Broker, Construction, Doc Products; Cash-out Product Hit; Federal Reserve Deep Dive

While in captivity, it is important that your home have the right ambiance, and emanate a welcoming feeling. Real estate agents are good at helping sellers establish the right ambiance, and while giving blood yesterday I coincidentally sat near an agent and we chatted. In her opinion, yes, listings are way down, but prices are currently not dropping. She said that the good agents are not sitting on their hands bemoaning their fate, but instead or marketing hard, figuring out ways to show properties (separate cars, booties, gloves, masks, no children), and says that, for the most part, buyers who wanted to buy a couple months ago still want to buy; it is the sellers that are lacking. Buyers are trying to adapt to the new norm, echoed by what Zillow is seeing. Page views on for-sale listings on Zillow and requests to be connected to a Zillow Premier Agent have ticked up in April, and both are higher than they were a year ago. And as we all know, people need a place to live, not necessarily a dedicated office space to drive to daily. (By the way, if your “new normal” includes video calls, AI lets you be Albert Einstein or the Mona Lisa on all your Zoom calls.)

Lender Services and Products

Dux Advisory, LLC announced this month it has developed a new methodology, working with a world class IT firm, to digitalize workflow processes. This methodology leverages the power of RPA and AI/ML to drastically reduce the manual interventions involved by automating the loan onboarding and/or validation processes in order to achieve significant efficiencies. For more information, please contact Richard Barrent.

Some are cutting back, but REMN Wholesale keeps growing. Industry veteran Jim Mitchell has joined REMN in the role of National Inside Sales Manager and strengthened their team with a who's who of notable account executives that includes Rick Blodgett, Loni Castro, Michael Diedrich, Sarah McHargue, Amy Lazar, and Kyle Young. In addition to their industry-leading 24-hour turn-times on purchases, REMN is well known for its leadership in renovation lending. To continue that distinction, Anthony Alleva has joined REMN in the role of Inside Renovation Sales Manager, and recruited Donovan Rees to further enforce REMN's strength in this area. When the loan matters, brokers can trust REMN Wholesale. From renovation loans to traditional purchase products to its competitively priced Platinum program, REMN offers a combination of value, speed, and reliability brokers are hard-pressed to find elsewhere. Success-minded brokers can connect with a REMN account executive through its website.

“I Googled ‘Paying It Forward’ and of course it wasn’t what I thought it was. Google’s definition is: ‘Respond to a person’s kindness by being kind to someone else.’ Which is great, but I had something else in my mind. I was thinking of paying people for work they haven’t done yet. Like Hanna my dog groomer, Bin who takes us to the airport for business trips, Karen my hairdresser, Gretchen my wife Chris’s stylist, our housekeeper, Solidad. Five people, 5 payments forward. BOOM! People who can’t work because of events beyond their control. I’m sure a lot of you have already done this, which is fantastic. Imagine if everybody in your branch did it? How about everybody at your company? BOOM! Dan Harrington, Usherpa.com.”

The DocProbe Story, Part One: So just how did DocProbe become the leading provider of Trailing Document services to lenders around the country? In 2009, a mid-sized lender reached out to Madison Commercial Real Estate Services, its title and closing resource, for help tracking down trailing documents to forward to investors and custodians. Focused on closing loans, this lender’s staff was struggling with the tedious demands of chasing post-closing documents. Hiring new staff would mean time-draining training and an expense that would turn into costly overhead when the market slowed. Recognizing the hole for this underserved, yet critical, function, Madison was up to the task and DocProbe was its solution. Efficiency and accuracy were needed to gain the trust of leading lenders throughout the country. Leveraging technology and market expertise turned DocProbe into an extension of lenders’ post-closing departments. Over the next few weeks, follow DocProbe’s path to becoming a complete 360° Post Closing Document Solution. Learn more about DocProbe here or email Nick Erlanger.

GSF Mortgage Corporation (GSF) is expanding its wholesale product offering beyond Single Close Construction to include non-construction conventional loans for approved brokers. Effective Monday, April 27th, GSF will start offering Fannie Mae 30-year and 15-year fixed products. GSF added conventional loans to its product line based on feedback from several of its approved partners who are looking for additional options for their conventional business. Partners will continue to benefit from GSF's streamlined loan process and superior turn times. GSF enables its clients to focus on selling while handling their loan to closing. GSF is an approved Fannie Seller Servicer and Ginnie Mae issuer. Questions regarding the new offering, please reach out to Robert Stephens (561-715-1064).

QLMS continues to be a refuge of stability for mortgage brokers across the nation. A month ago, it adjusted its lock process, providing partners with an unprecedented 50 basis point enhancement, total credit of 76.5, on the 15-day lock opportunity. QLMS’ partners have responded in huge numbers. LOs and their clients are benefiting from the huge short-lock incentive. Additionally, those partners and clients are now happily monetizing the nearly 500 basis point dip in the market. This policy has been an incredible win for all at a time when every penny counts. With more certainty around states’ shelter-in-place policies, QLMS is now offering forward locks for all periods. As turmoil continues to rock the industry, demand to partner with QLMS is at an all-time high.  An average of 150 new partners are signing up every week. To join them, click HERE.

COVID-19 Related Developments

Black Knight reported that its data indicates that the 3.4 million homeowners now in forbearance plans represent 6.4% of all active mortgages. Together, they account for $754 billion in unpaid principal and includes 5.6% of all GSE-backed loans and 8.9% of all FHA/VA loans. Yikes! “Mortgage servicers would need to advance a combined $2.8 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $1.3 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 5.7% of these loans are in forbearance as well).”

PennyMac got the word out that, for loans purchased on or after April 23, 2020, the following updates regarding loans that enter forbearance after purchase apply. “A conventional purchase or rate and term loan enters into forbearance after purchase but prior to the loan being sold to an Agency will be assessed the standard agency LLPAs of 5% (for first time homebuyers) or 7% (for all other loans) as announced in Fannie Mae Lender Letter 2020-06 and Freddie Mac Bulletin 2020-12. This LLPA is in addition to all other LLPAs applicable to the loan and is not subject to the LLPA cap. Conventional cash-out transactions remain subject to repurchase if the loan enters forbearance within 15 days of purchase by PennyMac. Additionally, Correspondents will be billed a $1,000 administrative fee for each conventional or government that enters into forbearance within 60 days of the PennyMac purchase date, regardless of whether such loan has been sold to the agency.”

Wells Fargo told its correspondent clients, since Fannie Mae and Freddie Mac detailed temporary policies for loans that enter forbearance after closing, but before sale to them, and that temporary policies indicate cash-out refinance transactions are ineligible if in forbearance, that “Wells Fargo Funding will suspend the purchase of conventional Conforming cash-out refinances – whether in forbearance or not – effective April 24, 2020, as detailed under the effective date below. This includes Texas Section 50(f)(2) transactions that are required to be underwritten and priced as Agency cash-out refinances, as defined in Wells Fargo Funding Seller Guide (Seller Guide) Section 820.40: Texas – Homestead Property.”

Capital Markets

We are now in the blackout period during which Fed policymakers refrain from public comment ahead of the next Federal Open Market Committee (FOMC) meeting on April 29. The minutes from that meeting will paint an interesting picture as The Federal Reserve has initiated numerous policy actions over the past month amid the pandemic that is causing the U.S. economy to tumble into a deep but, hopefully, short recession. The comprehensive toolkit of emergency lending facilities, traditional quantitative easing (QE) and regulatory policy adjustments has afforded the Fed flexibility to address the current and projected economic fallout from this coronavirus pandemic.

Originators know that the Federal Reserve has engaged in traditional QE at a blistering pace over the past month. Fortunately, as Treasury yields have declined and liquidity in the market has improved, the Fed has steadily tapered its purchases, and at present is purchasing around $10 billion per day. The projected pace of purchases through the first half of the year at around $2 trillion, which would put the Fed’s total Treasury holdings at roughly a quarter of the market, historically high but still with room to do more.

The efforts have been successful, and Treasury market liquidity conditions have improved significantly over the past few weeks, with Treasury yields comfortably under 1 percent. The Fed has also purchased a large chunk of agency MBS in just over a month, improving liquidity and funding conditions and allowing spreads on agency MBS over Treasury securities to return to more normal levels after multiple spikes and significant volatility over the past month. The “smartest guys in the room” expect that the Federal Reserve will likely continue to taper its purchases of Treasuries and agency MBS and shift its focus to T-bills as it tapers through the summer.

States and counties were not left out. To help municipalities, the Federal Reserve has both purchased short-dated municipal debt through its commercial paper funding facility, and created the Municipal Liquidity Facility, which can purchase up to $500 billion in short-term notes issued by adequately populated states, counties, and cities. These purchases should help states with their cash flow until the new tax filing deadline (July 15) in the wake of the CARES Act, and help bridge the gap to when the economy reopens and a surge in hiring and consumption spurs an acceleration in income and sales tax receipts. The Federal Reserve has also said that it is prepared to take further steps, if needed, to provide liquidity support to the markets for municipal securities.

The Fed has created a facility that will support the Paycheck Protection Program (PPP), the lending program established under the CARES Act for small businesses, via generous liquidity support to financial institutions that make loans under the program. The Federal Reserve will extend credit to these institutions at a rate of only 35 bps, will take the PPP loans as collateral, charge institutions no fee to participate in the facility, and the PPP loans they make will have a zero percent risk weighting like U.S. Treasury securities, for regulatory capital purposes.

Lastly, for larger companies that operate heavily in the corporate bond market, the Federal Reserve has created facilities to support both the primary and secondary markets through buying corporate bonds through the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility. The comfort in knowing the Fed will be there at some point in the future to make sure credit is flowing to U.S. companies has allowed spreads in both investment grade and high yield corporate bond markets to come down materially from their recent wides.

The FOMC should provide additional details on purchases and previously announced facilities after its meeting on April 29. The FOMC may make the technical adjustment of increasing the IOER in order to keep monetary policy operations running smoothly now that the fed funds rate will likely once again be at the “zero lower bound” for an extended period of time. The FOMC will likely leave the overnight repurchase rate anchored at 0.00 percent, as it did in the Great Recession, for there is no need for the Fed to make the facility any more attractive.

LOs should know that, although there are no zero-probabilities in today’s world, it is highly unlikely the FOMC will venture into the land of negative interest rates or yield curve control at its April 29 meeting. Not only have the results been mixed in the economies where negative policy rates have already been adopted, but the structure of the U.S. financial system, where money market funds play an important role, means that this policy could potentially have more adverse effects in the United States than in other major economies. In addition, with the level of Treasury yields already quite low, and the curve currently having a relatively healthy upward slope, the need for yield curve control at this point in time seems minimal. Should the Fed need to put further downward pressure on Treasury yields and/or address the shape of the yield curve, it could first try to do so by changing the size or composition of its purchases.

U.S. Treasuries closed Thursday modestly mixed. There were poor international economic readings, and weekly Initial Claims pushed the total number of new claims filed in the U.S. over the past five weeks above 26 million, though it was the lowest initial claims reading in four weeks. That puts the unofficial unemployment figure somewhere between 17 percent and 20 percent. New Home Sales weren’t as bad as feared. Holden Lewis, Home and Mortgage Specialist at NerdWallet, said New Home Sales readings “are likely to continue to decline. Even though homebuilder confidence has fallen, don’t expect builders to offer big discounts anytime soon. Buyers eventually will return, and in huge numbers.”

Pushing spreads tighter was the Federal Reserve continuing to purchase MBS. Yesterday the Desk purchased $7.9 billion MBS of the $8.938 billion maximum (88.4 percent, and 49.7 percent of the $15.918 billion tendered). Since the restart of QE on March 16, the Desk has purchased a total of $550 billion MBS. The NY Fed reported gross and net MBS purchases for the week ending April 22, respectively at $59.9 billion and $55.7 billion, all for May settlement. This equated to $11.132 billion per day on average versus daily selling from originators that averaged $6.2 billion. Today’s FedTrade schedule is a repeat of Monday and Wednesday with the Desk scheduled to purchase up to $10.7 billion TBAs.

The domestic economic calendar is underway this morning with March Durable Orders (-14.4 percent, the largest drop ever) and Durable Orders ex-transportation (only -.2 percent). This week’s economic calendar closes later this morning with the final April Michigan Consumer Sentiment Survey. We begin the day with agency MBS prices unchanged as is the 10-year’s yield at .61 percent.

Employment

Freedom to Succeed! Freedom Mortgage is growing and looking for talented and experienced Wholesale operational professionals to help us serve the needs of borrowers, brokers, and wholesale correspondents across the nation. Work from home opportunities for Loan Processors, Closers and Underwriters are available throughout the continental U.S. Prior to the COVID-19 pandemic, the vast majority of teams already worked from home, so you will be ready to seamlessly and efficiently contribute to Freedom’s goals on day 1! If you are fueled by your entrepreneurial spirit and are looking for a great work culture, please visit Freedom Careers to review available positions and submit your resume. 

PHOENIX, a premier advisory firm for MSR & WL Trading, Mortgage Services, and Analytics, continues to grow! Career opportunities include seasoned MSR analysts, GRC/security analyst, IT, contract finance for whole loans, and mortgage services. With over two decades of industry leadership, PHOENIX has successfully managed over $1T in MSR transactions since 2013 alone and provides analytic solutions to a majority of the Top 50 banks and mortgage servicers. Diverse business-lines offer high-touch trading advisory and valuations/analytics for MSR’s & WL’s, in addition to servicing oversight/QC and loan-level due diligence. Our team integrates a comprehensive understanding of tailored client objectives, accumulated market intelligence, policy insight, and unwavering customer service to forge deep and durable relationships across the industry. Experience the PHOENIX difference and explore opportunities with us today. PHOENIX offers competitive salaries and benefits. Please visit us or contact Ben Siew for career opportunities.