Daily Mortgage News & Commentary

Apr. 3: LO jobs; appraisal, credit, doc, broker products; major jumbo changes; delay in servicer rescue?

While in captivity it is important to focus on the friends you’ll see when you’re released. Your borrower doesn’t want the fuss and muss of typing up their own forbearance letter so they don’t have to make payments on their federally backed mortgage? Don’t worry: someone has created a form letter. The press focuses on the bad news, like NYC hospitals reportedly implementing ‘Do Not Resuscitate’ policies for coronavirus patients, or the political finger pointing that will be debated for decades. There is good news, however, like Spain and Italy seeing a slowdown phase of new cases. Strides are being made in finding people immune, or quick finger-prick blood tests to determine whether we’ve ever had COVID-19. Treatments and preventative vaccines are actively being tested, like Remdesivir or anti-malaria drugs. There are risks and rewards, just like in lending. LOs are asking me about changing jobs to originate for smaller lenders that haven’t followed the companies with large servicing portfolios that have changed, for example, minimum FHA or VA credit scores. I ask them, “If you were a running back, and the play was ‘student body right,’ would you want to go left and face 11 defenders?” The definition of “risk” is changing by the day, the market is arguably broken, and to make a career change to lend to someone with a 590 FICO, well, that’s up to you.

Jobs

Thanks to its early focus on digital, eMortgage pioneer Mid America Mortgage is well positioned to overcome the challenges presented by the COVID-19 pandemic and actively seeking high-performing LOs to join its team. As Mid America’s CEO Jeff Bode notes, “We’re able to offer great pricing and same-day underwriting turn times, and with remote online notarization, we can close transactions quickly to get borrowers in their new homes faster. Our warehouse line capacity remains strong, and our Whole Loan Trade Desk continues to purchase closed agency loans. This solid financial position not only enables us to add to our network of highly talented LOs, but it also allows us to provide on-going contributions to our local food bank to support our community during this devastating time.” LOs interested in joining Mid America Mortgage can contact Michael Cooksey (972-767-5701) or Kerry Webb (615-881-4906).

Lender products & services

Trailing Docs in a Remote World: Deserted offices. Entire departments working from home. This is the eerie new normal. Discovering RON and implementing E-Closings are the new urgencies. And not to mention the Non-QM meltdown and lack of liquidity on the market. But let’s talk about some solutions. Or at least one. Trust DocProbe with your Trailing Documents so you can focus on your core business. For the last 10 years, we have been our clients’ trusted remote extension of their post-closing teams. Thanks to our proprietary technology, we handle both wet-signed physical documents being scanned and shipped (by our essential in-office staff!), as well as E-Closings and electronic delivery process through our digitalized platform. Efficient. Complete. And off your plate. Onboarding and implementation are easy and quick with under 2 hours of setup. Email nerlanger@docprobe.net , visit us at www.docprobe.net or call us at 866-486-0554 to learn more about our complete remote Trailing Document solution.”

Flagstar Bank recently announced enhancements for all brokers to Loantrac 2.0, its proprietary LOS system. Its improved disclosure model is designed to save time by eliminating steps and providing more control when sending required loan information to clients. Other new features include an application disclosure module that allows users to generate and send initial Loan Estimates and applications from one place, as well as new templates that auto-populate fees which allows control and direct quotes from third-party providers. Additional small enhancements that will make a big difference to clients include a new e-sign feature and an improved e-consent experience. The flexibility and efficiency of the enhanced Loantrac 2.0 is just one of many ways Flagstar provides solutions to its brokers.

Leveraging loanDepot’s proprietary mello technology, we are pleased to announce our new and improved mello Broker Portal! Offering an updated look and feel, mello is simple, speedy, and streamlined. mello offers an automated process to send initial disclosures to borrowers for e-signature, instant AUS findings with an editable 1003 feature, as well as the ability to create multiple loan scenarios and comparison documents for your borrowers. These new features and a simplified CD request process are just a few of the exciting enhancements available. Jump on one of our weekly trainings to learn more. Start originating your loans in mello today!”

“Almost twenty years ago, Don Unger, founder and president of Advantage Credit sent his first employee home to test working from home. From that point on, Advantage Credit has been a virtual office. So, during this time of uncertainty, everything at Advantage Credit is business as usual. Because we are a virtual office, we are able to hire the most knowledgeable people from across the country. Our staff is top notch and there is absolutely zero learning curve for us on working from home. Check out more of our story here. We are here to meet all of your credit reporting needs! We provide credit reports, verification services, client retention services, predictive leads, Realtor networking and much more! Contact us at sales@advcredit.com.”

Join Nationwide Appraisal Network (NAN) and the Florida Association of Mortgage Professionals (FAMP) today, Friday, April 3rd from 1-2pm EST for an informative webinar as we discuss the impact of COVID-19 on current appraisal practices. Joni Pilgrim, CEO of NAN, Steve Sussman, SVP of Sales and Strategy and Cristy Conolly, Chief Appraiser at NAN will be addressing hot topics concerning appraisals amidst COVID-19. Register Now. “As the situation with COVID-19 continues to develop, NAN has implemented many resources for our valued partners to utilize as we navigate through this global health challenge. As our ‘new normal’ continues through a virtual workforce, NAN will be conducting several educational webinars to stay in front of our valued partners, bring clarity to the appraisal process during COVID-19 and to continue to provide the best personalized service, as always. To schedule a private webinar for your team, please contact: sales@nationwide-appraisal.com.”

Corona changes spread

The industry is grappling with changes to policies, procedures, and guidelines in the primary markets. Meanwhile, our industry is grappling with erratic servicing values. It’s hard to set a rate sheet price when the illiquidity for MSRs (mortgage servicing rights) cannot be overlooked, Service Released Premiums (SRP’s) recently hit zero, yet current origination MSRs do have economic value to their owner/originator. But what is it? Retaining MSRs creates income diversification through alternative business strategies, and many lenders believe that, if the servicing is done properly, current originations are less risky. And right now Agency pricing is much higher than the aggregator’s.

Bloomberg reports that, “U.S. regulators are holding off on helping mortgage servicing firms that could be hit with a surge of missed payments from borrowers hurt by the coronavirus crisis.” Oh, and non-bank servicers who argued that having massive amounts of capital for a time like this wasn’t necessary? Things don’t look good as Bloomberg’s Joe Light reports, “Now, many of those companies say they are in desperate need of a bailout to stave off bankruptcy and a potential collapse of the U.S. housing market. Any rescue might not come quickly, as regulators are holding off on providing additional help to see if policies already put in place ease the industry’s expected cash crunch… That could lead to anxious moments for Quicken Loans, Freedom Mortgage, Mr. Cooper Group Inc. and other nonbank mortgage firms.”

During my career MSRs were always thought of as a “rainy day” hedge and a way to build your balance sheet. That’s gone out the window, and it seems the smartest guys in the room are the ones that sold everything servicing released and collected the premium upfront. Yet the top five servicers (Wells, Chase, NewRez, PennyMac, and Lakeview, followed by non-banks such as Freedom Financial and Quicken Loans), and many smaller companies servicing loans have found the market today risky, totally chaotic, and exhausting.

Setting pricing margins are difficult. A lender can expand theirs, but competitors expand theirs twice as much. And what about lightning-fast underwriting or policy changes?

Wells Fargo Jumbo is temporarily removing its requirement for tax return transcripts for all loans. (There is no change to the 4506-T requirements.)

Any lender doing jumbo loans has one less option. Wells Fargo Funding’s Non-Conforming program will be suspended after today. “We will honor Loans Locked on or before April 3, 2020. Prior Approval? Last day to register was yesterday. Last day to lock is today until 5PM CT. Correspondent Credit Underwrite (CCU): If the Seller has issued a borrower loan commitment on or before April 2, 2020, which was underwritten to Wells Fargo Funding CCU guidelines: Last day to Register and Lock is before 5PM CT today. Locks for Non-Conforming Loans will no longer be accepted after 5PM CT today.”

In an interesting coincidence, Finance of America told brokers about its temporary product suspension: Finial Jumbo. “Due to market conditions, Finial is temporarily suspended until further notice. No new loans or forward locks permitted. Loans in the pipeline must be approved on or before April 2, and locked by April 3, 2020 at 12 PM PST. All loans must fund by lock expiration date. Relock and extensions not permitted.”

Previously AmeriHome announced the temporary suspension of the IRS tax and W-2 transcripts requirements. While the USDA requires transcripts for all household members, Sellers may also provide evidence of their documented attempts to obtain the transcripts. USDA Rural reminded folks that, “The purpose of this announcement is to inform lenders of additional guidance to provide support to borrowers impacted by the Presidentially declared COVID-19 National Emergency, as per the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which was signed into law by the President on March 27, 2020. The 60-day foreclosure and eviction moratorium announced by USDA, Single Family Housing Guaranteed Loan Program (SFHGLP) on March 19th, remains unchanged and in effect…. If the lender determines the borrower is financially unable to resume making contractual payments at the end of the forbearance, the borrower shall be evaluated for all available options presented in the Loss Mitigation Guide which is found at Attachment 18-A in Chapter 18 of the 3555 Technical Handbook.

Yesterday’s commentary mentioned, “Impac Mortgage Holdings, Inc. enacted a two-week suspension of all lending activity including mortgage originations, and temporarily laid off most of its staff.” The action was technically a “furlough” of most of its staff.

US Bank Home Mortgage sent out SEL-2020-024: Updated Credit Overlays for Government and Conventional Loans.

Lakeview Correspondent Bulletin C202011 addresses changes to Best Efforts Minimum Lock Period changing to 90 Days, the retirement of Lakeview No MI, Lakeview No MI with Community Second Products and Libor ARM products.

First Community Mortgage Wholesale Bulletin 2020-12 declares changes and/or flexibilities to government loans outlining the requirement of a verification of employment to be completed within 3 business days on all loan programs.

Capital markets

The US economy was in solid shape prior to the Covid-19 outbreak which has resulted in the precipitous pause to economic activity across the county. New claims for unemployment, which were running at near historical lows, jumped to a record high of 3.28 million for the week ending March 21st with a high probability of worsening in the coming weeks. Job losses have been observed across many industries including hotels and restaurants; arts, entertainment and recreation; and healthcare and social assistance. Prior to the outbreak consumer spending, which is the largest component of GDP, increased 0.2 percent in February and is expected to dramatically weaken over the next few months. It is difficult to quantify the effect that sudden decline in spending will have on GDP although analysts expect the US to officially enter a recession by the third quarter. Europe, which has the highest number of Covid-19 cases outside China, is a couple weeks ahead of the US in terms of the pace of new cases; however they have yet to reach a confirmed peak.

Remember that the Federal Reserve announced it would address “strains in the markets” and “continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning.” The statement also declared that the Fed would add agency commercial MBS to its purchases.

The Federal Reserve unveiled an unprecedented series of emergency measures to combat the worst of what promises to be a rough year for the U.S. economy. The central bank said it will buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs low. All the aggressive steps taken by the Fed over the last couple weeks have been intended to ease what it called “temporary disruptions” in Treasuries, flooding the market with liquidity and expanding its purchases of U.S. government securities in a measure that brings to mind the quantitative easing it used during the financial crisis. The Fed’s actions are intended to make it clear that the Fed will not allow liquidity to dry up any time in the foreseeable future, and the measures have added a massive jolt of liquidity to financial markets that will also expand the Fed’s balance sheet for the duration of the operations.

Repo and QE actions are meant to ensure ample liquidity, but financial conditions remain incredibly tight, and the Fed announcement did little to slow funds that own mortgage bonds from attempting to sell billions of dollars in assets to meet investor redemptions. As a result of the volatility, many companies suspended co-issue MSR purchases effective immediately. Banks will likely begin to tighten credit standards (credit spreads in the corporate bond market have already widened significantly) and business fixed investment spending will wane. Economic forecasts for U.S. GDP growth as recent as last week have been rendered obsolete as the contraction is now expected to be deeper and more protracted than anticipated.

One of the key reasons U.S. fiscal policy is seen as so important in the current economic environment is that conventional monetary policy ammunition is relatively limited. While central banks have already slashed policy rates to zero, the U.S. government currently has the fiscal capacity to implement a large-scale fiscal stimulus, should it choose to do so. Admittedly, the federal fiscal outlook is bleaker than it was prior to the last recession: the federal budget deficit was just 1.1 percent of GDP in 2007, compared to 4.6 percent in 2019, and the stock of debt has more than doubled as a share of GDP over this period. Despite this rising debt burden, the federal government’s interest costs as a share of GDP are historically low and right around the levels that prevailed in 2007. Yields on Treasury Inflation-Protected securities (TIPS), are firmly in negative territory, suggesting that the federal government can quite easily service both its existing debt and some new debt, should it so choose. Another benefit at present is that the Fed still has the experiences from 2008 as guides in the present situation.

Between the investor updates (suspensions) and mortgage rates not responding traditionally to Treasury movements or economic releases, let’s keep this section brief. Yesterday’s big news was President Trump saying that he had brokered a deal between Russia and the Saudis on crude production cuts, though Russian officials later denied this. After yesterday’s grim initial claims figures which raised initial claims to nearly 10 million over the last two weeks, today began with March employment: nonfarm payrolls -701k, earnings +.4%, and the unemployment rate is up to 4.4 percent. The weekly calendar closes with final March Markit services PMI and March ISM non-manufacturing PMI. Based on the latest schedule, the Desk is scheduled to conduct a repeat of yesterday, purchasing up to $30 billion MBS. We begin the day with Agency MBS prices better by .125 and the 10-year yielding .59 percent after the unemployment data.

Dating in the era of the coronavirus?

Without you my life is as empty as the supermarket shelf.

I saw you from across the bar. Stay there.

Baby, do you need toilet paper? Because I can be your Prince Charmin.

Since all the public libraries are closed, I’m checking you out instead.

Is that hand sanitizer in your pocket or are you just happy to be within six feet of me.

You can’t spell virus without U and I.

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.)