Yesterday I was driving across Northern California to the coast (Gualala), and in Sacramento I asked the McDonald’s drive-through clerk (hey, only the best for me!) why the medium French fries were 30 cents more than the double cheeseburger ($4.29 versus $3.99). She immediately launched into an explanation of farming inequalities and Keynesian economics, and how aggregate demand does not necessarily equal the productive capacity of the economy. I shot back with, “Whoa, sister, where’s my extra catsup packet?” Okay, that exact exchange didn’t take place, but it did remind me of supply and demand, and mortgage rates, and there is an explanation of the current forces is in the capital markets section. There are a myriad of other things that CEO and owners are watching, many of which will be discussed today at 11AM PT during the Mortgage Matters podcast (register here) when Mark Jones, President of Union Home Mortgage and Chairman of the MBA, is the guest. (Today’s podcast can be found here, and this week’s is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite's three core products, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process. Hear an interview with CoreLogic Chief Economist Selma Hepp on the latest Home Price Index and trends in housing markets across the nation.)

Lender and Broker Products, and Services

What do we want? More competitive insight! When do we want it? Now! Fortunately, there’s no need to picket. The data you need to benchmark where you stand in comparison to your peers is already available in Optimal Blue’s Competitive Analytics. Best of all, this data solution was recently enhanced with features that give you even more granular views, including product type, high balance/jumbo flags, business channel, and branch. Plus, it’s now even easier to inform your pricing strategies with dedicated pages for rate and price comparisons, as well as margins and concessions. Contact Optimal Blue today to learn more about how Competitive Analytics can enhance your strategies and boost your competitive standing.

Lenders are considering many options to deal with rising credit costs. Informative Research seeks to reduce and eliminate unnecessary credit expense through a new platform feature called IR SmartChekTM as a complement to its existing SoftQual and Premier credit report product suite. IR SmartChekTM allows a lender to pause the prequalification or loan application process using customized loan file evaluation criteria from the lender, thus avoiding additional credit expense. This new feature will be available through direct integrations with Informative Research and existing LOS and POS delivery channels. To learn more about this feature and how it can help your lending operation manage increasing credit costs, please click here.

With credit report fees on the rise, more and more lenders are choosing to collect these fees at application instead of closing. If you’re using Encompass® by ICE Mortgage Technology™, fee collection is a breeze with Fee Chaser. Borrower gets a text message, pays the fee on their device and everything is updated in Encompass automatically.

Master today's market and join The Loan Store's Mastermind event on December 7th at 10:00 am PST / 1:00 PM EST! Veteran loan officers will share their lead gen tactics and trust-building secrets to help you dominate today's market. Level up your HELOC game: register now.

“As 2023 comes to a close, empower your financial strategy with insights tailored for lenders. Join CWDL for a webinar on Tuesday, December 12 as we recap the year in accounting and tax and identify what action you need to take before the year ends. Our mortgage banking experts will review tax legislation passed in 2023 and what’s coming for 2024, share tips to get year-end financials closed accurately and efficiently, discuss preparing for your audit, review HUD and GNMA reporting requirements, address going concern analysis, and more. Reach out to Kasey English to register for this free webinar, and emerge with actionable insights to take advantage of these last few weeks of 2023.”

Broker and Correspondent Program News

Effective immediately, U.S. Bank is aligning with the conforming loan limit increases for conforming and high- balance loans, as announced by Fannie Mae and Freddie Mac, and will accept DU Approve/Ineligible or LPA Accept/Ineligible decisions when the “ineligible” result is solely due to the loan amount being in excess of the 2023 limits but is within the 2024 limits. As a trusted advisor, U.S. Bank appreciates the power of partnership and, together, we will empower sustainable homeownership.

Exciting news from Pennymac TPO! Pennymac TPO released a Fixed Rate Home Equity Seconds product in select states this week, providing mortgage brokers with more options to stay competitive in today’s market. Pennymac’s broker partners can now offer their clients a Home Equity Loan as a second lien solution to access more cash, while still preserving the low interest rate on their first mortgage. This program offers loan amounts for primary residences up to $500,000 (minimum $50k), up to 85% LTV, and eligible loans do not require a full appraisal with accepted Pennymac AVM. For a deeper dive into Pennymac TPO’s new product and how to position it with your borrowers, contact your Account Executive, and register for their Power Your Business Webinar, “Home Equity Seconds Product Overview,” on December 14 at 10am PT/1 pm ET. Become an approved Pennymac Broker Partner and request an application today.

“As 2023 comes to a close and we reflect on all that we’ve accomplished, Citi’s Correspondent Lending team would like to express our sincere gratitude and appreciation to our Correspondents for their partnership and business this year. As we look ahead to 2024, we’re excited to continue expansion of our Community Lending platform and building relationships, new and existing, with those who share our passion for supporting underserved communities. We extend our best wishes to all for a happy, healthy, and prosperous 2024!”

This holiday season, Verus Mortgage Capital wants to thank its lender clients for their ongoing support and partnership which has enabled it to further solidify its position as the leader in non-agency investing. Since the company’s inception, Verus has purchased $26 billion in non-agency loans. Verus will acquire $6 billion in loans this year and the fourth quarter will be its largest. This is the perfect time to give the gift of more loan options to borrowers who need greater flexibility – such as those with non-traditional income, property investors, foreign nationals, or those in search of alternatives like interest-only payments or home equity options. This can easily be accomplished through non-agency loans. To learn more, contact Jeff Schaefer, EVP – National Sales, 202-534-1821.

A New Non-Profit

FirstHome IQ is a new nonprofit, founded by industry leaders, Kristin Messerli, Dave Savage, and Todd Bookspan, with the mission to educate the next generation in financial literacy and homeownership. The group is announcing the expansion of its Ambassador Program, now including 50 Ambassadors, donating a portion of every loan to support the development of educational materials, tools, and resources to turn loan officers into the first responders of the financial literacy crisis.

This initiative builds on the successful foundation set by the inaugural Beta Ambassadors, who have played a pivotal role in developing an approach that blends community impact with innovative business growth strategies. Ambassadors receive impact social media content, presentation materials, lead nurturing and educational tools, and playbooks and resources to facilitate relationships with Realtors and educational institutions.

FirstHome IQ has created online courses and teacher curriculum designed to reach the next generation. The Ambassador Program plays a key role in funding these educational initiatives and building valuable connections with educational institutions and nonprofits nationwide. If you would like to join the Ambassadors waitlist or learn more about how to be involved, visit FirstHomeIQ.com/industry-partners or email Kristin.

Capital Markets

Yes, mortgage rates have come down, but maybe potential borrowers don’t know about it yet. They have come down versus Treasury yields, which is nice, and now value analysts are saying that agency mortgage-backed securities are a good value in this market, and may be improving further. Spreads to the 10-year T-note are still wide: Today the 6% UMBS is yielding around 5.85-5.9 percent, which is 165 basis points over the 10-Year Treasury. A glance at rate sheets shows that origination rates are about 7.1 percent, which is still 290 basis points over the 10-year.

When that spread, which blew out in part from the March bank problems that never spread, will start to come in? It peaked at around 310 basis points a few months ago. Many expect to see continued improvement, perhaps down to 250 basis points in the first quarter as demand for MBS outpaces the supply. Mortgage rates will never match Treasury rates, of course, due to prepayment and credit risk, neither of which impact U.S. Treasury yields.

But mortgages, besides credit risk, do have prepayment risk. There are thousands of LOs and brokers with nothing to do except chase refis when mortgage rates get down to 6.5 percent, or maybe 6 percent. No investor wants to pay 103 for a loan, or a pool of loans, and have them pay off early at 100: that is a three point loss. This is keeping spreads wider right now. This spread narrowing by itself could bring mortgage rates down by another 20-40 basis points.

In terms of interest rate activity, so much for Monday’s pullback: Bonds, which include mortgage-backed security prices of course, resumed rallying yesterday after a weak jobs report and a Moody's downgrade of China's credit outlook to negative from stable. Available job positions fell in October to 8.7 million, according to ADP. That marks the lowest level of openings since March 2021 and is a figure that was well below 9.4 million consensus expectations. That follows continued jobless claims from last week jumping to the highest in about two years, another sign of a moderating labor market. Labor market figures of late underscore both the economy’s cooling pattern and notions that the Fed will dodge a recession through proper rate cuts next year. Expectations are currently pricing in around 125 basis points of rate cuts in 2024.

Even with Fed Chair Powell signaling in a speech last Friday that Fed officials expect to leave interest rates steady when they meet later this month, traders responded to Powell’s comments by doubling down on expectations for rate cuts starting next year. With the market and Fed at odds once again, traders will inevitably be forced to reassess whether Fed rate cut pricing has gone too far. Despite getting ahead of the Fed several times over the past year, markets aren’t buying what the Fed chair is selling. Expectations for rate cuts from the ECB have also continued to increase, accelerating yesterday after a hawkish ECB policy maker said that additional rate hikes are unlikely due to slowing inflation and that policymakers should not aim to keep interest rates at their current level through 2024. The highest yields in a long time have made fixed-income more appealing: Last month, the rate sensitive real estate sector was a market outperformer as investors poured in capital.

We learned yesterday that the ISM Services index expanded at a faster rate in November than in October, attributed to the increase in business activity and slight employment growth. Continuing concern exists over inflation, interest rates, and geopolitical events. Slower price declines can be traced to key commodities, but the descent in goods prices may be finding a floor. Rising labor costs and labor constraints remain employment-related challenges. Separately, real consumer spending rose 0.2 percent after a downwardly revised September gain, showing waning demand and reinforcing forecasts that the Fed is done hiking.

Today’s economic calendar began with mortgage applications from MBA, which increased 2.8 percent from one week earlier, the fifth straight week of increases as mortgage rates continue to fall. The prior week’s results include an adjustment for the observance of the Thanksgiving holiday, which introduced some noise into the reading. Markets have also received ADP employment for November: a downside surprise at 103k, 106k revised from last month when it was expected at 130k versus 113k previously. The trade deficit for October and Q3 productivity and unit labor costs have also been released with no impact on rates. After the 10-year note yield settled at its lowest level (4.18 percent) since September yesterday, we begin Wednesday with the 10-year yielding 4.16 and Agency MBS prices roughly unchanged versus Tuesday’s close.

LO Jobs

“In a market where many lenders are pulling back, NOVA® Home Loans continues to grow. NOVA® has a rich history of financial strength and stability, and for over 40 years NOVA® has thrived in all market conditions. We are looking to have conversations with Loan Officers & Branch Managers looking for a home built by Loan Officers for Loan Officers. We spend more to support our Loan Officers than our peers as we peel off the administrative tasks from the LO and delegate them to other team members, technology, and dedicated departments. Our Loan Officers also produce more loans per month and stay longer than Loan Officers at other companies. Our proprietary coaching platform has helped develop America’s top originators, including the #1 Loan Officer in the country. To learn more about the NOVA® advantage that will help you double your production, visit our recruiting page here & please reach out to Jenny Skaggs, Director of Recruiting & Corporate Engagement, 520.202.4102.”

Don’t forget that private mortgage insurance companies are hiring: MGIC, National MI, Arch MI, Radian, Essent, and Enact (in no particular order). And while’s we’re at it, Fannie Mae and Freddie Mac. And my cat Myrtle’s friend the CFPB has career opportunities, as well as the FHFA, which oversees Freddie & Fannie: it is hiring.