Ahead of Groundhog Day tomorrow, one realizes that our industry certainly has its share of unexpected ups and downs. The latest example of a “down” is Mike Gill, a SVP of Capital Markets at the Housing Policy Council, who is fighting for his life after a shooting during a car-jack. Let’s all think positive thoughts! In other “people who make a difference” news, Brian Levy has some nice words to say about ex-MBA president and FHA Commissioner Dave Stevens in his most recent Mortgage Musings. Levy highlighted how Stevens’ death is a big loss for housing finance thought leadership, especially for an industry already quite low on the supply of independent thought leaders. (Dave’s Life Celebration will be held tomorrow, February 2nd from 2-5:30 at Capitol One Hall, Tyson’s Corner, Virginia.) Today’s Commentary podcast can be found here and this week’s is sponsored by Calque. With The Trade-In Mortgage powered by Calque, lenders help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Hear an interview with Calque’s Jeremy Foster and Cross Country Mortgage’s Nikki James on helping clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI.

Lender and Broker Software, Products, and Services

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Successfully managing MSR portfolios can be a lucrative endeavor, but navigating regulatory compliance, risk management, and understanding market values can be daunting. Join MQMR and MCT for a webinar on February 15th at 11am PT entitled MSR Risk Management, Compliance, and Current Market Strategies, where panelists will dive into operational and regulatory best practices, share invaluable tips to avoid common MSR management pitfalls, and provide insights into current pricing trends. The joint webinar will also explore crucial topics such as servicing regulatory developments (FHFA, GSEs, NCUA, GAAP compliance), a bulk MSR market update, trends in retained vs. released vs. co-issue, and understanding the value of your portfolio. Don't miss this opportunity to enhance your portfolio management skills and elevate your lending income. Register today for a comprehensive session that will empower your financial strategies!

NFTYDoor, a division of Homebridge Financial Services, Inc., offers plug-and-play, digital HELOC origination platforms for Wholesale and Correspondent channels in all 50 states. NFTYDoor's system intelligence combines the speed of digital processing, with built-in flexibility to support real-life borrower complexities. The benefit is fast, automated completion of most applications and full transparency on others, with more traditional underwriting methods available when needed. Both Wholesale and Correspondent channels offer a fully branded experience, so that you remain front and center to your customers. Best of all, NFTYDoor provides an In-house Help Desk with real-time support for MLOs and their customers, so leaders can focus on scaling the business. Don't miss out on this once-in-a-generation HELOC opportunity! Please contact Seth Cohen, SVP Business Development, for more information.

“Annual Home Mortgage Disclosure ACT (HMDA) data filings are underway, with submissions due March 1. Do you originate at least 25 loans annually? If so, you must submit data on all of your loan applications, even on loans that didn’t close. Xactus, the leading verification innovator for the mortgage industry, can take care of your HMDA data testing and LAR Reporting. We'll validate your HMDA data in your LOS from applicants and borrowers and identify any inaccuracies. That way, you'll be able to make any corrections before you submit your data to CFPB. And with our per-record pricing, you only pay for the data you use. Ensure you meet the HMDA deadline: email us to schedule a demo today. Stay updated on upcoming news, webinars, and other industry insights by following the Xactus LinkedIn page.”

Time for the CFPB to Pony Up

Pony up means to pay money, to pay what one owes, to make good a debt. The term “pony up” is said to date back to the sixteenth century, a corruption of the Latin phrase “legem pone,” a term found at the fifth division of Psalm 119, a bible passage which was sung on March 25th. And you say that you never learn anything reading this Commentary…

My cat Myrtle, who often seems disinterested in most things, seemed attentive to the latest Consumer Finance Protection Bureau happenings. Namely, the CFPB agreeing to pay $6 million to settle discrimination claims by Black and Hispanic employees. The class consists of all “minority employees and women who work or worked as Consumer Response Specialists and have been subjected to and harmed by the Bureau’s agency-wide pattern or practice of discrimination and retaliation and discriminatory policies and practices.”

Then there was, “Lawmakers Oppose CFPB’s Proposed Rule on Supervising Nonbank Financial Firms.” “Three members of Congress have urged the Consumer Financial Protection Bureau (CFPB) to reopen and extend the public comment period on its proposed rule that would allow it to supervise large nonbank companies that offer services like digital wallets and payment apps.” This is focused on crypto companies, but still, IMBs may tag along…

Capital Markets

Any lender or loan officer relying on the return of 3 percent 30-year fixed rate loans… well, I wouldn’t count on it. Many LOs seem like they’d be happy with 5 percent. That aside, the MBA predicts a tepid unit count, and that means things are slow even if loan amounts are higher than four years ago. The bump everyone received from the unexpectedly low mortgage rates of the pandemic era (hard to believe that it’s been almost four years!) are unlikely to make a comeback, and for good reason. Think about it: what would drive them back there?

Economists warn that such rock-bottom rates, while seemingly advantageous for homebuyers, could spell trouble for the broader United States economy. Or conversely, serious problems in our economy would lead to those lower rates, and who wants those? A return to the 2 percent to 3 percent rates would indicate severe economic distress. Few want to see a major economic downturn.

As we all know, during the height of the pandemic, mortgage rates plummeted; good for homebuyers and those already owning real estate. The opportunity didn't arise from deliberate efforts by the U.S. government to encourage homeownership during the pandemic: Mortgage rates reached such unprecedented lows in response to the COVID-induced financial crisis, prompting the Fed to reduce its policy rates to nearly zero as a means of stimulating an economy grappling with recession. We don’t want that again.

Recall 2008 when the Fed cut rates to 0 fairly quickly and there was a financial crisis, but also the unemployment rate shot up to 10 percent. In other words, at some point we’ll probably be back in the 5s, but don’t bet your career or company on the 3s. Low rates are good, really low rates are bad.

Yesterday’s Fed statement was good. We’re not in a situation where the Fed needs to slash rates quickly, but instead will leave short-term rates alone and continue on its path to bringing inflation down to its 2 percent target level, and even signaled to the potential of four rate cuts this year, which would inevitably bring mortgage rates down.

Loan officers are telling their clients, and potential clients, “If you're in a place where the mortgage rates being high is really putting a pinch on what you can buy, well, if you wait, with a high likelihood, the interest rate is going to be less." Many expect 30-year fixed rates in the high 4s or low 5’s by year end. Let’s say 30-year rates are 6.8 percent. Assuming a 20 percent down payment on a $425,000 home, a 5.8 percent mortgage rate would save a buyer $222 per month, while a 4.8 percent rate would result in savings of $433 per month. Of course, Treasury rates could sink, and mortgage rates hover, based on other factors. No one has a crystal ball…

In terms of actual interest rate moves, as expected, the Fed held its benchmark rate range from 5.25 percent to 5.50 percent for the fourth consecutive meeting yesterday and implied it is done raising rates. Members signaled an openness to cutting rates at future meetings, though not all agreed that a cut should come at the next meeting. The committee said it was still waiting for inflation to fall closer to the Fed’s 2 percent target. Bond yields sank by yesterday’s close over concerns surrounding regional lenders' exposure to commercial real estate.

This first day of February has a busy calendar that kicked off early with monetary policy decisions from Sweden’s Riksbank and the Bank of England; both kept rates unchanged. Domestically, the calendar began with Challenger layoffs for January: U.S.-based employers announced 82,307 cuts in January, a 136 percent increase from the 34,817 cuts announced one month prior but down 20 percent from the 102,943 cuts announced in the same month in 2023.

The layoff news was followed this morning by jobless claims (224k, moving slightly higher from 215k) and preliminary Q4 productivity (3.2 percent, down from 4.9 percent in the 3rd quarter) and unit labor costs (+.5 percent). Later today brings the final January S&P Global manufacturing PMI, construction spending for December, ISM manufacturing PMI for January, and Freddie Mac’s Primary Mortgage Market Survey. We begin the day with Agency MBS prices slightly better than Wednesday’s close, the 10-year yielding 3.91 after closing yesterday at 3.97 percent, and the 2-year down to 4.20.

Jobs and Transitions

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Congratulations to Ann Marie Prohaska, the new Mortgage President at Commerce Bank, and overseeing the bank’s mortgage and home equity lending business. (She succeeds Jeff Gerner who will continue to work with Prohaska as Chairman of real estate lending, until his retirement in December.) Prohaska is no rookie, bringing 30 years of mortgage experience to her new role, nearly 20 years of that time at Commerce Bank.

Rutledge Claims Management, Inc. (RCM), a provider of hazard insurance claims management for the mortgage industry, announced Aubrey Gilmore has been promoted from chief operations officer to president where she will oversee RCM’s core services and drive strategic decisions, ensuring client satisfaction and the company's reputation for excellence in the hazard insurance claims sector. RCM founder and former president, Tom Rutledge, has moved to the newly created position of chief financial officer, where he will be responsible for managing the company's fiscal operations and upholding the company's continued financial stability and growth.”