I knew it was going to be a rough morning today when my alarm went off and I found my cat Myrtle staring at the computer screen watching Social D’s “Don’t Drag Me Down.” (Excuse the language.) There was this email: “Rob, I’m thinking about leaving my company because it doesn’t offer 180- or 270-day rate locks. What do you think? We have trouble competing even with shorter term pricing. My current employer is allowing me to lock in a 60-day rate at 1 percent higher than the 10-day lock price, but my competition has stronger pricing than ours, and a few of the banks trounce everyone’s pricing.” 270-day rate locks? The longer the lock, the greater the risk. I am going to simplify this a little, but they’re light a light switch: figure either 0 percent will fund at that price, or 100 percent. Think of the lenders that offered that program at the beginning of 2020: none of those loans closed at those rates. Think of the lenders that offered that program at the beginning of 2022: every one of those loans will close at those rates. (More on long-term locks in the capital markets section.) (Today’s audio version of the commentary is available here and this week’s is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender. Interview with Jon Irvine, Chief Product Officer at Change Home Mortgage, on how relationships go a long way when it comes to treating brokers & borrowers the right way.)

Lender and Broker Products and Services

When Freddie Mac upgraded its Loan Product Advisor asset and income modeler (AIM) to offer income assessment using direct deposit data, FormFree was selected one of the first authorized report providers for the groundbreaking initiative. That’s because FormFree helps simplify verification of income (VOI) by enabling lenders to conduct customer-permissioned income assessments using direct deposit data sourced directly from banks. Want to learn more? If you’re attending the MBA’s Technology Solutions Conference and Expo in Las Vegas, see FormFree’s Christy Moss, CMB, share her expert insight in the Technology Strategies panel tomorrow at 2 PM PT in Bellagio Ballroom #7. Can’t make it? Request a virtual demo and see for yourself how FormFree’s direct deposit VOI capabilities can streamline the homebuying experience for lenders and borrowers.

“At wemlo℠, our hyper-focus on customer service starts with our highly qualified team of loan processors. Our processors follow rigorous training standards and focus on continual education to stay on top of the ever-changing mortgage landscape. In addition to top-notch communication and customer care, you’ll have the option to work with a small, dedicated team so you’ll always have backup. As your loan processing powerhouse, wemlo currently offers services in 45+ states and we recently expanded our list of supported loan products to include Non-QM, Manufactured Home, Construction, and FHA Streamline. Ready to put your processing work in the industry’s most capable hands? Chat with a wemlo rep to get started today! NMLS ID 1853218.

“Expert Mortgage Servicing for 2022 and Beyond. A few years ago, who would have ever imagined the mortgage servicing landscape that is facing us today? To meet these challenges head-on, Cenlar channels years of unwavering mortgage servicing expertise and a kind of determination that is unrivaled in our industry in part because we’re employee owned and personally vested in the success of our clients and their homeowners. What’s more, Cenlar is a financially strong wholesale bank and has been around for decades. With a diverse client portfolio of banks, credit unions and mortgage banks, our longevity and sheer breadth of client experience of every kind enables our talented team of mortgage servicing professionals to deliver custom, flexible, quality mortgage servicing solutions, time and time again. Let’s discuss how Cenlar can meet and exceed the mortgage servicing needs of your organization. Call 1-888-SUBSERV or visit Cenlar. We want to be your trusted partner, each and every day.”

This spring, as the conventional mortgage market continues to slowly contract, Verus Mortgage Capital is working with lenders to increase their non-QM loan volume by broadening their borrower base. As the nation’s largest issuer of securitizations backed by non-QM loans, Verus has programs for self-employed, higher-balanced loan amounts (JUMBO), foreign nationals, investors, and more. In fact, Verus can underwrite non-QM, Prime Jumbo Non-Delegated, and Delegated in a matter of days. Partner with the leading non-QM investor to grow the number and types of borrowers you serve and protect your business. To learn more about non-QM, please email Jeff Schaefer, Executive Vice President, Correspondent Sales, or schedule a meeting at the upcoming Texas Mortgage Bankers Association’s Annual Convention April 24-26 in Austin or the National Secondary Market Conference May 15-18 in New York City.

As we approach yet another year of unknowns and steep competition, lenders need all the data advantages they can get. Watch an on-demand webinar presented by HousingWire and Black Knight to learn how near real-time data alerts on critical property-related events, such as natural disasters or property listings, can help you reduce your financial exposure, deepen borrower relationships and spur business growth. In this complimentary recorded webinar, expert panelists highlight the innovative capabilities of data alerts with real-life scenarios. Hear about the benefits of property-related event notifications and how you can use them to leverage cost savings and beat your competition to the borrower. Watch now.

Introducing eClosing from Maxwell: a better closing experience for borrowers and LOs. Mortgage solutions provider Maxwell has partnered with Snapdocs, an industry-leading digital closing platform, to bring lenders a best-in-class eClose experience. Maxwell Point of Sale and its eClose solution streamline the closing process so you can exceed borrower expectations, reduce delays and errors, and handle more closing volume. Supporting a variety of closing options including wet sign and hybrid closings, Maxwell eClose empowers LOs with automatic preparation of all lender and title documents and frees lending teams from communicating deadlines, sending reminders, and coaching borrowers to prepare for closing. Plus, borrowers can stay in the point of sale from start to finish, with the ability to preview and sign documents before closing day. Want to simplify your closing process for LOs and borrowers alike? Click here to learn more or request a demo today.

Is your tech stack primed to process non-QM loans? Adding non-QM to your product mix requires more than offering the loan option itself. Lenders must have the right lending infrastructure to deliver borrowers the best homebuying experience. Check out these four primary ways automating more of the mortgage process and ensuring you have the right tech stack can help deal with the challenges (and opportunities) presented by non-QM loans. MeridianLink Mortgage LOS helps lenders streamline processes for mortgage lending, including non-QM. The platform comes with a rules-based engine that enables users to automate various operations, including underwriting, product pricing, closing cost generation, and more. Lenders can create and upload loan requests, run automated underwriting systems, and monitor applications end-to-end using our third-party portal.

If you don’t finish a race in first place, you might as well be last. Or so Ricky Bobby tells us. Considering that 79 percent of borrowers do business with the first lender they talk to, he may be on to something. How can lenders ensure their team not only reaches prospects first, but can also effectively educate those prospects on a variety of loan options? Find out TODAY at 1 pm ET as Sales Boomerang’s Alex Kutsishin and Knowledge Coop’s Ken Perry show you how to better prepare your mortgage advisors to meet the financial needs of each and every consumer. Set your team up for success and register now.

Capital Markets: Long-Term Lock Primer

There are a couple ways to hedge a long-term lock, construction or otherwise. There is no magical pixie dust to use, and seasoned capital markets staff will tell you it’s painful, inefficient, and not advisable for most. Typically lenders will use the program as a loss-leader, and book any up-front fees as income and hope for the best. Selling generic (to be announced, or TBA) Agency mortgage-backed securities for settlement 2-3 months in the future is the typical way to hedge a pipeline, but that market doesn’t go out six months or a year.

That said, U.S. Treasuries on the short end of the curve can be used to hedge long-term locks. Many non-QM lenders employ such a hedge too. But there is basis risk that usually comes from changes in credit or prepayment. There isn’t a built-in mechanism to account for a degrading credit market (U.S. Treasuries are backed by the full faith and credit of the U.S. Government; Mr. & Mrs. Johnson are not). This credit difference can put secondary groups in tight spots when their hedge doesn’t move 1:1 with credit, or what investors may perceive credit is doing.

As mentioned above, the traditional way to hedge an Agency pipeline for 30- or 60-day locks is in the TBA market. For longer locks, capital markets will usually sell a 90-day TBA on day one of lock (July for today), then end up rolling it (buying back the 90-day when it rolls to a 60 day, and resetting your hedge back Into a 90 days). This “roll cost” chews up margin like nobody’s business: The lender is a victim of not only the 6-10 times you have to roll the security (a cost as you drop from one month to the next) but the bid/ask spread bounces around making it even costlier. At best this cost can be estimated for in the front-end pricing, traditionally measured in points and added to the cost of the lock. So basically when a borrower locks their 1x construction loan at par, Secondary Marketing groups are probably seeing 102/102.5 on the secondary market for that rate that day, and pricing it at par (100) still chews into profitability. Duration is not your friend hedging any interest rate instrument.

And yes, depositories, including credit unions of course, view most mortgage transactions differently than mortgage bankers do. The acquisition of the customer is more important to the retail banking side than making all their profits in the mortgage rate lock/secondary marketing side of things. I’m not saying they give away every mortgage, but in certain programs and certain products they are at best break even, net servicing values aside.

Shifting our collective gaze to interest rates, the relentless rise in Treasury yields continued to open the week as investors' focus remained firmly on inflation and the impact of policy tightening by central banks. The Federal Reserve’s plan for aggressive monetary-policy tightening, through sharp rate hikes and balance-sheet reductions, has caused 10-year Treasury yields to rise for seven straight days and climb through 2.75 percent for the first time since March 2019. The Fed’s goal is to tamp down inflation without a recession, but investors are skeptical even with inflation expected to moderate later this year. Inflation will remain front of mind, with March CPI out today (expectations were for prices to climb again to more than 8 percent) and at least eight Fed speakers before the Easter break.

Today’s economic calendar is under way with the latest NFIB Small Business Optimism Index for March (95.7 dropping to 93.2). We’ve also received the all-important March CPI (+1.2 percent as expected; +8.5 percent year over year), core (+.3 percent, lower than expected). Later this morning brings Redbook same store sales, a Treasury auction of $34 billion reopened 10-year notes, the March budget deficit, and remarks from Governor Brainard and Richmond Fed President Barkin. The Desk will purchase up to $2.16 billion 30-year 3 percent through 4 percent. We begin the day with Agency MBS prices are better by .250 and the 10-year yielding 2.72 after closing yesterday at 2.78 percent. The average 30-year fixed mortgage rate now sits above 5 percent according to Mortgage News Daily.

Careers and Moves

Gold Star Mortgage has established a need for a Consumer Direct Team to handle a significant amount of purchase transactions in 17 states. This Team needs to able to scale quickly for significant demand. We have an award-winning tech stack that is simple to use, 4-day appraisals, 12-day fundings, unlimited leads access, plus much more! If you are a consumer direct team leader, and your team wants to grow with direct access to strategic purchase-driven Realtor involved transactions, please call us today! (888) 696-1344.

Entrepreneurship? We prefer to say “Mottownership” at Motto Mortgage. What’s the difference? According to Motto Mortgage franchise owners, it’s not having to start from scratch thanks to the leading-edge tools available on day one: “When I compare Motto to other franchises or other opportunities that I've had, the number of tools we get from Motto Mortgage is incredible.” - Sallie S., Motto Mortgage Franchise Owner. “I really look at Motto as a technology company. They’re always looking to see what we can bring in that’s going to help our brokerage out.” - Paul B., Motto Mortgage Franchise Owner. Want to hear more insight from Motto franchise owners and ask the most important questions on your mind? Join us at the next Meet Motto event on April 21 at 12 p.m. MT/2p.m. CT. Register here.

Due to its continued Direct to Consumer and Call Desk growth, Southern California’s Sovereign Lending Group is hiring for sales, marketing, and lock desk positions. Contact Dan Holtz for a confidential discussion.

Open Mortgage has appointed Andrea Easter to the newly-created position of Chief Compliance Officer. Andrea will manage all risk-related functions within the company including overseeing the development and implementation of policies and procedures regarding state and federal regulations and agency requirements.