June 18: Letters on housing & the economy (allowing gazumping!) and cutting costs, vendor news: Saturday Spotlight: Change Wholesale

Yes, we all knew that rates were going to go up. After all, 30-year mortgage rates weren’t going to stay in the 2 percent range forever. But the speed at which they have in 2022, and the volatility in the bond market, has caught everyone by surprise. The press, and lenders, are watching affordability take a hit and lock volume has plummeted. Someone told me that the “average” mortgage payment on the “average” loan on the “average” house has gone from $1,200 up to $2,000 per month. Capital markets ace Brent Nyitray points out that, “HPML/APOR fails aren’t helping either. I guess the CFPB never envisioned rates rising this far this fast.” Changes in lending aren’t confined to home loans. As an indication, auto lenders have been “pumping the brakes” on riskier buyers, who until recently didn’t have all that much trouble getting a hold of financing for vehicles. This time last year, 8 percent of borrowers getting financing from the company Global Lending Services didn’t have a credit score, a level that last month was down to 5.6 percent. Santander’s subprime arm cut down the fraction of its auto loans that went to buyers without a credit score from 12 percent of its loans at the start of 2020 to 8 percent this year. Now they’re worried that with a worsening economy, the customers who the computer said looked like they might not be able to actually afford the car may not in fact be able to afford the cars.

Saturday Spotlight: Change Wholesale


“The only owner-occupied loan that doesn’t require income, employment, or a DTI ratio to qualify.”


Change Wholesale, a mission-based company focused on closing the wealth gap through home ownership, is America’s largest Community Development Financial Institution (CDFI). Our CDFI certification from the U.S. Department of Treasury allows us to help brokers, borrowers, and communities in ways other lenders and banks simply cannot.


What should everyone know about Change Wholesale?

Change Wholesale is on a mission to deliver home financing solutions to prime, credit-worthy borrowers who may have been neglected, ignored, or excluded by other lenders and banks. Our goal is to help more Americans achieve their dreams of home ownership, one closed loan at a time.


How big is Change Wholesale? 

Change Wholesale is the nation’s largest CDFI by origination. We are a vertically integrated organization that offers licensed services throughout the United States, employs over 700 talented staff, and works with over 1,600 of the nation’s best lending partners.


How important is diversity and representation at Change Wholesale? 

Change Wholesale is proud to have a Community Advisory Board (CAB), leadership team, and staff that is as diverse as the communities we serve. Diversity and representation don’t end with our team, however. As America’s CDFI, we create custom programs that are tailored to meet the needs of more quality borrowers from all walks of life.


What kind of social impact has Change Wholesale had?

In 2021, we committed to lending $2 billion to expand Black and Latino home ownership. A year later, we have far exceeded our goal by successfully funding over $2.9 billion in loans to Black and Latino families, and we’re not done yet!


Want to know more about America’s CDFI? Visit ChangeWholesale.com today!

(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)


Cost-cutting is the name of the game


Every lender out there is trying to cut costs, and at over $10,000 per loan, they should. And one huge cost for many companies is employee health care. When was the last time that you did a review of yours? Not only that, but costs and debt spill over into lending. Over 100 million Americans, including 41 percent of American adults, have medical debt, and about half of the country has been saddled with debt because of medical or dental bills in the past five years. About 1 in 5 don’t expect they’ll ever pay the debt off. The new data comes just as recently as hospitals in 2019 recorded their most profitable year ever, with profit margins of 7.6 percent. That has a cost: 55 percent of 18- to 29-year-olds, 69 percent of 30- to 49-year-olds, and 60 percent of 50- to 64-year-olds have had medical debt in the past five years.

Of course health care is only one of the costs lenders face. I received this note from Tricia Migliazzo from Lenders One. “Rob, we have been inundated with member requests to review their current spend for credit, flood, and verification products to offer savings through our credit agency and our reseller programs. Our dialogue now is not only with CEOs/Presidents, but with CFOs as their primary objective is cutting costs fast and this is where we are seeing the largest financial impact in the shortest amount of time.

“During the past two years of record volumes and profitability not much attention was given to cost containment because everyone was busy closing loans. The amount of savings we are able to offer has been very eye opening and we are creating substantial ROI for our members. As you can imagine, our pipeline is very large and growing daily. It is our longstanding mission to create value for our members by increasing their profitability, and that has not been more important and truer than today.”

Housing and the economy


Our economy is driven by jobs and housing. With the run up in home prices over the last two years, combined with the recent increase in mortgage rates, affordability is suffering. I received this note from Keith in Nevada. “Rob, what planet are some people living on that they don’t see what is happening? Even Hannity was able to follow the linkage between an affordability decline and a consequent housing market shrinkage. Does anyone think Pulte and other builders are going to be banging out new housing with a public that can’t afford to pay the mortgage?

“The stupidity of the Fed was in providing funds that allowed the gazumping of house prices while the government didn’t step in to rein in the Blackrocks of this world from ‘hoovering up’ large swaths of housing for rentals. The use of interest rates to dampen inflation is not a tool you can use in an overpriced housing market since most of us will ride out higher gas prices and supermarket hike pricing. But when you pierce the psyche of homeowners who perceive to have lost value in their homes, you are going to prolong the recovery expedentially. (Pelosi, et al, love that word).

“Why, oh why, do we let these people run our country? And here I include the Fed. You know the phrase, ‘Ignorance is bliss.’ Well, its being transformed into, ‘Ignoring is bliss!’ This perversion of the supply and demand principle is so dangerous.

“For example, look for your auto Insurance to increase substantially as the cost of repairs skyrockets due to staff shortages/wage hikes and supply shortages/increased cost of parts. It is probably same for home insurance. Think they will find their way into the inflation calculation? Right. I don’t think the brain trust in Washington DC appreciates just how quickly a housing recession will happen. They have been pontificating about low unemployment and strong consumer spending. Both will be seriously impacted once homes stop being sold.

“Seems people have become so accustomed to the seemingly never-ending property price increases, that they don’t see how fragile that is. Certainly once we have 6% mortgages over summer, and all those wannabe first timers can’t qualify, or more importantly, can’t afford, then the resolution is one track only: price depreciation to get them re-connected.

“I’m ready to throw out all my economic textbooks as they don’t count anymore. Why do house prices virtually double in a pandemic when the economy and employment have tanked? Because we weren’t building new homes quick enough? Please, do they think we’re that naïve? That shouldn’t account for these price hikes.

“Just look at the oil market. Just how much of a shortfall in world oil supply is there? Enough to send prices from $50 to $122 a barrel… 144 percent higher? Russia is still selling its oil despite the war (and at these prices, doing very well). Where’s the shortfall? Oh the old refinery shortage excuse. We’re being played for fools by the oil producers.

“But returning to housing and lending, Quontic, which recently cut its No Ratio program, has its finger on the pulse of the industry. The company is telling the market, ‘Bad times are ahead so wake up.’ How can a housing recession be avoided when price appreciation was based on the ‘temporary’ inability of house builders to build and hedge funds gobbling up inventory? And we had unemployment at how many million? Used autos were selling for a premium because of limited availability but that fell away once new cars arrived onshore. Shouldn’t housing be the same? The high cost of affordability will impact the market sooner than later.”

On a side note, back in December, six months ago, Keith wrote to me saying, “Like many of your readers, I’m still trying to understand where the surge in home prices came from. So far, I’ve heard that worries on money supply have sent investors rushing into real estate, people working from home began to realize they needed more space and went looking, the exodus from large cities has people paying over the top in heated competition with others fleeing the cities, and finally pent-up demand stifled during the pandemic exploded onto the market causing prices taking off.

“All this would be understandable in a non-pandemic economy. But while the economy is recovering from its pandemic plunge, it’s not fueled by productivity but printed money. And inward looking for our own industry, even 3% rates doesn’t allow first time buyers to be able to get on the housing ladder. Never mind 4% or more once the Fed acts in 2022. All seems to point to a future housing recession.”

Thank you, Keith!

Vendor news


Third party providers for residential lenders, whether independent mortgage banks, banks, credit unions, or brokers, have a plethora of offerings. Let’s take a random look at who has been doing what recently.

Mortgage Capital Trading, Inc (MCT®), a fully-integrated provider of capital markets services and technology, announced a new technology for MSR buyers to produce more granular pricing for mortgage servicing. The new feature leverages an application programming interface (API) to connect MSRlive!, to clients’ systems for more precise and accurate loan-level pricing in real time. This new functionality informs users and helps servicing buyers avoid over-paying for potentially underperforming assets, available to MSR buyers that want to receive more granular pricing for their bidding today. Connect with MCT to start securing company profitability with a wide array of software systems and expert consultants.

Enterprise quality management and control software, ACES Quality Management® (ACES), released its quarterly QC Industry Trends Report covering the fourth quarter (Q4) and full calendar year (CY) of 2021. The latest report analyzes post-closing quality control data derived from ACES Quality Management & Control® software. Some notable findings from the Q4 2021 report include overall critical defect increased 0.08% to 1.95%, a change of 4% from the prior quarter. Appraisal-related defects rose in Q4 2021 after experiencing minimal levels throughout the last refinance. Conventional lending share is now 8 points below the pandemic peak amid a mini resurgence in FHA lending. View ACES Q4 Mortgage QC Industry Trends Reports, ACES reports are available for download, free of charge.

An integration between independent title and settlement service provider, Boston National Title Agency, and CLARIFIRE®, a default mortgage servicing and loss mitigation application, was recently announced. Servicers reliant on CLARIFIRE to streamline workflow and workout processes will further benefit and increase efficiency by automating requests and responses for property reports, MMP’s, and similar documentation from Boston National Title, without ever going outside of CLARIFIRE. With these additional services delivered rapidly to their dashboards, they have robust visibility and capabilities. Nathan Bossers, President of BNT, stated “As an Incenter LLC company, Boston National Title shares Clarifire’s commitment to helping servicers work smarter. As the industry prepares for increased loan modifications and defaults, our integration will move them closer to this goal.”

As community banks look to bring loan servicing in-house amid the current rate environment, Chickasaw Community Bank was searching for a modern mortgage servicing software partner. After a detailed review of the market, Chickasaw chose fintech company Sagent to power its enterprise and homeowner experience across the entire loan lifecycle. Sagent’s tech stack will accelerate Chickasaw’s move to bring loan servicing in-house without sacrificing the exceptional service for which Chickasaw is known. The announcement details the 10-year deal between Chickasaw Community Bank and Sagent.

First Guaranty Mortgage Corporation® announced a new addition to Maverick Solutions™, its robust suite of proprietary Non-QM products with the launch of its Stand-Alone Second Lien program, known as Explorer Equity. Specifically designed to increase opportunities for homeowners who want to access equity in their home without disrupting the rate they may have previously locked in on their primary mortgage. “The needs of borrowers today can change quickly as the market fluctuates, and we must be nimble and ready to adapt with it” said Paul Jones, SVP of Non-QM Development & Production. Although currently limited to a Stand-Alone offering, FGM plans to expand to offer a piggy-back option quickly.

Leading provider of Intelligent Document Processing (IDP) solutions, Infrrd, announced the unveiling of an industry-first 100 percent accuracy offering for the processing of high volumes of complex documents spanning many variations of document types including invoices, mortgage-related documents, Form W2s, tax paperwork and more. With this new offering, Infrrd is promising its customers they can achieve unprecedented levels of success in the extraction and processing of data from within their documents. Infrrd’s IDP software platform, coupled with its team of data experts (which provides as needed human-in-the-loop processing), has the ability to learn from initial errors in the processing of data and quickly correct these to ultimately reach this 100 percent accuracy target.

(Warning: Rated PG, I guess. Don’t read this if you’re easily offended.)

A firefighter was working on the engine outside the station, when he noticed a little girl nearby in a little red wagon with little ladders hung off the sides and a garden hose tightly coiled in the middle.

The girl was wearing a firefighter’s helmet. The wagon was being pulled by her dog and her cat.

The firefighter walked over to take a closer look.

“That sure is a nice fire truck,” the firefighter said with admiration.

“Thanks,” the girl replied.

The firefighter looked a little closer. The girl had tied the wagon to her dog’s collar and to the cat’s testicles.

“Little partner,” the firefighter said, “I don’t want to tell you how to run your rig, but if you were to tie that rope around the cat’s collar, I think you could go faster.”

The little girl replied thoughtfully, “You’re probably right, but then I wouldn’t have a siren.”

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, “The All-Cash Phenomenon.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


(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 2022 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