I really wanted to mix things up today so decided to send this commentary out from the other side of the dining room table this morning. Yippee! Speaking of mixing things up, usually I maintain a train of thought through my opening paragraph, putting similar topics together. Not today, so fasten your seatbelts for truth and satire. If you’re thinking about heading to Chicago for some pizza, think twice unless you want to spend I really wanted to mix things up today so decided to send this commentary out from the other side of the dining room table this morning. Yippee! Speaking of mixing things up, usually I maintain a train of thought through my opening paragraph, putting similar topics together. Not today, so fasten your seatbelts for truth and satire. If you’re thinking about heading to Chicago for some pizza, think twice unless you want to spend 14 days in quarantine. What will that do to that economy? What about San Francisco rents plunging 31%? Provident Funding told its brokers that for all new loans locked from now on, self-employment income will only be used in qualification for current Provident Funding customers. Blackstone-backed Finance of America is set for IPO, “going public” with a $1.9 billion valuation by merging with “blank-check” firm Replay Acquisition. Marketing is everything, right? Amazon is going to offer, for a price, each package to be branded with the logo of a struggling, non-profit bookstore that helps disenfranchised communities or a local farming co-op. (Smiley face.) The clinical trials for a COVID vaccine continue to falter, the latest being Eli Lilly’s. Lastly, if my life is threatened, the last thing I will do is not only film it, but then post it. How about dropping the phone and waving your arms or big sticks? Or use your firearm in some way?

Broker and Lender Services and Products

The team at ReadyPrice has seen the number of Wholesale Lender-Sponsors continue to grow on its platform over the past few weeks, allowing those sponsors to promote their best loan products to brokers regionally and nationwide. For the growing number of new Regional Lenders, ReadyPrice gives them an opportunity to compete in their selected markets by putting their programs up against some of the industry leaders. The pricing and delivery platform provides brokers with the information and pathways to become a customer of any lender-sponsor and start delivering loans to them immediately. If you’re interested a finding out how ReadyPrice can help accelerate your wholesale business, schedule a call or visit www.readyprice.com/lenders.

There are so many things that can go wrong with appraisers and AMCs…what’s your biggest pet peeve? Lack of communication? Missed deadlines? Incorrect valuations? Triserv’s goal is to solve these problems for lenders, and, according to a Mortgage Lending Manager at a Tennessee bank, it’s succeeding. “Triserv excels at customer service. Most appraisals go smoothly, but a small percentage of them present a challenge. That’s where Triserv excels. Responsiveness, customer service, and the staff’s ability to resolve issues and overcome challenges in a timely manner, that’s where they stand out. These guys are amazing.” To find out more, go to www.triservllc.com/expect-more or contact learnmore@triservllc.com. Triserv is a 50-state AMC that has client-specific, dedicated teams on both coasts offering high-touch, personalized service.

Now that autumn is here, fall back into learning with AFR Wholesale’s complimentary webinars! Beginning this month, AFR presents a NEW interactive series dedicated to answering your questions about their lending programs. Hosted by Laura Brandao and featuring an AFR special guest, “In the House” is a monthly LIVE Q&A session that addresses questions about a specific lending program in real-time. This month’s “In the House” on October 21 will focus on Manufactured Housing. Don’t wait, register today! Also, check out the variety of other webinars offered by AFR, so you can learn about new programs, or simply just refresh your memory, when it’s convenient for you. Register for upcoming sessions or watch on-demand versions as frequently as you'd like. For more information about becoming a partner, go to afrwholesale.com, email sales@afrwholesale.com or call 1-800-375-6071.

Stearns Wholesale Lending’s client platform, SNAP continues to roll-out client driven tech enhancements that improves business processes and usability based on feedback from users. This month, Stearns has launched a brand-new Condition Pinning technology in SNAP for Non-Delegated and Wholesale transactions. Broker and Non-Del clients can now pin documents directly to a condition on their condition screen. Bulk upload is still an option as well, so brokers chose which way they would like to submit their conditions. Stearns Wholesale clients can contact their Account Executive for a walk-thru of this new feature. If you’d like to partner with Stearns, click HERE to be contacted. 

The Utah Association of Mortgage Professionals is bringing in yours truly to get hear some perspective on the most important topics of 2020 and the outlook for 2021. This is a must attend event for all Mortgage Originators. But even if you’re not in Utah, dial in and say hi!

Auction Primer and The Bond Market

Two men won the Nobel Peace Prize by tackling the tricky problem of making auctions work efficiently. The committee said Wilson's work showed "why rational bidders tend to place bids below their own best estimate of the common value," which could mean the item goes for less than it's worth and perhaps not to the buyer who most wants it, neither of which is supposed to happen if the auction is working properly. One problem for sellers in auctions is “winner's curse.” If buyers are vying to purchase, say, fishing rights, they have to make bids without knowing what the price of fish will be in the future. They begin to worry that they will only prevail by overpaying, and they can respond by scaling back their offers. But a solution is for the seller to provide as much information as possible before the bidding begins, perhaps providing an independent appraisal of the item being sold.

I mention this because lenders should know that the U.S. Government auctions off fixed-income securities of all shapes and sizes every week. (Some of these are purchased by our Federal Reserve.) Each day this commentary comes out, I mention U.S. Treasury yields. For years, people have tracked the “benchmark” 10-year Treasury as a predicter of larger mortgage rate trends. Many often overlook how the yields on Treasury notes are determined, and why it is important. Here is a little more information on how the Treasury auction process works and that relationship with price and yield on the bonds.

A common misconception is that the Federal Reserve directly manipulates mortgage rates. In truth, the Fed only has direct influence over the short-term overnight federal funds rate at the base of the yield curve. The remainder of the curve, aka Treasury prices, are determined by supply and demand for Treasury debt at auction and how they trade later in the capital markets. Always remember, price and yield have an inverse relationship, so when one goes up, the other goes down, and vice versa. Prices move higher with more buyers in the market, and in that scenario, yields would go down (higher demand = higher price = lower yield or interest rate).

Considering a 10-year investment is yielding about 0.7% currently, why would anybody want to own a Treasury bond? The modest return is offset by the extreme safety of the investment. Traditionally, a stronger U.S. economy makes corporate (private) debt more attractive than government debt, which in turn raises mortgage rates. A weaker economy (what we are seeing currently) promotes a "flight to quality," increasing the overall demand for Treasuries, creating lower yields and lower rates. Anything that increases the demand for long-term Treasury bonds puts downward pressure on interest rates. And Agency MBS tag along.

To attract investors, any bond or debt security that contains greater risk than that of a similar Treasury bond must offer a higher yield (e.g., the 30-year mortgage rate historically runs a couple percentage points above the yield on 30-year Treasury bonds). Maybe now you understand why Treasury rates are very important. Additionally, we talk a lot about the yield curve flattening or even inverting, but in general, extra yield is awarded for the uncertainty associated with longer term bonds.

The U.S. Treasury issued approximately $11.8 trillion in securities in 2019, some new issuance and some to cover maturing debt. To finance the public debt, the U.S. Treasury sells bills, notes, bonds, Floating Rate Notes (FRNs), and Treasury Inflation-Protected Securities (TIPS) to retail investors and institutional investors through public auctions. Once an auction is announced, you may submit a bid for the security through TreasuryDirect, an established TAAPS account, or through a broker, dealer, or financial institution.

As I said, all auctions are open to the public, and the demand for a particular security spills over into the demand for mortgage-backed securities, and therefore rate sheets. There are two bidding options for the auction: competitive and noncompetitive. Competitive bidding is limited to a percentage of the offering amount, and a bidder specifies the rate, yield, or discount margin that is acceptable. Noncompetitive bidding, like you and I would do, is when a bidder agrees to accept the rate, yield, or discount margin determined by the auction. All bidders receive the same rate, yield, or discount margin of the highest accepted bid. Treasury bills are then issued at a discount or at par (the face amount) and are paid at par at maturity. Longer maturities in a similar fashion, but not generally at a discount. Step right up and buy if you like earning $7,500 per year on a million dollars of your savings!

Turning to rates, determined by bond market price activity, after Monday's Columbus Day bond market closure, we returned to the lack of vaccine… fiscal stimulus optimism… election odds moving things… blah blah blah. Or not. Markets are turning increasingly skeptical about the chances of a “Democratic sweep” on November 3, one where the party takes full control of Congress and the White House, which would make it more likely a second rescue package is passed come January.

Separately, three major drug makers had to pause virus vaccine or antibody testing trials in the race to create a defense against the coronavirus. Markets also received better-than-expected, but still not great bank earnings. And across The Pond, a weak set of confidence surveys from Europe pointed to waning optimism. By the end of the day, Treasuries had rallied across the curve and the UMBS30 basis lagged due to origination supply. The September CPI report showed pockets of inflation, but nowhere near enough to set off any alarm bells at the Federal Reserve.

MBA mortgage applications for the week ending October 9 kicked off the news cycle, decreasing 0.7 percent from one week earlier but still 37% above a year ago. We’ve also had the September PPI report (both headline and core +.4%, stronger than forecast). The only other release on the calendar today will be the September Fed Beige Book this afternoon. We have remarks from several speakers from the Fed, as well as the IMF with President Trump scheduled to speak before the Economic Club of New York. The Desk will conduct the final two MBS purchase operations on the current schedule on Wednesday which total up to $3.8 billion starting with $890 million UMBS15 1.5% and 2% followed by $2.9 billion UMBS30 2% and 2.5%. We begin the day with Agency MBS prices unchanged and the 10-year yielding .72 after closing yesterday at 0.73% after the PPI news.

Employment and Transitions

Norcom Mortgage continues to break sales records. As a Direct Seller/Servicer to both Fannie and Freddie, and as a Direct Issuer to Ginnie, Norcom has a huge advantage in allowing for minimal overlays, competitive programs, and pricing. This would not be possible without Sheli Flieger, Norcom’s SVP of Capital Markets and Post Closing. Her hard work and industry experience allow Norcom’s Loan Originators to succeed. If you’re an LO lacking the programs and pricing you need in today’s market, watch this video then contact Norcom’s SVP, Greg Radding today.

A strategic mortgage CFO with a track record for generating millions in annual savings is looking to join a great company. This candidate is confident they can pay for themselves 10X over using methodical approaches, strong negotiation tactics and creative strategies. These lasting savings paired with actionable reporting and SQL automation will help to drive business growth and process improvement. While a great deal of individuals in the space focus solely on producing financials, very few focus on how to improve the financials and grow revenue. If you are looking for a strong, business minded CFO that has a history of partnering with sales and operations to increase profitability, please email Chrisman LLC’s Anjelica Nixt for details. Credentials include a masters in financial engineering, experience at Fortune 20 companies, and CFO positions at independent mortgage banks. Candidate has managed IT, facilities, secondary and finance departments in Retail (Expense/Corp branch) and CD environments.

“Nationwide Mortgage Bankers (NMB) is proud to announce our excellent company culture has earned a spot on the Great Place to Work US Fortune Best Small & Medium Workplaces™ 2020 list. Jodi Hall, President of NMB, said, "We are building an organization on core values which earns us a spot in Great Place to Work for several years in a row. This proves that we have the most passionate, driven, dedicated, and innovative employees not only in the mortgage industry but in the country and across all sectors." NMB provides fantastic benefits and believes in creating a different culture where everyone contributes to its success and is rewarded. We hire and retain top talent in the industry, providing them the training, support, and leadership to grow their careers at NMB. NMB believes that by placing our employees with their experience and goals, we can help their professional growth. Join our passionate team today! Apply now!”

A&D Mortgage, a full-service lender headquartered in FL, is seeking to hire a talented Financial Controller, Wholesale Sales Manager, and Operations professionals such as Processors, Underwriters, and Closers, including remote positions. Whether you are looking for a new place to work, or to take your career to the next level, we have an option for you! Our company has an extensive portfolio of Conventional and Non-QM products and a diverse team of experts equipped with cutting edge loan origination technology. A&D provides training, mentorship, and continuing education to help employees further their careers. A&D Mortgage has been awarded a “Top Mortgage Employer” in 2020 by National Mortgage Professional Magazine. If interested, please contact lana@admortgage.com. We look forward to your application!”

SettlementOne announced Anthony Ruiz has joined it’s growing team as VP of National Sales. Ruiz will be responsible for revenue growth, as well as relationship management within SettlementOne’s Mortgage Credit Service vertical which includes a full suite of mortgage credit, data and verification products and services. Throughout his career, Anthony has become very involved in industry and community groups, including Kentucky Mortgage Bankers Association, Habitat for Humanity of Indiana, and the Indiana Mortgage Bankers Association. “I am thrilled to have Anthony joining our team. His drive and integrity are unmatched within the mortgage credit industry”, said Kelly Taylor, Chief Revenue Officer. CEO of SettlementOne, Tom Hurst added, “I am excited to have a person of Anthony’s caliber join our team. Our company enjoyed a record year in 2019 and 2020 is looking even better. Anthony will be a key part to our continued growth!”

Atlanta’s Equity Prime Mortgage announced Paul Ervin is its new Wholesale Underwriting Manager to assist in the growth of this division and the company as a whole, as well as general management responsibilities.