12.5.24 To Cut or Not to Cut; Rate's Ben Cohen on Winning Volume; Prepayment Expectations

To stay competitive in this market, lenders need to find efficiencies and understand their operations in a much deeper way. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Visit https://richeymay.com to learn more.

Transcript

Don’t steal packages off of porches… you never know what will be inside them… A very low-tech attempt at dissuading thieves. On the flip side, what do Signal, iMessage, and WhatsApp, used by some originators in communicating with borrowers, have in common? Apparently, per the FBI, they’re “encrypted” and have much more security than simple texts… Worth thinking about using rather than plain texts. Speaking of tech, of great interest to lenders and vendors in general, these days, most popular TV models utilize automatic content recognition (ACR), a form of ad surveillance technology that gathers information about everything you watch and transmits it to a centralized database. Manufacturers then use your data to identify your viewing preferences, enabling them to deliver highly targeted ads. Here’s how to stop it. (Today’s podcast can be found here and Richey May is sponsoring this week’s. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Rate’s Ben Cohen on some tips and tricks on what has helped to consistently make him a top-five originator in America by both file count and dollar volume.)

Employment

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“loanDepot’s melloNOW underwriting engine is delivering fully conditional loan approvals in minutes. Deployed late last year, melloNOW has shortened turn times and lowered manufacturing costs while providing a seamless experience for both originators and customers. The proprietary technology, which was initially implemented in loanDepot's consumer direct division, is now rolling out to the company's in-market retail team. “We're giving our teams their most needed commodities: time and the opportunity to delight our customers by delivering the clarity and speed they deserve” said LDI President Jeff Walsh. From our industry-leading technology to unmatched lead delivery to one of the widest product portfolios in the business, melloNOW is just one more reason top originators choose loanDepot. Interested in joining us? Contact Shane Stanton.”

In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking for a diverse product group to create lasting client, Realtor and builder relationships. At Banner you have Portfolio lending, Construction to Perm financing, Fannie, Freddie, FHA, VA, and USDA along with equity products for HELOC, bridge financing and Lot Loans to serve your clients. Banner has opportunities for lenders looking for local decision looking to build or build onto their career with support for homebuyer education, CRA lending (state bond and Portfolio) as well as access to internal and external DPA to add value to your eligible clients and make more loans possible. Banner is the right fit for an established team, or the individual looking to grow their business and take the next step in their career. Please send resumes to Aaron Miller.

(As a reminder, anyone searching for employment can post their resume at no charge at www.lendernews.com, and potential employers can view all resumes for several months for only $75.)

Lender and broker software, services, and products

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What were the greatest challenges for loan originators this year? What tactics did they use to find success? Which trends affected them the most? Get the answers to these questions and more in the latest Loan Originators Survey Report from MGIC and Loan Officer Hub. 1,000 originators shared their insights on marketing, social media, referral relationships, technology and more. Download the 2024 report to get valuable insights you can use in your own planning for 2025!

'Tis the season of giving, and what better way to celebrate than by treating borrowers’ pets to shiny new tags for their new home? With Operation Fido, tags are automatically ordered directly from Encompass® by ICE Mortgage Technology™ when a loan closes, ensuring furry friends stay safe as they explore their new neighborhoods. It’s a simple, thoughtful way to make borrowers (and their four-legged family members!) feel at home. Watch the video to see how it works! Servicers know not every interaction with customers is created equal… It’s the meaningful conversations that can help drive true retention efforts. ICE is delivering self-service tools to help customers answer more loan questions on their own, and digital innovations for agents that helps them provide a better call center experience when customers do reach out. Read the blog from ICE’s EVP of Servicing Technology Product Innovation Sandra Madigan on how ICE is elevating the call center experience for customers and agents.

Correspondent and wholesale products

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“As the year draws to a close, Planet Home Lending’s Correspondent Division extends our heartfelt gratitude to our invaluable correspondent partners. Together, we've stood strong in the face of challenges in another demanding market. Thank you for being an integral part of our shared journey. As we look forward to 2025, we continue our commitment to being your go-to team – your reliable partner, your toolkit, and your product gateway. Here’s to a smooth finish for 2025 and a prosperous New Year.”

Rocket ProSM TPO kicked off its new December Presence campaign to provide its partners with special weekly offerings to close out the year strong. Last week, the lender announced the expansion of their leading Home Equity Loan product, which now includes 15- and 30-year terms. This week, partners received an extension of Rocket Pro TPO’s popular 24 Takeoff (a 24-bps credit on conventional, VA and FHA purchases and refis) plus an additional 20 bps credit on eligible VA and FHA loans. More wins will be announced throughout this month. If you’re interested in learning about these offerings and more, contact Rocket Pro TPO.

STRATMOR, Reggora, and repurchases

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STRATMOR Group’s New Repurchase & Appraisal Underwriting Study! Are you up to date with the latest industry benchmarks on mortgage repurchase rates and appraisal underwriting costs? Join Reggora and STRATMOR Group on December 12 at 11:00 a.m. PST / 2:00 p.m. EST as they unveil findings from STRATMOR’s New Repurchase & Appraisal Underwriting Study. The webinar will dive into insights gathered from leading lenders across the industry, including repurchase rates (understand how your performance compares with industry averages), appraisal Underwriting Costs (gain visibility into typical costs from appraisal findings, LLPAs, and defect fees), defect and Risk Metrics (explore common reasons for repurchases, the financial impact of appraisal-related issues, and best practices for risk management, and labor and Time Benchmarks (see average times for appraisal reviews and learn where automation could yield time and cost savings.) Register now!

Top LO Matt Weaver and Robbie Chrisman (Part 3 of 3)

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Recently Robbie Chrisman sat down with Cross Country’s Matt Weaver, ranked No. 1 for Most Loans Closed and No. 4 in Top Dollar Volume in 2023. Hearing his perspective is a must, given the election results, rates, and drooping MBA forecasts for 2025 for the industry. Matt dropped out of high school and happened to be waiting on a top real estate agent… and, well, you can guess the story.

“Good LOs should have a daily routine. They should. I put thought into it every day. I’ve learned from my mentors that it should be very intentional, yet most people don't think about it. They should. I have always been an early to bed, early to rise person, but some people are late to bed, late to rise people, as well as people who can operate on very little sleep. LOs should work based on what makes them most effective; don’t skimp on sleep. You don't want to be around me if I haven’t been sleeping. I have a wonderful family, but I enjoy rising early and having that quiet time with a cup of coffee.

“After waking up the first thing I do is I sit with a pad and a pen, and I take anywhere between 30 to 45 minutes to think. That's it, think. Today my focus was, ‘How can I serve my customer better?’ I'll write down a series of thoughts on how I can serve my customers better. And something will come from that. Now you add that day over day over day, let's say at the end of the month, I'll have anywhere between 200 maybe 250 thoughts, and maybe one will go into action. I'm really big on executing and understand that the cost of perfection is too expensive. So, in a lot of ways, we have to always focus on executing, rather than trying to be perfect, or trying to roll it out perfectly, whatever initiative that we're thinking of doing.

“I think that fitness is critically important as well. I try to exercise six days a week. It goes hand in hand with success, and it helps your discipline. Remember, when we're in this industry, discipline is really everything. Because what we're working on today as originators, whether you're 20 years in the business, or whether you're brand new in the business, what you're working on today, in a lot of ways, doesn't come to fruition until 60, 90, or 120 days out, and maybe even never. But you got to continue to work, and you got to continue to show up. So that takes a lot of discipline.

“Throughout the day, throughout the business day, I'm pretty regimented in what it is that I do from beginning to end. LOs should set aside creative time, however. As I mentioned, I do about 110 seminars a year, and our seminars don't really have anything to do with mortgages. We don't talk about mortgage products. We don't do anything like that. What we do is we give our agents innovative concepts, and a different way of thinking so they can grow their market share. That's the idea behind what it is that we do.

“Occasionally I hear about originators who have an adversarial relationship with other groups, like capital markets. There's just no space for that type of individual, and that type of disposition, in order to succeed at the absolute highest level. Everyone on your squad, everyone on your team, is equally as valuable as you are. And I stress that every single day, in fact, I've really trained the team to come and ask me, ‘Matt, what are you doing to push the team further today?’ I'm equally accountable to them as they are to me. Everyone plays a role, and a critical one. So having that type of arrogance… I can't imagine anyone really winning at the highest level with that, because you need great people on the team, and I think sharing is important.

“A few years ago, in order for me to continue my drive, I started a private group called F 13. F 13 is a private consulting group with that consists of 25 members today, of which I am consulting them on everything that I do, from beginning to end, every value proposition, all of my content. I did all that not necessarily for money. I did it so I could create my own competition, so it's a lot of fun. For many of them within the group I'm their enemy. Think about that. So, it helps me to get better. It causes them to get better. And we're all getting better together. We need people, whether it be within our team structure, or if you want to add a little bit more fuel to your fire, if you're highly competitive like I am, share what you're doing. Create your own competition. Because watch, you're going to create things faster.

“Lastly, don’t be afraid to look at files that other lenders have turned down. About 15 to 30%, depending on the month, of our transactions were declined by others. We step in, take over, and close and fund successfully. I doubt that any lender is turning away possible deals, but some of them don’t quite work. I’ve done well at Cross Country, and the owner of the company (Ron Leonhardt) contacted me earlier this year and said, ‘We've been reviewing the HMDA data, and Matt, you are truly helping the American dream. As a Florida originator, you are helping the most first-time homebuyers, the most African Americans, and the most Hispanics in the entire state of Florida for several years running.’ That made me happy. Our mission is that every human counts. Originators should remember that people have a need, and our job, our requirement, regardless of how small or how large is, to give them the same quality of customer service throughout. Because that is their own little paradise, regardless of whether it is a penthouse in South Beach (Miami) or a manufactured home and everything in between.”

Thank you to Matt and Cross Country!

Capital markets: a lot of data isn’t moving markets

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ICYMI: Through a new agreement with CME Group, Optimal Blue is taking what’s possible with rate lock data to an entirely new level. Beginning in January 2025, originators and owners of mortgage assets can hedge risk using CME Group’s Mortgage Rate futures, based on the Optimal Blue 30-Year Fixed Rate Conforming Mortgage Index. The launch of CME’s Mortgage Rate Index futures will bring market participants a precise and highly efficient risk management tool for mortgage pipelines, mortgage servicing rights, and mortgage-backed securities. With more than one-third of mortgage locks processed through its capital market platform, Optimal Blue has unparalleled access to real-time rate lock data, priming it to furnish the critical data needed to bring this hedging instrument to the market. This tool furthers Optimal Blue’s mission to help lenders and market participants maximize profitability on every loan transaction. Read the press release for more information.

How does Lincoln Federal manage a 288% lock desk volume fluctuation without impacting accuracy or headcount? In MCT’s new case study, Amy Haeffner, SVP and Loan Production Manager at Lincoln Federal, shares how MCT’s full-service lock desk, hedging services, and software like MCTlive! improved their operations and profitability. “We no longer face as many small pricing issues or exceptions as before, saving us thousands of dollars annually,” explains Haeffner. “With MCT’s lock desk, we seamlessly scale for volume fluctuations, even as high as 288%, without onboarding or training new staff.” Learn how Lincoln Federal streamlined processes, enhanced accuracy to 99.9%, saw +20 BPS over best efforts, and saved over $12,000 annually in MCT’s case study.

To pause or not to pause? That is the question for the Federal Open Market Committee (FOMC). Below-consensus ADP Employment Change data for November (146k versus 170k expectations) and ISM Non-Manufacturing for November yesterday (a decline to 52.1 percent from 56.0 percent previously) aided rate cut expectations. Ahead of tomorrow’s payrolls report, ADP Employment data yesterday printed roughly in-line with consensus (146k actual, versus 150k expected). Should economic data in the next couple weeks come in significantly stronger than anticipated, the door is still open for a pause. 

Playing the role of Hamlet is Fed Chairman Powell, who spoke yesterday afternoon, reiterating that the economy is in good shape and that the central bank can afford to be more cautious as it seeks the neutral rate level. Despite that, investors continue to increase bets that the Fed will cut rates by another 25-basis points in just under two weeks: the implied probability in fed funds futures currently sits around 75 percent for a cut. Investors are also keeping a close eye on South Korea’s declaration and subsequent reversal of martial law and the vote of no confidence for the existing French government (to say nothing of conflict in the Middle East or Trump’s trade rhetoric).

Mortgage rates are impacted directly by supply and demand. The Agencies will release prepayment speeds after the close and into the evening today, and this report will see day count drop from 22 to 19, a 14 percent decline in aggregate. Along with the declining percentage of the outstanding universe that still has refinance incentive, November seasonals historically tend to have people concentrate more on family than finances. Accordingly, aggregate speeds are expected to drop between 15 percent and 20 percent. Of course, there remain pockets of activity for those homeowners who still retain refinance incentive, and those coupons should be responsive. Within the conventional 30-year space, the bulk of those reside in the 6.5 percent coupon ($138 billion) along with nearly $41 billion in the 7.0 percent coupon and $6 billion in the 7.5 percent. 

Job cuts for November from Challenger Gray and Christmas led off today's economic calendar:  U.S.-based employers announced 57,727 cuts in November, a 3.8% increase from the 55,597 cuts announced one month prior and up 26.8% from the 45,510 cuts announced in the same month in 2023. We’ve also received weekly jobless claims (224k, 1.871 million continuing), and the October trade deficit. Later today brings Treasury's announcement of next week’s mini-Refunding (consisting of $58 billion 3-year notes, $39 billion 10-year notes, and $22 billion reopened 30-year bonds to be auctioned over Tuesday to Thursday), Freddie Mac’s Primary Mortgage Market Survey, remarks from Richmond Fed President Barkin, and Treasury conducting a liquidity management operation in which it purchases up to $4 billion 2-year to 3-year coupons. We begin the day with Agency MBS prices about unchanged from Wednesday evening, the 2-year yielding 4.15, and the 10-year yielding 4.19 after closing yesterday at 4.18 percent.

We’re coming up on the holiday travel season, so let’s skip the usual humor or trivia and put out some advice from a retired flight attendant who flew for 35 years. Weather delays, equipment or crew issues, and computer glitches seem to have become the norm. (Part 4 of 5.)

12. Get trip insurance if you have a lot of money invested. I hate the whole idea of this, but I also hate the idea of losing money. Example: I was working a flight recently that waited over an hour for a gate. A family of 8 missed their flight to Rome. The only flight of the day. They were going on a cruise which they would now miss. They were all crying, there was nothing I could do.

13. Please keep your shoes on. That’s not water on the bathroom floor. And for the love of God wear them into the bathroom!

14. Speaking of third-party websites and saving money, flights are full. If a flight is oversold, and no one volunteers to give up their seats, who do you think is the first to be bumped? You guessed it, the family that saved a few $$ by using sites like Expedia, Kayak, Hotwire etc.

15. Pack smart. Don’t be “That guy.” Don’t hold up boarding because you have your extenders open ‘til they are busting, and you can’t figure out how to make it fit in the overhead. (Passengers are stressed too, they can be aggressive when boarding a delayed flight.)

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current STRATMOR blog is “A Lender’s Personal Touch Can Help After a Disaster.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).