Non-QM, Investment Property Products; ARM News; Tax and Fee Trends
Some are fond of saying, “Zillow’s never set foot in a house.” But the company is a force to be reckoned with, especially now that it is in the process of buying a lender (MLOA). And regardless of your opinion is about services like Zillow’s Zestimates, there is no doubt they have changed the way Americans research housing prices. How accurate are online pricing calculators? While I’m on the topic, by several measures housing is slumping. Pending sales are down Y-o-Y for seven straight months, existing sales have fallen four months in a row, home price increases are slowing, as are starts, homebuilder share prices are struggling, and inventory looks to be finally bottoming. Yes, rates are higher than a year ago, but have been stable for several months. Experts say that rising prices are finally squeezing demand, especially at certain price points.
ARM News
The Agencies are reportedly examining their adjustable rate purchasing policies and procedures. As an example from Fannie’s trading desk a while back came news that, “When committing in Pricing & Execution - Whole Loan®(PE - Whole Loan), you will see improved whole loan pricing for the following Hybrid ARM products: 5/1 LIBOR ARM Plan 2725, 2/2/5 Cap Structure, 5/1 LIBOR ARM Plan 2737, 5/2/5 Cap Structure, 7/1 LIBOR ARM Plan 2727, 5/2/5 Cap Structure, and 10/1 LIBOR ARM Plan 2729, 5/2/5 Cap Structure. Only ARM loans less than 4 months seasoned can be sold directly through PE - Whole Loan. For loans seasoned greater than 4 months, committing will need to be done on a negotiated basis directly with the Capital Markets Pricing & Sales Desk. Please contact the desk for assistance.
“Additionally, we will allow only 25bps in total servicing for all ARMs products. As this may affect loans with LPMI, be sure to check the servicing value before committing. The gross margin is required to be within the range of 200 bps to 250 bps on all commitments for ARM products. Sellers looking for a servicing-released execution for their Hybrid ARM production may commit through Servicing Marketplace or Servicing Execution Tool™ solutions.”
Taxes and Fees
With Massachusetts scheduled as the next state to legalize recreational marijuana sales, initial estimates having the market exceeding $1 billion by 2020, and the state seeing an estimated $200 million in additional tax revenue. Many are seeing Massachusetts as the tipping point for further east coast legalization, and real estate trends in the region will be followed closely to see if they mimic gains seen in other pro-weed states.
Remember that, earlier in the year, to avoid suspense items that can delay purchase of your Loans with Wells Fargo Funding, it required 2017 tax transcripts (W-2, 1099, or 1040), when applicable. *for Loans Closed on and after June 17, 2018. If a borrower has filed an extension, include the following in the Closed Loan Package: Evidence that the extension was filed. A 2017 tax transcript showing “No record of return filed,” and for salaried borrowers: 2016 tax transcript, a current paystub, and 2017 W-2. − For self-employed borrowers: 2016 tax transcript and 2017 profit and loss statement. If a borrower is not required to file, tax transcripts are still required. If “No Results” feedback is received, provide a copy of the feedback in the Closed Loan Package with supporting income documentation.
AmeriHome posted changes to its pricing policy for loans with corrections to Borrower names(s), Borrower information, or property address is changed. Changes must be reviewed by the Commitment Desk and may be subject to Worst Case Pricing defined as the lesser of the following: Commitment price as of the most recent Lock, Relock, or Worst-Case Pricing event, plus accumulated Extension/Relock fees, plus Relock fee (as noted on the Rate Sheet in effect as of the Relock date/time), or The Rate Sheet Price in effect at the date and time of this Relock, for the relevant Relock Commitment term.
Back in May ditech updated appraisal fees on appraisals ordered through Mercury on or after May 14, 2018. The complete fee schedule will be posted on its website in the Forms Library.
Paramount Residential Group has eliminated the escrow waiver fee in all states.
Capital Markets
In terms of volatility, this summer has been a snoozer for bonds, but there is still plenty going on from which originators should at least have awareness. For example, GDP is strong – but rates haven’t budged. Real gross domestic product increased at a 4.1 percent annualized rate in Q2, the strongest acceleration in consumer spending since the end of 2014. Business investment was solid, increasing at a 7.3 percent annualized rate in Q2, after a strong 11.5 percent gain in Q1. Business investment in structures, including new drilling for oil wells, increased at a 13.3 percent annualized rate in Q2, almost matching the Q1 acceleration.
Surprisingly, real inventories were a drag in Q2, declining by $6 billion and subtracting a full percentage point from headline GDP growth. Real exports accelerated in Q2, growing at a very strong 9.2 percent annual rate while imports bumped up at a 0.5 percent annual rate. Net trade added 1.1 percent to real GDP growth in Q2. Total government spending increased at a 2.1 percent annual rate in Q2, driven by a strong 5.5 percent gain in federal defense spending. The surprising drop in inventories in Q2 suggests that inventories could swing to the positive in Q3, boosting GDP growth in the current quarter.
Looking at another economic indicator, why should we pay attention to durable goods data? Durable goods, consisting of manufactured products such as cars or washing machines that last three years or more, are ordered in larger quantities by businesses and consumers when the economy provides them the confidence to do so. Hence why it is considered a leading indicator, as a durable goods report that shows an increase in orders is a sign that the economy is trending upward. Durable goods orders set expectations for the manufacturing sector. Beginning with the July 26 release of June 2018 data, historical Durable Goods estimates will be available on a seasonally adjusted basis as well as not seasonally adjusted. Additionally, monthly data for the Advance Report will be available in the Census Bureau’s application programming interface.
Separately, the M3 survey provides monthly statistics for manufacturers' value of shipments, new orders (net of cancellations), end-of-month order backlog (unfilled orders), end-of-month total inventories (at current cost or market value), and inventories by stage of fabrication (materials and supplies, work-in-process, and finished goods). Data published from the M3 survey are based on a panel of approximately 5,000 reporting units that represent approximately 3,100 companies. Responses are an indication of month-to-month change for the manufacturing sector. The M3 survey also provides broad and timely monthly statistical data on economic conditions in the domestic manufacturing sector.
Looking at yesterday’s bond market price activity, the U.S. 10-year closed -2bps to 2.88% after the release of a weaker than expected ADP Employment Change report for August. That was aided by news that the United States, Canada, Germany, and France have backed the United Kingdom's findings, blaming Russia for the use of a chemical agent in March. And as far as economic releases went, the decrease in jobless claims indicates a tight labor market, as employers appear reluctant to cut payrolls. The revised reading for Q2 productivity came in unchanged, as expected, so there was no market movement from there.
Today brought the August employment situation, not likely to have an impact on the market believing the Fed will raise short term rates twice more this year. The unemployment rate, expected to decline 0.1% to 3.8%, actually came in at 3.9%. Hourly earnings were +.4%, and Nonfarm Payroll was +201k. Today also sees three Fed Presidents speaking starting with Boston's Rosengren, followed by Cleveland's Mester, and concluding with Dallas' Kaplan. After the employment data the 10-year is yielding 2.91% and agency 30-year MBS prices are worse .125, so rates are up slightly based on the wage growth.
Products, Services, and Events
Todd Duncan’s 26th annual Sales Mastery Event, hosted in San Diego, is only four weeks away! In our market that is quickly changing—competition is fierce! Inventory is a moving target! Pricing pressures are enormous! Margins are down! Profits have declined. Do you know what to do in the face of all the pressure? Sales Mastery 2018 promises to equip you with a fail-safe formula for success to become a Game Changer to not only disrupt your own business but the market at large. Register today!
Silvergate Bank Correspondent Lending is now offering the DSCR – Investment Property Product. This is in addition to the Bank’s current Non-QM Portfolio Products of 12 & 24 Month Bank Statements, Asset Depletion, Limited Doc (1Yr), and Foreign National programs. Current guidelines can be found at www.silvergatecorrespondent.com, or you can contact Greg Davis, SVP-Correspondent Lending.
New Penn Financial has expanded its proprietary non-QM SMART Series product line by introducing the SmartCondo product. The SmartCondo Product is designed for borrowers seeking flexible financing options for condominium properties that do not meet agency guidelines. SmartCondo allows for a higher commercial space and offers more flexibility for things such as Single Entity Ownership, HOA Replacement Reserves and more. Call your rep for more information or visit www.gonewpenn.com
Coming off of a record Q2, Angel Oak Mortgage Solutions, the leader in non-QM, added 7 new account executives in August to help brokers and correspondents grow their business. Adding additional coverage across the country, Kendra Cutuli came on-board in Los Angeles, John Jernigan in North Carolina, Armando Aviles and Diane Hardgrove in Dallas, Otto Oliva in Inside Sales with John Macedo covering Monterey Bay to the South Bay and Vee Elmazaj covering the South Bay in California. To continue to educate brokers and correspondents, Angel Oak is hiring Account Executives across the country and operations staff in their Dallas and Atlanta offices. There is no better time than now to join the nation’s leading non-QM lender. To learn more, view the latest job openings on the Careers Page or email Regional Sales Manager, John Wise.
More exciting growth for PRMG as they continue to expand their national footprint by opening 5 new Retail Branches during the month of August! 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 Livermore, CA; Broomfield, CO; Cape Coral, FL; Brecksville, OH and Edmond, OK. PRMG is Built by Originators for OriginatorsTM and is devoted to continuously growing their retail platform. If you are a Motivated Loan Originator who wants to be Progressively Better, contact Chris Sorensen (909.262.0452).
“Towne Mortgage Company is looking for experienced Account Executives with a book of business throughout the Southeast, Mid-Atlantic, Texas, Ohio, Northern Illinois, Western Pennsylvania and Iowa. This position will have access to multiple operation centers and a wide range of product offerings including FHA, 203K, Fannie Mae HomeStyle, HomePath, HomeReady, DU Refi Plus, VA, USDA, and Manufactured Programs. Towne is looking for a seasoned, high-energy, salesperson who can partner with Towne to expand their lines of business. We are looking to fill positions in our financial institution channel working with Banks, Credit Unions and AgBanks as well as our traditional broker channel. Delivery mechanisms include both wholesale and mini-correspondent relationships. Towne offers competitive compensation packages including Medical and 401K. Sound Interesting? Email Cassi Sluka.”
Flagstar Bank Retail lending and Opes Advisors, a division of Flagstar Bank, continues their commitment to grow retail and expand nationally with industry veterans and well-known sales leaders. In the West they welcome Pat Riley as Area Manager in Nevada, Ryan Shea as Regional Manager in San Diego, Scott Hoolahan as Area Manager in Los Angeles, Mark Bratlien as Regional Manager in North Central California; in the East they welcome Eileen Blossom as Mid-South Regional Manager. If you are a producing manager or loan officer wanting to learn how they can help you grow your business by leveraging their federal exemption for 50-state lending, low cost of funds and robust product offering including additive jumbo and other portfolio products, feel free to contact the folks above or Steve Rennie, its national sales recruiter (408-831-5042). You can also see an overview here.
FundingShield, LLC announced that Jim Svinth has joined its Senior Advisory Board. “Jim is a seasoned business leader with 30+ years of financial and operations experience with several Fortune 500 companies including: GE Capital, Norwest, The Prudential, and Citigroup. Jim has led virtually every aspect of the mortgage banking process with emphasis in risk management, capital markets, and structured finance disciplines.” Congrats!