Putting out this daily commentary is like being in the army: I usually do more by 6AM than many people do during much of the day. The commentary is a little early this morning since I received an email on Thanksgiving from IsabelleDuvall@opale-voyages.fr that my U.S. Government social security account password had expired and for me to send her my social security number and a new password. I wanted to take care of sending Isabelle the information first thing this morning, and am sure that everything will be just fine. It’s not fine in the credit world any more than the tale above is. The industry was given an early Christmas “present” by Fair Isaac and the three credit bureaus, although this is not “official”: the vast majority of the mortgage lending industry will most likely incur a massive mortgage credit report price increase for 2023. With per-loan costs over $11,000 already, this sure won’t help. For better news, today’s podcast is available here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking.
Warning: Credit Costs Will Escalate
The cost of credit is going up. Lenders nationwide are trying for cost savings wins or success in negotiating vendor contracts, including those related to credit. In the credit world, can lenders save money by analyzing the number of pulls per file, or reminding staff about hard versus soft pulls, or dealing with duplicate logins? But the big news is out there:
“The National Consumer Reporting Association (NCRA) is aware and can confirm that the vast majority of the mortgage lending industry will most likely incur a massive mortgage credit report price increase for 2023.
“NCRA understands that the end users of the tri-merge mortgage credit report (the mortgage lenders) have been grouped into three pricing tiers by Fair Isaac (FICO) with a wholesale price increase of less than 10% for the top tier of approximately 46 lenders, about 200% for approximately six lenders in the middle tier, and more than 400% for all other mortgage lenders in the nation. This is a paradigm shift in the pricing structure for credit scores and is being dictated to the mortgage credit reporting industry from all three national credit bureaus and/or FICO.
“NCRA is not aware of the full origin of this change as it has not been disclosed to us by either FICO or the national credit bureaus. It will be up to each mortgage credit reporting company to determine how to implement this change with its customers based on its individual business plans.
“NCRA feels the need to address this issue due to questions raised by the mortgage lending community the media who are beginning to be made aware of a major pricing change coming for the new year. The industry as a whole is looking for more details, which are complicated by the contractual limitations that prevent NCRA members from disclosing the reason for this price increase. Unfortunately, we can only confirm the limited information above and urge the source/sources of this dramatic pricing change to be more transparent with the reasons requiring this statement.”
Non-Agency and Non-QM
NewRez added temporary rate buydown options for non-QM borrowers. But that isn’t the only news out there as small and large IMBs look for non-Agency investors or find them in their pricing engines. (On the wholesale side, you can always look at www.mortgageelements.com and enter the state and program.)
Wells Fargo Funding Newsflash C22-026nc provides details of upcoming policy additions to non-conforming loans effective December 5th. The addition of the Loan Estimate (LE) and Closing Disclosure (CD) to the minimum documentation required for a Non-Conforming Loan to be considered delivered (received). Market classification and LTV/CLTV restrictions on non-Conforming.
In today’s ever changing mortgage market, lenders of all sizes are continuing to evolve and offer different programs to help a buyer's ability to afford their new home. With the purchase market as competitive as it is, the BankingBridge 3-2-1 Buydown program offers relief to a prospective home buyer. There are many scenarios in which a mortgage lender may offer this program, but the most typical reasons are the seller of the home wants to incentivize the potential sale of their home, or the buyer expects to increase their incoming in the next few years, allowing them to save money for home remodeling, and renovations.
Widen your market reach with self-employed borrowers. Loan Stream Mortgage is offering a new program, Non-QM 1-Year Self-Employed program. Only One Year of Self-Employment required, up to 80% LTV purchase, Refinance and Cash Out available.
Loan Stream Mortgage is now offering pre-locks on Non-QM programs. NanQ/Non-QM Pre-Locks up to 45 days. Non-QM Pre-Locks must be Submitted to Underwriting within 10 calendar days, or the Pre-Lock will be canceled. Non-QM Pre-Locks will be available until December 31, 2022. Contact Loan Stream for additional details.
PRMG posted Product Update 22-66 regarding Alternative AUS Solution. Information provided includes appraisal date requirements, and declining market LTV/CLTV/HCLTV.
Angel Oak Mortgage Solutions updated guidelines adding benefits and ways to help more borrowers to qualify for a mortgage. Angel Oak increased LTVs and lowered credit scores Non-QM programs. Also, DSCR is now allowed down to 0.80.
Citi Correspondent posted updates to its credit policy regarding Non-Agency Minimum Loan Amounts, Gift Funds - Source of Funds & Verification Options, and Restricted Stock. For details, view Citi Correspondent Lending Bulletin 2022-14.
Management Topics
What are capital markets and top management looking at as we head into the end of 2022 and enter 2023? How deep should personnel cuts and salary reductions be to try to keep up with revenue declines. Weighing RIFs versus furloughs, and whether or not to pay out severance.
Secondary gains and margin compression continue to be a battle, as do hedging concerns and using the appropriate coupon to hedge. Anyone got a good ARM buyer, or 0-point options for second homes or investment properties? Or strategies in finding local banks or credit unions to partner with and buy loans? How about creating products by partnering with insurance companies? A national down payment assistance program? Trying to get back to having 101 or 102 pricing on the rate sheet? How to know non-Agency investors will be around next month, and is their pricing in non-QM pricing engines? What are the S&D options out there, and are there any new strategies to fix broken loans with rising rates? There are repurchase issues and pushing back against agencies or aggregators.
Having warehouse, investor, and Agency conversations nearly constantly regarding income and balance sheet changes, as well as having a plan in place to “stop the bleeding.”
Lenders, especially independent mortgage bankers (IMBs) continue to talk about, but do little about, adjusting LO compensation. Hourly wages for loan officers are a topic, and whether to have outside loan officers and the issues with agreements and documenting them. Owners are keeping an eye on plans for handling future EPOs both from an investor perspective and going back to individual LOs, and watching to see if the quality of files is deteriorating.
Another topic is whether or not lenders are having much success with cost savings wins or success in negotiating vendor contracts. In the credit world, can lenders save money by analyzing the number of pulls per file, or reminding staff about hard versus soft pulls, or dealing with duplicate logins.
Capital Markets
The FOMC (Federal Open Market Committee, the “action arm” of the Federal Reserve) released the minutes from its November meeting on Wednesday, which indicated the Fed will begin slowing its pace of rate hikes even as policymakers have yet to see meaningful signs of inflation pressures abating. Most officials are in favor of slowing the pace of rate hikes, though the debate now surrounds a higher terminal fed funds rate range. Investors were looking for clues that the Fed is ready to pivot to a less hawkish monetary policy, and expectations are now that we will get a 50-basis point hike in December and then another 50 sometime in 2023.
"A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," according to records from the Nov. 1-2 gathering. "A slower pace in these circumstances would better allow the Committee to assess progress toward its goals of maximum employment and price stability."
After yesterday’s break for Thanksgiving festivities, markets are back open today. However, there is an early 2PM ET, 11AM PT, SIFMA recommended close for the bond market. The economic calendar is empty. We begin the day with Agency MBS prices unchanged from a few days ago and the 10-year unchanged from Wednesday afternoon yielding 3.71 percent.
Originator Jobs
Mountain West Financial is continuing its expansion forward by deepening its roots in Northern California. Click here to hear from longtime branch manager, Tisha Torres, who recently returned to the MWF Family. “I'm excited to welcome our Rio Linda branch back to MWF. This decision is an affirmation of our commitment to Branch Managers and Originators. We are focused on attracting elite professionals and helping originators do more volume,” said Ed Adams, SVP Production at Mountain West Financial, Inc. Interested in learning more about the MWF Family, please reach out to Ed Adams.
In the Northwest, Banner Bank is searching for Builder Direct Mortgage Loan Officers as well as Mortgage Loan Officers. These are true portfolio lending opportunities with local decision making and direct to Fannie and Freddie loans with retained servicing to assist in client retention and marketing opportunities. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. 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 resume to Aaron Miller.
There are advantages in being an originator for a national bank, and NBH is looking for growth-oriented originators in its footprint states which include CO, MO, KS, TX, UT, NM, ID, and WY. Any loan originators interested in a career with NBH, please send me a confidential resume for forwarding.
“Ross Mortgage Company is committed to giving our loan officers every possible chance to succeed in today’s market. We have worked to forge local relationships to give our LOs access to extremely competitive ARM rates. These rates combined with access to a robust affinity partnership network has allowed Ross Mortgage Company loan officers to stay productive. If you are a loan officer frustrated with your current rates, lack of inbound leads, or promises that have fallen flat as the market shifted, reach out to VP of Sales, Kevin Coleman for a confidential conversation.”
“Equity Resources is a private (family) owned mortgage banker that has continued to expand even in a challenging environment. We are very excited about our future and adding talented Loan Officers to our team! If you are a mortgage banker or broker and you have concerns about the viability of your current company, we should talk. We are an agency direct lender that is currently licensed in 19 states with a strong presence along the east coast and mid-west. We are proudly celebrating our 30th anniversary next year and positioned for continued growth. We are committed to the residential lending market and have launched over 10 new lending programs in 2022. For confidential inquiries to join our award- winning team, please contact Tom Piecenski, Executive Vice President of Sales and Development at 614.327.5353 or via email.”
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