Do you know what “splooting” is? Here’s a hint: 4-legged animals do it. (Hey, I don’t make these things up.) Quite the word. Words are very interesting, and can incite a riot, help someone get through a loss, make up this Commentary, entertain. Every morning I share my Wordle results with a few friends, comparing who was able to find the 5-letter word of the day in the fewest tries. For the most part Wordle is quick, fun, and mildly entertaining, which is the exact opposite of financing a home as any borrower or loan originator will tell you. Originate? “Origin”: source, inception, root means the point at which something begins its course or existence. Origin applies to the things or persons from which something is ultimately derived and often to the causes operating before the thing itself comes into being. “ate” is a suffix meaning “state of quality of” and when added makes an adjective a verb. Originate, tolerate, stimulate, nominate, dislocate, penetrate, intimidate… there are thousands of words with -ate on the end. And as many of us are in, or head to, San Diego for the MBA’s conference, origination volumes, margins, and revenues will certainly be discussed, as will attempting to lessen the friction that each loan goes through during processing and closing. It is important to remember that we’ve helped millions of families by originating their loans and save billions of dollars, and will continue to do so. (This week’s podcast is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking. Today’s has Part One of an interview with Keller Williams Scott Agnew on navigating through uncertain times and what the industry has learned since 2008.)

Lender and Broker Software, Products, and Services

From getting in shape to learning a new skill, millions of people start the New Year with ambitious resolutions. However, many are short-lived, with research suggesting that most people give up by January 19, a.k.a. “Quitters Day.” Facing reduced volume, one resolution lenders won’t ditch in 2023 is investing in pipeline-filling homebuying solutions like those from SimpleNexus, an nCino Company. Just ask VanDyk Mortgage, which uses Nexus Engagement, Nexus Origination, and Nexus Closing to unite its people and systems on a single-sign-on platform. Make a commitment to improve your efficiency and productivity in the new year. To see how VanDyk Mortgage is using SimpleNexus to support a “from anywhere” homebuying experience featuring hybrid eClosings, download the free case study.

“Citibank N.A. remains committed to sustainable growth and responsible expansion of the Correspondent channel, where one of our key focuses is loan quality. In the current mortgage landscape, partnering with a quality-focused investor is an important consideration. Citi’s pre-purchase loan due diligence can assist you in navigating the current mortgage environment by helping you minimize repurchase risk and creating best practices dialogue you can leverage to maximize loan manufacturing quality across your larger book of business. To learn more about becoming a Citi Correspondent partner, contact our National Client Services Team or complete our Prospective Correspondent Questionnaire.”

The StorySeller Adventures officially comes out tomorrow, and it’s an entertaining allegory and step-by-step guide to StorySelling written by Gibran Nicholas, CEO of Momentifi. “StorySelling is when we use the language, structure, and characters of story to sell more effectively,” says Gibran. “You need a better StorySelling system if, (1) you sometimes struggle to overcome objections or get buy-in for your ideas; (2) you want a more consistent way of tapping into pre-existing human desires or habits to get better results in less time; or (3) you want to grow an epic business and make a meaningful difference despite current obstacles. If that describes you and what you’re looking for, click here to sign up for The StorySeller Daily, which is a free daily email that provides StorySelling tips and leadership insights using the concepts from Gibran’s book (a link to buy the book will be provided tomorrow when it’s released).

2023 is one of the most competitive years for lenders in recent history because of limited homebuyer demand coupled with price hikes. The bright side is that your business doesn’t have to shell out millions to compete with mortgage marketing giants. The dynamic mortgage marketing capabilities of Surefire by Black Knight enable local and regional lenders to outshine the billboard guys with out-of-the-box lead management tools, intelligent automation, and effective creative content. Download the free eBook for winning mortgage marketing game plans that won’t break the bank.

Long-term Rental or Vacation Rental? Visio Lending is the nation’s leader in Non-QM Investor DSCR loans for buy and hold SFR rentals with nearly a decade of experience and over $2.1 billion in originations. No-DTI, 30-year term, rate buy downs; I/O and Sub-1 DSCR options available. Through our top-notch Broker Program, brokers are able to earn up to 2 points YSP, and 5 points total. Visio Brokers can count on a designated Account Executive and in-house processing.”

Free book: How to shift your strategy for profitable lending in 2023, according to industry veterans. With interest rates volatile and loan volume uncertain, creating profitability this year might feel daunting. Luckily, mortgage solutions provider Maxwell is here to help! To arm you with confidence, Maxwell interviewed four mortgage veterans (Maxwell’s Jim Smith, CMB, Alan Parris, and Peggy Rubadue, along with Thrive Mortgage’s Donielle Geiser) on best practices to tackle 2023’s market. With this free 12-page download, you’ll receive actionable advice to better use technology to improve efficiency, expand into new markets sustainably, and flex your business to drive borrower leads. Ready to view 2023 as a call-to-action instead of an insurmountable challenge? Click here to download Planning for 2023: How to Recoup Revenue, Save Costs & Drive Loan Volume in an Uncertain Market.

“Keeping sensitive information out of the hands of cyber criminals has become more challenging in recent years. According to Newsweek, we are now in a “cyber-pandemic” and many of us are unaware of how vast this problem is. Every day of the year, hackers unleash a stream of major attacks against government agencies, companies, and individuals. If you don’t feel prepared for a cyber incident, our cybersecurity experts are here to help. Richey May’s team of cybersecurity experts delivers services designed to help lenders identify and mitigate the risks presented by their people, processes, and technology. Read our blog on Cybersecurity in the Mortgage Workplace to learn 4 steps that lenders can take to better protect themselves against cyber-attacks. Contact us today for help assessing and defining your cybersecurity program for greater visibility and resilience.”

Fanne/Freddie Conforming and Conventional News from the FHFA

Last week the industry was abuzz with the FHFA, through Freddie Mac and Fannie Mae, adjusting loan level price adjustments which flow directly through to borrowers. “We’ve issued Lender Letter LL-2023-01, New Loan-level Price Adjustment Framework, to provide information about future changes to loan-level price adjustments (LLPAs) and an overall redesign of the LLPA matrix. The updated LLPAs will be effective for all whole loans purchased on or after May 1, and for loans delivered into MBS with issue dates on or after May 1… For complete

details, see the Loan-Level Price Adjustment (LLPA) Matrix.”

On the news, Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), sent out, “FHFA’s holistic review of the GSEs’ up-front pricing framework has led to extensive reworking of the grids, and it will take some time to assess the full impact on borrowers and the market. Our initial review indicates that the new framework results in a modest net increase in overall pricing, which is a concern given ongoing affordability challenges and the higher interest rate environment.

“With the peak homebuying season coinciding with these changes, FHFA should consider additional program changes to improve affordability, including raising the area median income threshold for the GSEs’ low down payment products. This move would expand eligibility for borrowers who can meet the monthly obligation of a mortgage payment but do not have significant savings to make a large down payment. We also urge FHFA to be flexible with its May 1, 2023, implementation date should the industry need more time to integrate these updates and the recalibration of the upfront fee matrix into mortgage pricing.”

Recall that the FHFA also released a bulletin addressing expectations for Fannie Mae and Freddie Mac (collectively, the Enterprises or individually, an Enterprise) “to establish and implement risk management policies and procedures for monitoring and valuing seller/servicers’ mortgage servicing rights (MSRs).” Many believe that this will negatively impact any independent mortgage banks (IMBs) who may have been overvaluing their servicing to enhance reported financial performance.

“MSR values can fluctuate greatly even during periods of low market volatility. Seller/servicers and other market participants may value MSRs based on differing model assumptions, levels of sophistication, and strategic objectives. These differences can cause volatile MSR values. For these reasons, the Enterprise should not accept MSR valuations provided by seller/servicers without an independent evaluation."

FHFA announced enhancements to Fannie Mae and Freddie Mac’s Radon Standards for Multifamily Properties

Freddie Mac announced additional details regarding the LIBOR transition. Based on guidance and in alignment with the Federal Reserve Board's final rule pursuant to the Adjustable Interest Rate (LIBOR) Act, Freddie Mac will not include term SOFR as a benchmark index for new loans or floating-rate securities. The LIBOR Transition Playbook and FAQs will be updated to help guide transition to SOFR. Look for updated resources on Freddie Mac’s Reference Rates Transition webpage.

Fannie Mae reminded the market, that it will transition its legacy LIBOR loans and securities to the SOFR-indexed benchmark replacements recommended by the Federal Reserve Board. Additionally, in alignment with the Federal Reserve Board's final rule, Fannie Mae will not include term SOFR as a benchmark for new loans or floating-rate securities. Fannie Mae will update its LIBOR Transition webpages in the coming weeks.

Fannie Mae is on a journey of continuous improvement to make the home valuation process more efficient and accurate. To learn more, visit the new valuation modernization page to see our valuation spectrum, learn new terminology, and peruse resources and perspectives on valuation modernization.

Homeowners are choosing to renovate and make energy improvements to their properties. As a reminder, Fannie Mae provides a $500 loan-level price adjustment (LLPA) credit for HomeStyle® Renovation or HomeStyle Energy loans that include financing for energy improvements or refinancing property assessed clean energy (PACE) and solar loans.

Fannie Mae issued LL-2023-01, outlining New Loan-level Price Adjustment Framework, provides information about future changes to loan-level price adjustments (LLPAs) and an overall redesign of the LLPA matrix. The updated LLPAs will be effective for all whole loans purchased on or after May 1, and for loans delivered into MBS with issue dates on or after May 1st. The new LLPA matrix is available to view.

The latest Freddie Mac Loan Product Advisor® (LPASM) releases for January include new service provider for LPA asset and income modeler (AIM). Feedback message updates related to High-cost area pricing, Community land trust (CLT) mortgages, and Junior liens.

Under the direction of the FHFA, Freddie Mac issued Guide Bulletin 2023-1, that introduces new credit fees, updated fee rates and assessment criteria for certain Single-Family mortgages. Also, to help clients more easily understand the changes, we are introducing a redesigned Exhibit 19, Credit Fees. Changes announced in Guide Bulletin 2023-1 will be effective for settlement dates on or after May 1, 2023. Additional Guide provisions will be announced in a future Guide Bulletin.

Capital Markets

Jobs and housing drive our economy, although we learned last week that the U.S consumer has finally started to slow spending, evidenced by retail sales falling a higher-than-expected 1.1 percent in December; November’s data was also revised downward. Many have been expecting a pullback in consumer goods spending in the face of dwindling savings and rising consumer credit, but the data also highlighted slowing restaurant sales. Slowing demand led to falling manufacturing output which saw a 1.3 percent decline in December.

The rest of the economy is starting to feel the effects of the Fed’s monetary tightening that the housing market has felt for the last year. However, as the expected end of the Fed’s tightening cycle draws near, interest rates have eased from their recent highs, and purchase mortgage applications jumped 25 percent for the week ending January 13. Existing home sales ended 2022 at their slowest pace since 2010, and supply remains tight to start the new year. Meanwhile, builder sentiment rose for the first time in 13 months due to lower mortgage rates and material costs.

This week’s economic calendar includes month-end supply, regional Fed surveys, S&P Global PMIs, durable goods orders, the first look at Q4 GDP, and PCE on Friday. Regarding MBS, Class D 48-hours is tomorrow. Today’s calendar is relatively light with the only data point coming later this morning when December leading indicators are released. We begin this five day work week with Agency MBS prices worse a few 32nds and the 10-year yielding 3.50 after closing last week at 3.48 percent.

Employment, IMB Wanted

Independent Mortgage Lender Looking to Acquire! A Midwest-based independent mortgage lender with 40 years of experience is looking to expand its existing retail network through acquisition or merger with another retail-based lender. The acquiring lender is a FNMA/FHLMC/GNMA seller servicer with over $5B of in house servicing and offers a full set of agency and non-agency products. With licenses in 45 states, this IMB offers a unique opportunity for other small to midsize retail lenders looking for an opportunity to align and grow with an award-winning company. If confidentially interested in learning more, please send a note to Chrisman LLC’s Anjelica Nixt for forwarding.

West Gate Bank’s Correspondent Mortgage Division announced Tony Nienas has joined its team as VP, Correspondent Account Executive and will be responsible for developing long-term correspondent business relationships with financial institutions in the Central Plains region, increasing market penetration for Correspondent Mortgage Services, and training clients on the bank’s products and programs. West Gate Bank Correspondent Mortgage Division is headquartered in Lincoln, Nebraska offering Correspondent Mortgage Services since 2010. West Gate Bank works with correspondent financial institutions’ borrowers in more than 20 states across the country to help provide mortgage lending solutions.

FHA has one vacancy for a Director, Homeownership Center in Santa Ana, CA. Job functions of this position include identifying problems and trends and developing corrective strategies. Assure that housing production, quality assurance, customer assistance, and any other program responsibilities assigned to the Center operate in accordance with the current policies and procedures established by the Department. And one vacancy for Director, Office of Single Family Asset Management reporting to the Deputy Assistant Secretary for Single Family Housing. The incumbent serves as the principal advisor to the Deputy Assistant Secretary for Single Family Housing on all matters pertaining to servicing of performing and non-performing FHA-insured mortgages, second mortgages, and other notes, policy related to the payment of claims, and the disposition of HUD-owned Single Family properties.