Critics outside of our industry say that the mortgage biz is dull, mature, and overly stable. Those inside of it, however, know differently, and see it as an ever-changing kaleidoscope of exciting changes, incredible innovation, and complexities rivaling the Apollo Program.
“We put the bank in ‘point bank’ for you. We’re looking for un-motivated, mediocre loan originators and branch managers to join us in hopes of originating enough loans to keep us afloat at these poor margin levels. We will make you better! We offer an outdated origination platform, but have a new one lined up, and in-house underwriters who still believe it is 2008. We will allow you to set up the branches any way you see fit, and allow you to write your own contract for Marketing Service Agreements and Joint Ventures, and then hope for the best. We offer an unequaled compensation package with different comp plans for different programs. You’ll earn twice as much as your peers by closing one or two loans per month, as long as they’re the right program. If you consistently over-promise and under-deliver and are looking for yet another 6-month draw guarantee, then we have a place for you! Click here to learn more about our future together!”
Lender products & services
Congratulations to Eastern Zions Bancorp for taking its marketing efforts to a new level: launching a blimp. (Somehow my IndyMac coffee mug, WAMU T-shirt, and Thornburg mouse pad pale in comparison.) Here is the latest. Hopefully there are no jokes about “the highest rates in the land” since maintaining a blimp is a serious and expensive business.
It is rumored that a major vendor will be announcing plans for an attention-grabbing product as soon as next week. The Loan Bone is expected to turn heads, tentatively being billed as “the product that stands up for you when you need it the most.” Designed for lenders who have a passion for implementation, product designers assure early users that it won’t take too long to get it up knowing that time is of the essence for many lenders. How the product will be measured has yet to be determined. Watch for details.
Rumors abound of a large correspondent lender addressing the burgeoning Second Time Homebuyer Program. The VP of Sales announced, “First Time Homebuyer Programs have run out of steam. How long can our industry beat that horse? The hundred other correspondent investors all have First Time Homebuyer Programs, but our sales staff have told us that their clients are clamoring for a solid Second Time Homebuyer Program. Gen Xers have been forgotten for too long, and we’ll be rolling that out to our correspondents some time this quarter. The hurdle will be finding Baby Boomers who actually want to move out of their homes.
Rumors swirl of one of the Agencies unveiling its Unaffordable Housing Program in the second quarter. Details are nearly non-existent but are focused on helping consumers purchase homes that they thought were unaffordable. Differences between this and the Affordable Housing Programs need to be reconciled.
Chrisman LLC was sent this transcript of a meeting between high-ranking officers at Freddie Mac and Fannie Mae by a recently retired Agency vet. Readers can catch a glimpse of what is behind the curtain and open the impenetrable Agency kimono in discussions of new programs and customer service.
“Look, we can’t boil the ocean. We may want to assemble a Tiger Team, since it is more technical than SWAT Team, given that this is in our wheelhouse. At the end of the day we need to stay in our swim lane and take advantage of synergy to take it to the next level. If need be, we can take it offline before we tee it up.”
“Agreed. Let’s all think outside the box since it has a lot of moving parts. Let’s circle back before there’s any talk of tabling this. I think this new product can really move the needle and I don’t want to hear any talk of punting. We can lever our technology to deliver a robust solution and then run it up the flagpole.”
“I agree 110%. Let’s make it scalable so that lenders drink the Kool-Aid. We can empower our clients and really have an impact. It is what it is, but our sales team needs to remind clients that it’s a paradigm shift. I had a critical learning from that last project which will help us deliver lots of bang for the buck. We need to write up best practices and remind IT that we want to be on the bleeding edge, not just the cutting edge. Maybe we should assemble a Blue-Ribbon Panel to dive into blue-sky thinking and brainstorming before we’re anywhere near a burning platform. Remind everyone to look to our core competency and corporate values. Our teammates can do more with less. Don’t throw them under the bus. Let’s let them push the envelope, do the heavy lifting, and be the rainmakers.”
“Agreed. And now I think we’re out of metaphors.”
In other Agency news, saying it would mark a significant change in the company’s direction, one Agency’s marketing group announced a bold new plan that was evidently intended to undo the havoc caused by last year’s bold new plan. “It’s time to make some major shifts in how we do things [in reaction to the disastrous major shifts I implemented last year],” said an unnamed official of the sweeping new initiative that amounted to a point-by-point retraction of his sweeping initiative from almost exactly one year ago. “We’re all going to have to accept some changes [to salvage the resources wasted due to my last disastrous strategic move], but I’m confident this is going to be an important step [backward] for the company. And, who knows, maybe we’ll even have [no] fun [whatsoever] in the process.” As this commentary was being written several employees were being laid off whose salaries amounted to the bonus he had received last year.
The upcoming table tennis tournament between the top 64 wholesalers is fast approaching. Although the brackets were still being determined as this commentary went to press, much of the attention Las Vegas oddsmakers and warehouse banks has been focused on the United Wholesale, Quicken, and Freedom matches in recent months during league play. The posturing, jawboning, and maneuvering over who will take home the coveted “Golden Paddle” has attracted everyone’s attention. Stay tuned!
With razor-thin margins, travel and entertainment budgets have been reduced for many lenders, but travel is still a fact of life. For example, ahead of next month’s MBA conference in New York, at the usual Marriott with circular bank of elevators, plenty of capital markets employees are booking flights. So in a related story out of Denver, explaining that the costs of the service have grown too high in recent years, Frontier Airlines announced yesterday that it will no longer offer free cabin pressurization to passengers starting May 1. “Unfortunately, to stay competitive as a legacy carrier in today’s air travel market, it no longer makes economic sense for us to provide breathable air at altitude,” said the Frontier Airlines CEO, noting that despite the cutbacks, air pressurization would still be available to first- and business-class travelers as well as those willing to pay an additional fee – usually MI reps. “While we regret any altitude sickness, blood problems, dimmed vision, or hyperventilation that may result from air pressure less than a third normal levels, we remind our customers that such effects will diminish as soon as the aircraft descends below 15,000 feet.” There are rumors that Jet Blue is planning to discontinue complimentary landing gear on flights under four hours.
The annual FHFA Easter egg hunt will be held on April 20th. If previous year’s results are any indication, 70% of the eggs will be found by Fannie employees, 30% of them will be found by Freddie employees, but neither will say anything about the other. It is expected that each group will sell them to the public and use the proceeds to help pay a special dividend to the U.S. Treasury. It was also reported that some of the best hunters were contemplating moving on to other hunts that offered more eggs with prettier decorations and that didn’t have taxpayer judges watching the egg hunt. (The CFPB was not invited this year, again, apparently due to last year’s requirement of waiting until 3 days after the hunt to actually eat the eggs.)
FinCEN will require FNMA, FHLMC and the FHLBs to develop AML programs and file SARs reports with the FHA. According to SIFMA, RMBS and CMBS probably will not be impacted, nor will DU, LP, the CD or LE, but the MBA, NAR, HUD are reviewing the program to see its impact on MLOs. The CFPB is expected to issue a rulemaking on it, possibly reviewing the DTI, VOR, VOM, VOD, VOE calculations. The FDIC and FTC have not weighed in but may ASAP.
The CFPB, which is running out of mortgage companies and transactions to regulate, but still wanting to lash out against something, in an unusual move has gone after both layaway plans and bottled water sellers. One unnamed CFPB official warned, “Some will say we’re 80 years too late taking a hard look at layaway plans (agreements in which the seller reserves an item for a consumer until the consumer completes all the payments necessary to pay for that item). But we’re putting the management of Gold Circle, Penny’s, Sears, Wanamaker’s, Bonwit Teller, Montgomery Ward, Woolworth’s, Macy’s, Mervyn’s, Gimbel’s, Kinney Shoes, Hudson’s, and Marshall Field, Kaufmann’s, Hills, and others on notice that ‘we’ll be in touch.’”
When told that most of these companies have been out of business for decades, the CFPB official stated, “If the consumer is wronged, there is no statute of limitations. With layaway plans there is little risk involved for the seller, and so it was readily offered to those with bad credit who also used pay day lenders and pawn shops. If the transaction is not completed, the item is returned to stock and the customer’s money is returned minus a fee. The fees were onerous, and we will be combing through the archives!”
Although bottled water is not a consumer financial product, another CFPB official suggested that someone, somewhere was being wronged financially. “Look, things have changed since Dick (Cordray) left, and bottled water is an easy target. Why would someone pay $6 for a pint of something that comes out of the tap or drinking fountain for free? We plan to get to the bottom of it!” Loan originators everywhere cheered the news. One vet quipped, “I hate being beaten up on pricing when the borrower is sitting there drinking a Fiji Water or a cup of $5 Starbucks latte. If they’re so concerned about grinding me on price, how ‘bout tap water or a Dunkin’ Donuts free refill?”
Your MBA at work
The Mortgage Bankers Association, with or without the “The” in front of it, continues to stay in the forefront of residential and commercial issues. At the helm is President and CEO Bob Broeksmit, who said of his senior management team, “These guys are as hard working as beavers, and can be as feisty as terriers when it comes to defending our membership.” Others chimed in with admiration of Bob. COO Marcia Davies noted, “Bob is as clever as an otter!” SVP Dr. Michael Fratantoni observed, “Bob has a comical side just like an otter.” Peter Grace remarked, “Bob is as noble as a lion.” Helen Kanovsky stated, “Bob is as wise as an owl!”
Bill Kilmer recorded, “Bob is as industrious as a beaver!” Tom Kim recorded, “Bob is certainly a busy bee!” Steve O’Connor commented, “He is as diligent as an ant.” Perhaps missing the mark slightly, Pete Mills admired, “Bob is as swift as a falcon, is as strong as an ox, and has the tawny thighs of a jungle cat!”
I am happy to announce that Private Capital is returning to the mortgage market! (No, this isn’t some play on a private in the Army named “Tony Capital” who is financing his house.) I received an odd e-mail last week saying, “Meet me at Pier 12 at 10:30PM tonight.” I was intrigued, especially having seen all “The Sopranos” episodes, and had nothing better to do than to visit a loading dock rather than sleep.
I showed up, and Private Capital immediately commented that based on my e-mails I should have been taller, younger, better looking, and more educated. The meeting went downhill from there. I asked why Private Capital hadn’t been around in any kind of noticeable fashion in several years, and PC replied that the returns just weren’t there. And in fact they were getting worse. PC then shot off several demands. “First, I want returns in the teens. No one wants a 30-year fixed rate asset at 4.25%. Give me intermediate ARM loans, like 3-1s or 5-1s or 7-1s, at 14%. I either want no delinquencies, so servicing is a breeze, or give me pools with lots of delinquencies so that I can either foreclose and sell the house at a profit or collect a lot of fee income. And lastly, I need you to take care of Fannie Mae and Freddie Mac. The two of them are really muddying the waters. Make it quick, because the last thing the mortgage industry needs is continued droning on by politicians and regulators in the middle of the four-year election cycle. Don’t remind your readers that in the past they served a critical role in housing – this is a new era!” Before slipping into the darkness Private Capital finished with, “If you do all that, we’ll let you invest in our funds and pay our management fees.”
Turning to the markets, the only news from around the world (which had virtually no impact on rates) was the release by the Japanese Institute of Supply Management of its quarterly tally. These numbers are notoriously suspect, and of poor predictive ability.
Loan officers can tell borrower clients that while overseas flows have quieted into their fiscal year end, U.S. traders have seen better domestic real money interest in G2s over the past few days (both outright in 3 and 3.5 as well as adding of G2 swap rolls) and traders added the 3 and 4 swaps out of the gates yesterday. The 3.5 swap looks high on the stack to analysts, however, with a new quarter about to start and the general consensus that the real money community is underinvested, it feels like the 3.5 swap is not about to underperform materially over the next few weeks and so we started to add the ones around it. Borrowers should know that traders are looking to add the 4 swap on weakness and sell pops in basis.
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Changes in the role of the LO and Their Compensation.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)