12.20.24 Potential Government Shutdown; HomeLight's Rich Haddad on Realtor Outlook; Home Sales and PCE

Thanks to today's podcast sponsor, Visio Lending. Visio is the nation's premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Visio is fast, simple, and dependable when it comes to financing rental properties. They believe time is money, and strive to be upfront and consistent about their qualifications. Using a simple DSCR rather than a complicated NOI calculation, there are no tax returns or personal financial statements, and their pricing is set, so you always know your rate. Learn more, including about Visio’s top-notch broker program, at https://www.visiolending.com/. 

Transcript

There are only a few days left until Christmas, and possibly buying last minute presents. Guys, be careful out there in your selection! Refinancing is less time sensitive than Christmas, and STRATMOR’s current blog is “Refis Help the Economy and the Industry is Ready to Help.” Whether a purchase or a refi, honest communication is paramount. “Father, I cannot tell a lie. I chopped down that cherry tree.” Many of us learned that George Washington quote, but the message resonates: don’t tell a lie. In the most recent example, Flagstar is being fined $3.5 million for “negligently making” materially misleading statements after a hack that resulted in the theft of 1.5 million customers’ personally identifying information. And when it rains, it pours: NYCB’s Flagstar Bank is eliminating 700 jobs, or 8% of the workforce, as part of the lender’s effort to turn around its business. (Those impacted can always post their resumes for free on www.lendernews.com.) (Today’s podcast can be found here and this week’s podcasts are sponsored by Visio Lending. Visio, which has a top-notch broker program, is the nation's premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview with HomeLight’s Rich Haddad on real estate agent outlook on the past year and expectations for the next one.)

Employment & transitions, and another retirement

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“Churchill Mortgage announced Gary Matthews & Bill Harp joined as Regional Production Managers. With over 25 years of experience in the mortgage industry, Matthews will be responsible for Churchill Mortgage’s Southeast Region. With over 20 years of experience in sales and operation leadership, Harp will lead Churchill Mortgage’s LoneStar Region, focusing on growth in Texas, New Mexico, Arizona, and Oklahoma. “We are excited to add Bill and Gary to our production leadership. Both have proven track records of strategic growth and bring over 40 combined years of successful distributive retail management experience. The future looks bright for Churchill,” said Kelly Lee, Executive Vice President, National Production for Churchill Mortgage. With these additions and others, we’re confident in our future. Churchill Mortgage, a debt-free company of over 30 years, has a sound leadership team and is an E.S.O.P! With employees as owners, we’re a company of leaders, laser-focused on the success of our team & customers. If this mentality interests you, learn more about us here. We’d love to speak with you about opportunities in your area.”

“Logan Finance continues to blaze a trail in the Non-QM world with month-over-month production records, technology enhancements and implementations, and a full-scale hiring blitz. We’ve onboarded an exceptional class of Account Executives and support staff including Young Kim, Sandy Au, Ed Tatum, Paul Goodwin, Harvey Goldberg, Paul McDermed, Jacob Abbatiello, and Carl Crowley. We have more essential job openings to fill, too. Apply today for these available roles: National Business Development Manager, Appraisal Support Desk Specialist, Encompass and Python Developers, Scenario Analyst/UW, and Funder. Logan’s commitment to excellence has created an environment of encouragement and support for our employees, and we know you’ll thrive working with us, so apply now. Join Logan and experience the difference that everyone is talking about. We’re fun, we’re successful, and we’re looking for the best and brightest! Check out all the open positions and join the Logan team.”

Planet Home Lending has hired 16-year vet Candice McNaught as Senior Vice President, Business Development and Strategic Initiatives for the Distributed Retail channel. In her previous role, McNaught oversaw 200 branch locations and a national network of more than 700 loan officers. She led recruiting initiatives that grew branch footprints, enhanced profitability, and elevated team performance.

Ginnie Mae announced the upcoming retirement of Leslie Meaux Pordzik, SVP of the Office of Issuer and Portfolio Management, effective December 27, 2024, following a distinguished 36-year career in the mortgage finance industry and 13 years with Ginnie. She oversaw more than 400 Issuers, modernized compliance and monitoring protocols, introduced innovative tools such as the Issuer Operational Performance Profile, and developed a comprehensive framework to manage Issuers along the compliance continuum. Harlan Jones will serve as the Acting Senior Vice President of Issuer and Portfolio Management.

(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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“2024 has been a successful year, and we want to express our heartfelt gratitude to you, our valued clients, for your loyalty and support in making that possible. As we begin to shift our focus to 2025, we are committed to add value, support, and service to allow you, our customer, and Newrez Correspondent to grow and thrive throughout the coming year. We are also focused on enhancing your experience with Newrez Correspondent! Be on the lookout for system and process improvements throughout next year, designed to make your interactions with us more seamless and efficient. Again, thank you for all your business and the trust you have placed in us, and we look forward to a prosperous new year together!”

The real estate industry is evolving, and so are the challenges and opportunities for loan officers. With the National Association of Realtors’ (NAR) settlement reshaping buyer-agent compensation and introducing new complexities for homebuyers, loan officers are stepping into a central role in the homebuying process. This is your chance to demonstrate value to borrowers, strengthen your referral network, and build your pipeline by becoming a trusted financial partner. Total Expert's new "Loan Officer’s Guide to Navigating the NAR Settlement Changes" shares five actionable strategies to help you succeed in this new post-NAR settlement landscape. Download the guide here.

Rocket ProSM TPO continues its impactful December Presence campaign, helping its partners finish the year strong with several exciting updates. These include new 15- and 30-year terms for its Home Equity Loan product and the extension of the popular 24 Takeoff program through December 29, featuring a 24-bps credit on conventional, VA and FHA purchases and refis, plus an extra 20 bps credit on eligible VA and FHA loans. The Fast 15 Guarantee also promises eligible loans will be clear to close in 15 days or the client will receive $2,500. Correspondent partners also benefit from a waived $999 acquisition fee. Additionally, from December 16 to 31, for every 100 Home Equity Loan applications that close by January 15, Rocket will donate $2,500 to Rebuilding Together. If you’re interested in learning about these offerings and more, contact Rocket Pro TPO.

STRATMOR on 2025 strategies

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Remember the days before our favorite songs were available instantly through streaming services? It was a time when we painstakingly compiled our favorite tunes using a cassette recorder to curate the perfect playlist. Making a mixtape was a labor of love, requiring patience, attention to detail, and a deep appreciation for music. In its latest Insights Report, STRATMOR Group puts the same care, patience, attention, and appreciation for the mortgage industry into compiling its “Greatest Hits: Volume 2024.” The article offers actionable strategies to help mortgage lenders navigate and capitalize on emerging opportunities in 2025. The firm’s experts tackle lenders' most pressing issues, from improving communication with technology partners to streamlining operational processes and adapting to rapidly changing market dynamics. Using STRATMOR data and its experts’ frontline experiences, the article outlines strategic considerations that will shape mortgage lending next year and provides valuable strategies and recommendations.

Another government shutdown threat… great

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As if high rates, low inventories, and over-capacity aren’t enough to keep lenders awake at night, we have our government. Government shutdowns occur whenever Congress fails to pass, or the president of the United States refuses to sign or vetoes, legislation funding the operation of some or all government agencies. Non-essential federal functions are suspended. Systems including health programs, Social Security and Medicare, SNAP benefits, Food and Drug Administration inspections and small business loans would be affected.

My money is still on “kicking the can down the road,” but shutdowns could last a day or a couple months, who knows? Most IRS services will pause… what else? The last time this happened under then-President Trump, it lasted 35 days, and then the Trump Administration “gave in” and agreed to what Congress put forth.

As of this writing, the federal government is on the brink of a shutdown with a deadline of 11:59 p.m. ET on Friday, December 20, to pass what would likely be a short-term Continuing Resolution (CR). The Mortgage Bankers Association has created a member guide that outlines the potential impacts to single-family and multifamily government lending programs.

“Starting on Saturday, December 21, a shutdown would necessitate a furlough of certain federal employees and significant curtailment of certain operations requiring agency staff intervention or action at the Department of Housing and Urban Development, Veterans Affairs, and the Department of Agriculture. National Flood Insurance Program (NFIP) authorities are also scheduled to expire on December 21.

If the past is any indication, these shutdowns are more show than substance and usually have little to no economic effect beyond pushing some growth from one quarter to the next. The IRS didn’t send tax transcripts (see below), which delayed some closings.

NOTE: The shutdown preparations below were taken from previous information published by the government, Agencies, and correspondent investors. It is meant to serve as a guide only, and lenders are advised to check with their partners for current details. That said, there may be little difference between “then” and “now” but let’s hope they resolve it!

Remember late 2018 and early 2019, the last major shut down. Many, if not most, lenders temporarily suspended the requirement for Tax Transcripts. Once the shutdown ended, lenders obtained the transcripts after purchase for impacted loans. If issues were discovered upon receipt of the transcripts, loans may be subject to repurchase. In general lenders continued to require a signed 4506-T in accordance with program guidelines.

“In consideration of current events and a potential shutdown, Citi is issuing the following reminder addressing impacts of a potential government shutdown. Many Federal employees will be affected, including employees who work for government contractors, vendors and other businesses that rely on work from government agencies such as the National Flood Insurance Program and the Social Security Administration.

“Citi will continue business as usual and proceed with review of closed loan packages submitted subject to the following guidelines, unless we have communicated otherwise: All required documentation and verifications must be present at the time the closed loan file is delivered to Citi. Citi will not purchase loans without all required documentation.”

Here’s what borrowers read in the press about their problems under the shutdown.

Ginnie Mae issued a release of information regarding its operations during a lapse in government funding, as did Freddie Mac and Fannie Mae.

The 2018/2019 Federal Government shutdown had no direct impact on Freddie Mac. It continued normal operations without interruption during the shutdown. Review its 2018 system and customer service hours of operation for Freddie Mac technologies. Borrowers who may be impacted by the shutdown are eligible for relief options, including forbearance, as detailed in Chapter 9203 of the Freddie Mac Single-Family Seller/Servicer Guide (Guide).

Remember that The FHA has issued FHA Info Bulletin #18-52 which provides additional clarity for HUD mortgagees regarding which systems are operational, and which FHA customer support operations are functional, though limited. The FHA’s reverse lending program has been put on hold along with USDA mortgage insurance endorsements.

As a result of the 2018/2019 Federal Government shutdown due to a lapse in appropriations, the Federal Housing Administration’s (FHA) Office of Single-Family Housing and its mortgage insurance program operated with limited services. As was the case in previous shutdowns, under a lapse in funding, FHA’s actions and decisions about which operations continue, or not, are governed by the Constitution, statutory provisions, court opinions, and Department of Justice (DOJ) Opinions, which provide the legal framework for how funding gaps and shutdowns have occurred in recent decades. A full descriptions and details can be found in the Department of Housing and Urban Development’s (HUD) Contingency Plan for Possible Lapse in Appropriations document posted on HUD.gov.

During the previous shutdown, as announced on December 22, 2018, during a lapse in government funding, Ginnie Mae continued to remit timely payment of principal and interest to investors. There was no disruption of essential functions, including the granting of commitment authority and support for continued issuance of Ginnie Mae-guaranteed Mortgage-Backed Securities (MBS) and Real Estate Mortgage Investment Conduits (REMICs).

Freddie Mac published Bulletin 2019-1 to provide temporary selling and servicing requirements to assist borrowers who may have been impacted by the federal government shutdown. These temporary requirements are effective immediately and will automatically terminate once the federal government resumes full operations.

Fannie Mae issued a Lender Letter to provide temporary guidance on selling and servicing policies that may be impacted by the federal government shutdown that began on Dec. 22, 2018.

In late 2018 USDA announced it would not issue commitments during a partial government shutdown, despite rumors of companies funding these loans. Rural Housing Service (RHS) loans that have a valid Conditional Commitment in effect as of the date of closing are eligible for closing/funding.

Back then, despite the government shutdown, The Federal Emergency Management Agency (FEMA) announced that the NFIP program will resume the sale, renewal, and monetary endorsements for flood insurance policies.

Whether or not these same 2019 policy and procedure changes occur here in 2024 remains to be seen. But it is always good to be prepared.

Capital markets: a nice bump in existing home sales

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After the Federal Reserve’s 525-basis points of hikes and subsequent holding pattern over the past four years, the Federal Reserve lowered rates for a third-consecutive meeting on Wednesday (bringing the total easing in 2024 to 100-basis points). According to Fed Chair Powell the central bank has entered a new phase where they’re going to be cautious about further cuts (his words, not mine). As markets continued to react to the Fed yesterday, the day also featured several international central bank policy announcements. The Bank of Japan maintained its policy rate at 0.25 percent against some expectations for a 25-basis point increase while the Hong Kong Monetary Authority followed by a 25-basis point decrease of its own (to 4.75 percent). Elsewhere, the Bank of England and Norway's Norges Bank left their respective policy rates at 4.75 percent and 4.50 percent while Sweden's Riksbank announced a 25-basis point cut to 2.50 percent. There was also some attention on Washington, where Congress attempted to push through a short-term funding deal to avoid a shutdown going into the weekend, but the attempt met resistance from the incoming administration.

The economic release from yesterday’s domestic calendar that was in-focus for the mortgage industry was existing home sales, which rose 4.8 percent during November, the second consecutive monthly gain. The recent pick-up reflects the temporary dip in mortgage rates in the late summer. Existing home sales are struggling to regain momentum as buyers face high mortgage rates, elevated home prices, and limited inventory. In November, resales totaled 4.15 million units, a 37 percent drop from the 2021 peak and comparable to the lows seen during the pandemic in May 2020. Some of the monthly uptick in sales can be attributed to delayed closings from hurricanes, but overall, inventory is at its lowest point since May. This indicates that buyers are snapping up available homes that meet their price and condition expectations.

Historically, existing homes have far outpaced new home sales, typically at a ratio of 7.5 to 1. However, this ratio has fallen to just below 6 to 1, as the supply of existing homes has dwindled to just over 1 million units, half of the 2-million-unit average seen in recent decades. This inventory crunch has contributed to higher median prices for existing homes, which have surpassed those of newly built homes in four of the past ten months, something that occurred only once in the previous 23 years, in June 2005. Affordability remains a significant concern, as the average monthly mortgage payment has surged to over $2,000, twice the amount before the Federal Reserve's QE4 program helped inflate the housing market.

Also of interest to the mortgage industry, mortgage rates jumped in the latest Primary Mortgage Market Survey from Freddie Mac. For the week ending December 5, the 30-year and 15-year mortgage rates respectively rose 12-basis points and 8-basis points to 6.72 percent and 5.92 percent and are 5 basis points higher and 3 basis points lower from a year ago.

Today brings the Fed-favorite inflation gauge, the Core PCE Price Index for November (+2.4 percent year-over-year, core +2.8 percent), along with personal income and spending (+.3 and +.4 percent). These reports would normally carry a decent amount of weight, but not so much this time directly in the wake of a Fed decision and right before many people leave their desks for the holidays. PCE prices were seen increasing 0.3 percent month-over-month and 3.0 percent year-over-year versus 0.3 percent and 2.8 percent previously, while income and spending were expected to increase 0.6 percent and 0.4 percent, the same as October. Later today brings final December Michigan sentiment. We begin the day with Agency MBS prices better than Thursday’s closing by about .125, the 2-year at 4.26, and the 10-year yielding 4.52 after closing yesterday at 4.57 percent.

We have just received notice from the North Pole that all those in the lending industry will not be receiving presents this year. Apparently, Santa IS UPSET! He is currently working on a refinance that was set to close yesterday and the lender added conditions…

As he stated to us, He has had it up to his red cherry nose with conditions. 

1. The ELVES have refused to return phone calls to verify employment as they expressed this is just too busy of a time to call anyone.

2. He can’t sign his loan documents in time to make his lock as he will be leaving on an extended vacation starting 12/24.

3. The lender is asking for proof that Santa has not taken out any new loans on his sleigh.

4. The lender is requiring proof that Mrs. Clause has been in the cookie business for more than 2 years.

5. When the Social Security Verification form was sent off the information came back stating “Santa Did not Exist.”

6. Due to a lack of comps in the area and the rural property the lender is requiring a second appraisal.

7. The copy of Santa’s photo ID cannot be verified as there are too many imposters around to prove it is him.

8. The lender has required us to count the expense for reindeer food and maintenance in Santa’s DTI ratio calling it “cost of doing business.”

9. Santa has refused to sign the AKA statement as it is about 4 pages long listing this such as Kris Cringle, Father of Christmas, Jolly old man, Mr. Clause, Old Saint Nick, etc.….

10. Apparently, the lender is trying to call Mr. Clause’s work “SEASONAL”, and they want to verify if he collects unemployment on the off season.

11. The underwriter is questioning the large number of dependents on his 1040.

12. The underwriter is also questioning the amount of business expenses on his Schedule C, especially his travel expenses.

So all of you out there in the mortgage industry please plan accordingly as we only have a few days left until Christmas and you are only getting COAL. 

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. STRATMOR’s current blog is “Refis Help the Economy and the Industry is Ready to Help.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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