Jumbo and Alt Product Trends; AOT Product; Yield Curve Update
I don’t think Brookstone, which declared bankruptcy yesterday, ever sold them, but is the “Tiny House” movement getting big? If you’re near Colorado Springs this weekend, there’s a festival celebrating them. One step away from CO, at Four Corners, in Arizona, a school district near Tucson is building a tiny-home community for faculty to help address the affordability issue. Hey, they’re okay with the Agencies if comps can be found, right?
Jumbo, Non-Conforming, Guideline Shifts
Newfi Wholesale recently announced an expansion of its proprietary Sequoia Portfolio Plus loan program. With Sequoia, Newfi makes all credit decisions and exceptions in-house, delivering flexible qualification standards and faster approvals on loan amounts up to $2.5 million. Sequoia Portfolio Plus accepts multiple documentation options including asset depletion and bank statements. Loan scenarios and same-day exceptions are supported through its dedicated team of product experts. Newfi is committed to the return of make-sense lending, considering a borrower’s unique income and asset circumstances. “We wanted to create a loan program that combines the best of jumbo and non-traditional lending options,” said Newfi CEO Steve Abreu. “With Sequoia Portfolio Plus, we are empowering brokers to serve more homeowners in a tight market.” To support this product expansion, Newfi is actively seeking Wholesale AEs in key markets – resumes should be sent to Steve. Learn more about Sequoia Portfolio Plus here.
Wells Fargo Funding is adding a new market classification level called Market Classification 2 Restricted for Non-Conforming Loans. Market Classification 2 Restricted counties will be subject to LTV/CLTV restrictions based on Loan Score. Note there are no counties listed in the new classification level at this time. Wells is notifying of the change now in preparation for when counties are added in the future. There will be an Alert Newsflash once Market Classification 2 Restricted counties are identified.
And Wells Fargo Funding has simplified its number of appraisals policy for Non-Conforming Loans including eliminating the requirement for desk reviews. Previously, appraisal requirements for Non-Conforming Loans were based on multiple criteria, total loan amount provided by Wells Fargo, LTV, and median home price. Now, the number of appraisals required is determined solely by the total loan amount provided by Wells Fargo.
Pacific Union Financial posted the following: Automated Underwriting System (AUS) approved 2-unit property transaction types are no longer restricted to a maximum 50% DTI: When any borrower is a first-time homebuyer, regardless of geographic area; or if the property is in New Jersey.
Mountain West Financial will now be offering FHA and VA 5/1 Treasury ARMs for High Balance loans.
Loan Stream is offering ITIN loans. Program highlights include: Purchase, Rate/Term & Cash Out Refinance, 620 Minimum FICO, Full Doc and 24 Month Bank-Statement Options, Blended Income Allowed, Options for First Time Homebuyers, Owner & Non-Owner Allowed, Non- Documented VISA or Residency Status OK, ITIN Number Must Show on 2 Years Tax Returns if Full Doc, Credit Must be Pulled with ITIN Number. Contact Serene Vernon with questions.
Capital Markets
MCT has announced the automation of Tri-Party Agreement for bid tape AOT programs via its Bid Auction Manager (BAM) technology. A first of its kind technology, the solution benefits all counterparties and establishes newfound efficiencies for bid tape AOT executions. Company officials at MCT say that this execution is poised to gain rapid adoption and will likely account for a substantial portion of agency commitments. MCT collaborated with Wells Fargo to streamline the process leveraging eSignature technology. "Historically, Tri-Party Agreement made the AOT process extremely inefficient, as the form had to be printed out, wet-signed, scanned, stored, and in some cases faxed,” stated Phil Rasori, COO at MCT. “BAM automates this process, allowing parties to generate, eSign, and securely deliver agreements, all with the click of a button.” BAM is a component of MCT’s suite of Best-Execution technology that helps lenders and investors manage whole loan trading securely and efficiently.
Why should MLOs care about the yield curve? Because if it inverts, all LOs lose their license automatically.* The spread between the 10- and 2-year yields has fallen below 30 basis points, marking the narrowest spread since 2007 and causing further speculation on the risk of an imminent recession. The flattening yield curve in the past has possessed an alleged ability to signal a recession, as inversion in the yield curve has occurred prior to each of the past seven recessions, leading some to consider an inversion to be a good predictor of an economic downturn on the horizon. The yield curve can provide a valuable indication of forthcoming economic activity, but it represents only one factor in an economic outlook. Remember that the Fed is buying long-dated securities, artificially keeping long rates low, and thus a flatter curve. (* just kidding.)
In the short term, movements in the curve are largely a result of investor expectations, or where investors are assigning risk. Others have called to heed recessionary concerns, noting that current policy dynamics that are unique to this cycle are affecting the shape of the curve. The continued tightening in the federal funds rate by the FOMC is shifting the short end of the curve higher, while the unwinding of the Fed’s balance sheet will reduce buying at the long end. More broadly, forward-looking policy changes related to the budget deficit and ongoing fiscal stimulus could provide a lift to long-term bonds, a dynamic that typically does not occur late in the economic cycle, furthering the understanding that the flattening of the curve is something to pay attention to, but not a means for immediate concern.
How’s our friend – the consumer – helping the economy? Consumer spending continued is strong pace in June after surging in May and likely has contributed to potentially strong economic growth in Friday’s upcoming GDP report. Retail sale rose 0.5 percent in June and May’s 0.8 percent gain was revised up to 1.3 percent, fueled by sales gains at car dealerships and gas stations. Gas prices are up nearly 21 percent year-over-year and consumers are on pace to spend almost $5 billion more on new vehicles through the first half of the year than in 2017. Industrial production was also strong in June, rising 0.6 percent and reaching a new high. Despite the increases in manufacturing production, there is still plenty of room to grow as capacity utilization was at 75.5 percent in June compared to the mining sector which was at 92.7 percent utilization. The leading economic index, which is a composite of ten indicators designed to identify peaks and toughs in the economic cycle, increased 0.5 percent in June and is consistent with a positive outlook for the economy. Constraints on labor and resource supplies and their effects on wages and prices, however, are potential risks as we move into the second half of the year and beyond.
The advance estimate for real gross domestic product came in about as expected at a 4.1 percent annualized rate, driven by a 4.0 percent increase in consumer spending which coincided with comprehensive tax reform. Business investment was also a positive to headline GDP, however real inventories declined by a surprising $6 billion and reduced GDP growth by a full percentage point. Net trade added 1.1 percent and government spending, boosted by a 5.5 percent increase in federal defense spending, also added to the headline. Other recent economic releases included durable goods orders, which increased by 1.0 for the month of June after declines in April and May. Initial unemployment claims remain at a low 218k, up only 1k from last week. The negative data of the week was both new and existing home sales. New home sales declined 5.3 percent and existing home sales declines 0.6 percent in June. Supply for new homes increase to 5.7 months’ and supply of existing homes increase to 4.3 months’, indicating supply remains tight.
In the bond market, rate-wise, nuthin’ much doin’ out there. Yesterday the U.S. 10-year closed just below 3% as the BoJ was forced to act once Japan's 10-yr yield crossed above the 0.14% level and the Bank of England voted unanimously to increase its official bank rate by 25 basis points to 0.75%. Despite the hawkish rhetoric, the pound still dropped as investors did not fully buy into a brighter economic outlook. There is a lot of talk surrounding a trade war between the U.S. and China, but the economy has been chugging along at a very healthy clip, as evidenced in the recent corporate earnings reports and today’s jobs report.
This morning we’ve had July’s employment data. (The June trade deficit was also released, but no one cares that it was $46.3 billion, and later we’ll have July Markit Services PMI and ISM Nonmanufacturing PMI, and no one cares about those either.) The unemployment rate (3.9%), hourly earnings (+.3%), and nonfarm payrolls (157k, low, but a decent back-month revision) all about as expected. So, we start Friday with the 10-year yielding 2.98% and agency MBS prices are nearly unchanged versus last night’s close.
Lender Services and Products
Patty Gong EVP, Secondary Marketing at Parkside Lending (San Francisco, CA) notes “DocProbe has been a built-in part of our team since 2014. They work the Final Docs on both our business channels (correspondent and wholesale) and ensure that every trailing document is handled through best practices. The DocProbe team, process, and software coordinate flawlessly with ours. During one bulk sale, our investor misplaced some of our trailing documents; DocProbe handled a tedious reconciliation and resolved the issue. All in all, DocProbe has been a fantastic vendor to service and manage our trailing final documents.” DocProbe will be attending the LendersOne conference in Salt Lake City next week. “We look forward to spending time with our clients, the L1 team, and the L1 membership. We are looking for a Business Development Rep to represent the Central-Northeast region. Email Nick Erlanger to set up a call to learn more about our service or to submit your resume.”
GSF Mortgage continues to expand its Construction Lending Platform, offering a true Single Close Option for FHA at 96.5 LTV, USDA at 100% LTV, VA at 100% LTV, Conventional at 95% LTV. All underwriting requirements are the same as a traditional resale property for a resale property. This product suite has stabilized volume in this era of tight inventory. GSF is accepting Correspondent Lender applications. Please contact bolster@gogsf.com. All retail interest please contact cjampedro@gogsf.com.
Employment
If you believe your company should be providing you with stronger support and a higher level of customer service for your clients, Firstrust is interested in speaking with you. “We are looking to expand our Wholesale team in the CT, North Jersey and Florida markets. Firstrust offers the traditional product set along with a unique portfolio product including high LTV jumbo financing. If you are interested in making a move, please forward you information to Mike Scheier. Firstrust is a privately-held bank with assets of $2.7 billion. Safe and sound for more than 80 years.”
Centennial Lending Group, LLC is expanding its branches in the Southeast! “Centennial Lending Group, an award-winning mortgage lending company with multiple locations, is looking for talented loan officers. CLG is recognized as National Mortgage Professional Magazine’s Top Mortgage Employer for 2017 & 2018, Philadelphia Corporate Culture Award Winner 2017, and Montco Happening Winner 2017 & 2018. We offer great benefits, a flexible schedule, personal sales coaching, guidance from highly experienced senior mortgage officers to help build a successful sales playbook, a clear path to give full support necessary to grow professionally and personally, a marketing team support with social media, realtor presentations, print campaigns, videos, marketing coaching, online campaigns, CRM, mobile app and more, and full digital support to provide seamless access to borrowers and realtors. If you are interested in taking your career to the next level, please contact careers@clg-llc.com today and see the difference!”
Mike Miller who currently oversees the Wholesale Mountain Region for PRMG will now have the additional responsibility of overseeing and recruiting for the entire Midwest Region. “Over the last year with PRMG, Mike has demonstrated himself to be a strong leader along with a direct hands-on approach. He is always working toward building an elite team of Wholesale and Non-Delegated Correspondent Account Executives who as he states are ‘Noticeably Different.’ If you’re ready to join a top-tier team and company, then it’s time to talk! Contact Mike Miller (303.951.8390).”
DocProbe is looking for a Business Development Rep to represent the Central-Northeast region – see note below.
Congratulations are due: Roostify announced that Eric Amblard has joined the company as Chief Financial Officer. Rajesh Bhat, the CEO of Roostify, stated, “…Eric will also manage the company’s internal regulator, compliance and contract teams.”