June 17: AI, verification, LOS, renovation, valuation, HELOC products; VA, HUD, Ginnie changes & modernization efforts

This week includes Juneteenth, a reminder of how slow news traveled in the past, as well as the Summer Solstice. Here in Hawai’i, in terms of daylight, the difference between summer and winter solstices is only about 2 ½ hours. (Compare that to 7 ½ hours in Seattle or 6 hours in Boston.) People are already in town for the MBAH yearly conference. With MBA Chairman Mark Jones joining us this year, as at other state and regional events some of the talk is bound to include state legislative and regulatory committee work, the Mortgage Action Alliance and MORPAC, advocacy and lobbying, and the MBA’s state relations committees. At the originator level, no lender operates in a vacuum. Here’s a very handy website for you to research your own company as well as your competitors; Just type in the name of the company at the top. (It’s lacking in niceties but is chockfull of origination data including branch data.) Today’s podcast is found here, and this week’s is Sponsored by Quontic whose mission is to help creditworthy borrowers obtain home loans and give them the “yes” they’ve been waiting for. Hear an interview with Lender Price’s Paul Orlando on the launch of Bulk Price API, new PPE features, and what he’s been working on as it relates to AI.

Software, products, and services for lenders and brokers

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Attention loan officers! Are you struggling to earn in today’s volatile rate environment? With Figure’s platform, borrowers get cash fast without giving up their existing low-rate mortgages, and you still get paid! Many of the biggest lenders already offer HELOCs through Figure’s platform, so what are you waiting for? The borrower-driven application process is low-touch and fast, with many finishing in as little as 1 day. Borrowers can apply in as few as 5 minutes, verify income and property value online, get autopay and credit union discounts, and in some states, even complete an e-notary, all while getting a lower rate than many of our competitors. When you’re ready to become a Figure Partner, email Anthony Stratis.

Registration for the 2024 Loan Vision Innovation Conference (previously the Loan Vision User Conference) is now open! With a focus on innovation, growth, and doing more with less, our new and improved annual conference is taking place in Chicago, Illinois from Monday, September 23rd – Wednesday, September 25th. This conference will deliver highly recognized names in mortgage banking as our speakers, enhanced social networking events, and a fresh agenda for both executives and users and will be aimed at redefining industry standards and setting a new benchmark for excellence. If you’re interested in sponsoring this event, please contact Haleigh Heilman. To learn more about this conference, register, and book your hotel, please visit here.

Opteon is officially your one-stop shop for all your valuation needs, as it has brought Alternative services under the Opteon umbrella! Formerly known as Spectrum, the Alternative product offerings will now be part of the Alternative Products division of Opteon. They are utilizing their in-house technology platform, Jaro, to serve as the single source Order/Vendor Management System. Through this migration, customers can now order multiple valuation products from a single source. Learn more now.

TPO Go offering specialized support for renovation lending programs! Wholesaler Third Party Origination Go (TPO Go), has expanded support for broker partners to facilitate renovation loans for its clients. TPO Go has offered a variety of renovation loans since its inception, but recently added tools and resources for brokers, including an online resource library and training certification programs. The firm is also joined by subject matter expert Sherri Eckles, Senior Vice President of Renovation and Construction Loan Programs, who provides training for internal teams and broker partners, and facilitates and expedites loans in-process. In addition, live real-time support is available for brokers and contractors from Renovation Specialist Sam Kerrigan. TPO Go offers a wide variety of loan programs, including loans from Fannie, Freddie and Ginnie, as well as niche renovation and HFA programs. Brokers also benefit from USDA, VA, TPO GO 100/Chenoa and a proprietary first-time homebuyer program.

Why does Byte offer one-year LOS contracts? Because we find once lenders use Byte, they love it. When you do business the right way, you don’t have to lock your clients in to long contracts. Powerful automations and business rules, unlimited custom screens and fields, a flexible API, built-in compliance tools, and a US-based support team that’s second to none are just some of the reasons Byte clients love working with us. If you’re tired of feeling like a number with your current LOS, request a demo or visit bytesoftware.com.”

You may have heard by now that Truv saves lenders 60-80 percent on verification of employment and income, but did you know that re-verifications are also included for free? Most lenders pay $60+ for VOIE during application in the loan origination process, and then they are charged this same amount again 10 days before close when they have to re-verify the borrower. That’s over $120. If the borrower has a co-borrower, then it’s $240. Double the amount. For one file. When a borrower verifies with Truv, it’s at a fraction of that cost, and you get up to five re-verifications free of charge. The savings with Truv may be substantially more than you realize. Let’s chat.

NEW: Maxwell’s Clear to Close podcast tackles all the mortgage market questions you’ve been dying to ask. Ever wonder how AI and mortgage technology will evolve over the next five years? How about what it would take for housing inventory to improve in the foreseeable future? Been pondering how the upcoming election might impact mortgage lending? In this special episode of the Clear to Close podcast, hosts Alan and Anthony dive into the burning questions asked by you—our audience. To hear the Maxwell team’s thoughts on a range of subjects, from market speculation to long-term views of the mortgage industry, don’t miss this interactive episode. Click here to listen to the newest Clear to Close episode: Audience Q&A.

VA, FHA, Ginnie, HUD, and government program updates

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The percentage of veterans living in places like Florida, San Diego, and Hawai’i tend to be higher than in other areas. Beginning Aug. 10, 2024, eligible Veterans, active duty service members, and surviving spouses who use their VA home loan benefits can opt to pay for certain real estate buyer-broker fees when purchasing a home.

On October 2, servicers of loans guaranteed by the Department of Veterans Affairs will be required to implement the Veterans Affairs Servicing Purchase, or VASP. The news prompted Donna Schmidt, Founder, WaterfallCalc, to write, “The VA had been trying to come up with a ‘post-COVID’ workout option (one that provided the veteran borrower with more payment relief than their standard loan modification loss mitigation option) which under today’s high interest rate environment only helps to bring the loan current. But the new modified mortgage payment is significantly higher than the pre-modification mortgage payment.

“After months of waiting, VA finally issued their new program which allows for the servicer to essentially sell the loan to the VA which then modifies the terms to allow for a lower payment. The terms could not be offered in a normal GNMA pool. The servicer gets the delinquent loan off their books (though loses potential future income), while the borrower is brought current and offered a lower monthly payment.

 

“The issue is that VA has not released sufficient details on reporting, documentation etc. for most servicers to feel comfortable in launching this program at this time. Many servicers were burned after VA began offering their version of the partial claim. The details were sparse, yet servicers were expected to begin offering the option to delinquent borrowers affected by COVID. It was only after many Partial Claims were completed that VA clarified documentation requirements, forcing many workouts to be completely redone, at major costs to servicers. So, despite the benefits of the new program, most servicers are hesitant to be the first to implement it until VA publishes more details.”

The MBA reported that Karen Kreutziger Powell, CEO of Flat Branch Home Loans, testified at a hearing on pending legislation before the Committee on Veterans’ Affairs Subcommittee on Economic Opportunity.

Meanwhile, there’s a lot going on with Ginnie Mae. The department is trying to staff up. Management has a desire to move to a loan-level construct rather than at the pool level. The entire computer system is viewed as outmoded, and Ginnie is trying to update it. Ginnie Mae Central is a thing. Ginnie is carefully watching prepayment speeds to see if certain lenders or servicers are exhibiting signs of being outliers in terms of churning.

Ginnie Mae’s All Participants Memorandum APM 24-09 announced updates to its Digital Collateral Program Guide (eGuide). These updates follow the previous announcement allowing for the commingling of loans with eNotes and paper notes in the same pools. Ginnie Mae is updating several eGuide sections to support commingling, provide clarification, and make other necessary changes designed to address questions and other feedback received from program participants.

HUD updated the 4000.1 to revise the requirements pertaining to documenting the transfer of gift funds. HUD has added additional flexibilities. The handbook was updated, as follows (underlined text indicates the change). The Mortgagee must verify and document the transfer of gifts from the donor to the borrower, in accordance with the requirements below: For gifts that will be verified prior to settlement, the Mortgagee must obtain one of the following: The donor’s bank statement showing the withdrawal and evidence of the deposit into the borrower’s account, a copy of the donor’s canceled check and evidence of deposit into the borrower’s account, a copy of the donor’s withdrawal receipt and evidence of deposit into the borrower’s account, or evidence of the electronic transfer of funds from the donor’s account to the borrower’s account. For gifts that will be verified at settlement, the Mortgagee must obtain one of the following, evidencing payment to the settlement agent: evidence of electronic transfer of funds from the donor’s account, bank certified check, cashier’s check, or other official bank check. For gifts of land, the Mortgagee must obtain: Proof of ownership by the donor, and evidence of the transfer of title to the borrower. These guideline updates may be implemented immediately but must be implemented for mortgages with case numbers assigned on or after August 19, 2024.

National Homeownership Month is this month, and the FHA “remains committed to providing more opportunities for first-time and low- and moderate-income homebuyers, including those in underserved communities, to attain stability and the wealth-building potential of homeownership.” To learn more, visit HUD’s National Homeownership Month 2024 web page.

In Multiclass Participants Memorandum (MPM) 24–01, Ginnie Mae announced updates to the Multiclass Securities Program. These updates inform interested participants that, effective with issuances on and after June 12, 2024, Platinum Participants may aggregate MBS Pool Type C ET into Platinum Pool Type C EP and HMBS Pool Type H SA into Platinum Pool Type H PE. For more information regarding the Multiclass Securities Program updates, see MPM 24–01.

Effective June 3rd, 2024, PHH Mortgage is making updates to FHA Eligibility for Best Efforts Commitments. Additionally, updates and clarifications to its Non-Agency Gold product offerings were announced.

Capital Markets: why the Fed uses a pencil

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The Fed now expects just one 25-basis point cut this year, down from the three reductions it penciled back in March. But why? It is hard to argue that our economy needs stimulating through a Fed rate cut.

Geopolitical concerns had investors cautious to close last week, as the uncertainty surrounding the snap elections in France drove some safe-haven interest, pushing both bond yields and mortgage rates lower. Last week’s softer than expected inflation data (core consumer prices, ex-food and energy, eased on a year-over-year basis and producer prices also softened in May by 0.2 percent month-over-month) was welcome news to the markets following May’s stronger than forecast jobs report from the week prior.

The other main event last week was the Federal Open Market Committee (FOMC) meeting and press conference, which saw the committee’s future expectations for the fed funds rate range implying only one rate cut in 2024. However, during his post-statement press conference, Chairman Powell suggested it may have been a toss-up for committee members as to whether one or two cuts would happen. Current inflation data is not consistent enough for the committee to be certain that prices are under control and heading towards the central bank’s 2 percent target, although the FOMC did acknowledge that significant progress has been made. Cleveland Fed President Mester called the latest data showing softer inflation “welcome news,” but said she would like to see a few more months of good data before considering lower interest rates.

Yes, our central bank “penciled” in a single cut for 2024 at its latest meeting, but that’s why central bankers use pencil. Several components of the Fed’s favored inflation measure, the personal consumption expenditures (PCE) price index, helped drive the May producer price drop. At least as far as consumer perceptions are concerned, an economic soft landing for the U.S. got a little harder on Friday. The University of Michigan’s consumer sentiment index tumbled for the third consecutive month in June as high prices continued to take a toll on views of personal finances, defying economists’ estimates of a rise for the headline reading. A measure of consumers’ current assessments of their personal finances fell to the lowest reading in seven months, and views on economic conditions are the worst since late 2022. Consumer sentiment is now at roughly the midpoint of where it has been over the past two years. The growth in prices may be coming down, but prices are not.

This Juneteenth holiday week, with some companies open and others not, opens today with the non-market-moving NY Fed manufacturing index for June, expected to improve from May. Later today brings various short-duration Treasury auctions and Fed remarks from Philadelphia President Harker as well as Governor Cook. Economic news over the remainder of the week includes retail sales for May, business inventories for April homebuilder sentiment for June, Philadelphia Fed manufacturing, housing starts and building permits for May, June PMI flashes, existing home sales, and leading indicators. Monetary policy decisions will be forthcoming from the RBA tomorrow and SNB, Norges Bank, and the Bank of England on Thursday. We begin the week with Agency MBS prices roughly unchanged from Friday’s close and the 10-year yielding 4.24 after closing last week down 22 basis points over the course of the week at 4.22 percent; the 2-year is at 4.71.

As a teenager I had a summer job pumping gas. One week an older guy drove up and said he wanted a fill-up. Then he got out of the car with an umbrella, opened it, and followed me around as I worked, holding the umbrella over my head to keep the sun off me. I awkwardly thanked him as he paid his tab and drove away.

A week later, he came back for a fill up. Again, he got out of the car with the umbrella and opened it, but this time he just stood there watching me work.

I asked, “So you’re not gonna use that to keep the sun off me this time?” and he retorted, “Watch it, young man. Fuel me once, shade on you. Fuel me twice, shade on me!”

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 titled, “Catastrophe and Climate Risk Is Only Increasing”. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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Rob Chrisman