Apr. 29: MBA membership offer; a new organization; thoughts on IMBs & bank lending; tech & vendor news; recession chatter

Research conducted by economists at the University of California, San Diego, suggests individuals who have lived through high inflation may desire to own rather than rent to protect against future price increases. People wanting to own a home is obviously good news for our biz. And here’s an article from SoFi discussing how builders are swinging around to focusing on first time home buyers. LOs tell me that first time homebuyers often have to be educated in credit issues. Like, “Make your payment.” We all know that credit is not confined to home lending, nor are trends in credit. If you wanted to finance a fancy motorcycle, Harvey-Davidson’s financial services company is owned by Harley-Davidson. Unfortunately, though, the rate at which people are not paying auto and motorcycle loans is up, and this most recent quarter Harley-Davidson reported that its financial arm realized credit losses of $52.6 million, as there literally are not enough repossession companies to handle the volume of delinquencies that motorcycle owners are driving. We had a shortage of appraisers, and Harley-Davidson has a shortage of repossession people. Life…

 

MBA membership treat

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Laura Hopkins, VP of Member Relations at the MBA, writes, “Your readers should know that if anyone whose company is not a member of the Mortgage Bankers Association can join now and extend membership through 2024 for the cost of 12 months, and that there is some research data included in membership. (Click on the link to email Laura or call her a 314-853-0121.)

New organization

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Stacey Maisano writes about a new organization just getting off the ground, and how interested parties can write to her and/or click on the link. “WIMIN is a local industry non-profit called Women’s Inclusive Mortgage Industry Network. Championing women locally by connecting a vibrant community of dynamic professionals. The commitment is to the professional development and inclusion of everyone and the next generation of women leaders through education, advocacy, networking, and peer mentorship. The inaugural luncheon is on May 23rd at 11:30 in Houston, Texas.”

The “R Word… how long have we been talking recession?

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Recession talk has been going on for years at this point, despite a continued low unemployment rate and housing prices holding in well. This week we learned that the U.S. economy managed to eke out another gain in Q1, with GDP growth expanding by an annualized rate of 1.1%. It didn’t seem to matter to anyone that the numbers missed estimates of 2.0% growth and growth was slower than the 2.6% growth seen in Q4. In fact, the Dow (DJI) and S&P 500 (SP500) on Thursday notched their biggest gains since January, while the Nasdaq Composite (COMP.IND) scored its best winning session since March.

Many analysts and economists had predicted that a recession would already come in Q1, and while the U.S. economy is clearly shifting into a lower gear, the latest data may suggest that it also might be able to escape one in 2023. The numbers also support the case for the Fed to begin pausing its aggressive rate hike cycle, while consumer demand is still holding strong despite lower private inventories and residential fixed investment. Robust job growth has additionally outpaced layoffs, with the unemployment rate still at multi-decade lows, suggesting that Americans might be well-positioned to deal with inflation and economic uncertainty.

“The ‘R Word’ that one should use when discussing the economy over the past two years should be resilient, not recession,” wrote RSM chief economist Joseph Brusuelas. “The shocks of inflation and interest rate increases and a tightening in lending that are now affecting small and midsize businesses have yet to put a material dent in consumption. That strength is what is propping up overall economic activity as businesses have pulled back on both inventory accumulation and fixed investment.”

Seeking Alpha writes, “Some contend that a rolling recession has been happening to different sectors of the economy, and could support a soft landing, while others are doubling down on a mild to moderate recession coming in the latter half of 2023. ‘The principal problem of inflation is the same as it has been since it was being dismissed as ‘transitory’ by Fed and Treasury officials: there is too much money in the economy,’ writes SA author J.G. Collins.”

Thoughts on banks, IMBs, and FHA lending

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Chris Whalen, Chairman of Whalen Global Advisors LLC, weighed in on the issues facing a limited number of U.S. banks. “Silicon Valley Bank (SVB), Signature, and First Republic were all outliers in terms of the business models. The unwind of the massive market intervention executed by the Fed via QE in ’20-21 tipped over these outliers. Quantitative Tightening will cause further bank failures and involuntary sales over the next year. Only banks that are willing to aggressively reprice their balance sheets will thrive in this tough market.”

Under the title of, “When you have no way to measure the risk it really is not prudent to be in the business,” I received this from a retired (yes, actually retired!) industry vet. “I thought I would add one additional perspective to the report and conclusion on the FHA and the IMBs. Since a recent post takes the time to point out that it is the IMBs doing the lending it seems also important to ask why others do not participate. I worry that those that read this could be led to believe that this is just a simple choice that the Banks are making to not fully participate in this FHA rather than a well thought out one. Also, while the IMBs are filling the space now we continue to minimize how the externalities of their participation could play out in a crisis or downturn.

“I am not sure I would agree that these issues are easy to fix: If the fixes needed to improve liquidity and ease capital concerns were easy to fix, they would have been fixed by now. My experience tells me that these issues are hard. There is not an easy answer to the question of where liquidity will come from in a crisis for these guys. I think we got lucky in the last cycle with COVID, and I wonder about a future after Wells and perhaps other banks have liquidated the rest of the GNMA book. But it is not my monkey, not my circus any longer.”

A note from the MBA’s Pete Mills observed, “Another Friday has passed with no further bank failures, a hopeful sign that the recent turmoil has subsided. That said, policymakers continue to examine policy options in response to the surprise failures of SVB and Signature banks. While all the evidence points to failures of supervision, not the rules themselves, it is not stopping bank regulators and their Congressional overseers from calling for new, and tougher, capital and liquidity regs and legislation. And as we flagged at the beginning of this banking kerfuffle, policymakers’ attention is not going to be limited to banking rules.

“As if on cue, CFPB director Chopra, in speeches and interviews, said he is worried about nonbank risks broadly, and specifically the ‘nightmare’ of a large nonbank servicer failure. He also asserted the CFPB has existing authority to promulgate prudential standards for nonbanks. And then the Financial Stability Oversight Council (on which Chopra also sits) met on April 21 with a preliminary agenda that included (among other items) ‘an update on the work of the Council’s Nonbank Mortgage Servicing Task Force,’ and the Council’s proposed guidance on the process for designating nonbank financial companies for enhanced systemic regulation.

“The designation guidance was amended under the Trump administration to make nonbank company designations more difficult. The Biden administration indicated several months ago that they plan to revise that process to make company, as opposed to ‘Activity Based’ designations, easier. Any systemic risk designation by FSOC, including any changes to the designation process, will require certain findings and public notice and comment.”

The Treasury’s Financial Stability Oversight Council voted unanimously to issue (for public comment) new proposed interpretative guidance on the Council’s procedures for designating nonbank financial companies for Federal Reserve supervision and enhanced prudential standards to replace the Council’s existing guidance and describes the procedural steps the Council would take in considering whether to designate a nonbank financial company. This follows the Consumer Financial Protection Bureau’s (CFPB) proposal to bring more nonbank financial companies under its direct supervision.

Technology, and third-party vendor news

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Technology has become such an important part of the lending industry that digital capabilities are now one of the biggest factors that customers, especially those of a younger demographic, use to choose a lender or other financial institution. Research from BAI found that better digital capabilities would be enough to make 55% of people switch financial institutions, with the number rising to 75% for Gen Z customers. Digital transformation remains a top concern for financial institutions. According to a recent report from Cornerstone Advisors, 87% of credit unions and 76% of banks had initiated digital transformation plans moving into 2023, with another 18% of banks planning to strategize a digital transformation this year.

For example, as much as many people don’t like the thought of it, Conversational AI is another major priority for financial institutions, particularly as organizations struggle with ongoing staffing issues. Many financial institutions have begun using chatbots to bolster their customer service staff and offerings, which Cornerstone Advisors view as an integral part of digital transformation. Credit unions have been more aggressive than their banking peers on this front, with 30 percent of credit unions having already invested in or deployed chatbots and an additional 25 percent planning to do so by the end of the year. Only 18 percent of banks have already deployed chatbots, and 12 percent plan to do so this year.

Steve Brown from PCBB writes that, “Customer relationship management (CRM) is another big focus area for financial institutions. Cornerstone points out, however, that the aspirations organizations have on this front don’t always materialize. In their findings, 17 percent of banks and 20 percent of credit unions plan to replace or implement CRM apps in 2023. Comparatively, 15 percent of banks planned to do so in 2022, with only 13 percent following through, while 28 percent of credit unions planned to do so in 2022 with only 8 percent actually doing so.”

Turning to tech that lenders are looking at…

Realfinity.io is now offering its private-label platform, HomeDashboard, to lenders, allowing them to deliver property data and mortgage products throughout the entire real estate lifecycle. The question isn’t whether your clients will get a platform to manage their home’s finances. The question is who will give it to them. HomeDashboard allows lenders to partner with real estate agents and solve one of the industry’s biggest problems: its inability to move past a transactional value proposition. Realfinity.io already has hundreds of loan advisors using its platform and is currently onboarding additional lenders at no setup cost. After the onboarding process of an IMB, all LOs have the option to use the platform as an elective service and are billed directly by RF. Let’s chat about what Realfinity can do for you!

TransUnion announced a major B2B rebranding effort that puts focus on seven solutions lines, all aimed at giving its financial services, media and entertainment, insurance, telecom, retail, and other customers a “Tru Picture” of consumers. With this development, TransUnion has set a clear course for its B2B business products and its organic investments, including its multi-billion-dollar acquisitions of Neustar and Sontiq. The enterprise rebranding initiative organizes thousands of B2B products by business need and the promise to deliver a Tru™ picture of consumers, “providing a robust, multi-layered and actionable view of each person that is stewarded with care.”

Remember that Sales Boomerang and Mortgage Coach have officially rebranded as TrustEngine. The Maryland-based tech company announced the launch of its TrustEngine Borrower Intelligence Platform (BIP). TrustEngine CEO Richard Harris, a former Oracle executive, stated, “This groundbreaking solution will help lenders become lifelong champions for borrowers by gaining access to the kind of world-class customer intelligence leveraged by global leaders like Apple, Microsoft and Amazon.” Schedule a demo to learn more about the product.

Newfi Lending partnered with Tavant to integrate Touchless Lending® Document Analysis into their digital mortgage experience featuring machine-oriented classification, as well as handle Exception Processing for documents with low confidence rates, allowing for fully end-to-end document processing. Furthermore, documents processed through are sourced from Newfi’s Broker Portal (BLU), which is also integrated with Touchless Lending, specifically the platform’s Origination Experience designed for brokers and TPO partners. This partnership marks Tavant’s official expansion into Non-QM Lending and a significant step in the evolution of Newfi’s business and advancement in the mortgage industry.

A leading provider of Modern CRM and Marketing Automation solutions to the mortgage lending and real estate industries, Insellerate, announced the launch of its new powerful TPO solution.

Fully integrated into leading LOS systems like ICE Technology’s Encompass® and MeridianLink to seamlessly allow account executives to work on their loan files from their mobile devices, send dynamic marketing content to stay engaged with their TPO brokers, and enhance communication across multiple channels. Insellerate TPO solution delivers industry-first workflows specific to wholesale account executives to streamline their processes and daily activities.

Blue Sage Solutions, point of sale (POS), LION, is now available as a standalone offering for lenders to use with their chosen loan origination system (LOS). A component of the Blue Sage Digital Lending Platform, LION enables banks, lenders, and credit unions of all sizes to provide borrowers with a highly engaged, seamless digital experience while accelerating loan production and reducing costs. LION is highly configurable and supports dynamic workflows for purchase, refinances, and home equity transactions and is accessible from any device, anywhere, anytime. LION not only reflects and reinforces each lender’s brand, but it can also be easily white labeled to support any number of affiliates and joint ventures to expand the lender’s footprint.

THINGS THAT ARE DIFFICULT TO SAY WHEN DRUNK:

 

1. Innovative

2. Preliminary

3. Proliferation

4. Cinnamon

 

THINGS THAT ARE VERY DIFFICULT TO SAY WHEN DRUNK:

1. Specificity

2. British Constitution

3. Passive-aggressive disorder

 

THINGS THAT ARE DOWNRIGHT IMPOSSIBLE TO SAY WHEN DRUNK:

1. Thanks, but I don’t want to have sex.

2. Nope, no more beer for me.

3. Sorry, but you’re not really my type.

4. Good evening, officer. Isn’t it lovely out tonight?

5. Oh, I couldn’t. No one wants to hear me sing.

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 Yield Curve Is Inverted: Should Lenders Care?” is the current blog. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is 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 2023 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.)

Rob Chrisman