There are seven members of the Board of Governors of the Federal Reserve System, and each region has a President. For 2019, the annual salary for the Fed Chairman is $203,500. The annual salary of the other Fed Governors is $183,100. But just think of all the “free” lunches during your speaking tours! There is no pay gap between men and women in the Fed, nor should there be. But per the U.S. Census Bureau, unfortunately all of the largest occupations with over 1 million full-time workers show some degree of earnings gap between men and women. This pattern remains for most of these occupations even when accounting for educational attainment. Occupations in which men are, on average, older than women have higher earnings on average, compared with occupations in which women are older.

Disaster Updates

FEMA’s disaster declarations are always the final say about events, and the lending and insurance industries queue off that list.

ClosingCorp estimated that the residential mortgage industry has more than $7 billion in loan value and more than $60 million dollars in service fee and transfer tax revenue at risk as a result of recent California Wildfires. ClosingCorp based its estimate on “in-flight” residential mortgage applications in the FEMA designated affected areas for the Easy, Getty, Kincade, Saddleridge and Tick fires. An “in-flight” mortgage application is defined for this analysis as mortgages that are due to close between October 24, 2019 when the initial fire was declared by FEMA and the end of the year. When events like these occur, many lenders have broad and prudent policies to suspend loan closings until the event has passed and damage assessments can be completed. At a minimum this means the income associated with loan closings is deferred.  In many cases, new inspections and often new appraisals will be required before the mortgages can be approved and the sales completed. In some instances, the damage will result in significant delays or cause deals to fall apart.

AmeriHome is removing certain restrictions and requirements for Agency transactions without appraisals when the property is in a Presidentially Declared Disaster Area granted Individual Assistance. Updates have been made to Seller Guide sections: 10.10.7.1: Declared Disaster Areas – Property Inspection Types. 10.10.7.3: Seller Damage Certification and Third-Party Inspection Requirements (Conventional-Agency, USDA, and VA. 10.10.7.7: FHA Transactions in Declared Disaster Areas. Definitions – Appraisal Waiver. Fannie Mae Standard Conforming Balance Program Guide and Fannie Mae High-Balance Program Guide.

Mortgage Solution Financial posted an Announcement regarding the California Fires - Fire Management.

Vendor News

Vendors are doing all kinds of things besides combining words into names, wreaking havoc with spell check systems.

Simplifile set a new company record by e-recording 106,244 documents in a single day on November 12th. Through Simplifile, settlement agents can submit land records directly online to any of the 2,003 participating county recording offices. In just minutes, the county recorder can review, stamp, record and return documents to the settlement agent electronically, and recording fees and payments can be processed directly through Simplifile’s secure payment service, eliminating payment errors and check-writing expenses.

Broadridge announced the launch of a new centralized Trade Assignment Portal (TAP) that will help mortgage originators and broker-dealers transform the execution of Mortgage-Backed Securities (MBS) Trade Assignments through improved efficiency and error elimination on a web-based platform. Several originators are completing user acceptance testing in preparation for going live on TAP. MBS Trade Assignments are typically manual, TAP’s automation allows originators and broker dealers to electronically send and receive trade assignments thus processing at a much faster rate and providing transparent tracking capabilities.

FormFree has added paystub collection and verification to its Passport all-in-one asset/employment/income verification service. Capable of ingesting paystub information in various ways: direct data pull (with the consumer’s permission) from payroll providers, an uploaded PDF or from a photo taken within the Passport app, its analytics engine corroborates the paystub data against public and proprietary sources to validate that the stated employer is a real company with whom the loan applicant has a verifiable connection, compares the paystub data against consumer asset data collected by Passport to calculate annual net pay and gross income and the verified asset, and income and employment data points are pushed to the lender’s systems (i.e., POS, LOS, AUS).

What does that digital mortgage actually look like? To achieve a true digital mortgage, lenders must unify, automate, and streamline every aspect of their business, spanning customer acquisition to loan delivery. View Ellie Mae’s short video to learn how lenders are realizing the true benefits of a digital mortgage through one end-to-end solution.

Kentucky Bankers Association has officially endorsed Promontory Fulfillment Services' comprehensive mortgage fulfillment services and proprietary point-of-sale (POS) technology, Borrower Wallet. PFS’ tech-driven mortgage fulfillment solutions are designed to help banks, especially community banks, compete in the mortgage business without incurring the expense and burden of supporting an entire mortgage operation. PFS’ comprehensive set of solutions enables banks to determine their own product and loan pricing strategies while PFS provides the POS technology and process. Banks partnering with PFS field their own loan officers to co-pilot the application process and collaborate with their borrowers via Borrower Wallet®. PFS then processes and underwrites each loan using client-provided business rules and closes in the bank’s name.

The Lender Price Marketplace pricing engine provides mortgage brokers a search engine for multiple wholesale lenders. The recent addition of Home Point Financial increases the total number of wholesale lender partners to twenty-five. At no cost Lender Price distributes the Marketplace pricing engine through a partnership with the National Association of Mortgage Brokers (NAMB), an industry trade group with over 6,000 mortgage broker members.

Factual Data announced an integration with digital lending technology leader Blend. The integration will allow lenders who use Blend’s mortgage application platform to gain immediate access to Factual Data’s credit reporting services, increasing process efficiency while lowering risk and increasing reliability, providing an experience that will meet consumer’s expectations today.

Finicity announced the release of its new AssetReady Report that will rapidly identify a borrower’s assets using consumer-permissioned data during a lender’s pre-qualification process. Lenders have the option to receive balances and other data without having to ask for or include consumer Social Security numbers or date of birth. Fast, high-value data with less friction on lower probability applicants can provide lenders with better insights on how to strategically move borrowers forward in the application process without asking for detailed verification reports.

Sitel Group and CallMiner partnered to publish a research study titled Sitel + CallMiner Survey: Preventing Fraud and Preserving CX with AI. The study identifies consumer concerns around fraud, habits and channel preferences for communicating with brands and their perceptions around the use of artificial intelligence (AI) and speech technology to prevent fraud.

SimpleNexus has integrated with CoreLogic’s Instant Merge to give its loan officers users instant, on-the-go access to loan applicants’ credit reports and FICO scores from all three national credit bureaus. With SimpleNexus, borrowers can complete a loan application, upload documents and view loan status, all from a mobile device. Loan officers receive an alert as soon as a borrower applies, and they can use their own mobile device to move loans forward, including ordering credit reports, even when they are out of the office.

Deephaven Mortgage and LoanScorecard have enhanced the functionality of Deephaven’s popular Scenario Calculator, providing originators one-click access to the lender’s AUS engine, IDENTI-FI AUS. Now originators using the IDENTI-FI Scenario Calculator to view product and program eligibility scenarios and price loans will be able to obtain detailed AUS findings from directly within the scenario calculator.

PennyMac Loan Services LLC will leverage Ellie Mae’s Encompass™ Digital Lending Platform to support its correspondent business. This move expands PennyMac’s long standing relationship with Ellie Mae’s Encompass platform, allowing PennyMac to eventually consolidate its consumer direct, broker direct and correspondent businesses on a single platform. The Encompass Digital Lending Platform empowers lenders and investors to engage homebuyers and efficiently originate, close, sell and purchase loans that maximize ROI across their business, all from a single system of record.

Brace’s software solutions, used to streamline complex borrower loss mitigation processes, has partnered with The Palisades Group, a residential whole loan investment and asset management firm. Brace technology development is focused on providing the market with a digital solution to streamline one of the most inefficient and costly aspects of residential mortgage loan servicing - the borrower loss mitigation process. Joining an asset manager like Palisades lends credibility to Brace while providing direct access to whole loan and mortgage servicing rights (MSR) investors and servicers to further create new innovative product offerings which are catered to investors' needs.

Capital Markets

Every lender out there is trying to a) cut costs, and b) increase revenue. There are only a couple ways a lender actually makes money, one of which is superior mandatory execution in the secondary markets. And one way to improve that is by divvying loans into specified, aka spec, pools. Agency MBS carrying prepayment protection through "spec" pools have noticeably outperformed more rate-sensitive, generic collateral as interest rates have dropped, with spec pool price spreads over TBAs up nearly 4x since the start of this year. Almost half that appreciation has been realized since the end of April, with most companies concentrating towards "higher quality" specified collateral, keeping book values propped up, especially with the intensity of spread widening on current coupon mortgages.

REITs have been injecting additional prepayment risk into their portfolios by acquiring bonds with significant premiums at high leverage levels over the last few months. Unfortunately, the value embedded in high-priced spec pools could deteriorate quickly if rates snap back in the other direction, making it a tough time for Agency REITs to manage risk right, as companies are faced with either absorbing hefty premiums on new investments in spec pools (and possibly needing to increase leverage in order to maintain stable earnings), or taking the path of acquiring more prepayment sensitive (but cheaper in price, and potentially higher yielding) securities. The trade-off is complicated by the strong recent performance of spec pools, since prepays could accelerate rapidly if rates decline much further, even for the highest quality collateral.

Given that outlook, it calls into question how much room for additional appreciation the market is willing to bid for spec pools. And REITs also run the risk of price premiums collapsing in response to a sharp upward correction in rates, thereby leaving the portfolio stuck in lower yielding, slower paying securities as the market cheapens. All that being said, companies with relatively modest Agency prepayment risk, including those with offsetting exposure via discounted credit assets, are best positioned in the current environment. Most mortgage REIT management teams noted on Q2 earnings calls that book values were flat to up slightly in July, though that's been offset by slightly wider spreads on spec pools in August despite price pay-ups over TBA continuing to climb higher. Spec pools have still meaningfully outperformed a hedged portfolio of generic securities or TBAs, where both nominal spreads and option-adjusted spreads (OAS) are wider since the end of June. It will be interesting to pay attention to going forward, as the risk in rates dropping further could pressure economic returns for REITs.

Plenty of lenders are closed today and not even taking locks, but U.S. Treasuries ended Wednesday on a lower note due to better- than-expected data. Notably, durable goods orders increased when they were expected to decrease. The reading will surely be a positive input for Q4 GDP forecasts. Speaking of GDP, the second estimate for Q2 GDP beat expectations as it was revised upward, driven by a change in private inventories. The Federal Reserve's Beige Book for November noted that economic activity was little changed from the previous reporting period. And Brexit popped back up in the news, with the EU's Brexit negotiator telling European politicians that the U.K. will be expected to agree to free movement of people in order to secure a tariff-free trade deal with the EU after Brexit.

After bond and equity markets were closed for Thanksgiving yesterday, there are no scheduled releases today and there is an early close. Trading desks will be lightly staffed despite the month-end trade, and the futures pits will close with cash closing at 2PM ET. After everyone has left, the Desk of the New York Fed will release a new FedTrade schedule, covering December 2 to 12 and expected to total about $4.6 billion. We begin the day with Agency MBS prices unchanged and the 10-year yielding 1.77% after closing Wednesday at that level.