Daily Mortgage News & Commentary

Apr. 13: LO jobs; SBA PPP, processing products; Ginnie’s Issuer assistance; banks’ stress test changes; Agencies consider forbearance policies?

It was a rough weekend. The still in our basement blew up, throwing potatoes everywhere and setting us back weeks. That happened just as I was sending someone an email how bank balance sheets can hold only so much jumbo residential production, and if there isn’t a lot of non-Agency MBS demand, and if the Fed is the only buyer of Agency MBS, well, it’s not a good situation. Seriously, it was a bad weekend with continued coronavirus deaths as well as tornado and storm deaths throughout much of the South. Yes, there are large and small shifts going on everywhere, and not only people needing a larger recycling trash can. Retail malls have declined in popularity over the years. With people learning they can work from home; do we need all this commercial space and pay all that rent? Thank you to Kathryn G. for sending this article on some far-reaching thoughts, and to Carla M. for this piece on jobs at risk. (The workers bearing the brunt of the initial shock are the very people least equipped to weather it. Figure about 50 million jobs could reductions in hours or pay, temporary furloughs, or permanent layoffs, the vast majority being paid less than $40,000 per year.)

Employment

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Lender services and products

National MI is excited to announce that the Federal Home Loan Bank of New York (FHLBNY) has announced the addition of National Mortgage Insurance Co. to its list of approved mortgage insurers for the Mortgage Partnership Finance (MPF) Program. FHLBanks provide their members with a reliable source of funding for housing finance, community lending and asset-liability management as well as liquidity for members’ short-term needs. The FHLBanks play an essential role by helping member institutions meet the credit needs of communities everywhere in all economic cycles. Now member institutions can select National MI. If you have any questions, please contact your National MI Sales Advisor.

“SBA PPP loans and other assistance for mortgage bankers: Are you trying to find a bank to take your SBA application for the Paycheck Protection Program? Are you trying to understand what is needed to file an application? We can assist you in finding a bank, understanding the program and what is needed for specific banks. We can find other programs that can help you and your company. Our fees are reasonable for consulting and finding a lender. If you need assistance in completing the application, we will help FREE of charge. Contact Info@mdiinvestments.com (708-445-7238) or Mike Iannaccone (630-347-5939).

No limits on your success. There’s no avoiding the fact that everyone is currently facing unprecedented challenges. Fortunately, there is still a way to add more certainty to your pipeline. Unlike many retail loan originators at mega banks and giant online lenders, independent mortgage brokers have no limits on their pipeline, so their opportunities for compensation are unlimited. Which means you’ll be able to keep your business growing and on a positive track. Go to BeAMortgageBroker.com to learn more.

According to Informa Financial Intelligence March 2020 Mortgage Originations Data, rate-lock volume has increased 117% YoY and 47% MoM across all channels, while funded volume has increased 53% YoY and 26% MoM. In the Retail channel, lock volume has increased 127% YoY and 51% MoM, while funded volume has increased 65% YoY and 30% MoM. Average 30-year Conforming FRM funded loan note rates have fallen 105bps from March 2019, with refinance rates lower by 119bps and purchase rates lower by 100ps. Compared to 2019, YTD Purchase lock volume is up 11% and funded volume is flat, while YTD Refinance (R/T & C/O) lock volume is up 216% and funded volume is up 197% YoY. Informa sources a statistically significant data set directly from lenders to produce these benchmark figures.

The coronavirus has left a lot of uncertainty in the market. With jobs in flux, how can lenders make sure that borrowers are qualified? How can borrowers boost their score? What can lenders do to reduce the growing wait times for supplements? To help their partners, Informative Research is creating custom programs that help lenders with these issues and more. With their new digital tools and wide range of solutions, Informative Research can help push current applicants through the pipeline and quickly identify new prequalified borrowers with custom criteria. Informative Research is here to help lenders through this difficult time so reach out now to get started with an all-encompassing program: prequalification, score improvement, and customer acquisition tools along with consistent service and a faster, easier workflow.

Corona-driven changes

Don’t miss Floify’s upcoming “Top Tech for a Remote Mortgage Team” webinar, this Thursday, April 16th at 11:00AM PT. In this exclusive presentation, the Floify team will explore the challenges mortgage professionals are facing in 2020, including how lenders can maximize their productivity and profitability in remote and work-from-home scenarios.

loanDepot’s Anthony Hsieh, Chairman & CEO, weighed in on the current rate environment on Fox News.

What is the chatter out there, given what has happened in the last five weeks? Loan size will drop dramatically, impacting all kinds of statistics, as jumbo loan production tails off. Jumbo spreads have widened. The purchase market is diving, although real estate agents have sent me notes saying that transactions can, and are, taking place.

Given that about 70% of outstanding mortgages are federally backed, and the maximum forbearance allowed is 360 days with no proof of coronavirus hardship required, the industry is carefully watching that sector. Margin calls are also a concern. The Mortgage Bankers Association is working with other agencies about not requiring margin SEC FINRA authority over broker dealers to communicate. Not necessarily to change the rules, but groups should work constructively with counterparties. It doesn’t help broker-dealers to put hundreds of mortgage bankers out of business from margin calls. Will the S&D market (Scratch & dented) balloon up with all the forbearance technicalities that are not fulfilled?

Non-bank lenders don’t have “stress tests.” The US Federal Reserve plans to adjust this year’s annual bank stress test to include gauging how banks performed during the coronavirus pandemic and the downturn it triggered. Fed vice chairman for supervision Randal Quarles said that the results of the tests would “analyze how banks’ portfolios are responding to real, current events, not just to the hypothetical event that we announced earlier this year.”

On Friday Ginnie Mae issued All Participants Memorandum 20-03 (APM 20-03), which announces the expansion of its Issuer assistance programs in response to the National Emergency declared by the by the President of the United States on March 13, 2020, in connection with COVID-19 National Emergency.

“The APM introduces a new version of the existing Pass-Through Assistance Program (PTAP) for use by issuers facing a temporary liquidity shortfall directly attributable to the COVID-19 National Emergency. The existing PTAP program had been tailored to natural disaster situations with more limited impact. The application of PTAP to the COVID-19 National Emergency (PTAP/C19) allows Issuers to apply for assistance in meeting their contractual obligation to make timely and in full principal and interest payments due mortgage-backed security (MBS) holders without being held in default under the Ginnie Mae Guaranty Agreement. This assistance is intended to minimize disruptions in the mortgage servicing and MBS capital markets as borrower forbearance and loss mitigation programs are implemented to provide relief to homeowners affected by the COVID-19 National Emergency.

“Funds advanced by Ginnie Mae will bear a fixed rate of interest. The rate that will apply to a given month’s pass-through assistance to all Issuers will be posted on Ginnie Mae’s website on the second business day of each month.

Suddenly any lender who is also a Ginnie issuer is the “belle of the ball” in terms of M&A. What company wouldn’t want access to that? “This is an extraordinary and last resort option for Issuers in these unprecedented times, that will enable them to continue to serve homeowners and renters in America who rely on the government mortgage programs financed by Ginnie Mae,” said Ginnie Mae Principal Executive Vice President Seth Appleton.

The number of homeowners who asked lenders for more time to pay their mortgages increased to record levels in March, as borrowers feel the impacts of the coronavirus. A new survey by the Mortgage Bankers Association (MBA) found the total number of loans where the lender agreed to temporarily reduce or suspend mortgage payments grew to 2.7 percent from 0.25 percent between March 2 through April 1. The organization found the rise in forbearance requests was highest among mortgages backed by the government agency Ginnie Mae, at 4.25 percent, up from 0.19 during the same period.

 

Although there are lots of rumors that this will change, FNMA and FHLMC stated that loans in forbearance are not salable to the agencies. “Hope” is not a strategy, but talk is that the Agencies are now focused on devising a plan to purchase loans already in forbearance with strict requirements and under certain situations. Some would say that purchasing forbearance loans is now FHFA’s top priority due to the uncertain position in which the policy has placed lenders . Lenders who can, however, have shifted from selling loans to the aggregators, because the MSR are so low, to selling direct to the Agencies and retaining servicing.

Capital markets

Even though markets were closed for Good Friday, the government was open and there were two economic releases of note. The Consumer Price Index (CPI) dipped 0.4 percent in March, the biggest decline in five years, per the Labor Department. Though the drop was in line with the forecast of economists surveyed, it confirms the coronavirus pandemic’s shutdown of businesses is creating massive slack in the economy, and price pressures are expected to continue to fall in coming months. Core inflation (minus food and energy) prices fell 0.1 percent in March, the first decline in 10 years. The rate of inflation over the past 12 months fell to 1.5 percent, while core prices were up 2.1 percent on the year. The core rate of inflation was driven lower by declines in airline fares, lodging away from home, and apparel.

The Congressional Budget Office released its March report, which showed a $741 billion Federal budget deficit in the first half of the fiscal year, which began in October. The deficit was about $50 billion greater than the deficit at the same point last fiscal year. Just wait for those April numbers!

With no economic data of note today the week’s economic calendar kicks off tomorrow with the most recent Export and Import Price Index. Wednesday busy calendar brings the usual MBA Mortgage Applications, a very revealing Retail Sales for March, Industrial Production and Capacity Utilization, and the NAHB Housing Market Index for April. Thursday sees jobless claims figures, Housing Starts and Building Permits for March and the Philadelphia Fed Index for April before the week closes with Leading Indicators for March. The Fed is scheduled to buy up to $75 billion versus $100 billion last week, including maximum purchases of $14.55 billion on Monday, Wednesday and Friday, and $15.675bn on Tuesday and Thursday. We begin the week with Agency MBS prices unchanged from Thursday and the 10-year yielding .74 percent.

Self-Isolation Quarantine Diary:

Day 1 – I can do this!! Got enough food and wine to last a month!

Day 2 – Opening my 8th bottle of wine. I fear wine supplies might not last!

Day 7 – Strawberries: Some have 210 seeds; some have 235 seeds. Who knew?

Day 8 – 8 p.m.: Removed my Day Pajamas and put on my Night Pajamas.

Day 10 – Today, I tried to make hand sanitizer. It came out as Jell-O Shots!!

Day 14 – Laughing way too much at my own jokes!!

Day 19 – I put liquor bottles in every room. Tonight, I’m getting all dressed up and going bar hopping.

Day 22 – Struck up a conversation with a spider today. Seems nice. He’s a web designer.

Day 28 – Isolation is hard. I swear my fridge just said, “What the hell do you want now?”

Day 33 – I realized why dogs get so excited about something moving outside, going for walks or car rides. I think I just barked at a squirrel.

Day 35 – If you keep a glass of wine in each hand, you can’t accidentally touch your face.

Day 40 – Anybody else feel like they’ve cooked dinner about 195 times this month and its’s only the 13th?

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, “Drinking from a Firehose is Not a Long Term Business Model” If you have the 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.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is designed for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)