As Hurricane Michael heads toward Florida & Georgia (with the wind and storm surge, lenders and investors act – for example, Mr. Cooper has temporarily suspended loan purchases in several Florida counties effective today), contractors and builders are watching. Things aren’t rosy in that sector. DR Horton, for example, added to the housing unease with weaker than forecast sales. Home builder stocks have entered a bear market as interest rates continue to rise, tariffs have hurt the housing sector as higher building material costs from China negatively impact home builder margins, problems finding labor continue, the lack of raw, buildable land in some markets, along with the process and regulatory costs of building, first-time home buyers interested in the lower end of the market with less profit margins for builders, and affordability issues, well, things add up.

Lender Products and Services

The growth continues for Goldome Warehouse Lending. Grant Karda recently joined the Goldome Warehouse Lending group as a Warehouse Credit Analyst. “Grant brings a fresh perspective to the group and will assist Goldome with the growth of their lending portfolio. Goldome Warehouse Lending was acquired by Independent Bank in 2017 and is looking to partner with emerging and established correspondent lenders. Goldome is positioned to support a wide variety of correspondent lenders including but not limited to delegated lenders, non-delegated lenders, lenders that hedge their pipeline, and large aggregators. Our program can fund a wide variety of programs and products including some non-QM products and participations. We would appreciate the opportunity to tell you more about Goldome’s warehouse lending program. Please contact one of our experienced sales team members, Drey Roberts, Steve Harris, Jim Harrison, or Roxie Montoya, to learn more about our evolving program.”

Deephaven Mortgage recently announced the launch of IDENTI-FI AUS, a first of its kind technology aimed at helping the originator pre-qualify loans at the point of sale. The IDENTI-FI AUS is powered by LoanScorecard and utilizes LoanScorecard’s Portfolio Underwriter technology which analyzes the 1003, fully evaluates the credit report and runs against Deephaven’s underwriting guidelines, exception logic, & matrices to provide originators with an instant-read on potential options across Deephaven’s non-agency loan programs. This, in turn, enables originators to place loans that might otherwise not qualify. This new technology is free, available 24-7, and is at the originator's fingertips. To find out more about Deephaven’s new technology or its suite of Non-QM products, email Wholesale or Correspondent, or visit www.deephavenmortgage.com.

“Are you attending this year’s MBA Annual Convention and Expo? Origin Bank’s Jason Johnson and Lisa Reiter, Co-Heads of our Mortgage Warehouse Lending team, will be there and would love the opportunity to help you take your mortgage business to the next level. Lisa was promoted from within, and Jason recently joined our Mortgage Warehouse Lending team, which has been serving clients for eight years with the help of industry veteran Ken Johnson and Operations Manager Cindy Gressett. Origin Bank’s team believes in building relationships to better understand you and your business, so we can create a strategy for your success. Offering lines from $5 million to $60 million, Origin is unique in every way, from eMortgages to non-qualified mortgages to how we fund loans. Let’s chat about what we can do for you! To set up a meeting, call Jason at 214-252-2577, Lisa at 214-252-2533 or Ken at 972-407-3429. Member FDIC. Equal Opportunity Lender.”

Appraisal News from the Agencies

First, a correction regarding yesterday’s commentary. It contained a quote with an incorrect, meaningful statistic, noting, “At Val Expo during a panel discussion, Fannie revealed that 33% (which should have been 11%) of all loan submissions were eligible for an Appraisal Waiver but, interestingly, only 8% were accepted. A big reason was borrowers wanted to know what their property was worth - and an appraisal provided that while a waiver didn't.” To repeat, yesterday’s opinion referencing the appraisal industry and appraisal waivers included an incorrect data point. The actual appraisal waiver offer rate for recently delivered loans to Fannie Mae is 11% (not 33% as previously reported). A Fannie official noted that, “Appraisals remain a key component of Fannie Mae’s collateral risk management approach. The vast majority of transactions do not receive an appraisal waiver offer.”

The Fannie Mae Selling Guide has been updated to clarify policies for employment verification for union members and expand its current policy for borrowers who are using employment-related assets to generate an income stream for qualifying purposes. Updates also include comparable sales requirement regarding appraisals of MH Advantage™ homes and simplification of policies related to the outsourcing of mortgage processing and lender management of third-party originators.

FHA announced that it will require reverse mortgage lenders to provide a second property appraisal on loans flagged by FHA as potentially having an inflated property valuation. As part of the guidance, new HECM loans will undergo a risk assessment, which FHA will use to determine if a second appraisal is needed before the loan can be approved. LHFS will not approve or close a HECM before FHA has performed the collateral risk assessment and, if required, a second appraisal will be obtained. The fees associated with the second appraisal will be rolled into the loan's closing costs, and most importantly, LHFS will be required to use the lower of the two appraised values. LHFS the following is effective for all HECM originations with FHA case numbers assigned on or after October 1, 2018through September 30, 2019.

Freddie Mac published Selling Guide 2018-17 regarding temporary selling requirements related to Hurricane Florence and reminders related to property inspections.

FHA issued a waiver of its policy on the timeframe for completing the inspection of properties prior to closing or submitting the mortgage for FHA insurance endorsement in the August 4, 2018, Presidentially-Declared Major Disaster Area (PDMDA) due to the California Wildfires and High Winds declaration (DR-4382) in Lake and Shasta Counties. Mortgagees can find more information about FHA’s PDMDA policies, as well as the 203(h) Mortgage Insurance for Disaster Victims Program and the 203(k) Rehabilitation Mortgage Insurance Program, on the FHA Resource Center’s Online Knowledge Base.

With the third quarter in books, market participants are looking ahead to the advance GDP estimate which will be released at the end of the month. The Federal Reserve Bank of Atlanta publishes an unofficial GDPNow estimate that recently forecast 4.1 percent growth in Q3. One of the components that could have a significant impact on the final number is trade with the August trade deficit for merchandise widening by $3.8 billion. Real consumer spending growth for the quarter appears to have eased from the robust 3.8 percent rate in Q2. Durable goods orders were up 4.5 percent in August, rebounding from July’s 1.2 percent decline. New home sales were up 3.5 percent in August to an annual rate of 629,000 but the inventory softened to 6.1 months’ worth. Looking at interest rates, the Fed increased the Fed Funds rate as expected and the amount of maturing bonds rolling off the balance sheet moves up to a maximum of $50 billion per month which is expected to continue the upward pressure on yields.

Federal Reserve Bank of Atlanta President Raphael Bostic, who has said the central bank shouldn't need to raise interest rates again this year, said that could change because of the strength of economic and labor data. "The central question in my mind is whether the apparent strength in GDP and job growth is a signal that I have materially underestimated the underlying momentum of aggregate demand," he said.

The U.S. 10-year closed at 3.21%, slipping from its 7-year high as geopolitical uncertainty surrounding growing trade tensions and a precarious global growth outlook brought a welcome relief for originators. (Volume, however, were far from robust.) The IMF cut its global growth outlook for the first time since 2016, which parallels China aiding lending in response to a weakening yuan, though the yuan did gain in onshore trading yesterday. Remember, the IMF and World Bank hold meetings from Bali on Friday, when finance chiefs from around the world will congregate.

Market participants now turn their attention to the $230 billion worth of debt auctions being conducted by the U.S. Treasury this week. And don’t forget, earning season for U.S. banks kicks off Friday, with headliners including Wells Fargo, JPMorgan Chase, and Citigroup. Additionally, the biggest piece of market-moving data we will receive should be September U.S. consumer prices, out tomorrow.

Today we’ll have a measure of inflation – did you know that college textbook prices in the U.S. have risen faster than health-care, housing, and inflation? Looking at today, we have a light economic calendar. In addition to the usual MBA mortgage applications (-1.7% last week), we received September’s Producer Price Index (+.25, the first increase in a couple months, core +.4%), the October 5 Redbook index, and August Wholesale Inventories. We also have some Fed Speak, with both the Fed’s Evans and FOMC member Bostic taking the stage. And don’t forget that we have a $36 billion 3-yr note sale and a $23 billion 10-yr Treasury note reopening. Rates are higher than Tuesday afternoon with the 10-year currently yielding 3.23% and agency MBS prices are worse .125.

Jobs and Personnel Moves

Congratulations to Flagstar Bank on the recent addition of Scott Bristol as senior vice president, national production manager. Scott is a veteran of the mortgage industry with over two decades in retail and will join the team to help craft and advance the bank’s retail mortgage strategy. “This marks another step toward our goal to be a premier national retail lender,” said Kristy Fercho, president of Mortgage for Flagstar. “We’re thrilled to attract a leader of Scott’s caliber to help us achieve that goal.”z Flagstar has over 30 years in the mortgage business and operates a diversified mortgage platform serving customers in all channels. Interested in learning more about Flagstar? Please contact Steve Rennie, national sales recruiter, at (408) 831-5042 to have a confidential conversation.

“Does your pricing seem a little bit too high? Are you losing deals over rates? Is your ability to earn money limited by your company's high pricing? If you answered yes to any of these, chances are your company has too much padding or extra margin built into their rates, costing you money, deals, and possibly even referral relationships! Even worse, some companies build even more padding into your rates when their business slows down to keep their ‘high-profit appetite’ fed. Now there's a way to see 'behind the curtain' to make sure you’re getting the best deal possible. Check out this ‘Pricing Lie Detector’ - a free tool that shows you in 10 seconds how much money you may be leaving on the table due to over-inflated rate sheets from your company.