What’s our Federal Reserve concerned about? I was in a restaurant last night in Truckee, California, and was shown the table and handed the menu. When the waiter came back five minutes later, he said, “While you were deciding, we raised our prices.” Okay, a little inflation exaggeration humor there, but things are certainly always changing. Remember when everyone thought Amazon or Zillow were going to take over lending? Zillow is shuttering its closing and title services division. Something else that always changes is the population: 10,000 people a day turn 62, and many are eligible for a reverse mortgage, and so many lenders and LOs see reverse being a growth field. (Carol Ann Dujanovich, VP/Director of Reverse Mortgage Operations with University Bank, is featured on today’s 30 minute Rundown at 12PM PT on what’s made its Reverse Platform successful over the years.) (Today’s podcast can be found here and this week’s is sponsored by Gallus, the premier business intelligence tool for the mortgage industry. With hassle-free insights and user-friendly functionality, Gallus empowers you to make faster, data-driven decisions for enhanced profitability. Hear an interview with Michele Kryczkowski on business development in the mortgage industry and the best way to support sales teams.)

Lender and Broker Software, Services, and Products

Check out Quorum Federal Credit Union's Sizzling Summer Limited-Time Special Offers. With turn times as fast as 24-hours and expanded guidelines, including up to 90% on a Primary Residence and 80% CLTV on Second Homes and Investment Properties, we'll help clear any financial hurdles. In addition, Quorum partners with an executed agreement have the opportunity to earn up to 2.00% borrower-paid broker compensation on the entire line amount. There are no minimum draws and no early termination fees. Terms and conditions apply. Contact your Quorum Account Executive, visit Quorum’s Partner Portal or email for more information.

“AFR Wholesale® (AFR) is excited to announce the next session of our Why Wait Live Webinar Series with Freddie Mac on Wednesday, July 12th, at 1PM EST. Please join AFR and Freddie Mac to discuss Renovation, where we will primarily be highlighting CHOICERenovation® and CHOICEReno eXPress®. Over this series, AFR is emphasizing affordable financing solutions that provide homeownership opportunities to more families. The goal is to take the prospects in your portfolio and turn them into borrowers. Register today! This will be a live webinar and a recording and will not be provided, so sign up today and don’t miss it! If you are currently a partner of AFR you can start utilizing these programs right away! Contact AFR by going to afrwholesale.com, email or call 1-800-375-6071.

Serving the underserved community, Non-QM is an essential part of the mortgage ecosystem. With the number of borrowers served continuing to rise and the market share of Non-QM growing, now is the time to learn more about these products. To help this, we are proud to announce the National Mortgage Professional Non-QM Townhall Monthly Series, brought to you by industry-leading ACC Mortgage, Deephaven and NewFi Wholesale. Moderated by Steven Winokur, this impactful series will be conducted with such Non-QM experts as Tom Davis, Robert Senko, and John Wise. Each month a set of topics will be discussed, giving you the info you need to successfully implement and grow your Non-QM origination business. The first in the series will be held on Thursday, July 27th at 2:00 EST/11:00 PST. If you want to learn more about the current state of Non-QM, this is a series you do not want to miss. Register today!

Newfi, an industry-leading lender specializing in non-agency mortgage solutions, is proud to announce the launch of its correspondent lending channel! As an affiliate of Apollo Global Management, Newfi Correspondent stands ready to help mortgage bankers with the benefit of Apollo’s expansive resources and mortgage expertise. They offer a variety of Non-QM offerings including loan amounts up to $5M, alternative income (bank statement, 1099, asset depletion & more) and DSCR loans. Are you a mortgage banker ready to learn more? To support this expansion into correspondent lending Newfi is actively seeking to hire experienced Non-QM Correspondent Account Executives. If you are interested in learning more or applying, please contact Dan Bayer or Dean Reynolds for more information.

Conventional Conforming Program News

The Federal Housing Finance Agency is the conservator of not only Freddie Mac and Fannie Mae, but also oversees the Federal Home Loan Bank system. FHFA officials are considering imposing new limits on large banks' use of the Federal Home Loan Bank system. The changes are reportedly being discussed as part of the agency's review of the system, which is expected to conclude in September.

FHFA published its 2023 first quarter data for the Uniform Appraisal Dataset (UAD) Aggregate Statistics. For the first time, FHFA's UAD Aggregate Statistics include data on residential property sales comparisons ("comparables").

Freddie Mac AIM Check API, gives you a preliminary view (as early as point of sale) of a borrower’s qualifying income for a Freddie Mac-eligible loan before submitting a full application to Loan Product Advisor® (LPASM). This Origination API allows users to access Freddie Mac AIM capabilities independent of an LPA submission.

Freddie Mac is committed to working with housing finance agencies (HFAs) to advance affordable homeownership. Its HFA Resource Center is comprised of products and resources to reinforce your efforts in promoting and sustaining homeownership.

Freddie Mac updated Loan Product Advisor® (LPASM) and the new Area Median Income and Property Eligibility Tool with new AMI limits. If you participate in an HFA program, consult the HFA’s website for income eligibility and associated pricing of their Freddie Mac HFA Advantage® offerings. AMI limits are also used to determine whether a loan is eligible for the credit fee cap for first-time homebuyers.

Freddie Mac’s quarterly housing outlook pulse survey, Housing Sentiment in Q1 ’23. COVID-19 led to an increase in migration away from larger, more expensive areas toward more affordable ones. Read Freddie Mac’s research brief for a deeper dive. Low-Income Homebuyers are Less Likely to Migrate from Cities, More Likely to Miss Potential Cost Savings.

The Uniform Appraisal Dataset (UAD) and Forms Redesign team has released additional documentation to support ongoing implementation efforts. These resources supplement the initial documentation that was released in March 2023 to kick off industry development and preparation for the new appraisal dataset and report. This update includes additional Uniform Residential Appraisal Report (URAR) examples for various property types and more information on technical requirements. Read the joint GSE announcement and check out the resources to learn more.

Fannie Mae posted information on the Uniform Appraisal Dataset (UAD) and Forms Redesign team release of additional documentation to support ongoing implementation efforts. These resources supplement the initial documentation that was released in March 2023 to kick off industry development and preparation for the new appraisal dataset and report. This update includes additional Uniform Residential Appraisal Report (URAR) examples for various property types and more information on technical requirements.

Fannie Mae issued a Fraud Alert involving income misrepresentation using fabricated/altered public records documenting alleged court-ordered child and spousal support payments. This alert addresses loans originated in Northern California.

Capital Markets

A third consecutive day of selling in the bond markets yesterday was the net balance between reaction to Wednesday’s release of the June Federal Open Market Committee meeting minutes, strong job data, and anticipation of today’s June Nonfarm Payroll report. As was reported in this commentary yesterday, FOMC members at their meeting last month expressed a lot of concern toward "continued resilience in the economy" and "persistently elevated core inflation." The Fed believes that to bring aggregate supply and aggregate demand into better balance and reduce inflationary pressures sufficiently to return inflation to 2 percent over time, a period of below-trend growth in real GDP and some softening in labor market conditions will be required.

Sure, inflation for most countries around the world doesn’t match Sudan at 340 percent, Lebanon at 201 percent, or Syria at 139 percent. Nor are people hauling around wheelbarrows full of cash to buy a loaf of bread. The global fight against pandemic-era inflation has prompted projections ranging from recessions to soft landings. The labor market here in the U.S. is certainly strong.

We are seeing resilience rather than softening in the U.S. labor market, which helps those hoping for a soft-landing, but makes the Fed’s job more difficult and all but ensures more rate hikes. That resilience was evidenced yesterday, as private hiring surged (ADP employment number came in at 497k, the most in over a year, versus the expected 225k), layoffs slowed to an eight-month low (companies had a difficult time finding workers during the COVID-19 pandemic and are probably reluctant to let them go), and filings for unemployment benefits stayed relatively low. This “hardly believable” strength of the U.S. labor market should further push out any concept of a possible recession but should also push out of the market any hopes of a Fed rate cut during 2023.

Accordingly, the fed funds futures market is now a coin-toss when it comes to a November rate hike after a near-certain increase in July. Volatility dropped in June, if ever so slightly, and has been moving sideways of late, but could begin to trend downward once the Fed ends its current rate hiking cycle and investors come to terms with the fact that rates will likely stay elevated for much longer than is expected. Fed fund futures markets no longer see a rate cut by year-end.

Beyond the next few months, the inflation outlook (which is driving rate hike/cut predictions) largely depends on how resilient the economy proves in the second half of the year. The drastic tightening of monetary policy over the past 16 months means that the economy’s most likely path is a modest contraction of real GDP as businesses run down excess inventories. As activity slows in the sectors that are most sensitive to interest rates, like construction and manufacturing, the unemployment rate will likely tick higher over the next 12 months. This will further soften businesses’ pricing power, and slow inflation further.

Today brings the June employment report which could add further volatility to this week’s bond rout. Recent improvements in home affordability have been driven by wage growth. Headline payrolls in June increased 209k versus 230k expectations and 339k in May (revised down to 306k). The unemployment rate came in as expected at 3.6 percent when it was seen ticking down 0.1 percent to 3.6 percent, and hourly earnings were +.4 percent, +4.4 percent for the year. We begin the day with Agency MBS prices a few 32nds better, the 10-year yielding 4.01 after closing yesterday at 4.04 percent, and the 2-year at 4.94 percent. The 2-year/10-year curve sits at more than -100 basis points, within spitting distance of the largest inversion since the early 1980s. The inversion is being driven by concern over the chance of a recession and the fact traders have largely unwound bets for Federal Reserve rate cuts by year end.

Jobs

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