Yesterday the industry reacted to the topic of housing finance reform. HUD presented its plan for FHA. But, like Farrah Fawcett passing away on the same day as Michael Jackson more than ten years ago, the headlines were dominated by the plan for Freddie and Fannie, and U.S. Treasury Secretary Steven Mnuchin also presenting President Trump with a housing finance reform plan. Yup, the Trump Administration aims to privatize Fannie Mae and Freddie Mac and much of it doesn’t require Congressional approval. There are 49 recommendations to overhaul America’s housing finance system, focused on F&F which account for about half the $11 trillion outstanding residential mortgages. Affordable housing advocates have warned that returning the firms to the private market could threaten those mortgages or make them more expensive and more difficult to obtain for low-income home buyers. The administration said it would support an effort by Congress to provide an explicit, but limited, federal guarantee for mortgage-backed securities, which underpin banks’ lending to home buyers. Lots more below.

Lender Services and Products

“Refinances have dominated the end of the summer. But you can’t compete on rate alone. What tools do YOU have to show your clients they should get their low rates from you? To fulfill your role as the financial expert they are looking for, you need to discuss saving money AND meeting their financial goals. YOURgage – exclusively from QLMS – can help your clients reach their goals faster and easier by letting you and your client chose any loan term from 8 to 30 years. Is your client 7 years into their term? There’s no need to start over. They can take a 23-year term. With YOURgage, QLMS helps you provide value, in addition to the savings. Call your AE now to run through a few more scenarios where your clients can benefit from a YOURgage, or you can connect with QLMS here if you don’t work with it already.”

Homebot is a dynamic financial dashboard for the home that empowers homeowners to build wealth with the largest asset they may ever own. As a client engagement tool for loan officers and real estate agents, Homebot keeps past clients engaged, driving client retention and more transactions in the future. How are you reducing the 7-year cycle it takes for a homeowner to do another mortgage or real estate transaction with you? “Homebot gives me more conversations. Conversations equal transactions... It has been instrumental in giving us better, more personalized opportunity for conversation,” said Nicole Reuth, Branch Manager at Fairway Independent Mortgage and Homebot user. LOs! Book a 1:1 demo with Homebot’s team and learn more about this awesome platform. 

“Where can you get 11X return on every dollar you spend? There is only one place smart lenders go to get these returns consistently: Sales Boomerang. Why would you say no to 11X or better ROI? You can't, and you shouldn't. Believe me, your stake holders will thank you. ‘Now we don't let opportunities walk out the door thanks to timely notifications,’ said Michael Guidotti from American Pacific Mortgage. Lenders get on average an 11X return but many are posting 15X, 20X, 25X and all the way up to 60X returns from every dollar invested into Sales Boomerang. ‘Sales Boomerang is a game changer for us, because we've never had access to such information before,’ said Stephen Barton from Eustis Mortgage. If volume is not your problem today then profit and customer retention need to be at the top of your list. Check out the long list lenders already using Sales Boomerang.

LIBOR Shift

“In anticipation of the LIBOR index being discontinued in 2021, Associated Bank will be transitioning our ARM products from LIBOR to the One-Year Treasury Index. We expect to initiate the transition by mid fourth quarter of this year. We will continue to offer fixed terms of 3, 5, 7, and 10 years. The cap structure will remain the same as current products. The margin will be 2.750%. You can locate the one-year CMT on the Federal Reserve Board in the Federal Reserve Statistical Release H.15. located on the web. In forthcoming announcements, we will provide more information, including a live date, transition period, and job aid to assist you in your preparation…”

QM Patch Worries and Policy Changes?

More than five years after the CFPB enacted the QM rule (setting the characteristics a mortgage must hold for lenders to gain certain liability protection automatically) the U.S. mortgage market still has relatively strong liquidity. This is in part due to the so-called QM patch: a temporary measure that confers QM status automatically on mortgages as long as they meet certain requirements and are eligible for purchase or guarantee by the GSEs Fannie Mae and Freddie Mac. The CFPB recently proposed allowing the QM patch to expire as scheduled in January 2021, or shortly after, and is seeking comment on several potential changes to the QM rule. The expiration of the QM patch and concurrent changes to the QM rule could have significant implications for the U.S. housing and mortgage market. It will also affect Fannie Mae and Freddie Mac (which account for more than 60% of single-family mortgage-related securities issuance) mortgage originating and servicing banks and other companies, and CRT securitizations. S&P put out, “The Credit Effects Of The Temporary QM Patch Expiration On The U.S. Mortgage Market.”

The industry is abuzz about the future of FHA, Fannie, and Freddie. Know that FHA currently insures 8.1 million single-family forward mortgages, nearly 500,000 reverse mortgages, and 15,500 multifamily and healthcare properties. In addition, the Government National Mortgage Association (Ginnie Mae) guarantees more than $2 trillion in mortgage-backed securities. So it is not exactly an after-thought. HUD’s reform plan accomplishes four objectives: (1) Refocuses FHA to its core mission; (2) Protects American taxpayers; (3) Provides FHA and Ginnie Mae the tools to appropriately manage risk; and (4) Provides liquidity to the housing finance system.

Privatizing Fannie Mae and Freddie Mac without making it harder or more costly to obtain home financing by “backstopping” F&F with lines of credit in return for fees? Probably not It doesn’t really change much. Digging into the reports, the plan for F&F lacks meaningful details. Chances for legislation are remote, so the experts are focused on the reports' administrative recommendations. Neither report (HUD nor F&F) includes specific timelines to implement the recommendations. Like turning aircraft carriers these things will take time: some of the regulatory processes could be lengthy and last beyond 2020, in which case a change in power following the 2020 election could put the implementation of these recommendations in doubt.

The Treasury report recommends the end of the conservatorship of Fannie Mae and Freddie Mac as well as the net profit sweep that was established in the 2012 amendments to the Preferred Stock Purchase Agreements (PSPAs). While Treasury recommended an end to the sweep, it set no date and absent Congress's creating an explicit guarantee, per Treasury's recommendation, Treasury suggested that the PSPAs remain in place and the government be compensated for its support of the companies. Freddie and Fannie need to be recapitalized before the sweeps can end.

Treasury recommended that FHFA should reexamine the GSEs' businesses to make sure they all fall within the charter, consistent with past statements from FHFA Director Mark Calabria. As expected, Treasury recommended additional protections for the taxpayers via expanded use of credit risk transfers which caused optimism among the private mortgage insurers like Radian, Genworth, Arch, Essent…

Brian Gardner with KBW wrote, “The reports contained little new information. Regarding the GSEs, while Treasury recommended ending the conservatorship and the net profit sweep, there is no clear timelines for doing so and we can envision a scenario where the sweep and the conservatorships last into 2020 and possibly beyond.”

Capital Markets

Want to know how much your kids are going to make after college? Folks who love stats know that the U.S. Census Bureau updated the Post-Secondary Employment Outcomes (PSEO) statistics, which examine college degree attainment and graduate earnings, with the release of earnings tabulations for the University of Michigan-Ann Arbor and the University of Wisconsin-Madison. PSEO tabulations show earnings and employment outcomes for graduates of post-secondary institutions in the United States by linking graduate transcript records to Longitudinal Employer-Household Dynamics (LEHD) data. There’s a PSEO visualization tool, which allows for filtering by degree level. The pilot release of earnings outcomes was broken out by institution, degree field, degree level, and graduation cohort (1, 5, 10 years after graduation). The Census Bureau hopes to offer prospective students a comprehensive assessment tool to see how much money they might make by degree and institution nationwide. Additional higher education institutions will be added to the database in the coming months.

Looking at rates, know that the Federal Reserve's Beige Book, which compiles anecdotal statements from the US business community, recorded continued optimism on the near-term outlook, along with modest growth in economic activity, employment and salaries. Some concerns over tariffs and ongoing trade disputes were also noted.

U.S. Treasuries retreated on Thursday, lifting yields on longer tenors to their highest levels in nearly two weeks, including the 10-year closing +11 bps to 1.57 percent after China's Ministry of Commerce announced that trade negotiators from China and the U.S. will meet again in October, giving a boost to overall risk tolerance ahead of today's payrolls report and agency prepayments. There were a host of other eased geopolitical tensions including lowered odds of a hard Brexit and some calm in Hong Kong. Maybe most importantly, markets received a dose of stronger than expected U.S. economic data, including ADP employment and ISM nonmanufacturing PMI. Finally, there was some dampened optimism regarding ECB easing, when ECB Governing Council members refuted a recent source story citing aggressive easing at next week’s meeting.

The August payrolls report kicked off this morning’s calendar. Payrolls increased (+130k versus expectations of +160k), the unemployment rate held steady (3.7%), and average hourly earnings were +.4%, strong. The only other notable event today will be an appearance by Fed Chair Powell in Zurich at 12:30 ET. We begin the day with agency MBS prices unchanged and the 10-year yielding 1.57%.

Jobs

GSF Mortgage Corporation (GSF) is offering USDA Single Close Construction to Perm loans as a part of its portfolio of specialty construction products. All one-time close tasks are performed by GSF in-house, not by a third-party vendor. This is important when it comes to the handling the unique rules for USDA Construction lending. Stick-built, modular, and manufactured homes qualify for GSF’s USDA Single Close Construction loans. If you are interested in learning more on growing your USDA volume, contact Robert Stevens, SVP of Construction Sales.

Finance of America Mortgage (FAM), a national mortgage company headquartered in Horsham PA, has several opportunities for Underwriters in our very busy TPO Division. Remote positions are acceptable and we have many locations throughout the company for those that prefer to work in an office. Conventional, DE, SAR and Jumbo, and experience in any or all will be considered. Great opportunity for career growth in this quickly growing channel. Come join the FAM! Send your resume to: HumanResources@Financeofamerica.com

“Thrive Mortgage has added another rock star production team to the fold. Thrive recently announced top producing originator, Tristan Sherrill, has joined Thrive’s list of nationally recognized producers in the DFW market. “As a long-time veteran of the industry, and former co-host on local radio, my team’s goal is to educate our clients and provide them with exceptional service,” Sherrill stated. “In order to serve that mission, we must have solid leadership, a culture of success, and a community of professionals providing legendary lending experiences. Thrive has demonstrated those attributes, and to now be able to witness their amazing growth firsthand is very exciting.” Alana Dorbandt, Regional Manager for Thrive, remarked, “This is incredibly exciting for us as we continue to expand. Tristan’s team is simply a natural fit for our culture. We couldn’t be happier!” To learn more about available growth opportunities, please reach out to us at info@thrivemortgage.com.”

PRMG’s Retail Division continues to experience steady growth across the nation with the opening of 3 new branches in the month of August! Along with the drive and ambition to bring the American Dream of Homeownership to all cities across the country, PRMG opened doors in Alpharetta, GA, Atlanta, GA, and Columbus, OH. PRMG is Built by Originators for OriginatorsTM and is devoted to continuously growing their retail platform.  Ranked within the Top 25 of the Best 100 Mortgage Companies, PRMG is on its way to becoming a billion dollar a month company with over $840 million funded in the month of July! If you are a Motivated Loan Originator who wants to be Progressively Better, contact Chris Sorensen (909.262.0452).

“Caliber Home Loans, Inc. is having an awesome 2019! In July we funded over $6 billion overall and prior to that reported originations 13% over our sales plan for the first half of the year. Our business is growing, and we’re hiring nationwide for several in-demand positions for all sales channels. Caliber is having an Employee Referral Bonus Bonanza! Caliber employees can earn $500 by referring qualified candidates to our Operations department. Eligible candidates can apply online, or if you know a Caliber employee, let them refer you to us – it’s a win-win!”