Time flies, and we’re more than halfway through the 3rd quarter. Few lenders and vendors look forward to heading into the autumn or winter of any year, and with the U.S. 10-year up to 4.30 percent, millions of borrowers content with low rates thanks to us, and with four consecutive negative prints in MBA mortgage applications, the demand for mortgages is now roughly 9 percent lower compared to the last positive print on July 14th. With mortgage rates hovering around 7.5 percent, we can all expect rate sensitive borrowers to continue to sit out. Lenders everywhere are grinding away at lowering their cost per loan. Of course, part of that is beating up on vendors when ordering, putting together bundling packages, looking at employee cost (more on that below) and manufacturing cost. Pricing exceptions are looked at dollar by dollar, which is often why Lender A doesn’t care much when a branch goes to Lender B when examining Lender A’s book of business showed unprofitability. Lenders are cutting expenses on technology and services, corporate overhead, and spending money on vendors. There is little reason to believe that this will stop. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. Hear an interview with Kristin Messerli on the next generation of home ownership.)

Lender and Broker Software and Services

Scorching temperatures across the United States aren’t doing much to thaw out a chilly originations market. The Empower®LOS from Black Knight helps lenders pare back when lending volumes have cooled, but also allows them to scale up when things heat up again, all without hiring or firing as a reaction to the market. Empower puts lenders of all sizes back in control with a cloud-based platform featuring time-saving tools like online point of sale and document management designed to expand the effective range of your staff, and to speed up the loan application and loan origination process. It also supports retail, consumer-direct, home equity, correspondent, wholesale, and assumption channels, all on a single system. Schedule a demo with Black Knight today to see what Empower can do for you.

Collecting fees from borrowers is a pain. Fee Chaser by LenderLogix is a widget that lives in Encompass® by ICE Mortgage Technology™ that lets you collect fees in seconds. Appraisal fees, extended rate locks, condo docs and even interim servicing payments. It’ll even chase down unpaid fees for you.

“Attending the California MBA Western Secondary Market Conference in Dana Point? So is Axos Bank’s Wholesale & Correspondent Lending Team. Be sure to add us to your agenda! We’re scheduling meetings for Tuesday afternoon and all-day Wednesday to talk strategy and review our innovative mortgage solutions: self-employed borrower financing, buy-before-sell options, unlimited cash-out amounts (up to maximum LTV), pledged assets, and cross-collateralization programs. Contact J Shoop, National Sales Director, to schedule a meeting. Or check out our rates on our Quick Pricer. Our Residential Warehouse Lending Team will also be onsite Tuesday and Wednesday; reach out to Eric Nelepovitz and Justin Castillo via email if you’d like to meet.”

Please join MCT's Phil Rasori, Chris Anderson, and Justin Grant on September 7th at 11am PT for an important webinar on MCT Geocoding & Bid Tape Protection Initiatives. In 2018, MCT launched an initiative to replace property address and loan number in the loan trading process. Recent headlines show that data security is more important than ever, which makes now the right time to finish the job and continue to reduce collateral NPI exchanged in the secondary market. Register today for a discussion of NPI, implementation plans to reduce its unnecessary exposure, and a review of internal data security and business continuity practices.

Broker and Correspondent Products and Programs

“Did you know that as of yearend 2022, an astounding 82 percent of homeowners enjoyed interest rates below 5 percent, with an impressive 92 percent securing rates below 6 percent? Consequently, the demand for traditional cash-out refinancing has experienced a decline. In this environment, Vista Point's Closed-End Second loan becomes invaluable! This unique solution allows borrowers to retain their original low interest rate while accessing their built-up equity, creating a blended rate that results in lower monthly payments. To explore the potential savings for your specific situation, visit www.Blendedrate.com. Witness how our Closed-End Second Cash-Out Equity Solution can help your borrowers reduce their monthly mortgage payments while still getting cash! With second lien amounts up to $550K and combined lien amounts up to $2.5M, your borrowers can get the cash they need without sacrificing their advantageous interest rate. Available for full doc and bank statements, on OO and NOO. For more information, reach out to us.”

AmeriHome Correspondent, backed by the strength of Western Alliance Bank, continues to grow market share in the correspondent space. When you combine AmeriHome’s industry leading loan purchase platform with Western Alliance Bank’s warehouse lending and treasury management services, this is one “must-have” relationship for mortgage bankers of all shapes and sizes. Financial institutions, IMBs and Emerging Bankers alike benefit from AmeriHome’s Delegated and Non-Delegated options, full suite of conventional and government products, and Bulk, Bulk/AOT and Best-Efforts delivery options. AmeriHome is a CMBA President’s Council Sponsor and All-Attendee Party sponsor at the Western Secondary Market Conference; they’re also sponsoring the 4th Hole at the CAMPAC Golf Tournament so don’t miss an opportunity to meet up! Catch the Non-Delegated team at NAMB National Sept 9-10 in Las Vegas! Check out Upcoming Events for details on where they’ll be through year-end, find your sales rep here, or send them an email to learn more about partnering with AmeriHome!

Are you looking for new ways to market affordable mortgage solutions to your clients while exceeding expectations with real estate agents? The introduction of ONE+ by Rocket Mortgage provides an incredible opportunity for Rocket Pro TPO partners. With this product, eligible clients provide 1 percent towards the down payment and the other 2 percent down payment requirement is covered, plus clients are not responsible for paying the mortgage insurance! And, learn how you can use their 3-2-1 Temporary Buydown for additional payment relief. To learn more about these programs, Rocket Pro TPO wants to see you at the biggest industry event of the year: Originator Connect in Las Vegas! Executive Vice President, Mike Fawaz, will deliver an important keynote and you’ll hear from other industry pros. Register for free by using code ROCKETFREE. Interested in learning more about a Broker or Non-Delegated Correspondent partnership? Contact Rocket Pro TPO to learn more.

Philadelphia is highly touted as the “City of Firsts,” from the first daily newspaper, the first turnpike and let’s not forget one of the first trade shows in US history, Philadelphia’s Centennial Exposition. In 1876 Alexander Graham Bell introduced a brand-new invention (the telephone) in the same city where the mortgage industry will converge and discuss strategy, share ideas, and look to the future while respecting the past. You don’t want to be the last or late in booking your meeting with the Newrez team at the Annual MBA Conference in Philly. Bell would be okay if you email or text, but feel free to call your regional sales manager to setup a time to meet in the City of Brotherly Love, October 15 to October 18 at the Loews Hotel. And in case you missed it, we announced several new “valuation alternatives” being accepted by Newrez Correspondent so click here for details.

STRATMOR Comp Information and Survey

What do underwriters and processors and LOs make? STRATMOR has the information, spelled out in a recent Perspectives piece.

With budget season rapidly approaching, make sure you have comprehensive compensation data you need to drive your planning for next year. STRATMOR Group’s Compensation Connection® Study provides valuable insight into compensation components, incentive plan structures, role specifics and more, aggregated by company type, annual volume, and region. Prior three-year trending is also included on most metrics. Get the compensation data you need: sign up for the Fall 2023 Compensation Connection® Study today!

Natural Disaster and Climate Updates

Scientists everywhere are interested in how Sahara dust storms are impacting the Caribbean ecosystem, the weather in Miami and Houston, and the hurricane season. I mention this because it is not only the earth’s activities that are linked, but also every department in a lender. Saving money in one department helps all departments. Companies everywhere, lenders or vendors, are trying to earn a bigger “piece of the pie” when the “pie” is shrinking. But nature bats last, and no one wants to see the collateral for a loan disappear.

Regarding fires, attribute them to climate change, poor forest management, or human crime, according to the National Oceanic and Atmospheric Administration National Centers for Environmental Information, the number of acres burned each year has steadily increased since 1983. The average number of acres burned between 2010 to 2022 is 93 percent higher than that from 1990 to 2000.

Although the Maui wildfires are top of mind for most of the country right now, CoreLogic’s newly released 2023 Wildfire Risk Report declares the states of California, Colorado, and Texas lead the nation in the number of homes at risk of wildfire damage. For those of you who like numbers, the report quantifies the magnitude of wildfire risk across 14 western U.S. states in terms of the number of residential properties and their associated total reconstruction cost value.

In California, more than 1.2 million homes with a combined reconstruction cost value of more than $760 billion are at moderate or high risk of wildfire damage. In Colorado, more than 300,000 homes with a total reconstruction cost value of $140 billion are at risk, followed by 200,000 homes in Texas with a total reconstruction cost value of $85 billion.

The Los Angeles, Denver, and Austin, Texas, metro areas lead the top three states in terms of the number of residential properties with elevated wildfire risk.

Capital Markets

The Fed remains data dependent, and there are no clear signs that the Fed is done hiking rates. This is not surprising, but still, it is not great for those hoping for lower rates to earn a living or lower their mortgage payment.

The Minutes from the July Federal Open Market Committee meeting showed that policymakers still see significant upside risks to inflation, which could invite additional tightening. November odds moved up closer to 50 percent for a rate hike in fed funds futures. It was also revealed that the Committee has some concerns that the effects of tightening of bank credit conditions could turn out to be more significant than anticipated. Fed staff projections no longer saw the economy entering a mild recession this year, opting for below-trend growth in 2024 and 2025.

Fortunately, residential construction continues to gradually gain steam. Housing starts rose 3.9 percent month-over-month to a seasonally adjusted annual rate of 1.45 million units during July, but that did not draw a strong reaction from the market. This is up 6 percent on a year-over-year basis. The diverging trend between single-family and multifamily activity was once again evident, with single-family starts up about 9.5 percent on a year-over-year basis while multi-family declined slightly. Building permits took a similar trajectory, although the total increase in permits was fairly modest. A record number of apartments are under construction: A seasonally adjusted 986,000 multifamily units are being built, most of which are destined to be apartment rentals when they are completed, helping to relieve upward pressure on rents overall.

Weekly jobless claims (239k, down from 248k, as expected) and Philadelphia Fed manufacturing led off today’s economic calendar. Later today brings leading indicators for July, Treasury announcing the auction sizes for next week’s new 20-year bonds, reopened 30-year TIPS, and 2-year FRNs auctions, and Freddie Mac’s latest Primary Mortgage Markets Survey. We begin the day with Agency MBS prices worse about .125 and the 10-year yielding 4.29 after closing yesterday at 4.26 percent; the 2-year is up to 4.95.