“A Native American, pirate, and Frenchman walk into a bar. The bartender says, ‘Gentlemen, hau, arrrrrrr, oui, today?’” No one has to sound out “s-u-m-m-e-r”, and today is the last official Thursday of 2024. (Were there dog days?) One company’s solvency didn’t make it to the autumn: “Why did the pirate refuse to use Tupperware? Because every time he tried to burp it, it went, ‘Airgh!’ instead of ‘Arrgh!’” Tupperware, invented in 1946 by Earl Tupper and the king of kitchen containers and the life of every suburban mom's party, has filed for bankruptcy. Maybe the real takeaway here is, even the toughest Tupperware can't seal out the winds of change! Do you seriously think that your company is going to be around forever? In other financial news, the IRS recovered $263 million from a single individual. The three informants will split $74 million, nearly a third of the government’s proceeds and the largest award allowed by law, the lawyers said. After the split and taxes, each could buy Michael Jordan’s Highland Park mansion. Dang! It’s already under contract. (Today’s podcast is found here and this week’s is sponsored by Visio Lending. Visio has a top-notch broker program and 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. Hear an interview with Visio Lending’s Jeff Ball on the DSCR lending space, including pricing and investor demand.)

Making Sense of Down Payment Assistance

Renovation lenders note: What do you do if you’re Warren Buffett’s daughter and need $41k to remodel a kitchen? Don’t ask your father. One wonders if she had to come up with her own down payment when she bought the place. Some folks are just learning about down payment assistance (DPA) through national coverage of the Harris-Walz proposal to incentivize first time home buyers with $25,000. Should this program pass, it would join a virtual ocean of 2,415 existing DPA programs for homebuyers of varied income levels being tracked by Down Payment Resource. Now ask yourself: Will you have DPA operationalized in time to ride this wave? Why or why not?

Lender and Broker Software, Services, and Loan Programs

Don’t fall behind as AI evolves and expands! Did you take part in this year’s FHFA 2024 TechSprint on Generative AI in Housing Finance? If you missed it, here’s a chance to discover how the mortgage industry uses generative AI to improve and innovate customer experience, assessing creditworthiness, operations, and risk management & compliance. Read Clarifire’s recent blog, “FHFA Explores the Responsible Use of Generative AI,” and explore how you can leverage intelligent workflow and evolve the use of AI in your organization. With CLARIFIRE®, you can tap into the benefits of generative AI, coupled with workflow automation, allowing you to maximize data access, decisioning, and achieve meaningful, impactful results. That’s truly BRIGHTER AUTOMATION®.

Mortgage Investors Group (MIG) achieved 100% VOIE conversion improvement with Truv. MIG was facing rising costs of verification of income and employment and decided to make a change that led to 80% cost savings and 100% conversion improvement. “It’s really about partnering with somebody in the future you can trust, is going to save you money, protect your company, and make the customer experience better. And Truv checks all those boxes,” JR Huber, EVP of Sales and Production. Hear how they did it: Watch now!

Do you know how much business you’re missing in non-QM loan production? With the non-QM market increasing exponentially year-over-year, guideline training, program access, and visibility are crucial to compete intelligently in this market. With NIK-AI™ you can track all your non-QM production activities in one single place! NIK-AI™ can search through hundreds of pages of non-QM guidelines and provide detailed answers with source links in a matter of seconds. In addition, NIK-AI™ offers real-time reporting features that bring complete visibility to your production team’s questions, bottlenecks, and most popular non-QM programs. Help your team close more loans with NIK-AI™. Schedule a demo before 9/30 to receive your free 45-day trial period and have a unique and powerful competitive edge in this market!

“PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), is committed to providing mortgage lenders with a sustainable funding source in an uncertain market. With over 30 years’ experience, a well-capitalized, diversified financial holding company, PlainsCapital Bank National Warehouse Lending provides confidence to meet our mortgage lending partners funding needs. With exceptional operational performance, and a focus on relationship-driven business geared towards long-term success, we do not dwell on unnecessary fees. With PlainsCapital Bank National Warehouse Lending there are NO non-usage fees, NO application or renewal fees, NO third party due diligence fees and NO interest charged on the day your loan funds. If you are interested in learning more about PlainsCapital Bank National Warehouse Lending please contact Deric Barnett, (469)955-6786.”

Critical Defect Rate Rises to 1.58%, Per ACES Mortgage QC Industry Trends Report. This modest defect rate increase ends a five-quarter downward trend. Summary of findings include: The overall critical defect rate increased 3.27% to 1.58%, defects increased in two of the four major underwriting categories, legal/Regulatory/Compliance defects increased by 208.37%, insurance defects comprised 8.11% of all defects, although refinance review share declined this quarter, defect share doubled, indicating a degradation in quality in this area | Defect share outstripped review share for conventional loans this quarter, most certainly fueled by the surge in refinance defects. “Overall, the data clearly shows that lenders are under increasing pressure to maintain quality amid changing market dynamics. A proactive approach to quality control is crucial for mitigating risk and ensuring long-term stability.” (Trevor Gauthier, CEO of ACES Quality Management)

Breaking: Inglet Blair Partners with Saaf Finance to Transform QC and Due Diligence with AI. Inglet Blair, a wholly owned subsidiary of QC Ally and the industry’s premier residential mortgage loan due diligence firm, recently announced their partnership with Saaf Finance to deliver enhanced data integrity checks and diligence powered by AI to reduce risk and increase efficiency. This collaboration will provide financial institutions with deeper insights, better risk management, and faster due diligence using automated workflows. “We are dedicated to leading transformative innovation within the quality control and due diligence space,” said Chief Executive Officer at QC Ally, Jeffrey Flory. “Saaf’s value has immediate applications in our Due Diligence business and some incredible promise in Quality Control. We’re excited about what the partnership means for us today and even more excited about how we leverage it in the future.” Read the press release.

Correspondent Products

Unlock new opportunities in the growing manufactured housing market with Planet Home Lending Correspondent’s 5 Steps to Mastering Manufactured Home Lending. As rising home prices and limited inventory drive demand for affordable housing, manufactured homes are a smart solution for homebuyers. Download our step-by-step guide to learn how correspondent lenders can build volume in this growing niche. Partner with Planet Home Lending Correspondent to grow your business, meet CRA goals, and confidently serve a broader customer base. Download the guide today!

“One of the priorities at Newrez Correspondent is to share product and process improvements that demonstrate our valued partnership with you. Whether it be newly originated loans from our correspondent customers, or through MSR acquisition in bulk, AOT, co-issue or direct acquisition, our servicing portfolio grew by 28% Q2 over Q1, ranking Newrez #2 as a non-bank servicer. In addition, we sub-service for many lenders/investors and would like to discuss this opportunity if you are considering a change in your servicing strategy. Next up is expanding our product line to include Freddie Mac® GreenCHOICE Mortgages® as well as piloting the Ginnie Mae® PIIT Co-Issue option. Learn more by contacting your Regional Sales Manager today. Lastly, thank you for trusting in Newrez Correspondent, and don’t forget to schedule a meeting with us at the National MBA Conference in Denver, October 27-30.”

Helping Your Aging Clients

Do you, co-workers, or clients have questions about Medicare or Social Security? If so, join Wendy Barnett, owner of That Social Security Gal and Jennifer Paaske, partner at Boomer Baby Insurance, at a free 1 hour webinar on both subjects, Tuesday, Oct 8 at 10:00 AM PST to prepare you for important changes in 2025. Pre-Register Here; space is limited. “Social Security 101 is appropriate for anyone approaching 62 and wanting to know how your Social Security benefits are calculated and the best claiming options based on your unique situation. You will walk away understanding the key terms and be armed with a comprehensive booklet you can download before or after the live webinar to refer back to. Medicare 101 is perfect for those approaching Medicare eligibility, helping others who are, or are already enrolled and want to learn more. We'll highlight important Medicare topics like enrollment timelines, the types of Medicare insurance plans, what happens when you turn 65 and are covered on an employer's group health plan and more. We'll also cover the Part D changes coming in 2025 that you need to be aware of.”

Capital Markets

MCT’s Learning Center is a go-to industry resource for mastering mortgage capital markets. Their practical guides, whitepapers, webinars, and insights are designed to help you increase profitability and stay ahead of industry trends. Featured content like "Best Execution Analysis in the Secondary Mortgage Market" explains how to get the best price when selling to agencies or aggregators. For those looking to improve margins, the "15 Strategies for Lenders to Improve Profitability" whitepaper offers proven operations and technology strategies within secondary marketing to boost profits. Staying up-to-date on economic trends with newsletters like MCT’s Market Commentary is vital to business growth. By partnering with a trusted capital markets partner like MCT, you’ll always be at the forefront of developments that impact your business and opportunities that can elevate your career.

As we all know, over half of U.S. homeowners locked in very low-rate mortgages during the pandemic. So even if the Federal Reserve’s Open Market Committee eventually reduces overnight rates by two percentage points from here, it wouldn’t be enough to spur a significant wave of refinancing.

But what about all those Agency MBS that the Fed was purchasing during that time period? The vast majority of mortgage bonds owned by the Fed, some of which are slowly rolling off its balance sheet as part of its quantitative-tightening program, also carry low rates. There is, however, death, divorce… But not a huge amount. So, there’s little chance that the central bank, which must redeploy any MBS paydowns above a certain cap into Treasury securities, will be on the receiving end of a big prepayment wave anytime soon. The Fed still holds more than $2 trillion of mortgages purchased as part of emergency measures during the pandemic, and any fear of having that dumped on the market is low.

But back to what everyone has been talking about for months: the price of lithium. Okay, just kidding. In yet another example of the trader’s adage, “Buy the rumor, sell the news,” rates actually rose yesterday. Heading into yesterday's FOMC meeting, it was a coin toss about whether we would see a 25 or 50 basis point rate cut. In a “front-loading” move, the Federal Open Market Committee voted 11-1 to cut its federal funds target rate range by 50 basis points to 4.75 to 5.0 percent while at the same time signaling that it may not necessarily follow through with similar-sized rate cuts in upcoming meetings.

The more aggressive approach suggests officials are proactively trying to ease pressure off the economy and keep the job market from slowing any further. The Fed also released an updated Summary of Economic Projections (“Dot Plot”), showing that the median member of the rate-setting committee expects cooler inflation and higher unemployment in coming quarters than they expected on the latest Dot Plot, released in June

A drop in borrowing costs may not be enough to solve an affordability crisis as buyers await fresh inventory. Fortunately, we learned yesterday that housing starts increased 9.6 percent in August, driven entirely by an uptick in single-family construction. Builder outlooks have brightened as the anticipation of lower mortgage rates lead to higher sales expectations: lower financing costs should provide a boost to residential building. Single family starts and permits were up in every region, reflecting increased activity among builders that has been facilitated by sliding interest rates and pent-up demand. Meanwhile, builder completions of US multifamily housing units soared to a five-decade high in August, a development that will probably help ease pressure on rents.

Today’s economic calendar kicked off with the Q2 current account, weekly jobless claims (219k, lower than expected), and Philadelphia Fed manufacturing. Later brings existing home sales, August leading indicators, and Freddie Mac’s primary mortgage market survey. Treasury will announce the auction sizes for month-end supply consisting of 2-, 5- and 7-year notes for $69 billion, $70 billion, and $44 billion, respectively, and $28bn reopened 2-year FRNs before auctioning $17 billion reopened 10-year TIPS. Following yesterday’s Fed events, Norges Bank and the Bank of England will be out with their latest decisions with both expected to hold rates steady at 4.50 percent and 5.00 percent, respectively. We begin the day with Agency MBS prices worse .125-.250, depending on the loan term, the 10-year yielding 3.74 after closing yesterday at 3.69 percent, and the 2-year is at 3.61.