HELOC, Broker, Appraisal, DPA Products; Why Credit Costs Matter; Variance in Q3 Earnings

Many believe, and with good reason, that there will be some turnover at the CFPB coming up. Here are the pay grades if you’re interested in a job. (I can’t attest to the accuracy of Rohit Chopra’s comp.) The MBA’s latest prediction for 2025 is that residential volume will be up nearly 30 percent, and the industry hopes the MBA is right. According to Curinos’ new proprietary application index, refinances decreased 38% in October; the purchase index decreased 32% for October as a whole. But October 2024 funded mortgage volume increased 50% YoY and increased 15% MoM. (Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures.) At the other end of the mortgage digestive system, in the capital markets, the Fed’s MBS holdings have been running off, often through refinancing, so someone out there is doing them! (Today’s podcast can be found here, and this week’s is Sponsored by Calque. Partner with Calque to offer better loan solutions. Scale your business with a partner that puts your brand first and empower your clients to buy before they sell. Hear an interview with Prajna AI’s Ramesh Sarukkai on how mortgage companies can utilize the various types of AI to maximize enterprise value.)

Lender and Broker Software, Services, and Products

Major announcement from Byte Software. The enterprise-class features in BytePro are now available in ByteWeb, a new browser-based LOS platform featuring a fresh, modern user interface. With unlimited custom screens and fields, validation rules, macro automation, TRID warning lights, and much more, ByteWeb is available with the same affordable pricing structure that has allowed Byte clients to lower their costs while other lenders are stuck paying minimums based on 2021 production. You don’t have to choose between LOS functionality and affordability. It’s time to stop settling and start doing things your way. Designed to be both powerful and flexible, Byte gives you total control over your loan process and the freedom to do business the way you want. Maximize efficiency with a new browser-based UI, unlimited custom screens & fields, powerful data governance, flexible API, and workflow automation you can deploy with your in-house team. Request a demo to see why 97% of mortgage bankers say they would recommend Byte to their peers or visit here to learn more.

As political conversations heat up online, maintaining brand reputation is more critical than ever. Learn key strategies for navigating election-related social media risks in our latest blog, “Election Season: Protecting Brand Reputation and Managing Political Content.” With ActiveComply’s SocialShield® and WebCompass® solutions, monitor and manage compliance risks on social media and the web with ease, even during the most challenging times. Ready to see it in action? Schedule a demo and discover how to keep your brand safe and compliant, no matter the political climate.

California lenders, unlock a new revenue stream by offering GSFA Down Payment Assistance (DPA) programs. With up to 5.5% in assistance, no additional compliance checks, and flexible credit score requirements (as low as 620), this program is perfect for FHA, VA, USDA, and Conventional loans. Best of all, no first-time homebuyer restrictions make it accessible to a broad range of clients. Don’t miss out on this opportunity to expand your business and help more borrowers achieve homeownership. GSFA offers free online training to help you integrate DPA into your offerings quickly and easily. Start closing more loans and reaching new clients today! Visit here to learn more and register for training.

Stop wasting money on expensive, third-party tools for workflow automation and stop paying your CRM extra money for this same functionality. Usherpa’s newest feature, Pipelines™, helps you easily create customized Experiences™ for every contact type and lifecycle stage based on automated workflows for any scenario with an intuitive drag & drop kanban interface. Pipelines™ is a free tool for all Usherpa users, including corporate stakeholders who can create Pipelines™, add call scripting, and push the finished product out to specific LOs, selected branches, or company-wide, instantly. Usherpa delivers the daily tasks to Loan Officers and LOAs via the in-platform dashboard, email notifications, and mobile app alerts. Pipelines™ usage reporting helps leadership teams oversee task management and workflow success. Schedule a demo with Usherpa to see this groundbreaking new tech.

Reggora now includes a repurchase & LLPA adjustment warranty with its appraisal review software. When an eligible appraisal passes Reggora’s automated review, the company now covers any financial loss associated with a repurchase / LLPA adjustment due to an appraisal defect. Reggora is the first company within the mortgage industry to provide a repurchase warranty on the results of its appraisal review technology. Learn more about the warranty here.

Wholesale Product Offerings

“Arc Home is thrilled to announce that HomeEQ is now live and available to brokers nationwide! With U.S. home equity reaching $33.8 trillion (up 73% since 2019) now is the perfect time to help homeowners leverage their equity without touching their low mortgage rates. HomeEQ provides a fully digital HELOC experience with 2% broker compensation and funding in as little as 5 days. Existing Arc Home clients can easily amend their agreements to start offering this program, while new brokers can get approved in just hours. With HomeEQ, Arc Home is bringing brokers a seamless HELOC solution that meets today’s market demands. Check out our videos to see what HomeEQ can do for you and your clients. Ready to take advantage of this opportunity? Contact Shea Pallante for more information on how you can begin offering HomeEQ as soon as today.”

This week, Rocket Pro TPO continued its commitment to the success of its partners with the 24 Takeoff pricing promotion: A 24 bps credit on conventional, VA, and FHA purchases and refinances through November 17th (some product exclusions apply). This promotion empowers brokers to stay competitive and build their pipelines ahead of the holidays. Additionally, Rocket Pro TPO invites the entire community to a special VA lending sales training, “Learn to Serve Those Who Served Us,” on Friday, November 15th, at 2 PM ET. Led by a panel of veteran industry leaders, this session will share insights on meeting veterans' needs and expanding your business in this crucial market. Sign up here!

Earnings Tell the Tale: How Do You Stack Up?

From Michigan, United Wholesale (UWMC) announced its results for 3Q24 here. United Wholesale Mortgage’s profits took a hit from a decline in the fair value of mortgage servicing rights of $446 million. The wholesaler had $31.9 million of net income in the quarter, down 58.2% from the second quarter.

For some good news, UWM’s total gain margin increased from 106 basis points in the second quarter to 118 bps. The company closed $39.5 billion in 3Q23, up 18% QoQ and up 33% YoY with $26.2 billion of it being purchases.

“We anticipate fourth quarter production to be in the $34 to $41 billion range, with gain margin from 85 to 110 basis points… We exceeded both our volume and margin guidance despite mortgage rates remaining higher than anticipated for most of the quarter. UWM is on pace to have record purchase volume in 2024 despite a generationally slow existing home sales market.”

Radian has released its Q3 results, as did National MI. Zillow’s mortgage unit originated $812 million of mortgages in the third quarter of 2024, a 7.4% increase compared with the previous quarter. Blend Labs took a $2.6 million loss in the third quarter. In the previous quarter, the mortgage technology vendor had a $19.4 million loss.

From Connecticut, multichannel Planet Financial Group, LLC, parent of national mortgage lender and servicer Planet Home Lending, LLC and asset manager Planet Management Group, LLC, announced its performance for the 3rd quarter of 2024. “In the third quarter of the year, Planet expanded its Retail division with the acquisition of certain assets of Axia Home Loans, grew Retail volume by 28% to $251 million, increased its Servicing portfolio to $110 billion, and raised sub-servicing assets under management to $12.8 billion.

“Planet's residential origination volume was $5.11 billion for Q3 2024, up 28% from the prior quarter. Recapture originations increased to $482 million in Q3 2024, a rise of 109% compared to $230 million in Q2 2024. Distributed Retail volume increased to $251 million in Q3, up 36% from the prior quarter volume of $187 million. A key contributor to this success in funding and lock volumes have been growing homebuyer and builder demand for Planet's proprietary buy-before-you-sell and cash-offer products, which have gained traction as U.S. housing inventory levels remain constrained. Additionally, Planet's One-Time Close (OTC) and manufactured home loans have helped the company respond to the demand for affordable housing options.

“Correspondent volume was $4.4 billion, up 22% from prior quarter volume of $3.6 billion. We recently released a comprehensive Guide to Manufactured Housing Lending. Our renovation loan programs continue to be a grand slam, delivering significant value to our correspondent partners.

“Planet's total servicing portfolio ended the quarter at $110.4 billion, up 1% from $109.8 billion in the second quarter of 2024. At quarter end, Planet was the #8 Ginnie Mae servicer, and #14 servicer overall, according to Refinitiv. Residential sub-servicing volume ended the quarter at $12.8 billion, holding steady from $12.6 billion in Q2. Commercial servicing volume rose 12% in Q3. Planet manages and services a diverse range of agency and non-agency residential and commercial asset classes, including non-QM, Debt Service Coverage Ratio loans, Residential Transition Loans, small-balance commercial properties, multifamily and Single-Family Rental.”

Guild Holdings Company took a $67.0 million loss in the third quarter of 2024, primarily due to a $146 million hit on the value of Guild’s mortgage servicing rights (on its $91 billion of servicing). Guild’s origination unit had a $6.4 million profit on $6.91 billion of mortgages in the third quarter, up 5.8% from the second quarter. And Guild’s gain-on-sale margin increased from 326 basis points to 333 bps.

Reverse mortgage lender Finance of America saw $204 million of net income in the third quarter of 2024, up dramatically from its $4.9 million loss in the 2nd quarter due to “positive fair value adjustments of retained interests in securitizations, resulting from market inputs and model assumptions,” reported Inside Mortgage Finance.

Fair Isaac’s Cost Increase Ripples Through the Industry

Fair Isaac Corp. (FICO) announced on Wednesday that it has increased its wholesale royalty from $3.50 to $4.95 per score for mortgage originations. Any user, however, should read its blog.

Compensation is still far and away the largest cost with every loan, but let’s take a look at how the numbers work from a $1.45 increase on each score. A lender obtains three scores for a borrower, which is $4.35 more. If there are two borrowers on a loan, that is nearly a $9 increase. And if the lender runs a report at the beginning of the process and near when the loan funds, that is $18.

But wait, that’s just with Fair Isaac! There are three credit bureaus, and then the credit reporting agencies, each not wanting to go out of business, so the Fair Isaac prices are marked up. This has happened three years in a row.

As the MBA’s Bob Broeksmit puts it, “The problem is lenders have no choices, and not only do they have no choices, but they have no choices because the government itself mandates that the lender uses Fico for a credit score, and the 3 bureaus for a tri-merge. We think it's wrong that you can have a government bestow a market position like that and raise your prices completely out of line with inflation. If the if the price of a credit report went up 3% year over year, I think there'd be a big shrug and a yawn. But we're talking in FICO's case, 40%. We'll see what the bureaus do on top of that. And since there's no choice, it seems profoundly unfair. So, we're calling on the CFPB and the Federal Trade Commission to look into this and see if there are ways in which the government, and by the Government I mean FHA, VA, USDA, Fannie, and Freddie, requiring lenders to use these providers is driving up the cost in a way that's anti-competitive.

“This hurts the consumer because when the loan closes, the consumer pays these increased fees. But it also hurts the lender because I spoke to one lender yesterday who said, only 17% of the people for whom they pull a credit report end up with a closed loan, for several reasons. So, 83% of those credit report fees are going to the lender who has just eked out a profit for the 1st time in 9 quarters. So, it's really a problem. And that's why we put out a strong statement and are urging restraint by the score provider, and by the bureaus.” Thank you, Bob.

From Montana, Fair Isaac (FICO) noted that, “At this new per-score royalty, the amount collected by FICO will remain a small percentage of the cost of the tri-merge credit report and score bundle (on average approximately 15% of the $80 to well over $100 tri-merge bundle cost), which is itself an exceedingly small share of overall mortgage closing costs. Contextually, as we discussed in our recent RFI Response,[1] with total average closing costs of $6,000,[2] FICO’s share of total average closing costs before this new per-score royalty was only approximately two-tenths of one percent. Even after this change, FICO’s share will remain only approximately two-tenths of one percent.

Despite being the lowest of all individual mortgage closing costs, some have tried to suggest that our FICO Score royalty is a barrier to homeownership. It is not. For just a few dollars per score collected by FICO, the price commonly paid by a consumer for a cup of coffee, credit ready consumers can unlock access to homes worth hundreds of thousands of dollars, a small cost for life-changing benefits to aspiring homeowners.

FICO does not sell scores, or charge fees, directly to lenders in a typical mortgage transaction in the U.S. Rather, sales and distribution of the FICO Score are controlled by the three primary credit bureaus, Equifax, Experian, and TransUnion, the same credit bureaus that own and control VantageScore, FICO’s principal competitor. The credit bureaus and their tri-merge resellers not only set the price of the VantageScore used in connection with mortgage transactions, but they, not FICO, set the end user price for the FICO Score as well.

Capital Markets

As was widely expected, the FOMC decided at its policy meeting yesterday to cut rates by 25-basis points, the second rate cut in the last four years. The Committee noted that progress has been made in bringing inflation back to 2 percent and that the risks of achieving price stability and full employment are roughly balanced. The Fed changed language on its statement to note “labor market conditions have generally eased,” though expectations are for further easing at upcoming FOMC meetings.

A Trump victory means that investors now expect somewhat stronger economic growth, higher inflation, and larger deficits. Fed Chairman Powell repeatedly said during his press conference that decisions will be made on a meeting-by-meeting basis, adding that the labor market is not a source of meaningful inflationary pressures at this time. He also said that the election has no immediate impact on the central bank's decision making and that the recent rise in Treasury yields is not a source of concern.

Treasuries rallied through the release of yesterday's data, which showed a smaller than expected uptick in weekly jobless claims (to 221k from 218k) and a preliminary reading of the Q3 Productivity/unit labor costs report that featured a smaller than expected increase in productivity (2.2 percent versus 2.3 percent expectations) and a bigger than expected rise in labor costs (1.9 percent versus 0.5 percent expectations). The market dipped from highs in immediate reaction to the FOMC announcement, which brought the expected 25-basis points rate cut to 4.50-4.75 percent. The expected chance of a further 25-basis points reduction in December has an implied probability of around three-in-four.

Mortgage rates ticked up in the latest Primary Mortgage Market Survey from Freddie Mac. For the week ending November 7, the 30-year rate rose 7-basis points to 6.79 percent, while the 15-year ticked up just 1-basis point to 6.00 percent. From the September lows, rates on the two programs have respectively jumped 71-basis points and 85-basis points. However, they remain lower by 71-basis points and 81-basis points versus a year ago. (currently, rates are slightly higher as seen here: https://www.mortgagenewsdaily.com/mortgage-rates)  

Today’s economic calendar kicks off later this morning with the first look at Michigan sentiment for November. Following yesterday’s Fed events, today sees the resumption of Fed speakers starting with Governor Bowman who will be followed by St. Louis President Musalem. We begin the day with Agency MBS prices little changed from Thursday night, the 2-year at 4.20, and the 10-year yielding 4.31 after closing yesterday at 4.34 percent.