I’ve never seen my cat Myrtle fly commercial. That aside, time “flies” by, Tom Brady retired again, and here’s a trivia question for your friends and family: how many 747’s did Boeing produce before the last one rolled off the assembly line yesterday? Over 54 years, about two per month. (And did you catch that subtle word play?) Changing the scale, one would be hard-pressed to find the financial section of a newspaper in the last 54 months that didn’t mention the Federal Reserve or inflation (the Fed does not set the inflation rate, nor mortgage rates), and today we’ll have yet another announcement about the targeted range of Fed Funds. (It is the interest rate that banks charge each other to borrow or lend excess reserves overnight.) But wait! High inflation is a problem, but… Weak inflation could become a long-term challenge after high inflation ends, Treasury Secretary Janet Yellen says. Unlike in the 1970s and 1980s, this latest bout of high inflation has not triggered a wage spiral, Yellen says. "We're just coming through an unusual and difficult period. (Today’s podcast can be found here and this week’s is sponsored by Milestones. Giving homeowners an all-inclusive homeownership experience including home value and equity monitoring, home maintenance reminders and how-to articles, cloud-based document storage, one-click access to hire professionals for various projects around the home, and much more. Today’s has an interview with Coviance’s Omar Jordan on the latest in home equity lending and how technology is driving mortgage originations forward.)

Lender and Broker Software, Products, and Services

Webinar: Hot Topics on Mortgage Servicing and Originations Compliance. Join us on February 8 at 11:00 AM PST for our next QC Now Webinar where we will dive into what 2023 holds for mortgage compliance and servicing. Presented by ACES Quality Management's EVP of Compliance, Amanda Phillips, and Ballard Spahr’s Richard J. Andreano, Jr. and Reid Herlihy, this webinar will cover the mortgage servicing compliance outlook, regulatory trends related to Redlining/Digital Redlining/Appraisal Bias, and fair lending and fair servicing regulatory activity and trends. Register now.

At UMortgage, we’ve developed a platform that allows you to focus on what you’re best at—originating loans. How do we do this? Simple. Our dedicated operations staff handles everything from initial application through the funding of each transaction, delivering a mortgage industry-leading customer experience backed by our +94.8 Net Promoter Score (NPS). Custom marketing materials allow you to maximize your online reach and build stronger relationships with partners. And a team of fellow loan originators supports you with proven ideas and tactics that can help you diversify your approach with clients. If you want to learn more about the ways that UMortgage is bringing forward momentum to the mortgage industry, sign up for our weekly Discovery Meeting this Thursday at 2pm ET.

How are your borrowers computing monthly payments when they're looking at houses? This is a fundamental question every mortgage originator needs to ask themselves. Are you sending them off with a static PDF and saying a prayer that they come back when they have questions? Hate to break it to you, but you’re risking a lot with this strategy. The phrase “mortgage calculator” was searched 3.4 million times a month in 2022. Homebuyers clearly want instant answers so they can feel confident as they shop for their dream home. If you aren’t providing them with just that, your online competitors will. So, are you playing to win this year? Read Mortgage Calculators: A Look Behind the Lender Marketing Idea to learn more about how you can proactively stay in front of customers at the most critical conversion stage.

“Few things are new and shiny, and also trusted and proven. That’s why Optimal Blue is so excited to announce that the industry’s most widely used product, pricing and eligibility engine is getting a facelift. That’s right, the Optimal Blue PPE is being refreshed with a more intuitive user interface (UI). Optimal Blue has always been laser-focused on delivering functionality enhancements, and now it’s time to release a more user-friendly UI to match. Through the upgrade, all users will enjoy increased reliability and UI responsiveness, as well as accelerated response time for support and faster rollouts of new features. As part of our beta testing, we’re looking for users of both the Optimal Blue PPE and the Encompass LOS to test drive the UI upgrades. If you are interested in learning more, please reach out to your Optimal Blue Clients Services representative or email us.”

Infinite and instant scalability can only be achieved with a “humanless” technology. Candor Technology’s CogniTechTM Engine is the only patented, humanless, automated underwriting machine in the mortgage industry. The engine utilizes aerospace and expert systems technology to deliver unmatched decisioning ability providing borrower surety in 90 seconds, all while reducing your cost to produce! Schedule time to learn how Candor Technology is blazing new trails from POS to Servicing and helping clients realize economic benefits not achievable with other platforms. Schedule a demo here.

“Do you have the business intelligence and comparative peer benchmarking to optimize your business? Make 2023 the year to step up your game with Richey May’s RM Analyze, business intelligence designed by and for mortgage industry experts. Our platform consolidates data from every department and every piece of software you use. It provides just the right reporting from the C-suite to the front line, plus the ability to see how you’re performing against your peers in real time. Bonus: our analysts have deep mortgage experience, so you don’t need to train us on your business. Don’t wait any longer to set up the reports you needed yesterday. Cross-functional data. User-friendly dashboards. Real-time analysis. Contact us today for a walk-through and custom implementation plan.”

Credit Prices and Single Source Vendor Policy

Posted on the MBA’s website, the Mortgage Bankers Association urged the FHFA to ensure adherence to level the playing field in single-source vendor contracts.

“MBA recently sent a letter to FHFA Director Sandra Thompson highlighting MBA’s long-standing support for GSE-related policies that maintain a level field with respect to costs, underwriting standards, and access to the GSEs’ purchase windows and other services. The letter notes that a ‘level playing field has been a core shared principle for the MBA, the Enterprises, and the FHFA,’ and that FHFA should ensure that it is applied throughout the Enterprises’ operations, including in situations where the GSEs have selected sole source service providers for Enterprise programs or required services.

“The letter notes that ‘recent pricing increases by FICO…and the associated price increases imposed along the chain of credit providers has dramatically increased the costs that borrowers pay for credit reports and is inequitably applied across the industry.’

“Because the Enterprises play such a critical and substantial role in the housing market, the required use of a single vendor or provider for a service can be the catalyst for situations in which those vendors can exercise monopolistic behaviors that pick winners and losers in the market, quite the opposite of a level playing field. The MBA has consistently cautioned against the use of limited or single vendors, such as in the implementation of Day 1 Certainty, employment and income verification, and credit scoring.

“Implementation of FHFA’s recent decision to add new credit score providers remains years away. In the interim, the MBA has urged FHFA to ‘continuously evaluate developments to ensure adherence to the level playing field principle with respect to the Enterprises and the provision of Enterprise-required services, particularly where competitive forces among vendors are absent.’”

Capital Markets

Housing and jobs drive the U.S. economy, and we’ve seen some housing price news this week. For some reason mainstream press headlines contain words like “plunge” or “tumble” when writing about housing. Clickbait? After going up about 20 percent in 2020 and another 20 percent in 2021, price appreciation slowing or being slightly negative is entirely expected. And normal. We receive plenty of housing news throughout the month, and it is important to look under the headlines. For example, yesterday’s FHFA House Price Index only looks at homes with a conforming mortgage (Freddie and Fannie), which means it excludes jumbos and cash-only sales. Any declines in luxury home prices, which most believe is over-inflated, explains the difference between FHFA and Case-Shiller.

House prices fell 0.1% MOM and rose 8.2% YOY according to the FHFA House Price Index. “U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022,” said Nataliya Polkovnichenko, Ph.D., Supervisory Economist, in FHFA’s Division of Research and Statistics. “While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

With a three-month lag, the Case-Shiller Price Index tells us that home prices fell 0.5% month over month. “November 2022 marked the fifth consecutive month of declining home prices in the U.S.,” says Craig J. Lazzara, Managing Director at S&P DJI. “For example, the National Composite Index fell -0.6% for the month, reflecting a -3.6% decline since the market peaked in June 2022. We saw comparable patterns in our 10- and 20-City Composites, both of which stand more than -5.0% below their June peaks. These declines, of course, came after very strong price increases in late 2021 and the first half of 2022. Despite its recent weakness, on a year-over-year basis the National Composite gained 7.7%, which is in the 74th percentile of historical performance levels.”

Interest rates, of course, figure into affordability. Ahead of today’s expected Fed rate hike, we had a little rally yesterday in the bond markets, which snapped a three-day pullback. Despite the release of a cooler than expected Employment Cost Index for Q4, the mortgage industry’s focus was on the housing reports noted above.

Today’s economic calendar kicked off with mortgage applications decreasing 9.0 percent from one week earlier, according to data from MBA’s Weekly Mortgage Applications Survey. “Mortgage rates declined for the fourth straight week and have now fallen almost 40 basis points over the past month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022. Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months.”

We’ve also received ADP employment for January (+106k, much lower than expected probably due to weather). (Automatic Data Processing handles payroll for about a fifth of all privately employed individuals in the U.S.) Later this morning brings S&P Global manufacturing PMI, ISM manufacturing PMI, Construction spending, and JOLTS job openings. Today’s FOMC events kick off at 2:00pm ET with the Statement, where the Fed is expected to hike rates by 25-basis points to a 4.50 percent to 4.75 percent target range, followed by Chair Powell’s press conference at 2:30pm. He is expected to continue his hawkish lean and push back on near-term forward pricing. We begin the day with Agency MBS prices better by .125, the 2-year yielding 4.19, and the 10-year yielding 3.48 after closing yesterday at 3.53 percent.

Employment and Confirmed Layoffs

New Year means New Opportunities! Universal Lending Depot is excited to announce the launch of a national banking platform led by industry leaders James Hooper, President, Tyler Ermisch, Director of Sales, and Marllette Owen, Director of Credit/Compliance. ULD will be a national distributed retail, consumer direct, and TPO platform and is looking for exceptional team members to join our national retail and wholesale teams! If you’re looking to join a company that will be a household name in the coming years, email James Hooper for a confidential conversation to learn more about this exciting opportunity.

Tomorrow is Groundhog Day, when people across the United States tune in to see if the famous Punxsutawney Phil sees his shadow, thus predicting either six more weeks of winter or the early arrival of spring. Fortunately, the sales leaders at Supreme Lending do not have to rely on a large, furry rodent to forecast market conditions and their potential impact on the mortgage industry. Supreme’s Capital Markets Team is dedicated to keeping Branch Managers and Loan Officers informed about the latest worldwide financial and industry trends affecting the mortgage business in their own backyards. They share these stats and insights in daily market updates, monthly presentations, and frequent distribution of useful industry news articles. Real-time data resulting from this sharp lens on the market drives decision-making about product and service offerings to ensure Supreme remains competitive and financially solvent. Contact National Production Manager Ryan Baxter to join a lender that is prepared to face down any industry shadows to come.

I continue to say that companies hiring should make the headlines, not the ones laying people off since that is so widespread. Last week’s Flagstar’s cutbacks were unusual because word spread through social media and not an official announcement. But now Thomas Cangemi, president and CEO of New York Community Bancorp., which acquired Michigan’s Flagstar in a December merger, said in an earnings call that Flagstar's mortgage division is now under 800 employees, down from a high of 2,100 in 2021, back when mortgage rates were at historic lows and the business was booming.