“The San Diego Padres visited an orphanage in Mexico. ‘It's really sad to see their faces with no hope,’ said Juan, age 9.” In other San Diego news, Optimal Blue wrapped up its Industry Summit this week. As with many events, the talk in the hallways was nearly as important as the actual sessions. The California fires were a topic, and this month’s piece in STRATMOR is titled, “Natural Disasters and Economic Resilience.” There were certainly conversations about data protection, state licensing flexibility and remote work, and remote online notarization. OB launched many new products, interestingly, at no incremental cost to their clients! Skateboarder Tony Hawk (age 56) was even there. Also of interest, of course, is the general business climate. Many have seen locks pick up somewhat in recent weeks. According to Curinos' new proprietary application index, refinances increased 15 percent week over week and decreased 39% in January; the purchase index increased 15% week over week and decreased 33% for January as a whole. January 2025 funded mortgage volume increased 27% YoY and decreased 21% MoM. Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures. (Today’s podcast can be found here and this week’s is sponsored by Optimal Blue. OB bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Hear an interview with the MBA’s COO Marcia Davies on how the MBA and mPower are helping the industry stay on track and lead the industry.)

Lender and Broker Services, Products, and Software

Pennymac TPO continues to expand its TPO channel offering with the launch of NonDel+, a full-service Non-Delegated solution. NonDel+ enables an intuitive and smooth end-to-end loan experience that is tailored to Banker partners who value control over their loans but desire transactional efficiency and support in key functions like disclosures, loan documents, loan closing and file purchase. NonDel+ is integrated into Pennymac TPO's proprietary POWER+ portal. POWER+ users can easily toggle between their Broker and NonDel+ pipelines, while also enjoying consistent functionality and experience across delivery channels. You can learn more about Pennymac’s NonDel+ offering in their video announcement. Lenders can contact their Pennymac TPO Account Executive to get started with NonDel+, or sign up to become a NonDel+ partner today.

Compliance penalties can set you back worse than a bad call in the big game. Do you have the right playbook to stay ahead? HMDA LAR Submission is at The Two-Minute Warning! The March 1st deadline is fast approaching, but there’s still time! Our experts assist with reviewing your LAR, flag reporting errors, and ensure your data is accurate so errors don’t derail your play. Vendor Management is The Scouting Report: not all vendors are MVPs, and a weak link can cost you the game. MQMR helps you evaluate, monitor, and bench third-party providers, ensuring compliance and mitigating risk. Internal Audit is Your Goal-Line Defense, the last line of protection before regulatory penalties hit the scoreboard. With comprehensive risk assessments and in-depth process reviews, we make sure your organization holds up strongly under pressure. MQMR gives you a rock-solid game plan to keep your mortgage compliance in-bounds. No fumbles, no flags… just regulatory touchdowns!

How Lenders Will Grow in ‘25

The latest piece from Onward & Upward Consulting’s Rich Swerbinsky highlights how forward-thinking lenders are thriving in today’s challenging market by abandoning outdated strategies and embracing innovation. Instead of waiting for rates to drop, successful lenders are leveraging Marketing Services Agreements (MSAs), partnering with social media influencers to reach first-time buyers, and coaching loan officers to enhance their personal brands on LinkedIn. They’re also doubling down on local market knowledge, offering in-house buyer’s agent services, and diversifying with niche loan products like non-QM and construction-to-perm loans. By integrating AI tools to improve lead conversion and borrower engagement, these lenders are staying ahead of the curve and capturing market share while others play defense.

A Talking Robot!?

Is talking with a machine a conversation? Using chatbots for customer service can increase efficiency for a financial institution’s personnel, but sometimes customers really need to interact with a person. Vendors are striving to provide best practices for balancing chatbots with the human touch.

PCBB put out a very good piece on the topic. “Chatbots are a valuable tool in your community financial institution’s (CFI’s) arsenal but aren’t the ideal solution for every interaction between a CFI and its customers. CFIs can improve first-call resolution rates by 20 percent, save more than 4 minutes per inquiry, and save between 50 cents and 70 cents per transaction by using AI-powered customer service. Yet, anyone who has ever gotten stuck in an infinite telephone loop, pushing 0 over and over in the hope of accessing a human being knows that there are problems that a chatbot can’t solve. Sometimes human-to-human customer service is the right way to care for a customer.

“If your CFI is going to use chatbots, then it should also decide when it will hand over problems to human agents. Conventional wisdom says that chatbots should handle 80% of customer interactions, and people should deal with the remaining 20%. But which problems fall into the 80% and which into the 20%?

“To begin sorting different interaction types into one of the two groups, it’s helpful to compare the strengths and weaknesses of both chatbots and people. Chatbots are very good at providing instant customer service. A chatbot can provide quick, concise, accurate answers to common customer questions and walk customers through simple procedures. Provided that a CFI’s phone lines are adequate for call volume, chatbots can provide those answers quickly, without any need for callers to wait on hold for an agent. 24/7 availability: A customer who loses a debit card late at night or needs to get an account balance on a Sunday morning can report the loss or get the information they need without waiting for the bank to open.

“Simultaneous, high-volume customer service: A chatbot can handle many customer interactions at once. It’s also readily scalable for times of high volume, such as tax season, during a lending boom, or after a natural disaster. More efficient human agents: Freed from routine inquiries and quotidian functions, human representatives can focus on resolving more complex customer issues. Adding chatbots to an overall customer service plan typically saves CFIs money.

“It’s important to remember that chatbots aren’t good at everything. Human customer service agents thrive in offering these services the best. Empathy. A chatbot may be able to understand the facts of what a customer is saying, but technology isn’t able to create an emotional connection around how that person is feeling. Customers often end a banking interaction feeling much better if their problems are solved and another human being has empathized with their frustration. Flexible problem-solving. Chatbots learn rules, and that’s valuable. But some problems require adaptability and creative problem-solving, things that chatbots simply can’t offer. The more complex or unusual the problem, the more flexibility should come into play. Sensitivity. A person can hear a customer’s tone and adjust the conversation accordingly, recognize when a complaint is particularly significant, see an opportunity to cross-sell a product, or otherwise apply nuance to handling an angry or frustrated client.”

PCBB went on. “To set up the right division between chatbots and human customer service, consider the following. Think of chatbots as a supplement to a primarily human-run customer service program. Chatbots are there to serve people, whether they’re customers or bank employees. Let chatbots handle routine questions and walk customers through simple processes, such as balance inquiries or sending out a new debit card. Employ trained customer service agents to solve more complicated problems and address nuanced, sensitive situations.

Design chatbot scripts with natural language, clarity, and personalization while continuously refining based on feedback. Give callers an easy way to access a human customer service agent and minimize the time they’ll spend waiting to talk to a person. Design AI that passes along what it knows of the customer’s situation to a human customer service agent when the person takes over the call.

“A human-centered customer service approach can combine chatbots and human agents. Let chatbots do what they do well: routine questions and procedures. Hand off more complex or sensitive problems to people, with the chatbot passing along what it knows of the customer’s situation. Give callers an easy way to switch from a chatbot to a human agent, and you’ll find customer satisfaction will follow.” Thank you to Curt, Mike, and the PCBB staff.

Capital Markets

Yesterday we learned that productivity declined in the fourth quarter to 1.2% compared to 2.3% in the third quarter. Unit labor costs increased from 0.5% to 3.0%. This might have explained why inflation reappeared in Q4. Originators should know that productivity is a big driver of non-inflationary growth, and it has been trending down for the past couple of years: productivity collapsed in 2022, right about the time inflation was peaking.

Markets had both international central bank headlines and domestic data to wade through yesterday. Across the Atlantic, the Bank of England announced a 25-basis point rate cut to 4.50 percent, which was expected. Across the Pacific, a Bank of Japan policymaker said that the BoJ's policy rate should rise to 1.00 percent by the second half of this year. On the domestic data front, U.S. unemployment claims rose last week, with initial filings increasing by 11k to 219k, yet private payroll data from ADP showed steady hiring in January, reflecting a labor market that Fed Chair Jerome Powell recently described as “pretty stable.”

Another positive sign came from rising productivity, which grew 1.2 percent in the fourth quarter, surpassing expectations and following an upwardly revised 2.3 percent increase in Q3. Higher productivity helps temper inflation by controlling labor costs, a key focus for the Federal Reserve. Despite a 3.0 percent rise in unit labor costs, the 1.8 percent annualized productivity growth rate in the current business cycle outpaces the 1.5 percent rate of the previous cycle, offering hope for continued economic resilience. Additionally, continuing jobless claims climbed by 36k to 1.886 million, but overall, there’s little evidence of significant layoffs. While hiring may be slowing, employers don’t appear to be signaling a major downturn, reinforcing the view that the labor market remains stable.

Mortgage rates fell for the third straight week, as the 30-year rate fell further below 7.0 percent in the latest Primary Mortgage Market Survey from Freddie Mac. For the week ending February 6, the 30- and 15-year rates respectively fell 6-basis points and 7-basis points to 6.89 percent and 6.05 percent. From a year ago, rates are respectively higher by 25-basis points and 15-basis points. (As always, for the most up-to-date mortgage rate info, please visit https://www.mortgagenewsdaily.com/mortgage-rates)

The January employment situation led off today’s economic calendar. Nonfarm payrolls were +143k (versus expectations of +160k jobs versus 223k previously), the unemployment rate was 4.0 percent when it was were seen holding steady at 4.1 percent. Average hourly earnings were +.5 percent versus expectations of increasing 0.3 percent month-over-month and 3.8 percent year-over-year compared to 0.3 percent and 3.9 percent in December. Later today brings preliminary February Michigan sentiment, wholesale inventories and sales for December, consumer credit for December, and remarks from Governor Bowman and Governor Kugler. After the employment data Agency MBS prices are slightly worse than Thursday night, the 2-year yielding 4.24, and the 10-year yielding 4.47 after closing yesterday at 4.44 percent.