Price, Fee, and Lock Changes; Libor Update; Yield Curve Inversion
I received a note yesterday from the CEO of a well-known lender. “Rob, I love it when our competitors, who are losing money, wait weeks or months, after making the decision, to actually have a RIF or cutback. Now is the time for managers to actually manage, not just ride the gravy train, and the longer they wait in lowering overhead the worse their financials will look. We’ll outlast them by being more efficient and making the same revenue on every loan funded, but having lower costs.” Hundreds of companies are indeed cutting back, but don’t make the press. The latest to actually publicize cut backs is HomeStreet Bank as CEO Mark Mason announced the cuts in a second-quarter earnings call. “…we took additional steps in the quarter to streamline our mortgage banking operations by closing, consolidating or reducing space in 20 single family offices. These steps also include a reduction in headcount of approximately 127 full time equivalent employees” mostly in Arizona and coastal California.
Price, Fee, and Lock Policy Changes
United Wholesale Mortgage introduced a new Lock & Shop feature that gives mortgage brokers the ability to lock their borrowers’ interest rate while the borrower shops for a new home. Even without a formal offer on a property, Lock & Shop gives rate security with 60 or 90-day rate locks. If the rates improve as borrowers’ shop, brokers have the option to float down to the better rate.
Earlier this month Quicken Loans Mortgage Services spread the word that, “Now through July 31st we're giving you the ultimate bps offer: 40 bps on top of Rock Solid pricing. Redeem the ultimate bps offer on unlimited locks on agency loans above $200K and government loans above $125K for July only!”
Starting Friday June 22, “All ditech approved correspondent clients should note…ditech changed the LLPA on its 5/1 ARM 5/2/5 CAP from +0.250 to +0.050.
PRMG has eliminated the escrow waiver fee for all states.
Wells Fargo Funding has changed its tax service fee to a flat $80 per Loan fee and retired the state-by-state Tax Service Fee Schedule (Schedule B).
Effective June 4, pending state approvals, Arch MI reduced BPMI rate card premiums for most credit scores and updating adjusters for loans with more than one borrower and loans with a Debt-To-Income (DTI) ratio greater than 45%. Please see the BPMI Monthly rate card and Underwriting Guidelines for more details.
Back in May ditech updated appraisal fees on appraisals ordered through Mercury. The complete fee schedule will be posted on its website in the Forms Library.
Capital Markets
Originators should know what MBS traders and economists have been looking at recently. A majority of fund managers expect a recession in the US by early 2020, according to a Bank of America survey. A separate survey of bond-market experts reveals widespread expectations of a yield-curve inversion, a recession signal, within two years. Surely these people realize the long end of the yield curve is being held down artificially by the Fed, right?
The financial-services sector appears at risk of operational, financial and market-stability impact as replacement of Libor approaches. Regulators have voiced concerns Libor's disappearance after 2021 could catch the sector off guard. Off guard? We had 4 years notice!
Stepping back and looking at economic trends, BJ Necel writes, “Talk surrounding inflation has been widespread over the last few months as higher tariffs and tight labor markets points to increased pressure on businesses to begin the pass through at least some of those costs onto consumers. While we haven’t seen it come through in the broad data yet, many expect that price increases may begin to gather momentum. The Producer Price Index was up 0.3 percent in June and 3.4 percent in the last year; however non-energy materials used in manufacturing and construction are up 6.5 percent year-over-year. While consumer inflation was not as strong in Jun – only up 0.1 percent – prices have risen 2.9 percent over the last year as food, shelter, and gasoline have experiences steady gains. With the lack of slack in the economy and uncertainties around trade and the potential for consumer products to be directly affected, consumer prices are expected to face increasing upward pressure.
“Given that core consumer inflation is above the Fed’s 2 percent target, there is a good case to be made for the Fed to raise rates twice more this year. Currently, market expectations are around 85% for the next increase to be at the September FOMC meeting with the final rate increase expected in December.”
Continuing the look at recent weeks for economic trends, the labor market continued its hot streak in June as employers added 213,000 new jobs and May’s gain was revised up from 223,000 to 224,000. The unemployment rate increased to 4.0 percent, but this was mainly driven by a 0.2 percentage increase in the labor force participation rate. Hourly earnings also saw a small increase. The ISM manufacturing index increased to 60.2 in June, adding fuel to an expected strong Q2 GDP reading. New orders remained strong despite the tariffs, though manufacturers continue to report upward pressure on prices. Non-manufacturing activity also expanded in June as the ISM non-manufacturing index increased to 59.1. Construction spending in May was slightly below analysts’ expectations, however it did increase 0.4 percent and is up 4.3 percent for the year. Most of the monthly gain was in the residential sector as multifamily, single-family, and home improvement spending all increased. Finally, the trade balance narrowed to $43.1 billion in May as exports increased 1.9 percent. This marks the third straight month of declines for the trade gap and as a result should be a substantial lift to GDP.
Looking at the actual bond market yesterday, headline news revolved around the 20% drop in Facebook’s market value, but earnings reports generally have little impact on rates, and the European Central Bank holding interest rates was a much bigger player in the 10-year closing 4bps higher at 2.98% yesterday than anything occurring in the equity marketplace. The ECB said it will stick to its plan to end bond purchases and pledged to keep interest rates unchanged “at least through the summer of 2019.” The market, however, ignored the fact that while Mr. Juncker is one of the executives within the European Union, he does not speak for the entire union or any of the individual member states.The weeks continue to sail by, and today brought the first look at Q2 GDP. Expected to register at 4.0% (that would be the most since Q3 2015’s +5.2%), it was +4.1%. The only other economic release is the final University of Michigan Sentiment Index for July. The summer non-volatile rate environment continues: Friday starts with rates versus Thursday’s close: the 10-year is yielding 2.96% and agency MBS prices are actually better a couple ticks despite the strong GDP number.
Lender Products and Services
Marketing and CRM company Usherpa is proud to announce a partnership with borrower intelligence service Sales Boomerang. “We are so excited about our partnership with Usherpa,” said Alex Kutsishin, CEO of Sales Boomerang. “It is a perfect marriage of services, and the Usherpa team is dedicated to making the experience for their lender clients the best experience possible. Plus, the interface they created for Sales Boomerang notifications is awesome!” “Learn how customer intelligence can be the key to developing an effective customer relationship strategy in our latest blog post, and sign up for Usherpa and Sales Boomerang’s upcoming free webinar to learn about how artificial intelligence can help build authentic relationships.”
LendingQB's Vice President of Strategy David Colwell will be participating in a panel session at CMBA's Western Technology conference on August 6th titled, "The Life Cycle of the Loan - Technology for Every Aspect." LendingQB will also be participating in the conference's Technology Marketplace on August 7th to demonstrate LendingQB's powerful integration capabilities through their flexible OpenAPI's that allows for an extensive list of over 300 integrations that assist in propelling lenders into the digital mortgage fold. If you're interested in seeing a full demonstration of LendingQB, click here.
Employment and Personnel Moves
“Mr. Cooper is looking for a Rockstar! Do you know of someone who’s passionate about their work and a great people leader? Mr. Cooper Correspondent is seeking the right person to help lead our team as AVP, Customer Relationship Management. The ideal candidate should be a motivator and leader for client-facing personnel, an innovator and solutions-driven, and have deep experience in Correspondent Lending Operations/Pipeline Management. We’re aggressively growing our Correspondent channel and want to fill this position with someone who will complement our leadership team and enjoy working in our exciting and energetic culture. We attribute much of our success in 2018 to the recent accomplishments including the addition of Non-Traditional Credit, Modified Construction to Perm Loan Notes and Manufactured Housing products. And in development are E-Notes, FHLMC HomeOne and Temporary Buydowns. Mr. Cooper is a premier Correspondent and Co-Issue investor and the largest non-bank servicer with a servicing portfolio exceeding $500B. For information, please contact Bryan Budd.”
“DEAL Junkies wanted! CALCAP Lending, LLC a direct lender in the high demand private money lending marketplace is expanding and seeking motivated loan producers and experienced processors in Irvine and Pasadena, California. While 2018 mainstream consumer lending volumes are dropping, and margins are compressing, we’re continuing to grow in a very active market where the effective decisioning and fast funding are the overriding priorities of our clients. We are seeking career-minded, mortgage professionals who are open to change and would like to increase their earnings potential via the origination of private money transactions. CALCAP offers competitive rental, fix-and-flip loan (financing 100% of rehab), foreign national (no FICO or income verification), and construction lending (80% of total cost) and a full range of employee benefits. To learn more, you are invited to email CALCAP at careers@calcapfinancial.com, call us at 623-337-4504, or contact our HR Manager, Josie Fowler.”
The Federal Housing Administration (FHA), the world’s largest mortgage insurer, has open positions within many of its program offices, including its Single Family, Multifamily, and Healthcare program offices. Positions include underwriters, analysts, housing program policy specialists, and others. To find FHA job postings, visit www.usajobs.gov and search on “HUD” and then sort by “Agency.”
Recently a customer of Caliber Home Loans, Inc. was killed in action while serving our country overseas. To help his widow and children stay in their family home, Caliber presented them with a check for $33,000 on Tuesday, July 24th, to pay off the mortgage in full. The non-profit organization, Tunnel to Towers, initiated a nationwide fundraising campaign to collect the remainder of the family’s mortgage balance. "To be able to stay in our home forever, and where our memories were made... I won’t have to work multiple jobs and I can be there for my kids. I’m forever grateful," Briggs’ widow, Rebecca, said. The employees of Caliber strive to be ambassadors of goodwill and financial education in our military communities. Branch Manager Joseph Ferraro, RVP Peter Carney and Director of Military Community Engagement, Brittany Boccher were in attendance to represent Caliber.