This is the season that CEOs are asking underlings for 2015 projections, and of course no one wants to tell the boss that volume is going to go down. The MBA is here to help! It is forecasting that mortgage volume will increase 7.4% in 2015. (Given most people are thinking that home prices will increase by mid-single digits, that is not a lot of unit growth.) Some portion of that will come from refinancing, but no one can argue that as a share of total volume refinances have dropped significantly.

Rates dropping a couple weeks ago pushed some loans into the pipeline which will help the 4^th quarter for many lenders - but then what? Refinances have declined as a share of overall lending from 69% of mortgage originations in Q2 of 2013 to 45% in Q2 of 2014. Mike Fratantoni (rumored to have the longest title in mortgage banking with "MBA's Chief Economist and Senior Vice President for Research and Industry Technology") stated, "We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations. "We expect that the 10-Year Treasury rate will stay below three percent through the first half of next year as concerns about broader global issues have caused a flight to quality, with investors seeking safety in US Treasury securities. However, if the global turmoil diminishes and US economic growth continues, we anticipate the rate will exceed three percent in the second half of 2015, continuing to increase through 2016."

"VA lending: catch the wave." One offshoot of our nation being "at war" (although we haven't declared war since 1941) is that the active military and veteran population has grown enormously and as a result VA loan originations have shown a huge percentage growth curve. Even the mainstream press has noticed since 2011, when VA-backed mortgages represented about 3% of total home-purchase mortgage activity, they've soared to roughly a 7% share.

And although all real estate is local, it is hard to for anyone to argue that the housing market is in the doldrums. Late last week Freddie Mac came out with its MiMi (Multi-Indicator Market Index). Freddie Mac noted that, "The good news from MiMi this month is the improvement across more markets and not just the large markets like Los Angeles and New York which receive so much of the attention. In fact, we're beginning to see better signs on the purchase applications front in general. For example, the decline in the three month purchase application trend is slowing and in markets like Kansas City, Birmingham and Nashville it's actually showing a positive trend for purchase applications. In general, more homeowners are making timely mortgage payments, the employment picture is improving, and cheap mortgage rates are helping to support affordability."

How about Michigan? It takes guts to buy some of the houses in Detroit. Some would say that "guts" is not quite the term for it if anyone were to buy 6,000 derelict houses in the Detroit area - but someone did it.

And Zelman & Associates published its Single Family Rental Survey: "Rental Inflation Defies Typical Seasonal Headwind." Zelman Associates reported that rent inflation increased 3.1% in the third quarter of 2014, which is an anomaly from the 50 basis point average decline over the last two years.  Renter demand has declined over the past three months to 67 on a 0-100 scale, vacant rental supply increased 46.1% in September and the rent growth outlook was 3.8% in Q3 of 2014, indicating deceleration based on current new move-in inflation. Distressed pricing declines to 62.5 in September from 64 in August and new move-in growth declines 20 basis points to 4.2%, which is up 40 basis points from last year.

Rapid home value growth has been evident over the past two years but beginning in May of 2014 home value appreciation has been slower in each month than the month prior. According to Zillow Home Value Index, home values grew at an annual rate of 6.5% in September, with a median home value estimated at $176,500. Although many people may have benefited from accelerated home value appreciation, the market has shifted to a more sustainable and normal level. Some of the causes of rapid housing appreciation were due to low interest rates, low home values and minimal inventory.

On the renting side the Zillow Rent Index encompasses 857 metropolitan and "micropolitan" areas. National rents are up 3.5% YOY, with the greatest annual rent appreciation in San Jose (16.1%), San Francisco (15.5%), Pittsburg (12.1%) and Denver (10.1%). As rent prices increase, more people may turn towards the purchase market.

The latest Origination Insight Report published by Ellie Mae, reported that refinances accounted for 36% of closed loans in September and the closing rate on mortgage refinances fell about 6% to 48.3%, the lowest since February.  The COO of Ellie Mae, Jonathan Corr said there may be life left in the refinance market, as consumers are taking advantage of the low interest rates and recovering equity in their homes. The increase in refinance activity was the first monthly increase in 2014, the report also highlighted that the average number of days to close a loan shot up to above 40 days and the average 30-year interest rate for all loans dropped for the 5^th straight month to 4.381%, the lowest rate since July 2013. Ellie Mae also published profiles of closed and denied loans for September 2014: the average FICO score for closed first-lien loans for all loan types was 726, whereas the FICO score for denied loans for all loan types was 694. The LTV for closed first-lien loans for all types was 82 and the DTI was 24/37 while the LTV for denied loans for all loan types was 81 and the DTI was 28/45.

The NMLS is launching "Your License is Your Business" campaign to encourage businesses and individuals licensed through the System to submit their annual renewal requests in November. By doing so, there will be a significant reduction in the likelihood of a lapse in licensing, since 94% of all renewal applications submitted in November are approved by December 31^st.  To renew your license, you can log in to the System, select the state agency and the license type, pay the fees and submit a renewal request, you must also complete the required hours of continuing education prior to submission. As only two-thirds of license renewal requests are submitted in November The NMLS is encouraging licensees to submit a renewal request by November 15^th.  More information about renewing your license can be found here.

What is new with the debate about the mini-correspondent model? Time flies, and it has been four months since the CFPB released its "guidance" on the mini-correspondent model. (I have guidance in quotes since any lender that ignores it does so at its own peril. There is plenty of conversation about the fuzzy lines between being a broker, a mini-correspondent, and a correspondent, and examples of smaller lenders flipping between the three categories based on product, intent, or avoidance. The criteria that determine the differences are blatant, and include who draws the docs, who does the underwriting, who does the HMDA reporting, and who has the ultimate fiduciary responsibility.

A broker's value proposition to a borrower is relatively clear ("We can shop your loan around to many investors to find the best rate") but as a broker moves into a mini-corr relationship the objectivity and unbiased alliances become less straightforward. Is the broker doing so to avoid the 3% cap on points and fees? What is being reported to the borrower? What are the branches being allowed to do? Certainly the "manufacturing quality" of the loan is important and lenders must be transparent with their borrowers. The National Association of Realtors (yes, the one with the powerful lobbying effort) is urging the Consumer Financial Protection Bureau not to disrupt the imperative role mini-correspondent lenders play in the home-buying process for Realtors.

There is a paid web seminar on the topic coming up on Thursday from The American Banker titled "Mortgage Broker or Mini-Correspondent: Guidance and Perspectives to Staying Compliant." The cost is $99 and goes from 2-3:15PM EDT on Thursday. "Hear mortgage compliance experts share insights on the impact of the CFPB's new mini-correspondent guidance. Gain practical advice on how lenders of all sizes can adopt renewal processes, modify business relationships and implement internal infrastructure to remain both competitive and compliant. In this session we will discuss the intent and application of the new guidance, share roles, responsibilities, and risks for different lenders/originators, provide recommendations for implementing proper renewal policies and processes, and discuss the relationships and responsibilities between investors/warehouse lenders and mini-correspondents."

Trundling over to the markets, what if no inflation is the "new normal"? Good question: Reuters says the price development outlook is evolving and the Fed thus faces a fresh set of problems. While labor has dominated the Fed for years, a new challenge is emerging - "the possibility that weak inflation may be so firmly entrenched it upends the return to normal monetary policy". To respond the Fed could strengthen its commitment to ZIRP (zero interest rate policy) and may even contemplate fresh asset purchases.

Monday we learned that Pending Home Sales rose slightly in September and are now above year-over-year levels for the first time in 11 months, according to the National Association of Realtors. The index is above 100 for the fifth consecutive month and is at the second-highest level since last September. Of the reasons for not closing a sale, about 15 percent of Realtors in September reported having clients who could not obtain financing as the reason for not closing.

As far as the actual bond market is concerned, supply and demand, as always, move markets, and traders reported Monday that they saw a dip in supply. This pushed prices higher and rates lower for agency MBS relative to Treasury securities. For titillating news today we'll have September Durable Goods Orders, which are seen higher from last month's lower to negative prints (headline -18.4%). We will also have the August S&P/Case-Shiller house price index (-0.5% last), and October Consumer Confidence (86.0 prior) and Richmond Fed PMI (+14 previously). The Treasury auctions $29 billion 2yr notes at 1PM while the start of the FOMC two-day meeting begins today (the statement tomorrow at 2PM EST). Rates are a shade higher with the 10-yr at 2.28% and agency MBS prices down slightly.

Jobs

And companies are expanding. Endeavor America continues its mission to be the number one government wholesale lender in America. "Based on annualized FHA endorsements, EA Wholesale is the second largest wholesale FHA lender in the U.S. with a record 431 endorsements in the month of September (per HUD Neighborhood Watch). Not too shabby considering they just opened their doors for business in August 2013. By focusing on its culture and customer service and allowing brokers to work directly with underwriters, management continues to build its raving broker fan base and recently earned a 5 star lender rating for turn times, compliance support, and training by Mortgage Professional America Magazine.  Endeavor's guidelines mirror HUD with no overlays. 580+ FICO, Manufactured homes allowed, 203k streamline or full.

And on the correspondent side, First Mortgage continues its growth. "Mel Watt's speech at the MBA conference is encouraging lenders to revisit their strict standards of credit overlays. At the conference, he said he can see 'mortgage finance moving back to a responsible state of normalcy, one that encourages responsible lending to creditworthy borrowers...' First Mortgage Corporation celebrates 40 years of business in 2015 and has always been committed to expanding homeownership to the credit worthy; in particular the low-to-moderate income borrowers. FMC believes, as mortgage lenders, it has a duty to offer homeownership opportunities to all credit worthy borrowers through responsible lending. In addition to not overlaying its originations with FICO score limitations, FMC also offers a unique down payment assistance program, available in six western states, which allows maximum financing to qualified borrowers with FICOS scores as low as 580, in addition to those with non-traditional credit. You can substantially increase your originations while providing the American Dream to deserving families. FMC is very proud of its extremely low seriously delinquent rate of just 3.19%.  Partner with the time-tested experts.  To learn more about becoming a Correspondent with First Mortgage Corporation, contact Sharon Magnuson.