Let me start Friday with an apology… to Alaska. (I thought I saw an eye doctor on an Alaskan island, but it turned out to be an optical Aleutian.) Julie Moore (with Alaska USA Federal Credit Union) pointed out that, given my note yesterday about Jacksonville, FL being the largest city in the U.S., “While Jacksonville might be the largest city by geographic area in the contiguous United States, it is actually the fifth largest city in the entire United States. The first four largest cities, by geographic area in square miles are: Sitka, 4,811, Juneau, 3,254, Wrangell, 3,462, and Anchorage, 1,961. Thank you, Julie! (Editor’s note: Alaska is more than twice the size of Texas.) Something else to pay attention to is what lenders are thinking as we head into the summer, which is the topic of the current STRATMOR blog post, “Summer Concerns”. Inventory in the current housing market is a concern: it is dog eat dog. (Hint: look at the photos.) Even if you want an appraisal be prepared to wait 2-3 weeks between ordering and receipt. Today’s audio version of the commentary and is available here and is sponsored by Candor Technology, offering a dynamic underwriting engine that eliminates underwriting bottlenecks.    

Broker and Lender Products and Services

Lakeview and Stifel, Nicolas & Co are pleased to announce the addition of Cook County, IL and Hoosier Homes in Marion County, IN to our Local Government Homebuyer Assistance Initiative. These HFA programs support sustainable homeownership for qualified low to moderate-income homebuyers, including down payment and closing cost assistance for conventional and government loans. Lakeview’s mission is to positively impact the lives of homebuyers. Join us today. Visit The Housing Resource Hub to become a participating member.

As the share of refinance business continues to fall, mortgage Branch Managers are seeking tools to help Loan Officers make the transition to the purchase market. New tactics are required, but leaders always start with strategy. That’s why many are turning to Usherpa’s Peak Performance Learning Management System. Instead of a collection of “tips and tricks,” Peak Performance offers branch-specific strategy sessions with customized tactics that focus on your unique needs. It’s the kind of program that offers a strategic approach to helping Loan Officers perform like top producers, especially when it comes to successful sales calls to Realtors and builder business referral partners. It comes down to adding value, but you can’t do that if you don’t have a systematic method for doing what top performers do. Differentiate your team in a crowded market. Talk to Usherpa today to learn how to help your LOs in this challenging market.

When your borrowers need assistance, who do they turn to? How does your team enable borrowers to get the information they want, when they need it? Mortgage companies such as  AmeriSave, APM, and PRMG turn to Capacity to ensure borrowers find the information they need and receive a more personalized experience. By connecting to your knowledge base and disparate information, Capacity provides 24/7 level-0 support for borrowers. Capacity correctly and instantly answers more than 84% of all prospective and current borrower questions without any human intervention. Bottom line, Capacity allows you to take care of borrowers with superior customer experience and 24/7 automated support. Deploy within 30 days. Request a demo.

First Guaranty Mortgage Corporation® (FGMC) is your go-to partner for Second Homes and Investment Properties with the new enhancements to Maverick Solutions™, its proprietary Non-QM/Non-Agency product line! Our Visionary Investment product now has a Debt Service Coverage Ratio of 1, meaning your borrowers can use rental income to qualify for the subject property! We also offer the Trailblazer Jumbo product that allows for loan amounts up to $3 Million and has new low reserve requirements on all property types. If you are interested in structuring a Non-QM/Non-Agency deal or have questions regarding these updates, email FGMC’s Structure Desk at nonqm@fgmc.com. For more information about Maverick Solutions, contact Paul Jones, SVP of NQM Business Development, to get started today.

Company Sponsored Events

Down payment assistance and increasing Black homeownership: Zoom event on Thursday May 20, 2021 10AM PST/1PM EST. New American Funding & Freddie Mac have teamed up to discuss how homebuyers can overcome down payment obstacles. Freddie Mac will share its recent research including exciting new housing and homeownership data. Guest Speakers:  Lindsey Johnson, President of U.S. Mortgage Insurers (USMI), Sam Noel, Lending Engagement Manager, Freddie Mac, and Stockton Williams, Executive Director of National Council of State Housing Agencies. Join us to learn about Down Payment Assistance & Increasing Black Homeownership and how to develop, enhance and promote mortgage industry best practices to reach the Black community. Register today!

Homepoint’s pricing and turn times are as strong as ever, and a growing number of mortgage brokers continue to pinpoint Homepoint as a favorite partner to work with. On top of that, Homepoint's popular Elevate LIVE event series is giving brokers the insight they need to boost their business. Brokers are invited to register for the next event on Monday, May 24 with Sr. Managing Director of Wholesale Production Will Pendleton and BombBomb's Chief Evangelist Ethan Beute to discuss how brokers can build customer and referral relationships with the power of personal video. To register for the live online event, click here.

Company News

KBW released more Q1 analysis on earnings of major public players in the mortgage industry. As lenders shift gears from the “drinking from the firehose” days of 2020 and through the first quarter of 2021, it is always good to know what others are doing, right?

Rocket reported a slight beat as the company now expects gain-on-sale revenue in the second quarter of $2.2 to $2.6 billion. Investors have noted increased caution on the outlook for the industry as volumes normalize, likely putting pressure on gain-on-sale margins into next year. The reported gain-on-sale margin was 3.74 percent in the first quarter, down from 4.41 percent in the fourth quarter of 2020. The gain-on-sale margin in the Direct to Consumer (DTC) channel fell to 5.36 percent from 5.89 percent, and the gain-on-sale margin in the Partner Network fell to 1.93 percent from 2.57 percent. Management noted that gain-on-sale margins in April have fallen meaningfully. A modest increase in book value relative to GAAP income reflected the special dividend paid to shareholders on March 9. KBW said it appears that the company still has significant excess capital after paying out that dividend, and maintains strong enough earnings that there could be further special dividends or buybacks next year.

PennyMac saw earnings miss in the first quarter and management guidance that ROE would fall to pre-Covid levels (roughly 20 percent) for the remainder of 2021 from 43 percent in the first quarter. Ginnie Mae Early Buyout (EBO) Activity Remained a Very Strong Contributor to EPS. During the quarter, the company generated $238 million of gain-on-sale income from EBO loans up from $199 million last quarter. This equated to 32 percent of total gain-on-sale income. The company repurchased 4.7 million shares for $288 million during the first quarter, and another 270K shares for $16 million so far in the second quarter. Since the beginning of 2020, the company has repurchased 18 percent of shares outstanding. Buybacks should remain a meaningful part of the total returns as growth slows and the valuation of the shares remains compelling. Share buybacks should be accretive to EPS but not book value as the shares trade modestly above book value. A lower price target from investors going forward is being driven primarily by increased caution about the mortgage market which is facing meaningful headwinds as refinance volumes slow and industry capacity remains elevated.

Two Harbors noted a lower balance of interest earning assets in the first quarter, as the aggregate portfolio declined -16 percent quarter-over-quarter. KBW believes the company is well positioned to deploy capital as the Fed reduces its presence in the MBS market and expects capital deployment to increase as mortgage spreads revert to normalized levels over time. Management highlighted that increased MSR valuations were offset by lower MBS prices. Book value performance also included a one-time convertible debt repurchase premium. Given the tightness of spreads, management expects to maintain a low level of mortgage spread risk, which should result in low book value volatility. TWO has outstanding litigation with its former external manager (Pine River) that could result in a book value reduction due to a termination fee. The company expects capital deployment to increase as the Fed eventually begins to reduce its presence in the mortgage market. TWO remains focused on MSRs, which allow the company to flex the amount of mortgage spread risk it takes on. MSRs totaled 15.4 percent of total portfolio, up from 9.8 percent in the fourth quarter of last year. Management expects bulk sales to increase as normalizing GOS margins should force originators to sell in order to raise liquidity. 

Capital Markets

Despite hotter-than-expected April producer prices, and a larger than expected drop in weekly jobless claims, U.S. Treasuries ended Thursday rallying for the first time in four days and the MBS basis closed wider. Who can predict how “the market” will react to news? The latest Primary Mortgage Market Survey from Freddie Mac saw 30-year and 15-year fixed mortgage rates dip 2 bps and 4 bps to 2.94 percent and 2.26 percent, respectively. The Fed’s Waller spoke on the day, saying that the Fed doesn't want to "move too quickly chasing inflationary ghosts" and that the central bank would become very concerned if 4.0 percent inflation was seen "month in and out." The FOMC expects inflation around 2.25 percent or 2.5 percent for the next two years. Speaking of the Fed, it released a new MBS purchase schedule which covers the May 14 to May 27 period and sees coupons unchanged versus the prior schedule with all 30-year purchases in 2 percent and 2.5 percent and 1.5 percent and 2 percent in UMBS15s.

Today’s economic calendar is heavy and includes some important figures. We’ve seen both April Retail Sales (flat!) and Import Prices (+1.2 percent, stronger than expected, +10.6 percent for the year). Later this morning brings industrial production and capacity utilization, March business inventories, and preliminary May Michigan sentiment. Today’s lone Fed speaker sees Dallas’ Kaplan participating in a moderated Q&A session. That new Fed purchase schedule kicks off today with the Desk in for up to $4.5 billion starting with $3.3 billion UMBS30 2 percent and 2.5 percent followed by $1.2 billion UMBS15 1.5 percent and 2 percent. We begin the day with Agency MBS prices up nearly .125 and the 10-year yielding 1.64 after closing yesterday at 1.67 percent.



We’re looking for a candidate with leadership experience in collateral (appraisal, condo, title) underwriting to fill a Collateral Underwriting manager position. The ideal candidate will have experience building out a team from the ground up, be a solution-oriented thinker who looks for ways to solve problems and prevent them from happening and likes working in a collaborative team environment. This role requires good communication skills and an ability to be a systems thinker to identify and implement technology-based solutions and processes. If interested, please send your resume to Chrisman LLC’s Anjelica Nixt and specify this opportunity.

The Eric Vavere Team with NEO Home Loans is excited to announce its expansion to the St. Louis market. As part of the NEO Home Loans team of mortgage professionals, the Eric Vavere Team believes in the ethos of fostering open and honest communication, and that every team member should always be cultivating new skills and growing toward their ultimate potential. Team lead, Eric Vavere, delivers a symbiotic atmosphere providing each client with world-class service that delivers optimum results, which is essential in this highly competitive market. It’s this relationship dynamic that creates a dynamic and effective team. Join the Eric Vavere Team in St. Louis and get access to the resources, tools, and training to help you generate leads and guide your career to new heights. Are you ready to transform your career? Get in touch at eric@ericvavereteam.com. For more information on the Eric Vavere Team, contact (949) 413-3528 or check out www.ericvavereteam.com for more information.

Nations Lending is growing at an impressive rate, taking our business next level in 2021 with increased product services to our customers and sales partners, and strategically entering the field of joint ventures. Nations welcomes Lori Phillips, VP of Production Onboarding, and Lloyd Rutherford, VP of Product Development. “Lloyd and Lori are both very valuable hires. Lloyd’s tenacity and vision in the product space immediately improves our strategy there,” said Corey Caster, EVP of National Production. “Lori will help support our existing onboarding team in retail, and with the pace of our strategic growth, her more-than-a-decade of experience building joint ventures from the ground up – handling state licensing, government approvals, and compliance - gives us the advantage to scale safely and securely.” Nations Lending remains a landing spot for top talent in the mortgage industry. Contact our VP of Recruitment Doug Opdycke (Updike) at (623) 734-5747 to learn more about branch opportunities at Nations. #JoinTheNation”

Start your career with a top 5 lender in the nation. PennyMac is looking for qualified Underwriters across the country. With a team of more than 6,000 employees and nearly two million customers, PennyMac continues to expand its national footprint to restore trust and quality in the home loan experience from beginning to end. PennyMac is a proven, solid company to grow your career with for years to come. You’ll have the ability to focus solely on Underwriting with little to no borrower, processor, or sales contact. Overtime opportunities are also provided. If you’re seeking passion and purpose in your work, more flexibility with remote options, and greater career stability, then PennyMac is the place for you. Apply today.