Jan. 7: MLO jobs; marketing, pricing, strategy tools; upcoming events & training run the gamut

Money attracts criminal activity. I know that isn’t late-breaking news, but here’s a scam I hadn’t heard of involving, once again, real estate and appraisers. The good news is that when a landowner permanently protects pristine land from development, they’re eligible for a charitable deduction for the “conservation easement.” The bad news is that someone thought up syndicating the deal: A promoter buys the land, find an appraiser who’s willing to say it’s got enormous value if developed, and then sell stakes to wealthy investors. When that “incredibly valuable” land is then protected, all the rich investors get a juicy tax write-off on the hypothetical value of the land they were never going to develop as high as $4 for every $1 invested. The good news for those of us who don’t think this way is that the IRS announced it is escalating enforcement and launching criminal investigations, with over 80 tax court cases pending.

Employment, moves, & promotions

In more Movement boomerang news, super-producer and sales coach Scott Groves has returned to Movement Mortgage after a three-year hiatus. Groves, a nationally respected mortgage origination leader and sales coach, announced Monday he was returning to Movement, where he was the No. 1 producer from 2013-2016. “There are a lot of great companies out there, but my heart belongs to Movement,” Groves said. “I’m excited about the added support, expanded product offering and aggressive rates that will help support top producers on the West Coast. Adding Movement’s intrinsically fast turn time to an expanded business model creates the best place for me to grow my individual production and guide more potential buyers into the reality of homeownership.” Groves and his team in Los Angeles have originated nearly $1 billion in the last two years. He will be part of Chad Coester’s L.A. market for Movement. To learn more about opportunities at Movement, check out MovementLO.com.

Wyndham Capital Mortgage has promoted Ben Cowen to President and Josh Hankins to COO to kick off new decade. This move was made strategically to position Wyndham Capital for scalable growth in 2020. “In promoting Ben and Josh, plus the recent addition of Trey Rigdon as SVP of Marketing, we’re ready to build on a record year. We believe we’re positioned for explosive growth in 2020,” shares Jeff Douglas, Wyndham Capital’s CEO. Cowen played a crucial role in expanding Wyndham Capital’s footprint while Hankins is responsible for introducing programs like the WCM NexGen LO. This program is the future of modern lending and offers LO’s freedom and flexibility, operational support to close more loans than national average without sacrificing time, and marketing support to increase LO brand presence. Cowen and Hankins have also introduced efficiency gains with robotics and AI throughout Wyndham Capital’s lending process. Interested in joining Wyndham Capital? www.joinwyndham.com.

Congrats to Rob Truitt who is the new CFO of Michigan’s Amerifirst Home Mortgage, a division of Amerifirst Financial Corporation, in charge of financial analysis, forecasting and budgeting, strategic growth planning, capital management, and capital markets for the over 700 employees in branches across a dozen states.

Lender products & services

Ladies and gentlemen, welcome to 2020! If you’re in need of some new inspiration and guidance for your business, a new eBook from Maxwell, “2020 Mortgage Lending Resolutions”, is for you. It’s less an attempt to predict the future and more an exercise in setting our intention for the year ahead. It’s about setting goals that push us out of our comfort zone, and preparing to demonstrate our agility for what 2020 will surprise us with. A must-read for all lending professionals and managers, read your complimentary copy here (no form required).

 

Join National Mortgage Professional Magazine and Debra Killian, Cloes.online Director of Education and Mortgage Broker owner, for 7 Deadly Mistakes Owners Make When Setting Up A Mortgage Company. Debra will discuss real fatal mistakes that mortgage company owners have made when starting their independent mortgage companies. In this webinar, you will learn how to avoid their mistakes and grow your business worry-free. Do you have what it takes to move from really great MLO to owner? Do you know who can send you to jail, issue fines and take away your ability to produce? Do you know labor laws and recruiting that can put you in hot water? Join us Thursday, January 9, at 2PM ET/11AM PT for the answers to these questions and more. Click here to register.

 

As a Non-Delegated Correspondent Lender, you don’t always specialize in some of the more unique tasks surrounding the closing of a mortgage. That’s why ReadyPrice has directly with the industry’s top fulfillment providers, making their services available through Mortgage.Exchange. Focus Fulfillment and Shanks & Associates are two of the first to integrate with ReadyPrice through the MX Community, driving NDC independence by making it even more efficient for NDC Lenders to manage documents and ensure compliance. Learn more today at Mortgage.Exchange.

 

Developing lifetime customer relationships is a huge focus for many lenders. The leading brands are leveraging the latest and greatest technology to humanize the customer experience, anticipate their customers’ needs, and educate them throughout their financial journey. But, what about recruiting and retaining top producers to bring this all to life? How do you go about recruiting the best of the best and set them up for success with the right tech stack? It’s essential your employees not only feel valued, but also know their employer will provide them with the resources they need to grow the business. Total Expert Founder & CEO Joe Welu outlines key investments to make in your people and your technology to pave your organization’s way to increased retention and growth. Read the full article, “It’s What’s Inside That Counts: Why Your Internal Marketing Matters.”

 

Training and Events this month and next

What lies ahead for the mortgage industry in 2020? It’s important for originators and lenders to keep the constant stream of news in context in order to know how to best help their clients. Join MMG Chief Market Analyst Bill Bodnar and Rob Chrisman for the Industry Outlook 2020 webinar on Wednesday, January 8th at 2:00 p.m. ET, as we discuss some of the “big picture” industry topics for the year ahead. Click here to save your seat.

On January 9th the Puget Sound Mortgage Lenders Association is having its general dinner meeting in Fife, Washington. Yours truly will be there speaking about the economy, lending trends around the nation, and the importance of customer service.

Private morning insurance are good sources for training, as have been listed before in this commentary. National MI has its webinars, MGIC’s January 2020 webinars are currently posted here, and Genworth Mortgage Insurance provides complimentary courses: View the January Training Calendar.

FHA is providing a free online webinar, Wednesday January 8th on the Defect Taxonomy Version 2 Implementation. This webinar is scheduled from 2:30 PM — 4:00 PM (Eastern).

FAMC’s January 2020 Wholesale “Customer Training Calendar” offers a variety of training opportunities such as: Analyzing Appraisals, Working Virtually, How to Evaluate and Calculate Borrower Income – Focus on Base, Hourly, Overtime, Bonus and Commission, How to Create Your Perfect Presentation for Lunch and Learns and Detecting and Avoiding Fraud in Loan Files.

National Mortgage Professional Magazine and Debra Killian, Cloes.online Director of Education and Mortgage Broker owner, host 7 Deadly Mistakes Owners Make When Setting Up A Mortgage Company Thursday at 2PM ET: Click here to register.

Plaza Home Mortgage is offering a new webinar on Monday, January 13th: How to Evaluate and Calculate Borrower Income – Focus on Base, Hourly, Overtime, Bonus and Commission.

Check out Plaza’s January 2020 line-up of Webinars for additional training options.

Hudson Cook, LLP announced a monthly webinar series, CFPB Bites of the Month, beginning January 15.

On January 16th the California MBA is hosting a webinar: Hear from two top mortgage executives about a new mortgage origination strategy for 2020: digital origination only! “New Origination Strategy for a New Decade.”

Register for the CAMP-Silicon Valley Chapter’s Breakfast Meeting on January 17th. Guest Randy Warshawsky, EA will be addressing and explaining the new 2020 tax laws.

The PRMG University TPO Training Calendar for the month of January is currently available for viewing and registration on its January Live Webinars.

Collateral Risk Network has launched CRN as a non-profit with an ambitious agenda. The Compliance Roundtable on January 21 will focus on the new California “gig economy” law and the impact on the appraisal profession. There are also new data laws emerging that will impact lenders and AMCs. It looks like finally regulators and legislation has caught up to emerging technologies. Contact Karen to learn more.

From February 3-6, MBA’s Independent Mortgage Bankers Conference will be in New Orleans where IMB leadership and their management teams will hear the latest industry happenings and get new perspectives to position themselves competitively for 2020 and beyond.

The Mortgage Bankers Association of New Jersey in conjunction with the NJ Bankers Association and the NJ State Bar Association; will be having dinner with the Commissioner of Banking and Insurance, Marlene Caride, on February 6 at the Hyatt Regency in New Brunswick.

Register for FHA’s free, on-site Credit Underwriting Training in Denver on February 11 from 8:00 AM to 4:30 PM. Receive an overview of FHA underwriting procedures and addresses various industry-related FAQs related to FHA’s Handbook 4000.1. This training will also take an in-depth look at a variety of topics including credit, income, and asset (CIA) documentation; manual underwriting; automated underwriting systems (AUS); endorsement protocols; Loan Review System (LRS); and more.

The Americatalyst Conference is scheduled for February 11th-12th in Dallas. The conference will look at the future of mortgage banking, non-bank lending, technology and its influence, government policy and more. Find out more information by viewing the agenda.

Lace ‘Em Up! The next FDCPA Boot Camp will be held February 10th-11th in Minneapolis. Registration is underway for this intensive, hands-on curriculum designed to help you launch your Plaintiff’s FDCPA practice immediately.

On Wednesday, February 12th, join CAMP South L.A. for a free 2-hour event. From 10:00 AM to 12:00 PM at the University of Phoenix to hear guest speaker Nancy West, the Housing Program Officer for HUD. She will bring insightful information about FHA updates. Email to register.

The Mortgage Collaborative will host its winter conference in New Orleans on February 16-18. TMC’s conferences boast the highest LTV (lender to vendor) ratio of any industry conferences and are an incredibly interactive and impactful experience for its lender members, whom TMC allows to dictate the content, format, and agenda for their events. For more information on TMC or the upcoming event in The Big Easy, contact their COO Rich Swerbinsky.

On February 19th, in the evening, the Charlotte Regional Mortgage Lenders Association is having its monthly meeting. Come on by and say hello!

The Federal Reserve Bank of Dallas and the Real Estate Center at Texas A&M University have organized Room to Grow: Housing for a New Economy. This one-day Conference in Dallas on February 21st provides industry analysts, economists and experts to learn about the latest trends affecting housing, and discover developments that promise to change home buying.

Capital markets

Brexit and the U.S./China trade war will inevitably move markets soon, but the start of 2020 has been all about tensions in the Middle East. U.S. Treasuries began the first full week of 2020 rebounding slightly from Friday’s large rally. Risk tolerance improved slightly, though global investors remained concerned about the situation in the Middle East potentially escalating. President Trump and his aides spent the weekend arguing that the U.S. killing of Iranian General Soleimani made the world safer for Americans, despite Iran’s pledge to enact revenge.

U.S. allies haven’t thrown much support behind President Trump and there is confusion over U.S. policy in the region. While some people believe more U.S. troops will be sent to the Middle East, there are now reports America may be considering a withdrawal from Iraq (no decision has been made, one official said). After Iraq urged the U.S. to go, Trump threatened to sanction the ally and seek billions of dollars in reimbursement. He also repeated his threat to bomb Iranian cultural sites, widely condemned as a promise to commit a war crime.

 

Now, can we talk about Brexit and the trade war? The South China Morning Post reported that a Chinese trade delegation will travel to Washington D.C. on January 13 to sign the Phase One deal. Beijing had kept mum on the signing until that official report. And the British Parliament is expected to resume debating the withdrawal agreement this week.

Onto today as the economic calendar is already underway with the November trade deficit (narrowed to $43.1 billion, down to 2016 levels, as expected). Later this morning brings Redbook same store sales for the week ending January 4, December ISM non-manufacturing PMI, and November Factory Orders. Treasury conducts the first leg of this week’s mini-Refunding when they auction $38 billion 3-year notes just before noon ET. Additionally, the Desk will conduct a UMBS15 FedTrade operation targeting up to $200 million 2.5 percent ($99 million) and 3 percent ($101 million). We begin the day Agency MBS prices unchanged from Monday evening and the 10-year also unchanged yielding 1.81 percent.

My wife complained that my life revolving around Facebook has destroyed the way we communicate as a family.

So I blocked her.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Jan. 6: AE, LO jobs; profitability, non-QM, subservicer review products; wholesale & correspondent changes

“Rob, I know that it costs less to retain an existing employee than to train a new one. Last year companies were reportedly paying big signing bonuses, but are you hearing about outlandish retention bonuses for production staff?” Yes, I am hearing about those. And anyone offered anything unusual will often ask management, “Why aren’t you putting this money into my daily pricing, improved technology, Ops staff salaries, or the company’s marketing budget?” Speaking of personnel, this commentary has plenty of job opportunities. Every employer has a decision to make regarding having each position work remotely or be in the office. There are pros and cons to each. Every HR person should read this article about making remote employees more productive. After all, what employee wants to grapple with rush hour ten times a week if they don’t have to?

Jobs

“Great people are coming BACK to Movement Mortgage! Here at Movement, we exist to love and value people, that’s why we’ve had over 20 originators return to the South Atlantic Region in the last year doing over $200M in volume! If you’re an experienced originator who wants more for yourself, professionally and personally, we can provide you the tools and first-class coaching to help you develop habits that can lead to your future success.  To learn how we can make 2020 your best year ever, contact one of our experienced mortgage recruiting consultants in the South Atlantic: Shay Crow (720-315-2195) or Elisha Manning (252-714-8240). Visit https://movementlo.com/region/south-atlantic to learn more.”

 

2019 was more than another great year for Caliber Home Loans, Inc.; It was the BEST year in our company’s history. Caliber produced $61.1 billion overall last year! We all worked together to break more records, streamline operations and leverage our modern sales platform. One significant milestone was in November, when we made a hefty 70.9% jump in production from the second to the third quarter, according to Inside Mortgage Finance. This was the highest rate of increase of any lender in the top 30! The sky continues to be the limit at Caliber, and there is no better time than now to join us as a Loan Consultant! Visit www.joincalibernow.com or email Brian Miller to learn about a career opportunity in your market.

LoanStream Mortgage, The “One” Lender welcomes James Fitch, Area Sales Manager. James brings long-term experience, a great network and a strong knowledge of Non-QM, Conventional, and Government lending to expand our East Coast Team. He’s hiring experienced Account Executives in FL, GA, NC, VA, PA, and NJ. AEs & brokers looking to work with James can contact him at 800.760.1833. James is on our Non-QM Educational Webinar on January 10th, Friday – Interested loan officers, processors and teams can Register Here.”

Lender products & services

AFR is pleased to announce the governmental entity that offers DPA Advantage has expanded the eligibility requirements of the program. American Financial Resources, Inc. (AFR) is excited to help you use this program to bring more buyers home! With expanded eligibility for the DPA Advantage program, more eligible borrowers can purchase a home using a grant equal to either 2% or 3.5% of the purchase price. Which means you can help more hometown heroes buy a home within the community in which they work. Down payment assistance may even be combined with up to 6% seller concession for closing costs. In addition to providing business partners with unique products and services, AFR also provides industry-leading technology, professional expertise and continuous educational opportunities. For more information on becoming an AFR partner, email sales@afrwholesale.com or call 1-800-375-6071.

 

Do you use Dovenmuehle as your subservicer? Richey May & Co. will be conducting its annual subservicer oversight review over Dovenmuehle later this month to assist lenders with their monitoring and oversight responsibilities. Richey May’s program and subsequent 120+ page report provides value beyond the basic compliance requirements, including face-to-face interviews with all key department heads to observe their processes and challenges, a comprehensive review of business continuity and IT assessments to ensure client and consumer information remains secure, and a summary of the subservicer’s notable accomplishments and strategic initiatives for the future. The optional loan level testing provides succinct and valuable insight into how your personal portfolio is being serviced, potentially uncovering unobserved information and assisting in the client-subservicer relationship. To learn more or to participate in the upcoming review of Dovenmuehle, or our 2020 reviews of Cenlar or LoanCare, please contact Kevin Lohry.

Join National Mortgage Professional Magazine and Carrington Mortgage Services for a special DealDesk webinar on Non-QM lending and the Carrington Advantage, being held on Tuesday, January 7 at 2 pm ET / 11 am PT. Through this webinar, you will learn how to help borrowers who have been sitting on the sidelines for too long buy and refinance their homes. If a borrower doesn’t fit into the conventional or government guidelines boxes, we can help. Borrowers who are self-employed or need to use alternative documentation, need higher LTVs or have recent credit events including lates, bankruptcy, foreclosure or short sales can qualify for these Non-QM loans. We invite you to register for the webinar and submit your DealDesk scenarios right here.

In 2019 many lenders experienced relief from the profit margin compression of 2018 thanks to falling interest rates and high volumes. The question on many minds is whether this represents a temporary respite or a continuing trend? Regardless of market conditions, lenders with strong profitability will be in the best position no matter what the future holds – and the seasonal lull offers an opportunity to look inward. MCT’s latest whitepaper, 15 Strategies for Lenders to Improve Profitability, outlines actionable tactics you can put to use now in the areas of secondary marketing, business operations, and technology. These strategies amount to over 100 BPS of potential improvement to margins based on the experience of lenders who have put them to use. “Optimization of my investor set improved my margins by 30 BPS on government, which improved my all-in execution by 12-13 BPS.” – Andrew Stringer of First Bank discussing Strategy #2.

Wholesale & correspondent business tidbits

United Wholesale Mortgage announced that it set a company record of $107.7 billion in mortgage loan volume in 2019, more than doubling it’s 2018 production of $41.5 billion. The company’s press release noted, among other things, that, “UWM also secured the title of #1 wholesale lender for the fifth year in a row which has never been done before in the industry. Through the first three quarters of 2019, UWM accounted for 32.7 percent market share, which is almost eight times more than the No. 2 competitor in the market. UWM was also recognized as the nation’s No. 2 overall mortgage lender, behind Quicken Loans. According to data compiled by IMF, UWM outpaced big bank lenders Wells Fargo, Chase, and Bank of America in overall lending in all four quarters of 2019.”

Sun West Mortgage has implemented the Truth in Lending (Regulation Z) Annual Threshold Adjustments and has updated sections of its Implementation Guide accordingly.

A recent loanDepot Wholesale/Correspondent Bulletin summarizes recent and upcoming changes 2020 Truth in Lending Act – Threshold Adjustments.

Chase Correspondent Lending issued Operations Updates: Bulletin Process Improvements, HMDA LAR Requirements and MERS.

US Bank Correspondent/HFA’s recent Seller Guide Update includes information on Income Commencing After the Note Date, Escrow Waiver Requirements, Compliance Update

Second Mortgages – Appraisal Requirements and Correspondent Overlay Matrix Update. And U.S. Bank Home Mortgage published Seller Guide Update SEL-2019-030 18 Monthly Release covering HFA and Correspondent Overlay Matrix updates plus multiple other topics.

Plaza Home Mortgage® has updated its Appraisal Fee Schedule with all changes being effective starting December 2. Also, a Co-op Appraisal Fee has been added to additional states where Plaza lends on Co-op’s. Plaza now gives you the ability to offer your borrowers a simple and secure way of paying for their home appraisals online. Watch the short video to learn how to set up clients for this convenient payment method. Plaza is standardizing its Administrative Fees for new loans created in BREEZE on or after January 1, 2020. All loan products (excluding Streamlines and IRRRLs) will be $995. FHA Streamline, VA IRRRL, USDA Streamline will be $595. 2nds will be $500 (waived for TX and VT). The Administrative Fee will be based on when a loan is created in BREEZE, which may be earlier than when it is submitted. This means that loans created in BREEZE prior to January 1, 2020 will maintain the previous fee amount, if it differs from the new amount.

Bayview agency eligible products have been expanded to allow for additional occupancy types. Review the announcement for full details.

Carrington Wholesale now offers NIVA on Investment Properties 1-4 units. View the guidelines for more information.

US Bank Correspondent/HFA issued a reminder regarding escrow waiver requirements. Effective for applications taken on and after January 1, 2020, an escrow waiver may be granted for conventional loans with LTV/TLTV equal to or lessor than 80% (properties located in CA may waive escrows with an LTV/TLTV lower than 90%). Any consideration to waive escrows (excluding California due to state statute) must include the borrower’s ability to pay taxes, insurance and any other charges when they become due. Escrows may not be waived on: HPML mortgages, Government loans, Borrowers who do not have enough excess reserves to cover a year’s worth of taxes and insurance, Refinance loans where real estate taxes are delinquent or HFA loans. Situations when Flood Insurance is required. California loans with MI or flood insurance. MI escrows and flood insurance escrows cannot be waived.

Franklin American Mortgage added an enhanced loan delivery option that simplifies the file delivery process. Both closed loan files and non-delegated underwriting files may now be uploaded directly through the secure FAMC website. Details are posted on the website in the Loan Delivery chapter of our lending manual.

Minimal reserves are required with the High Balance USA Program. View the Land Home Financial Services Guidelines for details.

At a Seller’s request, AmeriHome Mortgage can provide daily Purchase Advice data in a csv or xml file via SFTP, eliminating the need to manually re-key Purchase Advice details and streamlining retrieval of each day’s data within a single transaction. Additionally, daily pre-wire Purchase Advice data is also available via csv or xml file, providing the opportunity for Sellers to preview in detail the Purchase Advice activity scheduled for each morning.

Capital markets

The last economic data to be released in 2019 told the same story we’ve heard for much of the second half of the year. The ISM Manufacturing Index fell for the fifth consecutive month to a more than ten-year low. Making this worse, the December reading captured the return to work at General Motors upon the conclusion of the AUW strike, but it did not account for the stoppage at Boeing for the 737 Max production which will no doubt be a drag on the data in the new year. Globally, manufacturing conditions remain soft due to steep contractions in Germany and Mexico. U.S. single-family residential projects bolstered construction spending in November which was up 0.6 percent for the month and 4.1 percent year-over-year. New jobless claims declined for the week ending December 28 but not to the 213k level seen for much of the last six months.

The disappointing ISM Manufacturing Index for December helped to advance the Treasury market, and thus mortgage prices. Nine states will likely slide into contraction in the next six months, the most since the financial crisis. Federal Reserve officials said on Friday the U.S. economy will keep growing at a healthy pace despite the Iran confrontation and continuing weakness in the manufacturing sector. On the bright side, the easing of trade tension between the U.S. and China could lead to better manufacturing activity in 2020.

 

The FOMC Minutes from the December meeting showed that policymakers are open to expanding asset purchases, though active repurchase operations are scheduled to end in the middle of January. The minutes gave scant clues about any change in the Fed’s position on interest rates for the rest of the year. It seems we can all still expect the federal funds rate to remain unchanged in 2020. However, inflation, specifically the kind that may result from rising oil prices after the killing of Soleimani, could impact headline pressures and crimp spending on other discretionary items.

 

Today’s calendar begins, and ends, here shortly with final December Markit Services PMI and Composite PMI. Tomorrow: November Trade Balance, November Factory Orders, and December ISM Non-Manufacturing Index. Wednesday brings the December ADP Employment Change, and after an uneventful calendar on Thursday, the week closes with the always-important December Nonfarm Payrolls, and November Wholesale Inventories. Supply also returns with Treasury conducting the mini-Refunding from Tuesday to Thursday consisting of $78 billion in 3-years, 10-years and 30-years. With regards to MBS, the Desk will conduct three FedTrade operations targeting up to $1.893 billion TBAs (in February) while December prepayments will be released on Tuesday after the close. We begin the week with Agency MBS prices unchanged and the 10-year unchanged, yielding 1.79 percent.

I accidentally booked myself onto an escapology course; I’m really struggling to get out of it.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Jan. 4: Changes in capital markets, Agency risk transfer helping borrowers, Credit Linked Note primer

The general environment? I received this tough note from a capital markets veteran. “Mortgages have been moving toward becoming a commodity business for years. Look at TBA securities and TradeWeb. Highly compensated MBS salespeople are exiting the business; they aren’t making a tick on every bond. As more technology enters the market, the trend should continue. We’ve been seeing this unfold for decades, and it’s been slow to implement, but I imagine someday mortgages will be like the travel industry. Now look at Zillow entering the mortgage market, with continued fears of Amazon. My biggest gripe is why does a realtor get 5 to 6% for selling a house? That’s an outrageous bid/offer spread in the world of the internet. Why does an LO make so much money? Why does it still cost $8,700 to produce a loan? Seems shocking. The irrational wholesale pricing we saw a year ago never lasts, but anyone with headquarters outside of an expensive state like California or New York (thus operating a business in a cheaper state) and following ‘The Wolf of Wall Street’ playbook can impact the industry.”

Agency deals continue

The Agencies (aka Freddie and Fannie) continue to help that process in both the primary and secondary markets, hoping to achieve competitive pricing in the secondary market while limiting risks borne by taxpayers. Along those lines, billions of dollars of conforming conventional loans have been bundled into CRT (Credit Risk Transfer) bond deals, nonperforming, or multifamily deals, which help reduce taxpayer exposure to the large book of mortgages guaranteed by the two housing giants and help the Agencies manage their capital.

These deals involve sharing part of the credit risk with third party investors – for a price. In the deals, the investors pay cash up front and purchase debt securities that are designed to absorb the credit losses on GSE (government sponsored enterprises) loan pools. The goal is to attract private capital into the mortgage market and shift some risk away from taxpayers since we are currently on the hook for Freddie & Fannie. And that helps rate sheet pricing for borrowers!

During the most recent committee call, the MBA Secondary & Capital Markets Committee discussed the differences between the Consolidated Securitization Risk Transfer structure (CSRTs) and Direct Issue Credit Linked Notes (CLNs). A CSRT involves an originating bank sending loans through a depositor to a specified purpose entity (SPE) where the loans will be classified by tranche (AAA to B or NR) before being sold to investors for cash that goes back through the depositor to the originating bank. The originating bank will begin by transferring a pool of mortgages through a depositor to a securitization SPE in accordance with FDIC Safe Harbor provisions, with cash flows of the Asset Backed Securities (ABS) issued by the SPE depending on transferred mortgage pool performance. Senior tranches are retained by the originating bank, with lower rated tranches, including first loss, sold to investors. Cash proceeds from the sale of junior tranches are commensurate with the investors obligation to absorb losses. The originating bank retains servicing of the mortgages and consolidates the SPE due to asset servicing and holding senior tranches. The transferred mortgages remain on the originating bank’s U.S. GAAP balance sheet. Normally, investors get about 95 percent of the ABS and the originating bank retains the remaining 5 percent.

When it comes to Direct Issue CLNs, the originating bank issues CLNs directly to investors, with the proceeds going directly from the investors to the originating bank. CLN cash flows are linked to the performance of a defined pool of underlying loans, providing the originating bank with first loss protection on the reference pool. Pool performance reporting from the reference loan pool is made available to both the originating bank and investors. Cash proceeds from CLN issuance are commensurate with the investors’ obligation to absorb losses. No actual transfer of the loans takes place, and the originating bank continues to recognize underlying loans on its balance sheet.

The first commercial mortgage-backed security linked to the Secured Overnight Financing Rate has been priced by Freddie Mac as part of a series of bonds backed by multifamily properties. “Freddie’s goal was to provide support to the fledgling SOFR bond market, create liquidity and provide proof of concept with a test case for multifamily securities tied to SOFR,” says Robert Koontz, senior vice president of multifamily capital markets.

In an industry first, Freddie Mac priced a new offering of Structured Pass-Through K Certificates (K-F73), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The approximately $765 million in K-F73 Certificates are expected to settle on or about December 20, 2019. The K-F73 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based. Freddie Mac is using K-F73 to provide support to the SOFR bond market ahead of a SOFR multifamily mortgage offering and to help ease the eventual transition away from LIBOR. K-F73 includes one class (Class AL: $565.645 million, 1-month LIBOR + 60 bps coupon) of senior bonds indexed to LIBOR and another class (Class AS: $200.00 million, 1-month average SOFR + 67 bps coupon) of senior bonds indexed to SOFR. Freddie Mac will provide a guarantee on Class AS that covers any basis mismatch if the SOFR-based index exceeds the LIBOR-based index. The underlying LIBOR-based multifamily mortgages and the K-F73 bonds indexed to LIBOR will convert to an alternate index, which may be SOFR, if LIBOR ceases to be published. Both classes have weighted average lives of 9.54 years and even $100.00 prices. The transaction helps ease the transition from LIBOR to SOFR, and underscores Freddie Mac’s commitment to providing market liquidity and stability.

On December 6, Freddie Mac priced a new $1.1 billion offering of Structured Pass-Through K Certificates (K-102), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 10-year terms. The company expects the K-102 Certificates to settle on or about December 12. Pricing for the deal is as follows. Class A-1has principal of $99.754 million, a weighted average life of 6.83 years, a coupon of 2.184 percent, a yield of 2.091 percent, and a $100.4991 price. Class A-2 has principal of $1,011.978 million, a weighted average life of 9.77 years, a coupon of 2.537 percent, a yield of 2.187 percent, and a $102.9937 price. Class A-M has principal of $64.993 million, a weighted average life of 9.87 years, a coupon of 2.246 percent, a yield of 2.240 percent, and a $99.9952 price.

As part of Freddie Mac’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds, on December 5, Freddie priced a $599 million K-C Series offering of Structured Pass-Through K Certificates (K-C07), which are multifamily mortgage-backed securities. The company expects the K-C07 Certificates to settle on or about December 13, 2019. The K-C07 Certificates are guaranteed by Freddie Mac and are backed by 7-year and 10-year fixed rate loans that feature longer than typical periods of reduced prepayment penalties before maturity. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement. Pricing for the deal is as follows. Class A-SB has principal of $50.50 million, a weighted average life of 5.10 years, a coupon of 2.182 percent, a yield of 2.214 percent, and a $99.750 price. Class A-7 has principal of $500.183 million, a weighted average life of 6.78 years, a coupon of 2.512 percent, a yield of 2.3378 percent, and a $100.9946 price. Class A-10 has principal of $49.02 million, a weighted average life of 9.75 years, a coupon of 2.591 percent, a yield of 2.4689 percent, and a $100.9938 price.

Freddie Mac priced a new $647 million offering of Structured Pass-Through K Certificates (K-1514), comprised of multifamily mortgage-backed securities, that were expected to settle on or about December 12, 2019. Pricing for the four classes is as follows. Class A-1 has principal of $90.0 million, a weighted average life of 10.73 years, a coupon of 2.481 percent, a yield of 2.4226 percent, and a $100.4948 price. Class A-2 has principal of $557.691 million, a weighted average life of 14.84 years, a coupon of 2.859 percent, a yield of 2.6144 percent, and a $102.9927 price. Class X1 has principal of $647.691 million, a weighted average life of 13.83 years, a coupon of 2.859 percent, a yield of 2.6144 percent, and a price of $6.5297. Finally, Class X3 has principal of $71.965 million, a weighted average life of 14.62 years, a coupon of 2.857 percent, a yield of 5.3937 percent, and a price of $28.2141. Freddie Mac requested and received preliminary designations and breakpoints from the National Association of Insurance Commissioners (NAIC) Structured Securities Group (SSG). The Regulatory Treatment Analysis Service (RTAS) provided a preliminary indication of the probable insurance regulatory treatment of K-1514 guaranteed classes and provided preliminary NAIC breakpoints for the K-1514 mezzanine securities. The K-1514 Preliminary Offering Circular Supplement can be found at http://www.freddiemac.com/mbs/data/k1514oc.pdf.

 

Freddie Mac announced the settlement of the third Seasoned Loans Structured Transaction Trust (SLST) offering of 2019, a securitization of approximately $1.3 billion including both guaranteed senior and non-guaranteed subordinate securities backed by a pool of seasoned re-performing loans (RPLs). The SLST program is a fundamental part of Freddie Mac’s seasoned loan offerings which reduce less-liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. Freddie Mac SLST Series 2019-3 includes approximately $1.069 billion in guaranteed senior certificates and approximately $257 million in non-guaranteed subordinate certificates. The guaranteed senior certificates priced on November 19 through a syndicated process. The right to purchase the subordinate certificates was awarded through a competitive auction in September to New York Mortgage Trust Inc. The underlying collateral backing the certificates consists of 8,121 fixed- and step-rate modified seasoned re-performing and moderately delinquent loans. These loans were modified to assist borrowers who were at risk of foreclosure to help them keep their homes. The loans will be serviced by Select Portfolio Servicing, Inc. in accordance with requirements that prioritize borrower retention options in the event of a default and promote neighborhood stability. To date, Freddie Mac has sold over $8 billion of non-performing loans (NPLs) and securitized more than $60 billion of RPLs consisting of $29 billion in fully guaranteed PCs, $25 billion in Seasoned Credit Risk Transfer senior/sub securitizations, and $7 billion in SLST transactions. Additional information about the company’s seasoned loan offerings can be found at http://www.freddiemac.com/seasonedloanofferings/.

 

Freddie Mac priced a new offering of Structured Pass-Through K Certificates (K-103), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 10-year terms. The company expects to issue approximately $1 billion in K-103 Certificates, which are expected to settle on or about December 19, 2019. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement. Class A-1 has principal of $109.473 million, a weighted average life of 6.98 years, a coupon of 2.312 percent, a yield of 2.22147 percent, and a $100.4946 price. Class A-2 has principal of $929.128 million, a weighted average life of 9.85 years, a coupon of 2.651 percent, a yield of 2.3014 percent, and a $102.9993 price. Class A-M has principal of $59.029 million, a weighted average life of 9.93 years, a coupon of 2.359 percent, a yield of 2.35365 percent, and a $99.9916 price.

Fannie Mae announced that it has completed its eighth and final Credit Insurance Risk Transfer (CIRT) transaction of 2019, covering loans previously acquired by the company. The deal, CIRT 2019-5, covers $18.5 billion in unpaid principal balance of 15-year and 20-year original term fixed rate loans, as part of Fannie Mae’s ongoing effort to reduce taxpayer risk by increasing the role of private capital in the mortgage market. With CIRT 2019-5, which became effective October 1, 2019, Fannie Mae will retain risk for the first 15 basis points of loss on a $18.5 billion pool of single-family loans with loan-to-value ratios greater than 70 percent and less than or equal to 97 percent. If the $27.8 million retention layer is exhausted, twenty-one insurers and reinsurers will cover the next 130 basis points of loss on the pool, up to a maximum coverage of approximately $241 million. CIRT 2019-5 expanded coverage of 15- and 20-year fixed rate loans, relative to prior CIRT deals that covered similar product, by including loans with lower loan to value ratios. The deal increased Fannie Mae’s risk transfer, relative to those prior deals, by extending the deal term from 7.5 years to 9 years and reducing the first loss retention layer to 15 basis points. To date, Fannie Mae has committed to acquire approximately $10.6 billion of insurance coverage on $404.6 billion of single-family loans through the CIRT program, measured at the time of issuance for both post-acquisition (bulk) and front-end transactions.

 

The covered loan pool for the CIRT 2019-5 consists of fixed-rate loans that were acquired by Fannie Mae from June 2018 through June 2019. A summary of key deal terms, including pricing, for these new and past CIRT transactions can be found here. Since 2013, Fannie Mae has transferred a portion of the credit risk on single-family mortgages with an unpaid principal balance close to $2.0 trillion, which includes the full contract amount for front-end CIRT transactions, measured at the time of transaction, through its credit risk transfer efforts, including CIRT, Connecticut Avenue Securities (CAS), and other forms of risk transfer. As of September 30, 2019, $1.2 trillion in outstanding unpaid principal balance of loans in our single-family conventional guaranty book of business were included in a reference pool for a credit risk transfer transaction. Depending on market conditions and other factors, Fannie Mae expects to continue coming to market with CIRT and CAS deals that allow private capital to gain exposure to the U.S. housing market. More information on Fannie Mae’s credit risk transfer activities is available here.

On their second anniversary, a husband sent flowers to his wife at the office.

He told the florist to write “Happy Anniversary, Year Number 2!” on the card.

She was thrilled with the flowers, but not so pleased about the card: “Happy Anniversary. You’re Number 2.”

This explains why words are so important.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Jan. 3: MLO jobs; pricing, broker products; M&A across the biz; credit & underwriting changes; Middle East driving rates

In state news, happy belated CCPA Day! The California Consumer Privacy Act officially went into effect 1/1, and it’s a big deal. Full compliance expected by July 1. Here’s what attorneys and “technologists” think about the potential impact of the new law this year and beyond. In other state news, house prices in 20 major US cities increased in October at the fastest pace in five months, according to an S&P CoreLogic Case-Shiller index. Prices gained 2.2% year over year, largely because of a strong labor market and declining mortgage rates. And who says that builders aren’t gobbling up chunks of land across the nation? Here’s a very interesting New York Times article with cool photographic proof from above.

Jobs

GO Mortgage recently launched its Assigned Revenue Model for single originators and branch managers. The new compensation model will increase the revenue share for its participants while delivering a streamlined rate sheet execution—allowing for more compensation and superior rates. GO Mortgage’s innovative, best-in-breed technology and marketing stack, delivers a modern mortgage banking platform without increased branch overhead. If you are interested in learning more about GO Mortgage’s new retail platform, please contact Frank Papaleo.

Lender services and products

What’s more important, price, speed, or customer service? REMN Wholesale’s new Platinum advantage product means brokers no longer have to choose. REMN’s Platinum Advantage ties the wholesale lender’s industry-leading 24-hour turn times and reputation for customer service into a product line that brokers around the country have been yearning for all year. Now, when price matters, REMN is there. When brokers need a wholesale lender, they can depend on, REMN is there. If speed matters, REMN can’t be beaten. Brokers interested in finding out more about REMN’s Platinum Advantage program can email their account executive directly or connect with a REMN regional manager online through its website.

Today, ReadyPrice announced definitive partner agreements with leading Fulfillment providers, Focus Fulfillment and Shanks & Associates. These agreements allow over 400 Non-Delegated Correspondent Lenders to access ReadyPrice’s Mortgage.Exchange. For the first time, NDC lenders and originators can own the process, beginning with initial product pricing gathered from the nation’s top investors, all the way through Post Closing documentation. Look like a broker with product selection and control the process as a banker, all from the Mortgage.Exchange platform. ReadyPrice is driving independence across the NDC Channel! Schedule your live demo today to get started.

QLMS ended the decade with its strongest year to date, and couldn’t stop breaking records! The number of LOs who closed a loan with QLMS doubled, growing to a whopping 13,000 LOs; Over 90% of them independent mortgage brokers. On top of industry leading pricing, products and operational excellence, brokers are leveraging the innovative technology QLMS has built. One of those technologies is “The Answer.” Its proprietary questionnaire-based algorithm gives clarity to difficult and uncertain mortgage questions. Brokers can use this incredible tool to keep tabs on ever-changing guidelines. Recently, the rules around proposed rental income history have changed. Do you know how to apply them? Are you missing out on approvals and/or commissions? “The Answer” will save those loans! Click HERE to see how ‘The Answer’ turns mind-numbingly complicated situations into concise answers, helping you give better advice and close more loans.

Changes in the credit landscape

People are certainly opening their wallets. Spending for goods and services initiated by credit, debit, and prepaid cards issued in the United States, which totaled $7.266 trillion in 2018, is projected to reach $10.086 trillion in 2023 according to statistics from The Nilson Report. At the end of 2018, there were 6.96 billion credit, debit, and prepaid cards in circulation in the U.S. That total is expected to reach 8.02 billion at the end of 2023. Nearly 7 billion payment cards generate more than $7 trillion in purchases of goods and services. Credit cards accounted for 54.17% of spending on all types of cards, down from 54.37% in 2017. Spending on credit cards is project to account for 54.13% in 2023. Outstanding credit card debt was $1.124 trillion at the end of 2018, an increase of 5.8%. Outstandings are projected to reach $1.435 trillion by the end of 2023.

But wait! There are more numbers! The average amount of a credit card purchase transaction was $90.73 in 2018, up from $89.88 in 2017. In 2023, the average amount is projected to be $94.44. Payment cards in circulation include general purpose type (Visa, Mastercard, American Express, and Discover), PIN-debit type (Star, Nyce, Pulse, etc.), as well as private label type (store, gasoline, medical, hotel, airline), ACH, and private label prepaid, etc.

PCF Wholesale’s EZ-DSCR product offers the ability to qualify off the I/O payment. No Income / No Reserves (to $1.5M) / No Employment on 1003. 80% LTV on Purchases, Cash-out to 75% LTV, FICO’s down to 600 plus more.

Redwood Trust Choice QM up to $2M with a min 661 FICO to 70%. Optimal Blue has replaced Redwood’s Renew products which are classified as “Standard” with a new “Expanded Guidelines” version. As a result, the “Standard” version of the Renew products have been discontinued and will no longer be offered in the Optimal Blue system. Customers utilizing this content for proprietary products have six months from 12/18/19 to reconfigure eligibility/adjustment sourcing. New and improved versions of Redwood’s Renew program are available in Optimal Blue’s new Expanded Guidelines fields. Contact Client Services with questions.

Lenders are reminded that individual loans need to be resubmitted to an Automated Underwriting Engine based upon investor specific underwriting and tolerance requirements. M&T does not impose any “overlays” on these investor tolerances. Reminder: AUS tolerances apply to AUS Findings only. The loan data transmitted must always match as of the closing date.

US Bank posted SEL-2019-067: Assets used for Repayment (Asset Dissipation Underwriting).

PRMG posted Product Update 19-76. Updates include clarification on using Financed MI on Agency Products. Clarifies seller provided seconds (seller carrybacks) are allowed, if HUD guidelines are met on FHA Standard and High Balance. The removal of properties with less than 600 square feet from Ineligible Property Types on USDA loans. VA and VA High Balance products clarification regarding two veterans where the factor for VA Funding Fee is not the same is considered an eligible Veteran/Borrower Combination. VA IRRRL and VA IRRRL High Balance loan seasoning, Self-Employment Income – Profit and Loss Statement (P & L) and Balance Sheet Requirements on Diamond Jumbo. Refer to the profiles for details.

M&A around the biz

S&P Global reports banks and thrifts in the US closed 3.3 branches to every one opened in September (221 to 66), bringing the total to 87,738 overall. Over the prior 12 months, 3,019 branches have been closed vs. 989 opened.

In depository bank news it was recently announced that, in Massachusetts, Cambridge Trust Co. ($2.8B, MA) will acquire Wellesley Bank ($986mm, MA) for $122mm in stock (100%) or 1.59x tangible book, and Bridgewater Savings Bank ($623mm) will merge with Mansfield Co-operative Bank ($527mm) and form a new mutual ownership entity. In Pennsylvania William Penn Bank ($418mm) will acquire Washington Savings Bank ($159mm) and will also acquire Fidelity Savings and Loan Association of Bucks Co ($86mm). First Bank and Trust Co ($54mm, OK) will acquire The First National Bank of Pawnee ($58mm, OK). In Maine Bangor Savings Bank ($4.6B) will acquire Damariscotta Bank & Trust Co ($193mm) for about $35mm in cash (100%) or about 1.85x tangible book. And in Texas First National Bank ($530mm) will acquire First State Bank ($185mm).

In the servicing biz, Sagent Lending Technologies announced a definitive agreement to acquire ISGN Corporation. “The acquisition will expand Sagent’s loan servicing solutions and further demonstrate an ongoing commitment to the broader mortgage industry for current and future clients.” Recall that Sagent was formed as a joint venture between Fiserv and Warburg Pincus in 2018 with a focus on improving the lending experience for both lenders and borrowers. “Through innovative solutions in mortgage and consumer lending technology, Sagent empowers lending clients to exceed borrower expectations, increase efficiency, and improve agility in an ever-changing compliance environment.” (ISGN is a global provider of mortgage technology products, delivering smart and innovative SaaS technology solutions to the residential mortgage industry.)

In the media biz, Mortgage News Network Inc. has announced that National Mortgage Professional Magazine, Mortgage News Network and its affiliated titles have been acquired by American Business Media LLC (AmBiz). Joel Berman, publisher and CEO of Mortgage News Network Inc., said, “We have broadened into the largest webinar provider in the industry, the most widely-read e-mail newsletters, and are the predominant chroniclers of the ‘who’s who’ in the mortgage lending field.” “American Business Media is the nation’s largest producer of conferences for the mortgage, banking and credit union industries. In 2019, AmBiz produced 32 conferences, trade shows and networking events throughout the United States.”

Capital markets

Tuesday’s talk of curve steepening was just that: Tuesday’s talk. U.S. Treasuries began 2020 with a rally that was paced by longer duration bonds. The 2-year Treasury yield closed yesterday unchanged from Tuesday’s close, while the 10-year dropped -4 bps (closing at 1.88 percent) and the 30-year fell -5 bps, as stocks climbed to new record highs (again) and U.S. jobless claims fell to a four-week low. The initial claims figure may have decreased, but not before registering the highest four-week moving average in 23 months. It seems a tight job market stopped meaning higher wages long ago, since most new American jobs are in the service industry and pay little.

I’d like to say it was a notable day for markets, but anything after the lightly traded last two weeks was probably going to seem like big moves worthy of headlines. Weak data out of Germany and the UK weakened the euro and pound as demand for the safe-haven dollar picked up. British factory output fell in December at the fastest rate since 2012, a survey showed, while a German Purchasing Managers’ Index survey showed the manufacturing sector contracted further in December.

The dollar recovered from a six-month low to rebound on the opening trading day of this year, ending a poor December for the dollar (tensions with China eased and global growth prospects rose) that meant it closed flat for all of 2019. While it may spell good news for the dollar, it does revive concerns that 2020 may not be as good for growth in the EU and in the UK as people were surmising as recently as a few weeks ago. While most Manufacturing PMI readings from the EU beat expectations yesterday, those same readings pointed to continued contraction. The final piece of international news was the People’s Bank of China announcing that its reserve requirement ratio will be lowered by 50 bps on Monday.

Fed speak isn’t expected to be very exciting over the next several months. With the recent de-escalation in trade tensions, the FOMC is expected to keep rates unchanged through 2021. Many big banks have an estimate of the optimal Fed funds target rate, which helps compare monetary policy across different economic cycles and provides some insight to the path of policy going forward. When the effective fed funds rate rises above the estimated optimal rate, this suggests that monetary policy is too tight, given the inflationary pressures in the economy and the probability of recession at that time. This often occurs when the FOMC embarks on hiking cycles to prevent the economy from overheating, such as at the end of 2018.

After hiking rates four times over the year, the FOMC had pushed the fed funds rate almost 40 bps, on a four-quarter moving average basis, beyond many estimates of the optimal rate. Increasing trade uncertainty and deteriorating growth abroad, pushed the FOMC to signal a shift in policy and cut rates by 75 bps over three meetings. Those cuts not only helped the FOMC assuage fears of recession but also revitalized the nation’s struggling housing sector.

Future FOMC actions will be largely based on if real GDP growth comes in significantly different than expectations. Stronger GDP readings would mean the Fed could then begin to discuss hiking rates. Something else to keep in mind is the FOMC is far more likely to risk being too accommodative rather than too tight. As Chairman Powell noted in his December press conference, inflation has repeatedly run below the Fed’s 2.0 percent inflation target and failing to hit this target on a sustained basis could push inflation expectations even lower.

Also today, the Desk of the NY Fed will conduct a UMBS30 FedTrade operation targeting up to $$793 million 2.5 percent ($257 million) and 3 percent ($536 million). There is a collection of non-market moving news this morning: December ISM-New York figures and business conditions, December ISM manufacturing PMI, and November construction spending. We’ll see the return of Fedspeak today with Richmond’s Barkin, Chicago’s Evans, San Francisco’s Daly, Governor Brainard, and Dallas’ Kaplan before the minutes from the latest meeting are released in the afternoon. We begin the day with Agency MBS prices better by a solid .125 and the 10-year yielding 1.83 percent: military news from the Mideast is driving bonds and stocks this morning.

Whenever someone says, “I don’t believe in coincidences,” I say, “Oh my God, me neither!”

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Jan. 2: Marketing, LO jobs; upcoming coast-to-coast training & events; who is buying MBS?

Florida, also known as “God’s waiting room,” is the nation’s third most populous state, behind California and Texas, with a population of 21.3 million. (California has about 40 million, New York, a popular trivia contest guess, has 19.5 million.) In the last nine years Florida grew 13 percent, third fastest of all states and behind just Texas, Utah (and DC). And at $1.06 trillion, its economy is the fourth largest behind CA, TX, and NY. It’s not all the climate: Florida is one of seven U.S. states that don’t impose state income tax. And of the ten American cities with the greatest discrepancy in taxes paid by new home owners and longtime home owners, two are in Florida (six are in California) where the 1992 Save Our Homes constitutional amendment similarly restricts reassessment. Bridgeport (CT) has one of the highest effective tax rates on the median-valued home, while Birmingham (AL) has one of the lowest. (But the average Birmingham resident pays 30% more in total local taxes when accounting for sales, income, and other local taxes.)

Jobs

 

“Are you an experienced, well-rounded tactical marketer who is looking to for a home to build a marketing masterpiece? A well-established San Francisco Bay area company is looking for an amazing, performance driven Multi-stack Marketing Manager to own, enhance, and drive marketing excellence for our company. You will be responsible for ALL ASPECTS of the marketing stack with a focus on strategy, implementing, and goal execution. We are looking for someone that wants to roll up their sleeves and be a change creator in the mortgage industry. Experience in managing marketing design, content and social media presence is required.” If interested, please send your resume to Chrisman LLC’s Anjelica Nixt.

 

MLOs should know that, “At AmCap, we offer our originators competitive rates, an extensive suite of mortgage products, flexible underwriting and exceptional compensation because we believe these are, and should be, the industry standard. What truly makes us an exceptional company is who we are, not just what we offer. In order to continue our legacy as a fiscally strong company dedicated to doing right by our employees and our customers, we’re constantly seeking new tools, new products and new opportunities to advance the interests of the loan officers and homebuyers with whom we work.”

Trainings and Events in the first two months to start 2020

On January 9th the Puget Sound Mortgage Lenders Association is having its general dinner meeting in Fife, Washington. Yours truly will be there speaking about the economy, lending trends around the nation, and the importance of customer service.

National MI is offering up the following webinars in January: January 7th: How to Create Your Perfect Presentation for Lunch & Learns, January 16th: Appraisal Review, Recent Changes, and What’s Ahead! January 21st: How to Avoid the Email Delete Barrier and Get More Replies

January 22nd: Crafting Your 2020 Social Media Strategy to Connect with Modern Homebuyers.

MGIC’s January 2020 webinars are currently posted at www.mgic.com/training and registration is open.

Genworth Mortgage Insurance provides complimentary courses to help customers manage, protect and grow their business, delivering you-centric solutions that matter. A new year means new learning, including a series focused on community lending and a webinar dedicated to “Understanding Genworth’s New Master Policy and Rescission Relief.” View the January Training Calendar.

 

On January 9th is the IP Lunch at Perkins Coie Conference Center in Seattle where John Mitchell, economist, will be providing a current update and discuss the outlook on the national, state and regional economies for the Washington Mortgage Bankers.

LoanStream Mortgage is providing a Webinar, January 10th on NonQM Products in 2020. Register here.

Hudson Cook, LLP announced a monthly webinar series, CFPB Bites of the Month, beginning January 15. Hudson Cook Partners Eric Johnson and Justin Hosie will present monthly updates, including but not limited to: CFPB press, rulemaking, ongoing litigation, supervision and other timely news. The webinars will last just 30 minutes during lunchtime on the third Wednesday of each month.

Confused about the new tax laws? Register for the CAMP-Silicon Valley Chapter’s Breakfast Meeting on January 17th. Guest Randy Warshawsky, EA will be addressing and explaining the new 2020 tax laws.

Collateral Risk Network has launched CRN as a non-profit with an ambitious agenda. Among other things, it will be establishing standards for valuations where non exist. CRN has assembled a fantastic lineup of speakers, including Brian Montgomery (FHA), John Bell and James Heaselet (VA), Ed Pinto (AEI), and Lynn Fisher (FHFA). The Compliance Roundtable on January 21 will focus on the new California “gig economy” law and the impact on the appraisal profession. There are also new data laws emerging that will impact lenders and AMCs. It looks like finally regulators and legislation has caught up to emerging technologies. Contact Karen to learn more.

From February 3-6, MBA’s Independent Mortgage Bankers Conference will be in New Orleans where IMB leadership and their management teams will hear the latest industry happenings and get new perspectives to position themselves competitively for 2020 and beyond. The conference offers unique opportunities for IMB professionals to learn from each other and share solutions, and has a reputation for boasting the largest gathering of IMBs each year since its targeted content is designed by IMBs for IMBs of all sizes and business models.

The Mortgage Bankers Association of New Jersey in conjunction with the NJ Bankers Association and the NJ State Bar Association; will be having dinner with the Commissioner of Banking and Insurance, Marlene Caride, on February 6 at the Hyatt Regency in New Brunswick. The evening will begin at 6PM with a cocktail reception followed by dinner and the program.

Register for FHA’s free, on-site Credit Underwriting Training in Denver on February 11 from 8:00 AM to 4:30 PM. Receive an overview of FHA underwriting procedures and addresses various industry-related FAQs related to FHA’s Handbook 4000.1. This training will also take an in-depth look at a variety of topics including credit, income, and asset (CIA) documentation; manual underwriting; automated underwriting systems (AUS); endorsement protocols; Loan Review System (LRS); and more.

The Americatalyst Conference is scheduled for February 11th-12th in Dallas. The conference will look at the future of mortgage banking, non-bank lending, technology and its influence, government policy and more. Find out more information by viewing the agenda.

Register for FHA’s free, on-site FHA Appraisal Training on February 12, in Denver from 8:30 AM to 4:30 PM. This training will cover FHA appraisal requirements, including appraisal protocol and updates to FHA appraisal policy as outlined in FHA’s Handbook 4000.1. This training also takes an in-depth look at a variety of appraisal-related topics including property acceptability criteria; minimum property requirements; property defects; appraiser responsibilities and requirements; and more.

The Mortgage Collaborative will host its winter conference at the historic Roosevelt New Orleans on February 16-18, just a week before Mardi Gras takes place. TMC’s conferences boast the highest LTV (lender to vendor) ratio of any industry conferences and are an incredibly interactive and impactful experience for its lender members, whom TMC allows to dictate the content, format, and agenda for their events. For more information on TMC or the upcoming event in The Big Easy, contact their COO Rich Swerbinsky.

On February 19th, in the evening, the Charlotte Regional Mortgage Lenders Association is having its monthly meeting. Come on by and say hello!

The Federal Reserve Bank of Dallas and the Real Estate Center at Texas A&M University have organized Room to Grow: Housing for a New Economy. This one-day Conference in Dallas on February 21st provides industry analysts, economists and experts to learn about the latest trends affecting housing, and discover developments that promise to change home buying.

Capital markets

I am sometimes asked, “Which U.S. bank is the largest holder of mortgage-backed securities (MBS)?” As some in the industry know, MBS are a type of asset-backed security similar to a bond that is made up of a bundle of home loans bought from the banks/agencies that issued them. Investors in MBS receive periodic payments similar to bond coupon payments.

 

MBS held by major U.S. banks have changed since the recession, with the proportion of total MBS held by the five largest U.S. banks having steadily declined since the downturn. Despite an increase in the dollar value from $393 billion in 2007 to around $690 billion currently, the share in MBS held by Bank of America, Wells Fargo, JP Morgan, Goldman Sachs, and Citigroup has gone from almost 63 percent in 2009 to less than 37 percent currently.

 

Bank of America holds the largest portfolio of MBS among all commercial banks in the country, with around $350 Billion of these securities on its balance sheet. Bank of America’s MBS portfolio increased from around $163 billion to more than $230 billion in 2008 thanks to its acquisition of Merrill Lynch. This metric has gradually increased since then, increasing from $234 billion in 2009 to more than $340 billion last year, making up around 18 percent of the total MBS across U.S. commercial banks.

 

Wells Fargo, the second largest aggregator, saw its MBS value shoot up in 2008, increasing from just around $55 billion to almost $100 billion due to the bank’s acquisition of Wachovia. The figure peaked in 2016 at $178 billion before shrinking over the last couple of years down close to $160 billion. This may have to do with the Fed’s enforcement order restricting Wells Fargo’s ability to grow its balance sheet.

 

JPMorgan, Goldman Sachs and Citigroup seen their share of MBS decline steadily since the crisis. Bank of American now holds more than half of the total mortgage-backed securities held by the five major banks. Other banks and private issuers are making up for the decline in MBS held by the major banks as the housing market has grown at a steady pace in the U.S.

Looking at rates, U.S. Treasuries pulled back slightly on a lightly traded session to end the year, steepening the yield curve yet again. In 2019 The S&P 500 gained 29%, the Nasdaq composite surged 35%, the Dow Jones Industrial Average rose 22%, and the 10-year Treasury ended the year dropping -77 bps for 2019 (closed at 1.92 percent on Tuesday). The 2-year to 10-year spread widened to 35 bps, stretching back from an inverted position in August. That steepening over the last several months was fueled by improved sentiment regarding growth prospects, and the Federal Reserve stating that it isn’t in a hurry to raise its policy rate.

 

Helping some of those growth prospects was President Trump saying on Tuesday that he will sign the first phase of a trade deal with China on January 15, finalizing an agreement that sees the Asian nation raising purchases of American farm goods in exchange for lower tariffs on some of its products. Beijing has not released any specific information yet on this plan.

What are the actual effects of the Phase One trade deal being signed with China? Since tariffs on mostly consumer goods were not imposed on December 15, this should slightly lower consumer price inflation forecasts, meaning growth in real personal consumption expenditures (PCE) should be stronger from growth in real income. Real business fixed investment spending should increase, though trade policy will continue to exert some headwinds on growth. The signing of the agreement should help real GDP figures in both the U.S. and China, though Boeing suspending production of its 737 MAX airplanes in non-trade-related events will significantly dent U.S. GDP in Q1 2020.

It seems financial markets were not priced for an imposition of tariffs on December 15, which would have weakened stock markets and widened credit spreads. The FOMC likely would have had to consider at least one rate cut in 2020, but with a ratcheting up of trade tensions averted, financial market conditions have not tightened. With GDP growing more or less at its long-run potential rate and with inflation not moving meaningfully above the FOMC 2 percent target, the committee should keep rates on hold through the end of 2021. The FOMC should tighten policy only if GDP growth turned out to be materially stronger and/or inflation significantly higher than their forecasts, though this is a low probability.

 

After the market was closed Wednesday in observance of the New Year’s holiday, today’s new year calendar began with layoffs from Challenger (job cuts announced by U.S.-based employers fell for the second consecutive month to their lowest monthly total since July 2018!). We’ve also received initial claims for the week ending December 28 (-2k to 222k). Coming up is the non-market moving final December Markit manufacturing PMI in about an hour. After that, Treasury will announce the details of next week’s mini-Refunding consisting of new 3-year, reopened 10-year and 30-year securities. We begin the day with Agency MBS prices better by .125 and the 10-year yielding 1.89 percent.

Two elderly gentlemen from a retirement center were sitting on a bench under a tree when one turns to the other and says, “Slim, I’m 83 years old now and I’m just full of aches and pains. I know you’re about my age. How do you feel?”

Slim answers, “I feel just like a newborn baby.”

“Really!? Like a newborn baby!?”

“Yep. No hair, no teeth, and I think I just wet my pants.”

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Dec. 31: Sales jobs; SAFE Act policies not uniform around the biz; impeachment process is not driving rates

“I can’t remember how to write 1, 1000, 51, and 500 in Roman Numerals! IM LIVID.” Some in the industry may be livid over Associated Bank’s announcement yesterday to not accept applications taken by an LO that has been granted the “temporary authority to operate.” But Associated is not the only one. More below on the Act, and a random sample about who is doing what when it comes to licensing. And, in general, the term “livid” is rarely used these days around the world as many believe 2019, despite the mainstream press focusing on bad news, was the best year ever around the world when looking at literacy, poverty, and health.

Jobs

Optimal Blue continues to expand and with growth, comes opportunity! The company is actively searching for CLIENT ADVISORS in our Plano, Texas office. What does a Client Advisor do? They put their stellar customer service skills to work and maintain client relationships by providing Optimal Blue customers with helpful information regarding the PPE solution, such as making suggestions on how to use the platform to its full capability. Visit the corporate careers page to learn more about this exciting opportunity and the innovative team at Optimal Blue.

Lender products & services

Financial brands taking a customer-centric approach are quickly setting themselves apart from competitors. And personalization, hyper-personalization and humanization are all at the forefront of improving the customer experience. But what’s the difference between these techniques and when should you use each one? Read the Total Expert blog and dive into the true meaning of personalization, hyper-personalization and humanization, and learn how you can leverage these techniques to grow your revenue.

SAFE Act

When a mortgage lender hires a large group of loan officers from a bank and that transition includes handling their licensing requirements, what can the lender do to transfer the loan officers from their bank registration to become licensed loan officers and not produce a myriad of state licensing requirement delays?

Section 106 of the Economic Growth, Regulatory Relief, and Consumer Protection Act is designed to reduce the barriers for mortgage loan originators (“MLOs”) who are licensed in one state to temporarily work in another state while waiting for licensing approval in the new state, and, for our purposes, specifically also grants MLOs a grace period to complete the necessary licensing, when they move from a depository institution (where loan officers do not need to be state licensed) to a non-depository institution (where they do need to be state licensed).

The Economic Growth, Regulatory Relief, and Consumer Protection Act amended the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act, and becomes effective in just a few days, on November 24, 2019. Beginning on November 24, 2019, an MLO who satisfies the Loan Originator with Temporary Authority eligibility criteria may act as a loan originator in a state where the loan originator has submitted an application for a state loan originator license, regardless of whether the state has amended its SAFE Act implementing law to reflect the Economic Growth, Regulatory Relief, and Consumer Protection Act amendments.

A loan originator applying for a state license must follow the application procedures established by the state, and generally must wait to begin acting as a loan originator until the state grants the application, including transitional license situations. Loan originators who are eligible for temporary authority may act as a loan originator in the application state while the state is considering the application. The Economic Growth, Regulatory Relief, and Consumer Protection Act amendments establish temporary authority, which provides a way for eligible loan originators who have applied for a new state loan originator license to act as a loan originator in the application state while the state considers the application.

Attorney Brian Levy addressed the topic in his latest Musings. “I’m pretty sure TAO temporary whatever will prove to be another example of the 80/20 Rule (a/k/a The Pareto principal) operating in the mortgage business. Everyone knows 20% of your originators produce 80% of the volume. Conversely, TAO is likely to work like a charm for about 80% of originators who can follow your compliance/licensing team instructions and who breeze through the background checks and testing. The team, however, will be challenged by the 20% who don’t follow the instructions, can’t pass the test, or who have some skeletons in their closet. I’m not going to go into the details (see that MBA Guide for that), but those details and time frames are very important, so make sure any (formerly registered) bank originators and internal originators looking to get licensed in another state have their ducks in a row when the compliance staff asks for it.”

The NMLS Policy Guidebook was recently updated to add a new section on Temporary Authority to Operate concerning “qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company, and qualified state licensed MLOs seeking licensure in another state.”

The Georgia Department of Banking and Finance recently published a proposed rule which would add several state-specific requirements for mortgage loan originators (MLOs) seeking to utilize temporary authority in Georgia under Section 106 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (which took effect on November 24, 2019).

Wisconsin recently enacted a bill, Senate Bill 457, which, among other things, amends its mortgage loan originator (MLO) licensing provisions.

Lakeview Wholesale will not allow loans originated under the temporary authority of the SAFE Act Regulations amendments in effective as of November 24th. It will continue to monitor and evaluate any compliance risks related to temporary authority and loan origination practices.

“The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA) made amendments to the SAFE Act, effective November 24, 2019. These amendments permit certain individuals who were previously registered or State-licensed for a certain period of time pursuant to the SAFE Act to act as a loan originator in a State, if they have a applied for a loan originator license in the State (“loan originators with temporary authority”) [12 U.S.C. 5117]. At this time, Associated Bank has made the decision not to accept applications taken by a loan

originator that has been granted the ‘temporary authority to operate.’”

AmeriHome will accept loans where the MLO was operating under the “Temporary Authority” granted to certain loan officers by the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155). Sellers should be prepared to provide proof of the Temporary Authority, should this be requested by AmeriHome.

Plaza is accepting loans that have been originated by MLOs operating under the new Temporary Authority rules that went into effect on November 24, 2019. Under the new rules, MLOs who have applied for a license and completed their education and testing requirements, are permitted to engage in origination activities in that state for up to 120 days while they await full license approval. Correspondents utilizing this new rule must provide evidence of temporary authorization issued by the state.

Mr. Cooper’s Correspondent Division sent out, “The SAFE Act was recently amended with a new status for MLOs. Known as ‘Temporary Authority to Operate,’ the new status streamlines the license application process for federally registered MLOs seeking state licensure, and state-licensed MLOs seeking licensure in another state. State laws have or will be updated with this new Temporary Authority status, which will define the state-specific requirements regarding eligibility and application requirements for a mortgage loan originator to operate thereunder in each state. Prior to loan purchase, Mr. Cooper validates MLO compliance with the SAFE Act policy (including applicable state licensing laws). Any non-compliance with the policy results in a stipulation on the loan. Lenders must provide documentation of compliance prior to loan purchase.”

Capital markets

The difficulty in assessing how the economy is currently doing stems from increased volatility recently. Take housing starts in the autumn. Housing starts fell 9.4 percent in September, a big drop that co-opted the school of thought that slowing job growth and an inverted yield curve had made lenders and developers cautious amid other recessionary fears. At the time, builders remained upbeat since starts of single-family homes rose, their fourth consecutive increase. Multifamily units accounted for all of the drop, falling over 28 percent. U.S. homebuilding then rebounded in October and permits for future home construction jumped to a more than 12-year high, with everyone singing praises of the housing market amid lower mortgage rates. That makes for the fifth straight month of single-family construction figures rising, and markets also reveled in the multi-family sector rebounding solidly.

Additionally, that poor report for September was revised upward by 10k units to paint a more positive outlook. If the report holds, it could help to ease a supply squeeze that has plagued the housing market. So how do we gauge the strength of the housing market from here?

Lenders have grown more cautious about extending credit for apartment projects. Condominium development has also slowed as limits on the deductibility of property and state income taxes have cooled sales in many condominium-dependent markets. In the South, builders have been unable to find the workers they need.

On the positive side, lower mortgage rates and a shift by homebuilders to focus on more affordable product appear to be bringing buyers back to the market. Builders expect sales to improve further, convinced that the Fed’s rate cuts are working to offset some of the trade war-related weakness of overall growth. So, what are some warning signs? Builders complained in the most recent survey about “a lack of labor and regulatory constraints,” adding that “lot shortages remain a serious problem, particularly among custom builders.”

Of course the impeachment continues to dominate the news. The House Judiciary Committee began the process by hearing evidence from lawyers of both parties as it considers whether President Trump’s actions rise to the level of impeachable offenses. The White House, which has argued that the inquiry is illegitimate, declined to participate, focusing instead on the trial that would follow in the Republican-controlled Senate if/when the House approved articles of impeachment are sent to it.

So how exactly does the impeachment process in Washington impact mortgage rates? It would be an easy question to dismiss by saying that, directly, there was little impact as a result of the inquiry. That is slightly shortsighted, as uncertainty in political affairs usually causes investors to “flee to safety,” or trade in a risk-on fashion. If investors consider impeachment a disruption that would impact the economy negatively, they will flee to safety, which usually involves selling riskier or more volatile investments (e.g. stocks) and purchasing relatively safer investments (e.g. bonds and other fixed rate investments).

Bonds issued by the U.S. Treasury are considered the safest investment available, with Mortgage Backed Securities comprised of residential mortgages are a close second. As investors purchase bonds and other fixed rate investments like MBS, those prices will rise, causing mortgage rates to drop. What happens in Washington impacts investor’s decisions only as much as they feel impeachment will disrupt or benefit the economy. While individual investors may have personal political bias, investors as a group are concerned only with the politics that impact the bottom line. The question moving forward with impeachment is will there be any significant impacts to the economy as a result in any change in policies that affect businesses and markets? From the market’s muted reaction so far, in the unlikely event that President Trump is removed from office, the policies and actions of the new Pence Administration regarding business, trade, taxes and markets should not be much different from the current administration. That administration would take office for less than a year, so the larger effect will come from how markets think the 2020 U.S. election is going to play out.

Looking at the day-to-day bond market, the yield curve steepened on the last full trading day of 2019. Going into year-end there is often an urge to purge ‘losers” out of one’s portfolio to take the hit and start the new trading year on a clean slate without the unwanted risk exposure. The yield curve steepening is mainly due to the dumping of duration as the long end well underperforms in conjunction with thoughts of aggressive fiscal stimulus. Meanwhile, the front-end of the curve is much more sensitive to the actions of the global central banks, of which most expect to remain liberally accommodative for the foreseeable future. The purpose behind such a policy is to have inflation and inflation expectations trend higher even to the point where it exceeds their desired target for an extended period of time.

Markets today have a shortened session domestically, and all European markets are closed. The domestic calendar gets under way shortly with Redbook same store sales for the week ending December 28. Additional releases on the day include the October S&P Case-Shiller Home Price Index, October FHFA Housing Price Index, and December Consumer Confidence before the bond market closes one hour early. We begin the day with Agency MBS prices worse a few ticks and the 10-year unchanged yielding 1.90 percent: things are quiet.

Bread is like the sun. It rises in the yeast and sets in the waist.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Dec. 30: Vendor/lender survey; Taxpayer First Act updates; program & processing notes; China & our interest rates

I was telling my cat Myrtle that I have a problem when people ask me what I’ll be doing tomorrow after midnight. I don’t have 2020 vision! Barring any surprises the Fed has not made it a secret that the FOMC expects to leave short-term rates where they are well into 2020. In other Fed news, thank you to R.C. Whalen who passed along the news that, starting in early 2021, about the same time the QM patch expires, the FedWire will be open until 6PM. And servicers know that the publication of LIBOR is not guaranteed beyond 2021. (And, anecdotally, lenders originating ARM loans have moved away from offering LIBOR as an index. Why run the chance of legal troubles in the coming years by tying a borrower’s loan to an index that is likely vanishing?)

Lender landscape survey

The future of financial services will belong to firms that combine human interaction with technology in ways that create higher quality and more relevant experiences throughout the entire customer journey,” noted Joe Welu, founder and CEO of Total Expert, emphasizing the importance of a high-tech and high-touch consumer experience for lenders in 2020. Blend spoke to Welu and 15 other industry leaders to get their takes on the 2020 lending landscape. Dive in here

Program and processing notes

AFR would like to clarify a 3rd-party post from last Thursday: American Financial Resources continues to offer VA Loans up to $1.5 million. “To simplify and streamline our products, we have consolidated our VA offering into two products; the Standard product which is available up to the county loan limit, and the Jumbo product which is available above the county loan limit (up to $1.5 million). Please consult our lending guidelines for complete details. Note, if you are an Optimal Blue user please reconfigure your eligibility/adjustment sourcing to reflect this change. Click here to email for information on becoming an AFR partner (800-375-6071).

Mountain West Financial implemented a new relock policy for locks that have been expired for less than 60 days. A lock that has been expired for less than 60 days can be relocked for either 15 days or 30 days. Relock pricing shall be calculated as worse case pricing (original lock vs current market) plus a relock fee based on the number of days requested for the relock. Relock Fees: 15 Days = 0.125 and 30 Days = 0.250.

loanDepot Wholesale/Correspondent issued an Announcement describing VA IRRRL/Interest Rate Decrease Requirement, and loanDepot Wholesale’s Escrow Policy.

Caliber Home Loans Correspondent Lending is offering price improvements on the Elite Access and Premier Access Caliber Portfolio Lending Products. This pricing special is effective for Best Effort Lock Confirmations issued through December 31. All applicable rate sheets will be updated to incorporate this improvement. Price Improvements Include: 50 bps on Elite Access and 50 bps on Premier Access.

Taxpayer First Act updates

As mentioned in this commentary, recall that the IRS posted a clarification regarding the effective date of the new taxpayer consent and disclosure requirements needed to obtain and share IRS tax transcript information with investors, servicers and due diligence firms. The clarification notes that Section 2202 of Taxpayer First Act “applies only to disclosures made by the IRS after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.” With this clarification, seasoned loans and loans in the pipeline with transcript information received from the IRS prior to December 28 are not covered by the new consent requirement. The MBA expects the GSEs will update their published guidance to reflect this IRS clarification. MISMO, which worked to develop consent language that would meet the requirements of Section 2202, has updated its FAQs page to reflect this much-needed IRS clarification.

How will the December 28th, 2019 effective date of the Taxpayer First Act affect lenders and servicers? Well, the Taxpayer First Act requires taxpayers to provide consent for the express purpose for which their tax return information will be used. And taxpayers must provide their express permission for their tax return information to be shared with any other party.

In practical terms, if a lender or servicer obtains tax return information during the origination or servicing of a mortgage loan, the lender or servicer must obtain express consent from the taxpayer prior to sharing the tax return information with another party. Such sharing would extend to actual or potential owners of the loan, such as Fannie Mae or any other loan participant.

The IRS has indicated that it has no plans at this time to provide a standard form related to disclosing or sharing tax return information with other parties. The Mortgage Industry Standards Maintenance Organization, however, drafted a sample Taxpayer Consent Form designed to allow sellers/servicers to share tax return information with other loan participants (this form is available to organization members). Many document providers have also prepared a consent form which will be added to the early disclosures. Sellers/servicers may also prepare their own taxpayer consent form, as long as the form provides the purpose for which the tax return information will be used and provides the seller/servicer with express permission to share tax return information in accordance with the law.

The Internal Revenue Service has posted new information on its website that helps clarify the application of Section 2202 of the Taxpayer First Act (Act): “Section 2202 of the Taxpayer First Act applies only to disclosures made by the Internal Revenue Service after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.” Review the information on this IRS page under the topic “Limit on redisclosures of consent-based disclosures (Section 2202).”

Freddie Mac issued Guide Bulletin 2019-25 reflecting that if a signed consent form is required under the Taxpayer First Act, a signed copy must be maintained in the mortgage file. Whether the Seller is required to obtain the consent form is based on the language in the Act and not on the settlement date of the mortgage. Freddie Mac has updated its FAQs related to borrower consent under the Act for additional information.

Fannie Mae issued an Updated Notice, replacing its November 6th Notice, regarding a provision of the Taxpayer First Act.

loanDepot Wholesale/Correspondent issued an Announcement that speaks to State Required Disclosure Matrix, Sallie Mae Credit Card Liabilities, Freddie Mac Bulletin 2019-20 and the Taxpayer First Act.

AmeriHome added new Seller Guide section, 10.1.8: Foreign Language and Foreign Currency Loan File Documentation. It clarifies AmeriHome requirements when loan file documentation is provided in a foreign (non-English) language or in foreign (non-U.S. dollar) currency. In addition,

Seller Guide Section 10.5.6: Tax Return and W-2 Transcripts has been updated to include the Taxpayer First Act requirements.

There is a lot of buzz with regards to the Taxpayer First Act (TFA), especially as implementation deadlines are approaching that will affect lenders—in particular Sect 2201/2202. Although the IRS has not made a formal announcement on the new rollout date, here is a recent update to Section 2201 regarding the additional user fee to process 4506Ts: The IRS has delayed the January 1, 2020 rollout date for the new additional 4506-T user fee until further notice.

Click here to learn more on the IRS transaction fee increase from $2.00 per each tax year to $3.00 per each tax year mandated by the Taxpayer First Act, Section 2201. The IRS will issue a formal announcement to IVES vendors when an implementation date has been decided.

The PennyMac Correspondent Group has posted a new announcement: 19-70: Updated Taxpayer First Act Consent Form.

Effective December 28th, Wells Fargo Funding will require the taxpayer consent on all Loans, regardless of whether tax return information is required. This applies to Delegated and Non-Conforming Correspondent Credit Underwrite (CCU) Loans with Notes dated on and after December 28, 2019 and Prior Approval Credit Packages received on and after December 28, 2019.

Effective for loans with a Note date on or after December 18th, to conform to the Act and Agency requirements Fifth Third will require a signed borrower consent form on all loan files. Usage of a specific form is not required, however the form provided must include the borrower’s name and signature along with a statement giving express permission to share their tax information. Additionally, for loans selected for either a pre-purchase or post-purchase quality control review with a Note date prior to December 18th the borrower consent must be provided if not already in the file.

Capital markets

Markets around the globe breathed a sigh of relief with positive November PMI readings out of China but have been holding their breath awaiting any positive news on the trade front, as the well-being of the second largest economy in the world (behind the U.S.) has serious implications on the global financial landscape. China’s importance in the global economy has risen significantly over the past few decades. In 1988, China took in less than 2 percent of the world’s exports, and was responsible for producing only 2 percent of the world’s imports. In 2018, China’s absorption of the rest of the world’s exports grew to 10 percent and it supplied around 14 percent of the goods that the rest of the world imported, becoming a significant player in global trade flows in a relatively short period of time.

 

Although the country’s financial interactions with the rest of the world have also grown meaningfully, China does not have the same heft in the global financial system as it does in the global economic system. Its use of capital controls has restrained its financial integration with the rest of the world, limiting foreign amounts of direct financial exposure to China. From the earliest available data in 2004, foreign holdings of Chinese assets have grown from less than $700 billion to more than $5 trillion in 2018. But compare that with China’s ownership of foreign assets, more than $7 trillion last year versus foreigners owning $35 trillion worth of American assets (American’s alone hold more than $25 trillion of foreign assets), and you get a sense of the discrepancy. Foreigners also have more exposure to the assets of the United Kingdom, Luxembourg, the Netherlands, France, Germany, Ireland and Japan than they do to China. In short, China’s economic heft, via its effect on global trade flows, is significantly greater than its global financial heft.

 

An economic downturn in China likely would cause prices of Chinese assets to plunge, which could lead to significant financial losses for foreign investors with meaningful amounts of financial exposure to the country. Additionally, Chinese investors may need to sell their foreign assets, which could lead to additional weakness in the prices of those assets, if an economic downturn in China were severe enough. The limited exposure of foreign economies to Chinese assets can be explained by the capital controls that have historically dominated the Chinese financial system. A financial meltdown in China would probably cause a painful economic downturn in that country, which would impart a significant shock to global growth via the exports that China takes in from the rest of the world.

If anyone is locking loans, turning to this country, U.S. Treasuries & Agency MBS ended last week slightly rallying, despite investors not receiving any domestic or overseas economic data of note. The NY Fed did release a new two-week FedTrade schedule for December 30 through January 14 which totaled $2.7 billion, as expected, in four operations. The first operation is this Friday, January 3, with the Desk scheduled to buy a maximum of $793 million UMBS 2.5 percent ($257 million) and 3.0 percent ($536 million).

 

Today marks the start of the final full trading session for 2019, which should see some additional month-end index buying given the early close tomorrow for New Year’s Eve. The economic calendar is already underway with International Trade in Goods (-$3.6 billion to $63.2 billion), and Retail & Wholesale Inventories (-.7% and flat, respectively). Later this morning brings December Chicago PMI, November Pending Home Sales, and the December Dallas Fed Manufacturing Index. Tomorrow sees the October S&P Case-Shiller Home Price Index, October FHFA Housing Price Index, and December Consumer Confidence before the early close at 2ET/11PT.

With bond and equity markets closed for New Year’s Day on Wednesday, releases pick back up Thursday with jobless claims, before the week closes with the December ISM Manufacturing Index, November construction spending, and final December Markit manufacturing PMI on Friday. Also on Friday, the Fed will release minutes from the December 10-11 meeting, delayed from the normal Wednesday release due to the New Year’s Day holiday. We start the week with Agency MBS prices -.125-.250 and the 10-year yielding 1.93 percent after closing last Friday at 1.87 percent due to concerns in the European bond market and general illiquidity.

URGENT: NEW HOME WANTED!

Rex is an 8-week-old German Shepherd that I bought for a surprise for my husband at Christmas, but it turns out he is allergic to dogs, so I am now urgently looking to find him a new home. I don’t want any money, just free to a good home. His name is Chet, he’s 49 years old, a handsome and caring man who is great at chores. He can cook, likes wine, is good with kids and always keeps a clean house. 1-408-867-5309.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Dec. 28: Reader’s letters on the current M&A activity, the IRS fee increase, and the outlook for 2020

I received this note from “TeeGee.” As you think about New Year’s resolutions, here’s one we should all make together: resolve to insist that decades begin with the year ending in the numeral 1 and finish with a 0. For a decade to begin, we must start with the year ending with 1 (2021) and finish with 10, or so far as chronology is concerned, a year ending in 0 (2030). For example, January 1, 2001, opened the 21st century and the start of the new millennium, just as the year 1 A.D. marked the beginning of the Christian era. Of course, many of us will remember the wild celebrations that were touched off at midnight on December 31, 1999. But was that a year too soon? Yes! That fact was known even to comedian Jerry Seinfeld. And if at the stroke of midnight on December 31st, you think you’ll be celebrating the start of a new decade, guess again. As was the case 20 years ago, you’ll be one year early, for the new decade will actually start in the year 2021.”

Pay attention to the IRS

Sandra James, CEO of Private Eyes and 4506-Transcripts.com, sent, “The IRS reviews its Income Verification Express Service (IVES) user fee and will adjust the amount based on the cost of the program in addition to any changes in legislation. On July 1, the President signed the Taxpayer First Act of 2019 (the Act) (P.L. 116-25) into law. Section 2201 of the Act requires the IRS to “implement a program to ensure that any qualified disclosure (1) is fully automated and accomplished through the internet; and (2) is accomplished in as close to real time as is practicable.” In addition, the Secretary shall assess and collect a fee to cover the cost of the program requirements outlined in Section 2201. Once the automated program is fully implemented at a date to be determined it will replace our manual faxing process and deliver transcripts results in close to real time.

 

“The user fee per (IVES) transcript request will increase from $2.00 to $5.00 effective March 1, 2020. Per Section 2201 of the Act, the increased user fee will apply to a ‘qualified disclosure,’ which means a disclosure under section 6103(c) of the Internal Revenue Code of 1986 of returns or return information by the Secretary to a person seeking to verify the income or creditworthiness of a taxpayer who is a borrower in the process of a loan application. We will be sending separate instructions to our clients on how to process transcript requests falling outside the definition of a ‘qualified disclosure’ so that you will be billed the correct user fee.

“The IVES invoices dated April 5, 2020, for all March 2020 IVES transcript requests will reflect a charge of $5.00 per transcript, as will future invoices. Transcript requests processed through February 29, 2020, will be billed at the current $2.00 per transcript rate. Transcript adjustments for requests processed through February 29, 2020, will be adjusted at the $2.00 per transcript rate. Transcript adjustments for requests processed after February 29, 2020, will be adjusted at the $5.00 per transcript rate for qualified disclosures and the $2.00 per transcript rate for non-qualified disclosures.” Thank you, Sandra!

M&A, All the Way!

Thinking about merging with or acquiring another company? STRATMOR’s Jeff Babcock has some observations which should be of interest to anyone monitoring the current business climate for mortgage banking entities.

“Given that Merger and Acquisition activity in the mortgage banking sector has clearly accelerated over the last 18 months, why have there been no actual mergers, and could mortgage company mergers be more strategically attractive (than a company sale) and operationally feasible for a select number of independent lenders? STRATMOR believes so.

“While there are several developments which have combined to stimulate transaction activity, resulting in a material narrowing of the bid-ask spread, virtually all of the transactions have followed a similar pattern. That is, a buyer acquires the assets or the stock of the selling lender and typically consolidates some or all of the production and corporate support functions into the buyer’s organization which is the surviving entity.

We have learned that a traditional company sale is not the right solution for many entrepreneurial owners. The distinct properties which define a merger include reasonably similar production scale, comparable company valuations and the willingness of the respective owners to check their egos at the door. Since there is probably no such thing as a true ‘merger of equals,’ the theme here is to approximate a marriage where equality rather than dominance is the intention of both parties. The strategic objective of a merger is to create a mortgage bank with greater critical mass of origination volume, stronger balance sheet, competitive differentiation, perhaps production channel diversification and functional efficiency. These lofty objectives can only be achieved by carefully crafting a strategic plan wherein the go-forward organization is structured and positioned to capture the highest performing elements of each lender’s platform.”

(In the next edition of this message, Jeff will dig into the elements required to make a merger successful.)

Industry outlooks for 2020

I’ve received some thoughts on the year ahead. Bill Neville, 25-year vet and CEO of regtech provider LoanLogics doesn’t believe that 2020 will be the year paper “bites the dust” but says that the end is in sight. “Over the past two years, machine learning has proven wildly successful at accelerating the time it takes lenders to process loan file documents and extract data from them. By using technology to do the heavy lifting, data is being captured more quickly, accurately validated, and used to power other rules-based automation to reduce costs. The impact to audit review productivity has been dramatic, doubling and even tripling loans per person per day depending on audit type.

“I think that investors will start to see the difference. Getting at that data and then using it in an actionable way is the trick. When you combine data analytics with tons of high-quality data, investors have more insights to work with. This allows them to understand where there are quality issues and proactively work with sellers to reduce them, which is going to streamline the process immensely. I am sure that removing every piece paper from the 400 to 500 pages of documents in a single loan isn’t going to change overnight. But we’re off to a great start.”

In the non-QM space, Greenbox Loans’ founder and President Raymond Eshaghian wrote, “The sky’s the limit. I think that the non-QM market will continue expanding next year to keep up with growing borrower demand. It’s wrong to think of non-QM products as an emergency-only option when an agency loan won’t work. More lenders are starting to realize how many borrowers can benefit from non-QM options, especially self-employed borrowers, who make up three out of every 10 working Americans. Real estate investors, prime borrowers with high DTIs and non-prime and near-prime borrowers with credit issues all make great candidates for non-QM loans as well. It is not known how much impact ending to the QM patch may have on the market, but non-QM growth will occur regardless. We’ll see more non-QM second loans as home values continue to rise, too. When you add up all the different types of non-QM borrowers, the potential for originators to grow volume with alternative financing is tremendous.”

Where is residential real estate heading next year? The Mortgage Bankers Association reported total volume of mortgage loan originations in 2019 will hit approximately $2.06 trillion and mortgage rates to remain at or below 4 percent for 2020. Last week, Black Knight reported refinance lending nearly doubling over the past three quarters of 2019, up 132 percent annually in the third quarter. Cash-out refinances jumped 24 percent since the last quarter of 2018 and made up 52 percent of all refinances. Meantime, homeowners withdrew a collective $36 billion in home equity, the highest amount in nearly 12 years. New home sales in 2019 reached nearly 7.4 million in October, according to the U.S. Census Bureau and the National Association of Realtors reports 2019 existing home sales at more than 53.2 million as of October.

Pat Stone, Chairman and CEO of Williston Financial Group, said that for the most part, 2020 looks to be a continuation of 2019: low mortgage rates and limited supply. He expects purchase activity to see a small increase as extended employment and increased growth in salary and wages results in sustained-to-slightly increased demand and a decline in refinance activity, but still meaningful with the year probably seeing 75 percent to 90 percent as much activity as witnessed in 2019. “The biggest issue will continue to be the lack of starter homes for first-time buyers. That problem will not be corrected for the foreseeable future and will be compounded as more retirees seek to downsize as opposed to moving into retirement communities.

“Two issues that could adversely impact the housing market in 2020 are a recession caused by a continuation of the trade war, or the possibility of a decline in consumer confidence because of overall economic conditions or disruptions in the political process. The recession will become a problem should tariffs impact trade through the first quarter. The Midwest is suffering from the impact of tariffs on agribusiness. Government assistance to the Midwest has mitigated the problem to date but can’t continue at present levels. Historically, elections have not impacted housing activity to a great deal, but should the impeachment process, coupled with the election cycle, cause a drop in consumer confidence, housing will be impacted negatively.”

What about mortgage servicing? Say what you want about changes in the climate, there is no denying that record incidents of wildfire and hurricanes have reached historic catastrophic levels for the past three consecutive years and 2019 was no exception. In July, CoreLogic reported mortgage defaults from wildfires hit critical highs for the first three months with Sonoma and Butte counties reporting 50 percent and 70 percent increases in defaults, respectively. And the J.D. Power 2019 U.S. Primary Mortgage Servicer Satisfaction Study released in August said, “Focus on efficiency and cost controls comes at the expense of customer experience.” So, as mortgage servicers grapple with the likes of disaster recovery, and try to simultaneously innovate, carve out dollars to meet user experience demands, and use strategic foresight on how to build trust, the challenges begin to escalate.

Jane Mason, CEO of Clarifire, wrote, “The industry settled into newly imposed guidelines, revamped disaster programs, and increased focus on the experience of the impacted borrower in 2019. While predictive tools are more readily available to help servicers prepare to a certain extent, the real secret to preparedness is becoming more efficient overall. This means servicers need to continue, or start, efforts to incorporate disaster recovery processes into existing efforts to automate, or digitize, and innovate default servicing. Managing disaster relief fluctuations is entirely too complex to be handled as a one-off process tracked by spreadsheets.

“Mortgage servicers will need to carry over automation to the overall borrower experience in 2020. AI is taking process automation to new heights and continues to expand servicer access to data, leveraging for decisioning capabilities in workflow and business rules. While there’s an obvious cost to strategically incorporate AI into servicing rules and decisioning, the future gain in efficiency readily offsets the expense. AI for servicers can significantly reduce response timeframes and costs, as well as improve accuracy and efficiency. Of course, appropriately implementing AI, understanding the core algorithms and requisite documentation, enables organizations to aptly meet auditing needs.”

Here are 10 micro-steps (part 3 of 3) in a handful of areas of life. Each can serve as the foundation for continuing to make more changes in your life.

8) Block time on your calendar to manage your email. Refocusing after being interrupted takes time, so setting aside time for email can help you avoid constant inbox distractions.

9) Set aside a specific time (even 5 minutes) each day or week dedicated to worry time. Write down or reflect on your worries and concerns. Don’t set any expectations about solving your worries or generating solutions, though you might find that solutions come naturally once you start reflecting.

10) Declare an end to the day, even if you haven’t completed your to-do list. Effectively prioritizing means being comfortable with incompletions. Once you’ve handled the day’s essential priorities, recognize that in any interesting job it’s almost impossible to do all you could have done in any one day.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

 

Dec. 27: AE jobs; affordable lending, first-time buyer products; updates on the new URLA and conv. loan amounts

If Freddie Mac and Fannie Mae didn’t exist, would we create them now? Turkey will establish a new mortgage financing firm, Birlesik Ipotek Finansmani AS, similar to U.S.’s Fannie Mae, that will issue and sell mortgage-backed securities to facilitate housing ownership for lower income citizens. F&F certainly serve a purpose in the United States in the both the primary and secondary markets. Do you remember when mortgage companies and banks in the West sold their loans to Eastern investors? I doubt it, as that was about a hundred years ago. How about the Federal government intervening during the Great Depression, resulting in the formation of the Federal Housing Administration, the Federal National Mortgage Association (Fannie), and the Home Owner’s Loan Corporation? VA loans sprang up during WWII. In 1968, the Government National Mortgage Association emerged, and in 1970 the Federal Home Loan Mortgage Corporation (Freddie) came along to help promote home ownership. Unwinding all that and returning to all “private capital” is unlikely, but footprints can certainly be reduced.

Employment

“Do you consider yourself a Top-Flight Non-QM AE, but you are working for a subpar company? Or perhaps you’re just 1 of 25 other AEs in your company working the same area, fighting over the smallest of accounts? Have you had enough of your accounts disappearing on Monday, only to end up with another salesperson on Tuesday? Are you done with promises made to you but just not kept? Do you feel like you are on an Island with zero support? You looking for a sales minded company that will really support you? Do you want Non-QM programs that lead the industry? Start 2020 off focused on you and your career, start 2020 off with a conversation with Kevin DeLory, Vice President TPO Sales at Carrington Mortgage.

Lender products and services

The holiday break is here and time to re-evaluate your process and how technology can help improve your efficiency in 2020. Digital mortgage providers like Maxwell can be impactful tools to drive efficiency for your team. Maxwell is specifically designed for small- to mid-size lenders where customization is desired and personalization from the loan officer is critical to achieving a satisfied borrower. Today, the Maxwell team reports that lenders on their platform are closing loans 45% faster than the national average, collecting docs 73% faster, and driving borrower satisfaction up over 25%. These numbers highlight how Maxwell increases efficiency, drives agent referrals, and offers true ROI on technology. To experience Maxwell, click here and set up time for your customized demo. Cheers to better lending in 2020!

There’s no place like HomeOne for the Holidays! If you are an LO interested in the right product for a first-time homebuyer wanting the flexibility of conventional 3% down payment options, QLMS is here for you. HomeOne can be the gift of a lower down payment for clients who do not qualify for, or want, FHA or VA loans. It is the ideal tool for those looking for fixed rate purchase or rate/term refinance on non-high balance loans for one-unit primary residences. If you are not yet a partner with QLMS, click here to grow stronger together.

Freddie Mac Single-Family is ALL FOR building the future of home. Affordable lending is evolving and Freddie Mac is ALL IN on providing solutions that enable emerging populations to achieve the dream of HOME. We are changing perceptions by developing products and resources that drive real opportunities for businesses while creating a renewed sense of access for borrowers. Read an Executive Perspective from Danny Gardner, Senior Vice President, Freddie Affordable Lending and Access to Credit, that highlights the value of education and strategic outreach to overcome barriers to homeownership. In addition, don’t miss Freddie Mac’s take on The Future of Affordable Lending in Housingwire. Learn more about All For HomeSM, Freddie Mac’s approach to affordable lending, and discover key insights to inform your business and take advantage of solutions and tools that will further enable your borrowers to make Home Possible®.

Conventional conforming rolls on

It helps, to keep things in perspective, to see what the Agencies and a random sample of lenders and investors have been doing over the last month in terms of changes.

Time flies, and lenders must use the redesigned Uniform Residential Loan Application (URLA/Form 1003) and updated Desktop Underwriter® (DU®) Specification beginning on Nov. 1, 2020. Fannie Mae has published the updated implementation timeline and supporting resources as did Freddie Mac.

Fannie Mae issued an Updated Notice, replacing its November 6th Notice, regarding a provision of the Taxpayer First Act.

Freddie Mac has launched an automated eNote certification solution for third-party eNote custodians, which includes a system-to-system integration from Freddie Mac’s Loan Selling Advisor®. As a key component, this integration enables third-party eNote custodians to digitally compare the lender-delivered loan data with data included in the borrower’s signed eNote, and to provide results of the certification to the lender. Freddie Mac will remain as an eNote custodian option for its Sellers and Servicers and will notify eMortgage Sellers and Servicers in advance of any changes to the custodian options.

Fannie Mae issued Announcement SVC 2019-08 which revises and simplifies requirements. These include a payment shortage tolerance, adds contact information for reporting fidelity bonds and errors and omissions events, and more.

By now everyone knows that the loan limits in 2020 are increasing. The new loan limit for most of the country will be $510,400, a 5.38% increase over the 2019 limit, and is effective for whole loans delivered to Fannie Mae and loans in MBS pools with issue dates on or after Jan. 1, 2020.

Fannie Mae’s Selling Guide update SEL 2019-09 announces clarifications to calculating monthly real estate tax payments, clarifies non-applicant debt policies, addresses bridge loan treatment in monthly debt obligations, publishes information on titling manufactured homes, removes requirements for assignments of mortgage for loans in Puerto Rico, simplifies capital markets processes, and more.

Sun West Mortgage Company, Inc. will accept lock requests per the 2020 Conventional loan limits published by Fannie Mae and Freddie Mac for both its Wholesale and Correspondent channels. Program guidelines are available in AllRegs (Wholesale, Correspondent).

FAMC guidelines reflecting the new loan limits will be published to the Correspondent Lending Manual on January 6, 2020.

The PennyMac Correspondent Group posted a new announcement 19-65: Fannie Mae SEL 2019-08. And don’t forget these three: 19-62: Conforming Condo Project Warranty Documentation, 19-63: Fannie Mae and Freddie Mac Conforming Loan Limit Increase, and 19-64: Update to Conventional LLPAs.

Lakeview Wholesale issued Announcement W2019-31 outlining updates to Conforming Loan Limits.

Beginning December 16 Wells Fargo Funding allowed Sellers to enter into new Best Effort Locks and Mandatory Commitments at the 2020 conforming loan limits and change existing Best Effort Locks based on the 2020 conforming loan limits* for Conventional Conforming loans. *You don’t have to wait to Lock Loans that will Close at the higher limits. Details are available on Wells Fargo Funding website. In conjunction with eligibility of conventional Conforming Loans at the 2020 loan limits, effective 12/16 new Non-Conforming Best Effort Locks, relocks, and renegotiations must have a loan amount greater than the 2020 contiguous U.S. conforming loan limit, based on the number of units.

PCF Wholesale is accepting submissions with 2020 loan limits now on Conforming Loan Programs. The new base loan limit in most of the country will be $510,400. The ceiling limit for most high-cost areas will be $765,600.

FAMC is offering a new enhancement on Conventional Products – Student Loan Payments for Medical Professionals – LPA. Student loan payments that are in a period of deferment or forbearance may be excluded from the calculation of the borrower’s monthly DTI if the borrower is currently enrolled in, or has recently completed, a medical residency program and/or medical clinical fellowship program.

Land Home Financial Service is accepting 2020 Conventional Loan Limits. Funding loans with the 2020 higher loan limits is acceptable in December 2019. Clear to Close may be issued prior to DU & LPA (12/04) updates, provided the “ineligible” message is due solely to the loan amount (the underwriter must ensure the loan amount meets the 2020 eligibility for the county in which the property is located & 2nd signature is required for any loan clear to close with an “ineligible” message).

The FHFA has announced the new conforming loan limits for loans purchased by Fannie Mae and Freddie Mac on or after January 1, 2020. The base limit will increase to $510,400 and the high balance ceiling will increase to $765,600. Plaza Home Mortgage will accept the new loan limits for new conventional conforming and high balance locks effective immediately.

FAMC Correspondent systems are now updated with the new 2020 Conforming loan limits, the manual process to lock loans is no longer needed.

Capital markets

This past year for the U.S. economy was a year of ongoing growth, but high uncertainty driven by trade policy along with weaker global demand. A key element of the slowdown in U.S. GDP growth in 2019 was weaker business fixed investment, dragged down by a weakening of the U.S. manufacturing sector due to weaker oil drilling activity, the six-week-long GM/UAW strike, the cancellation of orders at Boeing, weaker global demand, uncertainty about U.S. trade policy, the strong dollar, a flat automobile market, and range-bound residential construction activity.

Despite weakness in both business investment and the manufacturing sector, the consumer sector has been a key source of strength and stability for the U.S. economy over this past year. Consumer spending has been increasing at a faster rate than GDP for several quarters now, supported by a tight labor market. Unfortunately, the tight labor market has not given the economy the expected wage growth or inflation many have hoped for. Weaker-than-expected inflation has been an important factor in monetary policy, with the Fed initiating three consecutive 25 bps rate cuts in June due to softer global conditions and low inflation. As announced at the latest December Fed meeting, the Fed is back in pause mode, which should continue well into 2020, or until there is a material change in the Fed’s outlook. Expect U.S. real GDP growth to slide from 2.9 percent in 2018, to close to 2.3 percent in 2019. Still, this is nowhere near recessionary territory.

U.S. Treasuries were little changed yesterday in a quiet post-Christmas session. The 10-year note dropped to a below 1.90 percent shortly after the completion of a soft $32 billion 7-year note sale before closing the day -1 bp to 1.91 percent. The yields of most durations across the curve were unchanged on the day. U.S./China trade optimism boosted risk sentiment, as reports now say the U.S. and China may sign a partial trade ceasefire next month. But don’t be lulled into a false sense of security: The protectionist impulse behind the trade war started by America remains as ineradicable as ever.

The late economist Rudiger Dornbusch said, “In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.” So is a recession coming? Stock markets would say no, though remember asset bubbles occur when greed overwhelms fear. Despite the muted day for Treasuries, gains in tech shares sent the NASDAQ above 9,000 for the first time yesterday. Apple shares hit a record as the iPhone maker remained on track for its best annual performance in a decade. And Amazon’s stock had the biggest advance on the S&P 500 Index after the e-commerce giant said its holiday season was “record breaking,” especially impressive considering the holiday shopping season was shorter this year with Thanksgiving being nearly a week later than usual.

There is not much on today’s calendar to move markets, and indeed bonds aren’t moving much. Near the end of the day, the NY Fed will release the FedTrade MBS purchase schedule for the December 30 through January 14 period with purchases estimated at $2.7 billion. We begin the day with Agency MBS prices better by .125 and the 10-year yielding 1.88 percent on no substantive news.

Sick and tired of being sick and tired? Here are 10 micro-steps (part 2 of 3) in a handful of areas of life. Each can serve as the foundation for continuing to make more changes in your life.

4) Turn a sit-down meeting into a walking meeting. Instead of sitting in a conference room, try walking with a colleague during a meeting. You’ll be less likely to peek at your devices, and the movement can help get the creative, problem-solving juices flowing.

5) Turn off all your notifications, except from those who need to reach you. The more our phone buzzes at us, the more it conditions us to release cortisol, or “the stress hormone.”

6) Do an audit of your phone’s home screen to reduce time-sapping distractions. Take just a few minutes to determine which apps you really need to access. Keep only “tools” that add value — not apps designed to consume more of your attention.

7) Let yourself be bored. Next time you’re waiting in line, waiting in traffic or waiting for someone who is late for a meeting, embrace it instead of immediately looking at your phone or iPad. Unstructured moments can lead to inspiration, creativity, reflection and connection.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Dec. 26, Boxing Day: Compliance job, 2020 forecasts; news from Ginnie, USDA, investors following FHA & VA changes

“I hate it when people ask me what I’ll be doing in six days. Come on folks. I don’t have 2020 vision.” You can be guaranteed that the Republicans will do what they can to prevent a recession in this election year. And I don’t think that refis will continue to account for 63 percent of total applications, as they did last week. On a smaller scale, in the recent past, and in 2020, VA lenders are definitely interested in the concentration of VA loans. Where are they being made? With the MOU between the Department of Justice and HUD regarding the False Claims Act, treble damages, and the potential for the potential of the lessening of punitive exposure, will be the Big Banks edge back into FHA lending? There is still a lot of mistrust of the government, and what one Administration says, or does, could change with a new Administration regarding government housing programs. Much more on the activities of FHA, VA, HUD, and Ginnie below.

Job

Sovereign Lending Group, a top independent mortgage banking company located in Costa Mesa, CA, is looking for an experienced Compliance Officer who has built the compliance infrastructure at one or more companies. The Compliance Officer (“CCO”) is the senior leader of all compliance-related activities. The right candidate is able to quickly build relationships and partner successfully with the business unit leaders.  This is a great opportunity for a driven individual who has both mortgage origination and loan servicing experience.

Vendor/lender forecasts

“In the coming second wave of fintech innovation, we will see existing banks and large financial institutions turn every line of business and financial product into a software product.” This was Jerry Chen’s answer to Blend’s question, “How will lending change in 2020?” Read more from Blend’s interviews with 16 industry leaders on what we can expect to see in the lending landscape in the coming year.

FHA, VA, HUD, USDA/Rural, and Ginnie news

It’s been interesting to watch the correspondent FHA market share shift to correspondent investors like PennyMac. It’s also been interesting to watch the profit margins on this product continue to be solid for many residential lenders, despite the share of overall business. For example, in last week’s application data, the FHA share of total applications was 14.5 percent and the VA share of total applications was 15.2 percent. (The USDA share of total applications was less than 1 percent.)

Ginnie Mae announced that issuance of its mortgage-backed securities (MBS) totaled $56.1 billion in November, providing financing for more than 216,352 homeowners and renters. A breakdown of November issuance includes $53.6 billion of Ginnie Mae II MBS and $2.5 billion of Ginnie Mae I MBS, which includes $1.9 billion of loans for multifamily housing. Ginnie Mae’s total outstanding principal balance of $2.1 trillion is an increase from $2.03 trillion in November 2018.

(As a quick aside, lower refinance volumes and more modest purchase growth presents a headwind for title insurers. The private mortgage insurers are well positioned in the face of rising mortgage rates given the benefit of stronger earnings as existing policies remain in force and investment yields improve despite the risk of a slowdown in new originations. While the FHFA and HUD increased the base limits, several key housing markets will benefit from increases of 7-10%, including Seattle, Denver and Nashville, providing greater flexibility for buyers.)

On January 1, 2020 the USDA Single Family Housing Guaranteed Loan Program will begin to assess and collect a fee (aka Technology Fee) from lenders on each closed loan that was submitted via the Guaranteed Underwriting System (GUS). Specifically, any file submitted via GUS that is issued Form RD 3555-18E, “Conditional Commitment for Single Family Housing Loan Guarantee,” on or after January 1, 2020, will require lenders to remit a one-time $25 Technology Fee with their loan closing package (i.e. the same time a lender currently remits the Upfront Guarantee Fee). An advanced copy of Handbook-1-3555 Chapter 16 provides direction on the disclosure and collection of the Technology Fee along with a new section on frequently asked questions for loan closings.

On Wednesday, January 8th, FHA is offering a free online webinar providing updates about FHAs quality assurance processes effective for loan reviews as of January 1, 2020, including the Defect Taxonomy Version 2 and Loan Review System (LRS) enhancements. There will also be a live Question and Answer session at the end of the webinar.

On Wednesday, January 22nd, FHA is offering a free online webinar providing an overview of FHA-approved servicer requirements including early delinquency activity; timelines; general loss mitigation; evaluation of the borrower’s financial condition; and collections best practices.

On Wednesday, January 29th, FHA is offering a free online webinar to review FHA’s option priority waterfall and the process steps to be followed when evaluating owner-occupant borrowers for home retention options. This webinar also covers guidance on the use of informal and formal forbearance repayment plans; how to review, qualify, and process the special forbearance unemployment home retention option; and the actions required to comply with HUD guidance.

On January 2, 2020, Wells Fargo Funding systems will be updated with the new loan limits for VA loans closed on or after January 1, 2020.

AmeriHome Mortgage Compliance has determined that, for its purposes, the technology fee does not meet APR exemptions and similar to disclosing a VA Funding Fee in “Services You Cannot Shop For,” is included in the APR calculation. Sellers should consult with their own Compliance and Legal resources to determine TILA and RESPA thresholds and applications.

Chase Correspondent issued a Revised Bulletin #CB19-50 to clarify the VA Loan Limit overlay. Revisions and clarification have been made to VA Loan Limit Overlay Addition, Dodd-Frank Act – Ability to Repay and Qualified Mortgage, Delegated Non-Agency Requirements and Non-Agency Interest Only ARMs.

Plaza Home Mortgage® will be standardizing its Administrative Fees for new loans created in BREEZE on or after January 1, 2020. All loan products (excluding Streamlines and IRRRLs) will be $995. FHA Streamline, VA IRRRL, USDA Streamline will be $595 and 2nds will be $500*. The Administrative Fee will be based on when a loan is created in BREEZE, which may be earlier than when it is submitted. This means that loans created in BREEZE prior to January 1, 2020 will maintain the previous fee amount, if it differs from the new amount. *waived for TX and VT.

And Plaza has revised its Department of Veterans Affairs (VA) program guidelines to incorporate the Blue Water Navy Vietnam Veterans Act of 2019, which includes changes that are effective for VA loans closed on or after January 1, 2020. Plaza’s updated guidelines will be effective on January 1, 2020. Between now and January 1 both current and future VA guidelines will be available.

Sun West Mortgage Company, Inc. accepts lock requests and underwrite FHA Loans per the new 2020 National Conforming and High Balance Loan Limits if FHA case number is assigned on or after Jan 1, 2020.

Bayview | Lakeview Correspondent issued Announcement C2019-47 covering updates to FHA, VA and Affordable Program.

And Lakeview Wholesale issued Announcement W2019-32 covering updates to FHA and VA loan limits.

Caliber Home Loans Correspondent Lending will align with the FHA 2020 loan limit increase effective with Commitment Confirmations issued on or after December 23, 2019; however, the case number should not be requested in FHA Connection until after January 1, 2020 for loans requiring use of the new loan limits.

PRMG updated its Resource Center with multiple changes. Under Policies, Procedures and Information, Upfront Chenoa Process Training has been added and Unison Program Information has been updated. Under General Forms, updates have been made to Income Calculation Worksheet, HOA Full Lender Condo Review Questionnaire, FHA and VA New Construction Documentation and FHA Single Unit Approval Submission Form. Additions to VA Forms for Closed on Or After 1/1/20 include Loan Guaranty Calculation Worksheet, VA Calculator Tool and an updated VA Cash Out Refinance and IRRRL Worksheet. Its Jumbo, Niche and Second Mortgage Product Forms and Information section includes updates to Expanded Access Bank Statement Calculator and the Investor Solution Certification Form.

American Financial Resources has discontinued its VA High Balance product line(s) but continues to offer VA Jumbo products. As a result, these products will no longer be offered in the Optimal Blue system. Customers utilizing this content for proprietary products have six months from 12/20/19 to reconfigure eligibility/adjustment sourcing.

Caliber Home Loans Correspondent Lending will align with the 2020 loan limit increase for VA. VA loans with notes dated on or after January 1, 2020 can begin to utilize the FHFA 2020 loan limits. The 2020 effective loan limits are posted at U.S. Department of Veterans Affairs Home Loan Limits page. The county loan limits do NOT apply to IRRRLs.

Capital markets

No one has a crystal ball, but anyone looking ahead should know that Fannie Mae raised its origination estimates for 2020 despite prominent downside risks. Housing is expected to remain supportive through the first half of 2020. Housing supported the larger economy in the third quarter, and we expect it to continue to play a productive role through the first half of 2020,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. “Positive contributions from single-family housing construction, home improvements, and brokers fees pushed residential fixed investment growth to a robust 5.1% annualized pace this past quarter, and we forecast continued but moderating strength as construction activity and home sales growth continue at a slower pace. With mortgage rates normalizing, we expect a decline in refinance activity in 2020, with the refinance share of originations dropping from a projected 37% in 2019 to 31%. Of course, the housing market as a whole remains constrained by the persistent supply and affordability issues, which is particularly unfortunate given the current strength of consumer demand for reasonably priced homes.”

U.S. Treasuries ended the abbreviated Christmas Eve session slightly rallying (let’s call it a stocking stuffer for loan officers everywhere) due to the results from a $41 billion 5-year note auction, where the high yield stopped through the when-issued yield, and the bid-to-cover ratio and indirect takedown were both above averages. Trading was obviously muted with many participants out for the early close and full close yesterday for Christmas.

 

Bond and equity markets are now open again and have already received the release of the MBA’s mortgage application index for the week ending December 20, down 5.3 percent from one week earlier. Also out are initial jobless claims for the week ending December 20 (222k, as expected). The highlight of today’s calendar is a $32 billion 7-year treasury note auction at 13:00 ET. After closing Tuesday -3 bps to 1.91 percent, we begin today with the 10-year yielding 1.91 percent but Agency MBS prices worse a few ticks, if anyone cares.

Instead of the usual humor or trivia, how about a little health information? We all say health is important, but how many of us do much about it. Sick and tired of being sick and tired? Here are 10 micro-steps (part 1 of 3) in a handful of areas of life. Each can serve as the foundation for continuing to make more changes in your life.

  1. Pick a time at night when you turn off your devices and gently escort them out of your bedroom. Disconnecting from the digital world will help you sleep better, recharge more deeply and reconnect to your wisdom and creativity.
  2. Set an alarm for 30 minutes before your bedtime. When you think of sleep as an actual appointment, you’re much more likely to grant it the time it deserves. Setting an alarm reminds you that if you’re going to get to bed on time, you need to start wrapping things up.
  3. Sit down when you eat, even for a few minutes. Eating on the run can make us feel like we’re being productive or saving time. But mindless eating while we are multitasking can lead us to consume more calories and is more likely to lead to bloating and indigestion. Make it a meal, instead, and you’ll be less tempted to snack afterward.

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 blog is, “Politics do Indeed Impact Interest Rates and Borrowers” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)