“Why did New Jersey get all the toxic waste and California get all the lawyers? New Jersey got to pick first.” (Hey, I don’t write ‘em.) Quips aside, California accounts for 20 or 25 percent of the nation’s residential lending, depending on who you ask. The Golden State’s economy has been growing steadily while the global economy has at times faltered, and as a result it’s poised to surpass Germany to become the fourth-largest economy on the planet! It jumped seventh-place Brazil and sixth-place France in 2015, and in 2017 it passed the United Kingdom, and has been in fifth place since. The current figures won’t be published until next year, but both Germany and California have a GDP of $3.5 trillion, and one forecast puts California up $72 billion over Germany. And, of course, right in the thick of advocacy and education is the California MBA. If you have questions about the issues that lenders are grappling with out West, contact CEO Susan Milazzo, recent winner of the MBA’s Woodward Distinguished Service Award. (Today’s podcast is available here and this week’s Sponsored by Candor Technology. Home of the One Touch Underwrite, supporting lenders from Point of Sale to Post Close QC, to reduce repurchase risk, increase underwriter productivity by 400 percent, and decrease turn-times by 10. Today’s has an interview with Candor CEO Tom Showalter on cutting edge technology at the MBA annual conference in Nashville and how machine learning continues to improve the borrower experience.)

Lender and Broker Services and Products

Are you looking to close more loans, faster? Automation technology is transforming the mortgage industry. Top leaders like Jodi Hall (NMB) and Kevin Peranio (PRMG) are using platforms like Capacity to bring AI to their teams, increasing productivity. Originators and brokers use data from many external sources to meet the regulatory requirements during the loan process. The time-consuming task of manually searching contracts, bank statements, loan applications, and guidelines is inefficient. The mortgage industry is in dire need of a platform that securely integrates with lenders’ key systems, providing loan officers with instant, actionable answers about borrower opportunities, loan statuses, guidelines, and more. Capacity reduces the time that LOs spend logging into a sea of endless systems to find information. If this sounds familiar, see how Capacity can save your team time and frustration. See how it works.

It was a wild year to be a loan officer. See which trends affected originators the most (you may be surprised) in the latest Loan Originators Survey Report from MGIC and Loan Officer Hub. Over 1,600 originators shared their insights on marketing, social media, referral relationships, business planning and more. Download the report to get valuable insights you can use in your own planning for 2023!

Who isn’t trying to do Non-QM??? Seriously, every lender is offering a Non-QM product(s). But can you really trust them? ACC Mortgage is the oldest Non-QM lender since 1999. The lender that survived 2007-08. The only Non-QM lender to lend throughout COVID. Profitable in 2022 and ACC has honored every single lock. Trust the most experienced. If your company is struggling with Non-QM or you are looking to make a switch, call us 877-349-050.

Chase continues to expand its client base! Chase Correspondent Lending is expanding its Delegated and Non-Delegated client base, especially for clients looking for ways to help underserved customers and communities. Our Community Lending Program (CLP) was introduced in conjunction with our $30 Billion commitment to advance racial equity, helping to build strong communities that will have a lasting impact on future generations. We invite lenders interested in the program and a relationship with Chase, to contact our Business Development Manager, Karen Russell, who can illustrate the benefits of the program and becoming a Chase Correspondent Lending client.

A volatile real estate market has created uncertainty for investors, lenders, and proptech companies. For a critical look at the immediate and long-term future of real estate, sign up to watch HouseCanary’s discussion with Brandon Lwowski, Director of Research, and Ketan Bhalla, Head of Product, as they recap housing trends and discuss how the broader economy is impacting the real estate landscape. Click here to view.

LONG-TAIL MARKETING ENGAGEMENT PLATFORM: Having the ability to engage with your new and existing customers in a long-tail fashion can provide tremendous value in brand loyalty and customer retention. With HouseCanary’s ComeHome platform, you can engage with your large book of business to generate new opportunities for your loan officers.

“Delivering Customer Service That Outpaces Industry Benchmarks! At Cenlar, we are always striving to improve the homeowner experience. The results of our efforts are clear, with the kind of progress that is measurable. Our call center is consistently outpacing industry benchmarks. Our performance reflects both our investments in people and technology, and the strengthening of our commitment to “think like a homeowner.” We strive to anticipate homeowner needs and answer common questions through proactive communications, like our chat bots and web site. While it is important to us that we are among the best in our industry, it’s of even greater importance that we are always improving the service we deliver to our clients and their homeowners. Let’s discuss how Cenlar can meet the mortgage servicing needs of your organization. Call 1-888-SUBSERV (782-7378) or visit us.

Ten Years Ago: The Bell Curve in Production

For grins and giggles, or, actually, to show you how little things have changed in our industry, I went back to my commentary exactly 10 years ago to see what the issues were. This could have been written today. “Hey, it's November 1st! Just think: any 60-day rate lock (pretty common place these days) expires in 2013! All those LOs with hefty incomes in 2012, thanks in large part to the U.S. government's programs, will be happy to shift income into 2013 for tax reasons. (And thus it looks like the first quarter of 2013, at least, should be decent.) But what about LOs or branches on the other end of the spectrum: branches losing money, or LOs only funding a loan a month in this environment?

“Jeff Babcock from STRATMOR writes, ‘For all but a few STRATMOR clients, improving Loan Officer productivity has persisted as a significant management challenge, even during this four year period of unprecedented stability and prosperity for the mortgage banking business. To put this issue in perspective, the MBA/STRATMOR peer group average for Loan Officers at independent mortgage banks has been only about 3.5 closed loans monthly; this compares with about 5 closed loans monthly at mid-size bank-owned lenders that tend to enjoy better productivity during refinance-heavy markets. At these relatively low levels of productivity (this benchmark averaged about 10 closed loans monthly in 2002-2003), most lenders hang on to a lengthy list of low producers closing only 1-2 loans monthly and who collectively account for a small percentage of total production. In view of minimum wage requirements for Loan Officers classified as inside sales people, this practice is not likely to be economic. And those poor producers tend to consume a disproportionate share of management resources. At STRATMOR, we encourage our clients to implement a threshold (~3 loans on a rolling average) for Loan Officers to remain employed. This same discipline should be applied to those small branch offices which are unprofitable. During the extraordinarily favorable origination market of 2012, this strikes us as the ideal opportunity address low LO productivity and rid your organization of that dead wood which will only become more burdensome when market conditions normalize.’”

“And production vet Steve Majerus writes, ‘Given the data from the STRATMOR Group that tells us the average LO does about $8.8 million in production per year, I will say I have observed a willingness and preference that higher producing loan officers, in fact, desire more leadership from their company, these days, in a couple of keys areas. First, understand and embrace the new professionalism required by more regulation, change of business practices and morphing lending rules to live by- offer tangible ways that build confidence in the way they practice their craft. And second, create true alignments of purpose throughout the organization: define professionalism in your company’s terms and ensure leaders do not dilute the clear stated direction of the company. A company’s leadership team should take full advantage of their most professional sales force members and allow them to integrate into a consistent communication stream from sales leaders to best hold each other accountable and ensure the company culture, its business practices and vision continues to build.’”

“Lastly, and in more direct terms, this from the CEO of a very profitable large ($3-5 billion a year) independent retail mortgage bank. ‘Rob, I love it when we let go an underperforming branch or LO, and then hear they've gone to a competitor. It is a double win for us. Any manager will tell you that the bottom 20 percent of your production staff absorbs an inordinate amount of your operations, compliance, processing, underwriting, and management resources. I didn't grow this company to this size and profitability catering to the lowest common denominator. I don't need my staff's morale to drop by keeping underachievers on the payroll. I have better things to do than to lie awake at night, worried about some branch that is failing to make money… Like figuring out how to make a profitable branch even more profitable or a solid LO get to the next level. If they can't make loans or money in this environment, we're all better off if they do something else, and at my prompting rather than them just sitting there withering.’”

Capital Markets: Rates Quiet

The Fed? Michele Raneri, TransUnion’s Vice President of Financial Services Research and Consulting, believes, “If the Federal Reserve raises rates again, it will demonstrate that it remains committed to raising rates until excess inflation abates. From a consumer credit perspective, the most significant impact of these rate hikes on borrowers would continue to be in the mortgage market, and increasingly, during the holiday shopping season, in the credit card industry.

“In the mortgage market, consumers who may otherwise be considering buying a home may choose to continue to hold onto their down payments, waiting to see if interest rates and/or home prices decline in the not-too-distant future. For those consumers who do purchase a home, adjustable-rate mortgages may continue to be more popular among consumers seeking lower monthly payments in the short term. And consumers looking to tap into available home equity may continue to look towards HELOCs and HELOANs instead of refis. Finally, on the credit card front, this latest interest rate hike will most acutely impact those consumers who do not pay off their credit card balances in full through higher minimum monthly payments.

Before today’s Fed decision (current fed funds futures predict about an 85 percent chance of a 75-basis point hike and a 15 percent chance of 50-basis points), economic data surprised to the upside yesterday, raising doubts about smaller future rate hikes by the Fed. JOLTS (10.7 million job openings at the end of September), ISM (the 29th consecutive month of expansion in the manufacturing sector), and Construction Spending (up 0.2 percent in September and 10.9 percent year-over-year) all beat expectations with job openings really surprising to the upside at 10.7 million versus 10.0 million forecasts. The rally was the market reaction we now expect following strong data.

There are cracks beginning to show in the economy, though. Manufacturing activity is now bordering on a contraction, which hasn't been seen since the pandemic-led contractions in April and May 2020. New single-family construction (-2.6 percent) continues to be a major drag on overall construction spending, reflecting the adverse impact of the spike in mortgage rates, higher building costs, and weakening homebuilder sentiment.

Consumer spending and business investment, which comprise more components of GDP than net exports, were flat during the third quarter. Consumer spending on goods fell for the third consecutive quarter. Residential investment is expected to weigh on growth in the coming quarters as mortgage rates and high prices have pushed buyers to the sidelines. Home prices are easing slightly, but a lack of inventory is preventing more significant declines. The Employment Cost Index showed earnings grew at a slower pace in the third quarter, a sign that labor markets may be starting to loosen a little. As upwards wage pressure subsides, it may reduce the need for businesses to pass those costs into consumer prices. Despite signs that inflationary pressure may be beginning to subside, core inflation remains well above the Fed’s comfort zone.

Ahead of this afternoon’s FOMC events with the Statement release followed by Chair Powell's press conference, markets digested the latest mortgage applications from the MBA: Mortgage applications decreased 0.5 percent from one week earlier. We’ve also received ADP employment for October (239k jobs created). Later this morning the Treasury announces the details of the Quarterly Refunding with the market bracing for potentially larger sizes following Monday’s increased borrowing estimates. The FOMC is expected to announce a 75-basis point rate hike, but there is ongoing speculation that Fed Chairman Powell could use his press conference that will include "pivot language" that will signal a less aggressive path going forward. We begin the day with Agency MBS prices little changed from Tuesday evening land the 10-year yielding 4.04 after closing yesterday at 4.05 percent.

Employment

Preferred Lending Services, part of the Newrez Family of Companies, is seeking seasoned licensed loan officers in the Central Florida area. This unique opportunity will allow the applicant to sit and originate right within one of the top leading real estate offices with Berkshire Hathaway Home Services Florida Properties Group. The partnership between Preferred Lending Services and BHHS Florida Properties Group will allow you to serve a larger customer base, enabling companies to access new markets and target a new audience all while maintaining your already established pipeline. Are you ready to take your production to the next level? Apply now or reach out to Brandy Novak, or our recruiting team today!

“As we're nearing the holidays, our focus inevitably turns to our families, whether for gift giving, planning gatherings, or simply making phone calls to check in. Family is important at Supreme Lending, so important it's one of our Core Values, ‘Emphasize family matters, at home and at work.’ Family is the word most frequently used by our team to describe our culture. Supreme fosters a work environment built on open communication, empathetic listening ears, and numerous opportunities for team bonding. With limited layers of management, our Executive Team is directly accessible and out in the company gathering employee feedback. Everyone on the team, from the top down, is ready to help get a job done or tackle any challenge. An example is when Supreme fell victim to a ransomware attack in 2019, our systems may have been down, but our people couldn’t be stopped in serving our Sales teams and fulfilling our commitments to our customers. To join a team who always has your back, contact National Production Manager Ryan Baxter or follow Supreme Lending on LinkedIn.”