Shutdown or no shutdown, the National Park Service’s Fat Bear Week is approaching, focused on how these behemoths tip the scale. Here’s your tip of the day: Having books in your Zoom background makes you seem more trustworthy. What if one of them is “The Complete Idiot’s Guide to Mortgages”? Maybe put some gold bars on the shelf instead? You can buy them now at Costco. Owning a home is a great way to build wealth, although mortgage rates are at 23-year high and mortgage applications have fallen 27 percent year-over-year… is your staffing down 27 percent from a year ago? (I know that’s simplistic, but…) At least you’re not Tanner Winterhof whom the Federal Reserve issued an enforcement action on for falsification of bank documents. On the more constructive side of things, originators and others can learn about special-purpose credit programs (set out unique standards and benefits to make loan qualification easier for people who are from underserved populations) in today’s Mortgage Collaborative’s Rundown at 3PM ET. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with LoanSense’s Catalina Kaiyoorawongs on why resuming student loan payments matters to the mortgage industry.)

Lender and Broker Software, Programs, and Services

In challenging down economic times, Loan Vision is your solution to maximizing profitability and reducing costs in your business. With Loan Vision, companies see improvements of 25 to 35 percent decrease in days to close the books, 20 percent reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Don’t accept a competitive disadvantage or get caught flat footed in a recovering market. To improve your cash position, gain a competitive edge, and prepare your business for sustained growth, contact Carl Wooloff to schedule a call today.

Deephaven Mortgage now offers a stand-alone second mortgage product called Equity Advantage. This mortgage product allows self-employed borrowers to qualify using 12 months of personal or business bank statements in lieu of tax returns. Equity Advantage benefits borrowers who want to utilize equity in their homes while allowing them to keep their low-rate first mortgage intact. This Non-QM cash-out refinance option can be used for home renovations, debt consolidation, tuition, funding a business, or other responsible uses. This product is an ideal loan solution for self-employed borrowers, real estate investors, and those who have recovered from credit events who just miss traditional loan requirements. Primary, second homes and investment properties. Minimum 680 FICO, loan amounts up to $500K, and up to 85 percent LTV. Documentation includes full doc, personal and business bank statements. For more information contact Chief Sales Officer Tom Davis.

loanDepot has cemented its position as a joint venture partner of choice for homebuilders. According to EVP of National Joint Ventures Dan Peña, the company’s laser focus on building successful joint venture teams that deliver exceptional service is what sets loanDepot apart in the minds of partners such as LGI Homes, Meritage Homes and others. Mike Snider, President, and Chief Operating Officer of LGI Homes agrees. “Dan and his team always put our needs first, delivering great service while finding ways to help us sell more homes and drive incremental profits. In addition, the flexibility of their model allows us to scale up or down as market conditions require, which gives us a true competitive advantage.” If you’d like to hear more about how a joint venture with loanDepot can drive success for your business, reach out to Dan Peña directly.

“Are you struggling with declining production volumes and increasing costs per loan? Look no further. Outsourcing accounting is the elegant answer to this common challenge faced by independent mortgage banks. Whether you lack accounting expertise in-house or have a new team with no mortgage experience, the Richey May Client Accounting and Advisory Services (CAAS) team is here to provide the support you need. Our team consists of industry experts who can customize a solution to meet your specific needs in this volatile time, without requiring any additional training. Whether you need help transitioning to loan level accounting, a fully outsourced function, or industry training for your controller, we've got you covered. Contact Richey May today!”

As noted above, originators and others can learn about special-purpose credit programs (set out unique standards and benefits to make loan qualification easier for people who are from underserved populations) in today’s Mortgage Collaborative’s Rundown at 3PM ET.

Shut Down Primer

As if high rates, low inventories, and over-capacity aren’t enough to keep lenders awake at night, we have our government. Government shutdowns occur whenever Congress fails to pass, or the president of the United States refuses to sign or vetoes, legislation funding the operation of some or all government agencies. Non-essential federal functions are suspended. Systems including health programs, Social Security and Medicare, SNAP benefits, Food and Drug Administration inspections and small business loans would be affected. They could last a day or a couple months, who knows? Most IRS services will pause… what else?

Let’s start with some potential good news. Minneapolis Fed President Neel Kashkari said that a government shutdown/drawn-out strike with the UAW could act to lower inflation and reduce the need for the Fed to hike further. "If these downside scenarios hit the U.S. economy, we might then have to do less with our monetary policy to bring inflation back down to 2 percent because the government shutdown or the auto strike may slow the economy for us," he said in an interview. "I'm not hoping for that, but there's an interaction there."

If the past is any indication, these shutdowns are more show than substance and usually have little to no economic effect beyond pushing some growth from one quarter to the next. The IRS didn’t send tax transcripts (see below), which delayed some closings.

Investors and lenders are preparing. “In consideration of current events and a potential shutdown, Citi is issuing the following reminder addressing impacts of a potential government shutdown. Many Federal employees will be affected, including employees who work for government contractors, vendors and other businesses that rely on work from government agencies such as the National Flood Insurance Program and the Social Security Administration.

“Citi will continue business as usual and proceed with review of closed loan packages submitted subject to the following guidelines, unless we have communicated otherwise: All required documentation and verifications must be present at the time the closed loan file is delivered to Citi. Citi will not purchase loans without all required documentation.”

Remember late 2018 and early 2019, the last major shut down. Many, if not most, lenders temporarily suspended the requirement for Tax Transcripts. Once the shutdown ended, lenders obtained the transcripts after purchase for impacted loans. If issues were discovered upon receipt of the transcripts, loans may be subject to repurchase. In general lenders continued to require a signed 4506-T in accordance with program guidelines.

Here’s what borrowers read in the press about their problems under the shutdown.

Ginnie Mae issued a release of information regarding its operations during a lapse in government funding, as did Freddie Mac and Fannie Mae.

The 2018/2019 Federal Government shutdown had no direct impact on Freddie Mac. It continued normal operations without interruption during the shutdown. Review its 2018 system and customer service hours of operation for Freddie Mac technologies. Borrowers who may be impacted by the shutdown are eligible for relief options, including forbearance, as detailed in Chapter 9203 of the Freddie Mac Single-Family Seller/Servicer Guide (Guide).

Remember that The FHA has issued FHA Info Bulletin #18-52 which provides additional clarity for HUD mortgagees regarding which systems are operational, and which FHA customer support operations are functional, though limited. The FHA’s reverse lending program has been put on hold along with USDA mortgage insurance endorsements.

As a result of the 2018/2019 Federal Government shutdown due to a lapse in appropriations, the Federal Housing Administration’s (FHA) Office of Single-Family Housing and its mortgage insurance program operated with limited services. As was the case in previous shutdowns, under a lapse in funding, FHA’s actions and decisions about which operations continue, or not, are governed by the Constitution, statutory provisions, court opinions, and Department of Justice (DOJ) Opinions, which provide the legal framework for how funding gaps and shutdowns have occurred in recent decades. A full descriptions and details can be found in the Department of Housing and Urban Development’s (HUD) Contingency Plan for Possible Lapse in Appropriations document posted on HUD.gov.

During the previous shutdown, as announced on December 22, 2018, during a lapse in government funding, Ginnie Mae continued to remit timely payment of principal and interest to investors. There was no disruption of essential functions, including the granting of commitment authority and support for continued issuance of Ginnie Mae-guaranteed Mortgage-Backed Securities (MBS) and Real Estate Mortgage Investment Conduits (REMICs).

Freddie Mac published Bulletin 2019-1 to provide temporary selling and servicing requirements to assist borrowers who may have been impacted by the federal government shutdown. These temporary requirements are effective immediately and will automatically terminate once the federal government resumes full operations.

Fannie Mae issued a Lender Letter to provide temporary guidance on selling and servicing policies that may be impacted by the federal government shutdown that began on Dec. 22, 2018.

In late 2018 USDA announced it would not issue commitments during a partial government shutdown, despite rumors of companies funding these loans. Rural Housing Service (RHS) loans that have a valid Conditional Commitment in effect as of the date of closing are eligible for closing/funding.

Back then, despite the government shutdown, The Federal Emergency Management Agency (FEMA) announced that the NFIP program will resume the sale, renewal, and monetary endorsements for flood insurance policies.

Whether or not these same 2019 policy and procedure changes occur in 2023 remains to be seen. But it is always good to be prepared.

Capital Markets

Treasury yields and mortgage rates remain near highs for the year despite a looming federal government shutdown and rising oil prices, items that would normally slow the economy. We learned yesterday that pending home sales slumped in August, down 7.1 percent from July. Pending home sales dropped in all four U.S. regions month-over-month and compared to one year ago as high interest rates have hurt home buying activity. Speaking of which, this week’s Primary Mortgage Market Survey from Freddie Mac saw mortgage rates hit fresh highs for the year, as the 30-year and 15-year rates climbed 12 basis points and 18 basis points to 7.31 percent and 6.72 percent, respectively the highest since December 2000 and July 2001. Finally, a $37 billion 7-year note sale yesterday met weaker demand than Wednesday's 5-year note offering.

Today sees a busy U.S. calendar including Personal Core Expenditures (PCE) for August and Michigan sentiment for September. The Core PCE Price Index increased .1 percent for the month and 3.9 percent year-over-year, as expected. Personal income and spending registered (+.4 percent for both), while the goods trade deficit improved slightly. Advanced retail and wholesale inventories were also out. Later this morning brings Chicago PMI for September and remarks from New York Fed President Williams. We begin Friday with Agency MBS prices .125 better than Thursday evening and the 10-year yielding 4.54 after closing yesterday at 4.60 percent.

Employment and Transitions

MAXEX, the digital loan exchange, is excited to announce Sean Claypool has joined the firm’s national sales team. Sean brings a wealth of knowledge and passion for building client relationships. He joins the company’s West Division to support growing originator demand for the mortgage exchange’s flow, forward and bulk Non-Agency liquidity programs. Connect with Sean Claypool. MAXEX connects originators to more than 25 leading Jumbo, Non-QM, DSCR, Agency eligible and Scratch & Dent investors, all through a single contract and clearinghouse. In addition to bringing Sean on board, MAXEX is currently looking to add additional experienced Non-QM sales professionals to its growing team. Learn more here.

More lead generation. More automation. More time back in your day. Movement Mortgage is delivering this and more with its new, aptly named sales and marketing platform, MORE. Built on Salesforce and fully integrated with Movement's LOS, POS, servicing portfolio and other key vendors, MORE brings your CRM, email marketing and realtor communication to one clean, mobile- and desktop-friendly interface. Movement is onboarding all new hires onto the platform today! Want to hear more? Email us.