Compliance, BI Platform, Community Bank Products; Primer on NBER, GDP, and Recessions

It’s a zany world we live in, and forecasts and predictions mean little (as seen by interest rates this week). Where should we start? Rumors of mortgage folks who travel with a wrench and shower head to change out hotel fixtures. Nah, that can’t be. Congratulations to Chicago which heads up the list of Best Places to Ride a Bike Naked. The 50 Greatest Names in Mortgage Lending was posted by Rich Swerbinsky of The Mortgage Collaborative. Remember photos of the snow monkeys in Japan relieving their stress in hot springs? Well, they’re done relaxing and have begun attacking humans, like some kind of science fiction movie. (That won’t help tourism!) What happens when William Shatner drops his wallet at a Gilroy, CA fruit stand? Alright, enough fun. Fannie Mae released its earnings this morning, reporting $4.7 billion of net income for the second quarter of 2022 and its net worth reaching $56.4 billion as of June 30, 2022. Fannie saw $111 billion of single-family home purchase acquisitions in the second quarter of 2022, of which nearly 50% were for first-time homebuyers. (Today’s podcast is available here and today’s has a discussion with an interview with Frank Fiore on APIs and how technology can bring down the cost of origination. This week’s is sponsored by Candor. With Candor’s Machine as an Underwriter, lenders modernize their manufacturing infrastructure making them immune to margin, capacity, and staffing challenges forever.)

Lender and Broker Services and Software

“Citi Correspondent Lending’s continued growth trajectory, despite the overall declining market, allows us to attract top industry talent and we’re excited to welcome industry veterans Karim Hashim and Judy Taylor to our team. Karim joined Citi in June as a Correspondent Account Executive, focused on growing Best Efforts and Non-Delegated clients across the US. This includes strategic relationships that support underserved markets. Karim brings a significant amount of experience in business development and account management, with a proven track record in identifying and harnessing opportunities for sustainable growth. Judy returns to Citi to lead our Client Excellence Team, and will be focused on executing a best-in-class client delivery experience. Judy has 20 plus years of progressive leadership experience in fulfillment and risk management across multiple channels. Learn more about how we can support your growth by contacting our National Client Services Team at 800-967-2205 or completing the Prospective Correspondent Questionnaire.”

ArmorDoc leverages AI to automate document classification, data extraction and stamp/signature recognition from residential mortgage documents. The key benefits of ArmorDoc are to replace manual reviews of loan packages with automation to manage the ebbs and flows of originations and bulk transactions for a more cost-efficient, faster, and accurate streamlined pre- and post-QA process. ArmorDoc has models for FHA/VA, Conventional, DSCR, Non-QM and Reverse mortgages (both newly originated and legacy). To date, ArmorDoc has processed more than 100,000 loans through their pipeline with results greater than 97.5% accuracy and as high as 99.9%. ArmorDoc was launched by mortgage industry veteran Mike Hartman in 2020 and is 100% US based. Request ArmorDoc’s One-Pager to learn more.

“News Alert: For lenders who use direct mail for lead generation, the USPS just raised prices by 3 cents for first class and 2 cents for standard mail. However, did you know you can actually lower your cost per call, even with the price increase? If you are interested in beating the postal price increase, drop us a line or check us out. We have technology improvements enabling you to get ahead of the market and outrun the increases! Give us 5 minutes to ask 3 simple questions and see if we can lower your overall cost per call to beat the rate increase!”

“Time is money and focusing on the right thing at the right time can make all the difference. With Velma Connector and our Automated Production Reports, your LOs see which loans are important for today and management insures no loan is left behind. “Velma Connector has allowed us to provide more communication to our end users. This ensure that even the busiest of users are kept up to date with tasks they need to complete.”-One Satisfied Velma Customer. Click here to see what Velma Connector’s Automated Production Reports can do for you!”

A recent STRATMOR Group study commissioned by Qualia found that poor communication is the biggest contributor to inefficiency for lenders with title companies. With lenders having to go back and forth on over 30 calls or emails per loan file to exchange information, it’s not surprising that lenders lack the control and visibility needed to efficiently close a mortgage. Given these findings, Qualia is proud to offer a reimagined title collaboration solution for mortgage lenders, Qualia Connect. Connect enables mortgage teams with the control and visibility to deliver on-time and error-free closings by plugging your team directly into the settlement ecosystem through your loan origination system. Connect powers lending teams to automatically place title orders, request and aggregate critical file information across all their title vendors, and collect documents from any settlement or title & escrow company, all without ever leaving their LOS. Learn how Connect works today.

“Cost to produce is going up. And, if you are a Community Bank, so is the cost to scale your residential business line. Affordable talent can be difficult to find, and reputational risk is ever present. If your Bank is looking for a more efficient way to do business, we have a solution for you. Mutual of Omaha Mortgage is proud to announce the launch of Mutual of Omaha Mortgage Services, a new business channel that is focused on the specific needs of community banks that provides Community Banks the benefits of best-in-class marketing and operational support as well as access to a full menu of mortgage products. As a Fortune 500 company and one of the national's most trusted brands, we'd love to help you reduce your risk and increase your fee income. For more information contact us.”

DON’T wait for “roadmap features” from other BI vendors. DON’T wait another day to set up the reports you needed yesterday. DON’T get boxed into pre-defined, limited metrics with no way to customize your BI solution to your business. DO THIS INSTEAD: Reach out to Richey May today for the most popular BI platform in the mortgage market three years running, RM Analyze. A complete business intelligence platform designed for mortgage lenders by mortgage industry experts, RM Analyze uses out-of-the-box, cutting-edge, proven technology that’s fully customizable and deployed in weeks. It consolidates data from every department and every piece of software you use to deliver actionable insights that help move your business forward. And it provides just the right reporting from the C-suite to the front line, plus visually engaging reports on all your key indicators. Contact us today for a walk-through and custom implementation plan.

Want to Up Your Compliance Game? Ncontracts Reveals 5 Things You Should Stop Doing Right Now & 5 Things You Should Do Instead. Compliance is a lot to manage. With near-constant regulatory change on top of a mountain of existing compliance responsibilities, the only way to get it all done is to make sure you’re focusing your energy on the right tasks. Are you spending time on activities and concepts that aren’t pushing the needle towards compliance management success? In her latest article, Stephanie Lyon, Vice President of Compliance & Regulatory Content Strategy at Ncontracts, covers five things that might be distracting you from making progress and what you should be doing instead. Check it out here!

Mergers and Acquisitions

Owners of residential lenders are aging. Some aren’t interested in going through another business cycle. Some want to “take their chips off the table” before being using hard-earned capital to support their companies for the remainder of 2022 and into 2023. Others are trying to improve efficiencies, and if there is a cultural fit with another company why pay for two accounting departments, two capital markets departments, two sets of doc drawers and funders, etc.?

For lenders thinking about these and more, Garth Graham, Senior Partner (954-325-7816) with the STRATMOR Group, has some tips on successful M&A steps for lenders and vendors. “Start early to figure out how to maximize value: There may be things you can do to “stage” the house, and that takes some level of planning. Ensure confidentiality: don’t just start taking calls without thinking through disclosure risk. At STRATMOR we typically engage with sellers in a confidential process to determine the best likely buyer and then coordinate a confidential process to have buyer and seller engage.

“Focus on model match and culture. Buyers and sellers need to have a level of compatibility to make the deal work. After all, you typically are going to work together after the sale, and the key is that it’s a good fit not just a good price. Earn outs can be very valuable if it is the right buyer with synergy. If a buyer can make more money with the sellers platform, then that extra earnings is part of a well-structured earn out. Often buyers focus only on upfront cash and don’t pay enough attention to the post closing earnings. Be realistic and be willing to compromise. A ‘scorched earth’ negotiation will ultimately create issue, the classic example of winning a battle but losing a war. Do not disclose potential or pending transaction prior to close date to anyone other than those that MUST know.

“Make sure you evaluate the transaction impact from the perspective of Sales staff, Ops staff and Corporate staff. It’s not just salespeople that are impacted. Does pricing, product menu, benefit programs, lending opportunities, technology tools and resources stay same or better? That is what typically drives retention. Be disciplined with your objectives and evaluation. If you want a deal too badly, you may very well get it badly. Celebrate the transaction with your employees but do not oversell it or apologize for it. A good deal often means better opportunities for the employees, and they need to know that.” Thank you, Garth!

Capital Markets

The National Bureau of Economic Research (NBER) has the responsibility of determining when a recession begins and when it ends. More specifically, it is the Business Cycle Dating Committee within the NBER that decides. Forget “a recession occurs any time you have two consecutive quarters of negative Gross Domestic Product (GDP) growth,” or “An inverted yield curve is a sure predictor of a recession.” According to the NBER, “A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators like real GDP, industrial production, and wholesale-retail sales. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

That said, we learned yesterday that the U.S. economy shrank for a second consecutive quarter. GDP was negatively affected by inventory investment, government spending, and housing with high inflation undercutting consumer spending and rate hikes putting hurting businesses and housing. Keep in mind that this probably won’t influence the Fed much, given it is older data. Personal consumption, the biggest part of the economy, rose at a 1 percent pace, a deceleration from the prior period as the economic environment has undoubtedly weakened.

This week’s Fed rate hike will increase short-term rates like credit cards, auto loans, and home equity lines of credit, but also a boost to the interest rate on savings accounts. The Fed move was expected to have no direct impact on home loan rates, but long-term rates actually declined. Back in June, when the Fed also raised rates by .75%, the 10-yr Note yield hit 3.49%, the highest levels in years and moved sharply lower on increased recession fears. For the last few weeks, as a barometer, the 10-yr Note hovered near 3 percent. Currently the 2-yr-Note yield is near 2.87 percent and inverted with the 10-yr at 2.70, which sometimes portends a recession. In a recession, long-term rates do not go higher, and the Fed doesn't hike rates.

No one owns a crystal ball, but the September Fed Funds futures contracts are pricing in an 80 percent chance of a 50-basis point hike and a 20 percent chance of a 75-basis point hike. Expectations are for the Fed Funds rate to be up 75- or 100-basis points from the current level by the end of the year. The June 2023 futures see lower rates than December. That means we are 3/4 of the way through this tightening cycle and the impact will really be felt later this year and in early 2023 due to the six- to nine-month lag.

Yesterday afternoon the NY Fed released a new MBS purchase schedule covering the July 29 to August 11 period. Despite the rally, there was no change to coupons with 30-year operations targeting 4 percent through 5 percent and UMBS15 operations targeting 3.5 percent and 4 percent. Today sees the Desk in UMBS15s for up to $151 million 3.5 percent and 4 percent.

Today’s economic calendar contains some first-tier data, much of which is of the inflation variety. We’ve received June PCE (+.6 percent, identical to May) as well as the Q2 Employment Cost Index (1.3 percent, better than expected inflation-wise), and PPE +1.0 percent. The Core PCE Price Deflator (). Later this morning brings Chicago PMI and the final July Michigan sentiment reading. We begin Friday with Agency MBS prices not doing much versus Thursday evening and the 10-year yielding 2.71 after closing yesterday at 2.68 percent after these inflation gauges this morning suggest the Fed will keep hiking.

Employment

At Keller Mortgage, you’ll have access to a captive audience of 180,000 agents to help grow your business. Join the Keller Mortgage team as it expands its nationwide team of loan officers in both direct and local channels. As a Keller Mortgage LO, you’ll have a best-in-class tech stack which leverages Blend, Salesforce, and Encompass for an elevated client experience and deep lasting relationships with agents. The company continues to introduce competitive products that serve more homebuyers such as Lock and Shop, manufactured housing, jumbo, and non-QM programs. Grow your business by joining a company that has been a leader in purchase originations in every mortgage cycle. Contact Cassidy O’Sullivan at 805-428-0082.