Big picture, in case you haven’t been paying attention, the National Bureau of Economic Research confirmed that the U.S. economy has slowed: The economy hit its peak in February and has since fallen into a downturn as the unforeseen pandemic caused shutdowns and brought an end to the 128 month record-long expansion. In the weeds, down at the loan-level, are we far away from the ability to scan a borrower’s face so they can instantly borrow money to buy a house? It sure sounds “Big Brotherish” to me, but Idemia, a French company that specializes in facial recognition, fingerprinting and iris resolution, has won a new European Union contract that will have it process images linked to the identities of 400 million people. This is part of the Shared Biometric Matching System, which will at some point be joined with existing systems already operated by Idemia. Idemia also runs TSA Precheck, is a facial recognition company used by the NYPD, and contracts with the U.S. Department of State to manage the passport database. Idemia is now in control of whether 800 million people can enter the U.S., E.U., and Australia.

Lender Services and Products

Unemployment is skyrocketing, economic uncertainty abounds, and COVID-19 has robbed us of the ability to confidently plan for the future. While the mortgage origination sector has been fortunate so far as low interest rates spur refinances and even home purchases, there will be more challenges ahead. It is increasingly difficult for lenders, particularly small to midsize lenders, to adequately staff to handle volume when business is booming without taking a hit when things go bust. Outsourcing can be a low-risk, high-reward solution for moderate-sized lenders who are growing too quickly to manage all their loan production in-house. Digital mortgage leader, Maxwell, has put together an incredibly helpful eBook, “Outsourced Fulfillment: Benefits, Myths, & Opportunities”. A great read for any moderate sized lender looking to better manage scale, growth, and opportunities for their business.

Compass Analytics, a Black Knight organization, recently announced two significant enhancements to its product, pricing and eligibility engine, CompassPPE, as part of its June release. These include a new branch manager margin administration site and an integration with Blend’s digital lending platform. The much-anticipated margin tool gives greater autonomy to branch managers to configure and maintain loan-level margin adjustments, as well as make margin decisions based on the needs of their individual branches. Additionally, CompassPPE is now fully integrated with Blend’s point-of-sale lending platform. This integration allows originators to see product and pricing options with closing costs, while also providing lenders the ability to configure custom questions in the search workflow. These new features provide secondary marketing managers with robust, effective tools to engage their branch managers in P&L strategies. To learn more about the full suite of enhancements in their June release, please contact marketing@compass-analytics.com.

INCOME+ is the income determination solution that saves 40 FTE minutes per file, is available in Encompass®, and streamlines borrower income calculations.  This is the income solution for your 20-day closing.  Service 1st has engineered Income+ as an easy lift – – straight forward to implement and easy to understand via a single page report. Additionally, as a Service 1st offering, there are multiple S1 class-leading credit and verification solutions to wrap around Income+ for a comprehensive lending solution. Service 1st is offering Rob Chrisman readers an unlimited and free 5-day trial for Income+. The trial program ends on July 15th. To learn more, visit SRV1st.com/income-plus for solution details and meeting opportunities.

UHOUSI Initiative, Civil Rights leaders, Dr. Alveda King and Bishop Harry Jackson, are leading a movement to address the national wealth gap, where minorities have 1/10th the net worth of whites. The UHOUSI Initiative is partnering with churches around the country to educate minorities on programs such as the Chenoa Fund, which aims to help families achieve the dream of homeownership through the provision of DPA. Homeownership leads to better family and community outcomes. You can make a difference in addressing the racial wealth gap in our nation by actively educating the minority community and increasing the pool of people you lend to. Did you know that 2/3rds of all household formations in the next decade will be minority led? Be part of a growing movement. To learn more, contact us about sponsoring a homebuyer education event in your community, where we will provide media outreach and spotlight your company’s efforts. 

Wholesalers Making Changes

Moody's structured finance analysts recently addressed the credit consequences for the various payment moratoriums that have impacted cash flows and added risks on assets backing securitizations around the world. Delayed payments from moratoriums support borrowers but erode transaction cash flows, which can be mitigated by transaction features.  Payment moratoriums initiated to help consumers and small businesses weather the coronavirus pandemic will help borrowers with loans in structured finance asset pools avoid default, but erode transaction cash flows by increasing the risk of interest and principal shortfalls, lowering recoveries on defaulted assets from delays in asset disposition, and heighten maturity risk from lengthened repayment terms. Fortunately, most structured finance transactions do have a range of mechanisms that help soften the negative impact on bond credit quality from the disruption of cash flow from payment moratoriums, including reserve funds and liquidity facilities, performance-based trigger mechanisms, the availability of principal to meet shortfalls in interest, and servicer advancing requirements.

United Wholesale has brought back instant funding, removed the overlay pertaining to the age of income/asset documentation to match Fannie/Freddie at 60 days and loosened conditions for borrowers on leave now allowing borrowers who are on traditional leave (maternity, sick, etc.) to be eligible for a loan if their employer can verify a return to work date and that income and hours are not affected by COVID.

loanDepot Wholesale has the following lock policy changes available in the mello Broker Portal: 60 day locks are the same price as 30-day locks. Refinances and purchases can be locked prior to submission.

loanDepot Wholesale (which includes non-delegated correspondent) has also recently addressed changes in policies and procedures on the Uniform Residential Loan Application in the Fannie Mae Learning Center and Freddie Mac’s Bulletin 2020-1, Conventional Lending Guide – Eligible Transactions and Income and its June Key Dates Calendar. New Initial appraisal orders will be business as usual: Broker to order the required appraisal product based on program eligibility and AUS findings in the mello Broker Portal. Exceptions to the required appraisal product will be accepted if: On-site appointments are causing extended turn times in the subject property’s region. Appraiser/Borrower is unwilling to schedule interior inspection. If the exception process is needed, loanDepot will partner with its AMCs to determine the best solution for eligibility and timeliness.

loanDepot Wholesale is now accepting Remote Online Notarization (RON) allowing Borrowers to close loans with an online Notary using a webcam, rather than in person. And this loanDepot Wholesale/Correspondent Announcement covers the following topics: FHA Fixed / ARM  and FHA 203(h) and Freddie Mac Bulletin 2020-1.

Mountain West Financial updated its policy regarding individual hazard and flood insurance policies on refinance transactions. A copy of the borrower’s current policy is required. The policy expiration date must be no later than 45 days from the date of loan closing. If the hazard insurance policy will expire in less than 45 days, evidence of a new policy is also required.

Capital Markets

Fitch assigned ratings to the first residential mortgage-backed certificates issued by First Republic Mortgage Trust 2020-1 (FRMT 2020-1). The certificates are supported by 303 prime adjustable-rate mortgage (ARMs) loans with a total balance of approximately $300 million as of the cutoff date. All of the loans were originated by First Republic Bank (FRB). Classes A-1 through A-5-IO were all assigned AAAsf ratings. Class B-1 had an AAsf rating. This is the first post-2007-2008 global financial crisis issuance from FRB, though the transaction is similar to other prime Fitch-rated transactions with a standard senior-subordinate, shifting-interest deal structure. Fitch’s ratings include revisions due to the coronavirus pandemic and resulting containment efforts.

Taking a step back to last week, May’s employment report surprised everyone when it showed the US economy added 2.5 million jobs after most indicators suggested the data would worsen from April. The market was forecasting a loss of 7.5 million jobs. The majority of the gains came from the leisure & hospitality sectors suggesting that many businesses immediately rehired staff as states lifted stay-at-home restrictions although many major industries added jobs. While the report had an immediate positive impact on the financial markets, there were still nearly 21 million people officially counted as unemployed in May. This total is still higher than the peak unemployment observed during the last recession and total employment is nearly 13 percent lower than pre-COVID. As the economy moves forward and more people are called back to work or find new work, analysts will closely watch for continuing unemployment claims to continue to decline as an indication of the rebound in labor markets. Despite the surprise uptick in jobs, expectations remain for a gradual rebound in employment as states continue to loosen restrictions.

To start this week, a large stock rally yesterday due to the easing of lockdowns bolstering economic optimism, in turn causing Treasury yields to rally. Additionally, Saudi Arabia said it wouldn't continue its additional, deeper output curbs beyond June. And the World Bank now expects global GDP to contract 5.2 percent this year, the most since World War II. The U.S. economy is expected to contract 6.1 percent this year, and emerging nations' output will shrink for the first time in at least six decades due to the pandemic. Per-capita output is expected to contract in more than 90 percent of countries, the biggest share since 1870.

Today’s economic calendar is already under way with the NFIB Small Business Activity for May (+3.5 points). We’ve also seen that the total number of loans now in forbearance increased from 8.46 percent of servicers’ portfolio volume in the prior week to 8.53 percent as of May 31, per the Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey. According to MBA’s estimate, almost 4.3 million homeowners are now in forbearance plans. Later this morning brings Redbook same store sales for the week ending June 6, Job openings from JOLTS for April, April Wholesale Inventories, and Treasury is back with the second leg of this week’s mini-Refunding when $29 billion reopened 10-year notes are auctioned. The NY Fed will conduct two FedTrade purchase operations totaling up to $4.545 billion starting with $1.575 billion UMBS15 2 percent and 2.5 percent followed by up to $2.97 billion UMBS30 2.0 percent through 3.0 percent. Finally, day one of the FOMC’s two-day meeting has already begun in Washington. We begin the day with Agency MBS prices slightly better than Monday night and the 10-year yielding .83 after closing yesterday at 0.88 percent.

Jobs

A Texas-based appraisal management company is currently expanding and is seeking acquisitions nationwide. The AMC is well capitalized and fully licensed in all 50 states and DC and seeking opportunities with full-service AMC's who are interested in rapid growth and expansion. All communication strictly confidential. Contact Chrisman LLC's Anjelica Nixt to forward notes of interest.

Succeeding Selflessly. The most rewarding and successful business partnerships are built on selflessness. We are at our best when we’re motivated by our compassion for others, so when each partner puts the other first, everyone thrives. At Primary Residential Mortgage, Inc. (PRMI), the continuous pursuit of selfless partnership is at the heart of why the average branch has been with us for more than eight years. If you want a business partner who knows your success is the key to its success, join us. Visit branchpartner.com or contact Amy Gallow, VP of Business Development to learn more.

Exciting things are happening at PennyMac. According to Inside Mortgage Finance Q1 Wholesale Channel statistics, they’re not only a Top 10 Wholesale Lender, they’re the fastest growing wholesale lender in the country. That means there’s immediate opportunity in the Broker Direct Division for AEs in Phoenix, Arizona. If you have mortgage or mortgage-related (or other financial services) experience, you should contact the folks at PennyMac. They offer a great training program and provide broker leads to set you up for success. Opportunity is waiting, so please contact PennyMac today.