Suddenly everyone’s ruminating on upcoming mergers and acquisitions (and there will definitely be some), but in the lower management ranks, lenders are already shifting their hiring practices, and taking a careful measure of production and productivity. Will we ever run out things to measure? The median age (half above, half below) of owner-occupied homes across the U.S. is 39 years, according to the latest data from the 2019 American Community Survey. (New York has the oldest owner-occupied homes at a median age of 60 years while Nevada has the newest at a median age of 23 years.) Why should every loan originator care about the age of housing in their area? As a lender, do you have a renovation product, or 2nd? The age of the housing stock is an important remodeling market indicator. Older houses are less energy-efficient than new construction and ultimately will require remodeling and renovation in the future, and cash to do it. Moreover, as people use their homes for more purposes and require additional space, older housing represents an investment opportunity for homeowners. (The audio version of today’s commentary is available here and is sponsored by FBX, an Informa Financial Intelligence business, helping lenders understand their competitive price position and lending performance metrics.)

Broker and Lender Products

Liberty Home Mortgage has significantly increased loan volume by 53% while increasing margins since leveraging Lodasoft’s award-winning configurable workflow platform. The mortgage lender substantially increased speed and efficiency with minimal increases in staff and resources, enabling significant profitability gains. According to Khash Saghafi, CEO at Liberty Home Mortgage, “Prior to Lodasoft, we were averaging 3.2 closings per month per mortgage banker. Now, we have increased to 4.9 closings per month per mortgage banker, but the key was in very minimal increase in processing staff. We grew in volume by 53% but grew staff by less than 13%. With the additional profits, Lodasoft essentially helped us purchase a brand-new building, all over the course of one year.” Lodasoft strives to make the loan process more efficient, scalable and profitable. The company has experienced 1,000% growth over the last 15 months, demonstrating a strong and growing demand for its solutions.

If you haven’t noticed, pricing and turn times at Homepoint are as strong as ever. Its turn times are averaging two days for purchases and three days for refinances. Homepoint Select refinance loans are getting fast-tracked approval in under 48 hours. Those are impressive numbers considering how the market is shifting, and a growing number of mortgage brokers continue to pinpoint Homepoint as a favorite partner to work with. On top of that, Homepoint is hosting an Elevate Live event on Tuesday, April 20, with President of Originations Phil Shoemaker being joined by Fannie Mae’s Chief Economist Doug Duncan to discuss how the latest market outlook may impact brokers. To register for the live online event, click here.

Question: How much more business could your top producing loan officers generate if they weren’t spending 40% of their time responding to emails and phone calls asking for updated pre-qual and pre-approval letters for different loan scenarios? How many more leads would Realtors send you if you gave them the ability to update and issue their client’s pre-approval letters within the parameters you set?  Give your loan officers the gift of QuickQual by LenderLogix. It’s probably already integrated with your LOS, and it’s literally the coolest pre-approval letter you’ll ever send. Head over to the LenderLogix website and they’ll text a demo right to your phone.

Consumer expectations for digital mortgage experience is high. At the same time, they want the human touch, more so in today’s uncertain environment. If this sounds like a tough balancing act, Sourcepoint’s Digitally Empowered Contact Center (DECC) can help: It combines the best of what technology and humans have to offer, accelerating efficiencies and cycle time while building trust and transparency. It offers omnichannel support (voice, email, text, social media, and chat), optimizing engagement and reducing borrower effort across Origination, Servicing, Forbearance, Default and Loss Mitigation. With DECC, borrowers can move effortlessly between channels while agents provide individualized support using our Unified Omnichannel Desktop and Next Best Actions. DECC also includes First Customer Intelligence (FCI), Sourcpoint’s AI-based speech and text analytics solution, for a deeper understanding of consumer preferences and behaviors. Watch how DECC can help you deliver beyond customer expectations.

Breaking news: Leading digital mortgage platform Maxwell announces partnership with mortgage loan origination system Byte Software. With the establishment of this partnership, Maxwell’s digital mortgage point-of-sale will connect to Byte’s loan origination system via an API integration. The integration will allow users to seamlessly connect their data and work within Maxwell with their LOS, creating a simple, intuitive process for lenders and borrowers. This includes acceptance of the new URLA 3.4 compliant loan application. Most importantly, the connectivity allows Maxwell to continue providing its lenders the ability to spend more time supplying vital expertise to borrowers and focusing on value-add tasks. Click here to learn more about the new Maxwell/Byte partnership and other strategic integrations Maxwell offers to the 250+ community lenders on its platform. 

Agency Trends: Not Exactly User Friendly

We have watched Freddie Mac and Fannie Mae shrink their footprint over the last several months. Also labeled as “reducing the taxpayer’s risk” or “driving toward recapitalizing so that the Agencies can be released from conservatorship,” the changes have been widespread. These changes, of course, impact borrowers, lenders, investors, private mortgage insurance companies, the non-QM and private label security channels, and MBS investors in general. This was happening even before the changes announced in the mid-January amendments to the Preferred Stock Purchase Agreement (PSPA) between the U.S. Department of Treasury and the Federal Housing Finance Agency (FHFA).

Critics have plenty to point at. “Shifting risk away from Fannie and Freddie to the FHA doesn’t lower taxpayer risk.” “If the FHFA (under Director Mark Calabria) wants to limit non-owner and 2nd home purchases, why don’t they just tweak the pricing to hit a 7 percent cap rather than announce a 7 percent cap?” “Why is the 10-basis point gfee hit from years ago to fund a government plan still in place?” Groups suggest that minorities suffer a harder hit, while others say the rapid pace of change disrupts lending to all borrowers. Rental units in single-family properties account for half of all rental units, many of which are rented by low- and moderate-income households. Cash window caps of $1.5 billion per Agency? The GSEs’ Cash Window has enabled small and regional lenders to remain competitive in the mortgage marketplace so small and midsized lenders are most severely affected by this a PSPA amendment restricting the sale of whole loans to $1.5 billion per GSE for any four rolling quarters.

The PSPA limits “high-risk” loans acquired by the GSEs to 6% of their purchase money and 3% of their refinance mortgages. A high-risk mortgage has at least two of the following characteristics: A loan-to-value (LTV) ratio of 90% or higher, a debt-to-income (DTI) ratio above 45%, or a credit score below 680. But underwriters will tell you that other factors make sense to incorporate into a borrower’s risk profile, like reserves.

So lenders are looking at caps on cash sales, caps on risk factors on loans, caps on investment property and 2nd Home GSE sales (jointly known as “non-primary residences”). The GSEs will limit the acquisition of single-family mortgage loans secured by second homes and investment properties to 7% of single-family acquisitions, aligned with their current levels, over the preceding 52-week period. Michael Ehrlich’s recent study showed that this figure is only slightly below the 8-10 percent F&F are seeing now, with Fannie’s percentage being slightly higher than Freddie’s, and the purchase percentage higher than refi’s.

From an investor’s perspective, they want to own mortgages that stay on their books for a while. It turns out that non-primary residence prepay speeds are markedly slower than owner-occupied speeds. Lenders are already turning to other investors than Freddie and Fannie. The names Lakeview/Bayview, PennyMac, bank portfolios, any non-QM investor, and investment banks like BAML or JPM Chase often come up.

Lenders are changing their guidelines given that the GSEs will limit the acquisition of single-family mortgage loans with multiple higher risk characteristics at their current levels. A maximum of 6% of purchase money mortgages and maximum of 3% of refinancing mortgages over the trailing 52-week period can have two or more higher risk characteristics at origination: combined loan-to-value (LTV) greater than 90%, debt-to-income ratio greater than 45%, and FICO (or equivalent credit score) less than 680. Do you change your guidelines as you near this cap?

Fannie’s trading desk announced that, “Effective June 1, all whole loans secured by investment properties must be purchased against the Investment Property commitments in Pricing & Execution-Whole Loan® (PE-Whole Loan). Loan Delivery will allow whole loans for investment properties to only be delivered against a 30yr or 15yr investment property PE-Whole Loan commitment. If an investment property loan is delivered against another commitment type (e.g. 30-Year Fixed Rate, 30-Year Fixed Rate - 110k Max Loan Amount, etc.) a fatal edit will occur.”

In the Single-Family Seller/Servicer Guide (Guide) Bulletin 2021-12, Freddie Mac provided updated information including new opportunities for Affordable Lending, Income and Asset Flexibilities and more.

Based on guidance from FHFA, Freddie Mac issued Bulletin 2021-13 announcing requirements and effective dates related to the purchase of loans subject to the Qualified Mortgage (QM) Rule and originated relying on the GSE Patch. The continued purchasing of government funded, guaranteed, or insured mortgages will require Freddie Mac’s written approval, based on an exception FHFA has granted.

The latest compilation of policy changes and updates from the Selling Guide, Servicing Guide, Lender Letters, and Desktop Underwriter® (DU®)/Desktop Originator® (DO®) are available in the release notes.

Fannie Mae issued Lender Letter LL-2021-09 stating that loans we purchase with application dates on and after July 1, 2021 must meet the Consumer Financial Protection Bureau’s Revised Qualified Mortgage Rule under the Ability to Repay regulation. Related changes will impact the high LTV refinance option and ARMs with terms of five years or less. This Lender Letter provides initial notice of the changes effective in July. Additional policy and implementation details will be provided in a future communication.

In the Fannie Mae Selling Guide SEL 2021-03, multiple updates are addressed including new forms for Fannie Mae review of co-op projects; revised Master Terms and Conditions to the Software Subscription Agreement; clarification of lender responsibilities related to gift funds identified in the Desktop Underwriter® validation service; eligibility of loans secured by second home and investment properties, incorporating the requirements announced in a prior Lender Letter; and a miscellaneous process change.

Capital Markets

Yesterday was one of those days when, if a trader had the news the day before, and positioned themselves accordingly, the trader would have been entirely wrong and lost a lot of money. What was up? Specifically, retail sales. 9.8 percent in March, the second largest jump in the data back to 1992, fueled by increased vaccination rates and stimulus checks. Manufacturing showed production at U.S. factories climbing by the most in eight months. What was down? Well, the number of applications for U.S. state unemployment benefits fell to the lowest since the pandemic began. And the yields on risk-free Treasury securities dropped the most since February! Fortunately for borrowers, MBS prices tagged along.

This week’s Primary Mortgage Market Survey from Freddie Mac saw the 30-year and 15-year fixed mortgage rates falling 9 bps and 7 bps to 3.04 percent and 2.35 percent, respectively. Separately, Black Knight reported a slight drop in the number of active forbearance plans. It’s more indicative of a well-documented mid-month lull in activity than any underlying weakness in the recovery, but does mark the seventh week of declining forbearance plan volumes, a positive trend.

Today’s economic calendar is much lighter than yesterday and is already underway with housing starts & building permits for March (“strong like bull!”: starts were +19.4 percent to a 1.74 million annual pace). Later this morning brings preliminary April Michigan sentiment and a lone Fed speaker in Dallas Fed President Kaplan. The Desk will conduct two operations targeting up to $5.3 billion 30-year 2 percent and 2.5 percent across GNIIs and UMBS30s. We begin the day with Agency MBS prices and the 10-year yielding 1.57 after closing yesterday at 1.53 percent.

Employment

“Do you trust your leadership’s direction and feel confident in your company’s vision? We’re proud of our past and confident in our future. It boils down to our leadership. Churchill Mortgage not only has a sound leadership team, but it is also an employee-owned company, which means we are a company of leaders! Our owners are laser-focused on the success of our company & the well-being of our customers. We are not only focused on profits, but also on our people, which is one reason why we’ve been voted a Top Workplace for 8 consecutive years! Loan officers have an average tenure of 1.7 years. According to LinkedIn, Churchill Mortgage loan officers have an average tenure of 4.3 years! If this type of work environment and leadership mentality interests you, learn more about us here. We’re growing and would love to speak with you about opportunities in your area.”

“Angel Oak is looking for a Secondary Lock Desk Manager to serve as a key member of Angel Oak’s Lending Capital Markets leadership team. Responsibilities will include activities relating to loan pricing, margin management, pipeline hedging, business analytics, and more. At Angel Oak, managers are given creative space to develop their team, while retaining direct access to senior leadership across the firm who are driving the Angel Oak vision. We operate in a fast-paced environment where there is never a dull moment, we leverage the best tech to ensure our teams are always equipped to get the job done and make investing in the growth of our employees a top priority. Angel Oak is a highly diversified and vertically integrated mortgage finance company. As a member of the Lending Capital Markets team, you will have exposure to all platforms, products, and channels under the Angel Oak umbrella. Please submit your resume to Christina Delgado for consideration or apply at JoinAngeloak.com.”

“FBC Mortgage, LLC, a National Mortgage Lender, has several opportunities for experienced Underwriters in our expanding retail channel. Recently FBC announced that Lauri McCray joined FBC Mortgage as the Director of Operations, Eastern Region and Rick Bargioni as the Director of Operations, Western Region. Both are tasked with expanding the operations support staff in their designated regions and have immediate openings for experienced Underwriters. The positions will be responsible for reviewing, analyzing, and underwriting both first and second mortgage loans. Candidates must have in-depth knowledge of Fannie Mae and Freddie Mac underwriting guidelines and automated underwriting engines, as well as strong customer service, communication, and problem-solving skills. Experience in Conventional, FHA DE, VA LAPP SAR and/or Jumbo underwriting will be considered. There is a great opportunity for career growth with competitive compensation packages. Please visit us for more information and to submit your resume! Equal Housing Lender NMLS#152859.

Amerifirst Home Mortgage has appointed Thinh Nguyen to serve as its chief information officer to oversee all aspects of the company’s IT department, including its strategy, execution, and infrastructure.