Marketing, Cybersecurity, eClosing Products; Shifts in LTVs, Credit, Pricing, Appraisal Policies

Remember when all we had to worry about was Amazon taking over mortgage banking? The sun hits different here in March – see joke at bottom. (Thirty days hath September, April, June, and November. All the rest have thirty-one except March which has 8,000.) Unintended consequences: It’s a fascinating case study, among millions of others, that the Federal Reserve stepped in to buy Agency MBS in an attempt to create price stability but induced a huge rally in MBS (not rate sheets!), causing even more margin calls for lenders as their positions used for hedging increase in price and their mark-to-markets deteriorate. Talk is that the Fed is scaling MBS purchases back, helping lenders reduce renegotiations, increase pull through, and hopefully cause less of a price rally thus reducing margin calls and the corresponding cash flow hit. And lenders are working feverishly to make sure their pipelines are “real” and they’re not hedging locks that won’t close, especially from hourly workers most impacted by the shutdown. Yep, if you were a non-QM lender using GSE TBAs to hedge your pipeline, the Fed pulled your chair out from under you.

Lender Services and Products

With the COVID-19 situation constantly evolving and interest rates low, the phones are probably ringing with interested borrowers trying to lock in those rates ASAP. But how are lenders making sure that borrowers are actually qualified? To be effective, lenders need to get in front of the right audience. Using a client’s credit criteria, Informative Research can quickly identify prequalified borrowers within a lender’s specific market, so you can send out a preapproved offer faster than the competition. Especially now that people are moving to digital and direct mail more so than ever, the competition is spiking and now is the best time to prequalify prospects before they call in or before your competitors get to them first – the sooner, the better! The competition won't be slowing down and neither should you.

Our industry is technologically challenged, and slow to change. The last 3 weeks have been a “roller-coaster” ride and it’s not over yet! Wild rates aside, “Social Distancing” is making it difficult for many to conduct business as normal. Not at Canopy, we are leveraging our cloud-based LOS & all working from home (including fulfillment). Hopefully the bill introduced last week for Nationwide Remote Online Notary (RON) passes soon so the industry can catch up with technology. Because we control our own tech stack and are currently doing hybrid eclosings, we can be ready in three days to enable FULL eclosings and RON.What does your technology offer? The market is unpredictable, but your business doesn’t have to be. Click Here to see how Canopy Mortgage offers loan officers total control with a sustainable business model. Or call to schedule a tech demo with us today (855) 660-0003 

Since the start of the COVID-19 pandemic, we have seen an uptick in ransomware and phishing activity. At the same time, the rush to get workers set up at home may leave lenders vulnerable to cyber threats. The cybersecurity team at Richey May Technology Solutions has set up valuable resources for lenders, including a live-updated IOC Tracker for IT teams to block known threats, advice on how to protect your company from cyber scams with examples we have seen in the wild and actions you can take today to improve security. Contact us today for assistance with penetration testing, incident response, training and more.

I recently joined the Clear to Close podcast crew on their show and, although we recorded the episode a few weeks back before the COVID-19 shift in the market, our conversation is even more relevant today than it was then. We cover everything from remote work and the future of the industry to cybersecurity and the story behind the Chrisman Report. I highly recommend everyone check it out. Download and subscribe from your favorite podcast platform: Apple, Spotify, Google Play, Soundcloud, or listen in your browser here.

Random Corona-Motivated ChangeS

STRATMOR’s comprehensive Insights Report is making the rounds about what lenders are doing. There are resources available to us common folk! Here is a good starter list for updated information: Mortgage Bankers Association (MBA) Coronavirus (COVID-19) Resources, CHFA COVID-19 Website, Fannie Mae COVID-19 Website, Freddie Mac COVID-19 Website,  and Federal Reserve COVID-19 Website.

The FHA weighed in on the “Re-verification of Employment and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single Family Programs Impacted By COVID-19” with Mortgagee Letter 2020-05.

What are essential services? Michigan Department of Insurance and Financial Services sent out Bulletin: Bulletin 2020-11-BT/CF/CU: Executive Order 2020-21: Essential Financial Services Ruling.

In New Jersey, Governor Murphy made two updates to Executive Order 107, clarifying which businesses may be allowed to operate during the COVID-19 pandemic. Realtors can operate and show houses to prospective buyers on a 1-on-1 basis or to immediate family members. There is still a prohibition on open houses," said Murphy.

Franklin American’s correspondent group sent out, “The IRS has suspended the acceptance of new tax transcript requests as they adjust to shelter-in-place orders. As a result of this suspension, FAMC is providing the following guidance until further notice. (For all products) the requirement for tax transcripts is suspended for all loans purchased by FAMC, effective immediately. o USDA-RD requires lenders to document the attempt to obtain and the reject notice in the permanent loan file, per HB 1-3555.”

Several of “low score” FHA wholesalers have raised the credit score requirement from 500 to 640, including Freedom Mortgage (FHA and VA from 500 to 640), AFR (American Financial Resources) which raised its FHA minimum score from 600 to 640 and halted all one-Time Close loans.

Brokers are seeing massive changes, ranging from changing guidelines and eliminating product lines to no longer taking locks or purchasing loans. As always, please request the latest information directly from the company but especially for these lenders/investors: Impac ceased non-QM but continuing with other products), Angel Oak, Lendsure, JMAC (loan can be locked after approval), Carrington, Athas, Loan Stream(new eligibilities), GreenBox (transitioning to Agency production), and NewRez. As we know Deephaven did announce it is shutting down, and Galton announced a temporary suspension of purchasing loans.

For example, NewRez’s announcement said, “Due to the ongoing impact of COVID-19 causing volatility in the markets, NewRez is updating the following changes to FHA, VA and USDA. The changes outlined below are effective with new locks, submissions, registrations or application on or after March 30, 2020. Existing locked pipeline loans will proceed as locked. Lock extensions and re-locks for loans locked prior to March 30, 2020 will be subject to changes outlined in this announcement.” For FHA loans, manual underwriting and manual downgrades are not permitted, manufactured housing Cash-Out Refi and Non-Portfolio Streamline are not permitted, credit, income and asset documentation must be 60 days old as of the Note date, down payment assistance programs are not permitted, subordinate financing is not permitted, non-traditional credit is not permitted, prior mortgage credit rejects are not permitted.

California’s Sierra Pacific sent out, “Effective immediately the pre-funding verbal VOE for all borrowers is now required within 3 days of the note date. This is a change to the 10-day pre-funding verbal VOE. Sierra Pacific does accept an email from the Employer coming from the employer address, URL address and all information on the signature line.”

AmeriHome is temporarily suspending requirements for tax and W-2 transcripts. Currently, USDA requires transcripts for all household members; this requirement is unchanged.

PennyMac revised the updates to the Government LLPAs effective for all Best Effort commitments taken on or after Friday, March 27, 2020. LLPA's for lower credit scores essentially shuts off that sector of GNMA borrowers. And PennyMac is temporarily suspending its requirement for tax transcripts. Note that USDA transactions require tax transcripts. Correspondents remain responsible for complying with all USDA requirements. An announcement will be released when the tax transcript requirement is reinstated. PennyMac will continue to require signed 4506-T according to current guidelines.

Effective with loans locked on or after March 30, 2020, Mountain West Financial Wholesale is adjusting the minimum FICO score for all non-specialty FHA, VA, and USDA products to 640.  Specialty products will still follow investor FICO requirements.

Flagstar Bank implemented new overlays on FHA, VA, and USDA programs.

Over the weekend, I've heard some really concerning chatter in the industry around folks using Skype/FaceTime in an attempt to conduct remote online notarizations (RON). Lenders need to know that this is not an acceptable way to conduct a RON session because that technology does not support any of the requirements that the existing legislation requires for compliant RON transactions. As lenders evaluate RON technology as a strategy for business continuity in the time of COVID-19 and social distancing, the MISMO RON standards give them a playbook to understand what to ask potential vendors while they do their due diligence to make sure they're working with a compliant RON solution provider. Fannie Mae and Freddie Mac also have great resources available to support their efforts. 

Webinars

MBA is working to provide timely and valuable information to help members navigate through the ongoing Coronavirus crisis. Today at 12:00 PM ET , Pete Mills and Mike Fratantoni will be speaking with senior leadership at Phoenix on liquidity issues in the MSR market. On Thursday, Rick Hill will be holding a discussion on cybersecurity challenges that have popped up in the past couple of weeks. Both webinars are complimentary to MBA members. Next week, MBA Education will be hosting a webinar on best practices and resources for Default Mortgage Servicing. MBA has relaunched its Residential Certified Mortgage Servicer Program. This  comprehensive program is comprised of three levels. Each level comes as a separate online package for purchase allowing you to take one or all three levels and pay as you go.

Here is a look at what National MI has lined up for April trainings! April 7th, Marketing to your past database with Bruce Lund, PhD. April 8th, Cold Email Prospecting Mistakes to avoid with Kendra Lee. April 9th, Pump up the Gram: A guide to Instagram marketing in 2020. April 14th, Income Analysis for Conventional Loans. Be sure to register to attend.

Genworth Mortgage Insurance provides complimentary webinar courses to help customers manage, protect and grow their business, delivering you-centric solutions that matter. Spring forward in this environment with our webinar courses: “Working Virtually,” “How To Communicate Bad News And Make It A Good Thing,” “Cross selling Opportunities within the URLA,” and new Self-Employed Borrower material. View the April Training Calendar here.

Register for Carrington Wholesale’s Webinar Power Up Your Non-QM Business scheduled for Thursday, April 2nd @ 11:00am (PST). Discussions will include Non-Agency/Non-QM loans and who they fit, smoother loan process from submission to funding, quickly qualifying borrowers and pricing Non-QM loans plus tools to elevate your marketing game.

We've all gone virtual overnight, but if you're not completely comfortable with this new world of online virtual meetings, Arch MI has teamed up with industry expert, Ginger Bell to hold two webinars in April on "How to Set Up and Conduct Virtual Meetings with Your Borrowers".  

The 30-minute webinar is complimentary and will go step by step through the process of setting up virtual meetings for your borrowers.  April 7th Click HERE to Register. April 9th Click HERE to Register.

Don’t miss MGIC’s exclusive webinar, “Financial Story Selling: How to Close More Loans as the #1 Financial Expert in Your Market,” on April 16. Gibran Nicholas, CEO of Momentifi, will share insights on how to build more profitable relationships, overcome customer objections and beat the competition. MGIC offers complimentary webinars every month to help customers succeed in today’s mortgage insurance industry. View the full MGIC training calendar at mgic.com/training.

Remember the Regional Conference, set for April 19 – 23? “For the first time in 37 years, we have had to cancel and reschedule the Regional Conference of MBAs. We could no longer ensure the safety of our exhibitors, registrants and sponsors. And there was no assurance that the restaurants and casino would be open during the Conference. We are rescheduling the Conference to October 4 - 8, 2020 at the Hard Rock Casino Hotel on the boardwalk in Atlantic City for both the commercial lending and residential lending programs. We are going to have programs that will be of value to both mortgage bankers and brokers, as well as others.”

Capital Markets

U.S. Treasuries rallied to open the week, including the 10-year yield closing the day -8 bps to 0.67 percent, after President Trump announced that social distancing guidelines will be extended through the end of April. The Fed’s buying of higher coupons is having not only little impact on mortgage rates (versus MBS), but the unintended consequence of richer hedges for MBS originators contributing to more margin calls. Unlike Friday, yesterday’s operations saw smaller takes and low hit rates, and the Fed lowered the “tentative maximum” from $40 billion to $30 billion going forward. For the day, the Desk purchased $20.7 billion MBS of the maximum $40 billion, 52 percent of the expected planned purchases and 48 percent of the $42.8 billion submitted. Total purchases since the Fed restarted QE purchases on March 13 now stand at $271.7 billion.

Today’s economic calendar sees a quartet of releases: Redbook same store sales for the week ending March 28, the S&P/Case-Shiller Home Price Index for January, March Chicago PMI, and Dallas Fed Texas services and revenues for March. The Desk will target up to $30 billion MBS for today's month-end session (mostly current coupons). We begin today with Agency MBS prices better by .125 and the 10-year yielding .70 percent.

Business Opportunity

A strong, well-funded, entrepreneurial bank committed to residential lending is looking for loan production office or small mortgage company acquisition opportunities in metro markets of Arizona, Montana, South Dakota, and Cheyenne, Wyoming. Great opportunity in having the stability of our organization with our commitment to mortgage. Send your inquiries to Chrisman LLC’s Anjelica Nixt; all inquiries will be treated with confidentiality.