“Rob, are you hearing of companies where branches are being picked off due to new budgetary constraints, and where new recruiting has become problematic for primarily the same reason?” Yup. Companies continue to look at management or regional layers (are they needed?), real estate costs (are all these leases needed for all these branches?), the cost of doing business (pressuring back office staff for every basis point yet continuing to pay mightily on the production side), and LO productivity (directives to LOs to do a minimum of 3 loans per month but not telling them how to do it, or give them the tools). Some companies like MB are saying, “Enough.”

Lender Products and Tech Survey

ACES Risk Management (ARMCO) releases an on-demand webinar focusing on how to best prepare for an on-site audit. “Surviving an Onsite Audit – Expert Advice on How to Ace an Audit” is a short webinar led by mortgage quality control expert, Sharon Reichhardt. The webinar covers pre-audit preparation, audit day tips, exit interview and follow up items, as well as year-round audit preparation. This is a “must watch” for every lender's QC team.

All this talk about Digital Mortgages, but if you are originating an end-to-end Digital Mortgage with an eNote, who is buying the loan you originate? One Lender is Merchants Bank of Indiana. Merchants just announced that it has received eNote approval from FNMA and FHLMC and therefore has begun purchasing eMortgages. This coincides with its warehouse group who has been funding agency eNotes for years. You can contact Rob Wilson for more information.

Cybersecurity certifications for the mortgage industry: Mitch Tanenbaum, partner in CyberCecurity LLC and a regular contributor to this newsletter, has launched the Mortgage Industry Cybersecurity Certification at https://micc.us. Four levels of certification from Bronze (starter level) to Platinum (NY DFS compliant). MICC benefits include gaining a competitive advantage over security-challenged competitors and building trust/reputation with clients, staff, vendors, regulators, and partners. Pricing from $195/yr. to $795/yr.  FAQ: Will this certification make you a target? No. The first step after installing a security system at your business or home is to put signs up notifying criminals that you have installed security. Criminals know that it will cost more to break in and they’ll move on to unguarded targets. See our FAQs for more info on this.

The Capital Markets Group of MIAC Analytics continues to expand its whole loan trading desk product mix. MIAC is pleased to announce its successful placement of approximately $66mm of seasoned reperforming whole loans. MIAC traded approximately $2.2 billion of whole loans in 2017 and continues to increase their trading volume. CRA & vanilla loan trading are of particular note. MIAC’s Whole Loan Brokerage Team specializes in leveraging MIAC’s advanced pricing analytics for Re-performers, NPLs, non-QM, S&D, and CRA mortgages. Synchronized with the whole loan brokerage capabilities, MIAC is the largest independent provider of fair- market values for residential, commercial mortgages and consumer loans.

MBA Tech 2018 is starting Monday in Detroit and it’s a good reminder to evaluate what technology should be in your process today. The numbers are continuing to lean against lenders as the cost per loan and days to close continue to creep up over the last 10 years. The answer is technology, and an acceptance to embrace and test change in your process. Those that do, will find themselves on the winning (and more profitable side) of the mortgage business. Maxwell is a great example of a lightweight and quickly deployable digital mortgage solution for lending teams of all sizes to help improve the profitability of their process. The team at Maxwell tells me teams using Maxwell are collecting documents 73% faster and reducing underwriting turns by 25%. To learn more about Maxwell visit www.himaxwell.com or request a demo here.

Capital Markets

“Ease” is a good thing when transferring information to the secondary market. Cloudvirga launched single-click submission of loan data to both GSEs’ automated underwriting systems (AUS) in a collaborative effort with Freddie Mac, delivering on the industry need for greater transactional ease. “The dual-AUS submission and review process allows lenders to maximize loan fungibility in the secondary market and improve loan quality through automation. Cloudvirga, a leading provider of digital mortgage point-of-sale (POS) software whose enterprise technology is powered by the intelligent Mortgage Platform, works behind the scenes to automate review of each GSEs’ AUS’ findings report, applying rules-based logic and predictive analytics to determine the best path for a loan without adding manual review tasks or interfering with a loan team’s preferred origination workflow. The functionality will be available to Cloudvirga customers with Freddie Mac Loan Product Advisor’s 4.8 release. Loan Product Advisor 4.8 also adds new support for automated validation of borrower asset and income data.

Originators who follow rates, and the economy, know that there are certain “headline” statistics that grab headlines. What about some of the “second tier” numbers recently? Are they also showing strength, and therefore higher rates ahead? The ISM Non-Manufacturing Index declined to 58.8 in March though this is still a positive number that points to improving conditions for much of the US economy. Like the sentiment data from last week, the ISM Non-Manufacturing Index declined slightly in March from 59.5 to 58.8; though that value is still positive and a sign of improving conditions.  All ten sub-indexes were positive, and the employment sub-index showed an increase which is consistent with the gains seen in the ADP Employment Report. Anecdotal comments in the survey were generally positive though respondents were keeping an eye on interest rate increases and tariffs.

Auto sales surprised in March when the improved to a 17.5 million-unit rate. Improving economic conditions typically support ongoing auto sales, however sales surged following hurricane damage along the Gulf Coast after declining for much of 2017. Regardless, consumer spending is the largest component of GDP.

Initial unemployment claims unexpectedly increased by 24,000 to 242,000 for the last week of March. Historically, this is still a low number and volatility is common during the early parts of the year due to seasonal factors, weather, and the timing of the Easter holiday.

March job growth remained strong according to the ADP Employment report which showed 241,000 private sector jobs were added to the US economy in March.  While the ADP Employment Report is not perfectly correlated with the official data from the Bureau of Labor Statistics it can inform markets as to where the BLS numbers are headed.  Much of the gains for March were in medium-sized business (50-499 employees) where 127,000 jobs were added. By contrast, small businesses increased labor by 47,000 and large businesses saw employment increase by 67,000.

March nonfarm payrolls were well below low market expectations for +185,000, coming in at just +103,000.  While this looks disappointing at first glance when compared to ADP’s reported 241,000 jobs added, February’s vigorous gain was revised upward to +326,000 and the first three months of the year are averaging a net gain of 202,000 new jobs per month.  U3 Unemployment remained at 4.1 percent for the sixth consecutive month while the broader U6 employment rate, which includes marginalized workers, declined to 8.0 percent. Hourly earnings increase 0.3 percent for the month and are up 2.7 percent year-over-year, consistent with tight labor market conditions. Employment gains were broad-based across industries; however much of March’s volatility can be attributed to construction employment, which fell by 15,000 after a 65,000 increase in February.

Turning to Thursday’s bond market, despite the increased geopolitical uncertainty after President Trump tweeted a follow-up to yesterday's threat of a strike on Syria, tweeting "Never said when an attack on Syria would take place. Could be very soon or not so soon at all!" Rates rose, including the 10-year closing above 2.80%. Turning west instead of east (or going further east for you flat-earthers out there), China's Ministry of Commerce clarified that the pledge to open the Chinese economy to foreign investment is unrelated to trade issues with the United States. In more positive news, the weekly claims figures had nothing in them to disrupt the encouraging trend we have been seeing in the job market.

The New York Federal Reserve continues to purchase Agency MBS securities. We also saw a new FedTrade schedule released, which sees the Desk purchasing up to $4.5bn over the April 13-26 period (despite a break on Wednesday, April 18), with the same coupons targeted as in the previous schedule with seven of the nine operations containing different sizes and sectors.

Turning to today, the economic calendar kicked off with Q1 bank earnings from JP Morgan, Wells Fargo, Citigroup, and PNC. (We’ll discuss the mortgage results early next week.) Today also sees three Fed speakers starting with Boston's Rosengren, followed by St. Louis' Bullard, and concluding with Dallas's Kaplan. We also have two economic releases scheduled, both due for 10AM ET release and of secondary importance. February job openings from JOLTS are forecasted to decline to 6.208 million vs. 6.312 million previously with Michigan sentiment seen declining to 100.0 vs. 101.4 with declines in both current conditions and expectations. We start Friday with the 10-year at 2.84% and agency MBS prices roughly unchanged versus Thursday’s close.

Company Moves

Isn’t the first, won’t be the last…$20 billion MB Financial in Chicago is shutting down its national mortgage business, cease accepting locked loans, and stop taking loan applications from its national business this quarter. The company will stop operating the business as a defined segment during the fourth quarter. This news came from a regulatory filing Thursday that the decision was based on recent economic changes, heavy competition, “very low” margins, and input from shareholders.

An employee sent me a note saying, “This will include Wholesale, Mini Correspondent, and most of Retail. Same story as many: super thin margins, bleak 2018 forecast, oversaturation of wholesale lenders, and rising cost per loan. We will continue to accept new submission until April 20 and will continue to fund pipeline loans through July 6. There will be a ton of folks looking for new employers so if anyone is looking for folks please make sure you reach out to MB folks!”

Employment and Business Opportunities

Are you an experienced salesperson looking to grow your book of business with an aggressively expanding, well capitalized company? Towne Mortgage Company is looking for an energetic individual to take the wheel to expand their production with direct access to Marketing, Underwriting and our Servicing Departments. Towne is a Direct Lender/Servicer with 37 years’ experience serving our community. “Our focus is on supplying our salespeople with the tools they need to be successful, whether that be our Industry leading CRM, Vantage, or our product offerings of Conventional, FHA, 203(k), USDA, VA, Jumbo, and soon to be Day 1 Certainty. This salesperson can expect benefits including Medical, Dental, Paid Time Off, and a 401k Company Match. Email Cassi Sluka for more information.”

PRMG Wholesale is Looking for Motivated Account Executives to help them support their continued growth throughout the Western United States!  "Built by Originators for Originators, PRMG is consistently ranked in the TOP 25 of the TOP 100 Mortgage Companies in America and Ranked in the TOP 5 of the 50 Best Companies to Work for In America.  Along with a great compensation package, PRMG is committed to providing the best combination of product, pricing, fulfillment and advanced technology to our Wholesale customers!  PRMG is licensed in 48 states and employs over 1,700 people throughout the country!  Become part of a Winning Team! Click here to apply online and learn more!" Or send a resume to Kevin Peranio, Chief Lending Officer, PRMG.

Waterstone Mortgage Corporation, a national bank-owned mortgage lender headquartered in Pewaukee, Wisconsin is looking to acquire small to mid-sized traditional retail, purchase-focused mortgage companies nationwide. “Today’s tighter margins and complex regulatory environment motivate many small mortgage companies to seek ways to expand their business, including strategic acquisitions to create additional synergies. Waterstone Mortgage has the strength and stability that mortgage executives seek when considering a sale of their retail business. The lender is a wholly-owned subsidiary of WaterStone Bank SSB (NASDAQ:WSBF), which has assets of more than $1.8 billion. As a Fannie Mae, Freddie Mac, and Ginnie Mae-approved lender, the company offers a broad range of products including FHA, VA, USDA, and conventional loans, one-time close construction financing, bank portfolio lending products, jumbo products, and condo financing. It produced $2.5+ billion in origination volume in 2017, 90% of which comes from purchase mortgage loans.