Broker Products; Vendor Developments; Rate Volatility Increase
Music fans are saddened by the recent news of the deaths of Eddie Money and the Cars’ Rick Ocasek. In our industry, the news late last week that Black Knight, Inc. has acquired Compass Analytics, LLC, turned a lot of heads. There is no reason to believe that larger companies taking an interest in successful vendors, or vendors merging, will ever stop. Conference organizers carefully monitor the LTV (lender to vendor) ratio. For lenders, “vendor management” has been a discipline for a while, especially as liabilities typically rest with lenders, and companies consult on managing them as each vendor promises that it will cut costs, increase productivity & reliability, and “talk to” other vendors. Oh, and are fast and easy to rollout without too much cost. Yes, some of them offer some nifty products. What else is going on in the vendor space? More below.
Lender Services and products
“Padlock, the innovative rate lock extension program from QLMS, has been live for a month and the broker community is loving it! QLMS is giving its partners FREE rate lock extension days based on the volume of business they share. Just like airline miles, with Padlock, the more loans you close with QLMS, the more extension days you receive for your clients’ loans. Partners get three free extension days for every closed loan, up to a maximum of 750 rate lock extension days in the bank. Earn your extensions during periods of dropping rates then, as rates rise, you can use your extension days to protect your clients’ money. Use this tool to help your clients and build your business. If you aren’t already working with QLMS, and banking rate lock extensions, click here to connect with them and find more ways to WOW your clients.”
“Beginning on Friday, October 11th, 2019 through Saturday, October 12th, thousands of independent mortgage brokers, loan originators and processors will join together at the AIME Fuse 2019 National Conference in Las Vegas at the Bellagio Hotel & Casino. AIME created the Fuse National Conference to aid in its mission to support and empower independent mortgage brokers. The conference will feature well-known speakers and top-name exhibitors who provide AIME members with the tools, resources and support necessary to successfully advise consumers with their residential mortgage needs. Join us and your fellow industry peers at the largest and most informative conference available in the industry. Register for AIME Fuse 2019 and check out what we will have in store for you this year.”
ARMCO Q1 2019 Mortgage QC Industry Trends Report found that loan quality has corrected with the market’s upturn. “Q1 2019 revealed the loan quality correction we anticipated after Q4 2018, but while there are many positives related to the overall market’s upturn, we saw an increase in defects related to key underwriting and eligibility functions,” said Nick Volpe, chief strategy officer for ARMCO.” The highlights? The critical defect rate fell 6%. Defects related to core underwriting and eligibility functions continued to increase, with more defects attributed to income/employment than any other category. Critical defects attributed to missing, expired and/or incorrect documentation continued to be volatile. Compliance-related critical defects fell to their lowest level since Q1 2016. Government-insured loans accounted for a slightly higher share of all loans in the benchmark.” Read the full report.
“Where can you get 11X return on every dollar you spend? There is only one place smart lenders go to get these returns consistently: Sales Boomerang. Why would you say no to 11X or better ROI? You can't, and you shouldn't. Believe me, your stake holders will thank you. "Now, we don't let opportunities walk out the door thanks to timely notifications," Michael Guidotti from American Pacific Mortgage. Lenders get on average an 11X return but many are posting 15X, 20X, 25X and all the way up to 60X returns from every dollar invested into Sales Boomerang. "Sales Boomerang is a game changer for us, because we've never had access to such information before," Stephen Barton from Eustis Mortgage. If volume is not your problem today then profit and customer retention need to be at the top of your list. Check out the long list lenders already using Sales Boomerang and then schedule your demo.”
Vendor Tidbits
Homebot Inc. announced the release of its iBuyer feature. This new capability enables lenders and their agent partners to help consumers navigate the various cash-offer options in the marketplace and compare these to traditional listing-based selling. The instant cash offer is quickly becoming commonplace with consumers as iBuyer offerings are making headlines across the country from companies like Zillow and Opendoor. Although only a small minority of homeowners are accepting instant offers, most want to at least "see" it before making a selling decision. The combination of Homebot's new iBuyer feature with an industry-leading 50% monthly engagement, positions the agent as the trusted advisor who can connect their clients to any iBuyer program.
Altisource announced the launch of a tailored suite of single-family rental (SFR) services for the SFR market leveraging Altisource’s experience in closing over 23,000 single and bulk asset acquisitions, dispositions and financing transactions. SFR homes comprise more than one-third of all U.S. rental properties, or roughly 16 million homes, with another 13 million new rental households expected to be formed by 2030. With this significant demand on the horizon, Altisource anticipates that investors and lenders will have an increasing need for SFR vendors that provide scale and consistency. Altisource’s suite of SFR solutions includes: Premium TitleTM Title and Settlement Services, RentRange® Rental Data, Hubzu® Online Real Estate Marketing, Appraisal and Valuation Services, Field Services and Renovation, Property Inspections, Construction Risk Management, Real Estate Brokerage, Rating Agency Due Diligence, Insurance and Risk Management and Mortgage Fulfillment Services.
Consulting services provider Newbold Advisors LLC joined the Ellie Mae® Pro Consulting Partner Program™. Newbold will help lenders and Ellie Mae accelerate the delivery, deployment, and adoption of the Encompass® Digital Lending Platform.
Fidelity has partnered with Notarize to empower their independent title companies to use us for online closings.
Simplifile announced that 31 additional recording jurisdictions located in 13 states throughout the Midwest, Southwest and Western U.S. have joined Simplifile’s e-recording network. As the nation’s largest e-recording network, Simplifile covers more than 80% of the U.S. population, enabling counties and other recording jurisdictions to drive down processing times by securely reviewing, stamping, recording and returning documents electronically. To date, 1,979 jurisdictions have joined Simplifile’s e-recording network. Here is a list of all jurisdictions in Simplifile’s e-recording network.
Pavaso, provider of digital mortgage closing technologies, announced that Hightide Settlement Services, a provider of title and settlement services, is now offering eClosings through the its platform. “With Pavaso, there will be an expanded range of options available for Hightide customers, along with faster, more convenient closings. Its platform breaks down traditional silos, bringing everyone involved in the homebuying transaction together in the same digital environment to seamlessly communicate, collaborate and securely exchange information throughout the entire closing process.”
Capital Markets
Moody’s, who, along with the other rating agencies, many assign a portion of the blame of the financial crisis, continues to seek feedback from market participants on proposed changes to its approach to rating U.S. prime RMBS. Ratings impact RMBS (residential mortgage backed securities) backed by GSE and private label prime first-lien mortgage loans originated during or after 2009. For example, Moody’s wanted input on seven main proposed changes, as follows: Update the model calibration using updated data on private label prime first-lien loans and data provided by the GSEs. Revise treatment of historical Home Price Appreciation in the Aaa scenario by incorporating an HPA factor from loan origination to the time of analysis to reflect any observed growth in home prices since loan origination. Revise prepayment incentive assumptions in the Aaa scenario by setting the market rate to be the same as the loan rate instead of assuming a constant prepayment incentive in the Aaa scenario. Provide clarifying language on the ongoing surveillance of U.S. RMBS using the MILAN framework and how performance information is incorporated in the analysis. Update the approach for assessing the benefit of mortgage insurance and rejection rate assumptions in analysis (proposed Aaa rejection rate assumptions of 1 percent for GSE transactions, and between 5 percent and 15 percent for private label prime transactions. Revise the approach to analyze credit enhancement (CE) floors by introducing new criteria for assessing the sufficiency of any CE floors proposed in the structure. Finally, incorporate other technical model and methodology enhancements and minor document edits, including spread-at-origination and the horizon over which economic forecasts are used. Visit the Request for Comment page to see more.
Looking at what is moving rates, this morning the markets are watching oil prices after the attack on Saudi Arabia’s oil facilities. Last week we learned that U.S. economic data remains mixed, but retail sales for August were good, and provided a positive uplift for third quarter GDP expectations, buoyed by an increase in auto sales and building materials. Consumer prices were muted at the headline level, but core prices increased in August and were up 2.4 percent over the last twelve months. Producer prices saw similar results with core PPI up 0.4 percent for the month and 1.9 percent over the last year. Both indexes were aided by declining energy prices. Initial unemployment claims dropped 15,000 to a very low 204,000 for the week ending September 7. And internationally, the European Central Bank announced new stimulus measures, further driving their key rate into negative territory. Finally, mortgage applications picked up again for the week ending September 6: from one year ago, purchases are up 5.1 percent while refis are up 167.2 percent.
But the bond market, and therefore interest rates, got creamed last week. Why? The August bond rally continued and 10-year yield ended the Friday session +11 bps at 1.90 percent, as U.S. / China trade optimism and questions about the effects of central bank accommodation continued to weigh on bonds. It was confirmed that China will not impose additional tariffs on imports of pork and soybeans from the U.S. and markets digested ECB President Draghi claiming that the resumption of asset purchases is meant to trigger higher spending by governments in the eurozone.
Domestic economic readings were mixed to close the week, as Retail sales for August showed some strength, but Import prices and Export prices were down in August, revealing a lack of inflation pressure despite the tariff actions, unexpectedly. The more prescient CPI report earlier in the week showed decent inflation pressure for core consumer prices. The preliminary reading for the University of Michigan's Index of Consumer Sentiment showed that consumers are starting to worry more about the potential impact of tariffs on the economy, which is a stance that could lead to reduced levels of consumption.
Quantitative Easing? The New York Fed announced it planned to buy a maximum of $6.4 billion in agency MBS over the September 16 through October 11 period, based on August paydowns that exceeded $20 billion. For the two-week period beginning today, the Desk is scheduled to buy up to $3.225 billion across five FedTrade operations with the first (and largest) operation today when they will purchase up to $1.155 billion UMBS30 2.5 percent ($487 million) and 3 percent ($668 million).
The highlights of this week’s calendar are the latest central bank decisions from the FOMC on Wednesday, along with the BoJ, BoE and SNB on Thursday. Treasury supply is limited to 1-, 2-, 3- and 6-month bills along with $12 billion reopened 10-year TIPS, while IG corporate issuance is expected to be around $25 to $30 billion after $43 billion this past week.
Today’s calendar began with the NY Fed Empire State business conditions index for September (-2.8 to 2.0, whatever that means). The only other scheduled event is the $45 billion 3- and $42 billion 6-month T-bill auctions. In overseas markets, the minutes from the last RBA meeting are due out later today. Tomorrow, domestic releases include August Industrial Production and Capacity Utilization, and the September NAHB Housing Market Index, before the midweek session brings August Housing Starts and Building Permits and the September FOMC Rate Decision. In addition to the usual claims figures on Thursday, markets are slated for the September Philadelphia Fed Survey, August Existing Home Sales, and August Leading Indicators. After the FOMC events, Fedspeak returns on Friday with New York’s Williams and Boston’s Rosengren speaking. We begin the day with Agency MBS prices up .25-.50 and the 10-year yielding 1.83%.