“Why do psychics have to ask you for your name?” The future is always murky, at best, even to those who tell us that they can predict things. Fannie Mae raising gfees hit lenders everywhere without warning, catching capital markets staff with an un-hedgable hit. Costs everywhere are going up, and many or all of these are passed onto borrowers. More specifically, borrowers whose loans fund. Yesterday, Sandra James, CEO of Private Eyes, reminded me that the IRS is increasing the cost of 4506C's from $2.00 to $4.00 starting October 1, 2024. “It depends on what our clients are paying and volume that they do if we will increase our price. Since we integrated with the IRS, if the consumer responds to the Multi-Factor Authentication, then it is instant, and no labor is involved on those. We charge from $6.00-$12.00 per year per transcript.” (Today’s podcast is found here and this week’s is sponsored by EarnUp and its new AI Advisor tool. The industry’s first-ever context-aware conversation agent instantly analyzes users’ real-time banking and credit data to answer complex financial questions and provide tailored product recommendations. Hear an interview with A&D Mortgage’s Alexander Suslov on running a capital markets department, recent rate movement, and how the election could impact borrowing costs.)

Lender and Broker Software, Services, and Loan Programs

What are the most important things for a lender to have in place to succeed in today’s market? Great people and great technology. Get new insights from Dale Vermillion, Founder and CEO of Mortgage Champions, on how solutions like ICE Surefire can help you succeed in today’s competitive landscape and maintain the personal touch you’re known for. Listen to his perspective now.

“Focus your efforts, be more effective, and achieve sustainable growth with Richey May’s RM Analyze. See how you’re performing in vital production and operational areas in comparison to your peers and highlight where you can reduce expenses, for half the cost of a full-time employee. With RM Analyze + Peer View Ops you’ll gain access to a strong bench of mortgage industry experts and a suite of pre-built dashboards completely customizable to your needs. Our latest enhancements allow you to schedule email reports, so the most relevant KPIs are delivered straight to your inbox on a regular cadence so you don’t miss a beat. Empower your efforts - contact Spencer Smoot today!”

Join ActiveComply’s webinar series: Compliance & Coffee, where top industry experts break down the latest mortgage compliance trends over your favorite brew. Each session delivers valuable insights into regulatory updates, best practices, and strategies to navigate the complex mortgage landscape. Whether you're a compliance professional or industry enthusiast, our webinars offer the perfect blend of knowledge and practical advice, ensuring you stay ahead in this ever-evolving field. Don’t miss out: Grab your coffee, connect with peers, and enhance your compliance expertise with us. Join in on September 4th, at 2pm ET to hear from industry expert Brian Levy, author of the famous Mortgage Musings, on all things RESPA RESPA RESPA! Register now to secure your spot.

STRATMOR on the Benefits of… Chilling!

“Almost everything will work again if you unplug it for a few minutes, including you.” American writer Anne Lamott’s quote underscores a truth often overlooked: taking time off from work is essential for long-term sustainability, especially in demanding industries like mortgage lending. Given the tough market lenders and servicers have experienced over the past two years, it’s a message that bears repeating. In STRATMOR Group’s August Insights Report, Senior Partner and CEO Lisa Springer emphasizes the importance of rest and relaxation in fostering creativity, productivity, and positive relationships. In “Relax and Unwind: Why Taking Time Off is Vital to Long-Term Sustainability,” Springer draws parallels with the strategies used by Olympic champions to identify key factors contributing to their success and shows how they relate to our mortgage industry. Check out the full August Insights Report.

Patelco Cyberattack and a Word of Warning

Recall that two months ago credit union Patelco was hit was a ransomware attack, resulting in various investigations. In June this Commentary did a write up of companies to know about in case you are attacked.

Brad Blumberg, the founder of Aster Key, wrote, “The fallout from a data breach or ransomware attack is devastating on all fronts. For financial institutions like Patelco, the immediate financial impact can soar into the millions, compounded by reputational damage and operational disruptions that threaten business continuity. For consumers, the consequences range from potential financial losses from hackers playing the long game with stolen personal data, to the stress and time investment required to untangle the immediate or longer-term mess. After a cyber-attack, which is indeed a digital assault, banks and consumers are left grappling with enduring challenges that can impact their financial stability and overall well-being for the long haul.

“In many cases, class action lawsuits follow, which tend to benefit the law firms. They typically get +/- 33% of the lawsuit proceeds plus exorbitant expenses, with consumers getting small checks that likely won’t cover a meal at McDonalds. The solution lies in cultural and mindset changes at the bank and technology improvements. Saying, ‘Everyone is getting hacked,’ does not cut it.

“Safeguarding consumer data in today’s massive, hacker-targeted systems requires more than a single solution. It demands a blend of cultural and technological commitment. Institutions must champion consumer security by investing in robust employee training and hiring skilled professionals with advanced cybersecurity tools. These tools are crucial for detecting and addressing anomalies in internal and third-party systems, where breaches frequently happen. Innovation is key. The future is a world of decentralized and permissioned data, which will give more control and empower consumers who today have little voice in how their data is used.”

Yield Curve Primer

Why should an MLO or borrower care about the yield curve? Let’s start with some basics.

The curve (e.g., a graph) represents interest rates on Treasury debt for a range of maturities, showing the yield an investor expects to earn if they lend their money for a given period of time. The curve is a diagram of leading economic indicators, in that its changing shape occurs at different points in the economic cycle. It is typically upward sloping, reflecting higher long-term returns (e.g., 30-year bonds) than short-term returns (e.g., overnight fed funds, or a 3-month yield) since investors expect more compensation for lending their money for a longer period of time due to the greater risk.

The yield curve flattens or eventually inverts when the perception of long-term investors that interest rates will decline in the future causes shorter-term debt to be more attractive by comparison, which usually dovetails with the expectation of a decline in inflation and portends an economic downturn. It is important to pay attention to because the shape of the curve helps investors get a future sense of the course of interest rates. Since investors will generally prefer the lower risk of short-term maturity securities over long-term maturity securities, the price of short-term securities will be higher, and the corresponding yield lower. Typically, the more robust the economy, the steeper the slope.

In 2020, when the Federal Reserve decreased the overnight Federal Funds rate (the rate banks charge each other) to near 0 percent, the slope of the yield curve increased. But starting in April of 2022 through May of 2023, it dropped dramatically and went negative (an inverted yield curve) leading many to state that a recession was on the way. Lately long-term rates have been declining, but short-term have been declining even more, suggesting that the yield curve may recapture it’s normal, upwardly sloping, shape with few signs of a recession on the horizon.

For a fine pictorial chart of yield curve trends, the Federal Reserve of St. Louis comes through for us!

Capital Markets

MCT announced that the company has been granted a patent for the security spread commitment, a key feature of the industry's largest mortgage asset exchange, MCT Marketplace. The security spread commitment improves execution, liquidity, and approval times in the secondary market. “For decades industry players have imagined a time when buying a loan would be as easy as buying an item on eBay,” said Phil Rasori, MCT COO. “Arduous counterparty approval processes always blocked the way… But no longer. By committing to a price spread against the underlying security, buyers and sellers can confidently transact before undertaking mutual approvals.” Read the press release for details and use cases such as CRA, AMI, and spec targeting. Mortgage market participants interested in learning more about the impact that innovative loan sale practices may have on their business are encouraged to read the whitepaper, Why Your Loan Sale Process is Holding You Back.

With nothing of note on the economic calendar and no Fed speakers yesterday, bond market focus turned to another heavy day of supply, as the U.S. Treasury auctioned off $70 billion of 5-year notes. The sale met okay demand, drawing a 0.3 basis points tail. The bid-to-cover ratio (2.41x) was in line with the prior 12-auction average while indirect takedown (70.5 percent versus 66.5 percent average) was strong. The auction isn’t revealing any particular market sentiment. As it stands, the market is betting on a harder landing for the U.S. economy than what was expected at the beginning of the month.

The second look at Q2 GDP (3.0 percent annual rate, higher than expected) and weekly jobless claims (231k, about as expected) led off today’s economic calendar. Remember that it is a backward-looking report, but GDP was expected to slip to 2.6 percent from 2.8 percent in the advanced report and final sales were expected to rise 1.8 percent (versus 2.0 percent). The Core PCE Price Deflator (+2.8 percent on an annual rate) when it was seen unchanged at 2.9 percent. Later today brings pending home sales for July, several Treasury auctions that will be headlined by $44 billion 7-year notes, Freddie Mac’s latest Primary Mortgage Market Survey, and remarks from Atlanta Fed President Bostic. We begin the day with Agency MBS prices worse a few ticks (32nds) from Wednesday’s closing, the 10-year yielding 3.86 after closing yesterday at 3.84 percent, and the 2-year down to 3.89.

Jobs

“Nations Lending was created by producers, for producers, offering originators the full autonomy to expand their business. We prioritize local control and decision-making, with direct access to an Executive team focused on partnering with top producers to provide tailored service and competitive loan solutions. Our state-of-the-art marketing automation gives producers a powerful competitive advantage. With a thriving corporate culture, a robust $10 billion servicing portfolio, a diverse product range, and a streamlined management structure, Nations Lending is the perfect platform for growth. For those eager to learn more about our exciting opportunities and the unique advantages of joining our team, we encourage direct contact with our Divisional Managers. In the Western Division, please contact Mike Towery at 541-951-3559. If you’re in the Eastern Division contact Tim Dowling at 815-245-3052. Discover why so my top performers chose Nations Lending!”

In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking to create lasting Realtor and builder relationships at a bank focused on the market today. Banner has opportunities for lenders looking for local decision making with FHA, VA, USDA, state bond and true Portfolio lending opportunities along with servicing retained Fannie and Freddie loans to assist in client retention. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. Banner is the right fit for an established team, or the individual looking to grow their business and take the next step in their career. Please send resumes to Aaron Miller.