Cap. Mkts., LO Comp Survey, Fulfillment, Retention Tools; Agency-related Changes

This weekend we receive an extra hour of 2020. If there was ever a reason to end the time change, this certainly is it! Markets don’t like uncertainty, and nothing about 2020 has been certain (although this morning we learned two certainties: Fannie Mae’s net income was $4.2 billion for the third quarter of 2020, compared with net income of $2.5 billion for the second quarter of 2020, and Freddie Mac had a net income of $2.5 billion – nice!) The pre-election polls (versus Poles versus poles) were misleading in 2016, but many surveys are suggesting that Biden and other Democrats have leads. Who knows for sure? To have the election settled in a normal, democratic way would alleviate some of the uncertainty, and we know that the markets will adjust to whatever the election brings. And there is plenty of cash out there that will adjust, and equity and debt investors are watching the recent spate of money raising and IPOs, and rumored delays or cancellations of IPOs, of lenders & vendors. The latest example is Tomo” which has $40 million of seed money to play with. “Although Tomo provided few details about its specific business model, the company said it aims to streamline the mortgage and home-buying process for buyers and agents.” Why does that sound familiar? (Tomo, by the way, is “I take” in Spanish.)

Lender Products and Services

Home Point Financial continues to grow in popularity among correspondents and mortgage brokers, alike, as one of the fastest-growing lenders in the country. And its partners sure aren’t bashful about their affinity for the nation’s third-largest wholesale lender. From Nick Hunter, President & COO of River City Mortgage: “HomePoint is not strictly a 9-to-5. I’ll receive emails from our rep late at night sometimes. I know that’s not customary and it’s not necessarily expected, but you feel like they care about us as an account, and also our customers. It really does feel like a partnership, that we’re aligned in the same direction and walking the same path together.” To learn more about Home Point and to become a TPO partner, click here.

Promontory Mortgage Path LLC, a leading provider of digital mortgage and tech-driven fulfillment solutions, announced the launch of its new initiative to support minority depository institutions’ (MDIs) mission of creating jobs, increasing access to affordable housing, and expanding financial opportunities for underserved communities. MDIs joining the initiative will leverage Promontory Mortgage Path’s technology, U.S.-based mortgage fulfillment services and robust joint marketing program at an aggressive discount, fast-tracking efforts to deepen and broaden their reach and expand access to homeownership in their communities. Learn more. “Through the initiative, we dedicate our technology and mortgage fulfillment solutions to banks with a rich legacy of increasing access to vital financial resources in their communities,” said Paul C. Katz, Promontory Mortgage Path’s managing director and head of bank relations. MDIs interested in learning more about becoming strategic partners or joining this initiative should contact Paul (212-652-3511).

If you lose a borrower to one of these lenders, you will never get that borrower back. That’s because they use the #1 Borrower Retention service in the industry, Sales Boomerang. Want your name on the list? Let’s talk. Assurance Financial, Eustis, American Pacific, Bank of England, Annie Mac, UWM, PRMG, Freedom, Movement, and hundreds more. Don’t take it from us, hear it from them.

In news from the mortgage broker sector, NEXA Mortgage was recently awarded the "Bootstrap Award" by SourceScrub for its growth in the 1st half or 2020. As the fastest growing financial company in the world that had no institutional investment, NEXA is disrupting the industry for producing Independent MLOs. Through innovative support for MLOs, industry leading pricing, products, processing, and compensation, NEXA is changing the way MLOs do business. As a producing Independent MLO, you can login for their upcoming "Why NEXA" webinar held each Thursday at 11am Arizona time at www.NEXAmortgage.com/support. The CEO, Mike Kortas goes over in great detail how the company achieved such explosive growth.

Today LBA Ware released its Q3 2020 Mortgage Loan Originator Compensation Report. For the first time, the report includes loan processor compensation data, and as the kids say, I’m here for it. Although LO paychecks were bigger in Q3 2020 (50% higher than Q3 2019), the uptick in refinance production contributed to a 0.9% decrease in per-loan commissions. Processors handled 30% more loans in Q3 2020, fueling a 54% increase in average incentive compensation. Read the full report here. If managing incentive compensation is slowing you down, you might want to reach out to LBA Ware. At MBA Annual, CFPB Director Kathy Kraninger signaled that the Bureau may soon allow greater flexibility in how lenders compensate MLOs, including lowering compensation in the case of LO errors. The industry has been clamoring for that latitude, but when it comes, it’s sure to make calculating compensation even trickier.

Investors React to Agency Changes

For credit unions, CUNA supports Fannie & Freddie’s housing goals for 2021. The Credit Union National Association is strongly supportive of the Federal Housing Finance Agency’s efforts to ensure the Government-sponsored enterprises meet their public mission.

Weekly Announcement: Beginning October 5, 2020 includes updates on Freddie Mac Rental Income, and loanDepot Wholesale Program Overlays Matrix.

Remember that FAMC will no longer purchase loans utilizing LPA Student Loan Payments for Medical Doctors underwriting option as it is no longer available with Freddie Mac. Student loan debt for medical doctors must follow the standard student loan guidance, per the AUS type. FAMC posted an update to COVID-19 interim guidance on conventional products. Rental income used for qualification is not permitted on investment property transactions, effective immediately for all loans locked on or after September 21. And it has adopted the date extension to October 31, 2020 per Fannie Mae Lender Letters 2020-03 and 2020-04, and Freddie Mac Bulletin 2020-37 temporary COVID-19 Interim Guidance.

The PennyMac Correspondent Group has posted multiple new announcements: 20-66: Introducing the Home Value Estimator Tool, 20-67: Fannie Mae HomeStyle Renovation Program Availability, and 20-68: Update to Conventional LLPAs.

Caliber is aligning with Fannie Mae Lender Letter (LL 2020-03 and LL 2020-04) and Freddie Mac Bulletin 2020-40 to extend the COVID-19 temporary flexibilities and requirements, subject to Caliber’s existing overlays. The effective date for the temporary flexibilities and requirements has been extended for applications taken on or before Nov. 30, 2020, for the following:

Verbal Verification of Employment, Power of Attorney, Condominium Project Review flexibilities, Appraisal Flexibilities for Exterior-Only and Desktop-Only Appraisals. Effective for all 90-day commitment confirmations and relocks, issued on or after Sept. 3, 2020, a 50bp loan-level price adjustment will be assessed on all conventional refinance mortgages.  This update will be reflected on Caliber Home Loans Correspondent Lending rate sheets published on and after Sept. 3. Additional announcements will be forthcoming as we prepare for the Dec. 1, implementation date announced by the Federal Housing Finance Agency.

Effective for applications taken on or after Monday, November 2, 2020, Flagstar Bank is removing the temporary tolerance to waive tax transcripts prior to closing. Read Flagstar’s Announcement 20102 for details. Flagstar posted Conventional guideline updates in Memo 20096 regarding Freddie Mac tax exempt income.

Mountain West Financial® is extending the temporary requirements and flexibilities previously announced by the Agencies through November 30, 2020.  Flexibilities were to expire on October 31, 2020. Temporary flexibilities available pertain to Employment, Income, and Appraisals. Temporary Policies extended were announced in various Wholesale Bulletins.

And MWF posted Bulletin 20W-116 that includes updates to Fannie Mae and Freddie Mac COVID-19 Requirements for Self Employed Borrowers.

In order to align with FHFA’s implementation date, while at the same time keeping consumers in mind with the intent to provide as much flexibility as possible and avoid implementing the fee where it is not necessary, PRMG will begin feathering in the price adjuster of 50 basis points (bps) on applicable conventional conforming refinance transactions.)

Plaza Home Mortgage is now accepting Fannie Mae HomeStyle and Freddie Mac CHOICERenovation loans.

This loanDepot Announcement covers the following topics: Fannie Mae and Freddie Mac – COVID-19 Temporary Flexibility Extensions.

Capital Markets

It’s about time 2020 had some good news. MCT recently announced another industry-first: secure remote secondary execution through any Amazon Alexa enabled device and MCTlive! account. As part of this first release in a much larger initiative of full voice control integration within the MCTlive! platform, Phil Rasori is back to detail the functionality in “Alexa Voice Integration - Rasori's Relentless Releases Episode 5.” Far from a simple Alexa skill, the secure multi factor authentication will grant users access to command chains for all execution related needs, including loan sale commitments and TBA positions. MCT will be sending detailed instructions on account linking to MCTlive! users, and for more information, stay tuned by joining the MCT newsletter.

The big news, in an otherwise boring bond market yesterday, was that the Fed will buy 1.5% securities, a monumental announcement reflecting just how low mortgage rates are. For all you LOs out there who don’t purport to be their own capital market geniuses (rare, I know), here’s why the coupon of the mortgage-backed securities (MBS) into which loans go matters. Mortgage pricing on your rate sheet is primarily determined by supply and demand, and with the Fed buying/opening up a new coupon, acceptance and liquidity increase and helps prices, which in turn fosters lower rates. Keep in mind, this doesn’t mean you should expect to start seeing 1.5% 30-year fixed rates on your or any of your competitor’s rate sheets. The mortgages that fit into the 1.5% security are likely to be 2% and higher, due to both the cost of servicing (roughly 25 bps) and the guarantee fee (“gfee” roughly 50 bps) charged to securitize the mortgage. It changes every day, depending on pricing and buyup and buydown grids, but 2.5% and 2.625% 30-year mortgages are currently heading into 1.5 percent MBS which in turn are priced slightly above par (100).

I’m still undecided on my Halloween costume (the Tiger King? Ghost of Bear Stearns? Myrtle already has a sexy Manx covered), and the United States is waiting for the decision on who our next president will be with only five days until the election. While that election uncertainty, rising coronavirus infection rates, a stalling in the labor market recovery and the lack of stimulus have all materially impacted the bond market recently, the U.S. reported the fastest quarterly growth on record today, as Q3 GDP registered +33.1 percent on an annualized basis, still in the hole though it was expected. What is less discussed is that the pace of growth has moderated significantly since then. Maybe that is being too pessimistic, as we did see earlier this week that durable goods orders were way ahead of expectations, home price growth was more robust than foreseen and the Richmond Fed Manufacturing Index also came in well ahead of where economists had estimated it.

By the end of yesterday, Treasuries were mostly unchanged and the basis closed mixed despite the largest equity selloff since June. Today stock and bond markets have already digested the latest monetary policy decisions from the BoJ and ECB, and weekly jobless claims (-40k to 751k, some progress). Later this morning brings the September Pending Home Sales Index and Freddie Mac’s Primary Mortgage Market Survey. The Desk released a new FedTrade schedule yesterday covering the October 29 to November 13 period. 1.5% coupons were added to the UMBS30s rotation while 2% and 2.5% stayed. UMBS15 operations continue to target 1.5% and 2% and 2% and 2.5% in GNIIs. Today’s schedule sees the Desk purchasing up to $5.3 billion MBS: $975 million UMBS15 1.5% and 2%, $2.9 billion UMBS30 1.5% and 2% and $1.5 billion GNII 2% and 2.5%. We begin the day with Agency MBS prices better/up a few ticks and the 10-year yielding .78 after closing yesterday at 0.78 percent after the volatile GDP number.

Jobs and Transitions

“Caliber Home Loans is committed to putting its customers on a successful path to homeownership. But our company and our employees are always motivated to do more. On Oct. 27, DREAM, our employee resource group that supports the professional development of women, sponsored Pink Day. DREAM members dressed in pink and celebrated four Caliber *** cancer survivors who shared their journeys fighting this terrible disease. Caliber and DREAM work together to donate time and funds to UT Southwestern Simmons Cancer Center in Dallas and the Susan G. Komen Foundation in Oklahoma and San Diego. These centers serve the communities near our offices. If you want to work for a company that cares about its customers and communities, then come work for Caliber Home Loans. Visit our website today to view open opportunities. To be immediately considered for Operations or Sales positions, email Jonathan Stanley and Brian Miller respectively.”

Cenlar FSB, the nation’s leading mortgage loan subservicer and federally chartered wholesale bank, has a new Corporate Development Officer: Walt Mullen. Walt will be responsible for evaluating development opportunities within and outside of the core operations of Cenlar at a time when our technology investments are positioned to meet the changing needs of how our clients and their borrowers want to be served.