In September, major league baseball teams expand their 25-man roster to 40 as teams scramble for the playoffs in October. In the mortgage business, however, rosters are being cut in the 2nd and 3rd quarters as lenders reversed course and achieved a $580 per loan profit versus the $118 loss in the first quarter. Will the industry follow baseball into the fall and expand or contract their rosters as the purchase market cools off? “RIFs” continue, the latest semi-publicized one coming from the non-delegated correspondent sales group at SunTrust. (Rumor has SunTrust moving to an inside sales model for that group.) And Acopia announced a “repositioning.” “As we strategically realign our plans and investments to support our growing retail brands, we have decided to exit the wholesale and correspondent lending space. Brokers & correspondents will have until the end of business on 9/14 to submit & lock loans. All loans must close by 10/31.”
Freddie and Fannie, Conforming Conventional Changes
Overall, the Agencies are doing what they can to streamline the sale of servicing since lenders are selling. They are taking another look at buying adjustable rate mortgages although the flat yield curve isn’t helping ARM production, nor are the post-2008 underwriting changes (like using the fully indexed rate.) Agency liquidity has been good in last 10 years, and there are more options for struggling borrowers. Serious delinquencies peaked at over 5%, now less than 1%. Significant defects in purchases peaked at over 6%, now less than 1%. Freddie and Fannie have repaid the Treasury much more than was borrowed, and everyone agrees that there has been a shrinkage of risk to taxpayer. F&F have gone from “storage businesses” to “moving businesses” via risk transfers.
Freddie Mac announced some changes. CEO Donald Layton, who at age 68 some would argue is just hitting his stride, will be retiring. Not a week from now, not a month from now – a year from now. Freddie struck up its “CEO Succession Plan,” which is expected to be completed in that same timeframe and includes considering candidates from both inside and outside the company. For its internal candidate, the company has identified David Brickman, currently EVP and head of Freddie Mac Multifamily. In addition, the Board has formed a search committee and will retain an executive search firm to seek outside candidates. Effective immediately, Brickman will be appointed to the role of President of Freddie Mac. In addition, Deborah Jenkins, currently SVP of Multifamily Underwriting and Credit, will be promoted, effective January 1, 2019, to head the Multifamily business as EVP.
Remember that a couple months back Fannie Mae CEO Timothy Mayopoulos announced that he will be stepping down by the end of the year. Combine this with FHFA Director Mel Watt's term ending in January and folks are talking about how the Trump administration will influence U.S. housing finance. Some folks asked me about Freddie’s Christina (Chris) Boyle as a contender for a Freddie promotion or even to be the first woman CEO at one of the Agencies. Hey, don’t ask me – ask the folks at Freddie – they have a year to figure it out.
Ten years of conservatorship has flown by. Occasionally someone in Congress or the Administration will float up a plan, but actual changes continue to come from within the FHFA and the industry. The MBA, joined by 28 organizations, wrote an open letter to the Administration and Congress on the topic. It urges policymakers to lock in recent administrative reforms and complete the additional reforms needed to protect taxpayers, provide liquidity, and promote stability.
Fannie Mae issued a reminder to reiterating its existing policy that premium pricing must not be used to fund any portion of a borrower's down payment, including funding a Community Seconds® (with an exception for eligible housing finance agencies) or other second mortgage loan. Premium pricing is unacceptable when a borrower is charged a higher interest rate in exchange for a lender credit more than actual closing costs, a second mortgage loan, or other borrower benefit (such as a gift card, furniture, or appliances).
Fannie Mae will reimburse real estate taxes, flood, and property insurance premiums advanced by the servicer when funds in the escrow account are insufficient to cover these payments on mortgage loans that have subsequently become delinquent. These advances will be eligible for reimbursement regardless of when they were paid in conjunction with the last paid installment date. These changes became effective for reimbursement requests submitted on or after August 1st and will apply to escrow advances incurred on or after Jan. 1, 2018. These and other terms are outlined in Servicing Guide Announcement SVC-2018-04; additional information is available in the Servicer Expense Reimbursement Job Aid on the Servicer Expense Reimbursement page.
Fannie Mae revised the AAA matrices to clarify language included in the August 1st updates regarding foreclosure-related title cost guidance (issued June 6 and effective for referrals on or after Sept. 1st). Please note that the title search allowable cost and/or title update standard excess cost may have changed.
On Aug. 18, Fannie Mae’s Condo Project Manager™ (CPM™) was successfully updated to align with the June 5th changes to its condo policies and to enhance the user experience by providing links to applicable Selling Guidepolicy. For more information, review the release notes on the CPM page.
Freddie Mac has combined its Home Possible® and Home Possible Advantage® offerings into one consolidated offering and expanded certain requirements. The Single-Family Seller/Servicer Guide (Guide) Bulletin 2018-13 also updates mortgage eligibility and credit underwriting requirements related to: payment calculation, requirements for student loans, cash back from no cash-out refinance transactions, inquiries on credit reports, income starting after the note date and extends the effective date for previously-announced rental income requirements.
During the weekend of Sept. 22, Fannie Mae will implement a new version of the Desktop Underwriter® (DU®) Underwriting Findings (Findings) report. With the updated report, you'll be able to track changes from a previous DU submission and easily identify Day 1 Certainty® messages. The new Findings will be an option available for DU 10.1 and 10.2 loan casefiles entered after the weekend of Sept. 22. Customers who receive the current Findings directly in their loan origination system (LOS) may want to contact their LOS vendor to find out when the new version of the report will be available.
In case you missed any Fannie Mae recent policy updates or clarifications, Fannie now offers a new and improved In Case You Missed It 2018 summary of Selling Guide updates, Lender Letters, and DU/Desktop Originator® release notes. The summary makes it easy to find important updates by category, highlights changes that impact Day 1 Certainty, links to related resources, and more. Look for updates throughout the year.
Don’t forget that The Wall Street Journal reported that FHLMC is entering into the single-family home rental market. FHLMC was authorized by the FHA to fund up to $1.3B of loans for single-family rental homes in a trial run. This is a big change in direction.
For folks watching LIBOR being eased out, like every servicer of lots of ARMs, a $1 billion bond offering from MetLife puts the spotlight again on the Secured Overnight Financing Rate, a benchmark developed by the Federal Reserve Bank of New York as a replacement for Libor. The company supposedly has issued two floating-rate notes tied to SOFR. But an AFME study finds preparedness for the switch remains low, with 11% of those affected having a budget and 12% having an outline.
Stock and bond markets are global. But did you know that Texas, New York, and California all have economies bigger than Russia? Rates were unchanged yesterday on no real news. If anything, of note was the U.S. Dollar Index falling after reports/denied reports on the United Kingdom and Germany agreeing to abandon key Brexit deal demands to focus on a deal. And since we had a lot of Fed speak yesterday, St. Louis Fed President Bullard, a voter next year, argued for pausing the rate hike cycle. That came before we saw the largest monthly increase in the trade deficit in about three years as it showed an increase in the deficit with both the European Union and China. That will certainly be a drag on Q3 GDP.
Today sees a heavy economic calendar ahead of tomorrow’s payrolls report. We have already had Challenger job cuts for August and ADP employment (private employment +163k), weekly jobless claims (203k, the lowest since 1969), final Q2 productivity (still +2.9%), and unit labor costs (-1%). Markit Services PMI for August is expected to decline, as is July factory orders are seen falling following an increase in June. Ahead are the ISM Non-Manufacturing Index, and Factory Orders. NY Fed President Williams will be the sole Fed speaker. Thursday starts with rates – no surprise here - little changed from Wednesday’s close: the 10-year is yielding 2.90% and agency MBS prices are unchanged.
Lender Products, Services, and Events
On Saturday, October 20, 2018 more than 1,500 independent mortgage brokers, loan originators and processors will join at the AIME Fuse 2018 National Conference to learn from industry experts about how they can access the best technology, originate more loans each month and become a marketing expert for their own business. AIME Fuse will unite the nation’s most passionate mortgage professionals around a singular focus: to celebrate and enhance the value of independent mortgage brokers. This is the inaugural national event for the Association of Independent Mortgage Experts (AIME) and will be held at Bellagio Las Vegas. Register for AIME Fuse 2018 here.
Here's a webinar: You Can’t Afford to Be Wrong: Overcoming Construction Loan Compliance Challenges. Construction lending presents its own set of inherent risks. Add to this the confusion of state and regulatory requirements and construction lending becomes even more worrisome. Compliance-related issues cost the banking industry at large approximately $270 billion per year. Despite many bankers across the country calling for reform, TRID 2.0 is scheduled to be released in October 2018 giving construction lenders even more cause for uncertainty. Join Asurity Mortgage Group and Land Gorilla on Tuesday, September 11th at 10:30AM PT to learn how to create compliant construction loan packages to improve efficiency, mitigate risk, and avoid costs. Register now!
Usherpa announces another great tool. In its never-ending quest to provide Loan Officers with tools to help them sell more, Usherpa is introducing new interactive charts and graphs. The charts cover everything from historical rate comparisons and housing data to rent statistics. These are super shareable and Realtors love ‘em! Check them out here. And while you’re at it check out Usherpa.com the mortgage industry’s original CRM/Marketing platform. We know Loan Officers don’t have time to keep track of marketing details so Usherpa does it for them. That way they can close more deals with less effort!
Planet Home Lending branches receive tactical-edge, secure IT solutions backed by U.S.-based tech experts on call 19 hours a day. From day one, you’ll have the hardware, telephony, applications, and software to power your current branch and open new offices. Automated marketing from Surefire/Top of Mind, a digital lending platform, Velocify best-practice account management, Encompass, branch websites and social media, telecom and IP telephony support. Get the IT tools you need to win in today’s market. Call 888-792-8480 for a confidential consultation or email firstname.lastname@example.org.
“Is it time for you to spread your wings a bit? Now is your opportunity to better yourself professionally and personally by becoming a producing branch manager in your market for Assurance Financial. Make more money with the same amount of effort and enjoy a truly supportive and committed mortgage origination environment. We’ve recently opened 4 new branches, and we’re more committed than ever to see our company grow with great people and an expanding suite of make-sense product offerings that will help you build relationships with Realtors, builders, and borrowers. Come fly with the Home Loan Experts. Contact Paul Peters, CMB (225.239.7948). Assurance Financial is a growing, full-service independent mortgage banker seeking dynamic producing branch managers and MLO teams throughout the South, Southeast, Southwest, East, and Midwest, U.S.”
It's time for standalone/self-generating MLOs to face reality. The ability to thrive and grow in this career has never been so uncertain. Realtor referral business is threatened by existential changes in real estate, major mortgage players are aggressively buying market share, and consumer behaviors are changing fast. Many MLOs are contemplating an array of career options that offer little promise of the financial freedom and independence this industry has traditionally offered. Lionsgate Real Estate Group (a division of American Capital Corp) is taking the lead to offer professional MLOs a better option - the position of "Hybrid Agent." As the Home of the Hybrid Agent, our platform allows MLOs to compliantly practice loans and real estate in CA and TX. Create more value for consumers, increase your ROI, become your own best referral partner, and decrease your misery index by exponents. Contact Brett Bonecutter, Executive Director, to learn more. More states are coming soon - feel free to inquire.
GSF Mortgage has experienced 28% production growth in the first two quarters of 2018 with its Direct Originator Partner Program. This program is for originators that work from home or in a small office setting connecting directly with the corporate office and outside of the typical branch constraints. GSF covers the home and office overhead for the originator. Because of the low overhead the pricing and service have been exceptional and is driving growth. GSF is hiring Direct Originator Partners in 34 states. If interested, please contact VP Retail Production Frank Papaleo.