May 6: Letters about a successful LO mindset, banking; vendor news; Saturday Spotlight: Change Wholesale; a joke for Realtor clients

Happy May 6, which for many may be a little fuzzy after a night of margarita-fueled dreams. “Inflation in the U.S. is so bad right now that I called a car dealer to get the book value on my used car. They asked if the gas tank was full or empty!” Yesterday we had the jobs data, next Wednesday is the Consumer Price Index (when the strong number from last April rolls off, lowering the year-over-year number). We’re data dependent! So far in 2023, the behavior of the U.S. economy has been, in capital markets parlance, real whacky. Corporate earnings have, in some cases, come in better than expected and jobs data has been resilient. Yesterday’s jobs numbers were strong, and you can’t have a good ol’ fashioned recession with low unemployment. Generally, the economy needs to add about 100k jobs to absorb new entrants into the workforce (the higher the number of new jobs above that figure, the harder it is for employers to hire as demand outstrips supply). With the labor market remaining so tight, the Federal Reserve has felt confident in its inflation fight, raising its interest rates without inflicting too much damage on the economy. But inflation has been resilient as well, and no one seems to agree on what it all portends. Are we headed for a recession or a near-miss? Stay tuned!

Saturday Spotlight: Change Wholesale

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Financing America’s diverse homeowners, fairly and responsibly

What sets Change Wholesale apart with non-QM Bank Statement Loans?  

Change Wholesale is re-defining bank statement loans in our industry, creating an unfair advantage for brokers by making loans that make sense. Just a few examples of how we are innovating the non-QM bank statement space:

1) 1^st-Page Only Required: Does your borrower have multiple accounts with hundreds of pages to comb through? Change solves that problem with a simple, pragmatic approach that focuses on the deposits and balances. It’s that simple.

2) Personal Bank Statements: No employment stated or verified. Do you have a borrower with less than 2 years of self-employment experience, but nonetheless, a successful business with cash flow that qualifies? This is your answer. Personal statements = no employment verification. You leave it blank on the application.

3) 1 Month Seasoning on Assets: Money moves around, we get it. When you close a loan with us, we source the assets/funds with 1 month’s statements.

4) Bank Statement Pre-Qual Desk: Need a second look, or a first look, at income on your bank statement loan so your borrower can shop with confidence? Send us your bank statements, first page only, and we will have our underwriting team pre-review and send back your exact income before you submit your loan.

5) Non-Owner Bank Statement Loan: NO LLRA/LLPAs for non-owner properties. With industry leading pricing, and multiple ways to qualify, this is your go-to for your entrepreneur/investor clients.

 

How does Change Wholesale help brokers with their loans?

Change Wholesale provides brokers with an unfair advantage by offering sensible loans and industry-leading pricing for both owner-occupied and non-owner properties. As a best-in-class team, we aim to close most loans within 30 days, with some closing in as little as 15 days. As a CDFI, we create our own portfolio of products and guidelines that are exempt from complex underwriting rules and regulatory restrictions. Ultimately, we use smart credit decisions and leading-edge technology to increase the number of loans brokers can close.

 

How does Change Wholesale prioritize customer service?

Change Wholesale prioritizes customer service by providing a process that is quick and easy, with most loans closing in less than 30 days. Change has a best-in-class operations, underwriting, and sales team to ensure a smooth loan process. Our goal is to have every broker walk away as a hero with referrals knocking on their door after every transaction. We strive for a 5-star review from every customer.

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

 

Thoughts on banking

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Most “experts” will tell you that the vast majority of 4,000+ FDIC insured institutions in the United States are in fine shape. But of course, just as well-run lenders rarely make the headlines, well-run and sound banks don’t either.

Recall that the Federal Reserve Board announced the results from the review of the supervision and regulation of Silicon Valley Bank, led by Vice Chair for Supervision Michael S. Barr. The review finds four key takeaways on the causes of the bank’s failure Silicon Valley Bank’s board of directors and management failed to manage their risks. Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity. When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough. Lastly, the Board’s tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.

FDIC Board Member Jonathan McKernan sent out a note on First Republic Bank. “I am pleased we were able to deal with First Republic’s failure without using the FDIC’s emergency powers. It is a grave and unfortunate event when the FDIC uses these emergency powers. Any decision to use the FDIC’s emergency powers should be approached skeptically, taking into account the unique facts and circumstances of the time, and with careful attention to the implications for the future.

“The March 12 rescue of SVB and Signature’s uninsured depositors was an admission that 15 years of reform efforts have not been a success. Many of the Dodd-Frank Act regulations were prescriptive, burdensome, and expensive. Yet still a failed bank’s investors do not always bear the consequences of the bank’s poor risk management. And yet still the banking system is not resilient to failures of bank supervision.

“More work remains to be done. We should avoid the temptation to pile on yet more prescriptive regulation or otherwise push responsible risk taking out of the banking system. Instead, we should acknowledge that bank failures are inevitable in a dynamic and innovative financial system. We should plan for those bank failures by focusing on strong capital requirements and an effective resolution framework as our best hope for eventually ending our country’s bailout culture that privatizes gains while socializing losses.”

Matt Levine with Bloomberg writes, “Bank runs are largely a self-reinforcing phenomenon: If people worry about a bank, they will take their money out, which will lead to the bank not having enough money, which will make more people worry and take their money out, etc.

“But the recent set of bank runs in the U.S. were caused largely by regional banks’ unrealized losses on their long-term bond portfolios as interest rates rose: The banks borrowed short-term from depositors to invest long-term in safe bonds, and as interest rates went up those bonds lost value, leaving the banks undercapitalized and causing depositors to flee. That is a partially self-reinforcing phenomenon: If your depositors are all fleeing, you have to sell bonds to get cash to give to the depositors, further driving down the bonds’ prices. (And the Fed stepped in to break this cycle in part by promising to lend money against those bonds, so they don’t have to be sold.)

“But it is also a partially self-limiting phenomenon, because if rising interest rates cause a banking crisis, then the banking crisis will cause (long-term expectations of) interest rates to fall, so your bonds will go back up again. Rising rates over the past year saddled banks with losses on their massive portfolios of bonds. Those losses helped sink Silicon Valley Bank last month. But since that failure sparked turmoil across the banking sector, falling bond yields have narrowed those losses. If rising interest rates cause banks to fail, that will lead to a recession, which will cause interest rates to drop, which will rescue those banks. The trick is the timing.

Successful LO mindset

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Plenty of loan officers are concerned about the expected decline in units in 2023, and thinking about the situation constructively is important. For some thoughts I turned to CrossCountry’s Hunter Marckwardt, who had recently interviewed top loan officer Matt Weaver. “Matt’s mindset is around winning every deal. If your mindset is around winning, then your business practices force you to think about how you win more. The only way you can win more, with integrity, is to be better. The only way to be better is to allocate time to understanding what in your business is working, what is not, and adapt accordingly.

“Matt has a ‘singleness of purpose’ whereby he understands that the real estate agent is his client above and beyond anyone else. Matt laid the groundwork for this in 2020 and 2021 and was 92 percent purchase when rates were in the 2’s and low 3’s. When asked, ‘Why didn’t you do any refinances’ Matt replied, ‘How does me doing a refinance help my Realtor buy/sell another home?’ And Matt doesn’t tolerate any negativity in his CrossCountry office. I found him to be a total team player, but he doesn’t talk to other loan officers, doesn’t watch the news, and is intentional about keeping his headspace, and his teams, in a positive place. He knows data that he needs to know for his business, he blocks out everything else that is negative and serves no purpose to winning.”

Hunter went on to discuss where things stand now. “Inventory is next to nothing, and rates are much higher than a few years ago, so every LO has excuses. But excuses don’t help in creating paychecks. Excuses truly do help you be less which might sound obvious but the more I can drill down into the word, the more I’d like to stay away from it. Namely, the first definition of excuse that I found was, ‘An attempt to lessen the blame attaching to (a fault or offense); seek to defend or justify.’ No thanks.

Hunter wrapped up with, “When LOs drop their ego, and their excuses, and learn from what LOs like Matt are doing, positive momentum can start. My team is great, we’re not 100% broken, we do a lot of things right, but every LO needs to have some fires reignited to simply be better. I think so many have been on their heels, you actually get used to it, we believe our excuses and we start to justify them more and more. Getting out, talking to people still winning, eliminating excuses, finding, and thinking, of ways to win, tweaking things in our business, and seeing the results, it’s more fun and certainly leads to being better.” Thank you, Hunter!

Vendor/third-party provider news

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Vendors to residential lenders do much more than create new acronyms for their names or capitalize middle letters. Let’s take a brief look at who’s doing what.

LenderLogix, a provider of mortgage automation software and application programming interfaces (APIs), launched LiteSpeed, a streamlined point-of-sale (POS) system designed for small to mid-sized lenders. Delivering the essential POS functionality needed to compete in today’s digitally driven market, LiteSpeed is available at a lower cost and without significant investment in the implementation and internal support larger platforms require. Strategically and intentionally designed to provide borrowers with a simple, yet amazing user experience, the white-labeled platform guides borrowers through singular, auto-advancing application questions using animated iconography and dynamic messaging.

Real estate finance industry’s standards organization MISMO^® announced the release of the MISMO API Toolkit Version 1.1, which includes updates to enhance efficiency in the development of new technologies. It enables the exchange of information through standardized APIs, increases efficiency, and reduces costs for industry participants to benefit the mortgage finance industry. The API Toolkit helps to facilitate rapid development of new products and applications across the mortgage industry.

Despite the significant risk that climate change poses to residential real estate, consumers have limited options for locating a home’s flood risk and few ways to determine how that risk may change over the duration of home ownership. Finding a home’s flood history can be difficult, as disclosure laws vary by state and individual flood insurance claims are protected by privacy laws. MISMO’s^® Environmental, Social and Governance (ESG) Community of Practice (CoP) collaborated with industry constituents to create the Flood Risk Disclosure Resource Guide. The Guide provides the industry with flood risk information that can be shared with consumers and provides specific risks the consumers will take, questions they should ask, and links to web sites where they can learn more about flood insurance and state requirements.

Mobility Market Intelligence (MMI), a leader in data intelligence and market insight tools for the mortgage and real estate industries, has launched its new Custom Dashboard Hub and expanded the business intelligence (BI) tools available on its platform, increasing users’ ability and ease in developing strategy, recruiting, nurturing talent, and discovering new opportunities. Users can locate and track high-performance real estate and mortgage markets in their area and show nationwide trends. Up-to-date benchmark statistics enable LOs to quickly compare their performance to their peers nationally and locally. Users can manipulate criteria and filter data on their own from county to loan type and more. MMI is constantly developing new dashboards in response to the mortgage industry’s needs and continuous user feedback and requirements.

Experian announced its integration with Freddie Mac that now allows mortgage lenders to access Experian Verify through Freddie Mac’s Loan Product Advisor^® asset and income modeler (AIM). This integration provides mortgage lenders with new options to instantly verify borrower income and employment information using up to date payroll data. Coupled with Experian’s recent move to become an authorized report supplier for Fannie Mae’s Desktop Underwriter® (DU®) validation service, this move makes Experian one of the few providers who are authorized report suppliers for both government-sponsored enterprises (GSEs).

In a News Release, subservicer LoanCare announced it has launched a proprietary, all-in-one portfolio management solution, LoanCare Analytics™. The platform was built to support mortgage servicing rights (MSR) investors with a focus on customer engagement, liquidity, and credit risk.

On the first day after the divorce was final, he sadly packed his belongings into boxes, crates, and suitcases.

On the second day, he had the movers come and collect his things.

On the third day, he sat down for the last time at their beautiful dining room table. By candlelight, he put on some soft background music, and feasted on a pound of shrimp, a jar of caviar, and a bottle of spring-water.

When he’d finished, he went into each and every room and deposited a few half-eaten shrimps dipped in caviar into the hollow center of the curtain rods.

He then cleaned up the kitchen and left.

On the fourth day, the wife came back with her new boyfriend, and at first all was bliss.

Then, slowly, the house began to smell. They tried everything; cleaning, mopping, and airing-out the place.

Vents were checked for dead rodents, and carpets were steam cleaned.

Air fresheners were hung everywhere. Exterminators were brought in to set off gas canisters, during which time the two had to move out for a few days, and in the end, they even paid to replace the expensive wool carpeting. Nothing worked! People stopped coming over to visit.

Repairmen refused to work in the house. The maid quit.

Finally, they couldn’t take the stench any longer, and decided they had to move, but a month later they couldn’t find a buyer for such a stinky house even though they’d cut their price in half.

Word got out, and eventually even the local estate agents refused to return their calls.

Finally, unable to wait any longer for a purchaser, they had to borrow a huge sum of money from the bank to purchase a new place.

Then the ex called the woman and asked how things were going. She told him the saga of the rotting house. He listened politely and said he missed his old home terribly and would be willing to reduce his divorce settlement in exchange for having the house.

Knowing he could have no idea how bad the smell really was, she agreed on a price only 1/10^th of what the house had been worth. But only if he would sign the papers that very day.

He agreed, and within two hours her lawyers delivered the completed paperwork.

A week later the woman and her boyfriend stood smiling as they watched the moving company pack everything to take to their new home, and… to spite the ex-husband, they even took the curtain rods!

I love a happy ending, don’t you?

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 Yield Curve Is Inverted: Should Lenders Care?” is the current blog. 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.)