8.13.21 IRLC Review; Jason Kwasny on Subservicing; PPI Figures Mean Nothing Good

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Transcript

As potential buyers of odd properties cogitate on Boston’s Skinny House (reportedly built to spite the owner’s neighbor & brother), and our industry mulls over Fannie’s decision to include rent payments in its credit decision, stock analysts are mulling over lender earnings. Earlier in the year this Commentary discussed IRLCs in the opening paragraph. (“Income and revenue are certainly metrics whence people make decisions. Is the profit on a locked, but not funded, loan something a lender should count on their balance sheet? And if so, if the loan falls out, is it a real loss? If you’re interested in accounting nuances, ask your CFO about Interest Rate Lock Commitments (IRLCs), an acronym for a lender’s locked pipeline.”) I mention this because IRLCs are figuring into lender’s results, and may continue to do so. More details below! Servicing figures greatly into earnings, and today’s podcast is available here has an interview with TMS’ Jason Kwasny focusing on how lenders should choose a subservicer. This week’s is sponsored by Richey May: bringing solutions and innovation through advisory, audit, tax, technology, and other services in the mortgage industry and in banking.

Employment & transitions

“Have you ever tasted warm apple pie? Yeah… life at CIVIC is kind of like that. A culture by design and a next-level operation built to get more done, you’re ability to succeed goes further here. As a Top Institutional Private Lender on a $1 billion + annual run rate, CIVIC continues to expand nationally which has created opportunities for recruiting dynamic Account Executives to join our team. With our sights set on your goals, you can expect a consistent flow of high-quality leads, top-tier marketing resources, rewards for your clients with CIVIC’s Victory Club, and a variety of loan products to meet your clients’ needs. For those ready to aim higher, now’s the time to take a big, bold step to build your career with the best: click to apply or contact Bryan Russak to learn more.”

As the industry begins to see signs of slowing, some lenders are still growing and adding staff. Sun West Mortgage Company, a national lender recently recognized as a top lender by a national trade publication, announced this week that it is adding staff. “We know that every lender in the industry is considering a business pivot at this point, but we have already made ours,” said Pavan Agarwal, CEO of Sun West Mortgage. Last year, despite the negative effects of the pandemic, Sun West hired over 600 new employees and grew its business over 500% from the previous year. While the mortgage market is off by nearly 25% from 2020, Sun West retail was 25% ahead of last year’s pace in May. Sun West says it will hire 120-150 additional Loan Officers by the end of 2021. To join the team, visit the company online.”

Provident Lending Group, Glendale, CA, is pleased to announce several new additions to its Executive Leadership Team. Bill Massey joined as COO in September and had previously held many executive leadership roles in Mortgage, Real Estate and Financial Services. Sharon Clark has recently joined as VP of Marketing. Sharon has over 20 years of leadership experience in mortgage marketing both on the Acquisition and Retention sides, most recently as Director of Retention for one of the nation’s leading lenders. Shelli Owens has come onboard as Chief Credit Officer and has over 20 years of mortgage leadership experience, including Sales, Operations and Post Closing, with her most recent role being SVP of Operations. President and CEO, John Abovian states, “We are extremely excited to round out the executive team with these veterans of the industry and are looking forward to an innovative and prosperous future.”

Assurance Financial is continuing to grow production, add retail branch origination offices, and expand its production reach into the midwestern U.S., particularly the Colorado, Arizona, Kansas, Missouri, and New Mexico markets. “We are searching for an established Regional Production Manager to help create and develop mortgage origination branches in the new midwestern territory… Someone who is an outstanding talent and proven retail sales leader with a demonstrated track record of hiring and managing multiple production offices across several states. We are a profitable and well-capitalized full-service mortgage banker offering an entrepreneurial, customer-focused sales support environment, FNMA/FHLMC/GNMA direct status, and well-positioned to compete for more growth with state-of-the- art operations/support technology. This new Regional Production Manager position will report to the CEO. If you are interested in joining a dynamic group of mortgage bankers and building a first-class production team, please contact Paul Peters, CMB or visit AssuranceMortgageLO.com to learn more.

Industry Leading Compensation & Turn-Times. Recently named among Top 6 Best Large Mortgage Companies to Work For by National Mortgage News and #1 Mortgage Lender on Ranking Arizona’s consumer poll, Geneva Financial Home Loans is filling Branch Manager and Loan officer positions in 45 states. Close in as little as 10 days. Large volume branches can opt for same-day Underwriting with in-branch Ops option. P&L includes zero fees for credit reports, AUS, LOS, CRM, technology fees, employer taxes (commissioned employees), VOEs, 4506Ts, and warehouse costs. See why Geneva Financial has a 5-star Google rating with over 1,800 verified borrower reviews!

Informative Research is hiring! “We are proud to welcome Catelynn Johnson as our newest Client Success Manager. Previously, Johnson served as Account Manager for Certified Credit and Factual Data for over a decade, managing credit and verification services for multi-branch national financial institutions. ‘Catelynn's CRA connections and experience add to the Informative Research best-in-class account management team led by Kelly Richards, and furthers our strategy for total client-centricity through a smart combination of technology and customer service,’ said Matthew Orlando, President of the Informative Research Mortgage Vertical. ‘Additionally, Informative Research is expanding its operations center in the Dallas Fort Worth area, and is recruiting Customer Service Representatives to support our future growth. If interested, please contact us here.’"

Products & services

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Lenders, are you struggling to get access to data in your LOS? Is your LOS not able to track every loan level change that happens in the process? Today, it is imperative that lenders have a strong record system where they can actively mine and conduct analytics against their own data. Having a normalized SQL database is a necessity in today’s data-driven environment. It also allows for users opening multiple loans, multiple users in loans, automated workflow events behind the scenes and a true GSE AUS loan copy/counteroffer ability. If this is a struggle for you, give us a look, you will be surprised. Please contact John McCrea or schedule a demo at https://mortgageflex.com/schedule-a-demo.

Is calculating borrower income creating a bottleneck in your underwriting process? Are repeated requests for documents impacting your borrower’s experience? LoanCraft can help! With its innovative workflow, just upload the personal returns via the secure portal or Encompass and LoanCraft will return a check list that includes preliminary income by source and the documents required for validation. Its unique process combines software and a team of analysts to produce a warranted income in 4 hours for typical files. LoanCraft will even include bank statement and P&L analysis in its report. Your production staff also benefits from having the information they need to qualify their client and request the correct documents right from the start. Training and set up are easy and the service is on-demand with no upfront fees or monthly minimums. Email Dominic Spadafore or visit loancraft.net to get started.

Lenders are differentiating themselves with end-to-end homeownership services. Consumers face numerous obstacles in the homeownership journey, from a lack of education to an inability to centrally coordinate all the necessary activities. They want an easier, less stressful, and less expensive way to purchase homes. Blend recently commissioned a study by the Aite Group to survey over 2,000 American consumers to identify opportunities for lender-facilitated solutions. And guess what? 89% of respondents expressed interest in using a homeownership service offered by a lender if it coordinated all of the activities associated with buying a home. Consumer expectations are often set by companies outside of financial services with streamlined end-to-end digital experiences. Guiding the consumer through the homeownership process is a tremendous opportunity for lenders. Download Reframing the Homeownership Journey: Consumer-Focused, Lender-Led and dive into key consumer survey takeaways and how your peers are approaching the challenge.

Accounting: the language of business

Non-bank lender’s financial results are flying at us. United Wholesale’s announcement is Monday, but Home Point’s 2nd quarter stats came out earlier this week, as did Guild with its net income of $170 million. loanDepot’s were last week, with a reminder that, “…the second quarter represented a transitional quarter from the record levels of loan origination volume and profit margins in 2020 into an operating environment characterized by lower profit margins resulting from industry overcapacity and increased competitive pressure, particularly in the wholesale partner channel. Higher interest rates resulting in lower refinance transaction volumes. Continuing strong demand for purchase transactions, which is somewhat adversely impacted by supply constraints on new and resale housing. And sharper focus on industry consolidation and expansion of ancillary products and services to capture additional revenue sources and expand customer engagement points.”

Rocket Company’s earnings came out yesterday. Of course “Rocket” has many other companies besides residential lending, but Rocket Mortgage generated $84 billion in mortgage origination closed loan volume and gain on sale of 2.78 percent. Rocket Companies delivered net income of $1.0 billion and adjusted net income of $0.9 billion.

Angel Oak Mortgage, Inc. (NYSE: AOMR), a pure-play non-qualified mortgage REIT, released its first earnings report: Angel Oak Mortgage, Inc. Reports Second Quarter 2021 Financial Results. “AOMR invests in first lien non-QM loans primarily originated by Angel Oak’s lending entities, which have originated more than $10 billion in non-QM loans since inception. This vertically integrated approach is a clear distinction when compared to other REITs which aggregate loans from multiple lending sources. QTD GAAP net income of $2.2 million, or $0.13 a share. YTD GAAP net income of $11.7 million, or $0.72 a share. Annualized GAAP return on equity of 2.7% for the second quarter and 8.1% for the first half of 2021.

Impac Mortgage Holdings had a net loss of $8.9 million. “Impac’s GSE origination business was not immune from the pressure of compressed margins experienced by the industry in the second quarter. We continue to enjoy healthy margins in our NonQM origination business, and are encouraged by the receptivity within both the primary and secondary markets to our recent product and pricing adjustments. The Company’s NonQM submissions and locked pipelines continue to ramp quarter over quarter, and as leading indicators should convert to increased originations and further the momentum already achieved within the alterative credit segment of our business.” During the three months ended June 30, 2021, NonQM originations increased to $100.6 million, as compared to $14.7 million for the three months ended March 31, 2021.

Capital markets

We had a lot of news and data to digest yesterday, not so much today. There was the hotter than expected July Producer Price Index, which means those higher costs paid by producers either translates into eventual price increases for consumers or profit margin pressures for producers. The National Association of Realtors reported that median U.S. home prices climbed the most on record in Q2 to an all-time high of $357,900. Prices increased in all but one (Springfield, Illinois) of the 183 metro areas measured. We also saw a larger than expected drop in jobless claims, a tepid $27 billion 30-year bond auction that was a blemish on a strong note and bond offering slate for the week, and San Francisco Fed President Daly echoing comments from other Fed officials in saying that asset purchases could be reduced later this year.

This week’s Primary Mortgage Market Survey from Freddie Mac saw the 30-year fixed rate rise, but remain well below 3.0 percent at 2.87 percent. Separately, Black Knight reported that after the previous week's 71k drop, we saw another significant decline of -83k in the number of active forbearances to round out the first full week of the month. We have been seeing the largest movement in the number of forbearances early on in a given month, as the plans scheduled for 3-month reviews in the month prior are reviewed for extension or removal.

After all that data yesterday, today’s economic calendar is much lighter. We have received import / export prices for July (+.3 and +1.3 percent, respectively). Later are some non-market moving numbers from the University of Michigan in the form of the Preliminary August Michigan Consumer Sentiment Survey. The MBS purchase schedule covering August 13 to August 26 released yesterday afternoon sees no change in coupons from the prior schedule with two operations daily, except today where there is just one. We begin the day quietly with Agency MBS prices up/better a tick or two (32nd) and the 10-year yielding 1.35 after closing yesterday at 1.37 percent.

To end the official workweek, how ‘bout a George Carlin video on modern euphemisms. Yes, he cuts right to the chase. (A pet peeve of mine, and I think about this every time I hear some company mentioning “reductions in force” or “right-sizing” rather than “layoffs” or “firings.”)