Credit Guideline Changes; Jumbo Secondary Market News

In celebration of National Doughnut, or Donut, Day, let’s talk about a subset of real estate agents. The typical Realtor, and there are 1.2 million of them in NAR, is a 53-year-old female who attended college and is a homeowner - not surprising. On average, they had 12 transactions in 2016. Median income (half above, half below) increased from $39,200 in 2015 to $42,500 in 2016. The recent NAR survey revealed that 24% of members make under $10,000, and 24% make above $100,000. Women represent 63% of Realtors.

Credit Guideline Changes

The May issue of STRATMOR Insights Report contains a riveting In-Focus article entitled The Changing Credit Landscape: What it Means for Originations written by none other than me. Are credit scores and underwriting guidelines, loosening as lenders seek to broaden the base of eligible borrowers in the face of higher rates? Will the credit agency changes that go into effect this summer help lenders? And will these changes result in a big boost to originations? In this piece, I try to shed some light on these questions and look at the changing credit landscape. To read the full article, click here.

The Wall Street Journal reports that new data from credit scoring agency FICO finds the average credit score nationwide hit 700 in April, the highest level since 2005. US credit scores hit a 12 year high this Spring as consumers continue to improve their financial situations by saving more and borrowing less. Interesting tidbit: More than 6 million families will have personal bankruptcies fall off of their credit reports over the next 5 years. Chapter 7 and 13 personal bankruptcy filings hit 1.5 million in 2010. That will be an additional source of mortgage demand in addition to Millennial first time homebuyers.

To more closely align its lending guidelines with current agency requirements, Franklin American Mortgage Wholesale Lending has relaxed, and in many cases removed, overlays across its entire product portfolio. See the full overview of new expanded guidelines.

To improve transparency and to help its clients better understand how a borrower's credit is reviewed during the manual underwriting process, Sun West has updated its manual underwriting guidelines specifically for the review of a borrower's credit. The updated guidelines include additional information on how various risk factors associated with a borrower's credit are analyzed during a manual underwriting review.

Effective May 19 Flagstar Bank made improvements to many agency overlays on the Fannie Mae Fixed Rate, Doc. #5301, Freddie Mac Fixed Rate, Doc. #5302, and Agency 3/1, 5/1, 7/1, and 10/1, Doc. #5331 products.

As a reminder, Fannie Mae's EarlyCheck version 5.2 will be implemented during the Memorial weekend, featuring new loan-level warning edits and several edit severity modifications. With this release, EarlyCheck will support and validate the delivery of Uniform Loan Delivery Dataset (ULDD) Phase 3 data points. Visit the EarlyCheck page to learn more. Also note, during the weekend of June 24, DU for-government loans will be updated to support FHA-related changes, as well as several other messaging and logic updates. All changes will apply to both new casefiles and to resubmissions. View the Release Notes for more information.  

Straight from Texas, the TMBA and Mark Yoder of Partners Credit & Verification Solutions are offering up a discussion of the upcoming credit reporting changes that will go into effect July 1, 2017. "Learn the specifics of the modified Public Records reporting requirements imposed as part of the National Consumer Assistance Plan and review the impact these initiatives have on the reporting agencies and the industry." Download the registration form or register online. (Members register for FREE as a part of their TMBA member benefit. If you don't have a TMBA profile, please email Tonisha Williams to setup your account. Once you have created a TMBA online profile, you will be able to register for future events, contribute to the TMBPAC, view activity, and manage your own contact information.)

Capital Markets - Jumbo Now Attracting Attention

For those watching jumbo securities, from Bloomberg's desk Matt Scully and Sonali Basak write, "Mortgage bonds nearly put American International Group Inc. under last decade. Now they are part of the company's turnaround plan. The insurer's asset management unit is buying mortgages from lenders and plans to bundle them into bonds to sell investors, according to Fitch Ratings. The business has purchased around $4.8 billion of home loans through April, most of them made to prime borrowers, Fitch said in an assessment of the business that is selling the bonds...It sold its mortgage guarantor last year for more than $3 billion, but said it remained committed to owning home loans and related securities.

"This time around [versus 10 years ago], AIG is trying to play it safer. The company's Residential Mortgage Lending Group plans to bundle prime mortgages it bought into bonds, Fitch said, meaning other investors will ultimately hold some of the risk. The loans are generally so-called jumbo mortgages, which are too big for government backing, and the borrowers tend to be wealthy and have prime credit ratings."

And Redwood Trust is putting a jumbo security out there backed by plenty of loans from First Republic and Quicken Loans but also 133 others. "The underlying collateral consists entirely of fully-amortizing, fixed-rate mortgages," and purchase loans accounted for over 60% of it. The new $349.46 million jumbo MBS deal from Redwood contains over 10% of its loans from First Republic and nearly 9% from Quicken. Most of the other lenders that contributed mortgages to Sequoia Mortgage Trust 2017-4 were not identified because they individually account for less than 5.0 percent of the deal's dollar volume. Nearly 11% of the mortgages came through the Federal Home Loan Banks' Mortgage Partnership Finance program. Servicing will be done by Shellpoint Mortgage and Frist Republic. Safe-harbor qualified mortgages have an average credit score of 770, an average combined LTV ratio of roughly 68%, and an average debt-to-income ratio of 32%.

Turning to the bond market, jobs and housing are big drivers of the economy, and the job market is arguably firing on all cylinders. Yesterday's ADP Employment Change for May was reported to be 253k, the fourth month in the last five that the ADP number has been at or above 245k. The ISM Manufacturing Index was decent. U.S. construction spending fell 1.4% m/m in April but a March revision made up for it. Initial jobless claims rose to 248k for the week ending May 27, a shade higher than expected. By the time the dust settled the 10-year price had worsened by slightly more than .125 to close at 2.22% while agency MBS prices sold off a few ticks.

This morning the folks at the Bureau of Labor and Statistics spat out the employment data. Nonfarm Payroll, expected +185k, came in at +138k for May with negative back-month revisions. The unemployment rate, expected to remain unchanged at 4.4%, was 4.3%. Average hourly earnings, expected to drop, were strong at +.2%. Almost as an afterthought International Trade data for April came out with a deficit of $47.6 billion. After this collection of numbers we find rates lower versus late Thursday. The 10-year is yielding 2.18% and agency MBS prices are better by .250 as the yield curve flattens.

New Products and Opportunities

Bay Equity Home Loans is being recognized for its leadership in cutting edge technology by industry giant Microsoft. "Bay Equity is committed to providing its originators with best in class tools and technology to enhance success. A great example is its early adoption of the Surface. Bay Equity became the first mortgage banker to utilize the Encompass LOS on the Surface. No other computer hardware is needed for originators or any employees companywide to execute the loan process from application through funding. As Bay Equity CEO Brett McGovern noted, 'We understand the best people in our industry expect the best tools to execute at the highest level possible. Having a close partnership with Microsoft has allowed us to take advantage of the Surface, Office 365, Skype and other tools to increase efficiencies and productivity.' For an insider view of how Bay Equity and Microsoft are leading the way, click here." In addition, Bay Equity has just been ranked by Scotsman Guide as #20 in the nation for retail loan volume in 2016. To learn more about opportunities with Bay Equity email Sean Wilson.

The adage that 'time is money' has never been truer than in today's highly competitive mortgage market. LenderLive Correspondent Lending recognizes the key drivers facing lenders: You need a partner who understands that fast, reliable service times, quick loan purchases and consistent competitive pricing are critical to your success. Challenges don't end there either. Aggregators are often buying your customer rather than just your loan, putting your customer relationships at risk. LenderLive won't cross-sell your customers and since we don't have a retail division, you won't be competing with your investor. Contact National Sales Manager, Bob Kallio to learn more. 

Retail continues to grow for PRMG with the opening of 3 new branch locations during the month of May! Along with the drive and ambition to bring the American Dream of Homeownership to all cities across the country, PRMG has now opened its doors in Sedalia, CO, New Haven, CT, and Plantation, FL. "PRMG is devoted to growing our retail platform and is always looking for motivated Loan Originators to support our mission to being 'Progressively Better in All that We Do.' Voted No. 1 of the 50 Best Companies to Work for in America 2015, No. 1 Best in the Desert 2017 and TOP 25 of 100 Mortgage Companies in America! PRMG employs over 1,300 people!  If you're ready to join a top-tier team and company then we need to talk! Contact Chris Sorensen at 909.262.0452."

Are you a Production Leader interested in learning new ways to create consistency, efficiency, and accountability to improve your recruiting success? As more lenders are fighting for a share of a smaller market, growing your production through organic RECRUITING efforts should be a top of mind priority. Model Match has cracked the code on the process of recruiting passive producers with transferable books of business. If you will be attending Mastermind next week, we would love to give you a hands-on look of our new features including Lead Name Sourcing, individual Success Coaching, customized CRM and Drip Marketing campaigns. You will walk away with a clear understanding of what you can do NOW to efficiently and effectively manage infilling and overall growth initiatives by leveraging your best resources - your local managers, leadership, and internal recruiting departments. To schedule time with our team, send us an email and we will coordinate a private meeting info@modelmatch.com

"UNIFY has a 'JACKPOT OFFER' waiting for you at Mastermind! With Real time LOS INTEGRATION, IPC's and Loan Details, UNIFY helps you increase revenue, productivity and efficiency to give you more time for what is important to you. We custom brand your marketing

collateral to conform to the brand standards you have worked so hard to build. It's your brand and reputation... Why settle for less? Unify is the 'END TO END' solution for you and your organization. Reserve a time by contacting Scott Benson at 651.288.7510 or Matt Zabbo at 618.610.5868."

In operations job news, "Seeking talent in Florida! A national lender with wholesale, correspondent, and non-delegated channels, and boasting a full product line, steady volume growth, and industry longevity, has plans to expand its East Coast operations and set up shop in South Florida. We're looking for operational staff, both leadership and support roles, including underwriters and account managers, along with 4-6 inside sales professionals to support more than 300 East Coast clients. All positions come with a competitive salary and full benefits, including 401K. Interested? Contact Brandie Young for consideration."

Multi-Bank Securities, Inc. (MBS) is pleased to announce that David Pesek has been promoted to vice president at MBS, specializing in TBA and mortgage backed securities fixed-income bond markets. As an associate of Gail Schaumann and Sara Weber, Pesek's primary area of expertise is in the trading of GNMA, FNMA and GOLD specified pools, "providing value-added trading execution to secondary marketing executives by offering a premium above TBA markets for certain types of pools, such as low loan balance and custom pools."

And LBA Ware, a provider of automated compensation software and systems integration solutions for mortgage lending and retail banking, has hired Finn Klemann as director of business development. In this role, Klemann will be forging new relationships for LBA Ware in the financial services industry, with a specific focus on targeting growth in the mortgage industry.

On the other end of the scale, Wells Fargo's retail group saw some turnover at the senior levels as some sales staff (Drew Collins & Sandy Streator) on the West Coast "are no longer with the company," the same fate as the head of retail Greg‎ Gwizdz (EVP/National Sales Manager at Wells Fargo Home Mortgage). The chatter is faulty sales practice consequences continue - but ask your Wells rep. Congrats to Liz Bryant who is now in charge of Wells' retail sales organization with its 7,900+ originators.