Overheard last night at a bar here in Austin, Texas: “It’s hotter than the hinges to the gates of hell.” Not so hot, as residential lenders know, are volume and mortgage rates (which some believe may drift down during the final five months of 2023). No one can predict interest rates with any degree of accuracy or confidence, so originators should optimize the current situation with the cards they have been dealt, which aren’t always good. Speaking of which, an owner of a non-bank lender who was doing $40 million a month a few years ago and who is now doing $10 million a month wrote, “Rob, are you hearing that, in the acquisition of a lender, that all the premium is gone, and that deals are comprised of just an earn out over 2-3 years?” Yes, I am hearing that, for lenders doing $10 million a month. But every deal is different, and for companies that were doing $80 million a month and are now doing $30 million, then there might still be a premium. You should check with someone like STRATMOR M&A partner Garth Graham for particulars. (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. Listen to an interview with LoanCare’s Rodney Moss on how subservicers are winning business and what to expect in the servicing space for the remainder of 2023.)

Lender and Broker Software, Products, and Services

“Calling all grads of Hedging 101 and 201! It’s time to kick it up another gear in the next installment of Optimal Blue’s popular webinar series. Make plans to join Hedging 301 as we take a deeper dive into more advanced capital market strategies and how they naturally interplay with technological advances. This session will address the many ways Optimal Blue helps clients streamline daily processes to achieve success and optimal best execution – including mandatory price discovery and dissemination, saving basis points while delivering representative mix, solving for numerous execution iterations, and integrating to the MSR broker community for live, loan-level servicing valuations. Previous sessions had record attendance, so be sure to save your seat for Hedging 301 today!”

Universal Component Lender Services (“UCLS”) is pleased to announce the release of the latest upgrades to its proprietary software system, Component Servicing Intelligence® (CSI). The CSI system represents a huge step forward in default loan servicing. “CSI was built by experienced default professionals who set out to solve the risks created by existing system limitations. “Utilizing its own technology, UCLS simplifies complex default servicing functions while still ensuring compliance at every turn. CSI enables UCLS to out-perform existing default operations and do it at a cost savings for our clients.” explained Steve Paton, SVP, and head of Default Servicing at UCLS. The system effectively connects to, not replaces, other servicing platforms without the worry of servicing data being out of sync. Timeline tracking and fee tracking provide real-time communication back to our clients. UCLS offers component servicing solutions from loss mitigation, default servicing, call center support and more. Our advisory team offers services for lenders considering bringing servicing in-house or looking for a new sub-servicer. Contact Joe Amoroso for more information.

For mortgage originators looking for a streamlined, more connected warehouse operation, Aware is the answer. SitusAMC, the leader in warehouse financing technology, launched Aware last year to compliment ProMerit, which is the most widely selected warehouse lending system. Aware allows borrowers to manage, track, fund and operate warehouse financing and credit lines with ease. Import data directly from LOSs, select warehouse lenders to engage, manage the funding and payoff process, and track collateral and custodial updates. Fully configurable Warehouse MRA, analytics engine that identifies ideal execution for 1 or many requests, output based on relationship, return, dwell time, and utilization. Schedule a phone call with the experts in warehouse financing at SitusAMC to discuss how we can power more connected, efficient warehouse borrowing and lending.

Interest rates will come down, inventory (nationally) will remain low, and home prices will increase. Q1 or Q2 2024? Don’t know… But now is the time to investigate marketplace vendor options, such as Service 1st. Combine income analysis (Income+) and credit reporting under a single vendor. IRS 4506-C performance has stabilized. Multiple S1 service cascades (VOE, credit, etc.) are ready today. This month S1 is deploying a new pre-populated and automated onboarding system for agreements and onboarding uploads. You’re bullish, we’re bullish. Let’s go! Contact S1 today for a simple quote.

Tips to Reduce Warehouse Expense by OptiFunder. IMBs continue to face volume headwinds from elevated mortgage rates, limited inventory, and the rise of SOFR (up about 350 percent from last year). In dollar terms, that is roughly a $400 increase in warehouse expense per loan. Reducing expenses is key to maximizing profit. A few things you can do to reduce warehouse expenses include keeping your best warehouses full, aligning incentives and being mindful of your fluctuating pipeline. The sooner you can pay down the lines when the investor wire is received, the better. OptiFunder was founded to help IMBs gain more insight into, and control over, their warehouse funding expense and automate processes from funding through loan sale. For more tips on reducing warehouse expense and increasing process efficiencies, visit here.

An innovative approach to loan origination requires innovative leadership to match. At UMortgage, we’ve assembled award-winning executive leadership that has the industry expertise and influence to drive both our platform and the mortgage industry as a whole into the future. Led by Gil Arbitsman, CFO & HousingWire Finance Leader, Kayla Lopez, SVP of Strategy & HousingWire Rising Star, and Corie Meredith, VP of Marketing & HousingWire Marketing Leader, UMortgage is creating a platform that offers all the tools & resources the modern Loan Originator needs to differentiate and dominate, even in the toughest market conditions. Get a no-commitment inside scoop on what it’s like to be a UMortgage LO. On that page, you’ll get a comprehensive look at how Arbitsman, Lopez, and Meredith’s contemporary approach has developed cutting-edge offerings like dedicated sales coaching, software that lets you originate from anywhere, streamlined operations pipelines, and much more.

Broker and Correspondent Loan Programs

“Service, solutions, simplicity are key Mr. Cooper priorities. Our team is dedicated to providing these to our clients and consistently exceeding expectations. To support the challenging affordability market, we have an attentiveness on affordable lending products, including HomeReady/Home Possible, FHA & DPA products and enhanced pricing on low- to-moderate income businesses. We’re successful through our comprehensive menu of Correspondent execution options including Single Loan Mandatory, Hybrid AOT, Bulk & Best Efforts. Our industry leading Co-issue program further complements our B2B options allowing our clients to tailor their released delivery strategy to their business model. We’re thrilled to be a Titanium sponsor of CMBA’s Western Secondary Market conference and have a jam-packed meeting schedule. During these meetings, we’ll be discussing all of these options. Contact us if you’d like to have these same conversations! Mr. Cooper is the largest non-bank servicer with a $882B portfolio (as of June 30, 2023).

Guaranty Home Mortgage Corporation (GHMC), originally founded in 1986, has joined forces with First Colony Mortgage Corporation (FCM), founded in 1984. Two companies with rich histories, now serving as one. The lending functions of Guaranty will operate as the following, state-registered DBA’s: GHMC, GHMC TPO, & GoGuaranty Home Lending, NMLS 3112. The TPO platforms of GHMC will primarily operate with legacy fulfillment staff in the Nashville, TN area. The popular G-Connect and G-Assist platforms will continue to operate as they have. The FCM/GHMC combined corporate office is located at 508 W 800 N, Orem, UT 84057; while a small regional office is located in Brentwood, TN. Members of the GHMC TPO staff will be onsite at this weeks’ FAMP convention, and the upcoming tradeshows in Las Vegas, (NAMB), Denver and Salt Lake City. For a demo into GHMC’s G-connect platform, email Rex Hagood, Andy Voyles or Chip Adkins.

Does your origination strategy include ITIN loan products? If not, work with a 100 percent Non-QM Lender offering a full suite of products to serve a variety of non-traditional borrowers. Champions Funding now offers loan delivery on ITIN loans through its new Non-Delegated Correspondent Channel to help sellers increase their margins while expanding their products. Find out more by contacting Trey Waters, National Account Executive to add ITIN to your origination strategy.

Investors and Lenders Tweak Conventional Conforming Programs

Fannie Mae's second quarter 2023 earnings were released this morning. Fannie had $5.0 billion of net income for the second quarter of 2023, with net worth reaching $69.0 billion as of June 30, 2023. Net income increased $1.2 billion in the second quarter of 2023 compared with the first quarter. Fannie acquired approximately 227,000 single-family purchase loans, of which more than 45% were for first-time homebuyers, approximately 54,000 single-family refinance loans, and financed approximately 139,000 units of multifamily rental housing in the second quarter of 2023. Fannie observed that home prices grew 3.6% on a national basis in the second quarter of 2023, compared with a 1.4% increase in the first quarter of 2023.

In a joint announcement from Freddie Mac and Fannie Mae (the GSEs) regarding their working together to produce the Uniform Property Dataset (UPD) in an effort to enhance data quality and consistency in property data collection. This dataset will replace each GSE’s proprietary property datasets and create market standardization and fungibility. Although it has alignment with some data elements and enumerations in the Uniform Appraisal Dataset (UAD), the UPD is separate. The GSEs will provide additional information on implementation timelines for this dataset at a future date.

FHFA Working Paper 23-04: How Do Students Value an Elite Education? Evidence on Residential Location and Applications to NYC Specialized Schools has been posted.

AmeriHome Correspondent General Announcement 20230609-CL summarizes previously published changes made during June, additional changes made with this announcement, and recent Agency and regulatory news.

Kind Lending allows the use of an Average Median Credit Score (AMCS) per Fannie Mae (FNMA) guidelines. This is a great option when you have two borrowers who qualify, but one of which may have a lower score that would generally prevent them from being approved. Kind’s eligible FNMA products include Fannie Fixed Rate, AMI <120, HomeReady Fixed Rate.

UWM is offering Special Purpose Credit Programs (SPCP) for HomeReady® and Freddie Mac’s BorrowSmartSM Geo-Target. These offerings will be available in select areas including Detroit, Baltimore, and Chicago for Freddie Mac’s BorrowSmartSM and Detroit, Baltimore, Chicago, Atlanta, Memphis, and Philadelphia for HomeReady® SPCP. Qualified buyers will receive up to $10,000 toward their down payment/closing costs with the Freddie Mac BorrowSmartSM Geo-Target Assistance program, or they will receive $5,000 toward their down payment/closing costs and up to $1,000 toward home warranty/appraisal costs with HomeReady® SPCP. Additional details on specific qualifications can be found on the product details page.

PRMG Product Update 23-34: Product Profile Updates includes Conventional Products information updates on full condo reviews requirement, Choice Products prepay penalties, and CA CalHFA FHA and Conventional updated link for income limits. Also, clarifications on detached condos review, Texas Cash Out on 2nd Homes Ineligible for Choice Stretched Prime and Non-Prime.

Recall that effective with new Best-Efforts locks and Mandatory commitments completed on/after Friday, July 21, Citi Correspondent Lending began supporting First-Time Homebuyer LLPA waiver. Review the First-Time Homebuyer LLPA Waiver announcement for complete details, including eligibility requirements and the process for the waiver to be applied to loans.

Effective Friday, August 11, 2023, Pennymac will introduce new Base pricing grids for the following loan amounts. View PennyMac Announcement 23-50 for details.

Effective July 28th for new and existing locks, as announced in 2023-155, PHH Mortgage Correspondent Lending updated its Delegated & Non-Delegated Non-Agency Products. Full Document, Alt Document Options, Debt Service Coverage Ratio (DSCR).

PRMG TPO Resource Center has been updated, as discussed in PRMG announcement 23-08, with multiple changes including updated Low Score – Low Risk Appraisal Checklist, Mortgage Insurance Certification Form Number Revision Requirements, Tax Transcripts and Tax Return Requirements. Addition of training/instructional materials on FHA Translated Mortgage Documents, FHFA (Fannie Mae and Freddie Mac) Mortgage Translations, and VA Alive and Well Certificate.

PRMG Product Update 23-35 includes information such as Standard Conventional and FHA Products EAD code for non-permanent resident aliens clarification, Agency Fannie Mae Standard and High Balance loans submitted to DU on or after 08/19/23, 7/6 and 10/6 SOFR ARMs qualify at the note rate and at that time 7/6 and 10/6 SOFR Arms that are Higher Priced Mortgage Loans or Higher Priced Covered transactions will no longer be eligible.

Capital Markets

As a reminder, and continuing to set the tone, last week’s economic data continued to outperform market expectations. Stronger than forecasted GDP growth in the second quarter was driven by business spending on equipment, structures, and intellectual property products. However, residential investment fell 4.2 percent. It was the ninth consecutive quarterly decline. Compared to the first quarter, personal consumption expenditures rose 1.6 percent versus 4.2 percent as consumer spending slowly wanes. Slowing inflation may be helping households maintain some spending habits. Annual core inflation slowed 4.1 percent in the second quarter and has been trending at 3.8 percent over the last three months. Additionally, wage growth, as measured by the Employment Cost Index, rose 1.0 percent in the quarter; the slowest pace in two years. Fed officials have maintained they need to see sustained moderation of inflation which would likely result in labor market declines. However, the Fed staff is no longer forecasting a recession over the next twelve months. It’s possible that without an economic downturn there would be little incentive for the committee to lower the fed funds target.

Given the activity last week, it was a very quiet start to the week ahead of this week’s risk events (highlighted by Wednesday’s Quarterly Refunding Announcement and Friday’s payrolls report) as traders refrained from making big bets amongst concerns of an overheated market. We’ve seen recently that the U.S. gross domestic product picked up steam in the second quarter, key inflation measures continue to cool, consumer spending is rising, and the labor market remains at near-historic strength.

Friday’s payrolls are, as usual, being talked about and are estimated at 200k in July, as the central bank's future policy moves will be strongly influenced by the labor market. Fed officials believe unemployment needs to increase in order for the central bank to reach its 2 percent inflation target. More evidence we are moving toward a disinflationary environment will lead to lower mortgage rates.

The Reserve Bank of Australia was out with its latest monetary policy decision overnight where it hiked rates by 25 basis points. The U.S. calendar doesn’t have much scheduled today in terms of news that would substantially move rates: Redbook same store sales for the week ending July 29, final July S&P Global manufacturing PMI, ISM manufacturing PMI for July, JOLTS job openings for June, June construction spending, July Dallas Fed Texas services, and remarks from Chicago Fed President Goolsbee. We begin the day with Agency MBS prices little changed from Monday evening, the U.S. 2-year at 4.88, the 10-year yielding 3.98 after closing yesterday at 3.96 percent.

Jobs, Transitions, and Promotions

In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking to create lasting Realtor and builder relationships at a bank focused on the market today. Banner has opportunities for lenders looking for local decision making with FHA, VA, USDA, state bond and true Portfolio lending opportunities along with servicing retained Fannie and Freddie loans to assist in client retention. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. Banner is 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 resumes to Aaron Miller.

Rocket, whose stock price was up slightly yesterday, announced to the world that it has a new CEO: “fintech” executive Varun Krishna, fresh from Intuit and PayPal. He starts right after Labor Day on the same day Bob Walters steps down as president and chief operating officer. Recall that Jay Farner retired last month following two quarterly losses. Interim CEO Bill Emerson will take Walters' president and COO role. Congrats to all involved.