Servicing, Jumbo, Appraisal, HELOC Products; CA ADU News; Why Extensions Cost Money; Recruiter Interview

“I’m supposed to respect my elders, but now it’s getting harder and harder for me to find one.” Gradually it’s becoming harder and harder to find a bank that does loans outside of its footprint. Finding people in their late 30s or 40’s is not hard: The median age in the United States is 38. There are plenty of people in our industry in their 40s. You know, the 40s… when you’re like an iPhone 6: you don’t have all the features of the newer models but you’re dependable and affordable. While we’re on ages, yesterday a few folks pointed out that Happy Days first aired on ABC (remember network TV?) fifty years ago yesterday. (It went for 10 years until July 1984.) The show was “set” in Milwaukee but filmed in California which accounts for 20-25 percent of residential loan production and is in the news for its ADU policy. (More below.) Today’s podcast can be found here, and this week’s is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite's three core products (nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics) unite the people, systems, and stages of the mortgage process. Today’s features an interview with recruiter Brianna King on how job candidates can separate themselves from their competition and common résumé faux pas.

Lender and Broker Services and Software

Spring EQ, ranked as the #1 non-bank and #6 overall home equity lender according to reported data from Bankrate (based on statistics from Inside Mortgage Finance,) knows money can be tight after the holidays. Now is the time to assist your borrowers in tackling their seasonal debt! Spring EQ’s fixed-rate home equity loans and adjustable-rate HELOCs (3yr & 10yr) can help your borrowers get the cash they need without refinancing a low first mortgage rate. Need pricing for a loan? Try Spring EQ’s quick Pricing Calculator and get multiple options in seconds! And with Spring EQ, you can earn up to 2.5 percent in broker compensation on HELOCs and HELOANs. Start 2024 off right and join today’s webinar, which will review the many reasons borrowers want to tap their home equity. Think of Spring EQ first for all your seconds. Become a partner now or contact your Account Executive today.

At this point, the phrase “appraisal modernization" is nothing new, but does it make sense? Are you lost in a jargon jungle, unsure what it means for you? This free webinar recording, "Decoding the Modern Appraisal," clears the fog and equips you with the knowledge to navigate all things appraisal modernization. Consider it your modern appraisal masterclass, your go-to guide. Industry experts like Scot Rose from Class Valuation, Rachel Robinson from Rocket Mortgage, and Julie Giesbrecht from the FHFA answer your toughest questions like: How are lenders utilizing modern appraisal options? What are the real-world results and benefits of these efforts? How do modern appraisals combat bias? What does the property data collection process look like? And more! Get ahead, get informed, and unlock the secrets of appraisal modernization. Click here to watch and navigate this ever-evolving landscape with confidence!

“Discover your secret weapon in today's mortgage market: the Lakeview Correspondent Team. In an era where reliable partners are vital, our Correspondent team stands out, providing solutions that enable mortgage lenders to not just compete, but thrive. With the Bayview Non-Agency Product Suite, including Bank Statement, DSCR, and Prime Jumbo ARM’s programs, among others; lenders are equipped with the innovative products necessary to pave a successful path into 2024 and beyond. Don't be left behind: contact our Regional Business Development professionals today and set your team up for success.”

Servicing Assistance and Software

“Can digitization change the customer experience in 2024? Absolutely! Ask yourself if your potential and existing customers can access the information, decision-making, and results they need 24/7, real-time, and from any device? This is the expectation. Regretfully, many servicers have limited capabilities in this area, and past industry volatility may have impaired your organizational capacity to meet the needs of today's customers. However, bridging the gap between current functionality and delivering a digital experience doesn't have to be daunting. Our recent blog, "Break the Rules: Reimagine a Digital Customer Experience in 2024," explores how digital capabilities can be readily incorporated into your existing processes, delivering innovation, self-serve access, dynamic results, operational efficiencies, cost savings, and more. Want to see how? Meet us in Orlando for MBA's Servicing Solutions Conference & Expo. A reimagined digital customer experience starts with a better approach, better results, and better software. CLARIFIRE®, truly BRIGHTER AUTOMATION®.”

MBA's Servicing Solutions Conference and Expo is around the corner, which means it’s almost time for Martini Hour. Servbank, the nation’s premier bank subservicer, and Auction.com are hosting a martini hour that promises to shine and be as lively as the city of Orlando. Indulge in martini flights and delicious food while enjoying the company of friends. The martinis begin flowing on Wednesday, February 21, between 5-9PM ET, at Blue Martini, 9101 International Dr #1182, Orlando, FL 32819. RSVP here. No time for martinis? Meet Servbank, the nation’s premier bank subservicer, at booth #601 or set up some time to connect by emailing us.

When your customers are hit by a natural disaster, they can find themselves face-to-face with financial challenges they never would have expected. And since experts predict the number and intensity of natural disasters will only increase, servicers need to rethink how they help homeowners, before the next crisis hits. After all, ICE data shows that most borrowers in forbearance after disaster events ultimately return to performing status. And what’s more, a multi-year analysis revealed that access to self-service technology may help more borrowers stay in their homes during periods of financial hardship. Read more in ICE’s complimentary case study, “Helping Homeowners in Times of Financial Hardship.”

ADUs: As California Goes, So Goes the Nation?

Are you ready to lend on them? AB-1033 gives California cities the option to allow homeowners to sell their ADUs separately from the main house. Accessory dwelling units, also referred to as ADUs and “granny flats,” have been available in California only as rentals. But the new law, Assembly Bill 1033, is giving Californians the opportunity to buy and sell them as condominiums.

California MBA CEO Susan Milazzo sent me a note yesterday. “The California MBA monitored AB 1033 throughout 2023 and worked to ensure certain amendments were taken to address mortgage industry concerns. Specifically of concern was whether the ADU sale would impact the mortgage note on the primary property. Eventually amendments were taken to include that the country recorder cannot record the separate ADU/condominium with the consent of all lien holders, which addressed our major concerns and allowed us to remove our opposition.”

Lenders and property owners across the nation that ADUs come in all shapes and sizes, like converted garages, a small structure in the backyard, or, as often seen in San Francisco, an unused portion of the main house.

Assemblyman Phil Ting (D-San Francisco) drafted the legislation where property owners in participating cities will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums. It gives homeowners more options for building on their property, and “the hope is, it would create more homeownership,” said Ting.

As with new condominiums, homeowners building ADUs must notify the local utilities, including water, sewer, gas and electric, of the creation and separate conveyance of the unit. The main residence and the ADU will have two different property taxes. Each property will also have to form a homeowner’s association to assess dues to cover the cost of caring for the property’s exterior and shared spaces, such as the driveway, a pool, or a common roof.

California, however, is not the first. Selling ADUs as condominiums is having success in places such as Oregon, Texas, and Seattle, primarily to friends or family members. When Seattle removed regulatory barriers that discouraged property owners from constructing ADUs in 2019, the city issued nearly 1,000 ADU permits, more than four times the number permitted in 2018. In 2022, the city permitted 437 attached ADUs and 551 detached ADUs, which it referred to as backyard cottages. Just under half were on sites with multiple ADUs and one-third were part of a development that included a new single-family residence and sold mostly between $500-800k.

The law, with the backing of the California MBA, removes a state prohibition on the conversion of accessory dwelling units (ADUs) to condominiums. It ties in nicely with the FHFA’s goal of increasing the supply of affordable housing. “FHFA asked the Enterprises to review AB 1033 in the form passed by the California Assembly on May 31, 2023. Specifically, the bill’s proposed language related to the separation of an ADU, and lienholder consent (Section 2) does not appear to conflict with the current Selling Guides of either Enterprise.”

A letter sent to the FHFA, which oversees Freddie Mac and Fannie Mae, earned a response with, “Your letter requests a formal confirmation regarding the Enterprises’ policies for purchases of loans on 2-to-4-unit condominium projects, including projects that were previously single-family homes with an ADU that are converted to condominiums. Information about the Enterprises’ current policies for condominium projects can be found through these links: Fannie Mae Selling Guide Section B4-2.1-01, General Information on Project Standards, Fannie Mae Glossary 2-to-4-unit Condominium Project Characteristics, Freddie Mac Selling Guide Section 5701.2 Condominium Project Review and General Condominium Project Eligibility, and Freddie Mac 2-to-4-unit Condominium Projects.

Capital Markets

For MLOs who locked their borrowers at the lows, I continue to be asked about why extending a rate lock, if even for a few days for something beyond the control of the borrower, costs money. The cost to extend a best-efforts lock reflects the cost incurred by Secondary Marketing to move the corresponding hedge to reflect the new closing date. It’s an easier concept to understand if you acknowledge the inequity of hedging a mortgage pipeline: best efforts locks, which may or may not close, are given for FREE to Loan Officers, then hedged with mandatory security instruments. When a lock extension is granted, the hedge needs to reflect the change in delivery dates.

For example, when a loan comes in with a 45-day lock, your hedge model will pull from your LOS the estimated closing date, to best execute that loan for delivery into the secondary markets. In the process it determines what month security needs to be sold to off-set the 45+ days of interest rate exposure that loan will incur. If that 45-day lock was taken out January 2nd, with an February 15th estimated funding, a February security would probably be sold as the hedge instrument; a ‘only 7 days’ extension might just mean that loan now best executes into a March commitment, meaning you now must buy-back your February coverage, and sell a March security to match the new closing date. This “roll,” from a front month security to a “back” month, has a transactional cost. Much of the fee charged to extend a loan with your secondary group reflects this cost.

In the next four days we’ll have some Fed surveys, retail sales, import prices, housing-related data, and Michigan sentiment on Friday. Besides bills, Treasury supply consists of $13 billion reopened 20-year bonds on Wednesday and $18 billion 10-year TIPS on Thursday. But today there isn’t much to move rates (NY Fed manufacturing for January, Fed Governor Waller speaking, the Treasury auctioning off $75bn of 3- and $68bn of 6-month bills followed by $70bn 42-day CMBs at 1:00pm, and some bank earnings). Last Friday the U.S. 10-year T-note closed yielding 3.95. This morning it’s at 4.01 while current coupon Agency MBS prices are worse by about .250. (The 2-year is at 4.20.)

Employment

A well-capitalized IMB, based in the NJ/PA tri- state market, is seeking Loan Officers, Sales Teams, or possible acquisition opportunities of small to midsize IMBs in NJ, NY, CT, FL, and PA, while expanding in MD, DC, VA, NC, and SC. The IMB’s focus is a highly personable and high touch experience for LOs and Realtors. Organizationally lean, very competitive pricing, a wide array of products, and much higher LO Comp than what is offered by other larger IMBs. The focus is to attract serious loan officers who want an unparalleled service, where your voice matters and you have a seat at the table in growth. If interested, message Anjelica Nixt for a confidential discussion.

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