Here at the California MBA’s Western Secondary in Orange County, besides talk of Utah’s Pie and Beer Day yesterday, or maybe it is Pioneer Day, most of the discussions are about products (to help borrowers) and lack of premium pricing. And rates. As an indicator, the 10-year Treasury yield ended last week at 2.75 percent and the 2-year closed at 2.97 percent. Meanwhile, the fed funds futures market swung around quite a bit all week, but settled at an 80 percent probability that the Federal Reserve's policy-making committee lifts the benchmark rate by 0.75 percentage points this week and a close to 20 percent chance of a full percentage point hike. Remember PIGS (Portugal, Italy, Greece, and Spain and their debt crisis from 2009-2014)? Unlike the U.S., which makes up one large jurisdiction, the European Central Bank’s decision to raise its rates will reverberate through 27 different member states and their economies, exposing more indebted countries like Italy to financial trouble and weigh on peripheral bond yields as a whole. Not helping matters was Italian Prime Minister Mario Draghi (a former ECB president) announcing his resignation, prompting Italy's 10-year government bond yield to jump above 3.5 percent, compared to the just over 1 percent yield on the 10-year German bund. Should Germany pay for other countries? (Today’s podcast is available here and today’s features an Interview with Sara Knochel on how Candor is moving into post close QC automation and enabling dynamic servicing strategies via robust and detailed data. This week’s is sponsored by Candor. With Candor’s Machine as an Underwriter, lenders modernize their manufacturing infrastructure making them immune to margin, capacity, and staffing challenges forever.)

Lender and Broker Software and Services

“News Alert – For those who use direct mail for lead generation, USPS just raised prices by 3 cents for first class and 2 cents for standard mail. Did you know, however, that 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!”

“LoanStream, the ONE Lender for Correspondent Lending is excited to have Teresa Talavera-King onboard as Correspondent Regional Sales Executive, with over 20+ years attained while working at top lenders within the industry. Teresa has a background in sales, client services, sales development, and relationship management. In her new capacity she will be working directly with our valued Correspondent clients and expanding their opportunities. Contact to get in touch. Not approved for Correspondent lending yet? Partner with the ONE lender for Correspondent Lending offering a variety of Agency and Non-QM programs plus loan programs exclusive only to LoanStream. Visit us or call 833.311.0126.”

A perfect storm of market and economic conditions triggered by a worldwide pandemic created unprecedented production in 2020 and 2021. As with all storms, eventually, the tide recedes. The industry is working through much more challenging conditions in 2022. Those conditions, which include significantly higher interest rates, lower margins, and much lower overall volume, will result in lower profitability for most companies, potentially including losses on a tax basis. In a year like this, it can make sense to incur as much of the pain from a book income standpoint, putting it all behind you and focusing on a stronger 2023, but the best strategy from a tax standpoint might run counter to that. What decisions can you make this year and next to reduce your overall tax liability now and in the future? Read our latest from Jared Frost, Richey May mortgage banking tax expert, to start planning now.

Hear that? That’s the roar of home equity demand coming our way. Make sure you capitalize on the current $11 trillion of tappable equity by contacting Computershare Loan Services (CLS). CLS can help you quickly ramp up your business by processing, underwriting, closing, and servicing all your home equity products. Put a stellar fulfillment and sub-servicing leader on your side. Reach out to my friends at Computershare Loan Services today.

“The housing market is shifting. Your loans are down. Your refi’s are tumbling. Your labor costs are rising. Saving money probably sounds pretty good to you right now, doesn’t it? What if we told you Velma Connector can help you save both time and money, with our ECOA-Adverse Action solution! Our clients have reported an over 400% ROI, all thanks to Connector’s easy-to-use, automated workflows. Connector can help you reduce your labor costs and eliminate costly non-compliance fines. Save loads of time, piles of cash, and costly headaches, all with a little help from Velma Connector. Click here to learn how!”

Non-QM lending doesn’t have to be so costly or cumbersome. Arm your non-QM lending operation with the power of GeniusWorks, Indecomm’s automation-enabled workflow that simplifies and accelerates non-QM tasks, processes, income calculations, and underwriting decisions, all while lowering costs. By pairing intelligent automation with Indecomm’s experienced mortgage talent, GeniusWorks helps you capitalize on the non-QM opportunity, so you can remain profitable in the down market. GeniusWorks works by reducing costs by 30% and automating 70% of mortgage processes behind the scenes at loan setup, processing, and underwriting. While you save on time and money, your self-employed/ non-traditional borrowers reap the benefits with faster and more accurate responses. Learn more by registering for our upcoming GeniusWorks webinar. Or, if you are only looking for automated mortgage underwriting and decisioning? Check out DecisionGenius!

Access the recording and resources from ActiveComply’s most recent seminar to learn more about using social media to increase purchase business while staying compliant. Jam-packed with data-backed and actionable insights, production superstar Barry Habib and fair lending guru Mitch Kider discuss how to get the most out of marketing on social media during these interesting market conditions. Love it or hate it, social media is a critically important tool that lenders and servicers use to attract new customers, promote brand awareness, and stay on the cutting edge of contemporary marketing strategies. But how does one safely navigate the conundrum that is federal and state mortgage advertising regulations while staying up to date with social media marketing trends? Explore ActiveComply’s wealth of compliance resources, learn more about our no-headache compliance solutions for IMBs, banks, credit unions, and other lenders, or request a free demo for your company today to find out!

Like the salty waters of the Dead Sea, refis kept many lenders comfortably afloat during the pandemic. But as rates rise and applications fall, those same lenders are seeing a storm on the horizon and it’s approaching fast. As a result, lenders are setting their sights on 2024, when analysts predict the housing supply will recover enough to return a healthy purchase market. Unfortunately, hanging on until then will be tricky for lenders that are taking on water fast. Cutting unnecessary technologies is a simple yet effective way to save costs, but it’s important to know which solutions are dragging you down and which are keeping you buoyant. Check out Sales Boomerang and Mortgage Coach’s latest eBook for three digital lifelines to keep lenders afloat in rough waters.

FHA, Rural, and VA News

Don’t forget that the FHA revised its appraisal validity period guidance via Mortgagee Letter (ML), ML 2022-11, which extends the initial appraisal validity period to 180 days from the effective date of the appraisal and increases the appraisal update validity period to 1 year from the effective date of the initial appraisal report that is being updated.

And for lenders interested in rural lending, in late June RHS issued a Final Rule updating the definition of “Rural Area” through a final rule updating the definition of “rural area” to exclude certain populations in rural area population counts. The updated definition excludes the following from rural area population counts: (1) individuals incarcerated on a long-term or regional basis; and (2) the first 1,500 individuals who reside in housing located on a military base.

There has been conjecture of a change in the FHA’s MIP levels. Income from FHA premiums go into the general Treasury fund when Congress passes a Transportation and HUD appropriations bill. Income from programs that earn a profit is deemed “negative credit subsidy.” The money can then be used for other programs. One can view it as a tax on FHA borrowers. The borrowers who pay it are disproportionately people of color and first-time homebuyers.

To improve the efficiency of Wells Fargo Funding loan purchase processes, effective August 15, 2022, additional documentation will be required in the Closed Loan Package for conventional Conforming, FHA, VA, and Guaranteed Rural Housing (GRH) Loans to be considered delivered (received). Details are available in Wells Fargo Funding Newsflash C22-030.

FAMC/Citizens Correspondent National Bulletin 2022-13 includes information on FHA & VA Products, Updates and Reminders. See Bulletin 2022-13 for additional information and all lock, delivery, and purchase by dates, if required.

First Community Mortgage provided information regarding VA’s preauthorization of pest inspection fees and repair be charged to the Veteran under certain circumstances. View more information in FCM Correspondent Announcement 2022-24 or FCM Wholesale Announcement 2022-37.

Mountain West Financial announced the Chenoa Fund DPA for FHA Loans is available 7/20/2022. The product combines the best of the former Chenoa DPA options into one simplified program. A single unified DPA product offering and requirements for FHA-insured loan repayable second mortgages have a 10-year term and an interest rate 2% above the first mortgage note rate. View MWF Wholesale Bulletin 22W-064 for other program highlights.

Effective for mortgages with case numbers assigned on or after June 1, 2022, FHA announced updates to its requirements for appraisal validity periods. See AmeriHome announcement 20220703-CL for details.

Capital Markets

June’s housing data released last week highlighted the impact higher mortgage rates and higher home prices are having on home sales. Existing home sales fell to a 5.12-million-unit pace as the average price was a record $423,300. Single-family housing starts have retreated to a 982,000-unit pace which is near pre-pandemic levels. Permits have also fallen as builders begin to scale back production in the face of higher building costs. Those higher costs have put average mortgage payments at the highest ratio to income since the 1980s. The good news for prospective buyers is that available housing inventory is increasing and competition for homes is waning. Should the job market start to cool, that would further reduce demand for home purchases.

Friday’s Flash PMI showing the services sector of the economy in contraction as well as other recent weak data points have changed market expectations about the path of rates. Markets now expect one more 75-basis point rate hike and then only 50-basis points in September with the Fed getting less aggressive earlier than was expected last month. No change is expected in the current rate of MBS roll off, which is at $17.5 billion per month and will bump up to $35 billion per month come September.

This week brings the latest Federal Open Market Committee decision on Wednesday followed by Fed Chair Powell’s press conference. A 75-basis point hike would bring the target fed funds target range to 2.25 percent to 2.50 percent. Besides the Fed events, there’s a pretty solid slate of economic news and the Chicago Fed National Activity Index for June (unchanged at -.19) kicked off today’s calendar. The Desk will purchase an average of $747 million today through Thursday, of which 83.5 percent will be in Class A, before releasing a new purchase schedule Thursday afternoon that expected to total $6 billion. We begin the last trading week of July with Agency MBS prices worse .125-.250 and the 10-year yielding 2.82 after closing last week at 2.78 percent.

Employment and Transitions

After National Bank Holdings Corporation announced an agreement to acquire Bank of Jackson Hole (with operations in Jackson Hole, WY and Boise, ID, it has been full speed ahead. There are advantages in being an originator for a national bank, and NBH is looking for growth-oriented originators in its footprint states which include CO, MO, KS, TX, UT, NM, ID, and WY. Any loan originators interested in a career with NBH, please send me a confidential resume for forwarding.

In the Northwest, Banner Bank is searching for a Builder Direct Mortgage Loan Officer as well as Mortgage Loan Officers. These are true portfolio lending opportunities with local decision making and direct to Fannie and Freddie loans with retained servicing to assist in client retention and marketing opportunities. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. The right fit for an established team or the individual looking to grow their business and take the next step in their career. Please send resume to Aaron Miller.

Hey, wanna make upwards of $150k a year? The FHA posted a job opportunity for a Management Analyst responsible for researching and investigating new or improved business and management practices, conducting complex and special studies for efficiency and productivity and provides recommendations, and analyzing and evaluating housing functions and activities being considered for conversion to contract operations.

Freddie Mac announced that Dennis Hermonstyne Jr., is joining the company in September as SVP and chief compliance officer (CCO).

Essex Mortgage added two new sales professionals to its team, Charlie Nager and David Sears, to represent Essex in the Midwest, Texas, and the surrounding area. (Essex offers a nationwide DPA with 100% CLTV financing. For any questions about Essex’s correspondent program, contact Kim Schenck.)