June 18: Ops, LO jobs; digital, QC, cap. mkts. products; Ginnie & FHA changes & trends

Capital markets folks focus on risk management every day. The public is getting a taste of another kind of risk management when they go to a bar, tattoo parlor, or hair salon. What happens when the government doesn’t specify what masks are acceptable? Should COVID just be part of our health landscape, as many have suggested from the outset, and we should become accustomed to it? (One reader jokingly wrote, “No one should be allowed to drive again until there are no fatal accidents for 14 consecutive days. Then we can slowly begin to phase in certain classes of people who can begin driving again, but only at half the posted speed limit, and wear a helmet.” But don’t scoff: not everyone who dies is 85 and in a nursing home, as plainly detailed in Orange County’s numbers.) While there is transformation everywhere, some things never change, which is the topic of the lead article in STRATMOR Group’s June Insights Report. STRATMOR Sr. Partner Jim Cameron analyzes the three immutable economic truths that have not wavered throughout the months of the pandemic (the laws of supply and demand, unintended consequences and cash is king) and the market reactions and the outcomes show the constancy that exists even amidst even the chaotic change we’ve experienced so far this year.


“Are you shifting your career path to financial services? Business is booming at Caliber Home Loans as we expand rewarding career opportunities in several regions with best-in-class preparation to guide your success. Our essential team members help fulfill Caliber’s mission of making customers’ home ownership dreams a reality, even during these challenging times. Caliber’s vast military support was evidenced in May as we set a company record of Veteran’s Administration (VA) Loans funded in a single month. The fact that it occurred during National Military Appreciation Month makes it especially gratifying! We have steadily increased the total number of VA loans by 95% year over year. Caliber welcomes Veterans to join our team of exceptional service! Visit the Caliber Careers website for opportunities across the organization!”

It’s time you be in business for yourself, not by yourself. The Motto Mortgage network supports entrepreneurship through industry-leading tools and full-service assistance, all for a flat, monthly fee. You’ll have complete and customized access to best-of-breed technology, business support tailored to you, and enterprise-level wholesale lender relationships for all your loan origination needs. When you own a Motto Mortgage franchise, you own an innovative business that funds dreams and propels your career growth. Discover how franchise ownership can put the control in your hands and the heavy lifting in someone else’s or email us at franchise@mottomortgage.com for more information.”

Lender services and products

SolomonEdwards and Constant have announced a cooperative agreement to offer TotalMod to help lenders and servicers manage the imminent spike expected in loss mitigation activity once forbearances expire. TotalMod includes Constant’s self-service platform that automates loan modifications and other workout solutions, end-to-end without human intervention, and SolomonEdwards’ best-in-class regulatory and compliance services. TotalMod is intended to help servicers avoid large staffing campaigns, reduce phone channel volume, and maintain compliance as enforcement and supervisory actions increase. The technology is ground-breaking in that it progresses borrowers through a series of steps to determine ability and willingness to pay, crafts the right hardship offer based on that analysis, and presents documents for e-signing.

“Today AFR Wholesale celebrates, alongside our business partners, 13 years of bringing families home! Sending a heartfelt ‘thank you’ to our clients, without whom this would not be possible. We are thrilled to celebrate another year focused on helping families. AFR Wholesale fully invests in the success of our business partners by providing an extensive portfolio of products and services, industry-leading technology, professional expertise, and continuous educational opportunities. For a limited time, AFR Wholesale is also pricing its 60-day lock at the 30-day lock price. For more information about becoming an AFR Wholesale partner, go to afrwholesale.com, email sales@afrwholesale.com or call 1-800-375-6071.”

Register for MBA Education’s highly informative webinarMOVING FORWARD: STRATEGIES FOR SECONDARY MARKETING SUCCESS, on Tuesday, June 23rd at 2:00 PM ET. Featuring industry veterans from Optimal Blue and Wells Fargo, this interactive webinar will examine market conditions and how the mortgage industry is reacting to economic changes in the wake of COVID-19. As the industry moves toward a steady, decisive recovery, the panel of experts will share successful secondary marketing strategies to help lenders navigate these volatile and unique times. For their guests, Optimal Blue has organized complimentary access to this MBA webinar. Please contact sales@optimalblue.com to receive a promo code that will waive your $299 registration fee.

CY 2019 Mortgage QC Industry Trends Report: “Market stability contributed to an overall better 2019 for lending quality. These improvements, however, will be severely tested as data comes in for the coming quarters as we start to see COVID’s impact on mortgage lending”, according to ARMCO EVP Nick Volpe. The Report Summary showed that Q4 2019 ended with a defect rate of 1.73%, an increase of 11% from Q3 2019. The share of conventional loans increased from 56.40% in CY 2018 to 61.99%. Purchase share fell 7.5% in CY 2019 as compared to CY 2018. Regulatory compliance issues were down 51% year-over-year. Loan Package/Documentation defects were volatile in CY 2019 but did post a 12% improvement compared with CY 2018. Income, assets, and credit related defects made up 53% of all critical defects in CY 2019VIEW REPORT.

MeridianLink’s LendingQB, a leading provider of SaaS loan origination technology, has integrated with eClosing platforms to provide a superior digital mortgage lending experience, from the application, and processing, to eClosing. The integrations will allow lenders, borrowers, and settlement agents to complete the eClosing process in a streamlined, safe, and secure way. The first integration with Docutech’s Solex eClosing is complete with IDS and DocMagic to follow. These integrations with LendingQB will bring further process improvement and help lenders safely meet the needs of mortgage lending customers. LendingQB is a browser-based mortgage loan origination system that provides the tools to help mortgage lenders decrease costs by streamlining processes through automation, improves the borrower experience, and increases profitability. This mortgage loan origination system is secure and compliant, integrating with most major core platforms to help eliminate tedious work and reduce errors. To schedule time to speak to someone about LendingQB and eClosing integrations, please click here.

Bringing back an oldie but a goodie episode from the Clear to Close podcast from Maxwell. Released earlier this year, with guest, Patty Arvielo, Co-Founder and President of New American Funding, the episode “Diversity and Inclusion in the Mortgage Industry,” is particularly timely in this moment as unresolved racial tensions in our country come to a head. It’s on all of us to create an open, equal, and welcoming environment in both the workplace and our daily lives. Listen and subscribe through your favorite podcast source below! See all episodes and listen in your browser at  www.himaxwell.com/podcast, Apple, Google Play, Spotify, and Soundcloud.

FHA & Ginnie news

Yes, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend their single-family moratorium on foreclosures and evictions until at least August 31, 2020. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The current moratorium was set to expire on June 30th.

Likewise, the Federal Housing Administration (FHA) announced a two-month extension of its foreclosure and eviction moratorium through August 31 for homeowners with FHA-insured Single Family mortgages. The extension “applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, and continues to direct mortgage servicers to: Halt all new foreclosure actions and suspend all foreclosure actions currently in process, excluding legally vacant or abandoned properties; and cease all evictions of persons from FHA-insured Single Family properties, excluding actions to evict occupants of legally vacant or abandoned properties.

The extension brought up the topic of FHA’s forbearance policy. “FHA requires mortgage servicers to offer borrowers with FHA-insured mortgages up to a year of delayed mortgage payment forbearance when the borrower requests it. FHA does not require a lump sum payment at the end of the forbearance period.”

And this week the FHA announced it would impose a 20% first loss penalties on properly underwritten loans that go into forbearance post-closing but before FHA insures them. The Community Home Lenders Association is calling on FHA to rescind and rework this policy. “From the lenders’ perspective, it could create a financial hit on properly underwritten loans from something they have no control over: borrowers invoking the new Congressional right to invoke forbearance. CHLA is also concerned that this creates incentives for lenders to apply credit overlays based on things like guessing who might next invoke forbearance. Put simply, the small savings FHA might make from this policy could be dwarfed by the outsized upfront access to credit impact in terms of underwriting new loans.

FHA published Mortgagee Letter (ML) 2020-16Endorsement of Mortgages under Forbearance for Borrowers Affected by the Presidentially-Declared COVID-19 National Emergency consistent with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here is the press release.

FHA published ML 2020-18 announcing the implementation of a new digital submission process for single or bulk loss mitigation home retention claims. Beginning Monday, June 15, these claims may be processed through the FHA Catalyst: Claims Module. Submission of loss mitigation home retention claims through the FHA Catalyst: Claims Module is optional.

The FHA Single Family Housing Claim Filing Technical Guide has been updated.

Ginnie Mae has added “Update for File Layouts for Single Family MBS Loan Forbearance Disclosure”. Ginnie Mae issued MPM 20-02 to inform interested participants of the updates to the Stripped Mortgage-Backed Securities (SMBS) program, effective for June 2020 transactions. And Ginnie Mae posted February 28 Notes and News. This post includes information on Issuer Operational Performance Profile Enhancements Overview and a reminder regarding Annual Audited Financial Statements.

Ginnie Mae announced that issuance of its mortgage-backed securities (MBS) totaled $57.85 billion in January, providing financing for more than 223,938 homeowners and renters. A breakdown of January issuance includes $55.46 billion of Ginnie Mae II MBS and $2.40 billion of Ginnie Mae I MBS, which includes $1.96 billion of loans for multifamily housing. Ginnie Mae’s total outstanding principal balance of $2.130 trillion is an increase from $2.053 trillion in January 2019.

Don’t forget that as part of Wells Fargo Funding response to the COVID-19 national emergency, it implemented a temporary minimum Loan Score of 680 for all FHA, VA, and Guaranteed Rural Housing (GRH) Loans, regardless of automated underwriting system (AUS) decision.

Orion Lending has made several changes to its FHA program underwriting criteria. Details can be found here.

PRMG posted Product Update 20-15. Products with updates include Chenoa FHA Edge and FHA Rate Advantage, CHFA FirstStep, both Ruby and Diamond Jumbo, Expanded Access, Choice and Choice Plus Conforming and Jumbo, Hybrid Conforming and Jumbo, and Investor Solution Products, VA and FHA products including VA IRRRLs and FHA Streamline, Agency DU Portfolio and HomeReady.

Recall that AmeriHome posted that the minimum decision credit score for streamline government loan transactions, FHA Streamline, VA IRRRL, and USDA Streamlined, will be 680. Effective for new commitments issued on and after Friday, April 3, 2020, the minimum decision credit score for non-streamline government loan transactions will be the greater of the program guide requirement or 640* This requirement applies to the following: FHA Standard Purchase and Refinance, VA Purchase, VA Cash-Out Refinance, USDA Purchase, USDA Rate and Term (Non-Streamlined) Refinance. (That was unchanged from the March 26, 2020 announcement, 20200307-CL Product Announcement – Minimum Credit Scores for Government Loans.)

PCF Wholesale available products include VA IRRRLs.

Capital markets

Rates haven’t done too much since last week when the Consumer Price Index fell 0.1 percent and the Producer Price Index increased 0.4 percent in May after seeing large declines in April. Recall that most of the gain in the PPI was attributed to a rebound in oil prices from record lows. Unemployment numbers continue to improve as new claims for unemployment insurance fell, although the Job Opening and Labor Turnover Survey showed the job openings rate fell to 3.7 percent and the hiring rate fell to a record low 2.7 percent in April. According to the National Bureau of Economic Research, February marked the peak of the last business cycle. Should the gradual reopening of the economy result in steady growth it is possible that the low could be in May or June making the recession of 2020 the shortest of the last 150 years. The Federal Reserve’s latest economic projections showed most FOMC members expect a gradual recovery and that the fed funds rate would remain near zero through the end of 2022.

After all that “risk off” trading I talked about yesterday morning, the day that followed was certainly “risk on.” Beijing said the coronavirus is still on the rise in the city and scrapped more than 1,200 flights yesterday due to a fresh outbreak. Brazil had a record 34,918 new cases, while previously virus-free New Zealand called in the military to enforce border controls after a positive test. Markets fluctuated a bit as investors weighed that increase in coronavirus cases with talk of government and monetary stimulus around the world. The 10-year yield closed the day -2 bps to 0.73 percent.

Fed Chairman Powell delivered the second part of his semiannual testimony on monetary policy before the House Financial Services Panel, saying that the central bank will reduce its purchases of corporate debt ETFs in favor of direct bond purchases. Powell urged Congress not to pull back too quickly on federal relief for households and small businesses amid increasing debate over whether to extend temporary bailout programs, and also warned lawmakers that a full economic recovery was unlikely until people were confident that the virus had been contained. On a positive note, he predicted “strong job creation between now and the end of July.” Separately, total housing starts increased in May, but were well below estimates and down 23 percent year-over-year. Total building permits increased nearly 15 percent month-over-month, but still missed estimates.

Today’s economic calendar is all but done and dusted. We’ve had initial jobless claims for the week ending June 13 (-58k from a revised figure from last week), continuing claims (20.5 million, -62k), and Philadelphia Fed manufacturing for June (+27.5 from -43.1). May leading indicators are due out later this morning, before some Fed speak with Cleveland’s Mester and San Francisco’s Daly. 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 $2.977 billion UMBS30 2 percent through 3 percent. The Desk will also report on MBS purchases for the week ending June 10. We begin the day with Agency MBS prices better/up by nearly .125 and the 10-year yielding .69.

A little old lady answered a knock on the door one day, and was confronted by a well-dressed young man carrying a vacuum cleaner.

“Good morning,” said the young man. “If I could take a couple minutes of your time, I would like to demonstrate the very latest in high-powered vacuum cleaners…”

“Go away!” cried the old lady. “I’m broke and haven’t got any money!” and she proceeded to close the door.

Quick as a flash, the young man wedged his foot in the door and pushed it wide open.

“Don’t be too hasty!” he said. “Not until you have at least seen my demonstration!”

And with that, he emptied a bucket of horse manure onto her hallway carpet.

“Now, if this vacuum cleaner does not remove all traces of this horse manure from your carpet, Madam, I will personally eat the remainder.”

The old lady stepped back and said, “Well you just stay right there while l get you a fork, cuz they cut off my electricity this morning.”

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.)

Rob Chrisman