Non-QM, DSCR, Lead Gen, Fee Collection, Regulation Tracking Tools; STRATMOR on Lending Environment; USDA and FHA News

“Borrow money from pessimists: They don’t expect it back.” We are re-entering conference season, and mortgage conference attendance is all over the map. Some groups have seen a drop. At the other end of the spectrum, the California MBA’s Western Secondary in a couple weeks is well ahead of last year’s numbers. Topics on agendas? Here in Southern California, at the CAMP event, there are two sessions on homeowner’s insurance. In fact, today California’s Insurance Commissioner is on the stage… and not suspended above a dunk tank. Many companies have “trimmed their sails” and are moving forward, and today at 11am PT/2pm ET, join STRATMOR Group Senior Partner Garth Graham, Customer Experience Director Mike Seminari, and Senior Advisor Sue Woodard for the first episode of Advisory Angle, presented by the Chrisman Commentary. From impending restrictions on trigger leads, capacity issues, non-traditional compensation plans, and the customer experience, the trio will talk about how the refi world has already changed and why it won’t provide the lift all lenders are looking for in this market. There are things lenders can do now to keep their businesses afloat, which Garth, Mike, and Sue will explore in this month’s episode. (Today’s podcast is found here and this week’s is sponsored by PHH Mortgage. If you are looking for a Correspondent Lending partner or an experienced, award-winning subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans, look no further than PHH. Hear an interview with H&M Mortgage’s John Hudson on what makes a 26-year-veteran mortgage executive leave the comfy confines of a salary and decide to open a broker shop and originate.)

Lender and Broker Software, Products, and Services

Customers always win with Sagent: 2Q24 rewind! Another successful quarter for Sagent customers, and what better way to make a splash than with a quick and fun highlight reel. Sagent’s relentless work to support American homeowners and buyers is what motivates the entire team at Sagent to work harder and faster as they innovate for the future. Check out this quick and fun recap reel highlighting all their customer wins. Plus, they’ve included a Fast Forward into 3Q, giving you a glimpse into what Sagent is up to and where they’ll be during conference season. Don’t get too comfy poolside, because they have a hot Q3 ahead! Check out the blog, watch the reel, and let Sagent know your thoughts.

Your customers’ experience, the health of your loan portfolio, and your subservicer’s performance is too critical to your bottom line to be left in the dark. You can’t simply trust that your needs and expectations are being met, but you must verify as well. And to do so, you need a partner that offers complete and 100% transparency. And when you partner with Servbank, what you see is what you get. Servbank’s client partners get access to 100% of their portfolio 24/7/365 through Servbank’s award-winning SIME technology. You have real-time, on-demand access to all the data you need and want in your preferred format with just a click of the mouse. SIME is built from the ground up for clarity and ease of use, eliminating the need-to-know random codes and outdated green screens. Not only can you trust that Servbank will exceed your expectations, but they have made it easy for you to verify as well. Your satisfaction is top priority. Servbank is fully compliant and does business with openness and honesty. Click here to partner with the nation’s premier bank subservicer.

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 and 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).

Regulatory Brief: 1071, CRA and Other Hot Topics. Implementing new regulations has always been challenging for financial institutions, and now a bevy of lawsuits questioning the regulatory agencies’ statutory authority has added a layer of complexity. Court cases dealing with rules including implementing Section 1071 of the Dodd-Frank Act and the updated Community Reinvestment Act (CRA) are raising uncertainty about deadlines and what implementation might look like. In its latest webinar, Ncontracts’ team of regulatory experts share which laws and regulations are facing legal challenges, and how to prepare for regulatory change in an uncertain environment. To hear about the latest updates on these legal challenges and what they mean for your institution, check out this month’s webinar. Download the webinar for more.

Many folks were recently caught off guard by the news of Tua Tagovailoa signing a massive $212M contract extension, and speaking of losing money, have you heard how much lenders are bleeding when they fumble upfront fee collection? Fortunately, if you’re using Encompass® by ICE Mortgage Technology, Fee Chaser has you covered. Borrowers get an email or SMS when a fee is due, they pay on their device, and everything flows back into the LOS. No more awkward handoffs of customer credit card info, and no more dropped fees when deals fall out.

New: 5 Powerful Ways to Generate Mortgage Leads in 2024. Standing out as a lender is difficult. Many homebuyers don’t understand exactly what to look for in a lender, and oftentimes lenders look the same to those buyers. Luckily, that creates a major opportunity for you to step up and earn new business. These 5 strategies from Maxwell will help you connect with buyers and drive them reliably into your pipeline. Click here to learn actionable ways to attract and nurture mortgage leads while measuring which strategies are driving the highest ROI.

Correspondent and Wholesale Products

“Are you new to Non-QM or looking for a better correspondent partnership to help you achieve your Non-QM goals? Look no further. At eRESI® Mortgage our leadership team brings decades of experience in mortgage, Non-QM, and correspondent lending. eRESI’s proprietary system is fully integrated throughout the purchasing process, giving you the transparency you need while providing consistent liquidity with a dedicated service team. Our lenders are able to tap into our wide breadth of products which include Full Doc, Alt Doc, DSCR, Closed-End Seconds, and Agency Eligible Non-Owner-Occupied products. If you’re heading to the Western Secondary Market Conference on August 19-21, come meet with our eRESI Representatives, Peter Heintz, Jeff Vanderluit, or Lisa Schreiber, who are ready to discuss how we can elevate your business through Non-QM opportunities. Discover for yourself why everyone is working with eRESI: contact your eRESI Representative or email eRESI Sales!”

Help your investor clients grow their real estate portfolios! Kind’s DSCR program qualifies solely on cash flow from the subject property with reduced documentation. Why choose Kind for non-QM? Our programs are designed to meet complex financial needs with flexible terms to help a wider range of borrowers who fall outside conventional lending guidelines. We understand that every borrower is unique and with the dedicated support of our seasoned mortgage professionals and streamlined broker technology, we ensure a smooth and simple process from submission to closing. Are you ready to build a new revenue stream and grow your pipeline? Kind’s non-QM lineup was built to expand opportunities for Kind partners and their borrowers, and we’re ready to help make that happen! Connect with your Kind AE to get started. If you’re not yet a partner with Kind, visit here.

FHA/USDA Changes

The Federal Housing Administration (FHA) published a final rule, Modernization of Engagement with Mortgagors in Default (Docket No. FR-6353-F-02) in the Federal Register (FR). This final rule updates HUD’s current regulation (24 CFR 203.604) that requires mortgagees to meet in person with borrowers who are in default on their mortgage payments. The final rule allows for the use of electronic and other remote methods of communication to satisfy HUD’s requirement to meet with a borrower who is in default. HUD’s updated regulation will align with advances in electronic communication technology and borrower engagement preferences while preserving necessary consumer protections. The provisions in this final rule become effective on January 1, 2025.

The FHA published a final rule in the Federal Register about face-to-face meetings with distressed borrowers. A report from the Mortgage Bankers Association discusses lessons learned from the financial crisis about borrower stress. Another report from the Journal of Urban Economics discusses the impact of negative equity on loan defaults.

Donna Schmidt, managing director of DLS Servicing, had some thoughts. “The benefit of this rule is it allows borrowers to schedule a ‘meeting’ (either in person, on the phone or other electronic communications) to discuss the default with an experienced default servicing professional. Cold calls either from the borrower or to the borrower could mean that neither were prepared to discuss the specific loss mitigation options available for the individual loan. This rule allows both the servicer AND the borrower time to prepare for a call, making it more productive. Overall, I think this is a very good thing for the industry and for borrowers. The key will be to ensure that the staff for the servicer are well trained, and they do their homework on the loan before they engage in the meeting.”

USDA Rural Development issued a bulletin on 07/31/2024 announcing The Single-Family Housing Guaranteed Loan Program (SFHGLP) Payment Supplement Account (PSA) Pilot. With the current market trends of higher interest rates, the SFHGLP recognizes the challenges servicers face to provide effective loss mitigation, resulting in adverse outcomes for distressed homeowners in need of servicing relief. A complete list of parameters and terms for the PSA Pilot have been published in the Federal Register. This pilot is effective July 24, 2024, and is anticipated to continue until July 24, 2026.

The Single Family Housing Guaranteed Loan Program (SFHGLP) announced revisions to technical Handbook 1-3555, Chapter 11, Ratio Analysis, effective upon the recent issuance of a Procedure Notice (PN). Revisions include Chapter 11 – Ratio Analysis: Increased the maximum PITI Ratio to 34%, provided additional clarification on business debts reported on the applicant’s personal credit report, clarified that waivers are not permitted to increase the PITI ratio above 34% for purchase transactions, and added additional compensating factors which may be considered to support approval of a ratio wavier.

Recently, USDA published PN 613 announcing revisions to Handbook-1-3555. View AmeriHome 20240716-CL Product Announcement for details.

Capital Markets

Is a bank like Wells Fargo Chase really worth 15 percent less than a few weeks ago? Probably not. But concerns about a U.S. economic slowdown have intensified, fueled by a combination of weak economic data, underwhelming corporate earnings, stretched market positioning, and poor seasonal trends. The economy, however, continues to look stable overall, with no major financial imbalances (yet).

The Federal Reserve has ample room to cut interest rates if needed and is expected to do so: Fed Fund futures are pricing in a nearly 95 percent chance of a 50-basis point rate cut at the Fed’s next meeting in September, with additional cuts expected throughout the remainder of the year. Despite this, any rate cuts are unlikely to make housing more affordable for Americans in the near term.

The CBOE Volatility Index yesterday soared to highs reminiscent of the Great Recession and the coronavirus pandemic. Chicago Fed President Goolsbee stated that the Fed would react if the economy weakened further. Traders are hoping that market nervousness will push the Fed to cut rates aggressively, but incoming economic data (we receive Fed-favorite PCE next week) will heavily influence the Fed’s decisions. This week’s data calendar is light, leaving markets focused on supply and upcoming Fed communications.

Outside of payrolls missing expectations to close last week, the latest economic data shows mixed signals. The ISM Non-Manufacturing Index yesterday showed a rebound in the services sector, highlighting its resilience. Meanwhile, lending standards have tightened, and consumer credit growth has slowed, reflecting the strain on low- and moderate-income households. Overall, while some indicators point to economic stability, others signal potential challenges ahead.

Although it really doesn’t move interest rates, the June trade deficit kicked off today’s calendar. (Expectations were for the deficit to improve from $75.1 billion to $72.5 billion.) Later today brings Redbook same store sales and several short-duration Treasury auctions that will be headlined by $58 billion 3-year notes. Overnight, the Royal Bank of Australia was out with its latest monetary policy decision when rates were kept on hold at 4.35 percent. We begin the day with Agency MBS prices worse about .250 versus Monday’s close, and the 10-year yielding 3.83 after closing yesterday at 3.79 percent; the 2-year is at 3.94. No one should be surprised to see a little bounce after the market moves we’ve seen.