Dec. 19: Cap. mkts., PPE, audit & tax, LO sales, subservicing tools; Fannie & attorney opinion letters in title biz; what is smishing?

Change is constant: How ‘bout U.S. Steel, the Pittsburgh steel producer that played a key role in the nation’s industrialization, being acquired by Nippon Steel in an all-cash deal valued at approximately $14.1 billion? (Let’s not forget that GM and Ford have been dwarfed by Tesla, Mercedes, Toyota, and even Volvo.) I had my share of “hard hat” jobs growing up, so I noticed OSHA announcing a switch from traditional hard hats to safety helmets. Is that the politically correct term now? Speaking of terms, “smishing” is a term that combines “SMS” and “phishing” where hackers try to get your personal and banking information through unsolicited text messages on mobile devices by pretending to be government agencies, companies that you might have done business with, or a package delivery service. They’ll say something to get your urgent attention like a text about a free gift that you have to pay a small “shipping fee” to receive or they will send a warning about suspicious activity on your account. Be careful out there! Today’s podcast can be found here, and this week’s is sponsored by Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools. Get loans approved in under two minutes. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar. Listen to an interview with Arch MI’s Carl Tyree on mortgage insurance (MI) misconceptions and various product offerings that separate MI companies from one another.

Lender and broker products, programs, and services

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Some things are just better together. The cast of Gilligan’s Island. John, Paul, Ringo, and George. And, of course, Myrtle’s favorite Tom and Jerry. Putting several good pieces together to create a better whole sums up what we think of nCino’s Mortgage Suite (formerly SimpleNexus). With a combination of great ideas and great technology, nCino’s Mortgage Suite automates loan processing and closing, delivers a modern customer experience, surfaces data insights and simplifies incentive compensation management, thus increasing an FI’s mortgage profitability (something we could all use about now). See how all the parts work together in this short video.

Assessing key performance indicators and operations during current industry headwinds is a great way for mortgage lenders to set themselves up for success for 2024 and beyond. In particular, looking at how your loan origination system (LOS) is maximizing efficiency, providing returns on investments and ultimately, helping you win business over competitors is a great place to start. Why? Because your LOS should serve as the central hub of the overall tech stack, allowing you to orchestrate your entire business from a single system of record. Read this recent article, to learn how Encompass® by ICE Mortgage Technology® is enabling lenders to manage their entire lending workflow in one place, from the customer’s initial point of thought through investor delivery.

Did you know that your LOS is the most powerful source for new leads? Every loan application, past or present, not only represents a marketable borrower, but any realtors on loan files can lead to even more opportunities. OptifiNow’s Contact Harvesting is a feature that automatically imports any realtors listed on an LOS loan file, creating a vast source of referral partners that can be easily marketed to. Contact Harvesting dynamically updates your database and creates links between borrowers and realtor records, allowing you to accurately track the amount of volume that a realtor is generating and calculate the pull-through rate of their referrals. As the mortgage market heats up, the OptifiNow CRM platform provides you with innovative tools that help you leverage the data you already have to increase loan volume. Contact OptifiNow to learn more about our flexible and cost-effective CRM solutions.

Is it a challenge getting what was promised out of your current subservicer? New regulations are always moving the compliance goal posts and your customers are craving the newest technology and high-quality customer experience to meet their needs.  After all, aren’t those the reasons you contracted with them? Perhaps it’s time for a change. Let Servbank show you how its cutting-edge, fully transparent and award-winning servicing platform (SIME), combined with their family of caring Customer Care reps, will protect your company from regulatory misses and keep your customers loyal by delivering a superior experience every time. If your current subservicer promised to make life easier for you, but continues to miss the mark, now is the time to partner with Servbank, the nation’s only fintech bank subservicer, who can meet your unique needs.

Feeling motivated and ready to conquer your 2024 sales goals? TrustEngine is here to help with Dave Savage’s three top sales coaching videos of the year. Featuring some of the industry’s top producers, tune in for invaluable sessions from the best in the business and share them with your LOs. First, explore Dave’s most popular 10x interview of the year, How Daniel Sa Is Closing Over 300 Loans This Year. Then, dive into Separation Season with Jeremy Forcier for essential strategies and explore the world of Moneyball Mortgage with Jim Deitch, and so much more. Don’t miss this opportunity to gain essential insights and strategies for the upcoming year. Your path to sales excellence starts here.

“With nearly 40 years of experience in mortgage banking, Richey May knows the industry from every angle. Many of our team members are credentialed industry experts who dedicate much time to building up other industry experts. From this expertise, we’ve created a wealth of services and products to help lenders stay ahead: audit and tax services, cybersecurity solutions designed to protect company assets and sensitive borrower information, intelligent automation tools for streamlined operations… you name it! Whether you’re leveraging our innovative platforms or having us work as your extended team for outsourced internal audit or accounting services, get ready to tackle challenges faster with some serious firepower on your side. Everything you need to prepare for 2024: contact our experts today!”

There are many reasons the Optimal Blue PPE has been the market-leading product, pricing, and eligibility engine for years, one being that we ensure our customers have the functionality and support they need through changing regulatory and market environments. Built as an open API platform, the Optimal Blue PPE allows customers to access critical product and pricing information on-demand. With an average of 300+ releases per year, users receive the latest innovations they need to operate in any market conditions. This year’s releases included: a mobile app, an updated user interface, and advanced loan officer compensation support. And with 50+ developers dedicated to the PPE, our commitment to innovation is continuous. This means Optimal Blue customers have the tools to tackle whatever the market throws their way. Reach out to us today to ensure you have the tools and support you need to win in this market.”

“Our 2023 accomplishments set the stage for what is to come. As we move into 2024 and beyond, Polly will continue to revolutionize mortgage capital markets and democratize revenue optimization, automation to reduce costs, efficiency gains, and more, all while providing a differentiated and completely unmatched loan officer and lender experience.” What else can you expect to see from Polly in 2024? The company’s Founder and CEO, Adam Carmel, reflects on a record-breaking 2023 and shares his excitement for 2024 in this open letter.

Conventional conforming news doesn’t stop

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The lion’s share of loans are processed and/or underwritten and/or sold to Freddie Mac and Fannie Mae. Who’s doing what out there?

Fannie Mae turned some heads recently with more thoughts on Attorney Opinion Letters in the title industry. Stacy Mestayer observed, “Fannie’s announcement will expand the use of AOLs to hundreds of thousands of more properties. This is an interesting update to many as ALTA has led many in the industry (and on Capitol Hill) to believe that title waivers and title alternatives are the same. While Fannie has opted not to pursue a pilot for title waivers at this time, it never wavered in its support for the AOL alternative.”

Two new underwriting solutions are now available from Fannie Mae to help lenders better serve borrowers. DU early assessment, which provides a DU risk assessment during a lender’s pre-qualification process with a single bureau soft credit report, and Income Calculator, which helps easily calculate income for self-employed borrowers. Discover how these innovations and other updates help simplify the lending process and work toward removing barriers and improving equitable access to credit.

Fannie Mae Announcement SEL-2023-11: December Selling Guide Updates includes information on permitting lenders to use alternative options to meet verbal verification of employment requirements, allowing optional use of Income Calculator to determine the monthly qualifying income for self-employed borrowers, allowing lenders to gross-up certain nontaxable income without providing additional documentation. Incorporate a list of programs into policy to assist lenders with their review of shared equity providers and transactions, and other miscellaneous updates.

Fannie Mae updated the Partner Playbook for the Credit Score and Credit Reports Initiative to include information on FHFA’s Nov. 21 Enterprise Regulatory Capital Framework (ERCF) final rule, share ways the public can participate in the stakeholder forums, and highlight the timeline to reflect the delay of milestones related to the bi-merge credit reporting option initially proposed for 4Q 2023 and 1Q 2024.

During the weekend of Feb. 10, 2024, Fannie Mae will implement an update to DU version 11.1. This will include updates to improve DU’s ability to identify rent payment history within asset verification reports and other changes to align with the Selling Guide. For additional information, view Fannie Mae DU Version 11.1 Feb. Update Release Notes.

In the December 2023 Appraiser Update, Fannie’s Mae’s 25th edition, timely appraisal topics from a 2015 Lender Letter is revisited, recent changes to requirements for manufactured housing appraisals, explain how to get answers when you need them, and offer a reminder for how to treat seller concessions.

Per Pennymac Announcement 23-85, Conventional LLPAs effective for all Best Efforts Commitments taken on or after Thursday, December 14, 2023 will be updated as follows:

Improving values for the ‘2nd Home Additional’ LLPA on the ‘LLPAs by Product Feature for All Eligible Loans’ LLPA Grid. Updating footnote for the “2nd Home Additional’ & ‘Investment Additional’ LLPAs.

Citizens Correspondent National Bulletin 2023-21 includes information on product updates on Conventional Conforming Products, Employment Offers or Contracts – DU, Income eligibility and calculations, timeshares, and updated appraisal practices, VA Products, Medical and non-medical collection and charge-off accounts. Citizens Correspondent National Bulletin 2023-22 provides information on Conventional Conforming, FHA and VA Product Loan Limits and Disaster Tax Filing Relief.

Kind Lending announced the adoption of Freddie Mac guidance as pertains to ADUs (Accessory Dwelling Units) and the allowance of income from the ADU used in qualifying.

Capital markets: is the bond market ahead of itself?

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Global financial conditions are loosening as investors expect central banks to begin lowering interest rates next year. A Goldman Sachs index that tracks corporate borrowing costs and capital markets conditions showed on Friday global financial conditions at their most accommodating level since early August. The end of the belief that central banks will keep interest rates “higher for longer” has fueled optimism in the corporate bond market, with yields on riskier corporate debt falling below 8 percent for the first time since February. Even though we haven’t seen one rate cut yet…There has been a significant easing in financial conditions that is giving companies breathing room.

Let me repeat something from last week that came from Dr. Elliot Eisenberg! “While the Fed kept rates unchanged, something entirely expected, it was the shift from a hawkish pause, one with a rate hike bias, as was the case after the last two meetings, to a dovish pause, a pause with a future rate reduction bias due to the declining inflation rate, that led to a record Dow Jones close. Discussion will now focus on the date of the first cut.” Sure enough, that is what we are seeing.

After Fed Chair Powell and his colleagues indicated that they are likely to cut rates three times next year, traders have largely ignored efforts by Fed officials to temper expectations and market rates have fallen sharply in anticipation of the central bank’s policy pivot becoming a reality. There has been a lot of Fed-speak after the FOMC meeting attempting to pour cold water on the narrative that rate cuts are coming quickly and aggressively, the latest being Chicago Fed President Goolsbee saying that he was a bit confused by the market’s reaction to the latest FOMC meeting/comments and Cleveland Fed President Mester saying that the market is a little bit ahead of the Fed’s rate-cut view. The Fed claims that markets are over their skis with respect to rate cuts, but markets are maintaining pricing for six rate cuts by the Fed before the end of 2024, with the first cut coming in March.

Putting aside the Fed momentarily, this week will have a lot of housing data. We received the NAHB Housing market index for November yesterday, which increased from the last reading, but not quite to market expectations. Today brings housing starts/building permits and existing home sales are tomorrow. We will also get another revision to Q3 GDP, personal incomes and outlays, and leading indicators. Real GDP is expected to be revised down slightly in the third estimate due to downward revisions to September retail sales, business inventories, and industrial production. Personal income is expected to have accelerated in November due to strong gains in wages and salaries pushing household spending higher.

Also on tap this week is the Fed’s favored inflation measure, PCE, where core inflation is expected to come in at a 3.3 percent annualized pace, down 0.2 percent from the previous month.

Today’s economic calendar is under way with housing starts and building permits for November: 1.56 million (higher than expected) and 1.46 million, respectively. Expectations were for starts slipping 17k versus the prior month to 1.355 million with permits 48k lower at 1.450 million. Later today brings Redbook same store sales and remarks from Atlanta Fed President Bostic. Today is also Class D 48-hours. We begin the day with current coupon Agency MBS prices a few ticks (32nds) better than Monday night and the 10-year yielding 3.90 after closing yesterday at 3.96 percent.

At this time of the year, when the roadblocks come up with great regularity, I would like to share a personal experience with my closest friends about drinking and driving.

As you well know, some of us have been known to have had brushes with the authorities on our way home from an occasional social session over the years.
A couple of nights ago, I had a few beers at Reno’s The Lucky Beaver after having a nice dinner and wine at home.

Knowing full well I may have been slightly over the limit, I did something I’ve never done before: I took a cab home. Sure enough, I passed a police road block but, since it was a cab, they waved it past.
I arrived home safely without incident, which was a real surprise as I have never driven a cab before and am not sure where I got it or what to do with it now that it’s in my garage.

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. STRATMOR’s current blog is titled, “How Treasury Auctions Influence Mortgage Rates”. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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Rob Chrisman