While in captivity it is important to have discipline. Independent mortgage banks exercised discipline and had a great 4th quarter, profit-wise, but that was so… “then.” (Costs were $7,500 per loan.) Looking at the present, many are beginning to ask an ugly question: “Does the worldwide economic harm, spiraling out of control, outweigh the potential casualties of the coronavirus?” Fortunately the Federal Reserve and Agencies are providing support, but given that non-QM and jumbo loan production is reeling, and the servicing market, especially for Ginnie Mae loans, was dealt a blow yesterday, can government-backed FHA/VA lending be far behind? How much pain can small or mid-sized independent mortgage bankers absorb, given EPOs, margin calls, renegotiations, and now angst in servicing/market-driven valuations? Will the government step in to save non-bank, large servicers, like Mr. Cooper? More below on new developments. Sorry about the length of the commentary today – there’s a lot going on.

Lender Products, Services, and Training

With so many borrowers employment being negatively affected by COVID-19 this is the time to remind lenders to make government insuring a priority. Once the borrower goes 30 days late then the loan can’t be insured forever. As a leading correspondent investor in Government loans, TMS has provided some reliable and practical best practices for lenders to ensure their FHA loans are sellable. Read more on TMS’ blog.

Looking for ways to stay engaged with prospective borrowers during this unprecedented time? Consider joining Optimal Blue as they host a highly informative webinar, “Engage & Convert Borrowers with Robust Social Media Automation,” on Thursday, April 2nd at 2:00 PM CT. During this webinar, attendees will learn about Optimal Blue’s social media engagement solution, current functionalities such as robust publishing, reviews, and compliance automation, as well as several innovations that will take the solution to a whole new level and will be announced for the very first time on this webinar. Most importantly, attendees will discover the social media techniques and best practices that successful Optimal Blue clients have already deployed to engage with prospective borrowers and convert them into new mortgage customers. Register now.

Day 1 of the MAXOUT 2020 “Unconference” presented by Maxwell and National MI is in the books and Day 2 & 3 boast some great sessions to attend. As a reminder, MAXOUT 2020 is a 100% Free, 100% Online “Unconference,” giving away great prizes to those that attend. As a reminder, I’ll be concluding the conference with my closing Keynote titled, “2020: CoVID19, Low Rates, Recession?” tomorrow morning. Check out the entire agenda and register for your sessions.

Join Golden State Finance Authority for an in-depth look at the new GSFA OpenDoors down payment assistance program! OpenDoors is a game-changer when it comes to helping homebuyers in California purchase a primary residence with little-to-no money out of pocket. The GSFA OpenDoors Program features homebuyer assistance up to 7% of the loan amount, FICO requirements as low as 620, flexible DTI requirements and enhanced pricing. FHA, VA, USDA and Conventional Loan financing is available. Plus, GSFA delegates the loan process to the Participating Lender so no additional compliance review from GSFA is necessary, making the process simple and easy for both borrower and Lender. Ready to start closing more loans?? Join us for a Lender Training Webinar and view program guidelines here. You don’t want to miss out on this EXCITING new Program!

With a lot of vendors sending their teams home, lenders might be worried about processing slowdown because of the potential higher turn times. Fortunately, Informative Research has digital tools that make it easier for clients to get things done without relying on a service team. With Informative Research’s Action Center, processors can instantly 1) remove a duplicate flag on a credit report and 2) check the status of rescore and supplement orders. And now they’ve added two more features: 3) Fix typos and 4) order/view a TriMerge credit report in a different report format. Clients can do all of these things automatically without waiting. Keep an eye out for more updates with even more functionality coming to the Action Center later this year! To learn more, just click here or call 800-473-4633.

Digital transformation can sound overwhelming but it doesn't have to be. Join Bob Meara (Celent), Eric Somers (BMO Harris Bank), and Alden Seabolt (Blend) for CBA's webinar "Leveraging Digital Transformation to Nail Customer Acquisition." They'll demystify what it means to transform your organization with strategies that support seamless customer onboarding experiences. Sign up for free with the promo code Blend0407.

HomeBinder (new Encompass plug-in) gives Originators a way to ensure they aren't forgotten post close. Join the growing number of mortgage originators giving HomeBinder to their clients. Show borrowers how to care for their greatest asset. Give them a reason to remember you with a branded complete home management suite of tools. The relationship doesn't end with a closed loan for you or Agents you work with. Don’t get forgotten by your mutual clients.  Co-brand and share the wealth! Call 800-377-6915 or email support@homebinder.com. Visit https://www.partners.homebinder.com/lenders to learn more. If you are interested in a 3-minute demo video, click here!  

Given the devastating impact on businesses throughout the country, and the financing pullback by lenders needed to ensure these merchants have the necessary capital to ride out the disruption caused by the Coronavirus, World Business Lenders has launched a COVID-19 RELIEF LOAN PROGRAM where it offers financing up to $2,000,000 to businesses impacted by the pandemic. The Program effectively loosens underwriting guidelines with respect to cash flow requirements so businesses shut down by the government or taking responsible action to limit the spread of the disease can still qualify despite little or no cash flow.  All loans are secured with adequate equity in virtually any form of real estate. The two-year COVID-19 Relief Loan Program is intended to give a struggling business the capital necessary to weather the economic storm by providing (1) a COVID-19 Shut-Down Period –no payments due for the first 3-months, (2) a Recovery Period – interest only payments for the next 9 months while the business is restored to a normal state, and (3) a Pay-Back Period – where the loan begins to amortize during the next year. Contact Phil Grossfield.

CV 19-Driven Updates

Quicken Loans Mortgage Services sent to its brokers: “… For most of your clients, the mortgage process will continue to move forward, but closings and appraisals in certain U.S. areas will be affected. Several U.S. locations have adopted mandatory shelter-in-place orders. If you are originating a loan in one of these areas, here's how the mortgage process is being affected: All new registrations and floating pipeline loans will not be able to lock until "Ready for Final Signoff Pending" status. The timeline for shelter-in-place orders remains uncertain. However, we will continue to accept registrations and loan applications and will complete loans that are currently in process. You can view the most current list of affected U.S. areas here.”

Mr. Cooper? It “will temporarily suspend participation in the GNMA Co-issue space (and) will continue to monitor the market volatility closely, and remains committed long-term to the Ginnie Mae Co-issue space. Mr. Cooper will honor & fund all currently accepted pools & at this time will not be accepting new pools.” (Of course it hopes to “re-engage” in the future.)

How about the large non-bank servicers with varying degrees of capital to back varying sizes of servicing portfolios? “Mr. Cooper, the nation’s third largest residential servicer, made a public plea Monday calling on policy makers in Washington to pass legislation to provide federally backed lines of credit to mortgage companies that upstream payments to MBS holders. ‘When customers don’t pay us, we still must forward the customer’s payment to Fannie Mae, Freddie Mac or Ginnie Mae so they can forward the funds to the bondholders,’ writes Mr. Cooper CEO Jay Bray.

Inside Mortgage Finance reported, “In a new analysis, Mr. Cooper argues that if 25% of homeowners are unable to make their mortgage payments… our industry will need $40 billion in the first three months to make the payments on the customers’ behalf. We are asking for legislation to provide a liquidity facility to mortgage companies.’” IMF notes that, at last check, Mr. Cooper serviced $643.5 billion in home mortgages, giving it a market share of 5.8%.

loanDepot and other wholesalers are reported to be drafting similar policies, not allowing refinance locks prior to final approval.

Pingora Transaction Management released, “In the face of the unprecedented challenge of responding to COVID-19 (coronavirus) and the additional volatility this has caused in the market, as of March 23, 2020, we will be suspending all new MSR purchase commitments through FNMA SMP pursuant to Section 13 of the FNMA SMP Addendum/Agreement.  Additionally, Lakeview Loan Servicing will be taking the necessary steps to terminate the existing Purchase Agreement pursuant to Section 11.1(e) of the underlying purchase agreement, effective 4/22/20. While we are terminating the purchase agreement, it is our preference to mutually agree to amend the existing agreement for a suspension period while we await some level of market stability as newly created MSRs have become increasingly difficult to value.” As always, check with your rep for specific details and plans going forward.

“Given the market disruption due to COVID-19 and the extreme volatility caused in both the mortgage and MSR markets, RoundPoint is suspending all co-issue MSR purchases effective immediately. Our hope would be to reenter the market in the future, and will continue to monitor the liquidity and valuation of the asset in an attempt to do so.”

This move has industry experts wondering, since Lakeview was about the only buyer of GNMAs, how long before the AmeriHome, Penny Mac, and Freedom stop buying whole loan service released? Or, to take another step, how long with lenders be excited about originating FHA & VA (the fodder for Ginnie Mae securities) product if there is no market for the servicing?

Finance of America told brokers of its, “Temporary Suspension of the following products: Apex, Flex, HBX and Reveal. All loan activities under Apex, Flex and HBX products, including loan fundings, have been ceased. Only those wholesale loans in our pipeline that have final loan docs signed and dated on or before 3/23/2020 or NDC loans purchased on or before 3/23/2020 will be accepted. Reveal products - no new application or locks are being accepted. Loans currently locked must close within the lock period. No extensions will be permitted.

FAM also cut manufactured home lending. “FAM will no longer accept applications for loans on Manufactured Homes. Only those wholesale loans in our pipeline that have final loan docs signed and dated on or before 3/23/2020 or NDC loans purchased on or before 3/23/2020 will be accepted. All other loans currently in the pipeline will be suspended until further notice.”

Appraisal (and VVOE) News

Yesterday the Federal Housing Finance Agency (FHFA) “directed Fannie Mae and Freddie Mac to provide alternative flexibilities to satisfy appraisal requirements and employment verification requirements through May 17, 2020… the Enterprises will leverage appraisal alternatives to reduce the need for appraisers to inspect the interior of a home for eligible mortgages. In addition, in the event lenders cannot obtain verbal verification of the borrower's employment before loan closing, the Enterprises will allow lenders to obtain verification via an e-mail from the employer, a recent year-to-date paystub from the borrower, or a bank statement showing a recent payroll deposit. Lenders should continue to utilize sound underwriting judgment to ensure these alternatives are appropriate to the borrower's circumstances… Other actions include a suspension of foreclosures and evictions for at least 60 days and offering forbearance for borrowers facing hardship due to coronavirus.”

Critics suggested that the FHFA took a “short view” instead of setting safe and sound standards in how to do things. AMCs can adjust (except if the FHFA pushes Waivers) but many lenders will probably still want full appraisals with interior inspections.

Fannie Mae issued Lender Letter LL-2020-03 providing reminders and temporary guidance on these loan origination policies: verbal verification of employment; continuity of income; notes, electronic records, and signatures; title insurance; and seller/servicer business continuity and submission of financial statements. And issued Lender Letter LL-2020-04 providing temporary guidance on appraisal requirements and completion reports, including allowing exterior-only and desktop appraisals for many transactions.

Freddie Mac sent out Bulletin 2020-5 that provides operational, credit and collateral requirements related to COVID-19. In it are updates on temporary guidance related to Freddie’s credit underwriting requirements, temporary guidance related to Freddie’s property valuation requirements, expansion of Freddie’s automated collateral evaluation eligibility, an extension to the deadline for certain annual reporting requirements, as well as reminders on the use of Electronic Records and Signatures, title insurance, and Seller/Servicer business continuity plan requirements and information about Freddie Mac’s business continuity plan.

PennyMac notified correspondents of its new VVOE and appraisal guidelines.

Last week loanDepot Wholesale sent this out to clients… “Effective immediately, we are not accepting new loan submissions for properties located in the following Bay Area Counties: Alameda, Contra Costa, Marin, Santa Clara, Santa Cruz, San Francisco, and San Mateo, with the following exception: Properties with a property inspection waiver (PIW) and written documentation that a notary can be retained for doc signing at the Borrowers’ shelter in place location. These submissions will also require a 60-day lock.”

Of course mandated self-quarantine may cause delays. Appraisers and homeowners who have or have not been in contact with COVID-19 are under self-quarantine. California, and other states, issued a mandatory self-quarantine for members of the community who are age 65 and older. Please be aware that this will impact many appraisers who will no longer be able to complete inspections, either because of their age or the age of one or more residents living at the property to be inspected. We will communicate issues as they arise and reassign orders as quickly as possible. In response to the spread of COVID-19 cases in the state of California, a legal order has been issued prohibiting non-essential business for the following counties: Alameda, Contra Costa, Marin, San Francisco, San Mateo, Santa Clara, Santa Cruz, San Benito, Monterey, and the City of Berkeley which has its own public health division. Unfortunately, all appraisal orders that have not yet been inspected will temporarily be placed ON HOLD.

Property Science ceased appraisals in all shelter in place counties until April 7th and that most lenders they work with are following. Others indicated their AMC will still perform appraisals so long as borrower is willing but require 60 lock on conventional loans. So not only are the county recorders an issue, but there are issues with appraisers either not able to physically appraise homes in ‘shelter areas’, but appraisers refusing to go inside homes for health fears…the best of times, in the worst of times…none of this feels very good.

“So, AXIS took that as a challenge and set a goal to define and establish a uniform set of inspection protocols in tandem with our lender-partners and general healthcare initiatives. This set of protocols is designed to protect both the appraiser and the customer, and instill best practices into inspections in this new environment. Here are some things you should know beforehand that have shaped how we’re addressing appraising today:

“It started last week when 6 Bay Area Counties in California issued Health Orders. From there it’s grown to include numerous other Counties and a burgeoning list of Executive Directives and Proclamations from Mayors of Big Cities to State Governors. (A list of all current Orders, Directives and Proclamations can be found here. One may also contact us with questions, feedback, or additional information).

“We have reviewed everything published to date and, after consultation with our Corporate Counsel and other industry sources, that a reasonable interpretation can be made that the professional services provided by AXIS and the appraisers we engage qualify as Essential Business services that support banking and related financial institutions. While Fannie Mae and Freddie Mac had been silent until this Monday, their release greenlighted the use of alternation appraisal products (Drive-by and Desktop appraisals utilizing the 1004 form but with a modified scope of work). It is noteworthy to point out that under Appraisal Preferences in that release, the #1 Report type listed in every case is a full appraisal – which requires an interior inspection. It’s also important to note that both FHA and the VA continue to support and require appraiser-provided appraisals that include full interior inspections.

“The following will be observed by all parties to an inspection. The lender will contact the borrower and/or homeowner prior to the appraiser scheduling the inspection appointment to determine that no one in the household has knowingly been exposed to COVID 19 nor is anyone in the house currently sick. The appraiser will re-confirm that there has been no change in the health of the occupant (or person providing access to the property) upon scheduling the inspection and prior to entering the property. Confirmation must be documented within the order. To minimize face to face interaction, the appraiser will conduct a phone interview with the inspection contact prior to visiting the site. Appraisers may request a list of improvements that homeowners have made to their home, the plat survey, and/or tax bill if applicable. These documents provide support for legal descriptions, dimensions, easements, and measurements included in the appraisal report. The homeowner will, if present, maintain social distancing as much as possible while the inspection takes place. The appraiser should always wear gloves and mask at all times while inspecting a home and endeavor not to touch any surfaces, door handles or light switches. Goggles are also recommended.

“Hand washing (or use of a hand sanitizer) before and after each inspection is a prerequisite – but not at the subject property! The homeowner will agree to turn on all lights in the home and see that all interior doors are open for easy access to every room. Although the CDC has not published protocols outside healthcare settings, a baseline of Personal Protective Equipment (PPE)used during inspections may ease concerns and may provide a level of mutual protections. PPE considerations include gloves, masks, eye protection, hygienic shoe covers, and a supply of hand sanitizer. Any questions or concerns at a property, simply stop and call AXIS.

“We believe appraising is a not-so-small and essential part of the lending equation – and appreciate the enhanced partnership our lender-clients have placed in us. As an aside, one of the more sobering results of the last several days has been the universal gratitude every homeowner has expressed for our appraisers being willing to come out. We captured some of the comments here. It’s been a very humbling and uplifting experience.”

Mike’s note finished with, “We hope more lenders encourage the GSEs, other investors and the industry’s regulators to be creative and offer to accept exterior appraisals with interior photos by homeowners as a temporary alternative to help those folks who are too unsettled by the thought of a stranger in their home for an interior inspection to take place. While we believe these challenges may be with us for longer than many expect, when this pandemic threat eventually abates, we hope these lessons and experiences will have added in a positive way to the strength of our industry.” Thank you, Mike!

Capital Markets

Mortgage rates? U.S. Treasury yields were pressured lower to begin the week, including the 10-year closing yesterday -17 bps to 0.76 percent. Though, as I have explained recently, lower Treasury yields aren’t necessarily translating to lower mortgage rates. We saw monetary and fiscal authorities in Japan, New Zealand, South Korea, and Germany active, but in the U.S., Congress failed to reach agreement on a spending plan, which helped cause the rate decline/bond rally. The Federal Reserve announced readiness to buy an unlimited amount of Treasuries and MBS, with nearly $700 billion in asset purchases planned for this week alone. The Fed will also establish a secondary market corporate credit facility, which will be able to purchase investment grade corporate bonds and U.S.-listed ETFs with exposure to investment grade corporate debt. (The first FedTrade operations of the day saw the Desk purchase $15.7 billion in the morning and then in the afternoon $30.2 billion MBS purchases.)

Today’s economic calendar is already underway with the Philadelphia Fed non-manufacturing survey for February (-12.8, region-level -35.1). Later today brings Redbook same store sales for the week ending March 21, preliminary March Markit manufacturing and services PMIs, Richmond Fed manufacturing and services for March, and the headline release of the day: February New Home Sales. We begin the day with Agency MBS prices better by .250 and the 10-year yielding .83 percent.

Jobs

Zoral Group Inc., an international leader and innovator in the AI/ML/Digital Products/RPA/Big Data space, is seeking a National Sales Director for its Enterprise Business Development. Looking for a true “hunter” with banking and financial service industry knowledge and extensive contact database, plus demonstrated prior success selling lending solutions. Knowledge of Artificial Intelligence and Data Analytics is a plus. This is a great opportunity to work with a fintech software company with over 15 years of experience and a broad global client base and help them broaden their reach in the US Market. Location agnostic, but will require some travel to attend industry conferences as well as visit client locations. 1099 Preferred. To learn more or to submit your resume, please contact Peter Sandler, SVP.