Oct. 21: Opinions on inflation, athletes, LOS tech; vendor news; “Hemingway” on home loans; Saturday Spotlight: Change Wholesale

Only ten days until Halloween… have you bought your sweet treats to hand out? In a few days I head to Chicago which has its share of delicious places for dessert. I mention this because, in yet another food-related inflation measure, the cost of sugar is up globally since the start of the year, owing to dry weather in parts of the world like India and Thailand that produce lots of it. U.S. sugar policy is strongly protectionist, and the government requires that 85 percent of purchases be produced domestically. Overall the global price of white refined sugar is up 35 percent this time last year. Industry analysts expect the price of Halloween candy to be up this year, based on those higher costs, but they’re not expected to spike badly because of how weird the sugar market is just generally. (More on inflation, and its causes, below.)

Saturday Spotlight: Change Wholesale


“Less Hassle. More Closings.”

Retired General Eric Shineski once famously said, “If you don’t like change, you’ll like irrelevance even less.” It seems that Change Wholesale has wholeheartedly embraced his advice. Can you tell us more about your “Changing” strategy? 


Our strategy is an extension of our mission to get capital into the hands of under-resourced and underserved creditworthy borrowers so they can become homeowners, which has long been a proven pathway for building strong communities and participating in the American Dream.


That pathway doesn’t always run smoothly, however. It can change, via government rules, regulations and guidelines, macro issues like rising employment, inflation and interest rates, and things like consumer confidence in the economy.


Our job is to do everything we can to keep that pathway open by providing viable lending solutions and workarounds that make sense for our broker partners and their clients. This keeps us nimble, relevant and in constant “Change” mode.


As examples, we recently introduced new asset depletion and P&L programs, implemented enhancements to our vast suite of existing products, and improved guidelines up and down our product lineup to make them more accessible and affordable. Further, brokers can now find us on more platforms, like Lender Price and Loan Sifter.


As a leading non-QM lender, you have used your leadership position to prioritize the growing housing affordability crisis. Can you address this a little more?


Making homeownership more affordable is part and parcel of our mission to broaden access to homebuying capital. The facts are, home prices are outpacing wages in 80% of U.S. markets, exacerbated by housing demand that has outstripped supply by 3.7 million units in the last decade. And these pressures fall disproportionately on Black, Hispanic, and other target groups.


Yet, we know investments in affordable housing contribute $1.8 trillion annually to our economy and that children living in a stable housing environment are 15% more likely to graduate from high school.


This recognition again is what drives our lending mission. Rather than penalize creditworthy borrowers who are self-employed, run cash-based businesses or fail to fit traditional lending models or norms, we want to reward their hard work and initiative with great, affordable loans.


How can Change Wholesale help brokers and their clients overcome the current interest rate headwinds? What are you telling broker partners? How can the two of you work better together?


The short answer is constant communication and education. First, higher rates shouldn’t necessarily keep your buyers on the sidelines. If rates continue to rise, then today is a good entry point, and if they fall, they can refinance. Second, we are constantly updating our broker partners on a host of flexible loan products and non-traditional borrowing alternatives available to their borrowers.


We listen, we adapt, we respond. The alternative to not responding to our partners and the greater market with better products and solutions is irrelevance.

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

Technology in the LOS world


Technology? How about this from an anonymous source: “LOS vendors have recently discovered that simply referring to their limited, often incomplete prototype mortgage software application as a ‘Technology Platform’ saves them years of effort and millions of dollars of difficult development costs over traditional methods of actually building a functionally comprehensive origination business software product that solves their business problem out of the box. Even more powerful in increasing their valuations is calling it an AI-driven Platform when there is barely a spec of AI in it.

“Lenders, meanwhile, have discovered that the software products (e.g., LOS) they need to produce loans from cradle to grave have now moved from their previous ‘proven’ mode where they were stable, certain, systematic and mostly predictable to a new state of ‘agile’ Platform where fuzzily described solutions are flexible, uncertain, exploratory and opportunistic, but don’t perform the business tasks needed and also don’t provide a development platform as advertised. The beat goes on….”

Mortgage banking and athletes


The MBA Annual this week had something for everybody. Or not. I received this note from an anonymous source who noticed that “The Great former Philadelphia Eagles Wide Receiver Vince Papale” spoke about stories of success and overcoming adversity, sponsored by FICO. “The MBA is so out of touch. Great, another athlete retelling stories of days gone by to a bunch of hungover mortgage bankers trying to not go under over the next year. ‘…Your present dilemmas remind me of training camp back in ’83…’ Really?”

Hemingway on mortgages


Len Tichy sent, “I keyed the following into my Open AI ChatGPT account: ‘Describe the mortgage borrowing process in the writing style of Ernest Hemingway.’ This is what I received:

“In the world of mortgages, it begins as a dream—perhaps a cozy home with a white picket fence or a city apartment with a view. But before dreams turn to reality, there’s a journey.

“First, you reckon with your finances. It’s a battle against numbers and paperwork, a challenge of proving your worthiness. You gather pay stubs, bank statements, and tax forms, laying bare your financial soul.

“Then, you meet the gatekeepers—the loan officers. They’re like poker players, gauging your sincerity, your stability. You share your story, hoping they’ll bet on you.

“Next comes the appraisal, a judgment day for your future abode. An inspector eyes every nook, every cranny, deciding if it’s worth what you hope. It’s a game of worthiness, and you’re on the edge of your seat.

“The underwriter, the silent judge, scrutinizes your dossier. They search for red flags, inconsistencies, reasons to deny. It’s a poker game, and you hold your breath.

“Finally, the closing day arrives. A table, a stack of papers, and signatures like battle scars. It’s a commitment, a leap of faith.

“And then, you have your home. It’s a triumph, a chapter in the story of your life. The process, a struggle, but the reward, a piece of the American dream.”

Inflation and the economy


From the Bay Area, Jay Voorhees, Founder of JVM Lending, has some thoughts on “why everyone got rates so wrong.”

“Far more cash continued to hit the economy throughout 2023 than most analysts who were making predictions anticipated. Here are a few of the factors that kept our economy much hotter than expected, which in turn kept rates higher than expected. First, wage growth. Employees were able to take advantage of a tight labor market to demand higher wages, which in turn fostered more consumer spending. Second, student loan forbearances: Analysts did not realize how much extra cash this put in consumer’s pockets and how much of it consumers would spend (all of it, it turns out).

“Third, Employee Retention Credits (ERC). These are massive government handouts put in place during COVID to incentivize firms to keep employees. The ERC program turned into a spending (and often fraudulent) boondoggle that continued to pump billions into the economy every month until the IRS put a stop to it recently. This too turned out to be far more unexpected stimulus than any analyst anticipated.

“The fourth reason is government spending. Our massive deficit spending is also stimulating the economy in ways that are offsetting the Fed’s efforts to slow things down. Mr. Biden signed trillions of spending into law in the form of the American Rescue Plan Act of 2021: $1.9 trillion; the Infrastructure Investment and Jobs Act: $1.2 trillion; the Inflation Reduction Act of 2022: $739 billion; and the CHIPS and Science Act: $52 billion.

“We also had the Bank Term Funding Program. This is a massive program that lets banks borrow money from the Fed that was put in place in March of 2023 to save failing banks, and but for this program, many banks likely would have failed, and rates would be lower as a result. In any case, this program pumped far more liquidity into the economy than any analyst anticipated.

“The sixth reason is savings: Overall savings levels hit record levels during COVID, providing a huge spending cushion that lasted well into 2023. We have T-Bill & Money Market Income: Millions of savers and investors have seen returns from Treasury Bills, Money Market funds and even savings accounts in the 5% range this year, creating another major source of unexpected income. And credit card borrowing. Consumers relied more heavily on increased credit borrowing than analysts anticipated, which in turn kept consumer spending stronger than expected.”

Jay wrapped up with, “Lastly, the ‘Lag Effect’ was delayed. When the Fed raises rates, it invariably slows the economy down (even if government spending is offsetting the impact of higher rates). But it takes a while for those higher rates to be fully felt through refinancing or financing at those higher rates. So far, most homeowners and businesses have been able to cling to yesterday’s lower rates, but it can’t last. Housing sales and refinances have been slowed to a halt, and commercial ventures with variable-rate debt are now forced to refinance into much higher rates.” Thank you, Jay!

Sometimes questions arise about certain components of the government measures of inflation. For example, does the Consumer Price Index include food or utilities, or is the Federal Reserve looking at indices that are not accurately reflecting daily impacts on consumer pockets?

For an expert answer I turned to the MBA’s Joel Kan. “Here’s one Q&A post from the BLS on that very topic. I think the short answer is that the ‘headline’ CPI covers everything, while the ‘core’ CPI excludes food and energy. The Fed focuses on core prices, not because we don’t spend on food and energy, but because those prices are much more volatile, which often makes it difficult to see broader trends in order to set monetary policy.

“On a quick technical note: while the Fed considers all data at hand, including the myriad of CPI sub-indices, it focuses more on another series of price indices, which they also forecast in their projections.”

Vendor tidbits


Insellerate is proud to announce that it has been named the Technology Platform of the Year during the AFFY Conference and Awards Ceremony in Los Angeles. The AFFY Expo is the premier entertainment, networking, and exposition company focused on delivering unique experiences to the Affiliate and Performance Marketing Industry.

Secure Insight has noticed a significant increase in requests by lenders to utilize the company’s repurchase defense services and loan file fraud review and loss mitigation services. The services were launched in January of this year in anticipation of the downturned market and the increasing risk of fraud and defective loans. Secure Insight VP of Client Development, Amanda Padd, stated “As the mortgage market has declined, the risk of buy backs and fraud loans has risen. As a result, lenders are seeking more affordable and effective outsourced means to defend against financial costs. Our trained staff have helped evaluate and defend dozens of repurchase demands in just the past few months alone.” According to SI President Andrew Liput, the company “charges a flat fee to review documents and loan files and provides a memorandum outlining strategies, identifying sources of recovery and potential setoffs, and offering recommendations for defense and recovery strategies.” For more information, email INFO@secureinsight.com.

FormFree announced the fourth quarter debut of FormFree Exchange (FFX®), a dynamic online marketplace that matches lenders with qualified borrowers for a faster, better and fairer lending experience. FFX eliminates the need for lenders to sift through unqualified or unready leads by providing verified financial data from borrowers who have already demonstrated that they are ready and willing to transact using FormFree’s free Passport® service. Lenders receive this data in the form of an anonymous Qualified Borrower (QB) Medallion that empowers them to make competitive loan offers while protecting borrowers’ identities until an offer is extended and accepted. Because QB Medallions also contain CRA eligibility, DPA eligibility and a host of alternative underwriting data, FFX supports lenders who would like to extend financing more inclusively without taking on additional risk.

Matic, a leading embedded insurtech platform, announced it raised $20 million as an extension to its Series B. The round includes $17 million in Series B equity co-led by IA Capital Group and Cultivation Capital with participation from existing investors and the majority led by new investors, including Intuit Ventures, TruStage Ventures, and Assurity Ventures. Concurrently, Matic upsized its credit facility by $3 million, bringing new liquidity to $20 million.

The Mortgage Collaborative (TMC), the nation’s largest independent cooperative network serving the mortgage industry, announced that the TMC Emerging Technology Fund LP (the “Fund”) has made its latest investment in Halcyon. Halcyon’s suite of services provides financial institutions with a 360-degree financial relationship with its customers by affordably expanding their offerings to include investment advisory, IRS transcripts and tax preparation services. Halcyon also introduces an industry-first rep/warranted IRS transcript income validation service at a fraction of the cost and time of any commercially available alternative. TMC Emerging Technology Fund LP is a specialist fintech fund explicitly focused on the mortgage industry and immediately adjacent verticals.

MISMO® is seeking public comment on the new eVault Standards and SMART Doc® Validation Rules documents created to help provide clarity to eVault interoperability for all parties in a real estate transaction. The 30-day public comment period runs through November 7, 2023.

In an attempt to promote more inclusivity, accuracy, and affordability, the FHFA recently revamped its conventional mortgage requirements for the first time in nearly 20 years. To start, it’s phasing out classic FICO and requiring FICO 10T and VantageScore 4.0 in its place. Additionally, bi-merge credit reports will soon replace traditional tri-merges. The FHFA claims that these updates will make homeownership more accessible to modern-day applicants. Despite these noble intentions, some stakeholders aren’t so convinced these changes will yield their intended results. So, what should mortgage lenders know about these changes’ impact on their businesses and their borrowers’ eligibility? Certified Credit’s analysis of the potential outcomes of the FHFA’s recent announcement in Certified Credit’s latest article, “New Changes Coming to Credit Scoring Models & Credit Reporting”.

On the outskirts of a small town, there was a big old pecan tree just inside the cemetery fence. One day, two boys filled up a bucketful of nuts and sat down by the tree, out of sight, and began dividing the nuts. “One for you, one for me, one for you, one for me,” said one boy.

Several dropped and rolled down toward the fence. Another boy came riding along the road on his bicycle. As he passed, he thought he heard voices from inside the cemetery, so he slowed down to investigate. Sure enough, he heard, “One for you, one for me, one for you, one for me…” He just knew what it was. He jumped back on his bike and rode off. Just around the bend he met an old man with a cane, hobbling along.

“Come here quick,” said the boy. “You won’t believe what I heard! Satan and the Lord are down at the cemetery dividing up the souls!”

The man replied, “Beat it kid, can’t you see it’s hard for me to walk.”

When the boy insisted though, the man hobbled slowly to the cemetery. Standing by the fence they heard, “One for you, one for me. One for you, one for me.”

The old man whispered, “Boy, you’ve been tellin’ me the truth. Let’s see if we can see the Lord!” Shaking with fear, they peered through the fence, yet were still unable to see anything. The old man and the boy gripped the wrought iron bars of the fence tighter and tighter as they tried to get a glimpse of the Lord. At last, they heard, “One for you, one for me. That’s all. Now let’s go get those nuts by the fence and we’ll be done!”

They say the old man had the lead for a good half-mile before the kid on the bike passed him.

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, “Mind the Down Payment.” 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 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