The U.S. mortgage industry likely recorded an operating loss in the first three months of 2018 due to falling loan volumes and growing expenses, the Mortgage Bankers Association’s chief economist, Michael Fratantoni, said yesterday here in New York. On a personal note, I know many owners and CEOs of residential lenders, however, and would never bet against their success. They represent a very savvy, entrepreneurial, and street-smart group of individuals but are faced with many risks, with LO comp, technology, housing inventory, and shrinking margins in the forefront. Check out The Plight of the Small Independent Lender.
Company News
Saturday this commentary mentioned that bitcoins were not suitable for a down payment in Fannie’s guidelines. David T. showed me that there are state-level regulatory restrictions. “In Texas, the Department of Insurance, as in many states, requires real estate closings involving title insurance to be conducted using ‘good funds’ as defined by the state. Examples would be wire transfer of funds or cashier's check. Cryptocurrency is not recognized as good funds and I don't know of any initiatives to expand the definition of good funds to include such.” Thanks David!
Georgia’s Uniform Power of Attorney Act, which has been renamed the Georgia Power of Attorney Act, has been modified to clarify provisions relating to the incapacity of a principal. The new subsection states that a finding by a court that a principal is incapacitated shall neither constitute a determination of nor create a presumption regarding the principal’s need for a guardian or conservator. The provisions relating to the execution of a power of attorney now require that a power of attorney be attested in the presence of the principal by a competent witness who is not named as an agent in the power of attorney being attested. The requirement that the power of attorney be attested before a notary public has been stricken from this provision. It also modifies sections relating to termination of a power of attorney, actions of agents, and liability for refusal to accept a power of attorney. Click here for the full text of House Bill 897
Georgia also has modified provisions relating to its Uniform Statutory Rule Against Perpetuities and Trusts to modernize the laws relating to trusts and to allow for trusts to exist for longer periods of time. The time allotted for interest to vest, a condition precedent to be satisfied, or a power to be irrevocably exercised before termination under the rule against perpetuities has been extended from ninety (90) years to three-hundred and sixty (360) years.
A new section has been added to the Act relating to the transfer of property in a trust. A transfer of property in a trust requires a transfer of legal title to the trustee. Additionally, if a trust is named as a grantee, then such a transfer is deemed to have been made to the trustee of such trust, rather than the trust itself. The Act has also modified sections relating to minor and unborn beneficiaries, modification and termination of trusts, and nonjudicial settlement agreements with respect to trusts. Click here for the full text of Senate Bill 301
The Commonwealth of Kentucky enacted provisions relating to its Uniform Power of Attorney Act, these provisions are effective on July 13, 2018. Kentucky Revised Statutes Chapter 457 is established and adopts portions of the Uniform Power of Attorney Act of 2006. A power of attorney is durable unless it expressly provides that it is terminated when the principal becomes incapacitated. KRS 457 Section 10 also outlines what constitutes a POA termination. KRS Chapter 457 also contains sections that detail the relationship between a power of attorney and a conservator or guardian.
Capital Markets
What’s new with capital markets? Not much. The GSEs (Freddie and Fannie) aren’t going away, and both have some changes coming up that most lenders will find helpful – as will their borrowers. The key message from the GSEs, FHFA, and the US Treasury is that the single security will happen (June of 2019), the operational infrastructure needed to support it is nearly there, and investors should prepare now. Hey, if it helps liquidity, that will help rates, and that will help borrowers.
There continues to be chatter about rates – it’s kind of like talking about the weather: not much anyone can do about them. Perhaps of more interest is the shape of the yield curve. I’ve written quite a bit about it, but as the yield curve flattens, it is attracting more and more attention. Normally a flat yield curve indicates a coming recession. But what if the slope is artificial?
We should all remember that the Fed is continuing to purchase billions of 30-year paper every week. So, on the one hand the FOMC has been raising short term rates, pushing them while simultaneously buying long-dated paper, pushing up those prices and pushing long rates down. And by paying interest on excess reserves, the Fed has pushed up short term rates more than demand for credit would imply. Chris Whalen argues that if the Fed stopped paying interest on excess reserves, the Fed Funds rate would get cut in half. And if the Fed stopped buying 30-year stuff, rates would go up – both leading to a steeper yield curve.
Rates were unchanged yesterday as the MBS market began the week with a quiet start despite Treasury Secretary Mnuchin's acknowledgment that trade wars between the U.S. and China are "on hold." Proposed tariffs will be halted, though there were no specific details on the trade detente, although it was reported that China has said it will buy more goods from the U.S. The quiet day was to be expected as many of you are in New York for the MBA conference.
The big news overnight, once again, pertains to China trade as tensions ease further. Today's calendar has some second-tier economic news of little consequence, and the Treasury auctioning off $45 billion 1-month, $26 billion 1-year, and $33 billion 2-year securities. Step right up and bid! The 10-year begins today yielding 3.07% and agency MBS prices are nearly unchanged from Monday’s close.
Products for Lenders
Borrower satisfaction has always been the focus for lenders, large and small. Many state the benefits of repeat business, increased referrals, and stronger relationships with realtors as their motivators, but very few in our industry know how to track the ROI and level of investment they should be putting towards their borrower focused initiatives. A new eBook, “Borrower Satisfaction & Profitability” brings together focus areas and industry data, enabling lenders to track and monitor the impact of their borrower satisfaction efforts. An exclusive to Rob Chrisman subscribers today and a must read for all mortgage lenders, Download Your Free Copy Here.
Every mortgage professional in the nation needs to hear what Dave Motley, Chairman of the Mortgage Bankers Association (MBA), has to say about the future of our industry. In this very special edition of Inside the Mortgage Mind—a podcast from XINNIX, the Mortgage Academy—XINNIX CEO Casey Cunningham talks with Dave about the greatest opportunities for companies right now, the biggest obstacles facing professionals today, and the most important focus for the MBA as they lead our industry into tomorrow. Don’t miss incredible insight from one the mortgage industry’s topmost leaders. CLICK HERE to listen!
The team at HomeScout-HBM is committed to assisting loan officers and branch managers by removing the obstacles that declining origination numbers and shrinking margins are having on commissions. With proven lead and conversion technologies, HBM has helped lenders for over 20 years, build relationships with top-performing agents, increasing purchase production and commissions for thousands of loan officers. Their National MLS for lenders provides 100% MLS listing data inside a custom mobile app that promotes loan officers! Converting more purchase transactions AND providing additional business for co-op agents. And since more buyers find their homes online, this digital real estate marketplace gives loan officers the opportunity to get in front of buyers earlier in the home buying process; before they find an agent. Stop by and see them at their booth during Mortgage Mastermind. For more information and schedule a demo contact them HERE or give them a call at 952-831-0623.
Employment and Business Opportunities
Assurance Financial is quietly growing into a nationwide leader in lending. Just ask Mike Killmeyer who recently opened a branch for Assurance Financial in Denver, Colorado. Mike was equipped to take loan applications immediately with little downtime and is now poised to add to his growing professional staff. Mike and his team saw that our compensation structure is excellent, and our back-office support was second to none - 16 years of working, changing, and perfecting it. He also saw that we have an unwavering mission to close loans on time, every time! We have immediate openings for proven, successful, producing Branch Managers and MLOs in Wilmington, Charlotte, Denver, Austin, and many other branch locations throughout the country. For immediate consideration, contact Paul Peters, CMB, Assurance Financial, Recruiting Manager (225-239-7948).
Last week a long-time mortgage executive shared his thoughts with me on today’s market. “The tough retail origination market we are in currently is here to stay for several years. The industry has grown accustomed to challenging markets ending in 18-24 months, usually based on some sort of refinance activity. That is not going to happen this time, and it is going to be particularly difficult for smaller companies originating $1 billion or less annually unable to reduce fixed operations costs enough to offset shrinking volume and margins. I believe that going forward to survive and prosper you will need plenty of capital, scale, the very best technology, and great cost efficiency. Eventually things will improve but not until capacity shrinks through company failures and consolidation. As it stands right now, company owners are taking more and more risk for a smaller and smaller share of the profits, and that is not sustainable. Eventually LO’s compensation will have to come in line with the realities of today’s economics, but many expect things to get worse for owners before they get better.” If you would like to discuss today’s environment, finding the right partner, or looking at your options, please contact me to forward your note along to an interested party.
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