In these times that lenders describe as busy, profitable, and overheated, capital markets personnel are focused on margin & capacity management, staff burnout, servicing values, and warehouse capacity. With lenders upping their first lien forecasts for 2020, warehouse lines are being increased as are broker/dealer trading limits. Overtime is an issue, and companies are adjusting workflows. Some lenders are pricing refis (with lock periods averaging 45-60 days) different than purchases. Meanwhile, over in the HELOC division, things aren’t so robust. The Mortgage Bankers Association’s latest study on home equity lines of credit found that HELOC use declined in 2019 and is expected to fall again this year. The renowned Marina Walsh, MBA's VP of Industry Analysis, observed, "The uncertainty from the COVID-19 pandemic will likely influence how originators manage risk, underwriting, and fulfillment in the home equity lending space.” The pandemic won’t be permanent in our lives, but some of the adjustments we’re making in the industry will be. At the personal level, we all hope that the talk of brain fog, heart damage, achy joints, and inflamed, swollen organs dissipates sooner than later.

Lender Services and Products

Ep 010 from the increasingly popular Clear to Close podcast with Alan Parris and Bryan Traeger just came out. Titled, “Mortgage Tech Adoption in the COVID Era,” the episode features Patrick Burns, CEO of Spruce, a leader in the digital title and closing space. COVID has changed a lot in our industry from a consumer behavior, demand, and regulatory standpoint, thus changing the trajectory of what technology can and will do for lenders in the future. Even if you don’t have your standard 20+ min commute to work anymore, this is a great listen to have on the background while you go about your day. Listen, download, and subscribe at your favorite place for podcasts: Apple, Google, Spotify, Browser. 

Join Service 1st 's CEO, @Curtis Knuth, and SVP of Business and Product Development, @Lisa Binkley, for Housing Wire’s Virtual Demo Day on Aug 24 @2:20pm CT as they demonstrate a transformational fintech solution called Income+. Engineered to empower simplicity, this solution suite cuts the income determination process by up to 40 FTE minutes. Lenders using Income+ have standardized the calculation process using a customizable rules engine -- eliminating multiple touchpoints down to one. Stakeholders review a simple, one-page report of validated source data results for quick decisioning earlier in the loan origination process. Sign up today: it’s free to register!

With record low rates and refis booming, EPOs are plaguing lenders. In mid-July 2020, the 30-year fixed rate hit an all-time low of 2.98%, and that was the 7th time this year. You better believe borrowers are shopping! Fear not, for there is a cure! On average, a Sales Boomerang lender's database triggers at least 17 EPO alerts per month with each EPO costing lenders an average of $11,500. That is almost $200,000 a month in penalties alone! Sales Boomerang has created a new and HIGHLY valuable alert that notifies mortgage lenders the moment when someone in their database is in danger of becoming an EPO. Now you can save 100% of those EPOs! “Look at the opportunity cost you have by not having Sales Boomerang. Last year we closed over $72M in loans that we would have lost from not having Sale Boomerang.” (Stephen Barton, Eustis Mortgage) Schedule a demo today!

CFPB and Lender Legal News

Non-QM lending has not taken off as “experts” thought it would, and March’s liquidity crisis didn’t help. But it is still in the news, and the CFPB issued a notice of proposed rulemaking (NPRM) to amend the ATR/QM Rule. The NPRM would create a new category of qualified mortgages for first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period, are held in portfolio until the end of the seasoning period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. The Bureau has provided a summary of the proposed changes. Take it home tonight… it’s only 130 pages discussing how first-lien, fixed-rate loans that have been held on a lender’s balance sheet for over 36 months could become eligible for so-called QM status based in part on a borrower’s past three years of payment history.

Put another way, in our future could be a new category of Qualified Mortgages: “Seasoned QMs”. The CFPB concluded that if a loan has performed for a long enough period of time and meets certain underwriting conditions and product restrictions, it is warranted to conclusively presume that the creditor’s determination of a consumer’s ability to repay at consummation was reasonable. The new QM category would designate the loan as a safe harbor QM, even if the loan did not meet the criteria of any of the other QM definitions during underwriting.

Unfortunately for the industry, despite originators currently making a lot of money, LO comp is still unresolved entirely. In a letter to the CFPB, the Community Home Lenders Association (CHLA) has laid out detailed recommendations on how to provide targeted flexibility with respect to loan originator compensation rules in three circumstances which would benefit consumers and lenders without opening loopholes that would allow steering.  

“The three circumstances track those identified in a September 2018 industry letter, which are: When a Loan Originator Makes an Error, Housing Finance Authority (HFA) loans, and Matching a Competitor's Offer for a Borrower the LO Has Worked With the Borrower.

“The most important change would allow a mortgage loan originator to reduce their compensation in order to facilitate the lender matching a competing offer. The limited circumstances CHLA is proposing are when the LO had first provided a loan offer and spent some time assisting that borrower. Then at the last minute the borrower obtains a better rate quote from a competitor as part of rate shopping, which the CFPB has encouraged.  Currently an LO may not reduce compensation, which makes it harder to match such an offer, allowing the loan originator to make the loan and maintain the client relationship that the loan originator may have invested significant time and effort in.

“Secondly, the CHLA letter also explains why lenders should be able to hold their loan originators financially accountable when the LO makes an error by reducing their compensation "by the costs associated" with that error.

“Finally, the CHLA letter explains that the LO Comp rule is discouraging the use of low-down payment loans done by state Housing Finance Agencies (HFAs).  As the HFA trade group, the National Council of State Housing Agencies (NCSHA), explained in a June 2019 letter, "The inability to reduce loan originator compensation . . . under the [LO Comp] rule harms consumers by reducing the availability of these vital programs."

“In all three circumstances, the CHLA letter explains how fixing this problem would help consumers and would not create financial incentives to steer borrowers to higher priced loans.”

Switching gears, plenty of people in the industry, and HR staffs, have been watching the G-Rate case in Chicago which is focused on litigation involving Guaranteed Rate and employee non-solicitation issues (Guaranteed Rate is the Plaintiff and Harry Richter is the Defendant).

A court sitting in the United States District Court for the Northern District of Illinois rejected similar arguments that Guaranteed Rate’s non-solicit was overbroad on its face. Here is a copy of the court’s decision in the case captioned Guaranteed Rate v. Gerald Wilson, Case No. 20-cv-1663: Guaranteed Rate, Inc. v. Wilson, No. 1:2020cv01663 - Document 33 (N.D. Ill. 2020).

Capital Markets

As expected, the momentum following June’s large economic gains as a result of the reopening of the economy started to wane in July as pent up demand gave way to consumer caution. Consumer sales increased 1.2 percent after spiking off the spring’s historical declines. While total sales have exhibited a V-shaped recovery, consumers diverted funds spent on services (many of which remained closed) to recreational goods, which are less likely to exhibit sustained growth. Add in the fact that a portion of these sales were buoyed by the now expired enhanced unemployment benefits and the outlook for the coming months becomes murky. Even though Congress adjourned for its summer recess without passing another round of stimulus, one is still expected and that would provide an upside to the outlook. This past new claims for unemployment fell below one million for the first time in twenty weeks although they were at a still high 963,000. While there is no Fed meeting until September it is unlikely that changes in monetary policy will have as significant an impact compared to direct fiscal support to households as echoed in speeches from Fed officials over the past week.

Despite the release of the FOMC minutes from the July 28-29 meeting yesterday, there was little market movement by the close of the day. We had a disappointing $25 billion 20-year bond auction due to weak demand.

Those Fed minutes revealed, among other things, that members are firmly against using yield caps anytime soon, although they had previously entertained the idea. The Committee expressed deep uncertainty about the ultimate outcome due to the coronavirus pandemic, and tempered optimism about growth in the second half as most members now believe we will see a protracted recovery period. The pandemic also played into the bankers backing off from a readiness to clarify guidance on the future path of interest rates after expressing an earlier readiness to set a clearer bar for raising interest rates. Minutes from previous meetings indicated policy makers wanted to sharpen their so-called forward guidance “at upcoming meetings.” I can say with some certainty that the policy rate won’t be changed in the near future. The FOMC next gathers on September 15-16.

Today’s economic calendar is already underway. Initial claims for the week ending August 15 (1.106 million), continued claims for the week ending August 8 (14.84 million), and Philadelphia Manufacturing for August (down to 17.2). Later this morning brings July leading indicators, Freddie Mac’s Primary Mortgage Market Survey for the week ending August 20, and remarks from San Francisco Fed President Daly. The NY Fed will conduct three MBS FedTrade operations when it purchases up to $5 billion 2 percent and 2.5 percent starting with $765 million UMBS15s followed by $2.8 billion UMBS30s and $1.4 billion GNIIs. The Desk will then report on MBS purchases for the week ending August 19 in the afternoon. We begin the day with Agency MBS prices better/up by a solid .125 and the 10-year yielding .64 percent after the weak employment figures.

Employment and Transitions

“Caliber Home Loans CEO Sanjiv Das recently published an article in Harvard Business Review discussing the importance of spot bonuses to reward and retain employees. This targeted incentive rewards specific behaviors, actions, or results while building employee satisfaction and boosting performance. Sanjiv’s approach of thoughtful leadership promotes a culture of mutual respect. We know our employees are Caliber’s most valuable asset. Join our team to see how employee appreciation and a healthy company culture translates into excellent service for customers! Visit Caliber Careers to learn more about our job opportunities. To be immediately considered for a position in Operations or Sales, email Jonathan Stanley or Brian Miller respectively.”

The most important traits of any TEAM are togetherness and unwavering commitment to your teammates – everyone, from top to bottom, having each other’s best interests in mind and supporting one another, whether times are good or times are tough. At Home Point Financial, that TEAM mentality doesn’t just stop at its 2,000+ Associates; It matters for their families, as well. Whether it’s raising money to support Associates that have experienced financial stress, such as a spouse losing a job, hiring nearly 300 people who are extended family members of Associates as part of its ‘Family First’ program, or giving out special mid-year bonuses throughout the company, Home Point has provided nearly $26 million in value to its Associates so far in 2020. If you want to be part of a TEAM that makes your career, and your family, a priority in everything it does, apply for one of Home Point's hundreds of open positions or email your resume directly to John Eite.

First Guaranty Mortgage Corporation (FGMC) is excited to welcome Paul Jones back as the company’s Non-QM Business Development Manager. Paul has 20+ years of experience in the mortgage industry and, in his new role, he will focus on leading the re-introduction of FGMC’s proprietary Non-QM product line, Maverick Solutions, to the market. The Maverick Solutions re-release, dubbed “Maverick Rise”, will include the return of FGMC’s core products: Champion Prime Jumbo, Achiever Expanded Credit and Visionary Investment. This is coupled with its popular Bank Statement, Non-Warrantable Condo and DSCR programs. Paul says, “FGMC is passionate about Non-QM and is excited to once again extend the product line to its Wholesale, Non-Delegated and Correspondent partners. A commitment to tell the unique stories of today’s borrowers is incredibly relevant and needed more than ever right now.” For more information, contact NQMBD@fgmc.com. Interested in becoming a #MortgageMaverick? View open positions. 

“PHH Mortgage is looking for experienced Loan Officers, Loan Processors and Underwriters to join our rapidly growing Lending division. As disclosed in our July 17, 2020 earnings presentation, our funded volume is up 14-times over the past year, and we expect to originate more than $30 billion in volume in 2020. We have an originations platform with multiple channels and products that can provide you with a steady flow of volume. PHH’s comprehensive benefits package includes medical, dental, vision, paid time-off, 401k plan, tuition reimbursement and more! Apply today by emailing your resume to Heather Nehmer or at our career site. You don’t want to miss out on what PHH Mortgage has to offer!”

Promontory MortgagePath LLC, a leading provider of comprehensive digital mortgage origination and fulfillment solutions, announced this week it hired Jordan Higgins and Kim Joyce as regional vice presidents, sales. They join the Promontory MortgagePath team in the midst of its accelerated recruitment efforts, bolstering the firm’s record growth. Higgins and Joyce bring with them extensive experience in mortgage and financial services and will help drive Promontory MortgagePath’s mission to fundamentally change the way lenders approach their mortgage businesses — driving down mortgage origination costs and helping lenders efficiently scale to meet market demands. Read the release. To support its nationwide growth, Promontory MortgagePath is continuing its expansion and searching for an additional Midwestern or Western-based regional vice president, sales. If you’re a results-driven professional with a proven track record selling to the financial services industry, Promontory MortgagePath wants to hear from you. Send your resume to careers@mortgagepath.com.

“Earlier this month, PrimeLending demonstrated RON-readiness by completing our first Remote Online Notary transaction! At PrimeLending, our top focus is on delivering an extraordinary customer experience at every phase of the mortgage process. We are partnering with industry leaders Docutech and Notary Cam to roll-out RON technology nationwide. In the meantime, our hybrid eClosings continue to gain momentum, accounting for almost 5,000 closings in July. Why do we work so hard to stay on the forefront of the latest mortgage technologies? Because our top priority is empowering and equipping our modern originators to win in today's digital marketplace. Do you have all the tools you need to succeed in today’s market? Contact Nic Hartke, Manager of Sales Recruiting, to confidentially discuss.”

HALO, the Home Access Lease Opportunity, announced that Brett Nicholas has joined the company as a Managing Partner where he will share day-to-day leadership with HALO founder David Sandmann.