We’re halfway through 2023 already. Time flies. It doesn’t seem that long ago when I was a kid and I had to learn how to make my own bowl of cereal with milk. Now there are instructions. Talk about the dumbing down of the population. I don’t know if they still make the small boxes with serrated grooves you could cut or tear through and then just add milk. Why dirty a bowl when you don’t have to? Spending money on useful things is one thing, although I’ve been known to spend money on some odd things, like copper fire extinguishers. But I guarantee that I will never spend my money on a $60,000 microscopic ‘Louis Vuitton’ bag. People are still spending out there. Why haven't we seen a recession yet? One of the biggest reasons is the labor market, which has remained remarkably resilient. Companies had a difficult time finding workers during the pandemic and are reluctant to let them go. Second, companies, governments, and families everywhere took advantage of low rates to refinance their existing debt, and now they are paying rates that are close to the inflation rate, the equivalent of free money. More on recessions below! (Today’s podcast can be found here and is sponsored by Visio Lending. Visio is the nation's premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Through its top-rated Broker Program, Visio brokers can earn up to 5 percent. Hear an interview with American Land Title Association’s Steve Gottheim on Fannie Mae’s title insurance pilot program and alleged attempted expansion beyond its core mission and statutory charter.)

Lender and Broker Services, Products, and Software

With a lukewarm homebuying season, many originators are left wondering how to tap into the more than $1 trillion in loans still available this year. This challenging market has made finding new business harder than ever. But there's still time to make 2023 a prosperous year! Join us on Thursday, July 20 at 2PM ET/11AM PT for an NMP Webinar, Making A Great Second Half of 2023 (even with a slow homebuying season). Mike Darne, VP of Marketing at CreditXpert, will unravel the trends of this spring, help you discover potential new loans hiding in your database via the Mortgage Credit Potential Index (MCPI), and reveals the critical element that can supercharge your pipeline. You’ll also learn the key element that will empower your sales efforts (hint: trust). This is your chance to turn the tide and seize the opportunity for a successful second half of 2023. Register for the webinar here.

Are you leaking revenue from uncollected appraisal fees? Book a complimentary consultation with one of Reggora’s mortgage solutions specialists to calculate how much you’re losing in fees each year. We’ll calculate your annual losses, benchmark them against 2023 mortgage industry averages from STRATMOR Group, and show you how to eliminate that leakage.

Rocket Pro TPO gives power back to the broker with innovative technology like Pathfinder. Seeing the need to provide partners with 24/7 access to definitive answers, Pathfinder was developed as a tool that brokers can use to grow and scale their business. It’s a searchable knowledge base with mortgage guidance and process info that can be accessed anytime from anywhere and on any device. A knowledge base built on thousands of years of cumulative experience and knowledge in the mortgage industry, Pathfinder is one of the many ways Rocket Pro TPO is empowering their broker partners. Learn more about a Rocket Pro TPO partnership today, and save the date for the next IGNITE Live on Tuesday, July 11th at 2 p.m. ET. Mike Fawaz, EVP of Rocket Pro TPO, is sharing some lesser-known facts about Rocket Pro TPO that can benefit your business! Sign up with the link here!

According to Accurate Group’s 2023 U.S. Housing Equity Loan Survey, 70 percent of homeowners indicate plans to take out a home equity loan or line of credit this year. Prepare to earn your client for life by offering them a Symmetry HELOC, before they turn elsewhere! Our HELOCs are designed specifically for Symmetry's loan originator partners who want to retain their borrower relationships. All workflow and borrower contact stays in your control. At Symmetry Lending, we help you retain clients for life. Contact your local HELOC hero today.

Recessions 101

At some point those predicting a recession will be right, just as predicting an economic expansion will eventually be correct. But don't forget the government has been handing out money like candy since COVID began and that spigot will eventually get turned off one way or another. Economies function in cycles, regardless of administration or foreign policy. And the “old” definition of a recession being two quarters of negative GDP, while simple and easy to understand, is stale and not accurate. And an inverted yield curve does not always predict a recession, as we’ve noticed for the last several months. Let’s take a look.

The Federal Open Market Committee, and various Fed Presidents, along with Fed Chair Powell, continue to talk about inflation. It remains too strong for the Fed’s liking and the GDP figures and other measures rarely point to a slowing economy. Volatile components present few indications about subsequent growth and the Fed thinks that there is significant underlying momentum in the domestic economy due to advances in household spending and business fixed investment combined with the further tightening of labor market conditions. Fiscal policy is intended to act as a natural drag on the economy while the supply chain issues get worked out, and a few members noted that there were signs that the pandemic-related strains on labor supply were easing.

The National Bureau of Economic Research (NBER) has the responsibility of determining when a recession begins and when it ends. More specifically, it is the Business Cycle Dating Committee within the NBER that decides. Forget “a recession occurs any time you have two consecutive quarters of negative Gross Domestic Product (GDP) growth.” According to the NBER, “A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators like real GDP, industrial production, and wholesale-retail sales. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

So, the NBER looks at multiple factors when determining whether we are in a recession. But because “a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity… the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis.”

And looking at employment, NBER’s Business Cycle Dating Committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment.

Recall that the NBER officially declared an end to the economic expansion in February of 2020 as the U.S. fell into a recession amid the coronavirus pandemic. According to the NBER, the recession was the shortest on record ending only two months later in April 2020.

Loan officers should know that there is no single way to predict how and when a recession will occur since economists assess several metrics to determine whether a recession is imminent or is already taking place. NBER aside, according to many economists there are some generally accepted predictors that when they occur together may point to a possible recession. Leading economic indicators (the ISM Purchasing Managers Index, the Conference Board Leading Economic Index, and the OECD Composite Leading Indicator) are watched, as is the Treasury yield curve.

Officially published data series from various government agencies that represent key sectors of the economy, such as housing stats and capital goods new orders data published by the U.S. Census, are also monitored. Changes in these data may slightly lead or move simultaneously with the onset of recession, in part because they are used to calculate the components of GDP, which will ultimately be used to define when a recession begins. Last are lagging indicators that can be used to confirm an economy’s shift into recession after it has begun, such as a rise in unemployment rates.

Capital Markets

Rates rose drastically yesterday as stronger than expected data, including a sharp upward revision to Q1 GDP, cast doubts on an economic slowdown. In addition to Q1 GDP increasing to 2.0 percent from 1.3 percent, weekly jobless claims decreased by 26k which was a much larger drop than expected. The selling in the bond market due to boosted risk sentiment and higher rate hike odds lifted yields on the 10-year note and shorter tenors to levels not seen since the second week of March. Expectations for a 25 basis points hike in July solidified today while the implied likelihood of another increase in September grew to 25.0 percent from around 15 percent yesterday. Atlanta Fed President Bostic took a different outlook, saying that he believes that the appropriate fed funds rate has been reached in order to return inflation to the 2.0 percent target.

Inflation is headed down, but how soon will it get back to 2 percent or so? Gas prices were a big part of the inflation story in 2022, and they’re a big part of the disinflation story now. About 60 percent of the decline in producer prices last month was due to lower gasoline prices. Despite the onset of summer, a traditional time for road trips, demand for gasoline has fallen this year. The current national average for a gallon of regular gasoline is $3.58, according to AAA, $1.43 less than this time last year. Supply chain bottlenecks are gone and all the COVID stimulus money has been spent.  A resilient labor market has been keeping inflation elevated, which is also the reason we have yet to see a recession. Now, with the rate-hike endgame in sight for many central banks, some investors are yet again betting on a U.S. downturn.

The close of today marks the month and quarter-end, but before then, markets will digest the latest personal spending and income data for May (+.1 percent, roughly as expected, and +.4, respectively). Expectations were for increases of 0.3 percent month-over-month in both versus 0.4 percent and 0.8 percent previously. The Core PCE Price Index was +.3 when it was seen increasing 0.4 percent month-over-month, and +4.6 percent, about as expected year-over-year, the same as April. Later this morning brings Chicago PMI for June and final June Michigan sentiment. We begin the day with Agency MBS prices roughly unchanged and the 10-year yielding 3.85 after closing yesterday at… 3.85 percent.

Jobs

“USA Mortgage announced new leadership roles for three executives! Employee-owned national mortgage lender, USA Mortgage, has promoted three senior executives to new leadership roles. Doug Schukar, who formed DAS Acquisition Company, LLC, (marketed as USA Mortgage nationwide) in 2001, is handing off his duties as CEO to current President and COO, Linda Pring. Schukar remains Chairman of the Board. Assuming the role of President is Ron Mueller, currently Executive Vice President. Dani Ploch, Chief Administrative Officer succeeds Pring as the company’s COO. USA Mortgage is a full-service mortgage bank known for its entrepreneurial spirit and commitment to superior customer experiences. Recognized as an industry leader, it has been named to 50 Best Companies to Work For, St. Louis Titan 100, Top Workplaces Excellence Awards, St. Louis Post-Dispatch Top Workplaces, Top Lender, along with several Scotsman Guide awards, and many more. For a confidential conversation about joining us, contact Brooke Anderson at 609-500-1250, or visit here to learn more.”

“MWF is excited to announce our New Growth strategy for the mid-west and key Southeast markets. Danny Kirbie has joined MWF to lead our New State expansion efforts. Danny is a well-known leader in our industry and will bring a strong leadership presence in our Midwest locations. As part of our mission, MWF will continue to add new personnel, branches, and originators in key markets. For 32 years, MWF has excelled in providing support, systems, tools, and products to our originators. Our expansion plans are rooted in an incredible culture with highly engaged leadership. We're honored to work with Danny as we lead MWF into the future. For information about our growth plans and career opportunities, contact Ed Adams.”