Feb. 26: LO jobs; renovation, training, USDA products; primer on why mortgages have different prices

We all learn something every day. For example, did you know that the grocery chain Trader Joe’s is owned by a huge German supermarket chain? Yup. How about loud noise impacts your perception of taste and, in an airplane, you may crave something rich and savory like tomato juice which you haven’t purchased to drink at home…ever? (Lufthansa sees its passenger consumer as much tomato juice as beer!) What if you wanted an updated study on how much judges earn around the country? Here you go (page down). Or how about, “Rob, what is an ‘on-line’ application?” Darned if I know, or if I’ve seen agreement across the industry. A lead generated through the internet? A form completed on a computer? Fill it out on your computer with the help of a human LO? Print out a form from the lender and fill it out and mail it in? Take a photo of the form and email it? Skype? The lender enters the app data and then the borrower can view it online? I give up.

Employment & job changes

“If you’re a purchase-focused loan officer that wants to join a company with senior leadership that understands the business, look no further than Citizens Retail Mortgage Lending! Our President of Home Mortgage, Eric Schuppenhauer, was recently named one of the 12 Power Players to Watch in 2019 by National Mortgage News. In addition, or senior leadership team had over 80 years of combined experience in retail lending. Simply put, we know how to give you the tools you need to compete and win in today’s market. If you’re interested in learning more about what joining Citizens Retail Mortgage Lending division can do for your career, apply at Citizens Bank today! For questions, please email us.”

Lender products & services

Conquering Shifts is a must read. Top mortgage pros Greg Frost, Drew McKenzie, David Jaffe, Jeff Lake, Julie Miller, Larry Bettag, Michael Deery, Michael Smalley, Ralph Massella, Tom Ninness, Mark Raskin, and Karen Deis share their stories. At times in their career when they faced insurmountable odds, they were still able to grow their careers admirably. “It’s incredibly rare to find such valuable insights in one place. This book has caused me to rethink several of my own business practices. It makes you feel like you’re seeing behind the curtain into the inner operations of some of our industry’s titans,” said Umar Gebril, Academy Mortgage. “Our team is not only enjoying the book but we have created many action steps based on the stories we have read,” observed Bob Duane, Michigan Mutual. For senior management looking to boost production, it’s time to order your copies in bulk. Discount pricing ends 02/28/2019.

Informative Research (IR), fintech leader in the mortgage industry, recently announced Mike Atwell as its new VP of Client Success serving the Western Region. Before IR, he had senior management positions at industry-leading vendors. With over 25 years of experience in sales and over 15 years in the mortgage industry, Atwell has used his extensive market knowledge and unique process-oriented problem solving to help his clients drive their revenue growth and ease their precise pain points. “We couldn’t be happier adding Mike to the team,” shared Matthew Orlando, Head of Client Success and Strategy at IR. “With a data and fintech background, Mike understands how lenders are applying technology and data to their processes to make them more efficient and customer friendly – a key goal for Informative Research.” To connect with Atwell, reach out to Mike via email (800-473-4633 x 7293).

Technology can empower your salespeople to do a lot of things, but another canned email won’t build a roster of referral partners. According to Constellation Research, lack of content relevancy generates 83 percent lower response rates in marketing campaigns. Too many technology solutions focus on the transactional nature of the sales role. Help your customer-facing teams put the human element back into complex financial transactions – building stronger relationships that keeps customers coming back for life. Read the Total Expert guest blog by Lori Day, SVP/Director at Alerus: How to Turn Your Salespeople into Relationship Managers.

“Are you looking for ways to grow business and help borrowers? Here’s a new USDA One-Time Close product that can be sold to your correspondent investor right after closing and before construction has begun. Save your borrowers the hassle of going through multiple closings. And, bundle their building costs and mortgage costs into one loan. It’s a win-win. Check out the new USDA One-Time Close purchase option TMS Correspondent recently rolled out for its partners.

“Are you ready to Reno? loanDepot Wholesale’s Renovation Lending Suite offers a full spectrum of renovation products and personalized Renovation specific support, allowing you to capture untapped market share and strengthen relationships with your Borrowers and referral partners. Join one of our live March webinars to learn more. Tuesday, March 5 at 11:00am PT or Thursday, March 14, at 11:00am PT.”

As digital mortgage tools become more prevalent, the importance of improving the borrower experience for competitive differentiation is an increasingly popular topic of conversation. For independent and community lenders in particular, a standout borrower experience can be an opportunity to shore up your competitive edge. In this margin-constrained market, however, it can be tough to identify positive-ROI investments to improve borrower satisfaction and increase profitability. A new ebook, “The Experience Edge,” helps shine light on the return and impact an improved borrower experience can bring to your business, providing tips to enhance your borrower experience to reap the fiscal benefits of happier borrowers. An exclusive to Rob Chrisman subscribers today and a must-read for all lending managers, download your complimentary copy today!

XINNIX students regularly achieve inspiring success, but this time, they’re reporting results you might have a hard time believing. Despite the headwinds facing our industry today, the experienced loan officers who completed the most recent EDGE class saw a 61% lift in their loan applications! These LOs prove that no matter what market conditions may be, partnering with XINNIX will help you grow purchase production to the next level. Their proven model of training, accountability, and coaching empowers mortgage professionals at every stage of their careers to surpass their wildest expectations of what they thought was possible for their business. So what are you waiting for? Find out what happens when “too good to be true” turns out to be better than you ever imagined. The next EDGE class starts March 7th. To learn more, CLICK HERE to schedule a call with XINNIX today! 

Capital markets

As brokers witness the price war with the top wholesale investors, which in turn has spilled over into other channels, LOs wonder why are there different rates for the “same” mortgage product. Essentially why does a 30-year fixed rate mortgage have different costs for the family buying a condo versus a family purchasing a single-family home versus a family refinancing and paying off an equity line versus other mortgage scenarios? How’s an LO explain this to a borrower?

If the most basic economic principle is supply and demand to determine prices, the second most basic investment principle is the greater the risk, the greater the return. And this price difference percolates down to the primary markets. Mortgages end up as investments in bonds, and the higher the credit risk, the higher the yield demanded by an investor. An example is the spread between QM and non-QM loans, with their perceived difference in credit risk, demanded by most lenders and investors.

Your typical conventional mortgage is funded by a lender who has a choice in the secondary markets. The loan can be sold to an aggregator, or bundled with other mortgages into mortgage backed securities (“MBS”), then eventually finds its way into a bond backed Fannie Mae or Freddie Mac, or are sold directly to Freddie and Fannie “cash windows.” In that case Fannie or Freddie bundles the loans into their own MBS.

Investors across the country, and around the world, purchase MBS as part of their portfolios and investment strategies receiving regular payments which includes principal and interest. The investor counts on receiving these payments until the bond pays down. (When a loan pays off extremely early there is often an “early payoff penalty” assessed by the security issuer to the original lender because bonds that pay off prematurely are tracked in the markets, and issuers who gain a reputation for fast prepayment speeds on their bonds are penalized in price in their future issuances.

Some mortgages are riskier than others, so investors in MBSs containing riskier mortgages demand a higher return. Many wonder, “What makes one mortgage more of a risk than another if they are being underwritten to the same guidelines?” This is where tiered-based pricing comes into play for mortgage consumers. There are seven main components to tiered pricing: occupancy, number of units, property type (e.g., condominium), LTV, credit score, purpose (e.g., cash out refinance), and rate lock term. There are more factors that go deeper into the weeds, but you can see that with so many factors in play, rate quotes can be risky proposition unless all the details and factors of the borrower and property are known. This is why it is often hard to quote borrowers interest rates unless one knows the complete credit profile, and details of the transaction, and it is also why the price may change during processing when details change.

Certainly thoughts about the direction of the economy move rates, and the economy is driven by housing and jobs. We’ll see February employment at the end of next week, but January saw a 304,000 increase in employment, and yes, furloughed federal workers were counted as employed in the establishment survey although December’s downward revision makes the net gain 222,000. They were not counted in the household survey, however, which is used in the unemployment rate calculation which resulted in the rate to increasing to 4.0 percent. Nothing like inconsistent math!

Moving on to other areas of the economy, the ISM Manufacturing Index increased to 56.6 in January as fourteen out of eighteen industries reported growth during the month. Meanwhile consumer confidence eased to a still positive 120.2. Mortgage rates continued to ease over the remainder January and the average rate for a 30-year fixed was at 4.76 towards the end of the month according to the Mortgage Bankers Association. Markets reacted favorably to comments from Fed Chairman Powell following the latest FOMC meeting in which he said balance sheet expansion will remain one of the Fed’s tools during future economic slowdowns.

As we found out last week, now that the Fed seems to be on hold with rate increases, investors have turned their attention to the size of the balance sheet. At this point, expectations are for it to run down from $4.0T now to about $3.5T. If so, it should add some upward pressure to longer term rates.

Given the Fed’s desire to hold mostly Treasuries, the discussion turned to reinvestment most if not all of run-off from its MBS portfolio in principal payments received from agency MBS in Treasury securities. Some thought that continuing to reinvest agency MBS principal payments in excess of $20 billion per month in agency MBS, as under the current balance sheet normalization plan, would simplify communications or provide a helpful backstop against scenarios in which large declines in long-term interest rates caused agency MBS prepayment speeds to increase sharply. Others judged that retaining the cap on agency MBS redemptions was unnecessary at this stage in the normalization process, as either principal payments are unlikely to reach the $20 billion level after 2019, the cap could slightly slow the return to a portfolio of primarily Treasury securities, or that the Committee would have the flexibility to adjust the details of its balance sheet normalization plans in light of economic and financial developments. In the end, the Committee participants said further discussion was needed regarding balance sheet normalization and a communication plan developed regarding the reinvestment of the MBS paydowns.

The U.S. 10-year closed Monday yielding 2.67% as Treasuries moved in a yield-flattening fashion as markets optimistically digested President Trump announcing that the increase in the tariff level on $250 billion worth of imports from China will be delayed past March 1 due to progress that has been made in negotiations. President Trump will travel to Vietnam to meet with North Korea’s Chairman Kim Jong-un on Wednesday and Thursday. Finally, despite continued speculation that British Prime Minister Theresa May would lobby for a Brexit delay, she said today she remains focused on leaving the EU on March 29.

Today’s calendar kicks off with the February Philadelphia Fed Nonmanufacturing Indices and December housing starts and permits at 8:30am ET. Markets expects declines in both starts to 1.230 million and permits to 1.290 million versus 1.256 million and 1.322 million previously. Redbook same-store sales for the week ending February 23 are next up at 8:55am ET (previously -1.5% MoM; 5.4% YoY). At 9:00am both the FHFA House Price Index and S&P/Case-Shiller Home Price Index for December will be released. February consumer confidence and Richmond Fed Manufacturing and Services are due at 10:00am and both expected to increase, the same time as Fed Chair Powell heads to the Hill to testify before the Senate Banking Committee on monetary policy and the economy. At 10:30am, the Dallas Fed Texas Services Index for February will be released. We begin today with Agency MBS roughly unchanged and the 10-year yielding 2.66%.

(Thank you to Paul A. for this groaner.)

So if a cow doesn’t produce milk, is it a Milk Dud or an Udder Failure?

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, “How are You Going to Compete.” 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.)

Rob Chrisman