Interesting times. Our CFPB has a new Chief Experience Officer. United Wholesale has an ad in the Super Bowl, recommending brokers to consumers. Experian also has an ad, and Quicken Loans is a sponsor. Early estimates have $2.4 trillion in home loans funding last year, the most since 2006, pre-CFPB, pre-ATR. In other statistical news, so far, experts are comparing the flu and the coronavirus. 8,200 people have died and 140,000 people have been hospitalized in the United States during the 2019-2020 flu season, according to preliminary estimates from the CDC. In China, the number of confirmed coronavirus cases in China approached 8,000 with total deaths reaching 132. Certainly it is not a laughing matter, and the escalating outbreak has grabbed headlines and caught the market's attention. Lots more below, including a comparison of SARS and the coronavirus.

Lender Services and Products

PollyEx, Inc is excited to announce its integration with PennyMac’s pricing and commitment APIs’s. PollyEx’s SaaS platform enables lenders to realize dramatic improvement to their gain-on-sale execution and capital markets workflows through its spot market loan trading exchange and pricing engine. This new integration enables lenders to receive PennyMac’s mandatory bids on demand, and ensures real-time pricing regardless of market movement. Once best execution is determined, PollyEx’s One Click Commit functionality seamlessly commits those loans and writes all pertinent commitment data back to lender’s LOSs at the loan level. To learn more please contact Jacob Gerson (816-332-2165).

JMAC Lending, Inc (844.888.5622) offers its continuing  “New Wave of Lending Educational Series” presenting its DSCR (No Income Doc/No Ratio) Qualifications Webinar on February 5 at 10AM PST. “This webinar will do a deep dive into the guideline requirements, how to qualify solely based on gross rental income of the subject property. Including our new addition to the “Investor Solutions” program- where you can take cash-out, no seasoning required, while the property is recently listed on the market-referred to as “Short Term” DSCR. A great product for your Fix and Flip Investors or First Time Investors!

Looking to grow in 2020? Monster Lead Group introduces The Monster Way, an unprecedented 8-week plan to radically change the future of your mortgage business. The Monster Way is a formidable combination of a direct marketing system, a sales process and a custom playbook for growing your organization. It includes a dedicated team of Monster mortgage experts who works with you to create an 8-week direct marketing campaign that generates a consistent flow of the right leads to your inbound call team. We’ll train your MLOs how to turn more of those calls into apps using the same professional sales techniques as the highest producing originators in the country. Your reps will graduate with the secret sauce for generating record sales in any market, regardless of rates. Join our clients who originated more than $10 billion in 2019. Find out if your organization and The Monster Way are a good match: Apply. (Space is limited due to high demand.)

The first month of 2020 is already behind us. Are you armed with a business plan to guide you to success throughout the rest of the year? Last week, XINNIX, The Mortgage Academy hosted a live webinar featuring special guest STRATMOR Group Senior Partner, Nicole Yung on “What It Will Take To Be Successful in 2020.” The first takeaway? “We have to expect the unexpected,” Nicole advised. The best way to prepare for the unexpected is to have a plan in place to help you maneuver obstacles when they arise. Whether you need to review your existing business plan or you’ve yet to create one, the insights shared in the discussion between Nicole and XINNIX Founder and CEO Casey Cunningham will help you navigate the remainder of 2020. Didn’t get a chance to join in last week? Click here to view the recording and receive a copy of the slides that were presented.

Everyone wants to know what to do post-close. Client relationships need to be maintained but drip campaigns end up in junk mail. HomeBinder gives Originators a way to ensure they aren't forgotten. Show borrowers how to care for their greatest asset. Give them a reason to remember you with a complete home management suite of tools. The relationship doesn't end with a closed loan for you or Agents you work with.  Don’t get forgotten by your mutual clients. Co-brand and share the wealth! Call 800-377-6915 to learn more or visit HomeBinder to learn more. Integrations with both Encompass and Calyx Point available. If you are interested in a 3-minute demo video, click here!

Capital Markets

The closest comparison is the 2003 SARS outbreak, but, despite it now being a global health emergency, according to reports the Chinese coronavirus is not as deadly as SARS and epidemiologists are able to employ better containment techniques today than they were 17 years ago. Unlike 17 years ago, the Chinese economy is much more reliant on retail spending, travel, and personal consumption prompting concerns of a potential impact that at this stage in the economic cycle.

Consumer confidence took a noticeable hit in 2003, with that translating to some categories of spending like air travel. But, even with the SARS outbreak still uncontained, and with the Iraq war happening, it was not long before U.S. travelers returned to the sky and resumed normal travel. Durable good outlays slipped into negative territory briefly during the SARS outbreak but rebounded sharply. Spending in all other categories was virtually unaffected. Non-discretionary consumer spending is remarkably resilient even in the midst of uncertainty, but discretionary spending can be more vulnerable to unexpected negative developments. Any fall offs in spending, however, are short-lived as consumers eventually get frugal fatigue during uncertain times. Service consumption is by far the least volatile spending component and represents two-thirds of overall spending. It takes a U.S. recession to weigh on services, and thereby overall spending. U.S. consumer spending will likely not be materially affected, assuming that the current episode does not become more widespread than the SARS outbreak.

The latest economic data remains mixed as the US economy continues to muddle through. The Leading Economic index eased in January, in line with market expectations. This index has retreated in four of the last five months which could be a warning of things to come. Unemployment claims increased by 6,000 for the week ending January 18th, but still remain at very low levels. Expect Boeing's production shutdown to have an effect on claims as some suppliers begin to announce layoffs. According to data from the Bureau of Labor Statistics, job growth is below average it the traditional manufacturing centers in the Northeast and upper Midwest while it is above average in the West South Central and Mountain regions. Turning to home sales, existing home sales increased in December to a year's best 5,540,000 annual units. Supply tightened to three months' worth, supporting price gains with the National Association of Builders reporting existing home prices increased 7.8 percent on year over year basis.

Looking at directly economic news, recall that the World Economic Forum in Davos came and went without any major headlines as those gathered renewed their confidence in global economic conditions. Back in the US, the housing market is showing new signs of growth as low interest rates and tight supply drove up home prices in December. Additionally builder optimism is near 20-year high with the market poised for further gains.

The FOMC did not release a “dot plot” at its meeting this week, as it only does so in March, June, September and December. The Committee, however, indicated in its last “dot plot” that it intends to keep rates on hold through the end of the year, is not altered after this policy meeting. The committee will now only change rates in 2020 only if growth turns out to be much stronger or weaker than expected or if inflation were to change dramatically, which does not seem very likely.

Additionally the FOMC said that the current stance of policy should support inflation “returning” to the 2 percent inflation target. Previously, the statement said “near” the target. This change likely reflects the FOMC’s willingness to allow inflation running a bit above target for a while. We can expect that the Fed will be on hold for the foreseeable future.

The FOMC said that the Fed would continue to purchase Treasury bills “at least into the second quarter of 2020.” The Fed started to buy T-bills in October to relieve upward pressure on repo rates at a pace of roughly $60 billion in Treasury bills per month. The FOMC did not specify an amount of planned Treasury bill purchases going forward, which is consistent with the view that the Fed will ramp down its monthly purchases from the current pace of $60 billion per month at some point during the first half of the year. In recent months, the Fed has been successful in providing sufficient liquidity to the market through Treasury bill purchases, and there was no spike in rates at year’s end, as some had feared. (The Desk of the New York Fed released a new FedTrade schedule covering the January 30 to February 13 period in which the Desk will purchase up to $2.825 billion MBS. That calendar starts with today’s operation that will target up to $976 million UMBS30 2.5 percent - $429 million - and 3 percent -$547 million.)

Sensibly, the FOMC decided to raise the rate it pays commercial banks on the reserves they hold at the Fed (the IOER rate), from 1.55 percent to 1.60 percent. The effective fed funds rate, which is the rate that is determined in the market, has been trading near the bottom of the target range for the federal funds rate (left unchanged at 1.50 percent to 1.75 percent, where it has been maintained since October) for some time, straying from a target more in the middle of the range.  This increase in the IOER is largely a technical adjustment and does not represent a fundamental change in monetary policy. By raising the IOER, the FOMC gives banks more incentive to keep reserves parked at the Fed, which should help to push the fed funds rate back toward the middle of the range. Some consider it a de facto 5 bps hike, and overnight GC rates for today, in turn, jumped 5 bps on the announcement.

Yesterday revealed that U.S. consumer spending growth slowed, business investment further deteriorated and annualized growth stayed the same at the end of 2019. U.S. Treasuries rallied in response, pressuring yields to their lowest levels since early October, and a key slice of the U.S. yield curve inverted on Thursday for the first time since October, rekindling memories of growth fears. The continued strength in notes and bonds resulted in an inversion of the spread between the 3-month bill yield and the 10-year note yield, but an afternoon pullback in the market returned the spread to zero.

How are markets responding to this week’s FOMC events? Rate cut expectations were pulled forward following Wednesday's dovish remarks from Fed Chairman Powell, with the fed funds futures market now seeing above a 50 percent implied likelihood of a rate cut in June, up from a one-in-four chance just a week ago.

Today’s U.S. calendar is already underway with December Personal Income & Spending (+.2%, +.3% respectively), Core PCE Prices (+.2%), and Employment Cost Index (+.7%). The weekly, and monthly, economic calendar closes out later today with January Chicago PMI and the final January Michigan Consumer Sentiment Survey. Additionally, the Desk of the NY Fed will conduct a UMBS15 FedTrade operation when they purchase up to $224 million 2.5 percent. And Fedspeak resumes with Vice Chair Clarida appearing. We begin today with Agency MBS prices a shade higher and the 10-year yielding 1.55 percent after closing yesterday at 1.56 percent.

Employment

“If you believe your company should be providing you with stronger local support and a higher level of customer service for your clients, Firstrust Bank is interested in speaking with you. Firstrust Bank is the largest family-owned commercial bank in the region with an unbroken commitment to the Philadelphia market for over 85 years. We are now moving into the Maryland market and are seeking Retail Loan Officers. Firstrust Bank offers a diverse product menu that includes Portfolio, USDA and FFD as well as an aggressive compensation package. If you or someone you know is interested in making a move please reach out to Mike Scheier, SVP of Residential Lending.”

Guardian Mortgage is proud to recognize Steve Howard, Dean Wegner, Wade Betz, and Sean Dunlavey for their high-performance achievements in 2019. They each won a hard-earned spot as a top producer amongst the other leaders from Sunflower Bank in attendance at the Sales Rally held recently in Dallas (The Colony), Texas. Mischelle Weaver, President of Guardian Mortgage, states, “We are privileged to have Steve, Dean, Wade, and Sean leading our teams in mortgage production, but we are even prouder of the vision and leadership they each bring to our organization. They exceed expectations. Guardian Mortgage prides itself on how we take care of our customers, and these four professionals embody the very best in customer service, from the application to closing and beyond. Congratulations!” For more information on being a part of an expanding, winning team with an empowering culture visit Guardian Mortgage.

“Assurance Financial takes a deeper approach to digital lending in 2020 by creating a new opening, Chief Digital Officer on its executive panel. Katherine Campbell has been promoted to this role. Previously the Director of Marketing, Campbell states “I am thrilled at the opportunity to take 20 years of technology experience in San Francisco and bring it back to my hometown. Client satisfaction is our number one priority and having someone oversee all integrations ensures clear messaging through the customer’s mortgage journey.” In her 14 month tenure with the company, she introduced new technologies, created a digital brand for the company, and oversaw the implementation of an improved online application process for Assurance Financial borrowers. Proving success, Campbell was instrumental in the creation of a new Centralized Retail division, allowing Loan Advisors to focus solely on mortgage applications generated by online advertising. As technology advances continue to grow in our industry, Assurance Financial is committed to adapting and embracing those changes. To learn more, visit AssuranceMortgage.com.”

Congratulations to Jim Bopp who is now the VP, National Renovation Lending, at Planet Home Lending, LLC.