The Ides of March… And college basketball time. Here in Kentucky (men #6 in the East, Louisville women’s team #5) I overheard someone on the phone. “Yesterday I saw a woman in Walmart with March Madness teeth. She was down to her final four.” March Madness is in full swing, whether it is hoops or bonds. Or bank stocks. Is this really a fundamental structural plunging of the United States’ financial system? Doubtful. Moody’s came out with a warning about downgrading certain banks in the United States. It is not 2008. How much of this is psychology? Tweeting causing a run on deposits? Banks everywhere are looking at their liabilities (deposits, since they owe their depositors money) and assets (the money lent out using their depositor’s money, or securities owned. “Lending long and borrowing short” works when banks can pay very little on their deposits (like checking accounts earning 0 percent) and take that money and earn 4 or 6 percent on securities. But when the deposit base becomes unstable, and a bank has to liquidate those securities at 80 or 90 cents on the dollar, it becomes a problem fast. (Much more below.) Today’s podcast can be found here and this week 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 an interview with Bank of England Mortgage’s Quinton Harris on the art and science of forecasting the housing, mortgage, and bond markets.
Lender and Broker Services, Products, and Software
A cross-sectional study of lender data found that one-third of declined loans could have been resuscitated with down payment assistance (DPA). These underused programs enable lenders to close more deals by unlocking life-changing homeownership opportunities in underserved markets — a win-win situation! Want proven tips for filling your mortgage pipelines while satisfying Community Reinvestment Act requirements? On Wednesday, March 29 at 1 PM ET, Sean Moss of Down Payment Resource will moderate an MGIC training webinar featuring some of the most creative minds in affordable lending. Tune in to hear Cadence Bank’s Phil Sandoval, M&T Bank’s Phil Swetz and iEmergent’s Laird Nossuli share common housing affordability obstacles and data-driven strategies to overcome them. Register and join the conversation.
“It is certainly a month of madness across the country. No, we’re not talking about basketball. We’re talking about strategic mortgage professionals preparing for the jam-packed summer months. Even the most seasoned MLOs can feel overwhelmed when business is booming… Thankfully there is a team of processing MVPs to pass the ball to. Third-party processing services by wemlo® offer busy MLOs a scalable alternative to the old, slow, and often clunky ways of processing loans. Best of all, there is no minimum loan volume needed or subscription required: We only charge our fee when the loan closes. Available in 47 states plus Washington D.C., wemlo’s processors are trained to work with dozens of loan products and lenders. Ready to experience loan processing that is a slam dunk? Schedule a 1:1 meeting to learn how wemlo can help up your game.”
It makes sense that a highly action-oriented, borrower-involved process like loss mitigation should leverage sophisticated mortgage tech and automated workflows. Covius and Flueid are doing just that, accelerating the digital transformation of loss mitigation. Flueid Decision is now integrated with Covius’ loan modification and default title processes, enabling Covius to provide an underwriter-backed, title-clearance decision in as little as 45 seconds. Flueid’s decisioning platform also provides critical property and consumer insights. Commenting on the integration, Covius Executive Vice President-Operations Joe Chappell, said: “Our early results show that Covius clients can expect to receive same-day ‘clear-to-modify’ eligibility decisions on most orders as well as a significant reduction in error rates from data keying processes. We are also working with Flueid to digitize title workflows in other areas, including home equity lending.” For more information on Covius’ loss mitigation services, contact George Schultz.
Two things can be true: you can simultaneously cut costs AND invest in tech. With a product like Fee Chaser by LenderLogix, you can automate the collection of your upfront fees and deliver borrowers with the digital payment experience they expect. Save hours of manual processing and realize revenue that would’ve otherwise gone uncollected on loans that fall through. Fee Chaser is the fee collection solution of choice for several top-10 US lenders. So what’s stopping you from checking it out? Have a sample fee request sent right to your cell phone on LenderLogix’s website to learn more.
“As the business continues to shift and new loans are harder to find, more originators that have the capacity to service their own loans are doing so. The risks of having these borrowers churned out of the portfolio by another lender hungry for business are just too high and so lenders are staying closer to their borrowers. Even servicers who have used subservicers in the past are pulling their servicing back in house, according to MortgageFlex, which offers the added benefit of cost savings. MortgageFlex is having more of these conversations in the wake of releasing a big update for its SQL-based, cloud-hosted, multi-lingual servicing portal. It’s a modern, nimble, cost-effective solution that is getting servicers’ attention. Find out more by contacting John McCrea or visit us.”
Does your subservicer oversight review simply meet the minimum compliance requirements, or does it provide you with valuable insights to identify risks and allow you to see how well your subservicer is complying with new regulations and agency requirements? Richey May’s subservicer oversight reviews enable you to play a more active role in the monitoring of the servicing of your loans and take proactive action to drive true value and reduce risk for your business. And if you’re not sure whether you should continue to retain servicing in this market, we can work with you to develop a long-term strategy and active monitoring process. By leveraging the team of mortgage industry experts at Richey May, you will gain valuable insights that help your organization reduce risk and increase profitability. Learn more about our subservicer oversight reviews and servicing strategy deep dives.
LOs, are your borrowers struggling to save enough of a down payment to purchase their dream home? Are current interest rates turning off potential applicants? The good news is SmartBuy, Click n’ Close’s proprietary suite of loan programs, is here to help. SmartBuy provides DPA programs that can be combined with 2/1 temporary buydowns. What’s more, Click n’ Close now offers lender-paid compensation for its SmartBuy DPA program, available through its wholesale lending division delegated and non-delegated channels, making this product more affordable than ever for you AND your borrowers. Learn more about Click n’ Close’s programs by contacting Adam Rieke (wholesale) or Julas Hollie (correspondent).
STRATMOR on the Customer Experience
We all love a good buzzer-beating basket, but what about the anxiety that goes along with it? The last days or even hours of the mortgage loan process can produce a lot of anxious energy for borrowers, which often translates to missed opportunities for referrals. According to data from STRATMOR Group’s MortgageCX program, a late start to a closing alone drops the Net Promoter Score (NPS) 65 points, and inaccuracies on the closing documents all but forfeit advocacy with an 83-point NPS drop. In his March Customer Experience Tip, STRATMOR MortgageCX Director Mike Seminari provides three steps originators can take to minimize end-of-game miscues. Don’t miss, “Score a CX Victory Over Last-Minute Loan Volatility.”
Banking 101: How to Keep Track of Headlines
“Central bank to review how it supervised and regulated California-based lender amid fears of wider fallout.” “KPMG stands by audits of Silicon Valley Bank and Signature Bank.” “US justice department probes Silicon Valley Bank’s collapse.” Banks are required to do a monthly Stress Test that looks at the bank’s balance sheet and earnings, should rates go up 100, 200, 300, 300, and 400 bps, instantly and on a sustained basis. It is done by the Finance department and is looked at by boards and regulators. Or at least one would think…
What about those depositors? In 1933 President Franklin Roosevelt signed the Banking Act of 1933, a part of which established the FDIC. The FDIC is funded by premiums paid by banks and savings associations. No bank customer has lost insured funds due to a bank failure when the account has $250,000 or less in it. But many accounts have much more than that in them. Economist Elliot Eisenberg, Ph.D., opined, “While distasteful, the Fed/Treasury/FDIC troika had no choice but to protect all bank deposits even in accounts with balances exceeding the $250,000 insured threshold. Absent that guarantee, depositors with holdings exceeding $250,000 would have raced to withdraw their excess monies, causing bank runs everywhere. Congress should now meaningfully increase the deposit insurance threshold as only 50% of deposits at commercial banks are insured. This is a needless source of instability.”
The Mortgage Bankers Association Bob Broeksmit sent out a note of explanation and reassurance. “Last Friday’s closing of Silicon Valley Bank and the shuttering of Signature Bank over the weekend have sent shockwaves through financial markets and the Washington policy and political landscape. SVB and Signature are two of the three largest bank failures in history, occurring within a matter of days, and just a week after what we thought was the relatively novel failure of crypto-exposed Silvergate Bank. All three banks had unique business models, depositor bases, and/or crypto exposures that could argue for limited knock-on effects. That said, the speed of the banks’ demise and the unpredictable nature of liquidity events have both markets and financial regulators on edge.
Much of the initial policy debate centered on whether the FDIC would protect SVB’s massive book of uninsured depositors. That question was answered Sunday night when Treasury, the Fed, and the FDIC announced that depositors at both institutions would be protected, and that additional measures would be implemented to ensure financial market stability, including a new Fed liquidity facility, backed by Treasury, known as the Bank Term Funding Program, that will allow banks to pledge Treasury securities and agency debt and MBS for liquidity at par for a one-year term, and a pledge by the Fed to address any further liquidity issues that arise.
This should contain the fallout, but the next few weeks (at least) will be volatile ones for markets. The events will also scramble the policy and political decks and will undoubtedly lead to high-profile Congressional hearings and regulatory proposals designed to prevent similar bank runs in the future. While all three bank failures appear to stem from a combination of idiosyncratic business models, management failures, and supervisory lapses, we believe capital and liquidity standards for all financial institutions will be in play for policymakers.
Our role as your voice in Washington will be to ensure that policymakers learn the right lessons from these events and respond with sound, fact-based proposals to shore up financial markets and mitigate the likelihood of future failures.
That means doing what we always do: sifting through the political noise and avoiding overreactions, gathering reliable intelligence and data (oftentimes from you, our members), engaging with policymakers, and then developing and advocating for thoughtful, tailored policy responses that address the issues at hand and don’t have negative ‘spillover’ effects on institutions and business models that were not part of the problem. Ensuring stability and access to liquidity for the housing and real estate finance markets will be our laser focus as this process unfolds.”
Bond and stock market volatility has increased, with plenty of intra-day price changes. But taking a breath for a moment, before the banking tumult in the last week, remember when all we had to worry about was inflation? Inflation at the consumer continues to run well above the Fed's 2.0 percent target, evidenced yesterday by U.S. consumer prices rising in February by the most in five months. Inflation at the consumer level rose 0.4 percent month-over-month and 6 percent year-over-year. If you strip out food and energy, inflation rose 0.5 percent month-over-month and 5.5 percent year-over-year. Housing was the big driver of the increase, while lower energy prices helped pull the number down.
Ongoing banking problems have made for a tough choice next week for the Federal Reserve over its interest-rate decision, and though a 50-basis points rate increase has likely been taken off the table, officials must weigh still-rapid inflation. The Fed may send a message that the banking problem is a bigger issue than people think by not raising rates only a few weeks after the Fed Chair teased the possibility of a 50-basis points hike.
With the latest fed funds futures predicting another 25 basis points with a small probability that the Fed stands pat next week, today’s economic calendar began with mortgage applications from the MBA, which increased 6.5 percent from one week earlier. We’ve also received retail sales (-.4 percent, ex-auto -.1 percent), the Producer Price Index (-.1 percent), and Empire manufacturing (-24.6, ugly). Later today brings January business inventories and the NAHB Housing Market Index for March. We begin the day with Agency MBS prices and the 10-year yielding 3.49 after closing yesterday at 3.64 percent. The 2-year is down to 3.94 percent!
Employment and Transitions
“A peek behind the scenes at Sagent! The incredible team we’ve built (and continue to grow) at Sagent is the key to our servicing-modernization vision, fundamentally changing the dynamics of America’s housing ecosystem to deliver positive homeowner outcomes. And it’s team members like Regan Kelly (Customer Success Manager) who reliably support our customer success team to make positive impacts every day, helping clients pull out wins, even during these tough market cycles. Regan lives in the trenches with our customers, advocating for their business, supporting new portfolios, or enticing new clients to their orgs, but she’s so much more than that. She’s also a canine search-and-rescue volunteer, a ‘citizen scientist’ at her local aquarium, beloved wife and dog/cat mom, and a former food fight instigator (or survivor, you have to read it to find out!). Check out our latest employee spotlight piece for a glimpse into Regan’s world and what it’s like to be a part of Team Sagent.”
We know. We know. Everyone’s talking about mortgage opportunities “springing up” and business “flourishing” this time of year. And yes, sprouts and flowers are fun, but do you know what home loan business actually comes down to these days? Real estate agent connections. The market isn’t all about refis anymore. In this shifting environment, working in close proximity to these “home-buying pros” is essential if you want to grow your pipeline. (Did we just make a spring pun? Whoops.) Want to work closer to real estate agents? The majority of Motto Mortgage offices are affiliated with established real estate brokerages. Motto Mortgage brokerages are hiring talented loan originators in: AR, CA, CO, CT, FL, GA, ID, IL, IN, MA, MD, MO, NC, NJ, NV, OH, OK, OR, PA, TN, TX, & WA. Click here for more information on becoming a Motto LO!
New American Funding named Pat Bolan as its new Chief Production Officer and will help NAF expand its retail sales (announcement here). NAF also recently announced the promotions of Patty Arvielo from President to Co-CEO and Christy Bunce from Chief Operating Officer to President.
Waterstone Mortgage announced the promotion of Jennifer George to VP – Investor Relations and Credit Policy where she will continue her credit policy duties and will also oversee Waterstone Mortgage’s Product Development team and focus on managing investor relations.