June 24: Thoughts on the current warehouse environment; vendor updates; capital market deals; Saturday Spotlight: Calque

“Taco Bell is the only place where you can still get gas for under four dollars.” Olive Garden dinners or pints of Ben & Jerry’s aren’t the only places where inflation is showing up. Have you taken a gander at your car insurance bill lately? Those rates are all going up, and some more than others. Florida’s rates, for example, are 40 percent more than the national average! And just try to get an estimate on body work: months out, not weeks. In other rate news, interesting to lenders of course, are the rates of the outstanding mortgages (page down once). More than 90 percent of homeowners in the United States have an interest rate below 6 percent, if they have a mortgage at all. About 80 percent are below 5 percent, 60 percentage-ish are below 4 percent, and about a quarter of mortgagors are under 3 percent. Yet homeowners are still refinancing: roughly 25 of the weekly applications are for refis, so some lenders are definitely helping people refinance. And banks & credit unions are proving their mettle in offering other products and lending services: It’s not “cross selling,” it’s “relationship deepening!”

Saturday Spotlight: Calque

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In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).

 

Launched in 2021, Calque partners with established lenders to empower homeowners to use the equity in their current home to buy their next home. The Trade-In Mortgage™ from Calque is an innovative mortgage product that simplifies and streamlines the home-buying process, allowing homeowners to submit non-contingent offers as good as cash on a new property, buy and move into their new home before they sell their existing one, and make repairs and stage their original home for sale after they have moved out.

Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.  

 

Calque engages with the Department of Housing and Urban Development to offer counseling assistance to potential customers of its affiliated lenders to support low-to-moderate income homeowners. Engaging with potential borrowers who may benefit from this product through a coordinated effort with HUD furthers Calque’s mission to educate consumers about their homeownership options so they can strengthen their overall financial picture.

 

What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?

 

Calque sponsors Continuing Education for all employees to foster and support their expanding knowledge of mortgage lending and real estate technology. The company also launched an internship program this summer, giving finance undergraduates interested in pursuing careers in the space an opportunity to learn more about the industry. The internship program aligns with the company’s mission to draw more innovation to the field of home lending in order to help chip away at barriers to homeownership.

Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable. 

 

Calque strives to create a flat hierarchy where communication is encouraged, and to promote comradery, we host company off-sites on a quarterly basis where employees engage face-to-face in both business and social activities. As a startup seeking to reimagine home lending through innovation, Calque is aware that creativity and free-thinking are crucial to the company’s continued evolution. From the very beginning, we have taken steps to create a culture that nurtures our talent so that every team member feels like a crucial part of the company and an active participant in its mission.

Things you are most proud of that don’t have to do with sales.  

 

We provide “top-to-bottom, end-to-end” support that includes technology, marketing, compliance, customer engagement, Realtor outreach and lender support. As we’ve seen in recent events, there is a lack of communication from innovative lenders to consumers. As part of this effort, we are launching an education/resources section on our website to help consumers understand the home-buying process.

 

We are also very proud of our cost structure, which we believe to be exceptionally transparent and efficient. Most of our competitors’ processes involve selling the home an extra time and often costs as much as 3 percent to 5 percent once hidden fees like leasing costs are included. With our product, no such hidden fees or extra steps exist – what you see is what you get.

 

Fun fact about Calque?

 

The word ‘Calque’ traces its roots back to Latin and means “loan translation.”

 

Is there anything else you’d like to share along these lines?  

 

The Calque solution allows any homebuyer to close on their new home before they sell their existing home. Unlike programs that appear similar, Calque doesn’t act as a real estate agent for either the buyer or seller, and thus has no involvement in nor conflict of interest when it comes to pricing the home for purchase or sale.

 

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

Warehouse lines: topics worth noting

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A lack of liquidity is the fastest way to cut off a lender. As a basic definition, warehouse lending is a line of credit given to a loan originator, such as an IMB, thus providing that liquidity. The funds are used to fund a mortgage that a borrower uses to purchase property. The repayment of warehouse lines of credit is ensured by lenders through charges on each transaction, in addition to charges when loan originators post collateral. The Mortgage Bankers Association has a fact sheet on it for a deeper dive.

But that’s theory. What about practice? Mike McFadden, CEO of OptiFunder Corp., writes that the need for warehouse lines continues to be high but the utilization remains low. “IMBs are continuing to take market share from the banks in this depressed market which means the need for warehouse lending remains high. But utilization of lines remains low as lenders are reluctant to shed proactively warehouse providers. Maintaining warehouse relationships provides optionality and reduces risk for the originator.

“Also, an inverted yield curve is making warehouse carry very difficult. Note rates, while high, tend to be lower than the short-term benchmark rates warehouse lenders use to price warehouse lines. Note rate minus lines are becoming more popular as originators look to diversify their borrowing cost and secure positive carry. (Most OptiFunder clients have been able to maintain positive warehouse carry through the use of AI and Optimization.)

“Warehouse lenders who integrate are seeing higher utilizations. Given the difficult volume and margin environment, originators are placing ever-higher emphasis on automation.  Those warehouse lenders that have chosen to integrate and support these automations are averaging higher utilizations due to originator requirements.

“Lastly, lenders should know that relationships will always matter. The relationship originators have with their warehouse lenders will always be very important. This means on-going communication and transparency is important. Additionally, data aligns and provides both originators and warehouse lenders the ability to better manage counterparty risk. OptiFunder allows originators to configure allocation targets for each of its warehouse lenders to ensure the value of each relationship is considered in the allocation decisions.” Thank you, Mike.

Thoughts on LOS, and vendor morsels

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I am occasionally asked about loan origination systems. There isn’t a simple answer, and Kris Van Beever with STRATMOR stated it well. He writes, “There is a large problem in the mortgage technology industry. While we all are painfully aware that there is not a single LOS on the market that is without limitations, flaws, or defects, they all are functionally capable of taking an application, collecting URLA data, gathering borrower data and processing loan fulfillment to funding. Len Tichy and I refer to this space as having nothing but mediocre choices for tech. But despite limitations, they still function.

 

“What does not work, which is the subject of STRATMOR work, is how lenders ‘choose’ to use the technology. I refer to this phenomenon as ‘shooting themselves in the foot.’ This is where the STRATMOR sweet spot exists. We have a great opportunity to educate, guide, and assist lenders in optimizing their use of this mediocre technology until someone cracks the code for how to develop a POS and an LOS that meet all the needs of all the snowflakes in the mortgage lending space. Until then, we have lots of potential clients that we can collaborate with as trusted advisors to eliminate the misuse of mortgage technology.”

Call them vendors or third-party providers, these companies do much more than capitalize random letters in their names. Let’s take a random look at who’s doing what in the primary and secondary markets to help lenders.

“It’s like if Zillow and your lender had a baby! With HomeDashboard, your Loan Officers deliver property data and live mortgage products to homeowners and homebuyers, building trust and deepening relationships. Realfinity onboards retail lenders at no cost. We directly engage with your Loan Officers, giving them full access to our enterprise solution now, including recently launched features such as Client Self-Registration, Live/ Adjustable Pricing, Realtor Co-branding, and Single-Sig-On. Help your Loan Officers to keep their clients in a closed ecosystem, increasing referrals and expanding their databases. Contact Luca Dahlhausen to get the integration set up asap, for free. We take care of the rest!”

VantageScore released MarketGain Powered by VantageScore™, a customized leading-edge analysis that provides lenders and fintechs with insights on how their specific addressable market could increase with the implementation of the VantageScore® 4.0 credit scoring model, helping financial institutions to identify newly lendable consumers and to potentially open up greater financial opportunities for consumer access to credit. MarketGain provides aggregated total lendable dollar amounts, Fair lending breakdowns and ethnicity data, Product specific opportunity breakdowns within an institution’s footprint across counties and states, Overall totals of newly scoreable consumers segmented into score bands (600-700) that were previously “invisible” with conventional models.

Clear Capital, a national real estate valuation technology company expanded its relationship with CoreLogic, a leading global property information, analytics and data-enabled solutions provider, to assist lenders in modern valuation and appraisal readiness. Through an existing integration, Clear Capital’s recently launched Universal Data Collection (UDC) product is now available to be ordered and fulfilled through CoreLogic’s suite of Valuation Workflow Solutions. Together, Clear Capital and CoreLogic are supporting industry-wide modern appraisal efforts by providing the ability for lenders to order from Fannie Mae or Freddie Mac without needing to re-collect data.

Mobility Market Intelligence (MMI), a leader in data intelligence and market insight tools for the mortgage and real estate industries announced it has released LO Highlight Reels, an easy-to-use video creation tool for loan originators (LOs) looking for an eye-catching way to share their success and increase their visibility. With their LO Highlight Reel, an LO can generate a video reel summing up their last 12 months of loan production and then share their unique reel URL across their professional network. Once created, each LO’s reel will continuously update with market data from the MMI platform to stay current, meaning it can always be safely shared without fear of the data falling out of date. Additionally, an LO can customize their attached profile to include their headshot, contact info, social links, relevant disclosures and even a call-to-action button. Beyond sharing the custom URL, LOs can also embed the video on their personal website.

The appraisal profession continues to develop guidelines and practices to help appraisers avoid the appearance of bias in their appraisal reports. October Research went in search of expert analysis of appraisal bias problems and solutions. Produced by Valuation Review, the free report, “Appraisal Bias: A Search for Solutions,” was just released. This report tells appraisers what they need to know about the issue and successful practices they can employ to avoid problematic reports.

Clients with a strong credit score have a higher chance of getting approved for a mortgage. The ability to borrow money at reasonable terms and rates can’t be taken for granted or assumed. CreditSmart® Homebuyer U* , a free course within the Freddie Mac CreditSmart® suite of educational resources can help. Available in English and Spanish, CreditSmart Homebuyer U has helped nearly 256,000 consumers prepare to become successful homeowners and fulfills first-time homebuyer education requirements for low down payment mortgages.

ACES Quality Management unveils ACES PROTECT® mortgage compliance testing module First fully integrated compliance engine within a Quality Control software solution which helps residential mortgage lenders improve loan quality, ensure compliance, and mitigate risk. ACES PROTECT is a suite of automated regulatory compliance tests, to its flagship ACES Quality Management & Control® quality control (QC) auditing platform. ACES PROTECT enables lenders to reduce audit time and improve oversight by incorporating automatic compliance testing into their overall QC auditing environment.

The Loan Store (TLS), a rapidly growing national wholesale mortgage company, announced a new Buy Before You Sell product, equipping wholesale loan originators with a greater ability to support their borrowers and real estate partners in a competitive purchase market. The product, which The Loan Store is making available to its mortgage broker and non-delegated correspondent partners via a partnership with HomeLight, improves a homebuyer’s ability to secure their desired home quickly and confidently without the contingency of selling their existing home first. Wholesale loan originators interested in offering the TLS Buy Before You Sell product are invited to join the HomeLight and The Loan Store partnership program.

Secondary market liquidity drives primary market rates

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Lenders know that if there is no outlet for a funded loan, whether it is going into an asset portfolio or securitized and sold in the secondary market to an investor, a lender won’t originate that loan. And so, lenders are well aware of Freddie and Fannie’s activities in the capital markets.

Fannie Mae priced Connecticut Avenue Securities (CAS) Series 2023-R01, an approximately $731 million note offering that represents Fannie Mae’s first CAS REMIC transaction of the year. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. The reference pool for CAS Series 2023-R01 consists of approximately 68,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $22.6 billion. The reference pool includes collateral with loan-to-value ratios of 60.01 percent to 80.00 percent, which were acquired between January 2022 and February 2022. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls. With the completion of this transaction, Fannie Mae will have brought 54 CAS deals to market, issued over $59 billion in notes, and transferred a portion of the credit risk to private investors on over $1.98 trillion in single-family mortgage loans, measured at the time of the transaction. Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages.

Freddie Mac’s Investment and Capital Markets Credit Risk Transfer (CRT) programs transfer credit risk away from U.S. taxpayers to global private capital via securities and (re)insurance policies, providing stability, liquidity and affordability to the U.S. housing market. Freddie published on its website the National Association of Insurance Commissioners (NAIC) 2022 filing year designations for certain STACR REMIC Trust, STACR Trust, and STACR Debt Notes in one single file. Overall, of the 199 reviewed STACR Notes, 159 (or 79.89 percent) have achieved NAIC 1 Designation, 34 (or 17.08 percent) have achieved NAIC 2 Designation, and 6 (or 3.01 percent) have achieved NAIC 3 Designation. It should be noted that 19 STACR Notes achieved NAIC Designation upgrades relative to their 2021 year-end NAIC Designations.

Fannie Mae provided more than $69 billion in debt financing to support the multifamily market and affordable housing in 2022 through the Delegated Underwriting and Servicing (DUS) platform, along with the Low-Income Housing Tax Credit (LIHTC). Notably, Multifamily Affordable Housing volumes totaled $10.3 billion in 2022, up nearly 7 percent from $9.6 billion in 2021, while Structured Transactions and Student Housing increased from $5.7 billion to $10.3 billion (82.6 percent) and $0.9 billion to $1.2 billion (26 percent), respectively. Additionally, Seniors Housing volumes totaled $1 billion last year, up more than 26 percent from $0.8 billion in 2021. LIHTC investments provided a reliable source of capital and served as a stabilizing influence on affordable housing. Fannie Mae was able to commit all of its $1.7 billion cap for calendar years 2021 and 2022 and these investments create or preserve more than 35,000 affordable units. In the past five years since Fannie re-entered the market, it has provided over $3 billion in equity investments in properties throughout the country, including underserved markets, populations with unmet needs, such as Native American and farmworker communities, supportive housing development, and disaster-impacted areas.

Fannie Mae priced Connecticut Avenue Securities (CAS) Series 2023-R02, an approximately $709 million note offering that represents Fannie Mae’s second CAS REMIC transaction of the year. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. The reference pool for CAS Series 2023-R02 consists of approximately 64,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $20.3 billion. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls. With the completion of this transaction, Fannie Mae will have brought 55 CAS deals to market, issued over $60 billion in notes, and transferred a portion of the credit risk to private investors on over $2.00 trillion in single-family mortgage loans, measured at the time of the transaction. To promote transparency and to help credit investors evaluate our securities and the CAS program, Fannie Mae provides ongoing, robust disclosure data, as well as access to news, resources, and analytics through its credit risk transfer webpages.

THE JEWISH ARRANGED MARRIAGE

A good Hassidic family is most concerned that their 30-year-old son is unmarried.

So, they call a marriage broker and ask him to find their son a good wife.

The broker comes over to their house and spends a long time asking questions of the son and his parents as to what they want in a wife/daughter-in-law.

They give him a long shopping list of requirements.

The marriage broker takes a long time looking, and finally asks to visit the family again.

He then tells them of a wonderful woman he has found.

He says she’s just the right age for the son.

She keeps a Kosher home, she regularly attends synagogue and knows the prayers by heart, and she’s a wonderful cook.

She loves children and wants a large family.

And, to crown it all off, she’s gorgeous!

After hearing all this, the family is very impressed and begins to get excited about the prospects of a wedding in the near future.

But the son pauses and asks, “Is she also good in bed?”

The marriage broker answers, “Some say yes, some say no…”

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. STRATMOR’s current blog is titled, “Compensation: Ever Changing.” 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