Our Federal Reserve doesn’t control events around the world, like a ship being stuck in the Suez Canal, or the current Red Sea geopolitical aggression, or China raising chip prices, or OPEC raising gasoline prices, or… or… or. So, consumer and producer prices are always a bit of a wild card. Since they influence the Federal Reserve’s actions, and therefore, in turn, mortgage rates, inflation has certainly been in the news for some years now. (There’s even a joke about inflation at the bottom.) The Consumer Price Index (CPI) is designed to broadly capture changes in the prices of goods and services purchased by U.S. consumers. The largest component is housing, with a weight of 45 percent. Next is transportation at 17 percent, then food and beverages at 14 percent, medical care at 8 percent, education and communication are 6 percent, recreation is 5 percent, other goods and services 3 percent, and then apparel at 2.6 percent. (Today’s podcast can be found here, and this week’s is sponsored by Truework. By connecting every verification method into one platform, Truework helps lenders eliminate process disruptions, maintain a competitive borrower experience, and reduce the fiscal impact of verifying income.)

Lender and Broker Services and Software

“Start off the new year celebrating your independence by connecting with Optimal Blue at the MBA Independent Mortgage Bankers Conference, Jan. 22 – 24 in New Orleans. As a proud sponsor, our capital markets experts will be set up at Table #1 and ready to talk about your 2024 goals. Trying to operate more profitably? Interested in finding new efficiencies? Ready to work with a proven and respected technology partner? We’re ready to discuss these goals and more. Let us tell you what it means to work with Optimal Blue to leverage the industry’s only end-to-end capital markets platform. Pay us a visit at IMB24 or reach out to our team directly.”

Discover the power of partnership with Planet Home Lending Correspondent. Our continually refined product lineup spans vanilla to niche products all tailored to your unique needs: Best effort, mandatory AOT, delegated, or non-delegated. Connect with Planet at the Independent Mortgage Bankers Conference in New Orleans, Jan. 22-24. Reach out to SVP Correspondent Sales Jim Loving (414-270-0027), VP National Renovation Lending Jim Bopp (518-348-6426), or Regional Sales Manager Jim Shaler (813-784-6237) to schedule your meeting. Not going to IMB this year? Click here to download the latest version of our Product Highlights, then put Planet to work for you in 2024.

Do more with a HELOC! NFTYDoor, a division of Homebridge Financial Services, Inc., has announced that it is now offering correspondent, private-label digital HELOCs to IMBs in all 50 states! Now you’ll be able to close and fund in your own name in DAYS, not weeks or months. NFTYDoor combines automation with real 5-star live support to ensure an exceptional mobile-friendly borrower experience and process. Providing your borrowers with a HELOC that is “private labeled” and predicated on speed to close, makes NFTYDoor the perfect choice for your HELOC originations. Now, add in the fact that NFTYDoor brands their platform to your entity and MLO, they close the loop on providing what you need and how you need it! Lenders can contact Info@nftydoor.com or visit www.nftydoor.com/lender to learn more about their offering and how to become an approved NFTYDoor partner.

AmeriHome Correspondent, the 2nd largest correspondent investor in the country, has a lot going to start the new year! Don’t miss its quarterly conversation with Freddie Mac on 1/17 at 11am PST - Steve Kolker will host Freddie Mac’s Chief Appraiser & Director of Property Valuation, Scott Reuter, and Senior Director of Property Valuation, Danny Wiley, along with Rekha Siddani, AmeriHome’s new EVP, National Credit Operations, for a discussion on the latest appraisal challenges, collateral evaluation tools and live Q&A. Register here. Rekha was promoted to this new role Jan 1 as Randy Wiltshire has retired after nine amazing years and will be missed by all. AmeriHome is now purchasing loans with Fannie Mae’s Value Acceptance + Property Data appraisal alternative! AmeriHome will be in New Orleans for the IMB Conference later this month - check Upcoming Events for details, find your sales rep here, or send them an email to learn more about partnering with AmeriHome!

In a world where there's so many cyber threats, why are loan officers and processors exchanging sensitive borrower docs by email? Loan portals are often difficult to use that loan officers are actively steering borrowers away. Doc upload should be as easy as it is secure, and LiteSpeed by LenderLogix makes it that easy.

“Are you wondering about mortgage rates, inflation, or how housing prices may affect mortgage volume in 2024? Unlock the secrets of the 2024 housing market with MCT's latest blog, 2024 Housing Market Predictions, which dives into expert analysis featuring insights from Andrew Rhodes, Senior Director, Head of Trading at MCT. The latest blog reviews mortgage rate scenarios, the trajectory of inflation in 2024, and includes a sneak peek into potential recession scenarios. Our comprehensive market predictions for 2024 will equip you with the knowledge you need to navigate the ever-evolving landscape of the housing market. Read the blog or join MCT’s newsletter to stay up to date on the latest educational content.”

Tabrasa is now offering a FREE 30-day trial (no credit card needed) to its new Tabrasa One Platform. What is Tabrasa One? 3 Products - Mortgage Market Guide, Marketing/CRM, and Video, on one login, for less than half the price. Click here to learn more and take a free 30-day look.

Secure Insight’s new payment fraud prevention tool, TruePay, is set to launch on January 22nd. Initial beta test results have been very positive with title agents around the country providing feedback and helping to improve the tool for its launch. The tool offers a platform to verify individual and business banking information, as well as a mortgage payoff verification database. The company is in discussions with title insurers for product endorsement for their agents. Secure Insight VP of Business Development, Amanda Padd stated “We have been pleased with the overwhelming positive response to this new tool, especially from smaller agents who find existing wire verification options much too expensive. We expect to have hundreds of agents using this product within weeks of its launch.” Find out more about TruePay at https://secureinsight.com/truepayenrollement/

Loan originators are looking at a “full stack” loan origination & processing platform like Realfinity.io to go “independent” allowing them to get the most competitive pricing directly from wholesale lenders with no overlays due to corporate expenses. Check out this WSJ article which really is opening eyes. To learn more about going independent reach out to Luca Dahlhausen.

Private MI company Makes an Investment

Radian Group Inc. announced today that it has made a strategic investment in FinLocker, a personal financial fitness and homeownership tool. “By leveraging advanced technology, FinLocker aggregates and analyzes a consumer’s financial data, offering personalized paths to mortgage eligibility and other financial transactions. Terms of the investment were not disclosed.

“The investment aligns with Radian’s commitment to ensuring the American dream of homeownership responsibly and sustainably through products and services that span the mortgage and real estate spectrum, while also deepening relationships with its customers by introducing them to unique and relevant solutions to help build their businesses. FinLocker and Radian’s homegenius business share a strategic focus on creating a personalized and data-driven experience for home buyers and sellers, and all the professionals who guide them to success in their homeownership journey.

“FinLocker’s customers primarily include mortgage lenders, banks, credit unions, and other financial service providers, which private-label the FinLocker tool with their brand to generate and nurture leads, stay meaningfully engaged with consumers throughout their homeownership journey, streamline the mortgage loan process, and cross-sell value-added products with the goal of creating customers for life…”

Incenting Capital Markets Employees

I’ve been in capital markets and hedging pipelines for a long time. Anyone who’s been in this business for a long time has seen expansions and contractions, rates go up and rates go down, layoffs and hiring. People still need a roof over their heads, regardless of rates, and someone has to be around to do $2 trillion in home loans in 2024, 2025, and beyond. And a good capital markets staff is critical in finding the right investors for those loans. They should be comped based on company goals, not secondary marketing managers (SMMs) trying to “swing for the fences” for profits.

It is part of the SMM’s job description to maximize the sales revenue from the lot of closed loans. A well-structured bonus plan does not simply give the SMM a token thank you at month or quarter end. It will truly incentivize the individual to minimize ever-present exposure and maximize revenue; refusing to leave any basis points unaccounted for. You want to find your leaks in this era of “breakeven is a win”? Have a compensation plan that truly rewards execution and devalues inefficiencies.

While a bonus can be a “little something” to thank the individual(s) for a job well done and a prosperous month or quarter, it won’t have much of an impact on exceeding goals and revenue. For a bonus plan to be of true value to all parties, it should likely be a substantial part of the compensation package, like many hedge funds analysts. With some lenders bonuses account for up to 50% of a compensation package. Management should look for ways to migrate towards a variable compensation that’s aligned with productivity and revenue.

Ownership, and/or the CEO, along with the Secondary Marketing Manager, best lay some ground rules before even thinking of a bonus structure. Typically, these SMMs manage a hedged pipeline and possibly even deliver to the agencies to build a servicing portfolio. The immediate thought often to pay a bonus based on the execution of the hedged pipeline, but there are some considerations.

Does the company have a benchmark for performance to base the bonus upon? Will you have a “high water mark” provision for the bonus? Will the bonus be applied on a cash flow or accrual basis? Should the bonus be based upon overall execution, margins, and volume, or just the hedged portfolio? Does the SMM manage margins and impact overall originations? Does everyone understand (and follow) the corporate lock policies and strategies, and how they impact revenue and hedge performance? Does everyone, including management, really understand the hedging gains and the possible MSRs/values of retained servicing?

Understanding any hedging gains, and the implications of retaining servicing, is critical. It’s standard for the SMM to understand the reporting and components of hedging, trading, and pair-offs, but to management or the lender’s owner, this is often foreign territory. Capital markets heads need to fully understand the hedging model themselves, including third party performance and mark to market reports and their own data. The validity and knowledge of these reports are absolutely critical as they would ultimately be what a bonus would be based upon, or at least partially based upon.

Of course, data integrity is critical. Garbage in garbage out. SMMs could easily knowingly or unknowingly push misleading data to third party risk management/hedging firms, which will in turn lead to inaccurate benchmarks and performance levels. The key here is understanding the data from time of original lock, through execution and loan sale.

Only when all parties completely understand all of the metrics and are fully confident with their data and benchmarking should any bonus be implemented. And yes, pay cuts are happening everywhere, but at some point, we all know that will stop and bonuses will be back in vogue.

Capital Markets

Ahead of today’s highly anticipated December CPI report, where analysts anticipated a slight increase in the annualized headline reading while core consumer prices were expected to cool slightly, the bond market experienced another decline yesterday. There was a mediocre $37 billion 10-year note reopening, which means the Treasury selling another batch of an existing security, which once again highlighted the large disconnect between the Fed’s projected slight easing in the latter half of the year and market assumptions that the Fed will cut rates 150 basis points by year-end, beginning in early March.

Today brought the data highlight of the week with December CPI. Headline CPI was +.3 percent, +3.4 percent year over year. Core was, as expected, +.3 percent, +3.9 percent year over year. The markets have also received weekly jobless claims: 202k, 1.8 million continuing claims.

Later today brings Treasury announcing auction sizes, highlighted by reopened 20-year bonds and 10-year TIPS, before auctioning $21 billion reopened 30-year bonds, Freddie Mac’s Primary Mortgage Market Survey, remarks from Richmond Fed President Barkin, and the December budget deficit. We begin the day with Agency MBS prices a shade worse than Wednesday’s close and the 10-year yielding 4.04 after closing yesterday at 4.03 percent after the inflation and jobless claims data. Very little movement.

LO Jobs

“Kwik Mortgage is hiring Direct to Consumer and Distributed Retail Sales, Teams and Individual contributor loan originators are welcome. We are based in Parsippany NJ and open to remote work locations. We are a Direct Lender with a full suite of Correspondent buyers inclusive of Fannie Mae and Freddie is on the table for 2024! From FHA and VA to Non-QM we have it all. Our operations platform is second to none and yes, we use Encompass among other well-known CRM and Point of Sell systems so training and on-boarding will be fast and simple. We virtually have no senior leadership levels of cost which means you’re not paying for more and getting less! We invest in our people and our process, and we have 27 years of company owned and operated success! We are always competitively priced no worries about rate shopping. If you are located or licensed in the NE, SE, SW, PNW, Texas, Ohio, or California we want to talk to you! Excellent compensation, support and care is how we do it! Speed up in 2024 and get, Kwik! If interested, please send your resume to Anjelica Nixt or Paul Campbell.”

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