Did you know that 4 out of 3 people have trouble with math? I do too, as suggested by my capital markets background, but I know enough to understand that “free is free,” and today is National Free Slurpee Day. 7-11… Get it? (I also understand that a small Slurpee sets 7-11 back probably less than a penny but puts you into their database which has lots of value to the franchise… do lenders have something similar? 7-11 outlets are very focused on pricing and profit margins, and this morning I head to North Carolina for a Lenders One BaseCamp where pricing, profit margins, and products will be the focus. And let’s not forget volatility and interest rates, driven by inflation: Inflation talk will front and center this week with the consumer price index and producer price index reports both expected to be just as strong for June as they were for May. The Fed’s focus is purely on inflation, and I haven’t seen prices dropping much in restaurants, grocery stores, or at the pump. (Today’s podcast is available here and features an interview on retention with Black Knight’s Andy Walden and James Iredale. This week’s is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender.)

Lender and Broker Products, Software, and Services

“Our team is heading to some exciting events, including the CMBA’s Western Secondary Market Conference in Dana Point, CA. Join Karaline Venezia, VP Industry Solutions at Capacity, on Tuesday, July 26 10:30-11:30 a.m. for a session focused on Leveraging Technology in the Secondary Market. If you’ll be in Dana Point July 25-27, we’d love to introduce ourselves and show you how Capacity can relieve your team of time-consuming tasks. The mortgage industry is in dire need of a platform that securely integrates with lenders’ key systems, providing loan officers and brokers with instant, actionable answers about borrower opportunities, loan statuses, loss mitigation, and more. Capacity reduces the time that LOs and brokers spend logging into a sea of endless systems to find information. If this sounds familiar, see how Capacity can save your team time and frustration. See how it works.

What kind of communication experience are you delivering to your servicing customers? If you’re striving to boost retention, timely and meaningful communication can be the difference between earning customers for life or losing them to competitors. Black Knight Chief Digital Officer Sandra Madigan summarizes keys for success in her blog post, 5 Ways to Retain More Servicing Customers Through Communication. These practical communication tips range from providing useful content, to taking a proactive approach to reaching customers. Plus, there’s a sneak peek into new customer engagement content, such as this video about escrow analysis, offered through the Surefire® CRM and mortgage marketing automation engine.

It's never too early to get started on your 2022 MERS Annual Review and e-Annual Report! Every MERS member is required to complete an annual report and, if your firm had 1,000 or more active MINs on March 31st, 2022, an independent third party must perform your MERS Annual Report. While the report is due December 31st; it can be filed now, so don’t delay! TENA offers a 40% discount to firms who submit all required documentation for review by August 31st. To ensure you satisfy your MERS requirements, contact TENA today to get started on your annual review submission. TENA offers a full range of MERS reviews to verify your firm’s compliance, including MERS Data Reconciliation and MERS Document Reviews. Our team of experienced auditors have made TENA Companies, Inc. the trusted source for Mortgage Quality Control Audit Services and Software since 1982.

“***News Alert – For all Chrisman readers who use direct mail for lead generation – USPS just raised prices by 3 cents for first class and 2 cents for standard mail.*** However, did you know you can actually lower your cost per call, even with the price increase? If you are interested in beating the price increase, drop us a line or check us out. We have technology improvements enabling you to get ahead of the market and outrun the increases! Give us 5 minutes to ask 3 simple questions and see if we can lower your overall cost per call to beat the rate increase!”

“Don’t wait another day: reach out to Richey May today to see the most popular BI platform in the mortgage market for three years running, RM Analyze. With 100% of fully implemented customers renewing year over year, Richey May’s RM Analyze is business intelligence designed by and for mortgage industry experts. Our platform consolidates data from every department and every piece of software you use. It provides just the right reporting from the C-suite to the front line, plus the functionality to build visually engaging reports on key indicators. Bonus: Our analysts have deep mortgage experience, so you don’t need to train us on your business. Get the cross-functional data, user-friendly dashboards, and real-time analysis you need. Contact us today for a walk-through and custom implementation plan.”

There presently is 10 trillion dollars in home equity trapped in U.S. residential homes. With most homeowners not wanting to give up their low-rate 1st mortgage, FundLoans is excited to launch an innovative way to unlock that home equity for business owners. Announcing our new Non-QM 2nd mortgage bank statement product ASPIRE. This new product features unlimited cash out, bank statements to qualify, loan amounts up to $1M, and LTV’s up to 80 percent. Inquire directly or call 760.388.2456.

Freddie and Fannie: Fees and Credit Report Concerns

Well, change is afoot with the FHFA and its fee structure, and this, of course, trickles down to what borrowers are charged on rate sheets.

“On June 14, 2022, Fannie Mae and Freddie Mac (the "Enterprises") both announced a new upfront fee on certain commingled securities, effective July 1, 2022. The fee was imposed to partially address the cost of capital an Enterprise is required to hold to guarantee the other Enterprise's securities. This capital requirement was proposed and finalized in the 2020 Enterprise Regulatory Capital Framework (ERCF).

“In the weeks since the announcement of this fee, FHFA has had an opportunity to receive valuable feedback from a variety of mortgage market participants, expressing concerns related to the fee and its impact on the Uniform Mortgage-Backed Security (UMBS) market. FHFA remains committed to the continued strength and resilience of the UMBS market, given the significant improvement in liquidity and stability that UMBS has afforded the To-Be-Announced (TBA) market.

“In light of this extensive engagement with the market and FHFA's ongoing commitment to UMBS, FHFA will be exploring alternatives to ensure the long-term viability of UMBS, including conducting a review of the ERCF in the near-term to ensure that the risks of commingled securities are appropriately reflected. During this period, the Enterprises will be retaining the fee covering the collateral of the other Enterprise in commingled securities as scheduled.”

Most tuned in to read the MBA's response to the announcement by Fannie Mae and Freddie Mac of a new 50-basis-point fee for commingled securities. The fee will apply to Supers or REMIC securities issued by one GSE that include UMBS collateral issued by the other GSE and is structured to apply only to the portion of the Super or REMIC backed by the other GSE's collateral. MBA has met with senior officials at FHFA and discussed issues around UMBS liquidity and risks related to a potential bifurcation of the market. Following advocacy by MBA and other market participants, FHFA Director Sandra Thompson issued a statement noting that the Agency "will be exploring alternatives to ensure the long-term viability of UMBS, including conducting a review of the [GSE capital framework]…" Director Thompson also clarified that the fee will remain in place during this review.

“This fee has the potential to generate significant frictions in the UMBS market, as it could impact the fungibility of Fannie Mae- and Freddie Mac-issued collateral that underpins the design of the UMBS. The GSEs noted that this fee is being implemented in response to a provision of their new capital framework, which assigns a 20 percent risk weight to their exposures to securities issued by the other GSE. In comments submitted in 2020, MBA recommended that no risk weight be applied to such exposures, as ‘any difference between the required capital for a [GSE's] own securities relative to those issued by another [GSE] could lead to different treatment and actions that weaken the aggregate UMBS market.’” These fees took affect for securities issued on or after July 1, 2022. MBA is gathering market intelligence and communicating regularly with FHFA and the GSEs. MBA's advocacy efforts will remain focused on ensuring a well-functioning UMBS market.”

On June 24, Fannie Mae and Freddie Mac issued additional guidance related to a coding issue that impacted approximately 12 percent of credit scores earlier this year. A consumer reporting agency informed lenders and industry members that it experienced a coding issue when it changed some of the technology to its legacy online model platform. For example:

Freddie Mac issued Bulletin 2022-14 to provide similar guidance to sellers about their credit reporting and data correction responsibilities, and stated that it will also “not issue a repurchase based solely on an inaccurate credit score used in the underwriting of a mortgage.”

After making a determination that the underlying credit report data errors resulting from the coding issue “are not considered to be material erroneous credit data errors under Selling Guide B3-2-09,” Fannie Mae issued LL-2022-02 to provide requirements applicable specifically to impacted loans. Specifically, lenders are not required to obtain an updated credit report and re-underwrite the impacted loan “by resubmitting the loan to Desktop Underwriter® (DU®)” nor are they required to “re-assess the underwriting decision for non-DU loans, based solely on this issue.” An inaccurate credit score used at the time of underwriting will not render the loan ineligible for purchase, Fannie Mae stated, adding that a “repurchase request will not be issued based solely on this issue.” Guidance related to obtaining corrected credit scores and making data corrections, as well as information concerning loan-level price adjustments, post-closing quality control review, and representation and warranty relief is also provided in the lender letter.

Capital Markets

We saw larger than expected job gains for June to close last week, giving the Federal Reserve a longer runway to fight inflation. Almost 400k jobs were created in June, putting U.S. unemployment at a five-decade low, and the unemployment rate is still firmly in the 3.60 percent range: the job market is tight. The robust job creation over the previous quarter (>1 million jobs) has many analysts still expecting positive GDP growth in the second quarter and narrowly avoiding recession. Wage growth slowed slightly over the previous twelve months (up 5.1 percent vs. 5.3 percent in the last report) which should be welcome news for the Fed.

Hiring needs are eclipsing concerns about an economic slowdown, and Treasury yields surged on the jobs report, as the data reinforced bets that the Federal Reserve will hike 75-basis points at its meeting later this month. The FOMC minutes released last week affirmed the committee’s commitment to aggressively combating inflation and when combined with recent data, shifted market expectations entirely towards another 75-bps rate hike at the end of the month. Meanwhile, mortgage rates have seen some relief with the average rate on a 30-yr fixed improving half a percent over the last two weeks as recession concerns increase.

This week includes several potentially market moving events including $98 billion in mini-Refunding supply as well as several higher tiered data releases including CPI on Wednesday, PPI on Thursday, and a laundry list of releases on Friday including retail sales, import prices, industrial production/capacity utilization, business inventories, July flash Michigan sentiment, and the Fed’s Index of Common Inflation Expectations which comes out quarterly.

This week’s economic calendar kicks off later this morning with the Employment Trends Index for June. The rest of the calendar all about treasury auctions, the most pertinent to MBS investors being $43 billion of 3-year notes. The Desk will purchase up to $922 million UMBS30 4 percent through 5 percent. We begin the week with Agency MBS prices better by .125-.250 and the 10-year yielding 3.05 after closing last week at 3.10 percent.

Jobs and Promotions

Caliber Home Loans, Inc. is seeking to expand its team of mortgage industry professionals and loan officers nationwide. Helping more borrowers transform their homeownership dreams into reality by offering accessible and affordable financing solutions is what Caliber does best. Ranked the #3 Purchase Lender serving the minority community, according to 2021 HMDA data, Caliber is continuing to serve more borrowers through ever-expanding product lines, state-of-the-art technologies, and unmatched expertise that backs Caliber loan originators from the top-down. If you’re as passionate about homeownership for all as we are and looking for an opportunity to build out your pipeline, Caliber is here for you. Explore open positions today, or email Brent Lubahn for more information.

FHA has 1-vacancy for a Senior Single Family Housing Specialist (Quality Assurance Division) located within Philadelphia's HOC to act as HUD expert and advisor on the lender origination and servicing practices. Prepare correspondence, technical back-up documentation, status reports, schedules, and other information for referral. Identify actions necessary for the correction of the lender's deficiencies.

FHA has two Senior SF Housing Spec (QAD) positions open in the Santa Ana Region. Job duties include selecting and interpreting statutory, regulatory, handbook and other requirements that are applicable to the risk management function. Exercising judgment in interpreting and applying guidelines in responding to and solving problems and dealing with controversial issues. Act as a HUD expert and advisor on the lender origination and servicing practices.

FHA has a job opening in Washington, DC for a Credit Policy Specialist. This role requires formulating training programs. The development of policies, standards, guides, and methods of credit and financial analysis for FHA. Resolution of many special types of credit policy issues. Interpret and translate statutory requirements, administrative policies, procedures, and methods of credit analysis. Provide expert technical advice and assistance on a wide variety of Single-Family programs, credit policies and Direct Endorsement issues.