There’s a splendid joke about the definition of an economist being someone who “will know tomorrow why the things they predicted yesterday didn't happen today.” Everyone’s warning everyone about everything these days: Recessions, plagues, housing collapses, overnight rates near 5 percent. The bigger the prediction, the bigger the headlines. No one has a crystal ball, but one thing for sure is that with the increase in both short and long-term rates, independent mortgage banks are seeing even less revenue. For example, their warehouse line costs have gone up. Optifunder’s Mike McFadden noted, “Rob, although every contract is different, with different covenants, with the migration from LIBOR, most warehouse lenders have resorted to some sort of SOFR as the reference rate. Each warehouse lender, however, has resorted to different terms or sources of SOFR (which is something Optfunder helps sort through). In general, many warehouse lines are based on a spread to Overnight SOFR, which is a short-term rate closely impacted by the Fed’s actions, and this spread varies materially based on lender. But the base rate has gone from ~5bps 6 months ago to over 300bps as of last week, meaning that for many IMBs the effective cost of borrowing has increased by 295bps in six months.” (Today’s podcast is available here and this week’s is sponsored by EarnUp, reinventing payment and data flows in real estate ecosystems, origination, mortgage, and fintech. We feature an interview with Mark Walser, President of Incenter Appraisal Management, on the latest in the appraisal space.)

Lender and Broker Products, Services, and Software

“We have a history together, relationships that were built over the years. I’ve been with my lender over 25 years and MGIC seems to always have had our backs, in the good banking years and the bad.” That’s why Cathy chooses to partner with MGIC. After 65 years, our customers know they can count on us to bring them new ideas, pursue every angle and advocate for them when they need us. Don’t take our word for it: see why lenders choose MGIC!

Looking for incremental revenue at high margins while eliminating last minute scramble at closing? Credible Insurance can save your borrowers significantly on their homeowners insurance (HOI) premiums while driving efficiency and revenue to your operations. Credible Insurance is an end-to-end, 100 percent digital HOI marketplace with an easy to navigate application process and multiple quotes from 40+ carriers. Proprietary dashboard provides quick access to the Evidence of Insurance and updates to the mortgagee clause with one click. Credible Insurance has multiple integration solutions for lenders and banking partners to seamlessly integrate within their digital origination solution with a few simple steps. Start saving your clients time and money on their HOI premiums. Credible Insurance offers a streamlined, completely digital, HOI shopping and purchase process, without any calls from agents (unless the client wants to speak to someone), and high margin revenue. Contact Mike Romano to learn more and/or to meet at MBA Annual.

Kingda Ka, the tallest roller coaster in the world, shoots 45 stories straight up and plummets down in a 270° spiral. This year, the industry felt a lot like that. Despite the volatility, lenders that outsource their processing, underwriting, and closing functions to Computershare Loan Services (CLS) have experienced a much smoother ride. CLS turns lenders’ fixed costs into controllable variable costs. Because they hire the industry’s best talent nationwide, CLS is equipped to scale your business up or down quickly, thereby eliminating fixed financial burdens like overhead and staffing. Safeguard your bottom line: contact Computershare Loan Services today.

Western Alliance Bank’s Specialized Mortgage Services Group continues to be solution-oriented in changing markets by providing multiple financing vehicles and a comprehensive and robust suite of treasury management products and services. “Our Treasury Management team will be in Nashville October 23-26 for MBA Annual. We would like to meet to discuss how our treasury management solutions can add efficiencies to your cash flow cycle. Contact Jennifer Schachterle, (720) 261-5774, or Mark Short, (469) 702-6212, to schedule a meeting. We understand the mortgage industry and can customize solutions to meet your needs in this ever-changing landscape. Our Warehouse Lending team finances a wide spectrum of loan types and works with borrowers to customize terms to meet investor and execution needs. Western Alliance Bank, Member FDIC.”

With less volume in the current market and no guarantee of profitability, it may feel counterintuitive to spend money on partnerships and technology. However, now may be the perfect opportunity to evaluate your processes and partnerships with an eye on your business objectives. Investing the time, energy, and money in these areas now can help you unearth potential opportunities to gain efficiencies and better compete in today’s market while setting yourself up for success when the inevitable upswing happens. The decisions you make now will ultimately impact your business down the line. A proactive approach to technology, partnerships, and processes can position local lenders as innovators in a rapidly changing market. Learn more about MeridianLink Mortgage LOS and the ease and flexibility it affords through partner integrations – watch on-demand.

Jumbo and Non-Agency Loan Changes

HELOCs are a big topic these days, despite the run up in the index rates. HELOCs even have their own home equity lending news: HEL.news. But jumbo, non-conforming, non-Agency, non-QM… although this general product is still the minority of production, loan originators need these products in order to help clients either refinance their existing homes, especially for self-employed borrowers, or purchase a new home.

The question occasionally comes up about why jumbo rates are less than conforming rates. The basic answer is that jumbo loans do not have a 52-basis point (about half a percent) guarantee/guarantor fee attached to each loan. The gfee is firmly in the domain of the FHFA’s Fannie Mae and Freddie Mac.

Life is not easy for non-QM lenders and investors. For example, this month Angel Oak Mortgage Inc., the publicly traded non-QM mortgage REIT, disclosed it had received a two-week extension on a financing facility it has with Barclays Bank. The new termination date is Oct. 14.

The facility was negotiated a few days ago through AOMI subsidiary Peachtree Mortgage. Angel Oak Mortgage parted ways with CEO and President Robert Williams, who helped take the company public in 2021.

Angel Oak Mortgage Solutions’ Non-QM products include delayed financing options. “It is a great way to pay to win a bid and then get the majority of it back within six months of purchase without waiting.”

Multiple topics on Non-Conforming Loans have been clarified in Wells Fargo Funding Seller Guide. For details, Correspondent Sellers review Wells Fargo Funding Newsflash C22-023nc.

Wells Fargo Funding Newsflash C22-024nc provides Seller Guide clarification regarding Non-Conforming PerformanceWorksSM plan.

Several changes to PRMG’s Expanded Access and Investor Solution products, both enhancements and restrictions that will be applied. Some changes under Investor Solution will not be available until October 3, 2022, as noted in PRMG Product Update 22-50.

BluePoint Mortgage is offering two new loan programs. WVOE Only Loan - for Primary Residence-No W2’s, No Paystubs, No Tax Returns, No 4506-T or Bank Statements Required.

STANDARD DSCR Investment Property loan program - DSCR <1.00 acceptable LTV (restrictions apply), First Time Investors Allowed, 40 yr. Interest-Only Available and No Ratio Available.

Let's face it, with fluctuations in income and tax write-offs, qualifying Self-Employed borrowers can be tricky; especially when it comes to using their bank statements to qualify for a loan. Acra Lending builds flexible programs to help qualify your borrower. Learn more about Acra Lending’s 12-Month / 24-Month Bank Statement program.

Citi Correspondent Lending Bulletin 2022-13 contains credit policy updates related to ACE waiver property eligibility, DU validation services, verbal VOE alternative, Condo & Co-op excessive single entity ownership. The bulletin includes multiple clarifications such as non-Agency bankruptcy, documentation requirements for public assistance/section 8 income, and gift funds & pooled funds. Additionally, contents include a notice on determining fully indexed rate.

Capital Markets: The Fed and Inflation

Credit Suisse, whose stock has dropped 50 percent, has agreed to pay $495 million to settle a case related to mortgage-linked investments in the United States, reminding us that the 2008 financial crisis is still having repercussions. Yup, you gotta follow those underwriting guidelines.

Remember when, for several months, the Federal Reserve would describe inflation as “transitory”? Those were the days… We don’t have another FOMC meeting until November ½, but the minutes released last week from the Federal Open Market Committee’s September meeting highlighted policymakers’ expectations that their tight monetary policy stance would lead to cooler labor markets and higher unemployment. Their desire is to restrict monetary policy further until they are certain inflation has meaningfully declined back to 2 percent, even in the face of a mild recession that brings fewer jobs and lower wages which is preferred to the current high inflationary environment.

September retail sales showed consumers have pulled back on durable goods such as home furnishings, electronics, and motor vehicles. September’s consumer price report, which came in higher than expected, reinforced the need for the Fed to remain aggressive at its upcoming meeting in November. The report indicated that businesses are still able to increase prices to consumers to offset the higher cost of doing business. The data have moved the market’s expectation for another 75-basis point rate hike by the Fed at their next meeting to near 100 percent.

After we learned that U.S. core inflation hit a 40-year high last week, and concerns that price pressures are becoming entrenched, it dashed hopes the Federal Reserve will dial back interest-rate hikes. This week’s economic calendar includes regional Fed manufacturing PMIs and housing-related news, more Treasury coupon supply, and the final Fed appearances before their blackout period begins ahead of the November 1/2 FOMC meeting. Ahead of that meeting, the latest Beige Book will also be released on Wednesday. The week gets off to a quiet start however, with just Empire State manufacturing for October (-9.1) due out today, unlikely to have any impact on mortgage rates. Regarding MBS, Class C 48-hours is tomorrow. We begin the week with Agency MBS prices better .250 and the 10-year yielding 3.92 after closing last week at 4.01 percent.

Employment

“Want products? Gateway’s got it! Start the new year off right with the right products at your fingertips! The beauty of being a part of a bank is the ability to bring unique products to the market. Gateway Mortgage, a division of Gateway First Bank, has an impressive portfolio of (X) products. Want a construction loan? Gateway’s Got it! Need it with a 1-time or 2-time close? We’ve still got it! And what about a Jumbo loan, ARM loan, or bond loan??? Yup! Got those too! Plus, Gateway offers buy-down options, extended locks, and more! Gateway is looking for high producers that need a large portfolio of products in a mortgage-centric environment that provides operations support so that loan originators can focus on customer and referral partner relationships. Give us a call and find out how Gateway can support you and your customers with the right products. Because…. Gateway’s got it. Contact Mary Ann Arbogast, 210-380-2516.”

One of the nation’s leading mortgage loan originators (Source: Scotsman Guide), 100 percent employee-owned USA Mortgage, continues to strategically grow its national footprint and to augment its management team with the addition of three Senior Vice Presidents to fill three newly created positions. The new positions herald the beginning of several new growth initiatives planned for launch by USA during these challenging times. Now carrying the USA banner in its quest to create new markets and opportunities are Philadelphia, PA-based SVP of National Business Development and Recruiting Brooke Anderson; SVP of National Production, Clay Duncan of Huntsville, AL; and Nic Stotler, SVP of Strategic Partnerships, St. Louis, MO. Anderson, a 12-year industry veteran and a 2019 member of National Mortgage Professional Magazine’s 40 Under 40 class, joins USA to lead their Recruiting and National Growth footprint, following stints at Academy Mortgage and NFM Lending. Duncan, with 24 years in the field, (most recently as a regional director at Movement Mortgage) is now tasked with taking USA’s sales team to new heights and growing the company’s production in offices coast to coast. For Stotler, the move to USA marks a new chapter in a successful residential real estate career. Previously CEO of Diehlmann Sotheby’s International Realty and regional vice president at Sotheby’s International Realty Affiliates, Stotler’s efforts turn to forging formal business partnerships for USA with an emphasis on residential joint ventures. For the record, the St. Louis-based firm booked $4.8 billion in home loans in 2021, an all-time high. Meanwhile, USA’s employee-owners have seen the value of their ESOP stock soar 521 percent since its inception. For a closer look at USA Mortgage, which employs 1,014 people at 176 locations in 49 states and the District of Columbia, click here or contact Brooke Anderson for a confidential conversation.