Camping: “where you spend a small fortune to live like a homeless person.” Lenders have done a remarkable job in the last few years trying to reduce homelessness in an indirect way, namely putting credit-worthy borrowers in well-collateralized properties in a compliant manner despite COVID. But let me get right to the point. It’s not good out there now for residential lenders, or their counterparties. After a remarkable, record-setting 2020 and 2021, the industry is now suffering, and companies are adjusting. (The current STRATMOR blog is, “Mergers and Acquisitions Continue On.”) We all knew the good times wouldn’t last forever, but the degree to which things have plummeted has been surprising. First the corporations were hit, then branches, and now mortgage loan officers (MLOs) are feeling the pain of a) very little business, and b) higher rates. Do IMB originators think that their 100 or 150 basis point commissions are untouchable, especially in price wars? Not to mention that we’re heading into the autumn and winter. What are MLOs, lenders, and vendors going to do to improve business? Our industry has a lot of smart, savvy entrepreneurs. People always need a place to live, and usually finance it, and someone has to be around to do those loans. Companies are strategizing. (Today’s podcast is available here and this week’s is sponsored by SimpleNexus, the homeownership platform that unites the people, systems, and stages of the mortgage process into one seamless, end-to-end solution that spans engagement, origination, closing and business intelligence. Click here to learn more about SimpleNexus, an nCino company.)

Lender and Broker Products, Services, and Software

For 96 years, Winnie the Pooh and his friends in the Hundred Acre Wood have had a ton of adventures. With the right group of friends, lenders can also have a ton of adventures despite a slowing market. In order to maintain a healthy pipeline and have more adventures with former customers, lenders have to start getting creative in their outreach. Sales Boomerang and Mortgage Coach have the borrower intelligence and conversion muscle to keep leads coming without the hassle, and BombBomb’s video messaging helps ensure lender outreach makes a lasting impact. On October 20 at 2 pm ET, join SB+MC’s Alex Kutsishin and Dave Savage, BombBomb’s Stephen Pacinelli, CrossCountry Mortgage’s Sean Herrero & Fairway Mortgage’s Shane Sharp and Wally Elibiary as they break down how pairing TCA comparisons with BombBomb videos creates an incredible experience for today’s borrowers. Register now and sweeten the pot and your pipeline.

While no one is excited about a market slowdown, it does provide an opportunity to reassess and improve your processes. Desktop appraisals are a great example. In the year since they attained GSE approval, the adoption process has been fraught with challenges like getting floor plans and appraiser acceptance. But the potential benefits still exist: fast turn times, detailed floor plans, appraiser-verified data, etc. When the market picks up again, and everyone else is complaining about backlogs and long turn times, you’ll be busy closing deals faster because you invested in a remote appraisal process. “As lenders turn to companies like us that have turn-key solutions for things like floor plans and virtual inspections, I think you will see increased adoption and prevalence,” Mark Walser, president of Incenter Appraisal Management said. Need an AMC who can help you get started with desktop appraisals? Contact us.

HELOC analytics solution: A lender's ability to offer HELOCs is becoming a more valuable solution with the record home equity many homeowners currently have. Members of HouseCanary’s executive team recently held an in-depth webinar to discuss HELOCs, and how HouseCanary’s HELOC solution can help lenders evaluate leads and pre-underwrite immediately with granular mortgage and property analytics. View the webinar and see if HouseCanary’s HELOC Analytics Solution is right for you.

“Lenders: are you looking to fill profit gaps in the declining market? Matic, an insurtech platform built for the mortgage industry, helps lenders add a new revenue stream, enhance their borrower experience, and automate the insurance process for faster closings and less headaches for loan teams. Trusted by top mortgage companies, Matic partners with lenders and servicers to embed insurance into the mortgage process when borrowers need it most. Through a marketplace of 40+ A-rated carriers, Matic shops for the best rates and coverage, saving borrowers days of work and over $600 on average. Developed specifically for mortgage partners, our flexible integrations work with your existing technology, requiring little demand on company resources. And with our industry leading NPS of 90, we help lenders delight borrowers and generate revenue along the way. Interested in partnership opportunities? Book a demo with one of our team members to learn more.”

Take a proactive approach to taxes. Taxes can cost you – both in revenue and business growth. Your best defense is a proactive approach managed by tax experts who know your business and the latest regulations. People who can advocate for you and arm you with tax-saving strategies. Meet the tax services specialists at Richey May. Planning, monitoring and always staying a step ahead – that’s how we earned our reputation as a trustworthy tax resource for business and individual tax needs across every sector and state. Read our latest thoughts from our Mortgage Tax Leader, Jared Frost, about what you need to be doing NOW to plan for tax implications in the future. Learn more about our Tax Services. Talk to a Richey May mortgage tax partner to learn how to take a proactive approach to your taxes today.

FundingShield, the market leader in wire & title fraud risk management and closing-agent compliance, released its Wire & Title Fraud Report for Q3-2022 showing a 30%+ increase in licensing issues and rise of insufficient insurance coverage for closing agents versus Q2-2022. During Q3-2022 47.9% of transactions had issues leading to wire & title fraud risk and 5%+ of transactions were not registered or valid in title-insurer systems at time of closing. “Bloomberg reported on wire-fraud real estate scams impacting consumers, something we have preventative solutions built for several top-10 banks. Our technology is putting loss prevention tools (CWAVs: Consumer Wire-Fraud Protection) in the hands of lenders, real-estate platforms and title companies so homebuyers and investors combat/prevent wire and title-fraud at the transaction level. The percentage of lenders losing in this market climate due to wire-fraud is rising at an alarming pace,” shared Ike Suri (Chairman/CEO FundingShield). ALTA continued to create awareness on wire-fraud at ALTA-ONE. Contact us.

Upcoming Events and Webinars

Julia Gordon, Asst Secretary for Housing and Federal Housing Commissioner of the US Dept of HUD, will be answering questions today at noon PT, 3PM ET, on the Rich & Rob Rundown on Oct 14th.

Adapt to the New Market, learn how to integrate social media into your marketing at the MBA-NJ Mid-Atlantic Conference. The Commercial Conference is scheduled for Monday, October 17th and Tuesday, October 18th. Residential Conference is Tuesday, October 18th - Thursday, October 20th.

If you're in the St. Louis market and looking to close on more homes, the Guild Mortgage Homebuying Solutions Seminar on October 18th may be a good place to get the inside industry scoop on the strategies and new product options available to qualify more buyers. Hear from Freddie Mac Affordable Lending Manager Nora Guerra, Freddie Mac Single Family Housing Outreach Manager Letania Gonzales, and Guild Mortgage EVP of Capital Markets David Battany on the challenges and solutions to improve housing affordability in St. Louis. Invite your buyers to the homebuyer session immediately following or stay to meet new homebuyers in your area. Register here.

Register for California MBA's DEI Committee Webinar on October 20th, 11:00 am–12:00 pm. Speakers Genail Nemovi, President & Managing Attorney, Nemovi Law Group, and Amanda (Mandy) Phillips, EVP of Compliance, Aces Quality Management will discuss appraisal bias, its history, current trends, and what lenders can do.

The Fed’s Strategy: The Basics

Wait… doesn’t raising rates mean higher prices, and worse inflation? Let me explain. In the most basic sense, inflation is caused by too many dollars chasing too few goods. But inflation can be complicated and rarely is it caused by a single factor. However, basic economics tells us that supply and demand dictate prices in a free market economy. Prices rise if demand increases and supply drops or stays the same. If supply falls without a proportional decrease in demand, prices will also rise. Fortunately, families and companies saved a tremendous amount of money during the pandemic. Unfortunately, they’re now spending it.

Turning to the bond market, when interest rates rise, it becomes more costly to borrow money. Something that may pencil out at 3 percent may not make sense at 7 percent, whether it is buying a house or a company like PepsiCo building a new bottling plant in Yuma. If a family doesn’t buy a house, or Pepsi doesn’t build a new plant, it tends to dampen the economy a little, or a lot. And when prices of things like electricity or gasoline soak up more savings or income from people, this leaves consumers with less money in their pockets, and they spend less as a result. This might cause grocery shoppers to prefer the generic brand over the name brand or spend less on non-essentials. Or shift from butter to margarine. It also affects business spending, which is sensitive to the cost of money. So rising interest rates tends to dampen both individual consumer spending and business activity.

If all goes well with the Fed’s moves, the result of raising the interest rates that the Fed has control over will be a cooling effect on the economy, causing interest rates to eventually fall back in line. The goal is not for inflation to be zero but to be about 2% because the Fed sees this as a healthy rate of inflation for a growing economy. This week’s Producer Price Index and Consumer Price Index show that we’re a long way away from that.

Rising interest rates are an attempt to bring the economy back into equilibrium. The expectation is that the prices of many items will fall, including everyday goods such as gas and groceries. However, the question is whether the Fed can walk this fine line of raising the interest without raising them too much, too quickly. This is sometimes referred to as a “soft landing.”

Meanwhile, borrowers suffer. They either pay higher rates, or don’t borrow at all. Or take a while to become accustomed to higher rates, but they still impact affordability. And lenders and MI companies and everyone associated with residential lending is impacted. Make sense?

Capital Markets

A volatile real estate market has created uncertainty for investors, lenders, and proptech companies. For a critical look at the immediate and long-term future of real estate, join HouseCanary on October 27 at 10 am PST for a discussion with Brandon Lwowski, Director of Research, and Ketan Bhalla, Head of Product, as they recap housing trends and discuss how the broader economy is impacting the real estate landscape. Click here to register.

Turning to bonds, we learned yesterday that U.S. consumer prices rose by more than forecast to a 40-year high last month, encouraging selling that sent yields along the yield curve to fresh highs for the year. Coupled with a solid jobs report last week and record-low unemployment, the inflation data pressures the Federal Reserve to raise interest rates even more aggressively (read: at least 75-basis points and potentially 100-basis points) at its November policy meeting. We do not receive another CPI reading before the Fed meeting on November 1-2, so this inflation figure, along with the PCE Index, will be what the Fed focuses on.

Yesterday's $18 billion 30-year Treasury bond reopening saw soft demand, though it was a bit better than interest received at 3-year and 10-year note sales over the previous couple days. There are some worries about a loss of adequate liquidity in the Treasury market as the balance-sheet capacity of broker-dealers to engage in Treasuries market-making hasn’t expanded much, while the overall supply of Treasuries has climbed. Separately, this week’s Primary Mortgage Market Survey from Freddie Mac showed the 30-year rate hitting its highest level since April 2002, 6.92 percent, after rising 26-basis points in the week ending October 13. The 15-year rate rose 19-basis points versus the prior week to a fresh high of 6.09 percent while the 5/1 hybrid ARM rate surged 45-basis points to 5.81 percent.

Today’s calendar is packed with potential market moving data, starting with September retail sales (unchanged, less than expected) and import / export prices (). Later this morning brings Business inventories for August, preliminary October Michigan sentiment, and remarks from three Fed speakers: Kansas City’s George, Fed Governor Cook, and Governor Waller. We begin the day with Agency MBS prices better .125-.250 and the 10-year yielding 3.87 after closing yesterday, 3PM ET, at 3.95 percent.

Jobs and Transitions

“Are you a top producer who knows you’re not in the best situation, but the comfort of being busy the last 2 years has stopped you from making a move? “There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.” (John F Kennedy) It’s not uncommon for a veteran top producer to fall into the trap of comfortable inaction. We provide our branches access to raw pricing, a low transparent corporate margin, and we encourage our branches to build their own brand/branch the way they want. We provide our originators a plug and play opportunity to join an existing branch, utilize a dedicated operations team and access to some of the best coaching in the industry. It’s time to learn about the platform you’ve earned. Contact Anjelica Nixt to forward your note and schedule a confidential conversation. YOU Deserve Better!”

Ready to join a sales team that’s focused on helping you win more business? Citizens Home Mortgage can offer our customers a full range of attractive relationship offers including our new Wealth Management relationship discounts which is amongst the best in the industry. Our deep interest rate discounts range from .375% to .750% off the rate, depending on eligible Private Wealth balances for tiered relationship discounts. Also, our corporate Affinity program allows for employees of approved companies to receive $1,000 off closing costs. Founded as a small community bank in R.I. in 1828 and now one of the top banking institutions in the U.S., Citizens is here to stay! So, no matter how large Citizens grows, we remember our roots – to help customers by listening to their needs, first. If you’re ready to join a winning team, email Sean Reilly or click here!

LoanCare is excited to welcome Kevin Cooke, Jr., to the team as SVP, Business Development. Bringing over 20 years of experience in the financial services industry, Cooke specializes in business development and client relationship management. With a focus on collaboration, Cooke will maximize client relationships and partner programs to identify new growth opportunities and build innovative solutions across our network. Reach out to Kevin if you’re interested in learning more about our subservicing capabilities tailored for today’s market needs, account-based marketing programs, and cross-sell opportunities.