This week I’ve been running football quotes in the joke section at the bottom. Thanks to Gary B. who sent Chuck Noll’s, “Pressure is something you feel when you don’t know what you’re doing.” Lots of folks in our industry, including me, don’t know what they’re doing in terms of technology. Nor does the consumer. “Rob, here's a question for your readers. I'm reading articles about Facebook secretly using the user’s iPhone camera as you scroll your feed. If a loan officer has Facebook on their phone, and receives loan applications through an app or other means on their iPhone, how does a mortgage company QC the security of consumer information? Signed: Make paper great again!” Regarding consumers, how about two who, gosh darn it, bought a house in Italy for 1 Euro? Why don’t I hear about deals like that? The best I seem to muster is a Happy Hour where you, “Buy a bottle of wine, get 1/2 off any appetizer $7 or less.”
Lender Services and Products
Will 2020 be as profitable as this past year? How would a rate increase affect your bottom line? What if your loan production gets cut in half for a month? These answers can be extremely hard to come by, however Loan Vision is making it easier to prepare for the financial future with its new Advanced Budgeting & Forecasting module. To learn how the module gives lenders the ability to test possible disruptions due to industry conditions, inspiring better financial decision making and aiding profitability, stop by Table #3 at the MBA Accounting and Financial Management Conference next week! Not going to the conference? Join us on November 25 for an overview of the module. You can register here for the webinar or reach out to Carl Wooloff for more information.
Lack of affordable housing continues to dominate the headlines, especially for low to moderate income homebuyers as well as those in rural markets. Mid America Mortgage, one of the nation’s leading underwriters of ALL government-backed loan products continues to fill the gap in affordable housing financing with its “One-Time Closing/Construction to Perm” program for use with FHA, VA & USDA products, which allows for up to 96.5% LTV on FHA loans and 100% LTV on VA and USDA loans. “Our partnership with National Capital Funding, Ltd., which is widely recognized by FHA, VA and USDA as the premier construction funds administrator in the U.S, ensures a smooth & seamless process for builder approvals/interactions and construction/draw administration, even for LOs who are new to the product. Contact your local Mid America AE today for more details click here.”
Once you understand the rich opportunities home equity offers for customer engagement and retention, you may want to immediately integrate it into your marketing strategy. Learn about home equity marketing opportunities and how to execute on them in this ebook from Blend. It outlines how to communicate with each customer based on their priorities, and the appropriate channels with which to reach them. Download the guide here.
Did you know Floify is one of the few digital mortgage point-of-sale systems that provides comprehensive solutions for sending automated text message notifications, including pre-composed templates, from day-one? Considering 98% of all text messages are read within two minutes, this feature is a major value-add for LOs looking to reduce loan cycle times, increase touches, and provide borrowers and referral partners with instant updates throughout the loan process. LOs who take advantage of Floify’s text message notifications can also send these timely communications under a variety of milestone-based conditions, including deadlines, document and application status changes, and more. If you’re not yet offering your borrowers and referral partners the convenience of text message loan status notifications, what are you waiting for? Discover how Floify can help turn your communications into action – request a live demo to learn more.
Rise of the Nonbanks
If you worked for a lender who was originating $500 million a month in home loans but only had a net worth of $1 million, would you be nervous? Would your company have enough capital for a couple buybacks? Warehouse banks and investors don’t allow that kind of leverage, but nonbanks traditionally are worth less than banks which usually have hundreds of millions or billions in assets. And this hasn’t escaped the notice of regulators.
BofA Merrill Lynch Global Research reported that in the 3rd quarter of 2019 the top 100 bank holding companies saw a notable increase in U.S. Treasury holdings, a step-up in conventional conforming MBS, a steady demand in Ginnies, and growth in CMOs (collateralized mortgage obligations). The top 100 banks added $67 billion in Agency MBS in 3Q19 per SNL. Adjustments drop this to $37 billion (prepayments, sales). How about a deep dive on the convergence of traditional and digital banks? How this will play out for consumers? Julian Hebron wrote, “4 Ways Banks & Silicon Valley Are Fighting For Your Wallet.”
Yesterday the Federal Deposit Insurance Corporation (FDIC) released a multi-part analysis of changes in the U.S. banking system since the 1950s, especially changes occurring since the financial crisis in 2008. “These analyses address the shift in some lending from banks to nonbanks; how corporate borrowing has moved between banks and capital markets; and the migration of some home mortgage origination and servicing from banks to nonbanks.”
FDIC’s reports will be published in the next edition of FDIC Quarterly. They include “Bank and Nonbank Lending Over the Past 70 Years.” “Total lending in the U.S. has grown dramatically in the past 70 years and, since the 1970s, the share of bank loans has generally fallen as nonbanks gained market share in residential mortgage and corporate lending. In other business lines, shifts in loan holdings from banks to nonbanks have been less pronounced as banks and nonbanks continue to play important roles in lending for commercial real estate, agricultural loans, and consumer credit. Studying the roles that banks and nonbanks play in lending markets allows for a better understanding of how banks respond to growth in nonbank lending and the implications of associated risks for the banking sector and the broader economy.”
For another light read, check out “Leveraged Lending and Corporate Borrowing: Increased Reliance on Capital Markets, With Important Bank Links.” “Over the past decade, U.S. nonfinancial corporate debt reached record highs as issuance of corporate bonds and leveraged loans grew rapidly while credit quality and lender protections deteriorated. Much of this growth in corporate borrowing came through capital markets, though important connections to the banking system remain. This article examines this shift in corporate borrowing to capital markets over the past several decades.”
Lastly, for dessert there’s “Trends in Mortgage Origination and Servicing: Nonbanks in the Post-Crisis Period.” “The mortgage market changed notably after the collapse of the U.S. housing market in 2007 and the financial crisis that followed. A substantive share of mortgage origination and servicing, and some of the risk associated with these activities, migrated outside of the banking system. Some risk remains with banks or could be transmitted to banks through other channels, including bank lending to nonbank mortgage lenders and servicers. Changing mortgage market dynamics and new risks and uncertainties warrant investigation of potential implications for systemic risk.”
The US 10-yr Treasury yield rose 20 basis points last week to 1.91 percent on renewed optimism of a trade deal between the US and China. But no concrete details were provided and there were reports over the weekend that the deal might not be completed anytime soon or at all if it is “not a great deal.” Despite the news, there is still a possibility that the 15 percent tariffs on $156 billion of consumer goods will still go into effect on December 15th. Markets nonetheless have eased fears of a recession especially given the Fed's willingness to confront trade policy shocks, slowing global growth and short-term liquidity crunches by adjusting policies. Recent economic data has moderated and consumer fundamentals remain strong. One continuing effect of the trade war is that business investment, which drives productivity growth, has fallen the past two quarters. Slowing productivity and continued compensation growth have driven labor unit cost growth to its swiftest pace over the last five years. Despite that, there is little concern of a significant increase in inflation. Overall, there are bright spots and sore spots in the economic data as well as macro issues such as trade and slowing global growth that will continue to move markets. Over the past week, the markets were focused on the bright spots, but that could change day-today.
U.S. Treasuries rallied, and with them mortgage rates, again on Thursday as major economies stalled. Germany posted 0.1 percent growth in Q3, narrowly avoiding a recession after last quarter’s contraction. Meanwhile, Japan saw growth slow to a near standstill amid plummeting exports and other, mostly disappointing, data from Asia. China's October Industrial Production, Retail Sales, and Fixed Asset Investment all missed expectations. Markets also received further weak growth figures from Europe and evidence of decelerating growth in major manufacturing centers.
Fed Chairman Powell addressed lawmakers again, testifying on the U.S. economic outlook before the House Budget Committee. His hint about a pause on any further interest rate cuts was a departure from recent history, which has seen multiple hikes to offset fairly mild consumer-price growth. Finally, Senate Majority Leader McConnell tweeted, "I was encouraged by a productive conversation…yesterday on legislation to further help the people of Hong Kong. The Senate needs to stand with Hong Kong and I hope we can take action soon." This will inevitably upset those in power in Beijing, right after China lifted a ban on imports of U.S. poultry, formalizing a move that was first announced in October.
Quantitative Easing is alive and well. Yesterday afternoon, the NY Fed announced it planned to buy a maximum of $9.6 billion in agency MBS over the November 15 through December 12 period, based on October paydowns (that exceeded $20 billion) and near expectations. For the two-week period beginning today, the Desk is scheduled to buy up to $5.065 billion MBS across five FedTrade operations with the first operation today, when they will purchase up to $762 million GNII 3 percent ($531 million) and 3.5 percent ($231 million).
Today’s calendar began with October Retail Sales (+.3%, strong, and +.2% core) and Empire State manufacturing for November (2.9) and October import prices (-.5%). Later we’ll receive October Industrial Production and Capacity Utilization, as well as September Business Inventories. We begin the day with Agency MBS prices worse .125 and the 10-year yielding 1.83% after closing yesterday -6 bps to 1.82 percent.
Jobs and Transitions
PRMG is on its way to becoming a billion dollar a month company with a record achievement of $984 Million funded in the month of October! PRMG is devoted to continuously growing its platform which includes Retail, Wholesale, and Correspondent channels. With over 2000 employees and ranked in the Top 25 of the Best 100 Mortgage Companies and the Top 5 of the 50 Best Companies to Work for in America, PRMG has invested in its operations teams to ensure they provide 24-hour underwriting and the best possible service levels to their customers and business partners. If you are looking to work with a privately owned company that is large enough to serve you yet small enough to know you and is on the cutting edge of technology please contact Kevin Peranio.
By most accounts, the MBA Annual Conference and Expo was a huge success with a great turnout. Thrive Mortgage’s Media Team was on hand for most of it conducting interviews with many of the industry’s most respected thought leaders and influencers. The first round of interview sessions were released this week HERE & HERE, with many others to follow in the coming weeks. “Sharing insights and viewpoints from such a diverse cross-section of the industry resulted in amazing conversations,” stated James Duncan, Director of Marketing for Thrive. “Our marketplace is comprised of so many amazing professionals with incredible stories. To document those moments, and now share them with the rest of the industry, is a great privilege. The talent level of our team members is fun to watch in action.” For more information on how our Marketing experts can help you grow your business in 2020, please visit join.thrivemortgage.com.
San Diego’s Guild Mortgage has promoted three senior members of its leadership team and two regional executives as it “continues to grow nationally and set records in lending and servicing.” Congrats to Terry Schmidt who is being promoted to president while Mary Ann McGarry continues as CEO. And to David Neylan who is becoming COO (Chief Operating Officer) as well as Amber Elwell, who has been promoted to CFO. Andy Stewart is now the divisional sales manager for the Mountain West Region, as well as California and Hawaii, and Chad Overhauser was promoted to divisional sales manager for all other regions. All changes take effect Jan. 1, 2020. (Guild is “sailing along” with total volume hitting a record $15.78 billion for the nine months ended September 30, 2019, up 23.1% from the same period in 2018 and servicing at $50 billion.)