March 4th: the only day that’s also a command. Lenders across the nation will be seeing plenty of “commands” in their in-boxes asking them for money in the form of Early Pay Off notices seeking money. EPO penalties are fees that originating lenders must pay whenever a loan pays off based on the contract that the lender signed with the investor, usually within four to six months of funding. Borrowers are not responsible for these fees; LOs or brokers shouldn’t write to me asking about your company or wholesaler charging you for them: that is between you and them! (And remember prepayment penalty mortgages? One can still find remnants of them in guides like Freddie Mac’s, a reminder of a bygone era, unless Freddie’s IT group sees this and removed it prior to you reading it.) The CFPB was instrumental in changing the structure of lending, including eliminating loans with prepayment penalties, and now the CFPB’s structure itself is being debated by the highest court in the land.

Lender Services and Products

“The digital mortgage is table stakes for lenders today. Achieving it means incorporating both customer-facing and back-office innovation to drive automation, quality and efficiency. In our latest report, we address what it will take for lenders to get there. The report outlines five key imperatives for lenders to get the most value out of their digital mortgage loan fulfillment process and borrower interaction. Mortgage companies can use AI, for example, to go beyond automating tasks to also extract more insights on what is essential to make better, faster decisions based on data, experience and interactions. Doing so creates more opportunities for process improvement and cost savings. Accenture provides comprehensive mortgage services to help lenders compete in the digital economy. We can combine our core capabilities (mortgage consulting, business process outsourcing and technology) however necessary to get lenders to the true digital mortgage. Contact Accenture today to see how we can help you shape and execute your vision for the future.”

PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), understands that with historically low rates, you want confidence in knowing your increased production volume can be funded with your current warehouse provider. We understand the need for additional funding capacity in high volume months and provide our customers with rapid temporary line increase and bulges at large month ends! We are committed to building strong relationships with our customers and providing the service you need most.  If you are interested in learning more about PlainsCapital Bank National Warehouse Lending please contact Deric Barnett.

While the coronavirus might pose a threat to public health, the rise of the super virus has had a curious effect on the mortgage market. Maxwell explores the impact of epidemics on the lending industry in their new blog, “Coronavirus & the Mortgage Industry: The Impact of Epidemics on the Mortgage Market.” For a heads up on what to expect if the coronavirus continues to spread, read the blog here.

Rate Movements 1A

Loan officers are often asked by borrowers, or wonder themselves, about why mortgage rates don’t track Treasury securities all the time. Robbie Chrisman sent this note for loan officers explaining how rates, and rate movements, work. (Questions or comments should be directed to him using the link.)

Coronavirus fears have sent bond yields tumbling, evidenced by both the 10-year and 30-year yields breaking through record lows in the past week. In fact, over the weekend we saw the 10-year T-Note touch 1%. Recently the average on the 30-year fixed rate mortgage, which loosely follows the yield on the 10-year risk-free Treasury, fell Friday morning to 3.23 percent, an 8-year low, but not a record one. The record lowest average on the 30-year fixed rate mortgage was set back in September 2012, when it touched 3.15 percent. Times are very good for originators at the moment, but some people are wondering why mortgage rates aren’t even lower.

Mortgage rates are not falling quite as fast as Treasury yields both because of how quickly Treasury yields have dropped as well as the current heightened risk to investors in purchasing mortgage-backed bonds (MBS). The historical difference in price between Treasury bonds and mortgage rates is due to risk. (Lenders like to think that all their clients are risk-free, but investors don’t share that opinion.) Unlike Treasuries, which can’t be paid off early by the government, mortgages can be paid off early when borrowers refinance. Mortgage investors pay a premium for MBS to receive higher monthly interest payments from borrowers over time, but when borrowers refinance, investors subsequently lose monthly interest payments and years of potential profit.

The faster mortgage rates fall, the higher the risk of prepayment for investors increases, as borrowers across the nation hear about a “refi boom.” And no one wants to pay 103 for a loan or security that pays off at 100 in four months.

How do investors who buy mortgages respond? Since they are that much more worried about losses from a refinance boom, the result is they begin to pay less for mortgages, and those premiums decline. As the premium investors pay goes down, the price for borrowers begins to go up, in either up-front costs or higher interest rates. On top of that, if the economy falters, the risk of delinquencies and foreclosures increases. And no one wants that.

Capital Markets

Financial markets were greatly impacted by the rapid spread of the coronavirus over the last week as equities were hammered and the 10-year Treasury hit a record low. Mortgage rates, however, did not see as dramatic a movement down coupon as they were mostly flat until the end of the week. The implied probability of action from the Federal Reserve, which prompted its move yesterday, has also increased with the bond market now expecting four rates cuts this year, up from one. But there is much debate over the effectiveness of a rate cut as they would do little to bring shuttered Chinese factories back online or convince people to begin flying again until the virus has declined. Rate cuts are designed to stimulate demand and the coronavirus will have its greatest impact on the supply-chain. Critics say that the Fed should have waited for material changes in the underlying economic data before embarking on any rate cuts. A lot can happen between now and the next FOMC meeting later this month.

If anyone cares, U.S. economic data over the last week was mostly positive although the impact of the rapidly expanding coronavirus drove the equities sell-off. Consumer confidence increased, capital goods orders exceeded expectations as did personal income gains, however it was discounted as the spreading coronavirus commanded the world's attention. Given low unemployment in the US and increasing household wealth, there is potential that the U.S. may be able to absorb some of the likely global economic slowdown and supply-chain disruption due to the coronavirus. Economists generally suggest it takes three major simultaneous events to push the US economy into a recession and they are looking at the financial market correction and the lingering effects to US manufacturing of the Boeing production shutdown as potential catalysts that could cause contraction in the U.S. Nonetheless, if there is a recession in the near-term, it is not expected to be as deep as the 2007-2009 recession.

The Federal Reserve lowered its key federal fund rates yesterday by half a percentage point, the Fed's first rate cut between scheduled meetings since the depths of the financial crisis in 2008. Fed Chairman Powell said the coronavirus outbreak has increased risks to the U.S. economic outlook. It wasn’t enough to stop a surge in Treasuries, which entered uncharted territory as 10-year yields fell below 1 percent for the first time ever, dipping as low as 0.906 percent before a rush of selling interest late in the day helped it to close the day -9 bps to 1.01 percent.

“The fundamentals of the U.S. economy remain strong,” the Fed’s policymaking committee said in a statement. “However, the coronavirus poses evolving risks to economic activity.” Still, rates fell across the curve, with the front end discounting the likelihood of additional cuts and the back end seemingly discounting the notion that today's rate cut isn't going to be a cure all for the adverse economic effects of the spreading coronavirus.

With government ministers holding emergency meetings (reaffirming commitment to use all appropriate policy tools to support growth) and stocks sinking, is it beginning to feel like another global financial crisis? Back in 2008, bailouts, massive liquidity and eventually quantitative easing helped lift economies out of the recession. Now, with many central banks already having very accommodative stances and no real signs of bank balance-sheet pressure, there is an argument to be made that the response should be mostly fiscal. Fortunately, the U.S. economy, backed by a strong labor market, enters this period in a position of strength.

Turning to today, mortgage applications increased 15.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending February 28, 2020. That jump was expected, considering the 10-year Treasury yield dropped 35 bps during the reporting period. We’ve also had the ADP Employment Change Report for February (183k versus +170k, as if anyone cares).

The economic calendar closes out later today with the ISM non-Manufacturing index for February, remarks from St. Louis Fed President Bullard, and the Fed's latest Beige book ahead of their March 17/18 meeting. We begin today with Agency MBS prices roughly unchanged and the 10-year yielding .99 percent.

Jobs and Lender for Sale

More than 500 Gateway Mortgage team members attended the company’s largest sales rally ever on February 10-12 in Tulsa, Oklahoma. The event celebrated outstanding 2019 results and showcased an exciting vision for the future. The high-energy event featured interactive presentations on best practices, cutting edge technology and becoming the best you can be in both your personal and professional lives. The theme “20 & 1” gave a nod to the legacy of the past 20 years built by each attendee and a look toward one year as Gateway First Bank, following the merger. Gateway Mortgage is a division of Gateway First Bank. Almost 100 of Gateway’s top performers were recognized throughout the event. The team also “Rocked the Rally” with a private concert and concluded the three-day event with a community service project to help Folds of Honor and Operation Gratitude. Visit Gatewayloan.com to learn more.

Wells Fargo is searching for a Correspondent Regional Sales Executive for Northern California and Nevada. The job requires 7+ years of mortgage experience, and 3+ years of correspondent experience, secondary marketing experience, or a combination of both, in the mortgage industry.

“Mortgage Pros love working with Mortgage Confidential and your response has been amazing! Mortgage Confidential is the #1 resource for mortgage professionals to find opportunities and maximize their value. We allow you to confidentially put yourself on the market to discover opportunities you may not have known existed. Most likely, you are happy and comfortable with your current situation, but that is no reason not to discover your true worth in the marketplace. Our site allows you to complete a profile that will remain 100% confidential. Lenders and Banks will have the opportunity to view your profile without having access to your name or contact information. You control the process. You control the lenders you want to engage. 100% confidential. Guaranteed. Check us out www.mortgage-confidential.com.”

Serial entrepreneur and ‘Undercover Billionaire’ Glenn Stearns goes back to his roots in mortgage banking to form his next new venture as Founder and CEO of Kind Lending, LLC, headquartered in Southern California. This time, he’s doing it all different from the all-star team that he’s hiring, to the brand spanking new broker portal, and everything in between. Together with Yvonne Ketchum, named President, and the inaugural team at Kind Lending, they are building a company that truly makes work fun and exciting again. They are even dubbing it the Kind Movement, and it’s already taking on a life of its own. Now, they are on the search for the next mortgage superstar. Visit www.kindlending.com for more information or send your resume to resumes@kindlending.com.

Long considered a leader in cutting-edge technology, Gold Star Mortgage Financial Group is at it again, announcing IRIS, its latest addition to an already robust digital lending platform. IRIS is Gold Star’s proprietary AI platform that aggregates public and private data and delivers real-time predictive analytics to both Loan Officers and their Realtor® Partners. Committed to giving Street Originators the edge over massive competitors in their local markets, Gold Star’s IRIS supplies the same or better data than mega-companies without the red tape of their oftentimes slow-moving bureaucracy. Gold Star believes the future of mortgage origination will be based upon Street Originators being able to cement local relationships through state-of-the-art Fintech, automation, and instant access to critical data. If you agree, and would like to meet IRIS, Gold Star would love to demo their data-driven advantage! www.JoinGoldStarMortgage.com

Gear up for Growth is the theme for Stearns Wholesale Lending in 2020. The overall strategy is to expand in new markets with dynamic Account Executives that possess the same values as we do. One of the key values at Stearns is Empowerment to control your own destiny. Wholesale leadership partners with the field to create the annual plan, goals and performance strategies. An example of this collaboration is the point-of-sale decision making by each Account Executive according to their business needs. To grow in your market, click HERE to speak with our Wholesale Recruiting Team.

Broker aboutMYmortgage.com, LLC is for sale, minimum asking price five million dollars by June 15. The company’s intellectual property (U.S. Patent No. 8,860,939, titled: 'Method for Mortgage Customer Retention') remains in effect until October 2027. “It provides a unique, proprietary win-win opportunity to increase both mortgage servicers' customer retention and borrower satisfaction. aboutMYmortgage Patent Information.” aboutMYmortgage.com, a licensed mortgage broker in Florida, Georgia, and Pennsylvania and can presently sell mortgage leads in 29 additional states. For questions or offers contact Tim Allen, CMB, founder of aboutMYmortgage.com, LLC (239.571.5440).