Customer Service, Cybersecurity, Repurchase, LLPA Protection Tools; Politicians vs Policy on Mortgage Rates
“I thought swimming with dolphins was expensive until I went swimming with sharks. It cost me an arm and a leg.” Through the wonders of modern air travel, I find myself in St. Louis for the MBA of St. Louis event. Here in St. Louis, lending costs, rates, and regulations are on the minds of lenders, as well as where Freddie and Fannie are going and how. “Rob, although the funding mechanism is in place, couldn’t the U.S. Government cut off funding for the CFPB, therefore leading to it scaling back because it doesn’t have the money? And if that happens, won’t the states ramp things up?” Yup. “Rob, what’s the deal with rates? Wasn’t a campaign promise lower rates?” Slightly hot consumer and producer inflation data, along with a comment from Federal Reserve chair Jerome Powell on Thursday that suggested the Federal Reserve would not be "in a hurry to lower rates" weighed on markets. With longer-term Treasury yields holding high and a December cut on shaky ground, mortgage rates are prone to staying elevated… not good heading into the winter. (Today’s podcast can be found here and this week’s is sponsored by PHH Mortgage. If you are looking for a Correspondent Lending partner or an experienced, award-winning subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans look no further than PHH. Hear an interview with Diverse Mortgage Services' Chuck and CJ Sanders on how the mortgage industry can become less pale, male, and stale, and the benefits associated with that.)
Lender and Broker Software, Services, and Products
Just announced! Legendary skateboarder and entrepreneur Tony Hawk will take the main stage at the Optimal Blue Summit! Joining him are notable speakers including MBA’s Chief Economist and VP of Research and Industry Technology Mike Fratantoni, MBA’s Associate Vice President Sasha Hewlett, HousingWire’s Editor in Chief Sarah Wheeler, and more. Be part of the event that will shape mortgage innovation and lender profitability in 2025. Join the Optimal Blue Summit from February 3 – 5, 2025, at the Marriott Marquis San Diego Marina. This client-exclusive event features multi-track sessions exploring AI and automation trends, profitability strategies, market insights, and more, led by leading economists, policymakers, lenders, and Optimal Blue’s subject matter experts. The Optimal Blue Summit is designed for operational leaders, capital market leaders, origination managers, loan officers, brokers, partners, investors, executives, and more. Don’t miss your chance to help shape the future of mortgage technology. Register now.
Tired of meeting people, and being asked, “What does your company do?" Gaffney Austin can fix that! When it comes to the mortgage business, the crew at Gaffney Austin are the communication experts, available to handle all your PR needs. Looking to get your company in the news or nab notable industry awards? Gaffney Austin’s got you. The staff will work with you to create a powerful communications strategy designed to elevate your company’s public profile and expand your reach. Gaffney Austin builds impactful media campaigns that deliver real results.
Did you know that an estimated 91% of marine species have yet to be discovered? The same can be said for the refinance opportunities in your past borrower database. But MMI’s new personalized Refinder Estimator is ready to help you count the hidden gems you’re not seeing. Enter your NMLS ID to create a personalized video that reveals the number of refinance opportunities buried in your past transactions. Adjust the numbers or use today’s rates to calculate the full value sitting in your database. Click here to view your custom video and dive into the sea of undiscovered opportunities right at your fingertips!
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.
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. Request a demo to see why 97% of mortgage bankers say they would recommend Byte to their peers.
“On average, cyber attackers spend 285 days living in a network before they are noticed. Do you have both prevention and detection processes? Do you have an incident response plan in place? And if so, have you tested it to ensure it's effective? If you’ve answered no to any of these questions, it’s time to strengthen your cybersecurity posture and create a culture of security. To identify potential risks and vulnerabilities within an organization, cyber assessments are conducted to ensure the company’s data and overall IT infrastructure have protections in place to minimize the risk of infiltration from cyber criminals. They help ensure that any overlooked security gaps are caught firsthand, and a plan is put into place to fill the gaps. Read our blog to learn more about how cyber assessments can help mortgage lenders stay ahead of the cyber criminals. Contact Richey May’s Cyber Team to build your resilience.”
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.
STRATMOR on Repurchases
As the industry watches Freddie Mac roll out its fee-based system for avoiding repurchase, Freddie has announced plans to roll out a quarterly report on this in an effort to be more transparent. The industry hopes that Fannie aligns with this.
STRATMOR Group’s New Repurchase & Appraisal Underwriting Study! Are you up to date with the latest industry benchmarks on mortgage repurchase rates and appraisal underwriting costs? Join Reggora and STRATMOR Group on December 12 at 11:00 a.m. PST / 2:00 p.m. EST as they unveil findings from STRATMOR’s New Repurchase & Appraisal Underwriting Study. The webinar will dive into insights gathered from leading lenders across the industry, including repurchase rates (understand how your performance compares with industry averages), appraisal Underwriting Costs (gain visibility into typical costs from appraisal findings, LLPAs, and defect fees), defect and Risk Metrics (explore common reasons for repurchases, the financial impact of appraisal-related issues, and best practices for risk management, and labor and Time Benchmarks (see average times for appraisal reviews and learn where automation could yield time and cost savings.) Register now!
The US President Doesn’t Set Mortgage Rates
But their policies may impact them. Although the general population may not grasp that fact, those in our industry know better, or should. While President-elect Trump has sought to pressure the Fed to cut rates, LOs should know that consumer rates on mortgages and other loans are determined by a range of factors largely outside of the president’s control. Some campaign promises are notoriously hard to deliver on, and determining the business cycle, including rates, is impossible. Put another way, as a candidate, Donald Trump promised to relieve consumers of high interest rates. As president, doing so will likely be a slow process largely outside of his desires.
Trump repeatedly said during the campaign that he would bring down interest rates without elaborating on how. He and his advisors suggested the president should have a say in determining rates set by the Federal Reserve and publicly berated the central bank and its chairman, Jerome Powell, for not lowering rates sooner.
Loan officers should know that while Trump has put a lot of emphasis on the Federal Reserve as a way to reduce the interest paid by consumers or businesses, the rates on mortgages and other longer-term loans are outside of any one person’s or institution’s control. Instead, those rates are largely determined by the bond market, where investors are looking at a range of long-term risks, like the likelihood of high inflation returning, prospects for economic growth and the United States’ ability to pay back its debts in the decades to come.
Macro trends are more important and can’t be ignored. It is fine to try to keep the economy stable with relatively low rates, but the Federal Reserve has less control than people think. If a drought occurs that impacts food supplies, if the flow of tankers is diverted, if one nation invades another, global markets will be impacted, including U.S. mortgage rates.
Granted, the Federal Reserve plays a part in influencing interest rates by setting the amount that banks have to pay in the short term to borrow money from each other in order to carry out their daily business. That amount can trickle down to how much lenders then charge consumers for a loan, but it isn’t always the case. Mortgage rates rose after the Federal Reserve cut rates in September for the first time since the pandemic, and despite the Fed cutting rates again on November 7, mortgage rates are expected to continue to rise based on the trends in the bond market.
Trump has no direct control over the interest rates set by the Federal Reserve, which is determined by a committee that includes seven members appointed to 14-year terms along with five regional Reserve Bank presidents. Under the current law, the president can’t fire Powell or any member of the Fed’s Board of Governors without “cause,” so removing any of those members because of a disagreement over interest rates would be challenged in court. Powell said during remarks on Nov. 7 that if Trump asked him to resign, he wouldn’t do so, and that it wasn’t permitted under the law for Trump to fire him or any members of the Federal Reserve board. While Trump has acknowledged that he likely doesn’t have the power to set rates or fire Powell, he’s indicated he isn’t going to stop voicing his views on what the Fed should be doing.
Outside of any actions Trump may take with the Federal Reserve, interest rates are expected to gradually ease if inflation remains under control, or the job market begins to weaken. But Trump’s own policies could drive rates higher if they signal a return to higher-than-normal inflation. Trump has proposed putting sweeping tariffs on all goods imported into the U.S., including a 60% duty on imports from China. If past tariffs are any indication, that would drive up the prices consumers pay for goods and could trigger another wave of inflation that would push rates higher. Significant tax cuts that put more money in people’s pockets could also contribute to higher inflation.
If the U.S. Congress or President Elect Trump takes steps to reduce its deficit and rein in spending, which would make the bond market more favorable to lenders and borrowers. If that doesn’t happen, we can expect higher mortgage rates.
Capital Markets
Between an underwhelming housing starts and building permits report as well as new geopolitical uncertainty after Russia lowered its threshold for a military response with nuclear weapons, it wasn’t much of a surprise that there was a flight to less risky assets yesterday, resulting in a rally in the bond markets.
Total housing starts fell 3.1 percent during October to a 1.311 million-unit annual rate, the second straight monthly decline. Building permits fell 7.7 percent on a year-over-year basis to 1.534 million units. The adverse impacts of Hurricanes Helene and Milton (evidenced by a 10.2 percent month-over-month decline in starts in the South, the nation’s largest homebuilding region) look to be the primary culprit behind the drop.
But prospects are bright for builders moving forward as they appear less-fazed by high financing costs and encouraged by the results of the recent election. “With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments,” said NAHB Chairman Carl Harris.
Homebuilder confidence did improve in November as political uncertainty abated, per the Mortgage Bankers Association (MBA). The Mortgage Bankers Association Builder Application Survey (BAS) data for October 2024 shows mortgage applications for new home purchases increased 8.2 percent compared to a year ago. Compared to September 2024, applications increased by 3 percent. This change does not include any adjustment for typical seasonal patterns. While more lenient regulations may increase confidence and help support activity, potential changes to trade and immigration policy represent headwinds for residential construction moving forward.
Kicking off today’s economic calendar was mortgage applications from MBA, which increased 1.7 percent from one week earlier. Later today brings some Treasury auctions that will be headlined by $16 billion 20-year bonds and a buyback in 20- to 30-year coupons for up to $2 billion, and remarks from four Fed speakers. We begin Wednesday with Agency MBS prices down a few 32nds from Monday’s close, the 2-year yielding 4.30, and the 10-year yielding 4.42 after closing yesterday at 4.38 percent.