Jan. 14: Limited English Proficiency recommendation to increase business; vendor news, Agency deals; a decent joke

Communication is important, as highlighted by a letter below about upcoming FHFA requirements. Close captioning isn’t only for the older folks. (A nice age-related joke below.) Apparently 20-somethings are requesting subtitles on shows in increasing numbers… So don’t worry, it isn’t only your ears, so don’t rush out and spend money on a hearing aid quite yet. “Follow the money” often makes a lot of sense. For example, in a non-mortgage story… U.S. builders have long blamed lumber costs, among other expenses, as contributing to the cost of housing. Looking overseas, Europe needs wood, and two big suppliers of that timber have historically been Russia and Belarus, responsible for €3.12 billion and €1.37 billion worth of wood respectively as of 2021. Sanctions that took force in July have cut off those suppliers, and countries with huge wood demand (Lithuania, Poland, Germany, Denmark and Latvia) have had to turn to other suppliers, like Kazakhstan and Kyrgyzstan, two former Soviet bloc countries that have begun exporting vast amounts of wood to Europe, jumping from €445,000 worth in 2020 to €30 million worth from June to October 2022 alone. But Kazakhstan and Kyrgyzstan don’t have wood! All that’s happening is Russian and Belarusian wood being routed through Central Asia to avoid sanctions.

 

Se habla Espanol?

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Recently the Commentary ran this ad:

In less than 60 days, the FHFA will require lenders to collect data about the borrower’s language preferences, as well as what they’ve done to educate themselves on homeownership. Click here to view the press release. “We’ve already seen a few industry giants launch Spanish-language homebuyer education tools in anticipation of this,” said Gibran Nicholas, CEO of Momentifi, a bi-lingual content marketing platform. “Why should smaller lenders and brokers get left behind?” Momentifi’s full content library contains over 150 personally branded bi-lingual resources that originators can use to market themselves and educate homebuyers. But wait, there’s more! Creating consistent content is the #1 challenge that social media marketers have according to Hubspot research. What if you could get done-for-you personally branded marketing content in two languages, and catch up with the industry giants in one smart move? Click here to learn more or sign up for Momentifi’s free 14-day trial.

As an industry it reminds us that we need to adapt. And the upcoming FHFA requirement prompted George Baker with Talkuments to write, “We’ve both seen more than a few cycles in our industry now, as well as the patterns that tend to precede and follow them. I’m hoping the panic stage of this downturn is nearing its end. And I’m wondering if/when we see what tends to come next: acceptance and adaptation.

“I think we saw a hint of this with the non-QM marketing spree around 2018 when we last anticipated a purchase market with reduced origination volume. This time, we saw a brief HELOC surge (while it made sense). So, I’m wondering if or when we, as an industry, will wake up and see the massive potential of the Limited English Proficiency (LEP) market.

“I shouldn’t have to toss around too many numbers. I think most of us know that millions of Americans are LEP. In 2013, ten years ago, 25.1 million Americans were considered LEP. Hispanic Americans with LEP make up the majority of this group: The U.S. Census Bureau projects the Hispanic population in the United States to be 68.8M by 2025 and grow to 74.8M by 2030.

“That’s an awfully large market. It also strikes me that it’s sustainable if lenders put the proper (and enough) resources into serving it. Something beyond a badly written marketing email and hiring a few more Spanish speaking MLOs.

“There are also several indications that lenders may soon be required (not just recommended) to offer more resources to LEP borrowers seeking mortgages. The CFPB has already told us it would like to see more LEP services made available, particularly in the mortgage servicing and lending sectors. You’ll recall that only two years ago,  in January, 2021, the CFPB issued guiding principles for servicing LEP customers and guidelines making this plain. A congressional bill (HR 3009) in 2022 passed the house but not the senate. If it became law, our industry would be required to offer eight (8) languages followed by four more.

“The real issue on LEP marketing and originations is compliance. Lenders are afraid of LEP laws (CA, MA) and unconscionability statutes (31 states), fair lending and UDAAP. Many have an “English only” policy knowing full well that their policy is violated everyday by their Spanish speaking originators. Almost all industries have standardized language resources to attract business, except the mortgage industry. Example, go to an ATM machine or call a service line (press 1 for English or 2 for Spanish). I believe Amazon provides services in 22 languages to purchase products. We lenders don’t even translate our websites.

“The preferred language question securely puts a ‘bulls’ eye” on lenders. It highlights the risk lenders face in today’s diverse marketplace. Regulators and class action attorneys may be able to identify consumer needs that are not being met, leading to fair lending issues and possible discrimination claims. Referencing the billions of dollars that have been spent by the industry to improve the consumer experience, the best we may have for loan applicants that prefer another language is, ‘Sorry, can’t help you.’

“Lenders have to provide language resources for business development and compliance purposes. As usual, we are behind the curve but we must change. Forget about translated documents. They don’t work. Technology provides the answers to these challenges. Will the mortgage industry look to seriously engage the potential LEP homebuyer market and, if so, when?” Thank you, George!

Vendor and third-party updates

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Vendors do a lot more than combine words for their names, make up words, or capitalize letters in the middle of their organization’s name. Let’s take a random look at some recent releases.

Credit Reporting Agency (CRA) Certified Credit released an article for originators titled, “3 Unique Ways for Lenders to Thrive Amidst Unexpected Challenges in 2023.”

This month’s STRATMOR blog is titled, “Productivity: More Important than Ever” and discusses how important it is to manage to the numbers.

Trelix is an expert mortgage QC and fulfillment provider and is well positioned to support any of your QC needs. Trelix offers Pre-Close, Post Close, Cancel/Withdrawn/Denied, EPDs, Repurchase demands, Servicing QC and Rating Agency DD reviews. To learn more about how Trelix can meet your QC and fulfillment business needs, contact Brett Parker  today. If you are an existing Trelix Post Close Quality Control client, let’s talk about how we can reduce your pricing to $99 per file with the same great service. If you are not currently using Trelix for your PCQC, contact us to discover the power of Trelix and to take advantage of this amazing offer. (Not a member of Lenders One? Contact Tricia Migliazzo to learn more about the membership.)

Curious how home Renting vs. Buying stacks up? To determine exactly how the cost of renting a home differs from owning one, LendingTree compared monthly rental and housing payments for homes with and without mortgages in the 50 largest metros. The new LendingTree Study found that renting is cheaper than owning a home, at least until a person has paid off their mortgage.

Looking for a resource on ways to get a home valuation estimate? HomeLight recently published a guide to finding the value of your house. The article covers the ups and downs of acquiring an accurate home value estimate and explain what makes property values fluctuate. It also describes different valuation tools to get your home’s worth.

Indecomm announced that IncomeGenius, its intelligent income calculation technology, launched across AmeriHome’s non-delegated correspondent channel. Already used by AmeriHome’s delegated correspondent underwriting team, its use expanded to its non-delegated correspondent partners. By rolling out Indecomm’s IncomeGenius to its non-delegated correspondents, AmeriHome will help its correspondent clients better capture and serve the growing population of self-employed customers.

ActiveComply, a provider of cloud-based solutions that help companies in highly regulated industries stay compliant, has launched Remote Office Inspection, a new digital service that utilizes the latest encrypted technology to help companies document their compliance with agency guidelines and state and federal laws when using remote employees. Remote office inspection is an easy, affordable, and accessible way for companies with remote employees to ensure compliance, workplace safety and supervision. It includes a customizable survey that enables organizations to remotely inspect branch offices to ensure they have the proper signage, business license display and adequate security, which saves the expense of sending someone out to do a physical inspection.

I’m excited to share an opportunity regarding the Knowledge Coop’s new membership platform. The Knowledge Coop offers all state and federal Continuing Education courses in an engaging and exciting video format that you’re sure to actually enjoy. Want to give yourself a sharper competitive edge? The Coop also offers in-depth training on specific topics like VA Loans and FHA within its Coop Academy. Get access to industry experts and connect with other mortgage professionals all in one space. Use Code Chrisman10 for 10% off your first year of membership at trythecoop.com.

Secondary marketing deals drive the primary market rates

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Although things have been somewhat quiet, as 2022 wound up and we march into 2023, the “deals” done by Freddie Mac, Fannie Mae, and others help determine the rates that borrowers see. These securitizations “test the waters” for demand for mortgages with an implied government backing, especially given how strong F&F’s market share is in residential lending. Let’s play catch up and take a random look at some Fannie deals to see what investors are interested in.

Freddie Mac priced a new $190 million offering of Multifamily WI K-Deal Certificates (WI-K135 Certificates), which are initially backed by cash assets that will be used to purchase the A-M class of a to-be-issued reference K-Deal. Once the reference K-Deal class is issued and purchased by the WI trust, the WI Certificates will be indirectly backed by a pool of fixed-rate multifamily mortgages with predominantly 10-year terms. The one offered class, Class A-M, has a weighted average life of 10.24 years, a 1.914 percent coupon, a 1.9085 percent yield, and a $99.9936 price.

Freddie Mac announced pricing of the SB83 offering, a multifamily mortgage-backed securitization backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust. The company expects to issue approximately $360 million in SB83 Certificates. Freddie Mac Small Balance Loans generally range from $1 million to $7.5 million and are generally backed by properties with five or more units. Pricing for SB83 is as follows. Class A-5F has $89.803 million of principal, a weighted average life of 4.14 years, a 6-bps spread, a 0.63 percent coupon, a yield of 0.5054 percent and a $100.4696 price. Class A-10F has $175.285 million of principal, a weighted average life of 7.28 years, a 21-bps spread, a 1.21 percent coupon, a yield of 1.1306 percent and a $100.4880 price. Class A-10H has $95.358 million of principal, a weighted average life of 7.12 years, a 34-bps spread, a 1.32 percent coupon, a yield of 1.2405 percent and a $100.4701 price. The Small Balance Loan origination initiative was first announced in October 2014 and expands the company’s continuing effort to better serve less populated markets and provide additional liquidity to smaller apartment properties.

 

Freddie Mac priced a new $942 million offering of Structured Pass-Through K Certificates (K-F99 Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The K-F99 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are SOFR-based. Class AS, the only offered class, has $942.323 million of principal, a weighted average life of 9.51 years, a discount margin of 20-bps, a 30-day SOFR average + 20-bps coupon and a $100.00 price.

 

In addition to K-F99, Freddie Mac priced approximately $1 billion in K-F98 Certificates backed by floating-rate multifamily mortgages with 10-year terms. K-F98 includes one class (Class AS: $893 million, 30-day SOFR average + 21 bps coupon) of senior bonds indexed to SOFR and backed only by SOFR-based mortgages, and another class (Class AL: $138 million, 1-month LIBOR + 17 bps) of senior bonds indexed to LIBOR and backed only by mortgages which are currently LIBOR-based. Both classes are priced at even par.

Freddie Mac priced a new $766 million offering of Structured Pass-Through K Certificates (K-F124 Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). Class AS ($766.3 million) had a weighted average life of 9.59 years, a coupon of the 30-day SOFR average + 22 bps, and a $100.00 price. The K-F124 Certificates, are backed by floating-rate multifamily mortgages with 10-year terms, which are SOFR-based.

 

Freddie Mac priced a new $739 million offering of Structured Pass-Through K Certificates (K-F123 Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The K-F123 Certificates are backed by floating-rate multifamily mortgages with 7-year terms, which are SOFR-based. The one offered class, Class AS ($739.5 million), has a weighted average life of 6.71 years, a 30-day SOFR average + 20 bps coupon, and a $100.00 price.

Freddie Mac priced a new $369 million offering of credit risk transfer securities backed by Tax-Exempt Loans (TELs) made by state or local housing agencies and secured by affordable rental housing. This is the company’s eighth ML Certificate offering and its second under the sustainability bonds moniker. The fixed- and floating rate ML-08 Certificates are supported by pools of fixed- and floating rate TELs. Freddie Mac has divided the securities into California only, non-California classes, allowing California’s state tax exemption to pass through to investors in the California classes and SIFMA-based classes. The ML Certificates are designated as “sustainability bonds” within Freddie Mac’s Sustainability Bonds Framework. The proceeds will be used to finance multifamily properties that (a) finance affordable housing to low-to-moderate-income families, (b) may have features, or are located in areas, that further economic opportunity for residents and (c) may include certain environmental impact features.

 

Freddie Mac priced a new $1.1 billion offering of Structured Pass-Through K Certificates (K-124 Certificates), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 10-year terms. K-124 pricing is as follows. Class A-1 has $83.166 million of principal, a weighted average life of 6.80 years, a spread of S+15 bps, a 0.964 percent coupon, a yield of 0.95709 percent and a $99.9936 price. Class A-2 has $885.643 million of principal, a weighted average life of 9.83 years, a spread of S+19 bps, a 1.658 percent coupon, a yield of 1.32466 percent and a $102.9954 price. Class A-M has $142.693 million of principal, a weighted average life of 9.87 years, a spread of S+24 bps, a 1.384 percent coupon, a yield of 1.37818 percent and a $99.9978 price.

 

The motivational seminar is packed to the gills with people. The speaker starts off the event by asking for some audience participation.

He asks, “How many of you have sex once a day?” Many people raise their hands.

“Okay, how many of you do it once a week?” A few more folks raise their hands.

“Okay, how about once a month?” A few more sheepishly raise their hands.

“Okay, how many of you have sex once a year?” A little old guy in the front row is jumping up and down and raising both hands.

The speaker asks, “Sir, you only have sex once a year?”

The guy responds, “Yes…and tonight’s the night!”

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. “Productivity: More Important Than Ever” 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