5.11.21 LO Comp, Dave Sims Interview, About Those Poor Payroll Figures

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Transcript

The real estate and lending industries operate in a world filled with laws, lawsuits, and regulators. (The latest example is REX’s suit against Zillow and the National Association of Realtors – NAR - over the real estate segregation rule, which puts the interests of legacy real estate brokers before consumers.) In the written version of today’s commentary is something every compliance department should read: a National Law Review article pointing out the CFPB’s current thoughts on lending and servicing during the pandemic. Compliance departments are certainly aware of how compensation is paid to AEs and LOs. After analyzing data from its CompenSafe ICM platform, LBA Ware’s Q1 2021 comp report showed a slight decrease in basis points paid. Increases in Year over Year refi and purchase volume contributed to higher commissions for LOs and processors despite a slight decline in BPS per loan. Processors handled 29% more loans per month in Q1 2021 compared to Q1 2020, fueling a 51% increase in average comp earned from $1,451 per processor per month in Q1 2020 to $2,194 in Q1 2021. On average, 3.6 individuals were paid a form of loan compensation per loan unit in Q1 2021. 

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For todays interview, I brought on Dave Sims, CEO of floify, to discuss some parts of his platform and trends in the industry as a whole

A parade of positive U.S. economic data over the last month that saw several series hit either all-time highs or multi-decade highs was halted by that pesky payrolls report to close last week. Some lawmakers suggest that the government’s supplemental unemployment benefits are discouraging people, particularly in lower-wage positions, from reentering the workforce. Let me remind you that one data point does not make a trend and there is bound to be the occasional miss. Demand is so strong across many industries that supply chains are having a hard time keeping pace, which is a much better problem to have than too weak of demand. 

The effect is that these strained supply chains are driving up input prices across the board, which in turn leads to higher basic commodity prices, higher financial asset prices, higher housing prices and likely higher consumer prices. That sure sounds inflationary, which could derail the U.S. recovery. The Fed likes a little bit of inflation. At least low, balanced, and predictable inflation. Too much inflation distorts the economy, debt markets, and other financial market pillars, while too little inflation discourages investment and consumption, leading to anemic performance. The question on investors’ minds is if the economy is going to overheat with interest rates so low. Maybe a little, but slightly higher prices for a temporary period aligns with the Fed’s general aim for an inflation rate of 2 percent on average over time, to make up for exceptionally weak gains over the recent time frame. 

So, back to that dismal payrolls report we go. Though a full economic recovery may already be priced into the market, the weak employment data has temporarily eased worries about too-hot inflation and the necessity of interest rate hikes by the Fed to combat it. It’s obviously going to be a complex economic recovery, but on the whole the broad basket of labor-related data remains very positive. We are set to receive some important inflation data with the Consumer Price Index (CPI) tomorrow and the Producer Price Index (PPI) on Thursday. 

Today’s economic calendar kicked off with the NFIB Small Business Activity for April (99.8, a 5-month high). The Mortgage Bankers Association’s latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 11 bps to 4.36 percent of servicers’ portfolio volume in the prior week as of May 2, meaning 2.2 million homeowners remain in forbearance plans. Later this morning brings Redbook same store sales for the week ending May 8, followed by JOLTS job openings and a $58 billion 3-year note auction by the Treasury in the afternoon. In addition to two operations by the NY Fed Desk for a maximum support amount of $5.5 billion, we will also hear remarks from New York’s Williams, Governor Brainard, San Francisco’s Daly, Atlanta’s Bostic, and Philadelphia’s Harker. We begin the day with Agency MBS prices pretty much unchanged from Monday night and the 10-year yield also unchanged at 1.60 percent.

WE now take you to a high school science class.)

Teacher: A single ant can live to be 29 years old!

Student: How ‘bout a married one?