Capital Markets Class, CFO Oversight, Correspondent, Non-QM products; Freddie and Fannie Changes

“When I was young man, I met a girl in Tennessee who turned out to be a moonshiner’s daughter. That was a long time ago. But I love her still.” The Commentary is going out this morning from a Buc-ee’s in Northern Georgia (on my way northward to Ohio), economic activity is active. Are high rates in my rear-view mirror, with lower rates down the road? Mortgage rates and U.S. Treasury yields have climbed further, with the 10-year bond reaching 4.36% and mortgage rates near 7%, as investors anticipate potentially inflationary policies from President-elect Donald Trump, such as tax cuts and tariffs. With better economic data, perhaps a too-dovish Fed, and more policy details from the Trump administration are higher Treasury yields and worse mortgage pricing a surprise? Today at 2PM ET/11AM PT "Mortgage Matters: The Weekly Roundup” presented by L1 has Jess Medema, who runs secondary marketing for Altra CU, discussing what happens behind the scenes in a secondary department and what originators should know about rates & pricing. (Today’s podcast can be found here. This week’s is sponsored by Floify. Floify is an easy-to-configure point-of-sale platform that allows each branch or loan officer to customize its look and feel to meet the needs of their lending team, homebuyers, and market. Today’s features an interview with Experian’s Joy Mina and Ivan Ahmed on how lenders can navigate a tight market, from rates to equity.)

Lender and Broker Software, Services, and Products

Congratulations to Panoramic's inaugural class, who just finished their module on securitization, for passing the halfway mark of their 14-week capital markets course! Students represent some of the most influential companies in the industry, including lock desk, capital markets and production professionals, along with technology and C-Suite executives. The combination of exclusive podcasts, learning modules, discussion forums, and excel-based modeling exercises creates an immersive experience unique in the industry in terms of depth and breadth of capital markets topics. From hedging best practices to servicing cash flows to performance attribution and more, this course is designed to take their professional knowledge to the next level. Additionally, current students’ invaluable feedback throughout the first semester has inspired enhancements and informed new material already incorporated into next semester’s course. Panoramic’s Spring class starts January 19th, 2025, and is already filling up! Enroll now for the Spring semester, and follow us on LinkedIn!

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“Artificial intelligence and automation are top of mind for nearly every industry player in 2024. At Optimal Blue, we embrace AI with a purpose: to help our customers solve real-world problems, improve efficiencies, and maximize profitability on every loan transaction. The AI-powered Profitability Assistant in the CompassEdge hedging and loan trading platform, announced in August, uses generative AI to provide an unbiased analysis of day-over-day changes to your P&L. It quickly summarizes top factors influencing profitability, highlighting impacts in dollars and basis points, saving senior secondary marketing professionals hours of research. Building on its success, we’ve added a monthly view that offers CFOs and secondary marketing leaders’ month-to-date summaries of top profitability drivers. This enhancement streamlines end-of-month analysis, allowing lenders to easily understand their performance without needing to manually compile and analyze daily reports, thus providing a holistic perspective on profitability trends over time. Read more in the press release.”

Verus Mortgage Capital hasn’t stopped listening to its clients after 10 years of buying closed loans. Its success is driven by competitive pricing, service, culture, and taking care of the customer. Do you need more flexible loan solutions to accommodate those who are self-employed or have complex income sources? Want to assist borrowers in tapping into their home equity? As a trusted leader in non-QM, Verus brings the experience and expertise to help you enter this market quickly. Verus has established itself as the predominant non-QM issuer by purchasing over $30 billion in non-agency loans, supporting both those new to non-QM and lenders interested in expanding its non-agency offerings. With a comprehensive range of loan options for property investors, foreign nationals, self-employed and more, Verus offers solutions to fit your borrowers’ unique needs. Let’s start 2025 strong with Verus as your partner in non-QM! Learn more. Contact Jeff Schaefer, EVP – National Sales at jschaefer@verusmc.com or 202-534-1821 to set up a meeting.

“When you say, ‘CFO Oversight Services,’ most people think financial forecasting and planning. And yes, those are important services we provide at CWDL, but there are so many ways CFO Oversight Services can bring value to your mortgage company. From leading the hiring process for a new CFO to mentoring financial staff, from being a sounding board for the executive committee to modeling the net financial contribution of potential acquisitions, and from consulting on company restructuring to developing financial models for compensation programs, we have a solution for every need. And paired with our industry-specific, scalable accounting solutions, you have a powerhouse team that delivers real cost savings, adds efficiency to your processes, and provides deeper insights into your business performance. Ready to elevate your financial strategy? Reach out to Kasey English or call 619.302.0010 to explore how our CFO Oversight and Outsourced Accounting services can transform your business.”

Freddie and Fannie Updates

Given that 60-70 percent of applications in any given week are conventional conforming loans, it makes sense to know what the teams Freddie and Fannie are up to, deep in the bowels of their headquarters.

Freddie Mac and the Federal Home Loan Bank of Des Moines (FHLB Des Moines) announced a collaboration to help increase affordable housing finance options on tribal lands. FHLB Des Moines will raise awareness about Freddie Mac's HeritageOne mortgage offering among its network of financial institution members. The HeritageOne mortgage offering is an innovative financing solution designed by Freddie Mac to meet the borrowing needs of members of federally recognized Native American tribes living in tribal areas. It also provides financial counseling and other resources to members of Native American tribes, especially first-time homebuyers.

Fannie Mae announced that it has approved the Mortgage Partnership Finance® (MPF ®) Program, administered by the Federal Home Loan Bank of Chicago on behalf of six Federal Home Loan Banks, to sell loans made to Native Americans and secured by tribal trust lands under the company’s Native American Conventional Lending Initiative (NACLI) program. This initial step will support Fannie Mae’s ongoing pursuit of agreements with area Native American tribes and when completed, will enable MPF Program Participating Financial Institutions (PFIs) serving tribal communities to offer conventional loans on tribal trust lands.

The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 0.7 points in October to 74.6, pushing the measure of consumer confidence to its highest level since February 2022 and significantly higher than the all-time low recorded two years ago. In October, the share of consumers who think it’s a good time to buy a home increased to 20%, while the share who think it’s a good time to sell a home declined to 64%. On net, consumers continue to expect home prices to rise and mortgage rates to fall, with the latter component hitting another survey high this month. The full index is up 9.7 points year over year. Read the full research report for additional information.

In November, Fannie Mae’s Selling Guide has been updated to modernize special property eligibility and underwriting considerations for leasehold estates; revise our project review requirements related to properties secured by manufactured homes; update requirements related to the Market Area analysis of the appraisal report and add standardized definitions relevant to appraisal market areas to the Glossary; clarify that sellers and servicers are responsible for preventing, detecting, and reporting mortgage fraud, and other miscellaneous updates. View Announcement SEL-2024-07 for details.

Capital Markets

Hopefully, you were able to take a deep breath yesterday. That’s what investors did as they awaited appointment announcements for President-elect Trump’s cabinet and received only small business optimism (improved versus the prior month, but still the 34th consecutive month below the 50-year average) and the New York Fed's one-year inflation expectations index (year-ahead inflation expectations dipped to 2.9 percent from 3.0 percent) from the economic calendar. This week does not contain any Treasury note or bond auctions, so that should be supportive of rate markets. The breather was welcomed after five-consecutive trading days of rising bond yields in anticipation of upcoming tariffs and an increase in deportations from the Trump administration that are expected to keep inflation elevated.

In the world of MBS, Class A dollar rolls happened yesterday, and Class B is on Thursday. For those not working on secondary marketing desks, these involve final settlement procedures, meaning these securities were now locked for delivery, shifting focus to December coupons for future pricing. This routine transition can make it appear as though prices have dropped, but it actually reflects the "time value of money" loss, where back-month securities start accruing interest later than current-month securities. Yesterday's roll doesn't necessarily impact loan pricing immediately, as most lenders already incorporate anticipated back-month pricing adjustments into their rates weeks in advance. This periodic market reset helps maintain alignment between loan pricing and actual delivery timelines for MBS investments.

Kicking off today’s economic calendar were mortgage applications from MBA, which increased 0.5 percent from one week earlier. We’ve also received today’s highlight in the form of October Consumer Prices (+.2 percent, as expected, core +.3 percent; +2.6 percent year over year). Forecasts did not see either the headline or core CPI moving any closer to the Fed's 2 percent target, with the former expected to come in 0.2 percent higher month-over-month to post a 2.6 percent annualized pace, while the latter was expected to remain steady at 3.3 percent. Later today brings the October Treasury Statement from the CBO, and Fed remarks from Dallas’ Logan, Kansas City’s Schmid, and St. Louis’ Musalem. We begin Wednesday with Agency MBS prices better about .125 versus last night, the 2-year at 4.35, and the 10-year yielding 4.37 after closing yesterday at 4.43 percent.