Automation, Marketing Tools; Shift in Evaluating Credit

If you knew the value of the house was going to decline, or that the borrower has bad credit and would default, would you make the loan? There’s always a debate about how best to determine creditworthiness based on past behavior (more on that below), but regarding housing prices, last month Arch MI released its quarterly Housing and Mortgage Market Review HaMMR) report and proprietary risk index showing the top cities across the U.S. where it’s actually more affordable to buy than rent. While we all know it’s expensive to buy in cities like San Jose and Los Angeles, you may be surprised to learn than Syracuse, NY is the #1 city to buy a house (and 30% cheaper than renting). The top five cities where it’s cheaper to buy vs rent are Syracuse, NY; Rochester, NY; Worcester, MA; Buffalo, NY; and Wichita, KS. Now all a client needs is a down payment!

Lender Products and Services

Imagine receiving your borrower’s entire underwriting package within minutes (instead of days) of a submitted loan application. With Maxwell’s digital mortgage platform, lenders are getting documents 73% faster with their FileFetch technology which connects to over 1,300 financial institutions for increased efficiency and a better borrower experience. This, coupled with their already impressive, customizable loan app, borrower portal, task list, and integrations, drive real performance. Loans in Maxwell close more than 45% faster than the national average. To learn more and start using Maxwell today, visit www.himaxwell.com and request a demo today.

One-third of all people give up on their New Year’s resolutions before January is over, according to the New York Times. While most resolutions fall through, your organization’s 2020 goals don’t have to. Our friends at LBA Ware have weighed in with some astute advice for keeping your 2020 objectives on track, starting with setting smart branch volume projections that motivate originators. Whatever your goals are, taking the time to identify where you stand, where you want to be and how you’ll get there will drastically increase your odds of success. If you still need help, LBA Ware’s turnkey BI solution, LimeGear, has all of the essential dashboards and reporting needed to improve productivity and efficiency across your organization. Contact Lori Brewer to schedule a demo today.

I’ve indicated in several posts Conquering Shifts is a must read. The authors, Cindy Douglas and Kathleen Heck have interviewed 12 of the mortgage industries most prolific originators. The book chronicles how these folks got start their, and honed their skills to become the best. They rose to the top with big dreams, hard work, constant learning and a passion to serve. No one is born with an instant massive pipeline, but the interviewees remind us through their stories we all have the ability to realize success. “I LOVED this book...it’s a reminder to keep building relationships, not selling products.” Elizabeth Douglass, Wintrust Mortgage. “If I had read this book when I first began originating purchase loans in 2011, I can honestly say that I would be leaps and bounds ahead of where I am today.” Ryan Grant, Fairway Independent Mortgage. Purchase your copies today, discount ends tomorrow.

He made the President’s Club while hospitalized! Here’s a true story about the power of personalized marketing automation: On a Mortgage Company’s Production Cruise in 2003 a winner slipped near the pool and landed on the back of his head. He was unconscious for 20 minutes, but when he woke up, he felt fine. Turns out he wasn’t fine. In fact, he almost died and spent a year in the hospital. The crazy thing is he did $12 million in production that year. How? He had great relationships, a great assistant, and his marketing was automated. His Realtors and Customers had no idea he was even sick. They continued to get great service from his assistant and targeted, personalized marketing from Usherpa. According to the Loan Officer, “Without Usherpa, I’d be out of business.” Killer Content sent to the right people at the right time with the right message: Usherpa.com.

FormFree is rocking the mortgage world again, this time partnering with AI-driven lead gen platform Teo to transform the way mortgage lenders identify quality customers and profitable market segments. FormFree’s Passport verification services are already used by thousands of lenders to gain insight into loan applicants’ ability to pay, and by partnering with Teo, FormFree is moving those insights even earlier in the sales funnel to power an entirely new way of engaging with prospects. After incoming leads are pre-screened to ensure quality, Teo’s AI assistant manages follow-up communication using the prospect’s preferred channels (text, Facebook, etc.) to quickly convert leads to loans. Teo’s leads are 100% exclusive, and beta users of the Passport-backed platform have seen an 8X boost in conversion.

Shifts in Evaluating Credit

Underwriters are abuzz over the “regulators” issuing a joint statement using alternative data in underwriting. In this instance it was the Federal Reserve, the CFPB, the FDIC, the NCUA, and the OCC, so it carries some weight. Alternative data use in underwriting may “lower the cost of credit” and expand credit access.

If adopted by Freddie and Fannie and correspondent investors, the potential benefits will help borrowers. They’d like increased “speed and accuracy of credit decisions” and the lender’s ability to “evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system.” Consumers may have the ability “to obtain additional products and/or more favorable pricing/terms based on enhanced assessments of repayment capacity.”

What does “alternative data” mean? Information not usually found in traditional credit reports or typically provided by customers like utility bills or automated cash flow evaluation which evaluates a borrower’s capacity to meet payment obligations and is derived from a consumer’s bank account records. It should improve the measurement of income and expenses of borrowers (especially those with steady income over time from multiple sources) and lead to lenders taking a second look at applicants who would be otherwise denied credit.

There are risks, just as there are with any credit decision. Practices must comply with applicable consumer protection laws, including “fair lending laws, prohibitions against unfair, deceptive, or abusive acts or practices, and the Fair Credit Reporting Act.”

Credit makes the world go ‘round, right? PenFed Credit Union's 2019 Mortgage Survey found 40 percent of adults nationally report personal finances or job stability as the top decision-making factors when considering a new home purchase, while 37 percent reported low interest rates as the second greatest contributor. 30 percent of respondents said being unable to afford a down payment in the city or town where they currently live, is the primary reason they are not looking to buy a home in that area in the next 12 months. 73 percent report down payment requirements as important when deciding on a specific lender.

Mortgage credit availability increased in October and November, according to the MBA, “driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans,” said Joel Kan, MBA AVP of Economic and Industry Forecasting. “Credit supply for government mortgages continued to lag, declining for the sixth straight month. Meanwhile, the jumbo credit index increased 3 percent to another survey-high, as that segment of the market stays resilient despite signs of a slowing economy.” And November’s numbers were firing on all cylinders.  The MCAI rose by 2.1 percent to 188.9 in November. The Conventional MCAI increased by 1.4 percent, while the Government MCAI increased by 2.9 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 2.2 percent and the Conforming MCAI rose by 0.2 percent.

Unconventional mortgage loans are making a comeback.

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.

Land Home Financial has Jumbo Loan Options like its ALPINE product. Highlights include 620 Minimum FICO, 80% Maximum Loan-to-Value (LTV); 75% LTV on Cash Out, Up to 50% Debt-to-Income (DTI), Up to $2,000,000 Loan Amount at 70% LTV; $1,500,000 Loan Amount at 80% LTV, Both Wage Earners and Self Employed, Owner Occupied, 2nd Home, & Investment, I/O is Available.

Mountain West Financial® is offering its Broker partners $250 OFF the Underwriting Fee for loans that meet the criteria of FICO’s 680 or above and Loan Size $250K and above. This offer excludes DPA & Bond programs and is available on New Submissions Only.

When the FHA lowered the cash-out LTV from 85% to 80% many borrowers were left without a cash-out option. So, Carrington Wholesale changed credit score requirements to 620 FICO and increased the LTV to 85% as part of its new, expanded cash-out guidelines for Carrington Flexible Advantage Plus loans.

On the vendor side of credit, LoanScorecard launched Bank Statement Analyzer™, a tool designed to automatically collect and verify bank statement data, and then calculate income for non-QM mortgages. can digitally source bank transaction data directly from a borrower’s financial institution. Once the data has been collected, Bank Statement Analyzer creates a report that details allowable deposits for each month; transactions that were excluded and why; and an average monthly income calculation. The detailed income analysis can also be pushed into LoanScorecard’s non-agency automated underwriting system, Portfolio Underwriter™, to validate the loan against program guidelines, by analyzing the full 1003 and credit history.

Capital Markets

Monday was a snoozer, and rates barely budged. There was a bit of news from China and Japan, and some conjecture about the pro-Brexit Conservative party being favored to win a majority in the UK’s general election Thursday. Demand was solid at the $38 billion 3-year note U.S. Treasury auction. On the trade front, it was reported that the Chinese government has ordered the removal of all foreign computer equipment and software from government offices. This comes well after Washington’s measures against Huawei were announced.

We’ve had a little more news today with the November NFIB Small Business Optimism Index (104.7, its largest monthly jump since mid-2018: small businesses are optimistic) and final Q3 productivity and Q3 unit labor costs (-.2% and +2.5%, respectively). Day one of the FOMC’s two-day meeting gets under way in Washington, D.C., Treasury holds the $24 billion reopened 10-year note auction, and the Desk will conduct a GNII FedTrade purchase operation, the last on the current schedule, targeting up to $685 million 3 percent ($503 million) and 3.5 percent ($182 million). We begin the day with Agency MBS prices down slightly but the 10-year unchanged from Monday’s close at 1.83 percent.

Employment

Give yourself the gift of Entrepreneurship this holiday season by owning a Motto Mortgage franchise! At Motto Franchising, business opportunity and career control are thoughtfully wrapped in our mortgage-brokerage-in-a-box. The Motto Mortgage network supports entrepreneurship through industry-leading tools and full-service assistance… all for a flat, monthly fee. You’ll have complete and customized access to best-of-breed technology, business support tailored to you, and enterprise-level wholesale lender relationships for all your loan origination needs. When you own a Motto Mortgage franchise, you own an innovative business that funds dreams and propels your career growth. Discover how franchise ownership can be the gift that keeps on giving or email us at franchise@mottomortgage.com for more information.

Optimal Blue continues to expand and with growth, comes opportunity! The company is actively searching for an Analyst (client services, hedge analytics, loan trading, secondary services) in OB’s Denver, Colorado office. What does an Analyst do? They put their stellar customer service skills to work as they complete loan committing, pipeline hedging, performance reporting, and data analysis on behalf of their clients. They also work to ensure and manage client relationships for right now and in the future. Ideal candidates will have at least 2 years of experience in secondary marketing including lock desk, pricing, and loan committing. Visit the corporate careers page to learn more about this opportunity and the innovative team at Optimal Blue.