Compliance, LOS, Best-Ex, MSR Valuation Products; 2nd Mortgage and Conv. Conforming News

Hey, there is plenty of competition among lenders and among vendors. But, to the best of my knowledge, vendors and lenders aren’t doing this to one another. “There oughta be a law against it!” At the MBA Secondary Conference last week, MBA CEO Bob Broeksmit railed about the regulatory knots that bind the mortgage industry. Attorney Brian Levy agrees that’s a big problem, but disagrees with Bob’s solution in his Mortgage Musings. (Levy also gives some more thoughts on the CFPB funding case.) Regulations, and complying with them, certainly add to the cost of home loans, which in turn are passed onto borrowers of course. For lenders, cutting costs is a full-time gig. The biggest cost, of course, is personnel and LO comp, usually for several thousand dollars per loan. Of course, business models factor into it… How do you produce a loan? What about orginators who aren’t productive? Paying producers who do one loan a quarter… The money has to come from somewhere. (Found here, this week’s podcasts are sponsored by American Financial Resources, the mortgage lender that's shaking things up by streamlining processes, bringing on the best humans in the business, and putting the customer experience front and center. Hear an interview with Angel Oak’s Tom Hutchens on how loan originators can navigate a competitive market with the increasing demand for niche products like non-QM loans and bank statement HELOCs.)

Training, Products, and Software

“In the movie ‘The Matrix,’ Trinity reminded Keanu Reeves’ character, ‘The answer is out there, Neo, and it’s looking for you, and it will find you if you want it to.’ Chances are she was not talking about MSR valuations, but we are. This is your sign to unlock the “MSR Matrix,” and join Optimal Blue on June 5 at 1 p.m. CT for our MSR 101: How to Value the MSR Asset webinar. MSR experts Vimi Vasudeva, Brad Eskridge, and Tony Paciente will discuss the different assumptions that factor into MSR valuations and how MSR assets can help you optimize profitability. Attendees will gain a thorough understanding of the asset from a valuation perspective, along with the differences between various valuation approaches. It's time to optimize your MSR assets and retain the most profitable loans in your pipeline. Don’t be a glitch: register for the webinar today!”

The Base Rate Generator is a tool that helps mortgage lenders generate rate sheets in their pricing engine using back-end pricing. It’s as simple as going to the rate sheet tab in MCTlive! and clicking Generate.” In this latest video, MCT’s Director of Product & Pricing, Luke Chang, describes key features of the Base Rate Generator, including specs being passed through the aggregator rate sheet, the best execution process, and advanced granularity benefits. By combining live agency API connections, co-issue executions, aggregator pricing, and custom TBA indications, the MCT Base Rate Generator allows mortgage lenders to improve margin management and competitive performance. Originators interested in learning more about the industry-first features included in Base Rate Generator should register for the upcoming webinar on June 4th.

Vaporware. That's when you're sold software that doesn't end up delivering a fraction of what was promised. Want to supercharge your LOS with software that delivers? Read these reviews on the ICE Mortgage Technology™ Marketplace.

Compliance Experts Report on Q2 2024 Mortgage Compliance Outlook! Join ACES Quality Management's EVP of Compliance, Mandy Phillips and Ballard Spahr's Richard J. Andreano, as they share their expert knowledge on the hot topics of mortgage compliance. on June 6th at 11:00AM PDT as they discuss the Supreme Court update and Townstone, FTC banning of non-compete agreements, CFPB view of UDAAP abusive prong, and a Fair lending update. Reserve your spot.

Conventional Conforming Pricing and Processing Changes

Fannie Mae updated Selling and Servicing Guide pages. All topics have new URLs, with temporary redirects in place until January 2025. To avoid disruptions, please update your bookmarked links as soon as possible.

Fannie Mae posted the May Appraiser Quality Monitoring (AQM) list to Fannie Mae Connect. The monthly list will also be available on the AQM page through July 30, 2024, when Fannie Mae Connect will be required for viewing.

On May 19, the 2024 area median incomes (AMIs) were implemented in Desktop Underwriter® (DU®), Loan Delivery, and the Area Median Income Lookup Tool. At a FIPS-level, 79.6 percent of AMIs increased for 2024, meaning more borrowers may meet AMI requirements. AMI is also used to determine eligibility for certain loan-level price adjustment (LLPA) waivers. Lenders may use this information to determine income eligibility for HomeReady and other loans with AMI requirements. Read the Fannie Mae Selling Notice for additional information.

Pennymac Announcement 24-52 describes Conventional LLPAs update effective for all Best Efforts Commitments taken on or after Friday, May 24, 2024.

AmeriHome Mortgage posted a reminder in 20240513-CL Product Announcement as to the GSEs recently published policy updates related to property insurance requirements. Sellers are reminded that these changes are effective for all Mortgage Loan applications taken on or after June 1, 2024, but are encouraged to implement these changes earlier.

Second Mortgage Programs

The word during the recent capital markets conference was that investors and large lenders will continue to rollout HELOC and 2nd mortgage products. There’s so much equity out there! For example…

Closed-End Seconds (Fixed Rate Home Equity Seconds) are available through Pennymac TPO. While the Pennymac Correspondent Group (PCG) does not currently offer the product, approved PCG clients are eligible to obtain it through its wholesale division, Pennymac TPO. PCG stated they are seeing rates for Fixed Rate Home Equity Seconds mostly in the 8.5-9.5 percent range while they offer a dedicated rate sheet specific to second mortgages that does not expose pricing on other products. Guidelines are straightforward and an appraisal is not required in many cases. You can sign up to broker the product in a few simple steps. Login to P3 for more information.

Recently, Plaza Home Mortgage® rolled out a new program that can significantly benefit your borrowers. Plaza’s Closed-End Seconds program is tailored to help borrowers tap into their property’s equity without affecting their existing first mortgage offering substantial cash-out potential, providing your borrowers with the means to enhance their financial stability. Please note, this program is available in all states except Texas.

Capital Markets

Fixed-income security prices, and therefore interest rates, are driven by supply and demand. The main news this week as far as capital markets staff are concerned has been lackluster sales of new Treasury notes and bonds. Tuesday brought a lousy bond auction of 5-year notes, which sent the 10-year yield back above 4.5 percent. The U.S. Treasury completed this week's note auction slate yesterday with a poorly received $44 billion 7-year note offering, which pushed the 10-year yield to a monthly high at 4.64 percent.

Like Tuesday’s 5-year auction, the 7-year auction tailed 1.3 basis points, which means that the buyers who barely got the bonds paid much less than the others, a sign of weak demand. As a quick reminder, a "tail" is the difference between the average price and the cut-off price (the lowest price that a bond is sold for). Put another way, a tail indicates a difference between the yield in the auction and the yield in pre-auction trading, meaning that the Treasury had to offer a premium to entice investors to buy the debt.

Both the weak demand for Treasuries and hawkish Fed “speak” this week has forced investors to pivot toward “risk-off” mode, which has pushed rates higher. Yesterday traders also sifted through the Fed’s latest Beige Book, which said economic activity continued expanding from April to mid-May at an uneven pace with most Districts reporting slight or modest growth. Retail spending was little changed while auto sales were also essentially flat. Travel and tourism improved while demand for non-financial services also grew. Lending growth remained constrained by high rates and tight standards, though housing demand rose modestly. The release comes on the heels of Minneapolis Fed President Kashkari saying earlier in the week that Fed policymakers haven’t entirely ruled out rate hikes.

Mortgage rates certainly impact overall origination volume. If you recall, we learned last week that existing home sales fell 1.9 percent in April as higher mortgage rates reduced demand and forced some potential buyers to the sidelines. Supply grew to 3.4 months’ worth over the course of the month, which is up from 3.0 months’ in February. New home sales fell 4.7 percent during the month and new home supply was up to 9.1 months.

Anecdotal data suggest that builders have once again stepped up their use of incentives and interest rate buydowns to lure buyers back to the market. That comes as messaging from the Fed continues to reiterate the "higher for longer" mantra, as it is taking longer than anticipated for FOMC members to gain confidence that inflation is on a sure path to two percent. If there is a rate cut this year, it will likely not be until the fourth quarter.

The second look at Q1 GDP (+1.3 percent) kicked off today’s economic calendar. Real GDP growth in the first quarter of 2024 was expected to be revised lower to 1.4 percent in the second estimate’s release, from 1.6 percent originally, reflecting downward revisions to consumer spending. The GDP Price Index was +3.0 percent on an annualized basis, slightly lower than expected. Core PCE was +3.6 percent, as expected. Initial Jobless Claims were +219k, also about as expected. Overall, there were no surprises.

Later today brings the Pending Home Sales Index for April, Freddie Mac’s Primary Mortgage Market Survey, and two Fed speakers are currently scheduled: New York President Williams and Dallas President Logan. We begin the day with Agency MBS prices slightly better than Wednesday’s close, the 10-year yielding 4.59 after closing yesterday at 4.62 percent, and the 2-year at 4.95.

Employment

In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking to create lasting Realtor and builder relationships at a bank focused on the market today. Banner has opportunities for lenders looking for local decision making with FHA, VA, USDA, state bond and true Portfolio lending opportunities along with servicing retained Fannie and Freddie loans to assist in client retention. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. Banner is the right fit for an established team, or the individual looking to grow their business and take the next step in their career. Please send resumes to Aaron Miller.

Kind Lending appointed 40-year industry vet Tammy Richards as its new Chief Operating Officer. (She remains the CEO of LendArch, a consulting firm she founded in 2021.) Tammy will “leverage her deep industry expertise and proven history of success to oversee all operational aspects of the company. Her focus will be on scaling Kind Lending's infrastructure and processes to support its rapid growth while ensuring the company upholds its commitment to social impact.”