While California girds its loins for an “atmospheric river and bomb cyclone”, readers should know that I sometimes ask myself, “Why can I remember the order of songs from an album 25 years ago, but I can’t remember why I went into the kitchen?” Yesterday I forgot that it was Ohio’s Union Home bought Michigan’s Amerifirst, not Guild. I apologize for the mistake… It’s all those “stable, multi-state, non-depository, residential lenders with strong management teams”… There certainly are a lot of rumors making the rounds. But also concrete news, about lenders and vendors are making the rounds, perhaps the latest being United Wholesale’s $37.35 credit report. Obviously this puts more pressure on the CRA world (as detailed in the Commentary a few weeks back). There will obviously be pressure on lenders to keep reigning in overhead. For example, the tendency allowing LOs to hang around in down markets is a management deficiency which many doubt will be corrected any time soon. “Hey, they know the system, so let’s keep trying to train them!” The management of lenders, and vendors with sales staff, are well aware that marginal producers do, in fact, cost something. (Today’s podcast is sponsored by MCT and its Hedge Advisory. Comprehensive capital markets software and services that empower secondary marketing performance. Today’s has an interview between two Robert Chrismans on the origination landscape as we enter 2023 and the intrinsic value of a mortgage company.

Lender and Broker Software, Products, and Services

Despite an impressive arsenal of plows, Syracuse, New York, once tried to outlaw snow when the city’s Common Council passed a decree on March 30, 1992, which made any more snowfall before Christmas Eve illegal. It snowed just two days later. SimpleNexus, an nCino company, is fully embracing the heavy snowfall at Utah’s Snowbird Ski Resort for its 5th Annual SimpleNexus User Group (SNUG) conference, happening March 13-16. The conference’s must-see keynotes and breakout sessions will help lenders ‘level up’ their mortgage technology to centralize the homebuying experience with mobile-first innovation, manage incentive compensation plans, build authentic referral relationships in a shifting market, and much more. Register now for SNUG 2023 and save $100 using promo code ChrismanSpecial.

“OptiFunder offers more value than ever before with its expanded Warehouse Management System. The unique platform combines optimized warehouse allocation decisions with automation for funding through loan sale and now, new Wire Data Check automation. ‘Try before you buy’ with a demo and free back test to discover your savings. Minimize warehouse expense while you maximize efficiency and insights to enhance results for 2023 and beyond. Book a meeting with us at IMB 23 or request a demo and back test today to see why our customers love OptiFunder.”

On December 3, 1992, 22-year-old engineer Neil Papworth sent the first text message to a colleague’s mobile phone, simply stating: “Merry Christmas.” Unfortunately, technological limitations meant that the recipient couldn't respond with their own holiday greeting. Even though texting has since become the most effective B2C communication channel, the majority of lenders have yet to incorporate it at scale. With out-of-the-box workflows and eye-catching mortgage marketing content, Surefire by Black Knight helps lenders maximize ROI and implement an automated, go-to-market text messaging strategy right out-of-the-box. Learn how to make your investment in text message marketing truly meaningful when you download the Surefire team’s latest eBook.

It’s the new year, which means it’s time to buckle down and really work on your business. Keep your customers yours. Shave off some costs. Focus on empowering all your LO's to market like top producers, Velma has a purpose-built alternative to your CRM that can save you some serious bucks. Get a vast content library, automated drip campaigns, smart open-house flyer creation, and so much more for way less than those other guys! Velma’s Marketing Solutions are the surefire way to get a jump start in 2023. “But Velma!” we hear you say, “We’re still locked in a contract with our old CRM!” Not to worry friend, for a limited time get Velma’s Marketing Solutions free until your old contract is up! Now that’s a sweet deal. Click here to learn more on how Velma can break you free from your old CRM!

Are more loans being locked with the recent fall in rates? As the leader in capital markets software and services, MCT supports more lenders with hedging and pipeline management solutions than any other single provider. This allows for the aggregation and analysis of a meaningful population of data and translation into macro trends and insights. MCT’s latest rate lock activity indices, based on actual locked loans rather than applications, show that despite rate locks falling across the board in December, rate-and-term refinances showed considerable rate elasticity. Check out the full report. Wondering what can we expect for 2023? MCT’s recent blog, 2023 Housing Market Predictions, delves into potential paths forward for the residential housing industry as we enter the new year. There is also MCT’s Putting a Bow on 2022 blog, published last week. Additionally, sign up for MCT’s newsletter to receive the latest capital markets content.

Wholesaler and Correspondent News

Effective for all loan submissions received on and after January 1, 2023, Carrington Mortgage Services, LLC has implemented the following Correspondent fee schedule. The new CMS Underwriting Fees run the gamut (VA loans for $700, Carrington Prime Advantage $900) for non-delegated, and for delegated all the products are $550.

Rocket Pro TPO released “Purchase Plus,” a credit program that offers up to $7,500 in lender credits for first-time buyers in underserved communities to eliminate a significant hurdle to homeownership. Click here and/or reach out to your AE for more details! Rocket is also giving brokers a 37.5 bps credit on 30-year conventional purchase loans $200K or less – now through Sunday, February 5!

A&D Mortgage launched its new temporary rate buydown programs designed to provide borrowers with more flexibility when it comes to their home financing options. The rate buydowns are available for owner-occupied and second-home Conventional and Non-QM loans, with third-party or seller-paid options as well. A&D Mortgage offers 3-2-1 buydown and 2-1 buydown.

Newrez Wholesale Smart Series Products have been updated; changes are effective immediately for all new loan submissions.

PRMG TPO Resource Center Updates 22-16: Training/Instructional Material, General Forms, checklists, VA forms, Jumbo and Second Mortgage Product, Forms, and Information, Non-QM Product, Forms, and Information, Compliance Information, Wholesale Broker Approval Package and Forms, Onboarding Forms. The Anti-Steering Disclosure became available on the PRMG TPO Portal. When the Broker completes the fields required, the form will generate with initial disclosures. To further assist with information, utilize PRMG’s Access Broker TPO Anti-Steering Training: ASD TPO Portal Training.

PRMG has New Temporary Buydown Selections on TPO. For details, access the buydown FAQ/Tips here: Temporary Buydown FAQ/Tips.

Capital Markets: Thoughts on the Fed’s Direction

One question on the mind of many in 2023 is, “Will central banks begin to pivot?” Meaning, will they stop raising short-term rates? In the United States, while inflation has eased recently, it is still way higher than the central bank's desired 2 percent target. "We will stay the course until the job is done," Fed Chair Jerome Powell declared at December's policy meeting, while ECB President Christine Lagarde added that, "we're not pivoting, we're not wavering." Last month, the Fed even raised its benchmark interest rate to the highest level in 15 years, and some fear that heightened geopolitical risks or uncontrollable events could happen again, causing inflation to spring back and return to its upward ascent. At this point it would seem that there's more risk of a high-side surprise.

As a reminder, the Fed, through the Federal Open Market Committee (FOMC), raised rates seven times in 2022, pushing its benchmark from a range of 0% to 0.25%, to the current 4.25% to 4.50%. However, smaller increases were implemented in December and officials signaled that they only plan to keep raising rates to between 5% and 5.5% in 2023. Better outlooks are already materializing, with many seeing the Fed continuing to raise rates in the first quarter, pausing in the second and possibly cutting rates in Q3 or Q4.

How does all this translate into yesterday? We had a little rally in the bond markets after another sign of peak inflation (e.g., wage pressures are easing), with investors largely shrugging off stronger than expected data and hawkish leaning minutes from the December FOMC meeting. Minutes from the last Fed meeting showed the central bank grimly resolved to finish its war on inflation. Investors were looking for the Fed's rationale to raise its inflation target when various economic data were showing a slowdown. Both the bond and equity markets latched on to the hawkish comment that “No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023.”

The minutes also noted the high level of uncertainty associated with the economic outlook while the outlook for inflation “remained tilted to the upside.” Minneapolis Fed President Kashkari said he sees Fed pausing its rate hikes at 5.40 percent, but notes rate could be taken potentially much higher from wherever the Fed pauses if there is slow progress in lowering inflation after the Fed pauses. There was no mention, as expected, of any changes to their current balance sheet reduction in MBS.

As far as economic releases went yesterday, November JOLTS - Job Openings showed the record U.S. job market remains strong with 10.46 million job openings in November. That's an increase in job openings versus October and more than expected, indicating a continued imbalance between labor supply and labor demand. That equates to roughly 1.74 job openings for all workers officially counted as unemployed. A tight labor market is good for American workers, but bad for fighting inflation, as the imbalance keeps upward pressure on wages.

Separately, the December ISM Manufacturing Index dropped further into contractionary territory in October. The ISM for December hit its lowest level since May 2020 and marks the second straight month of contraction. The cumulative effect of rate hikes around the globe is curtailing inflationary pressures, but adversely impacting demand. The Prices Index for the December ISM Manufacturing Index saw its lowest print since April 2020.

Today’s calendar is loaded with labor market indicators ahead of tomorrow’s payrolls report. First up was Challenger job cuts (U.S.-based employers announced 43,651 cuts in December, falling 43% from the 76,835 announced in November; Q4 cuts are the highest since Q4 2020), which was followed by ADP employment (235k, much higher than expected but of questionable validity), and weekly jobless claims (204k, down from 225k). We’ve also received the November trade deficit ($61.5 billion). Later this morning brings the final December S&P Global services PMI, Freddie Mac’s Primary Mortgage Market Survey, and the Treasury announces the sizes for next week’s mini-Refunding consisting of $40 billion new 3-year notes and $32 billion and $18 billion reopened 10-year bonds and 30-year notes, respectively. Fedspeak resumes with Atlanta Fed President Bostic and St. Louis Fed President Bullard delivering remarks. We begin the day with Agency MBS prices worse about .125 band the 10-year yielding 3.74 after closing yesterday at 3.71 percent.