If you had 20 million close friends, and each one owed $500k on their house, the total would be $10 trillion of mortgage debt. Coincidentally, that is how much mortgage debt is out there in the United States. (Doesn’t every MLO wish all that debt was at 4 percent!) I love headlines like, “National Association of Realtors Says Home Prices Are Rising Much Too Fast.” NAR has a powerful lobby, but it doesn’t determine house prices. And who is NAR to say something, entirely beyond their control, is too fast or too slow? The pandemic has really impacted everything, huh? Heck, had I known in March that it would be the last time I’d be in a restaurant, I would have ordered dessert! COVID has certainly jacked up the number of emails sent and the number of lunchroom and “walking down the hall” conversations is way down. Did you know that 306 billion emails are estimated to be sent and received each day in 2020? When I was a kid, they promised us we’d all have jetpacks by now. Now I sit around and send emails.

Broker and Lender Services and Products

In a recent conversation, a regional manager said “Today, it’s all about efficiency. We can’t run our operations like we used to.  It’s not just higher loan volumes. It’s that origination teams can actually be far more productive working remotely, an idea that’s now evolved from a ‘pandemic survival tactic’ to long-term operational advantage.” The highest producing teams are the ones with the most efficient, automated, integrated workflows. The sheer quantity of communications, deadlines, documents, and 3rd parties that LOs, LOAs and processors must coordinate means hundreds of details to track for every loan. However CRM+POS+LOS does not add up to optimal efficiency. In fact origination teams often waste over 50% of their time on inefficient communications throughout the process. This case study from a division of American Pacific Mortgage proves the point. The remote team 4x’d productivity and produced 280% more revenue using smart workflows powered by TeamworkIQ. 

Yesterday, Stearns Wholesale held its monthly annual Town Hall webinar, which covered the new URLA redesign and its positive impact, along with market updates and other key talking points. These exciting changes to the URLA will ensure that the application process is more organized and transparent for their borrowers and will gather additional information upfront to streamline the mortgage process. This exciting new update is one of the many topics featured in the Stearns Town Hall virtual webinars, which occur every month and highlight new products and market trends, include special guest speakers, and is open for anyone to attend! If you want to learn more about the benefits of the monthly Stearns Town Hall webinars as well as the URLA changes or partner with Stearns, click here to be contacted.

When FormFree CEO and Founder Brent Chandler shares what he sees on the horizon of evaluating borrower ability-to-pay (ATP), it’s worth a listen, especially given the fact that he introduced electronic asset verification to the world of mortgage lending. In a recent HousingWire article, Chandler writes: “The faster lenders move away from traditional credit scoring and toward ATP scores fueled by direct-source data, the sooner we can help the 50 million Americans without credit scores and the tens of millions of people whose income and employment have been affected by the pandemic. That’s because applications like Passport consider cash flow from both traditional and non-traditional income (i.e., the gig economy) and use sophisticated algorithms to evaluate credit risk, credit resiliency and other factors that aren’t discernable from traditional FICO scores.”

As interest rates get lower and lower, the rush of mortgages and refis gets higher and higher. We know you’re feeling overwhelmed. Here are three things you can do to stop leaving valuable loans on the table, and take advantage of the market so you can come out on top. At Truework, our dedicated team of mortgage professionals are committed to tackling and completing any and all VOE/VOI requests—So You Can Close Your Loans Faster Than Ever. Truework is a US-based company and has partnered with major lenders across the country to conduct 200,000+ verifications and counting. We’re also excited to announce that Reverifications Are Now Live: reverify employment for any request within 90 days of the original, receive up-to-date statuses on all verification reports, get fast turnaround times, and see discounted rates. Get started with Truework Today! And for a limited time, Rob Chrisman readers receive 5 free Verifications ($200 value). Let us do the heavy lifting so you can focus on what matters. Interested? Email Zackary Green.

Who’s Doing What?

As Wells Fargo Funding (correspondent) heads back into buying jumbo loans, but is going through a round of layoffs, there are other things happening. Chase’s Consumer Lending Division has reduced its credit guidelines to core customers who have primary banking relationships, at least in Manhattan, as it lowers the head count in a move toward digital. (Chase has also made recent changes to condos and coops - lower LTV - as that market in Manhattan declines in value.)

Bank M&A is alive and well; PNC has designs to acquire BBVA.

Rocket Companies reported a solid Q3, largely driven by gain-on-sale (GOS) income, as the 4.52% margin exceeded expectations despite being down 67 bps quarter-over-quarter. 40 bps of the change was driven by changes in product mix, namely the strong growth in loans through their partner network. Lower expenses, higher other income, and lower MSR amortization also contributed. Rocket's total net rate lock (IRLC) volume, which drives GOS revenue, was $94.7 billion, a +101% year-over-year increase. Rocket's total closed volume of $89 billion was above expectations, though there was no purchase/refi mix disclosed. The company reported an 82% refinance recapture rate and a 92% net client retention rate, showing the percentage of borrowers in the servicing portfolio 12 months ago that are still in the portfolio now. Purchase recapture was not released in the quarterly report but was in the low 30% range in 2019.

Two Harbors has seen a gain in dollar roll income. The asset yield fell but so did the cost of funds, resulting in a net yield increase. The company benefited from a reversal of the management agreement termination fee, as the company remains in litigation with its former manager, Pine River. The aggregate portfolio totaled $17.9 billion versus $19 billion last quarter. Agency MBS totaled $16.6 billion and the MSR was $1.26 billion. In addition, the company carried a net TBA position of $6.5 billion, up from $3.4 billion last quarter and consistent given the elevated returns from TBA dollar rolls. The $156 billion MSR portfolio carried a forbearance rate of 5% by loan count versus 6.5% last quarter. The percentage in forbearance and not paying was 3.6%. The company also strengthened its liquidity by closing a $200 million servicing advance facility and a $100 million MSR funding facility. The current elevated level of prepayments should generate enough cash flows to allow most servicers to meet their servicing advance needs.

Penny Mac saw gains from Ginnie Mae early buyout (EBO) loans in Q3, which should remain elevated for the next several quarters as UPB in forbearance at the end of Q3 was down 18% since 2Q. The company generated $154 million of gain-on-sale income from EBO loans in the quarter, which equated to 18% of total gain-on-sale income. The majority of these loans are repurchased out of FHA pools and cured through a partial claim (which is a type of modification where the missed payments are tacked on to the end of the loan as an interest-free second lien mortgage). 10% of the company's $245 billion owned servicing portfolio was in forbearance, and 9% of the portfolio was both delinquent and in forbearance. October was the strongest volume month in the company's history, and the company's base case for 2021 is that industry volume will be $2.5 trillion to $2.7 trillion. The downside is that we are getting later in the mortgage refinancing cycle.

The third quarter was a very strong quarter for the originations segment of Mr. Cooper. Earnings estimates were increased to incorporate stronger mortgage banking profitability, with an offset from weaker servicing earnings as MSR amortization remains elevated. The Q3 segment pretax profitability margin came in at 1.95%, down from 3.29% in Q2 largely because channel mix normalized. Correspondent bounced back to 42% of total volume from 18%. It’s estimated that GOS margins in direct-to-consumer (DTC) are 2-3x that of correspondent, but the correspondent channel is important from a new customer acquisition standpoint. Funding volumes are expected to remain strong, catching up to pull-through adjusted lock volumes, which rose +60% quarter-over-quarter in Q3.

Black Knight is in an enviable position, including from its recent purchase of Optimal Blue (and prior to that Compass Analytics), backlog implementation, and sales momentum across the business. While the mortgage market will likely face headwinds next year as refinance volumes normalize, Black Knight management sees minimal impact, even if refi volumes decline close to 50%. Organic revenue growth is expected to remain strong, excluding the impact from foreclosure revenues and mortgage volume headwinds.

Capital Markets

MCT clients have been raving about the virtual conference format of three shorter days across three weeks at MCT Exchange 2020. Day two of three brought a Keynote Session from MBA Chief Economist, Mike Fratantoni, on What We Learned in 2020 & What to Expect in 2021, an MCT Client Panel on How Lenders Navigated 2020, and another hit Networking Roulette & Cocktails session. Read the recap from week two here. The conference concludes this week with three sessions: “The Future of Secondary Executions,” “So, You Think You Can Retain MSR’s?” and the final Networking Roulette & Cocktails, sponsored by JVB Financial. The final day kicks off this Friday at 10am PST. Ready to start your journey with MCT? Join its newsletter today.

Looking at rates, U.S. Treasuries and MBS rallied by yesterday’s close to reclaim Monday's losses and the UMBS30 basis closed tighter, as investor focus turned to the surge in virus cases and new lockdown measures (which overshadowed Monday’s optimism about a vaccine). Fed Chairman Powell spoke, echoing recent economic reports that the pace of the economic recovery has slowed. He also stated the central bank "knows" how to unwind the stimulus that is being provided and said it is too early to think about normalizing the balance sheet. In other Fed news, controversial Fed nominee Judy Shelton was blocked in the Senate.

Tuesday saw a whole host of economic releases, headlined by weak October Retail Sales, reflecting a pullback in spending across several discretionary categories. Industrial production increased more than expected in October, as did the capacity utilization rate. Import prices decreased slightly in October while export prices increased slightly. Business inventories increased by more than expected in September. Finally, the NAHB Housing Market Index increased beyond expectations in November.

Today’s economic calendar is already underway with a trio of releases. Mortgage applications decreased 0.3 percent from one week earlier, according to data from the MBA’s Weekly Mortgage Applications Survey for the week ending November 13. October Housing Starts (1.53 million annualized) and Building Permits (1.545 million). Virtual Fedspeak is heavy with Chicago’s Evans, New York’s Williams, St. Louis’ Bullard, Dallas’ Kaplan, and Atlanta’s Bostic. In addition to the day’s $27 billion 20-year Treasury bond auction, the MBS purchase schedule is likely to have the largest impact on the MBS market. Today sees one of the largest daily Desk supports (over $9.1 billion) since the scheduled asset purchase program re-started in March. Over $7 billion of that is in Class A, including nearly $7.2 billion UMBS30. We begin the day with Agency MBS prices better a touch and the 10-year yielding .85 after closing yesterday at 0.87 percent.

Employment

Promontory MortgagePath LLC, a leading provider of comprehensive digital mortgage and fulfillment solutions, announced this week it hired Greg Bruns and Diane Capers as regional vice presidents, sales. They join the Promontory MortgagePath team in the midst of its accelerated growth, driven by the outpouring of interest in the firm’s platform as banks seek to manage the low-rate, digitally driven mortgage market. With current demands for digital product delivery, flexible staffing, and increased scalability, Bruns’ and Capers’ extensive experience in mortgage and community banking will help community lenders implement solutions to proactively (and profitably!) adapt to the rapidly-changing environment. Read the release. To support its growth, Promontory MortgagePath is looking for loan coordinators, underwriters, processors, and closers eager to apply their talent and experience in new, inspired ways. If you’re a mortgage expert interested in an opportunity focused on your growth and development, visit mortgagepath.com/careers.

NASA and SpaceX this week brought science fiction closer to reality with the launch of the Resilience mission to dock with Int'l space station, and the step-changes we see to the look and feel of, well, everything. What's your next mission? Interfirst has launched a new Charlotte office, near the heart of the Queen city, and is now aggressively hiring. Since Interfirst announced its return to the wholesale space, enthusiasm from mortgage brokers, community banks and credit unions has been sky-high! Interfirst is delivering on its commitment to being the most broker-centric wholesale firm in the country and is currently sourcing talented AEs to meet this growing demand from our expanding national footprint. Seasoned AEs interested in learning more about available opportunities can reach out to Casey Nunn directly or feel free to apply here.

Evergreen Home Loans™ was proud to partner with Barry Habib, CEO of MBS Highway, for the launch of the Evergreen Leadership Advantage webinar series. During this first session, Barry provided expert insights on interest rates post-COVID, keeping buyers engaged in a tight market, tips for social media engagement, and more! If you missed it or would like a refresher, check out the recording here. And if you want to be part of a company that gives you access to the tools, technology, and resources to stand out as a leader in your market and with your referral partners, check out the Evergreen Careers page or email Chuck Iverson for the latest career opportunities.