What? You aren’t offering a 30-year rate below 3% yet? Better catch up, because that is where the mainstream press is telling borrowers rates are. Of course, us capital markets folks hate it when newspapers talk about rates, and LOs don’t like explaining how “trivial” items such as risk and credit score can influence someone’s pricing. Meanwhile, “on the back end,” Congress and regulators are discussing an extension of the foreclose moratorium that expires on June 30. One month? Or past Labor Day? (Time flies… weren’t we supposed to be done with this pandemic “hoax” at Easter?) What is also being discussed are non-bank servicers and their financial health, which by most accounts is better than it was three months ago, so that is good news, although it lessens the chance of a liquidity facility. Of course things are happening at the state level as well. Replacing a statue in Tennessee? (With an entire statue, or just a bust?)
Lender services and products
Maxwell’s digital mortgage platform continues to make waves in the industry for small to midsize lenders doing $300M or $3B. Their POS experience has expanded quickly, providing meaningful benefits for the 200 lenders who have partnered with them. “Yes, we’re a point-of-sale and now, with our scale, our technology allows us to leverage the power of our community of lenders to offer access to value previously only accessible by the largest lenders,” says John Paasonen, the founder and CEO. “As we continue to invest millions in our technology, we’re committed for the long-term to making our lender partners successful.” With over billions facilitated through the platform every month, Maxwell’s growth has been a testament to their commitment to partnership. Learn more about Maxwell’s unique approach to being a lender’s digital mortgage partner
What’s next for servicers now that the tsunami of forbearance requests appears to be ebbing? Jane Mason, CEO of Clarifire, a leader in SaaS automated workflow technology, believes the real challenge has just begun. “After a record surge in mortgage delinquencies in April, and with efforts to redefine mortgage relief under the CARES Act still ongoing, servicers must shift their focus to streamlining their default servicing operations immediately,” Mason said. “This is not a simple proposition. Troubled homeowners are relying on servicers to guide them through their relief options. Having just scaled to meet huge volumes of forbearance requests, servicers must now rapidly expand and execute loss mitigation activities amid a completely tumultuous, unpredictable business environment.” To navigate this shift, Mason pointed out that servicing organizations may need to rethink their approach to technology. “For most servicers, dynamic, automated processing technology may be the only way to achieve the flexibility and efficiency they’ll need in the weeks and months ahead,” she said.
Of course managing LO comp with old-school spreadsheets drains time and resources, but who knew it could deplete your organization to the tune of $1 million per year!? A top-ten lender’s cost-benefit analysis showed jaw-dropping annualized savings from automating manual tasks, eliminating redundant processes, and reducing overpayments with incentive compensation management (ICM) platform CompenSafe. The lender found it was spending $346,000 a year in manual comp calculation labor costs and between $500,000–$1 million per year in overpayments caused by manual calculation errors! According to the lender’s analysis, implementing CompenSafe will allow it to recoup an estimated $900,000 in annualized savings. LBA Ware has made the analysis available for download here.
Right now risk experts face a conundrum: payroll data is dangerously outdated, but securing a manual VOE adds delays and opportunities for fraud. But there is good news. In a recent MBA Newslink article, FormFree Founder and CEO Brent Chandler writes that “borrowers hold the key in their unique bank account activity and bank statement data.” FormFree’s AccountChek 3n1 Report already verifies borrower assets, employment and income with direct-source, consumer-permissioned data. And Chandler has shared that soon FormFree will launch a solution that lets applicants deliver their financial DNA to lenders in an underwriter-friendly format. Contact Christy Moss or Gregg Palmer to see how FormFree is overcoming legacy indicators of creditworthiness.
Here’s why I’m so excited about AuI (Authentic Intelligence), Everybody’s heard of AuI’s cousin Artificial Intelligence. AI is great, or will be someday. But personally, I don’t think it will ever replace AuI. Plus, Authentic Intelligence is fully developed, right now. In fact, you already own it. AuI is about using your experience and your knowledge to win business. It’s knowing this is a relationship business. A trust-based business. Pretty exciting, right? Authentic Intelligence, nothing artificial about it. Check out how Usherpa helps you use AuI to explode your business.
Webinars & events
LAST CALL, WOMEN IN THE MORTGAGE INDUSTRY! It’s not too late to register for tomorrow’s live “Ask Us Anything” event hosted by Breakthrough. Breakthrough is a new forum for women in the mortgage industry created by XINNIX Founder & CEO, Casey Cunningham, and New American Funding President & Co-Founder, Patty Arvielo to connect women mortgage professionals from coast to coast to empower and encourage one another to break through the personal and professional barriers to success. Questions for Patty and Casey can be submitted in advance on the Breakthrough Facebook event or by using #BreakthroughAUA on social media. Join the conversation today by following Breakthrough on Facebook, LinkedIn, Twitter and Instagram.
How can mortgage lenders leverage social media to generate quality leads? On Thursday, June 18 at 11 am PST, the California Mortgage Bankers Association’s (California MBA) Mortgage Technology and Marketing Committee is hosting a webinar, “An Innovative Social Media Solution that Powers Lead Generation.” Sun West Mortgage Company will share how they built an advanced digital marketing and social media process using the OptifiNow CRM platform and C Squared Social, a targeted digital advertising platform. Click here to register and learn about the power of social media-driven lead generation and automated marketing.
Join National Mortgage Professional Magazine and Calyx on Thursday, June 18 at 1:00 PM Eastern/10:00 AM Pacific, for “Tips for Success: Serving your Borrowers in a Remote World.” Properly serving your borrowers can be tricky these days, especially in this unpredictable lending environment. But experienced originators understand the power of adaptability. In this webinar, we’ll outline how the right technology can help you meet your borrowers needs and keep your pipelines flowing. Join us to learn why now is the time to evaluate your technology stack, key factors in offering a contact-free digital mortgage experience, and effective marketing strategies to keep your borrowers engaged. Click here to register.
10,675 Mortgage and Real Estate professionals have already registered! Join them for Sales Mastery 2020: LIVE Digital Experience. Take your business and your team to the next level with industry best practices and cutting-edge LIVE training with our incredible line up of over 40 game-changing presentations and 12 On-Demand Breakout sessions. Learn from world-class keynote speakers such as Todd Duncan, Dr. John C. Maxwell, James Clear, Dr. Rebecca Heiss, Katie Lance, and many more. Check out daily agenda updates here. Get a front-row seat to trusted industry experts presenting solutions to the most relevant issues impacting your business that will change your world for years to come. Don’t miss the Sales Mastery 2020 LIVE Digital Experience! Register Now! Executive leaders, bring your entire company with our ENTERPRISE DIGITAL SOLUTION! Celebrate Sales, Operations, Leadership, Marketing: EVERYONE for one low price with 30-days of viewing.
NAMMBA is hosting a special state of the industry town hall series titled The COLOR of COVID on Friday, June 19, from 1- 4PM ET. This special town hall will include an open discussion on how COVID 19 has impacted communities of color across the country and solutions the industry can implement to reduce foreclosures. Additionally, MBA’s SVP of Affordable Housing Initiatives, Steve O’Connor, will share information about MBA’s Black Homeownership Initiative. The event will bring together industry stakeholders, policy makers, and CEOs to discuss how we can focus on helping communities of color grow home ownership post COVID-19.
Freddie & Fannie in the news
Remember that no one is going to hire an advisor to eliminate their own job. In early February, the FHFA hired Houlihan Lokey Capital as a financial advisor “to assist in the development and implementation of a roadmap to responsibly end the conservatorships of Fannie Mae and Freddie Mac (the Enterprises). While developing the roadmap, Houlihan Lokey will consider business and capital structures, market impacts and timing, and available capital raising alternatives, among other items as outlined in the previously published Statement of Work.”
Yesterday it was Freddie Mac’s turn, as J.P. Morgan was picked “as a financial advisor to help facilitate the company’s recapitalization and exit from conservatorship. The announcement comes following a competitive request for proposal (RFP) process the company announced in May.” (Darn it! I knew that I should have returned their phone call a few weeks ago.) “J.P. Morgan will provide strategic counsel and perform a range of tasks to help facilitate Freddie Mac’s exit from conservatorship, including advice and assistance on valuation analysis, consideration of potential capital structures and assessment of capital raising alternatives.”
And, in an amazing coincidence, yesterday Fannie Mae announced it has hired Morgan Stanley & Co. LLC as underwriting financial advisor to assist in developing and implementing a plan for recapitalizing the company and responsibly ending its conservatorship. “Selecting an underwriting financial advisor is an important milestone in meeting Fannie Mae’s 2020 FHFA scorecard objective to prepare a responsible transition plan for a potential exit from conservatorship.
And the FHFA will reconsider its January 31 proposal that would have increased some requirements for mortgage companies working with Freddie & Fannie, the government-sponsored enterprises. Yup, the Federal Housing Finance Agency will re-propose its updated minimum financial eligibility requirements for Fannie Mae and Freddie Mac seller/servicers. The new benchmarks will take into account the impact from the coronavirus, and are a tangible step forward in the effort to end GSE conservatorship. Smaller lenders requested a delay in the proposal’s implementation and welcomed the move. Keep in mind that the new proposal might not be good news, as in capital requirements could actually go up.
Recall that the FHFA had proposed a higher capital requirement for single-family seller/servicers, particularly on their Ginnie Mae books of business. Although the minimum net worth standard would have remained unchanged at $2.5 million plus 25 basis points on the unpaid principal balance on their single-family Fannie/Freddie portfolio, seller/servicers would have been required to hold 35 bps on their Ginnie business. On top of that, the enterprise base liquidity requirement was set to go from 3.5 bps to 4.0 bps, but would have risen more sharply to 10 bps on the UPB of Ginnie loans.
Now we can all comment again, as hopefully the new requirements aren’t more onerous. For example, “The Community Home Lenders Association commends FHFA Director Calabria for his announcement that FHFA would be reproposing and reassessing updated financial seller/servicer requirements for Fannie Mae and Freddie Mae, in light of COVID-19,” said Scott Olson, executive director of the CHLA, said in a press release.
For Fannie Mae Lender Letter updates that extend temporary policies, view its Updates and Resources.
At the direction of FHFA and in alignment with Freddie Mac, Fannie Mae issued LL-2020-09, introducing a new temporary structure for incentive fees for completed repayment plans, payment deferrals/COVID-19 payment deferrals, and Fannie Mae Flex Modifications.
Fannie Mae LL- 2020-08 formalizes the previously announced policy change limiting servicers’ responsibility to advance principal and interest due for certain delinquent loans to four months of missed payments. This update will become effective for August 2020 remittance activity based on July 2020 reporting activity.
Fannie Mae has updated LL- 2020-07, COVID-19 Payment Deferral, to: communicate the $500 incentive fee and reference the new workout option incentive fee structure introduced in Lender Letter LL-2020-09; provide a revised COVID-19 payment deferral agreement; and clarify certain policies.
Fannie Mae update SVC 2020-02 includes changes to the pre-modification housing expense-to-income ratio calculation for imminent default and cash contribution, with updated instructions to servicers regarding escrow shortages that are part of the full monthly contractual payment, and an update to the Mortgage Assistance Application (Form 710).
Fannie Mae has a LIBOR transition page for information and updates to help you transition to alternative reference rates. Resources include FAQs, playbooks, and timelines for single-family adjustable-rate mortgages (ARMs), mortgage-backed securities (MBS), and credit risk transfer (CRT).
Vice Capital Markets reported an increase in trade volume over the past 90 days, “shattering” many of its internal company records. Since March, the monthly totals reaching $13.4 billion, and Vice saw a 13% increase in its client base. Read the full announcement here.
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Yesterday… The same news is somehow now new news? Equities were moved by Fed bond-buying and America’s reassessing of some reopenings. The Fed followed through on a pledge to buy corporate bonds through its Secondary Market Corporate Credit Facility, an emergency lending program that so far has purchased only ETFs. The Fed says it will follow a diversified market index of U.S. corporate bonds created expressly for the facility. Reports state 22 states have rising coronavirus cases including California, Texas, and Florida. Nine states have flat cases while 19 states have declining cases. The 10-year Treasury yield ended the day unchanged at 0.70 percent.
As far as economic releases went, the Empire State Manufacturing Survey contracted slightly, but was well above expectations. It’s important to take these upcoming readings with a grain of salt, as month-over-month figures could paint a better picture than reality after such truly depressed conditions in April and May. NEC Director Larry Kudlow says he expects a V-shaped recovery, and wants to offer a $600 incentive for Americans to return to work because he believes enhanced unemployment benefits are a “disincentive” to work. Finally, the Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased microscopically from 8.53 percent of servicers’ portfolio volume in the prior week to 8.55 percent as of June 7. According to MBA’s estimate, almost 4.3 million homeowners are now in forbearance plans.
Today’s economic calendar is already underway with the Bank of Japan leaving rates and asset purchases unchanged, and in the U.S. May retail sales (bouncing back at +17.7 percent, +12.4 percent ex-auto). Later today brings Redbook same store sales for the week ending June 13, May industrial production and capacity utilization, the NAHB Housing Market Index for June, and Fed remarks from both Vice Chair Clarida and the semi-annual monetary policy testimony from Chair Powell. The NY Fed will conduct two FedTrade purchase operations totaling up to $4.349 billion starting with $1.372 billion UMBS15 2 percent and 2.5 percent followed by up to $2.977 billion UMBS30 2.0 percent through 3.0 percent. We begin the day with Agency MBS prices worse/down a few ticks and the 10-year yielding .76 after the solid retail sales figure.
“Rob, here in Tennessee I am not officially allowed to open my pub. But real estate agents are allowed to buy and sell houses with viewings. So… I am officially putting my pub on the market as of tomorrow. Viewings are between 11AM and 11PM, no appointment necessary, but you must buy a beer while viewing.”
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, “Reducing Friction”, focused on operations changes. 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.
(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.)