Non-QM 2nds, Renovation, Homeowner, Realtor-Facing Products; Reaction to Govt LLPA and Securitization Changes
What would this opening paragraph be without some fun, non-mortgage stuff? Watch a rare livestream of bald eagles nesting on eggs in California. 32 trillion gallons of water have fallen in California in recent weeks, resulting in a disaster declaration. Speaking of that state, the weather forecast for San Diego is warm and sunny next week as hundreds of mortgage professionals are preparing to go to California for the MBA’s Independent Mortgage Banker’s Conference. (Say “hi” if you see me.) One topic of conversation, of course, will be the bond market and mortgage pricing. Months ago, I’d receive question after question about pricing. “Why is no one paying anything above par (100)? I’d explain that no investor wanted to pay 103 and lose 3 points in a matter of months if rates dropped a little, and that 7 ½ percent 30-year loan refinanced at 100. Well, here we are. Helping lenders was a reduction in securitization costs, but taking away some of the rate environment was yesterday’s conventional conforming price news. Wall Street trader talk yesterday focused on an “up in coupon” recovery “on the heels of the LLPA adjustment (reducing refi's in general, and cash-outs, in particular) and to a lesser extent the stalling of the duration grab.” (More below.) This week’s podcast is sponsored by Candor. Candor’s patented automated underwriting decision engine, CogniTech™, is a state-of-the-art, 100 percent machine platform that can handle infinite loan scenarios.
Lender and Broker Software, Products, and Services
“LEVEL UP WITH SAGENT IN 2023: On our quest for homeowner-first modernization, in 2022, Sagent played at a high level, securing a landmark deal with Mr. Cooper. Skipping to 2023, Sagent hasn’t lost any of our game-changing momentum, and if you want a peek into what’s to come (plus some top scores for our customers last year) check out Sagent’s 8-bit video rewind of 2022. As we start Level 1Q23 with boss-mode market challenges ahead, Sagent is relentless in fighting for its servicing customers and the MVPs we all serve: the homeowners. It’s a multiplayer game, and we’re celebrating our clients and partners as we all put homeowners at the top of the leaderboard. Check out our 8-bit 2022 rewind video here.”
“Need to generate more revenue and stand out from competitors in 2023? Matic, an embedded home insurance platform built for the mortgage industry, has helped top lenders and servicers add a new revenue stream. Unlike most tech solutions, we add revenue to your bottom line, give borrowers an amazing experience with personalized insurance offers from 40+ names you know (like Progressive, Travelers, Nationwide and more, and automate the home insurance process) meaning faster closings and less headaches for your loan teams. Book a quick demo with our team of mortgage experts to learn more about partnerships.”
Flagstar Bank kicked the new year off right—with a larger, more diversified balance sheet after December’s merger with New York Community Bank. Why should that matter to you? Flagstar warehouse lending is well-positioned to provide more, as in more capabilities and more opportunities, to mortgage originators, aggregators, investors and MSR owners. Watch this short video for insights directly from EVP and President of Mortgage Lee Smith. Then, contact Jeffrey Neufeld or Patti Robins to discover how your business can do more with Flagstar.
In challenging origination markets, many lenders rely on servicing to help weather the storm. Valon helps you get even more from your servicing. Currently, we pass along 100 percent of the float income to our clients and can help protect your servicing portfolio through an integrated, loan-level recapture service built directly into the homeowners’ servicing experience. Using our proprietary software, homeowners get the best of both worlds: transparent access to information and easy-to-use tools to self-service on their terms, and a dedicated team ready to provide industry-leading customer support. By providing homeowners with more control and transparency, Valon brings increased trust, customer satisfaction, and ultimately, brand loyalty for future financial needs. To learn more about how Valon can add value to your business, schedule a call or demo.
As a top-performing bank in the nation*, Northpointe Bank Correspondent Lending provides tailored solutions to maximize your profitability and help your business grow. Northpointe’s market-leading programs give you the competitive edge to retain top sales talent and reach more borrowers. Programs include temporary buydowns, renovation, One time close, Non-warrantable condo, Bank Statement, AUS Jumbo, and debt service coverage ratio (DSCR) products with the ability to choose your preferred underwriting delegation based on approval. As your investor conduit to the capital markets, at Northpointe everything we do is focused on you. Start the New Year on the right track by partnering with Northpointe and accessing the most expansive product suite in the industry. Learn more about our programs, streamlined funding process, and client-focused approach. * S&P Global Market Intelligence ranked Northpointe number eight best-performing bank in the nation for 2020. For nine years, Independent Community Bankers of America® has ranked Northpointe Bank as a top-performing bank in the nation out of approximately 5,000 ICBA member banks.
Your IMB Colleagues have seen significant cost and time savings from our unparalleled, unique software platform for educational compliance. OPTIMIZE Compliance Solutions offers “Out-of-the-Box IMB Educational Compliance (cost cutting, organization-wide progress tracking on attorney-reviewed material, lightning quick audit response and more like Convertible Compliance) offering MLOs the option to convert training hours to CE, eliminating repetitive training. Schedule a 15 min demo with Dave Olchek. Optimize your educational compliance and increase MLO happiness with less training.
Nations Direct Mortgage is excited to announce the rollout of its NonQM 2nd. Ideal for borrowers that need cash out without refinancing their low rate first. NonQM 2nd is for “piggyback” purchases or refi’s. NDM also offers a pricing special to new brokers, click here to sign up today.
Do you have proper oversight over your subservicer? Richey May conducts annual subservicer oversight reviews on many subservicers to assist lenders with their monitoring and oversight responsibilities. Richey May’s oversight program goes beyond basic compliance requirements. With a focus on current servicing risks, the review includes on-going procedures, interviews with all key department leaders to observe their processes and challenges, a comprehensive review of business continuity and IT assessments, and a summary of the subservicer’s strategic initiatives. In addition, customized, on-going loan-level testing is recommended. Richey May’s loan-level testing digs deep into loans in your portfolio to provide valuable insights into how your portfolio is serviced. And if you’re not sure whether you should continue to retain servicing in this market, we can assist with your servicing strategy. For more information on Richey May’s Subservicer Oversight Reviews, custom loan-level testing, or additional insights contact us!
What have over 250,000 MLOs and real estate agents adopted in just the past 6 months?? Emerging new technology company Milestones has hit the ground running giving over 250k agents & loan officers access to the platform since their July 2022 Series A and go-to-market announcement. The technology is fully white-labeled and gives homeowners an all-inclusive homeownership experience including: home value & equity monitoring, home maintenance reminders and how-to articles, cloud-based document storage, one-click access to hire professionals for various projects around the home, and much more. Their unique revenue model allows MLOs to double down on their commitment to client retention and maturation, while substantially lowering their tech spend (and offering more value to both homeowners and Realtor partners). Milestones’ Chief Revenue Officer Ashley Terrell will be in attendance at IMB23 for those that want to connect in person, or you can learn more.
The hallmark of a good leader is the ability to motivate and inspire. Before the 1980 U.S. hockey team pulled off their “miracle on ice,” the coach gave a rousing speech, remarking that “great moments are born from great opportunity.” That’s what we have today, in this market. Building a solid team of Realtor partners is more important than ever, but many mortgage advisors haven’t sharpened that skill in years. One way lenders can motivate their teams to cultivate Realtor relationships and fill their pipelines is by providing the right game plan. Sales Boomerang and Mortgage Coach can help you inspire your mortgage advisors with this free guide on building realtor relationships. Don’t just sit around and hope for a miracle. Send your team out onto the ice knowing this is their time.
Industry Reacts to LLPA Changes
The industry’s collective attention was grabbed by the FHFA’s, which oversees Freddie Mac and Fannie, announcement of the loan-level pricing adjustments as well as the improvement in securitization costs. While Freddie and Fannie’s industry notices read that the changes are for loans delivered May 1, 2023 or after, investor changes are likely to go into effect soon and will vary by investor. Many emails that I received say that this is a disappointing announcement from FHFA, worsening affordability in many of the pricing buckets set forth by the LLPAs, and which negatively impacts affordability for individuals who have saved for down payment and managed their credit. There are generally lower LLPAs for low FICO, high LTV grids, and high LLPAs for low FICO 80 percent max LTV cash outs. The FHFA will accept comments.
Sasha Hewlett, AVP, Secondary & Capital Markets with the MBA, writes, “The FHFA announced new single-family pricing updates that will be effective May 1, 2023. These changes impact the remaining loans that have not been included in the two previous pricing updates. We are still analyzing the new grids and assessing impacts, but it appears that these changes, in aggregate, result in a modest increase in pricing. The FHFA hopes that these changes will be a way to lock in the previous changes in a more effective framework.
“There has also been a recalibration and reformatting of the entire LLPA matrix. There will now be three grids broken out by loan purpose - purchase, rate/term refinance, and cash-out refinance - recalibrated to new credit score and loan-to-value ratio categories along with associated loan attributes for each. Fannie Mae and Freddie Mac have both updated their guides with the new pricing grids. Bob Broeksmit, MBA President and CEO, issued a statement following the announcement which you can find here.
“FHFA also announced a reduction in the UMBS comingling fee from 50 bps to 9.375 bps. This comes as a result of months-long discussions, analysis, and engagement with industry participants. FHFA reiterated its dedication to preserving the strength of the UMBS market and plans to review the Enterprise Regulatory Capital Framework to ensure it appropriately captures the risks of the Enterprises business activities including commingled securities.”
The United States Mortgage Insurers weighed in. “Overall, FHFA’s review of upfront pricing in the conventional mortgage market will have a positive impact and result in savings and cost reductions for many low down payment borrowers served by private MI. USMI applauds FHFA and Director Thompson for taking a measured and prudent approach to identifying areas where upfront costs could be adjusted, and for many reduced, while maintaining a commitment to strong risk management.
“USMI has previously called for FHFA to reexamine and reform g-fees, particularly loan-level price adjustments (LLPAs), in numerous letters and columns. In October, USMI commended FHFA on its ongoing review of GSE pricing.”
Capital Markets
The market received both a solid jobless claims report (190k initial claims, the lowest since September) and a positive December Housing Starts/Building Permits report (new single-family starts increased by 11.3 percent month-over-month even after three months of slowing activity) yesterday. There were also well received remarks from multiple Fed speakers, with Fed Vice Chair Brainard saying that policy is now in restrictive territory and Philadelphia Fed President Harker saying that he doesn't see a current need for "overly restrictive" policy from the Fed. Treasury Secretary Yellen notified Congress that extraordinary measures are now being implemented by the Treasury Department to avoid a default now that the debt ceiling has been reached.
As far as rates were concerned, this week’s Primary Mortgage Market Survey from Freddie Mac saw mortgage rates decline for the second straight week. The 30-year rate declined 30-basis points to 6.15 percent while the 15-year rate declined 45-basis points versus the prior week to 5.28 percent.
Today’s lone economic data point, due out later this morning, is existing home sales for December, with expectations for 3.98 million versus 4.09 million previously. Two voting Fed speakers are scheduled to deliver remarks starting with Philadelphia’s Harker who will be followed by Governor Waller. We begin Friday with Agency MBS prices worse slightly from Thursday’s close and the 10-year Treasury yielding 3.43 after closing yesterday at 3.40 percent.
Employment and Lenders Wanted
loanDepot has quietly entered the retail acquisition market. The company’s scale, winning team and strong balance sheet have positioned it to weather the downturn and lead from a position of strength. According to LDI Mortgage President Jeff Walsh, “Through the successful execution of our Vision 2025 plan, we’ve done the hard work to ensure we can continue to invest in our platform, which includes driving organic growth by hiring one qualified producer or office at a time. In today’s tough market, a lot of high-quality organizations, with great cultures and reputations, just don’t have the scale or financial foundation necessary to thrive. The fight for survival takes their focus away from what they do best. As a leading in-market lender, we’re looking to selectively acquire strong teams or firms that align with our strategy of purpose-driven lending and deepen our capabilities to reach first time homebuyers and underserved communities.” Leaders interested in a confidential conversation can reach out to Jeff Walsh directly.
Supreme Lending team members across the United States are lighting up the Internet today in preparing to celebrate Supreme Day, an annual event to commemorate the date the Dallas-based independent lender was formed in the NMLS (January 31, 1997). The intent behind this fun, informal celebration is to build awareness of Supreme Lending and the benefits of working there through posts on social media with the hashtag #SupremeDay. This year’s theme (#SupremeSTRONG) brings additional meaning to Supreme Day, signifying the team is united and committed to working together to make Supreme the BEST mortgage banking company in America. Each of the company’s 1,800 employees are recognized for the important role they play in fulfilling this vision. Watch today for messages of gratitude and shoutouts to key contributors. Supreme would not be SUPREME without its people. Today’s the day to see the unique family culture at Supreme on the company’s Facebook, Instagram, and LinkedIn profiles. If you’re interested in joining this Supreme Team, contact National Production Manager Ryan Baxter.
A nationally recognized mortgage lender with the dependable financial backing of a publicly traded parent company is looking to expand its team. This mid-sized Utah-based company is consistently ranked a Top 50 mortgage company by Scotsman Guide in the United States and features a full array of mortgage products and a network of professional branches from coast to coast. The National Recruiting Director position will oversee production growth and team acquisition. To apply, please send your confidential resume to Chrisman LLC’s Anjelica Nixt for forwarding.