LOS, Warehouse, Servicing Products; Freddie Mac and Trended Credit Data; STRATMOR on Younger Borrowers

Did someone say, “National Margarita Day”? (Splendid timing, especially as vendors and lenders contemplate a rate and volume environment that may not change much for months, and compensation & personnel adjustments continue.) In 2023, the United States was the leading recipient of Mexico’s tequila exports, importing 84.8 million gallons of tequila from South of the Border. This has nothing to do with residential lending, other than plenty of folks in our biz enjoy a tasty margarita. While we’re on taste, the other day I mentioned a joke about vultures saying clowns taste funny which blog poster and attorney Brian Levy took as an invitation to “poke a little fun at this bear” in his most recent post. Levy’s most recent Mortgage Musings edition is titled, LO Comp, Bozo Buckets and “P&L Branches” and offers a spirited and insightful discussion of a couple LO Comp related issues that have been in the news (including this daily commentary). (Found here, this week’s podcast is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Today’s has an interview with PRMG’s Kevin Peranio and Truv’s Richard Grieser on verification across income, employment, assets, and insurance.)

Lender and Broker Services, Products, and Software

“As rates decreased in January, IMBs saw an increase in dwell-time and warehouse expenses. In January, dwell-time was up 3 days from the 15-day average. While rates are down for borrowers, overnight SOFR rates averaged 5.32 percent. With the additional 3 days of dwell, for the average IMB costs increased by nearly $70 per funded loan, a 170 percent increase from December. With full automation from funding of loans through Purchase Advice reconciliation and paydown activities, OptiFunder now offers the most comprehensive Warehouse Management System available, allowing originators to get loans from the primary to the secondary markets quickly and efficiently. Top IMB’s are using funding automation to save time and capital. Meet with us at Lenders One Summit or at the ICE Experience to see how you can streamline funding through loan sale to lower dwell and warehouse expense. Sign up for our monthly newsletter for more warehouse trends.”

Mark your calendars: Servbank and TMS have partnered to sponsor the upcoming MCT Exchange at the diamond level. Following their successful 2023 debut, MCT is back with even more insights into the capital markets, educational tools for enhancing profits, and a touch of fun at the Hard Rock Hotel in San Diego on March 22-23. To set up a time to meet about subservicing, reach out to subsales@servbank.com. To set up a time to meet about correspondent, reach out to: carespondent@themoneysource.com. See you in California!

“Conference season is ramping up, which means the Optimal Blue team will be ready to chat with you at events across the country. It also means you’ll have more chances to hear our experts share their wisdom during panels and speaking sessions. If you’re attending the Texas MBA Southern Secondary conference, don’t miss “Execution Philosophies” on Feb. 27, featuring Jeff Casella, managing director, and Jeff McCarty, senior product manager, from Optimal Blue. And if you’re heading to Los Angeles for the Lenders One Summit, set aside time to hear from Optimal Blue’s Mike Vough, VP of hedging and trading products, as he participates in the session “Capital Markets: Strategies for Technology Integrations and Servicing Portfolio Management” on March 5. If you’d like to set up a meeting with a member of the Optimal Blue team, please contact us.”

Last year’s regional banking crisis, pressure from the market downturn on mortgage originators, and recent events have all changed the warehouse lending landscape. Learn to navigate the new environment in MCT’s industry webinar, The New World of Warehouse Lines and Relationships, scheduled for February 29th at 11am PT. The webinar will be hosted by Chris Anderson of MCT and feature panelists from Western Alliance, Customers Bank, First Horizon, and Wintrust. Topics from the webinar will include an overview of managing warehouse lines, evaluating warehouse leader counterparty risk, and what to expect for warehouse lending in 2024. Register for the upcoming webinar to learn more about the new world of warehouse lines.

Now is the time for a LOS that can do it all. Mortgage Machine is an out-of-the-box, all-in-one LOS designed to accelerate lenders’ operational velocity and support an end-to-end digital origination process. Created by eMortgage pioneer Jeff Bode, Mortgage Machine’s key platform features include AI-powered Data management and task automation, a scalable cloud-based infrastructure, flexible APIs, pre-configured workflows for retail and TPO channels, integrated document management and POS functionality. Mortgage Machine also offers all-in-one eClosing capabilities, including an eClose room, eNotes, eVault and RON, and utilizes MISMO SMARTDoc® data and security standards. If you’re ready to harness the time- and cost-savings digital mortgages deliver, register for the live Mortgage Machine demonstration at 12 pm CST on March 7. Can’t make it? Schedule some time with the Mortgage Machine team

STRATMOR on Demands by Borrowers in their 20s

Generation Z is on the move and eager to replace Millennials as the largest generational mortgage buying population. In his latest Customer Experience Tip, STRATMOR Group Customer Experience Director Mike Seminari, explains that the buying behaviors of Gen Z are different than what current mortgage lenders are used to seeing. Check out “The Next Mortgage Frontier: Attracting and Engaging Gen Z” for tips from Mike and ActiveComply’s Ally Carty on how to engage with the next wave of generational borrowers and get an edge on the competition.

Conventional Conforming Updates

Okay, that headline was an exaggeration. But given that the Agencies (aka, Government Sponsored Enterprises, or GSEs) year in and year out account for the lion’s share of volume, it is good to know who’s doing what especially as lenders follow Freddie and Fannie’s lead.

Freddie Mac spread the word that, “Later this year, we’ll start requiring LPA submissions to include trended credit data, expanded credit information reflecting historical tradeline data such as balances, scheduled payments and actual payments reported for each month over an extended period of time. Inclusion of this data will allow LPA to perform a more robust risk assessment… While there should be minimal preparation work for you on this, we do encourage you to begin working with your credit reporting companies and technical affiliates to prepare for this change.

Freddie reminded us of LPA specification retirement on March 1, 2024. “LPA system-to-system (S2S) specification versions 5.0.06 and 5.1.00 will be retired as of March 1, 2024. If you’re still using these versions, make plans to update your systems to support either v5.2.00 or v5.3.00, or you won’t be able to submit new loans to LPA. Contact your Freddie Mac representative for additional guidance. Resubmissions on v5.0.06 or v5.1.00 will be accepted until September 9, 2024. Get a first look at the new specification v5.4.00 that’s enhanced to help you make smarter decisions with minimized risk, stay up to date with industry standards and expand your underwriting capability to fulfill more homeownership opportunities.”

What’s new with Loan Selling Advisor®? View Freddie Mac Loan Selling Advisor® February Updates and find out.

Freddie Mac is publishing the newest system-to-system (S2S) specification of Loan Product Advisor® (LPASM) next month. LPA will be enhanced to help you make better, smarter, and faster decisions to fulfill more homeownership opportunities. Get a preview of what’s to come with v5.4.00.

Fannie Mae February Servicing Guide SVC-2024-01 update clarifies servicer responsibilities related to monitoring and verification of property insurance coverage and provides other miscellaneous updates.

Since its inception in 2018, Fannie Mae has been a partner in the Appraiser Diversity Initiative (ADI), designed to attract new entrants to the real estate appraisal field while fostering diversity in the profession. Learn how ADI focuses on scholarships, mentoring, and an introduction to job opportunities to accomplish that goal, and how you can help.

Pennymac Announcements 24-08: Pennymac will update Conventional LLPAs values on the ‘Risk Based Price Adjustments – FRM’ LLPA Grid, effective for all Best-Efforts Commitments taken on or after Tuesday, February 13, 2024.

Per Pennymac Announcement 24-10, Pennymac is aligning with the Condo Project Advisor (CPA) enhancements to Project Assessment Request (PAR) announced in Freddie Mac Bulletin 2023-24. The enhancements to CPA include a new PAR finding status, “Not Eligible,” beginning on 2/26/2024.

Pennymac is aligning with the updates announced in Freddie Mac Bulletin 2023-22 regarding unacceptable appraisal practices. View Pennymac Announcement 24-11 for details.

Pennymac will update Conventional LLPAs effective for all Best Efforts Commitments taken on or after Tuesday, February 20, 2024 as described in Pennymac Announcement 24-12.

While we’re on “Penny,” known for its presence in the secondary markets for government loans (e.g., FHA, VA) PennyMac Financial Services is good to take a look at in terms of performance. The company increased its originations and production profits in the fourth quarter of 2023.

“The nonbank originated $26.96 billion of mortgages in the fourth quarter, up 6.4 percent from the third quarter. The bulk of the production came through the correspondent channel. On a pre-tax basis, PennyMac’s production segment generated $39.4 million in income in the fourth quarter, up 56.3 percent from the previous quarter.”

But overall, PennyMac took a $36.8 million loss in the fourth quarter, largely driven by $158.4 million in funds to be paid to Black Knight as the result of an arbitration ruling against PennyMac in November. The ruling centered on a breach of contract involving servicing technology.

“The impairment rate on securitized non-qualified mortgages increased by 27 basis points in December to 5.7 percent, according to dv01, an analytics firm. Impairments measure delinquencies and loan modifications. December’s trend means that non-QM impairments have risen over 100 bps in just four months, by far the worst performance in the sector’s short history outside of COVID… However, the firm noted that investors in mortgage-backed securities have yet to experience material losses tied to the rising impairments…”

Capital Markets

In a free market, prices of assets are set by supply and demand, and right now we’re seeing more selling in the bond markets. The U.S. Treasury sold $16 billion in 20-year bonds to record poor demand regarding the “high yield tailing the when-issued yield.”

For fundamental news, there was some brief volatility in reaction to the release of the minutes from the January FOMC meeting. Minutes showed that several participants expressed concern about financial conditions becoming less restrictive than appropriate, which could fuel demand and halt the progress dampening inflation. In addition, most policymakers acknowledged the risks of cutting the fed funds rate range too quickly. Remember that consumer prices jumped in January, stalling both recent progress against inflation and hopes that the Fed would start dropping rates sooner rather than later.

In the words of BOK’s Chris Maloney, “There are many who believe we are soon to bathe in the warm glow of renewed easy money,” though yesterday’s action again reduced rate cut expectations by a bit, with the fed funds futures market now implying less than a one-in-three likelihood of a cut in May. The market still expects that the initial cut will be made in June, though the implied probability of that move also continues to fall. The Fed wants greater confidence that inflation is moving sustainably down to 2 percent, and the street is finally digesting that message. Now, should things in the Middle East go from bad to worse, all forecasts are off the table.

Today’s busy economic calendar kicked off with the Chicago Fed National Activity Index for January and weekly jobless claims (201k, lower than anticipated, down from 213k, 1.862 million continuing claims). Later today brings S&P Global flash February PMIs, existing home sales for January, Treasury month-end supply consisting of $63 billion 2-year, $64 billion 5-year, $42 billion 7-year notes, and $9 billion 30-year TIPS, Freddie Mac’s Primary Mortgage Market Survey, and at least five Fed speakers are also scheduled. After this initial spate of news Agency MBS prices are roughly unchanged from Wednesday night, the 10-year is yielding 4.34 after closing yesterday at 4.33 percent (up around half-a-percent since year-end and the highest since November), and the 2-year is at 4.71.

Employment

HMA Mortgage (HMA) a leading independent mortgage banker, presents new combined leadership of President, David Holland, with Industry Leaders, Robert Fillyaw and Tom Mills. The company formerly known as Holland Mortgage Advisors, is now rebranded as HMA Mortgage, and recently licensed in 20 additional states across the country with 24 new branch locations. Recently onboarding more than 40 Loan Officers, HMA Mortgage offers additional products and services ranging from a robust Trade-In Mortgage Solution and Renovation Lending Platform to enhanced Marketing Support, Technology, and localized expertise. “Expanding our footprint to help more families in the U.S. was always the goal,” says David Holland, President. “We are partnered with local experts in multiple regions across the U.S. to create the strongest full-service mortgage experience, bridging HMA Loan Officers with their real estate partners and customers for life.” HMA is seeking sales leaders to play a vital role in its aggressive growth plan: for more information please contact: Tom Mills at 443-309-9346.

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