Daily Mortgage Commentary
Aug. 16: LO jobs; trailing doc and non-QM products; tech & vendor updates; white paper on reasons for margin compression
August 16, 2018
Trillions of dollars of securities are tied to LIBOR, but the London Interbank Offered Rate is scheduled to be phased out at the end of 2021. Companies servicing adjustable rate mortgages tied to LIBOR are concerned, understandably, about the transition to another index. So far, the front runner substitute seems to be the Secured Overnight Financing Rate. Floating-rate bank bonds tied to SOFR could be brought to market within months. A name to watch: TD Securities. TD Bank has aided issuance of SOFR-based bonds from the World Bank and Fannie Mae.
“Branch Managers and Loan Officers are moving to Planet Home Lending because its strategic leaders know how to thrive in tough market cycles, its balance sheet is strong, and it’s growing. Build your career and expand your reach as a Planet Home Lending branch manager in Manhattan Beach, California, an MLO in Las Vegas; Manhattan Beach, Chino Hills, City of Industry, or Alhambra, California; and in other key markets. You’ll get locally flavored marketing, great jumbo, non-QM and no-overlay agency products, a full suite of benefits including 401(k) match, and the best onboarding in the industry. For a confidential interview, contact Nicole Flannery at 818-669-1559 or email email@example.com.”
Lender products & services
Mr. Cooper is now an approved Co-Issue investor for Fannie Mae’s Servicing Marketplace! “Our participation in Fannie Mae’s Servicing Marketplace complements our institutional offerings to include: Correspondent, Direct Agency Co-issue, FHLMC XChange®, GNMA PIIT, and GN PIIT transactions. In addition to our continued focus on expanding our program offerings, we continue to invest in products including recently launched Non-Traditional Credit, Modified Construction to Perm Loan Notes, Manufactured Housing and FHLMC HomeOne® products. Want to learn more about lending for Manufactured Homes? Join our WEBINAR in conjunction with Radian on August 21. And in development are E-Notes and Temporary Buydowns. Mr. Cooper is a premier Correspondent and Co-Issue investor and the largest non-bank servicer with a servicing portfolio of ~ $500B. For information, please contact Bryan Budd.”
There’s no doubt that times have been tough recently for independent lenders across the country. In Q1 of 2018, the MBA reported average pre‐tax production losses of 8 basis points (a loss of $118 on each loan they originated)! To put this in perspective, only two years ago in Q1 of 2016 the industry averaged 33+ basis points! These numbers should not be surprising, but it doesn’t mean you cannot achieve greater profitability by reassessing your strategy to focus on the right metrics of your business. A great eBook from Maxwell, “3 Steps to Profitable Growth,” outlines key focus areas for lending managers to drive profitability in a challenging, purchase-heavy market. A must-read for all mortgage managers: Download your free copy here!
FinLocker, a financial data and analytics company, announced today the approval of its asset verification solution as part of Fannie Mae’s® Desktop Underwriter® (DU®) validation service. Lenders now have access to FinLocker’s asset verification reports via DU and are eligible to receive Day 1 Certainty® from Fannie Mae, which includes representation and warranty relief, when asset data is validated through the DU validation service. FinLocker is a consumer-enabled financial data platform that gives lenders access to critical borrower information via trusted 3rd parties that can be used to streamline the origination and underwriting processes for mortgages and other financial products. It reduces costs, time, and risks for all participants in the loan life-cycle, while expediting the data collection, verification, approval and analytics processes. “FinLocker is proud to offer this additional benefit for our customers utilizing our asset verification service”.
New Penn Financial’s SmartVest product, part of the non-QM SMART series, offers financing for experienced real estate investors who may have complex finances. Borrowers may have up to 15 financed properties. Cash flow analysis used in lieu of DTI; no tax transcripts, tax returns or TRID disclosure required. Fixed 30, ARM 5/1, 7/1, 10/1, all optional interest-only, available for loan amounts up to $1.5 Million. Call your rep for more information or go to www.gonewpenn.com.
“DocProbe, the nation’s premier Trailing Documents Service for Mortgage Companies’ Post-Closing Operations, helps lenders collect final (trailing) documents post loan closing in a systematic and efficient process. We offer complete fulfillment by retrieving the documents, auditing, ensuring corrections, and shipping to investors/custodians. Our cloud – based software is fully integrated to allow the final documents to flow into our clients’ LOS system. All documents are sent to your investors on time. Find out why correspondents and investors are working with DocProbe, specifically in today’s climate, to cut costs and work with a partner who understands the business. We are seeking a Business Development Rep to represent the Central-Northeast Region. DocProbe will be attending the TMC conference in Chicago next week. We look forward to spending time with the TMC team and the TMC membership. Email Nick Erlanger to set up a call to learn more about our service or to submit your resume.”
Technology & vendor news
Lenders can now participate in STRATMOR’s Technology Insight Study, a unique STRATMOR study that gets at the heart of the mortgage technology experience from the lender’s viewpoint. It is the only independent technology survey in the industry today that gathers data to give voice to mortgage executives’ observations regarding their technology perspective. Time is running out to participate in 2018, as the last day to take the survey is August 31.
“Our goal is to offer lenders much needed, non-vendor-provided data on the technology at work in the mortgage marketplace,” says STRATMOR Senior Partner Garth Graham. “Vendors are definitely paying attention to this study as they want to improve their systems, and they want to hear what their clients have to say." The 2017 Technology Insight Study reported that, for the third year in a row, Ellie Mae Encompass was the clear leader in loan origination systems (LOS) with 32 percent lender share. LendingQB with 15 percent and Mortgagebot with nine percent of installs rounded out the top three based on overall survey participation.
The 2018 report is expanded to also include the latest Digital Mortgage innovations, customer satisfaction survey programs, closing and collaboration tools and other mortgage technology solutions to provide lenders with an end-to-end view of available offerings. The results of this study will be available for the MBA’s Annual Convention in October. Take the Technology Insight Survey today: Technology Insight Study.
Rick Triola, founder and CEO of the remote online notarization solution, NotaryCam, calls the Department of Treasury’s recommendations in its July 31 report to the President: A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation “a cure to the persistent drags on real estate transactions that have prevented the consumer from experiencing the benefits now possible with digital technologies.” Triola specifically cited the positive impact of recommendations in the report’s section Electronic Closing and Recording (p. 107 – 110), in advancing the industry’s adoption of remote online notarization. “Getting to a full complete electronic real estate mortgage transaction has been an achievable goal for years, but the laws were not on the books that allowed for this to happen,” Triola said. He went on to say the Treasury’s recommendations are a great and necessary start, encouraging all states to get on board, but thinks national legislation will be needed.
The Mortgage Collaborative announced the release of its TMC Benchmark 2.0, an enhanced benchmarking solution for its lender members. In collaboration with TMC Preferred Partner LBA Ware™, TMC Benchmark now has an improved user interface, augmented reporting dashboards and peer segmentation. The new version provides an easy-to-use platform for members to submit production, operational, execution and staff compensation data and receive visual analytics for their organization, along with peer averages from across the TMC member network. It also offers the option for TMC Lender Members to have their data automatically extracted from their LOS and brought directly into to the platform with little to no manual work required to receive a customized monthly benchmarking report.
Total Expert has released its Expert Content, a comprehensive set of marketing content designed to help lenders and banks increase marketing and sales velocity. It is a collection of customizable content and campaigns that marries targeted web, social, email, print and video with best practices and cutting-edge automation. Expert Content is available through the Total Expert MOS, a centralized platform for managing brands at an enterprise level, attracting and retaining customers and partners and driving revenue.
Ellie Mae launched a new major release of its Encompass® digital mortgage solution – Encompass 18.3. “The latest release will help lenders of all sizes originate more loans, lower origination costs and shorten the time to close with compliance, efficiency and quality. Key highlights of Encompass 18.3 include enhancements to support Know Before You Owe 2 (KBYO2) rule changes, a new customizable TPO workflow, new correspondent investor integrations, and product and pricing enhancements.”
Digital lending company Blend unveiled Blend Insurance Agency, an independent insurance agency that enables borrowers to seamlessly shop for and purchase home-owners’ insurance digitally within the mortgage application process. With launch partners like nationwide providers MetLife, Stillwater Insurance and Swyfft, Blend Insurance Agency brings the antiquated, paper-heavy insurance industry into the digital age, helping borrowers get a quote and bind their home-owners policy in a fraction of the time it traditionally takes.
Lenders One Cooperative announced the launch of Lenders One® eClosing by DocMagic, a complete eClosing solution for borrowers, lenders and investors providing an entirely paperless workflow that integrates every component of the closing process and guides users through each step. When using the solution, the average loan closing “at the table” can be reduced from 60 minutes to 15 minutes, helping to dramatically improve the borrower experience. Features include integration with all the major LOS platforms to generate e-enabled documents.
An embedded compliance engine that automatically audits documents and data against applicable industry laws and regulations to help ensure compliance throughout the loan lifecycle. eNotary technology for in-person electronic notarization or remote online notarization where permissible. The ability to deliver a MISMO SMARTDoc® eNote with direct connectivity to the MERS® eRegistry. A secure, certified eVault provides long-term storage and eDelivery to warehouse banks and investors, featuring a date-stamped and time-stamped audit trail to help show proof of compliance at all times.
Effective August 15, 2018, all FAMC closed loans submitted for purchase must be delivered electronically through the secure FAMC website. Hard file delivery through the mail will no longer be a delivery option that is offered. Also note, correspondent lenders must transfer FHA Mortgage Records to Citizens Bank, N.A. on FHA loans purchased on or after August 1, 2018.
One of the most frequently discussed challenges facing lenders this year has been pressure on margins. Read the latest whitepaper from MCT to learn what caused lender profit margin compression. Market trends and a deep dive into aggregate data from lender clients are complimented by context from Director of Analytics Bill Berliner. Lender competition, decreasing volumes, increasing interest rates, and weakening of relative pricing of mortgage-backed securities are explored as contributors to margin compression. You may even pick up a few hints about what to expect for the rest of the year.
Turning to Wednesday’s bond market price action, which is another term for interest rates, the 10-year closed 5bps lower at 2.85% after it was reported that Qatar pledged to invest $15 billion in Turkey. (Have to do something with that oil money!) The country’s banking regulator moved to deter short-selling in the currency, which alleviated some concerns, but there is still a lot of uncertainty surrounding the ripple effects on the yuan or the rand or rupee.
In the United States, we continue to see solid news. Downward revisions to June Retail Sales mitigated the July headline beating estimates, though the strong reading is a positive input for Q3 GDP forecasts. Second quarter productivity increased 2.9%, the strongest increase since the first quarter of 2015. The uptick in Q2 productivity was the result of output increasing 4.8% and hours worked increasing 1.9%, and with labor costs in check, this will facilitate a gradual tightening path for the Federal Reserve. Industrial production increased 0.1% in July as figures pointed towards continued strength in manufacturing output, which offset declines in mining and utilities production. Finally, June business sales continued to outpace inventory growth, which is a favorable trend that carries the potential to lead to a better pricing environment for businesses.
Turning to today, we’ve had weekly jobless claims (212k), housing starts & permits (starts weak at +.9%, permits decent at +1.5%), and the Philadelphia Fed Manufacturing Index (weak at 11.9). Also expected to impact sentiment Thursday is the 9AM ET investor call with Turkey’s Treasury and Finance Minister Berat Albayrak hosted by Citigroup, Deutsche Bank, HSBC and DOME Group. We start with the 10-year yielding 2.86% and agency MBS prices little changed or worse a smidge from last night’s close.
ABOUT GROWING OLDER…
Eventually you will reach a point when you stop lying about your age and start bragging about it.
The older we get, the fewer things seem worth waiting in line for.
Some people try to turn back their odometers. Not me; I want people to know “why” I look this way. I’ve traveled a long way, and some of the roads weren’t paved.
When you are dissatisfied and would like to go back to youth, think of Algebra.
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, “With Regulations, Be Careful What You Wish For.” If you have both the time and 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.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 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 2018 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.)
Aug. 15: AE, LO jobs; fulfillment, non-QM products; corporate name changes; in MBS Land, what is a Mirror Security?
August 15, 2018
Bond prices and mortgage rates, like nearly every commodity, are driven by supply and demand. I mention this because early last week prices of US government bonds declined while the yield on the benchmark 10-year Treasury note increased (although it reversed itself due to turmoil in Turkey). Investors bought $34 billion of three-year Treasury notes amid relatively soft demand, with the week bringing the first sales of Treasury notes since the Treasury Department announced it is looking to increase its borrowing in the second half of 2018 to $769 billion, a 63% year-over-year increase. Just something to keep in the back of your mind if you’re hoping for lower rates, or relying on them to help your business model. Jobs & personnel moves Towne Mortgage Company is looking for experienced Account Executives with a book of business throughout the
Aug. 14: LO jobs; warehouse, new bankruptcy products; remote training this week; Agency changes continue
August 14, 2018
A Zen master visiting NYC approaches a hot dog vendor and says, "Make me one with everything." The hot dog vendor fixes a hot dog and hands it to the Zen master, who pays with a $20 bill. The vendor puts the bill in the cash box and closes it. "Excuse me, but where’s my change?" asks the Zen master. The vendor responds, "Change must come from within." Most believe that, despite thoughtful and continuous efforts by those in the industry, there won’t be any change coming from Congress this year, perhaps even next, on Freddie and Fannie’s status. There’s not a lot of urgency, nor is it an election issue, nor, it can be argued, are consumers being hurt by current policies and procedures. The FHFA and industry will be adjusting things as time goes on regarding guidelines, policies,