Yesterday, before the yield on the risk-free U.S. 2-year note rose to 4.25 percent, I mentioned my cat Myrtle being offered a big signing bonus by the family next door because word of her mousing prowess has spread. Myrtle’s tight-lipped on the details (which are assumed to involve plentiful halibut and wild salmon) but it did result in contemplating a possible retention bonus of a new scratching post and a catnip-infused cloth mouse. She seems to be thinking it over. Meanwhile, as rumors are running amok that publicly-held Finance of America is selling its dedicated retail group to G-Rate, lenders everywhere are stunned with the bond market and interest rates. Forget the assumptions that were built into signing bonuses a year ago, as those are going to hell in a handbasket, this interest rate market is bad. Yes, people still need home financing, but the sticker shock is bad. (Today’s podcast, which has an interview with Linda Case of TMS on servicing boarding and escrow and how she solves some of the issues, is available here and this week’s podcast is sponsored by AIM-Port, an appraisal management platform built to reduce costs and elevate the borrower experience for lenders managing appraisal operations. Go to aim-port.com for more information or click here to reach out to a team member today!)
Lender and Broker Products, Services, and Software
Lenders looking to cut costs and increase margins might be missing a massive area of opportunity: the appraisal process. Revenue leakage, lapses in communication, and manual order management all hurt the borrower experience and the bottom line, but Reggora has a simple solution. Learn how lenders can reduce their cost per loan file by $258 and other benefits from appraisal management technology in the Reggora white paper, Why Mortgage Lenders Should Optimize The Appraisal Process Now.
Executive Perspectives in Mortgage Lending is a new webinar series by Qualia where leaders in the lending industry share their experiences of ups-and-downs in turbulent market cycles. Join Kevin Peranio, Chief Lending Officer at PRMG, on Wednesday, November 2nd at 9 AM PDT as he analyzes the historical trends of rising interest rates in the mortgage market and provides insights on how lending teams can take advantage of this time to become more data-driven to boost margins. Not sure if you can make the live webinar? Register today and you will receive a recording once the event is complete.
Abbott and Costello are perhaps best remembered for the routine, “Who’s on First,” in which they struggle to answer seemingly straightforward questions about the members of a baseball team. For another legendary duo, Sales Boomerang + Mortgage Coach, answering questions with clarity comes naturally. By telling lenders “Who in my database is ready for a loan?” and “What’s the right loan for this customer right now?,” SB+MC helps mortgage advisors add an average of 2 loans per month apiece. As one happy customer put it, “I was using Mortgage Coach before I started using Sales Boomerang, and I am so angry that I didn’t have both earlier. This combo is truly the sweetest. I am closing more deals and referring more opportunities to my referral partners.” To make sure you always have the answers for your borrowers, team up with the industry’s only automated borrower retention and conversion platform today.
Speaking of industry news, did you hear that First American Data & Analytics announced the launch of its new Procision AVM suite last month? It’s true! This next-gen AVM suite is designed for lenders, proptech, brokers, and others who need a fast, highly accurate and up-to-the-minute property valuation solution. Users get access to the latest modeling tech backed by the industry’s largest database of property information. Learn more or speak to one of their experts today to get started.
In today’s digital age, the most tech forward companies are also the most competitive ones. More customer data is available than ever before, but if you don’t have tools for capturing it and turning it into useful business insights that help grow your business, you risk falling behind. That’s why TMS Subservicing developed SIME (Servicing Intelligence Made Easy), a proprietary servicing system that gives lenders 24/7/365 real-time, fully transparent views into their loan portfolios. Through SIME, see up-to-the-minute data, gain end-to-end compliance and regulatory management, access all customer calls and interactions, view the KPI/SLA performance of your portfolio, and more, all branded to your corporate identity. Ready to learn more? Check out TMS Subservicing today.
Are you prepared for the Affordable Housing Initiative? Xome®, the premier asset management provider, offers solutions as part of HUD’s First Look Program for homeowner, owner-occupants, HUD-approved nonprofits, and governmental entities to expand access to affordable housing in the U.S. Through Xome’s recent alliance with the National Community Stabilization Trust, eligible mission-driven buyers will have exclusive first-look access to properties available for sale on Xome.com, helping them identify potential properties for revitalization while keeping the dream of homeownership alive for thousands of American families. Learn how Xome can help you support this important initiative, maintain compliance, and keep the dream of homeownership alive.
“Give your business a competitive edge leveraged by our experienced team at Newrez Correspondent. Newrez Correspondent is a member of the Rithm Capital family of companies, a diversified group of complementary businesses designed to thrive in any business environment. We are excited to announce that we have recently rolled out co-ops for delegated and non-delegated clients to complement our already expansive product offering. Even more, with Newrez’s line of Non-QM products SmartEdge (Full doc), SmartSelf (Bank statement or 1099), and SmartVest (DCR), you’ll be able to give credit access to more borrowers. Ready to connect and find out what else we are working on? Our team will be heading to Nashville for the National MBA conference October 23 – 25. Contact us to schedule a meeting or a call to discuss our programs, processes, and the value of the partnership we have to offer.”
“NexBank is the partner for you! We reached record volumes in 2022 and continue to grow our mortgage portfolio and MSRs. Our services are timely and dependable, and to streamline the broker process, Initial LE Disclosure Automation is live! NexBank doesn’t compete with clients in retail and refers borrower mortgage inquiries to the originators. Contact us. Channels: TPO Wholesale, Non-Delegated and Delegated Correspondent, including mandatory. Pricing Competitive with largest aggregators. Many NexBank DEL clients are GSE approved. Select Products (Agency FastPass: Better pricing for W-2 earners, starting at 640 FICO; Portfolio Loans: $200K to $2M, 2nd homes (No LLPA), NOO (lower LLPA than Agency), HI BAL (No L.A. LLPA until $1M), Non-QM, 6-month ARM with some of the lowest industry start rates.) Products not available in all states. This is not a commitment to lend. Restrictions apply. Products, rates, prices, and guidelines subject to change. Material intended for business partners only. NMLS: 672886. Member FDIC. Equal Housing Lender.
Looking for solutions to add to your tech stack that can help streamline your mortgage process? Calyx has you covered. Check out our newest, cloud-based mortgage platform: Zenly. Zenly is designed for the broker who needs a simple origination software that can efficiently handle all the steps needed to complete a full mortgage app and deliver it with the accompanying docs to a wholesale lender. Stop by booth 836 at this year’s NAMB National and discover how Calyx’s full suite of innovative mortgage technology solutions can help you cut through the clutter and connect with more borrowers, fast!
STRATMOR on the Customer Experience
How is the mortgage lending like NASCAR? In the just-released September issue of STRATMOR Group’s Insights Report, Customer Experience Director Mike Seminari highlights the many parallels of auto racing to our industry to explain the key roles and tools that go into designing a world-class Customer Experience (CX) strategy in mortgage lending. It’s an informative article that points out the importance of having both the right tools in place and a skilled and proficient team to ensure borrowers are delighted with their mortgage experience in this race of dollars and basis points. Don’t miss “The Essential Questions for Designing a Race-Winning Mortgage Customer Experience” in the September Insights Report.
Q: Why are rates going up?
A: There’s a lot of cash, sitting in cash, right now. Traders and investors are in no rush to deploy their capital into riskier assets due to the grim economic outlook, but also in no rush to place that capital into less risky MBS due to the Fed pushing interest rates higher to tame inflation, making cash king. Even with bond prices at multi-year lows, and therefore rates at multi-year highs, investors realize that the central bank is unlikely to abandon its hawkish policy tilt anytime soon, subduing sentiment. Yesterday’s nightmare was fueled by fears that stimulus plans across the pond in the United Kingdom may keep inflation elevated elsewhere. The fixed income selloff and basis widening picked up steam (along with a selloff in the pound sterling) late morning when the Bank of England denied rumors it was considering inter-meeting emergency rate hikes.
As a result, the10-year rate yesterday climbed as much as 24-basis points to almost 3.93 percent, its highest level since April 2010. Mortgage rates for 30-year product are well above 6 percent, if not in the 7’s.
Q: When are rates going to go back down?
A: Originators need to consider why they’d go back down, or how. Supply and demand may shift, but with the Fed no longer buying mortgage-backed securities or Treasuries, that is not likely. Well, when there’s a new pandemic/recession, but nobody wants that, right? That kind of leaves us with rates coming back down when the inflation rate drops, and few are predicting that to happen until 2023.
Q: What are lenders doing about it?
A: Most are offering new programs and products, or promoting adjustable rate or 15-year loans. Certainly, the value of mortgage servicing rights is doing well, but that impacts a company’s balance sheet and if a company doesn’t have servicing income, they’re sitting there watching their volume decline into the autumn and winter, trying to cut costs fast enough to keep up with lost volume.
Remember that last week the Fed reaffirmed its commitment to aggressively fight inflation with another 75bps rate hike as well as signaling further increases to the fed funds rate. The economic forecasts released following last week’s meeting confirm the Fed expects inflation to remain above its 2 percent target longer and that a recession could be likely next year. Even though the fed funds target is now at 3.25 percent the current level of inflation means that the real rate is still negative. If the latest projections hold, continued rate increases, combined with declining inflation, would put real rates above zero at some point in Q2 2023. With the projected 2023 target fed funds rate firmly above current levels, the Fed’s Open Market Committee eliminated any suggestion of a pivot to accommodative monetary policy next year as inflation is expected to remain above the preferred level into 2024. For the moment, it appears the higher rate environment will continue and home buyers will need to weigh future home price movements against the possibility of higher mortgage rates.
But our bond markets don’t trade in a vacuum, and one needs to look around the world somewhat. The dollar is doing very well compared to other currencies. Pound sterling hit an all-time low yesterday, but BoE Governor Andrew Bailey ruled out an emergency hike in rates between meetings. In addition, the People's Bank of China said it is raising risk reserve requirements for banks involved in forward foreign exchange trading to 20% from 0%. The greenback's strength is also a problem for stocks, and creates an untenable situation for risk assets that historically has ended in a financial or economic crisis, or both. What's amazing is that this dollar strength is happening even as other major central banks are also tightening monetary policy at a historically hawkish pace.
U.S. rates are rising as the market reprices peak Fed Funds higher, and equities are being repriced lower.
Today’s calendar is packed with data, Fed speakers and supply. On the data front, we have August durable goods orders, Redbook same store sales, house price indices for July from S&P/Case-Shiller as well as FHFA. Markets then receive Consumer confidence for September, August new home sales, Richmond Fed manufacturing and services indexes, and Dallas Fed Texas servicing. Fedspeak includes remarks from Chicago’s Evans, Fed Chair Powell, Minneapolis' Kashkari, San Francisco’s Daly, and St. Louis’ Bullard. Treasury will auction $44 billion 5-year notes. We begin the day with Agency MBS prices better by .250 and the 10-year yielding 3.82 after closing Monday at 3.88 percent… “dead cat bounce”?