California, home of nearly 25 percent of home loans, is doing some interesting things, utility-wise. Last year came AB 205 which instructs the state’s utility commission to base the residential fixed charge on a customer’s household income level, with lower income households paying less than higher income households for grid and other costs. PG&E, along with Southern California Edison and San Diego Gas & Electric, have submitted a joint plan to levy an income-based fixed rate model, with higher-income residents paying higher rates while lower-income households would pay less. I mention this because, at the national level in mortgage banking, borrowers see headlines like, “Biden rule will redistribute high-risk loan costs to homeowners with good credit.” Regardless of one’s political affiliation, a new housing report by the National Association of Realtors® reveals middle-income homeowners accumulated $122,100 in wealth as their homes appreciated by 68 percent in the last 10 years. Ten years is a long time to make $122k, but it is a move in the right direction and a selling point for loan officers working with renters: Wealth Gains by Income and Racial/Ethnic Group. (Today’s podcast can be found here and is sponsored by Candor. Candor’s patented automated underwriting decision engine, CogniTech™, is a state-of-the-art, 100 percent machine platform that can handle infinite loan scenarios.)
Lender and Broker Services, Products, and Software
Baseball season never fails to remind me of Abbott and Costello, an all-star partnership that did a poor job of spreading the news about the great network of players on the St. Louis team. Likewise, in tight markets, LOs need to make sure they aren’t forgotten and left off their agent partners’ rosters. Well, with MMI’s new LO Highlight Reels, they’ll be in the starting lineup because at the low cost of nothing, an LO can quickly create a customizable, mobile-friendly dynamic video highlighting their recent production numbers. Once created, they’ll receive a unique link to their video they can share with their network. (The video even syncs to MMI’s database every play, ensuring an always current viewing.) LOs can further customize their profile to include their headshot, contact info, social links, and a call-to-action button. Create your LO Highlight Reel right now for free.
What if there was a quick and easy way to overcome borrower objections and update referral partners on current market trends? Check out Momentifi’s Spring 2023 Homebuyer Education Content because it will help you do just that! “Many homebuyers are under the mistaken assumption that home prices will collapse or that we're in a housing bubble," says Gibran Nicholas, CEO of Momentifi. "This content helps loan officers to educate homebuyers and referral partners and overcome their objections about today's market." The content package includes 150 personally branded articles that loan officers can post to social media or email to clients and referral sources. Many loan officers use the content as scripts to record short videos that they post up on their social media sites. Momentifi also offers an enterprise-level plan for banks and mortgage companies who want a company-wide content license. Click here to learn more or subscribe.
Your business runs on financing plus so much more. Discover how Western Alliance Bank’s Specialized Mortgage Services can tailor a suite of banking solutions to your needs, from a strong, stable institution that truly values your business. Our team of experienced, responsive relationship bankers and treasury management professionals help keep your accounts running smoothly. You’ll find trusted options for treasury management as well as warehouse lending, MSR financing, note financing and other mortgage finance products, with speed to approval and certainty of execution. Conveniently manage custodial and payroll accounts and originate streamlined online wire transfers, while taking advantage of competitive rates for business banking. To discover how we can help add efficiencies to your cash flow cycle, please contact Jennifer Schachterle (720) 261-5774, Mark Short (469) 702-6212, Chris Martin (480) 341-5483 or Nick Richards (646) 708-1211. Western Alliance Bank, Member FDIC.
“As a top tier aggregator, Newrez Correspondent is here to assist its partners and prospective clients grow their business in 2023. Our recent release of the “Duty to Serve/AMI LLPA waivers Job Aid,” “FNMA’s MH Advantage” and “FHLMC’s CHOICEHome” products will help you close more loans. We are also in the midst of piloting our Hybrid AOT and eNote solutions to add more options for our lenders. Just around the corner our Sales, Secondary, and Operations Management Team will arrive in New York City at the MBA Secondary and Capital Markets Conference and Expo, May 22nd and 23rd, ready to discuss these enhancements and more. Contact us today to schedule a meeting.”
Credit and Verification Policies and Procedures, Trigger Leads
With the rising costs of Mortgage Originations and increased fees for needed inputs like credit reports, lenders everywhere are looking for flexibility in how and when they pull them. Cloudvirga responded to those demands by launching soft credit pull, allowing you to reduce top-of-the-funnel friction and save money by ordering only when necessary, all while protecting your borrowers from unwanted tri-merge solicitation and negative impacts to their credit scores. Cloudvirga is a POS provider built by mortgage professionals and technology innovators, working to streamline the originations process from start to finish by offering solutions that help lenders serve their borrowers more efficiently while also focusing on user experience. Its Horizon POS and Wholesale platforms empower borrowers, loan officers, and brokers to close the loan more quickly through user friendly workflows and automation. If you’d like to learn more about what Cloudvirga is doing in the retail and wholesale space, click here to learn more.
“Meeting lenders’ needs is in Xactus’ DNA. It is all about enabling lenders to meet today’s demand for the mortgage process to be a fast, easy, and smooth digital experience. That’s especially important now that the spring home buying season is here. Xactus, the leading verification innovator for the mortgage industry, is filling a void in the marketplace where true innovation and outstanding service haven’t existed for some time – and focusing on what lenders are focused on: their customers. By delivering innovative, proprietary technology and market-leading service at scale, Xactus is advancing the modern mortgage. With a workflow-centric approach to verification, state-of-the-art APIs, and unparalleled service, Xactus can help you automate and integrate what were previously labor-intensive processes. The result? You close more loans more quickly with enhanced profitability while being supported by Xactus’ unrivaled commitment to your success. To learn more about how Xactus is serving to innovate and innovating to serve, email us.”
Normally almost an afterthought, the expense, process, and implications of pulling a borrower’s credit, when every borrower is precious, has zoomed into the spotlight. Legislation has been introduced to block the “trigger lead” business.
Jeff in Washington writes, “We opt to remove the borrower’s phone/email when pulling credit, then put it back after to avoid the trigger leads. Seems to work.” It may not work every time, but it certainly can’t hurt, right?
How bad is the problem? Scott from Atlanta warns, “You would think trigger leads would have to be compliant with TCPA but no, they are all over the buyers. Some of my clients are receiving 20+ texts and calls over a 4–6-hour period. I have seen a couple texts; they could only be described as bait and switch. I really hope this ends.”
MBA’s Bill Killmer, SVP of Legislative and Political Affairs, wrote, “The MBA believes that trigger leads need to be reined in and this bill is a good start. We will work with Congressman Torres and lawmakers from both sides of the aisle to stop unwanted harassment of consumers and maintain a well-functioning market." Sure enough, this week in Washington DC, industry representatives from all over the nation met w/ 250+ Congressional offices, and one of the topics was educating and urging Congress to address abusive trigger leads during the National Advocacy Conference.
Jim Smith with Winnow writes, “DTI LLPA and Trigger leads were the hot topics at the MBA National Advocacy Conference and well received by our congresspeople and senators who we spoke with (I was with the group from Michigan). I heard from one group that one congressperson yelled out, "That’s Bullshot" when hearing how borrowers are bombarded with hundreds of solicitations after applying. In my small group we had personal knowledge from a member’s grandfather, who was not only bombarded with over 100 solicitations in 24 hours, but some of those referred to the lender, saying they were affiliated with them, and asked the borrower for their income docs.
“This has, without a doubt, turned predatory in nature, and despite the goal of some ‘good ole-fashioned competition,’ it’s now turning dangerous, with bad actors asking unsuspecting borrowers for personal financial information.
Yes, an originator and borrower can follow the process to opt out of solicitations, but they come minutes to just an hour or two after credit is pulled. So there is no realistic way of avoidance by the opt-out.”
As noted in yesterday’s commentary, the “official” procedure is to call 1-888-5-OPTOUT (1-888-567-8688) or visit www.optoutprescreen.com where a borrower will be asked to provide certain personal confidential information, including home telephone number, name, Social Security number, and date of birth. “Don’t enter any personal information until you have checked for indicators that the site is secure: a lock icon on your browser or a web address that begins https.”
Early in the process LOs often tell borrowers to put their phone number on the federal government’s National Do Not Call Registry to reduce the telemarketing calls. Visit www.donotcall.gov, or call 1-888-382-1222 from the phone number you want to register. “You will get fewer telemarketing calls within 31 days of registering your number. Your number stays on the registry for five years, until it is disconnected, or until you take it off the registry.”
The industry took note of UWM’s credit-related announcement that it has enhanced its Safe Check tool to allow “mortgage brokers to use a soft tri-merge credit check for conventional loans, up until the loan is ready to be cleared to close, at which point a hard credit report would be required… this tool (allows) mortgage brokers to decide when they want to pull the hard credit report, and further alleviates the risk of a borrower being inundated by credit or insurance solicitations throughout the loan process.”
Black Knight on Mortgage Performance
Black Knight's “First Look” at March mortgage performance was released, presenting a very good picture about residential loans and providing more comfort for investors buying mortgages. “U.S. mortgage delinquency hit a record low (2.92 percent) last month, with overall delinquencies dropping more than 50 basis points (-15 percent) from February. While delinquency rates almost always fall in March as borrowers utilize tax refunds and other seasonal revenues to pay down past-due debt, the drop marked the second largest decline in the past 17 years.
“Serious delinquencies (90+ days past due) showed marked improvement, falling by 51K to their lowest level since March 2020, with volumes shrinking in every state… Most loans still have solid equity cushions. Both foreclosure starts (+9.0 percent) and sales (+4.6 percent) rose in the month but still remain well below pre-pandemic volumes at the national level. The number of borrowers in active foreclosure held steady in the month, up 31K, or 12 percent from before the pandemic. Finally, prepayments increased from February, but remain low by historical standards.”
We’ve seen changing expectations for the fed funds path over the past couple of weeks. Despite the good CPI numbers, with a 25 basis points hike in May baked in (pricing in futures markets implies a nearly 90 percent probability) the question has now become how long will the Fed have the fortitude to keep rates elevated? Atlanta Fed President Ralph Bostic said this week that the FOMC will probably hike another 25 basis points and then pause to “see how our policy is flowing through the economy and to understand the extent to which inflation is returning back to our target.” Once the Fed gets to its terminal target range, it shouldn’t have to do much except monitor the economy for the rest of this year and into 2024. Accordingly, fed funds have essentially erased any thought of a 2023 rate cut.
The Federal Reserve’s job has gotten a lot tougher of late with the fight against inflation now bumping up against fears of exacerbating fallout from recent bank failures. That was evident in the central bank’s change of tone at its last meeting. The Fed said it was committed to price stability but conceded it can’t be certain of the economic outlook or the flow of credit. Regional bank quarterly earnings this week revealed no major surprises or hints at which other financial institutions could be in trouble. And what about price stability? We are seeing disinflation begin to creep into the economy, evidenced by the latest CPI figures, but it's slow going. Wage growth is still elevated due to high numbers of openings, but job growth is beginning to slow, a narrower set of industries are still hiring, and the unemployment rate is beginning to rise.
It remains unclear how much, if at all, the recent banking turmoil and tighter credit conditions have affected the housing market. Mortgage rates did decline because of the bank failures, spurring some additional single-family demand. However, tighter credit conditions are resulting in homebuilders having a harder time financing new projects and there’s been no dent made in the shortage of single-family homes over the past three years. We learned this week that existing home sales, highly sensitive to mortgage rates, fell 2.4 percent in March to a seasonally adjusted annual rate of 4.44 million and were down 22 percent year-over-year, according to the National Association of Realtors. The inventory of existing homes for sale remains extremely tight, due in part to the strength of the labor market (and ability to work remotely) and higher mortgage rates that are quashing existing homeowners' interest in moving.
If banks aren’t buying MBS, what will happen to price and rates? The market shrugged off manageably sized FDIC sales yesterday, at least for Agency MBS, while the Treasury yield curve steepened on weaker data. Fortunately, the large FDIC liquidation sales have not had a material effect on the broader sector. A significant portion of MBS pool sales from the SVB and Signature bank portfolios, which began via Blackrock on Monday, were in the lower coupons (UMBS 2.0/2.5). Those coupons ended up trading more than a half-point lower in the TBA market this week. Increasing the supply of MBS hitting the market won’t help the price, especially with banks pulling back from buying a lot of mortgages and should keep mortgage rates high on a relative basis until the sales are digested by whatever buyers are out there.
Today’s lone Fed speaker is Governor Cook taking the stage. We begin the day with Agency MBS prices roughly unchanged from Thursday and the 10-year yielding 3.53 after closing yesterday at 3.55 percent.
“MWF is excited to announce our New Growth strategy into the mid-west and key Southeast markets. Danny Kirbie has joined MWF to lead our New State expansion efforts. Danny is a well-known leader in our industry and will bring a strong leadership presence to our Midwest locations. As part of our mission, MWF will continue to add new personnel, branches, and originators in key markets. For 32 years, MWF has excelled in providing support, systems, tools, and products to our originators. Our expansion plans are rooted in an incredible culture with highly engaged leadership. We're honored to work with Danny as we lead MWF into the future. For information about our growth plans and career opportunities, contact Ed Adams.”
Sovereign Lending Group continues to expand at its new Consumer Direct office at Fashion Island in Newport Beach, CA. While other companies are trying to figure out marketing, they have a steady flow of live transfers and smooth loan operations. Originators are expected to work in the office. No experience is needed: Sovereign will train and help you become licensed. Get rid of the market blues and call Matthew Cataño to understand how SLG can help. (949) 736-9148.