As numbers approaching a thousand head to Orange County, CA, for the California MBA’s Western Secondary, keeping an eye on the remnants of a hurricane, it is not an easy lending environment with mortgage rates at 20-year highs, firmly in the 7’s. Thomas Edison believed, "Vision without execution is hallucination." Many owners of lenders and vendors had very good vision and execution some years ago when creating their companies. But thinking that 2020 and 2021 would continue indefinitely would have been classified as a hallucination, and obviously things have become much more difficult with many wondering where things go from here. I don’t have a crystal ball, but a certain percentage of those owners who deferred being serious about exploring a sale, waiting, until after the cycle was obviously on the downside, they’ve perhaps undermined an opportunity for negotiating more favorable deal terms. It can be argued that the smarter entrepreneurs engaged in company sale negotiations while industry mindset is mostly driven by prosperity. (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.)

Lender and Broker Software and Services

“No time for social media marketing? Introducing… Social Media Marketing for Busy Loan Officers. Tired of stressing over what to post on Facebook or LinkedIn? Want to grow your audience on Instagram without spending hours each week crafting the perfect post? With Be Loangendary, we do all of it for you. Here’s how: 1) Our team of mortgage copywriters and designers craft your social posts every week. 2) Once they’re perfect, we schedule and post to your social accounts. 3) You sit back, relax, and watch the “likes” start rolling in. With Be Loangendary, you get engaging mortgage content without breaking a sweat. That’s social media done for you. Want to get started? Enjoy a 14-day free trial on us!”

"Salesforce is committed to partnering with mortgage lenders to drive their technology transformation with modern solutions that are already in practice and serving many of the top mortgage lenders in the country. As part of its efforts to drive the industry forward through the adoption of a modern tech stack, Salesforce identified UMortgage to establish the precedent of utilizing its mortgage and lending software to its fullest potential to facilitate better client experiences. Using customized task management systems and automations within Salesforce, UMortgage has been able to achieve 300% year-over-year growth and near-perfect 95 net promoter score (NPS), an indicator of a best-in-class client experience. Check out the following link to learn more about the innovative technological systems that are helping UMortgage Loan Originators maximize their lead generation & conversion. With an investment in intuitive solutions, UMortgage is driving the mortgage industry towards a better future that enables brokers to thrive."

We’re hearing that lenders are ramping up their tech stacks and (most importantly) focusing on the quality of the data powering that technology. If you’re considering taking your company’s tech stack to the next level, look for a property data provider that delivers the most comprehensive data through the best channels to meet your unique business needs. That’s why we’re highlighting First American Data & Analytics and its repository of more than 8+ billion recorded documents. First American is more than just a data provider. It offers end-to-end solutions for the mortgage lifecycle. From detecting fraud and risk to providing valuation solutions, First American powers lenders to make informed, data-driven decisions. If you’re ready to have access to the most accurate, complete, and current data, reach out to the team and get a data sample now.

“Lenders, the home insurance market is facing unprecedented volatility. We want to hear if it's affecting your business and the closing process. Take our five-minute survey to share your thoughts. As a thank you, you can select to be entered to win a $100 Amazon gift card, compliments of Matic Insurance. Click here to begin the survey. Matic is a home insurance marketplace built for the mortgage industry. Learn how mortgage enterprises can implement a new revenue stream that helps borrowers navigate the insurance buying process. Book a demo today.

Wholesale lending is undergoing a transformation that will leave those who cling to outdated processes behind. Using bargain CRMs as electronic phone books or even worse, spreadsheets to track brokers, is a clear sign that your sales process is holding you back. Modern CRM technology like OptifiNow provides a comprehensive, out-of-the-box solution that helps wholesale lenders create a sales and marketing process that drives broker engagement and significantly increases loan volume. Download our guide to finding the right CRM for wholesale lenders to learn how to transform your wholesale business and stay ahead of the competition!

What's an internal audit anyway and do you need one? An internal audit acts as a third line of defense for your mortgage operation. It provides comprehensive assurance based on the highest level of independence and objectivity to evaluate the effectiveness of management’s internal controls. This function should advise your mortgage operation on plans to achieve the company's strategic, operational, financial and compliance goals. An effective internal audit should go far beyond just checking a compliance box; it should be an integral part of protecting your company. If you want to ensure you’re adhering to regulatory requirements and demonstrating good faith business practices, a Richey May internal audit is a good fit. If you’re looking to be Fannie Mae approved in the future or want to maintain your approved status, it’s required. If you’re unsure whether you need an internal audit, ask one of Richey May’s experts today or learn more here.

Pricing Products and Programs

“Lender Price introduces Composable Pricing UI, an innovative user interface that empowers lenders to effortlessly customize their pricing engine using No Code or Low Code options. With a variety of skinning options and increased flexibility, Lender Price users can now easily create a personalized pricing experience with an abundance of options to choose from. Surpassing the limitations of single UI platforms seen with competitors, the era of rigid, one-size-fits-all PPE’s is over. With a flexible pricing engine like Lender Price, users now have the ability to tailor their interface based on their individual needs and preferences. Composable UI represents a paradigm shift in digital lending technology UX, liberating both individuals and organizations from the constraints of single UI platforms," said Dawar Alimi, Lender Price CEO. “With an abundance of options and unparalleled flexibility, users can personalize and take charge of their pricing experience.” Email us or request a demo today.”

In this market, hustle is everything. You can’t afford to waste a single deal or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check ReadyPrice out today.

STRATMOR Comp Information and Survey

Yesterday I published, “What do underwriters and processors and LOs make? STRATMOR has the information, spelled out in a recent Perspectives piece.” Several wrote to say that there is a wide disparity in pay based on experience, at every level, and that averages may not be telling the whole story. Point well taken, although the drop in volume/units has not been matched by the drop in personnel. Stay tuned…

Information is critical in making payroll decisions. 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!

Lenders can Relive the 2nd Quarter of 2023

Spoiler alert: Losses continue but at a slower pace. The MBA has crunched the numbers of those surveyed and calculated that independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $534 on each loan they originated in the second quarter of 2023, an improvement from the reported loss of $1,972 per loan in the first quarter of 2023.

Marina Walsh, CMB, MBA’s Vice President of Industry Analysis and overall good person, summed up the Quarterly Mortgage Bankers Performance Report. “After 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan. Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black… Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, most mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

Once again, servicing income helped big time. Think about that as companies sell it off. When the MBA looked at both production and servicing, 58 percent of companies were profitable last quarter, an improvement from 32 percent in the first quarter of 2023 and 25 percent in the fourth quarter of 2022. Still, the average pre-tax production loss was 18 basis points (bps) in the second quarter of 2023, compared to an average net production loss of 68 bps in the first quarter of 2023, and down from a loss of 5 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 47 basis points.

“Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 328 bps in the second quarter, down from 358 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,510 per loan in the second quarter, down from $11,199 per loan in the first quarter.

“The purchase share of total originations, by dollar volume, increased to a study high of 89 percent in the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 80 percent in the second quarter, with the average loan balance for first mortgages increasing to $343,386 in the second quarter, up from $329,159 in the first quarter.

It ain’t cheap to do a loan. “Total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) decreased to $11,044 per loan in the second quarter, down from a study-high $13,171 per loan in the first quarter of 2023. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,236 per loan.

“Servicing net financial income for the second quarter (without annualizing) was $94 per loan, up from $54 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $105 per loan in the second quarter, up from $102 per loan in the first quarter.”

For all the stats, there are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Contact Falen Taylor (202-557-2771). The reports can also be purchased on the MBA's website.

Capital Markets

At this point it can be argued that the Fed doesn’t want to see higher long-term rates. But bond yields continue to rise across the board, impacting mortgage rates of course, continuing an upswing that began nearly three months ago at the beginning of the summer. In fact, the yield on the benchmark 10-year Treasury (US10Y) closed at 4.25% on Wednesday, the highest level since 2008. The upward march this week follows the release of the latest Federal Open Market Committee minutes, which stressed that additional interest rate hikes might be needed.

"With inflation still well above the Committee's longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy... Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening... and emphasized the importance of communicating as clearly as possible about the Committee's data-dependent approach to policy and its firm commitment to bring inflation down to its 2% objective."

Stronger-than-expected economic data continues to pour in, helping stock market prices, especially if you think the Fed to end its hiking cycle soon. Others say 10-year yields above 4 percent still present a good buying opportunity, in contrast to the potential rewards from pricey stocks and multiples that might not be as appealing. But it seems that bond investors have shifted to a “higher-for-longer” narrative coming out of the Fed, causing nominal rates and real rates to keep moving higher. Not good for housing affordability.

Strong economic data continued yesterday with initial jobless claims -11k and Philly Fed beating expectations by 22 points. That helped to lift benchmark 10-year U.S. Treasury yields above 4.30 percent as MBS once again sold off across the coupon stack. The recent surge in U.S. mortgage rates to anywhere between 10-month and two-decade highs, depending on who you ask, has pushed housing affordability to the lowest level in nearly four decades. Yesterday also brought another troubling sign for the Chinese economy as Beijing authorities are said to have told state-owned banks to step up intervention in the currency market in a push to prevent a surge in yuan volatility.

With no major data releases or Fedspeak today, the market will be left to its own devices. We begin the day with Agency MBS prices better from Thursday afternoon by .250, the 10-year yielding 4.22 after closing yesterday at 4.31 percent, and the 2-year at 4.91: yield curve inversion is alive and well without a recession.