Internal Audit, Jumbo, VOE Tools; Government Program News; Southeast and West Lending Trends

“I just saw three people jogging outside, and it inspired me to… get up and close the blinds.” Are you inspired to fly somewhere on vacation this summer? Hopefully your ride is smooth, unlike the recent Singapore Airlines flight; here is a riveting interview with one of the passengers about what it was like. In terms of your travel, good luck: Airlines are cutting back on routes across the U.S. even as consumer demand grows due to plane shortages, recalls, and the lack of financial viability for low-cost carriers like Spirit and Frontier Airlines. Atlanta and Orlando saw some of the biggest cuts in the number of seats available: about 860,000 fewer seats are available on routes flying out of Atlanta this summer. Bloomberg reports that Delta cut about 2.3 million total seats from its plans for the summer. Maybe you’ll be traveling to Mt. Everest, as Goldman Sach’s managing director and senior client investment strategist Elizabeth Burton recently did. She is the guest today at 11AM PT for “Mortgage Matters: The Weekly Roundup” presented by L1. (Found here, this week’s podcasts are sponsored by American Financial Resources, the mortgage lender that’s shaking things up by streamlining processes, bringing on the best humans in the business, and putting the customer experience front and center. Register here for a webinar on June 6th with Robert Pieklo and Rob Chrisman, and today’s features an Interview with Mr. Pieklo on the rationale behind private money entering the mortgage space and why the fund managed by Proprietary Capital chose AFR for investment.)

Lender and Broker Services, Products, and Software

“Now more than ever, mortgage companies are challenged to compete for market share while navigating increasingly compressed margins and evolving borrower preferences. With Encompass® by ICE Mortgage Technology®, the industry’s leading end-to-end digital mortgage platform, lenders can unify and streamline every aspect of their business from customer acquisition to fulfillment of loans, as well as ongoing customer retention. As we continue to invest in the platform, we’re focused on four key areas of innovation to drive the industry forward, improve financial performance of mortgage companies and help make the dream of homeownership more affordable and attainable for consumers. Learn more here.”

In a game of telephone (better known as Chinese whispers in the U.K.), the first person in a line is told a short phrase, which is whispered down the line, only to reveal the (usually badly mangled) phrase at the end. For accurate insights, it’s much better to hear the story straight from the source. Argyle’s verification of income and employment leverages direct-source data from real-time payroll connections to automate tedious manual processes, decrease borrower friction, and reduce repurchase risk. But you don’t have to take my word for it; instead, hear what two former loan officers have to say about the seven ways direct-source data eliminates common VOIE pain points in the mortgage industry.

“’Since we started this dance together, we’ve taken our costs for verifications from 8 basis points per loan down to 3 basis points per loan.’ (Femi Ayi, Revolution Mortgage.) Revolution Mortgage estimates that it can save up to $20,000 per month in cost on verifications with Truv over traditional verification methods. Significant reduction underscores Truv’s commitment to providing cost-effective solutions for mortgage lenders. Lenders can lower costs by up to 80 percent on verifications, reduce the risk of fraud and buybacks by leveraging real-time data directly from the source, and accelerate growth by increasing pull-through rates and closing loans faster. Contact our team for a personalized demo today to start saving!”

“Go BIG this Summer with the new Jumbo ONE Select program from LoanStream rolling out soon! Our new Jumbo allows for income verification using Bank Statements and VOE. Reserve your spot at the upcoming new Jumbo ONE Select webinar to get full details on the program. Get the knowledge you need to thrive and compete in today’s mortgage environment by expanding your client offerings to include Jumbo. Register now.”

“An internal audit is required to apply for or maintain Fannie Mae approval and an effective internal audit function will do so much more. It will help you better understand what is really going on in your operation, so you can make informed decisions and operate more effectively while minimizing your risk. There are many free resources for sellers and servicers, provided by Fannie Mae, to assist in meeting your internal audit requirements. Discover these resources here and tune into Richey May’s Internal Audit Insight video series to get answers to all your internal audit questions. From risk assessment to control identification and testing, each episode explores how internal audits can fortify your operations, enhance compliance, and streamline processes. Email info@richeymay.com to speak with one of our experts today!”

NEW: Learn which loan products are performing and how to cater to today’s home buyers with Maxwell’s Q1 2024 Mortgage Lending Report. Maxwell’s latest Mortgage Lending Report shows that borrowers continue to pursue HELOCs, VA loans, and FHA loans as higher interest rates persist. Meanwhile, first-time home buyers are displaying resilience despite market challenges, with loan volume growing at twice the rate of the overall market. Today, first-time buyers make up nearly 30 percent of the market, their highest share since Maxwell began tracking this data. Want to access exclusive data that sheds light on today’s market, along with actionable tips to get ahead of the competition? Click here to get your copy of Maxwell’s Q1 2024 Mortgage Lending Report.

Going to California?

I was recently asked, by a few people, about my occasional comments that the single state of California accounts for 20-25 percent of residential loan production in the United States. Lo and behold, it is nowhere near that. I turned to Richey May’s Tyler House, Director of Data Analytics, for some number crunching on the HMDA data. “Here are the percentages of 1-4 family, 1st lien mortgage loans in California as a percent of total: 2018 (11 percent), 2019 (12 percent), 2020 (14 percent), 2021 (13 percent), 2022 (9 percent), and 2023 (7 percent).”

Tyler observes, “The decrease in California is part of a broader trend of fewer loans being done in the western USA, and more being done in the Southeast. There is a handful of things going on with this trend, but certainly the lock-in effect and historical purchase/refi mix in California are driving some of these trends in 2022 and 2023.”

Sure enough, when looking at units over the last several years, the Midwest and Northeast have been very steady (23 and 20 percent, respectively) but the Southeast has increased from about 30 percent to 38 percent in 2023 whereas the West has dropped from 30 percent to 20 percent.

And if you think that the volume figures are much different, you’d be wrong. Over the last five years California has fallen from 21 percent of the nation’s total down to 13 percent last year. Volume stats mimic the unit breakdown: the Midwest and Northeast have been very steady (16 and 20 percent, respectively) but the Southeast has increased from about 25 percent to 35 percent in 2023 whereas the West has dropped from 40 percent to 28 percent of national funded volume.

Not only that, but, per this story based on figures from some company that I’ve never heard from named Zumper, California rents are dropping.

Government Program Updates

At a Mortgage Bankers Association conference in New York, a VA official said the Department of Veterans Affairs plans to temporarily lift its ban on buyers directly paying for professional real estate representation until the agency deems it necessary to engage in a formal rulemaking process. Although not an official announcement, the comments from VA Deputy Director of Policy Michelle Corridon were met with relief from the real estate industry, as the VA’s home loan guaranty is the only loan program with this explicit prohibition. Veteran buyers have limited options in situations where the listing broker makes no offer of compensation to the buyer broker, potentially leaving veterans without professional representation or forcing them to switch to less favorable loan products. More information can be found in this article.

FHA published new Cybersecurity Incident Reporting Requirements in Mortgagee Letter (ML) 2024-10. These requirements are part of the Department of Housing and Urban Development’s (HUD) commitment to the security and integrity of all its systems and technology supporting FHA operations. Effective immediately, FHA-approved mortgagees that experience a potential or actual cyber incident must notify HUD via the FHA Resource Center and HUD’s Security Operations Center within 12 hours of detection with required information as outlined in the ML. Once notified of an incident, representatives from HUD will contact the designated representative from the institution reporting the incident to determine the appropriate mitigation steps based on the nature of the incident.

FHA published updates to the Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) clarifying instructions, adds new guidance, and incorporates previously published Mortgagee Letters (ML) in Sections I, II, III, and IV as well as Appendix 7.0. In addition to the incorporation of the updates and revisions, there are notable updates in Section II (Origination through Post-closing/Endorsement) and Section III (Servicing and Loss Mitigation) of which mortgagees should take note. Update also includes the updated Appraisal Report and Data Delivery Guide and the Single Family Default Monitoring System Reporting Codes documents that are posted to the Supplemental Documents web page.

USDA Rural Development bulletin issued on May 21 announced there will be an interest rate increase for SFH Direct Programs effective June 1, 2024.

In All Participants Memorandum (APM) 24-07, Ginnie Mae announced that it will now permit the securitization of Digital Collateral into the same pools as its traditional paper collateral (commingling), effective with June 1, 2024, issuances. The introduction of commingling is designed to promote liquidity and further increase participation in the Digital Collateral Program. Commingling also supports the Department of Housing and Urban Development’s (HUD) Strategic Plan with respect to the modernization and digitalization of the Mortgage-Backed Securities (MBS) program. For more information regarding the transition to the new reporting.

Ginnie Mae announced the recovery planning requirements for non-depository Issuers whose portfolios equal or exceed a remaining principal balance (RPB) of $50 billion at the end of the calendar year. The initial recovery plans for the calendar year 2024 are due no later than June 30th, 2025. For more information regarding the transition to the new recovery planning requirements, see APM 24-08​.

Plaza Home Mortgage® is the only TPO-focused lender that securitizes and services 100 percent of its Reverse Mortgage Loans. Plaza’s Reverse Mortgage Division is committed to equipping you with the necessary tools to effectively navigate reverse mortgages. Dive into an informative video for a thorough understanding of how to request a Reverse Mortgage PreQual.

Capital Markets

A stronger-than-expected consumer confidence report for May added some upward pressure to rates to open the week and was aided by two poorly received note auctions. May marked the first increase in the consumer confidence index after three consecutive months of decline, evidence that consumers are feeling good about labor market conditions. On the auction front, a $69 billion 2-year note sale tailed by a basis point while a $70 billion 5-year note sale drew a 1.3 basis point tail. The S&P Case-Shiller Home Price Index was up 7.4 percent year-over-year in March, while the FHFA Housing Price Index was up 0.1 percent in March after increasing 1.2 percent in February. There is some important data to come this week with the second revision to Q1 GDP tomorrow and personal incomes / outlays on Friday, which contains the PCE Price Index, the Fed’s favored measure of inflation.

The latest look at May prepayments showed an expected increase due to turnover seasonals, with refinancing activity slightly higher and the day count unchanged at 22 days. FN30 and FN15 speeds are seen increasing 3 percent and 4 percent, respectively, with GNII increasing more at 6 percent, the same as the preliminary forecast. Gross issuance is currently $89.0 billion with a few days to go, which would be the highest level since $96.6 billion last September.

Mortgage applications from MBA kicked off today’s calendar, decreasing 5.7 percent from one week earlier. Later today brings Redbook same store sales, Richmond Fed surveys for May, Dallas Fed Texas services, Treasury auctions that will be headlined by $28 billion reopened 2-year FRNs and $44 billion 7-year notes, and the latest Beige Book from the Fed. Two Fed speakers are currently scheduled: New York President Williams and Atlanta President Bostic. It’s Wednesday already and we begin the day with Agency MBS prices worse about .125 from Tuesday, the 10-year yielding 4.57 after closing yesterday at 4.54 percent, and the 2-year yielding 4.96.

LO Jobs, and a Farewell…

If you are in need of a leadership candidate that has 25+ years in the credit risk and underwriting space, we know of one that is available immediately. The person has spent the last several years successfully building out new departments for one of the largest lenders in the country and has a track record of consistently being successful in developing and growing cross-functional teams in a remote capacity. They utilize a wide variety of reporting and analytics mechanisms to gain insights into the past, present, and potential states of affairs and are passionate about process improvement. Therefore, if you need to either build out an entire new Credit Risk, Policy or Underwriting Department, or need to add a strong candidate/leader to your existing department(s), please reach out to Anjelica Nixt to forward your note.

Congratulations to industry vet Tom Millon, whom I’ve known since 1990, who has effectively retired from the mortgage banking industry but is moving into board of director roles, with the purchase of Computershare by Rithm. Tom was the CEO of Computershare Loan Services US (CLS).

John Hale let me know the sad news that Mike Frankovich, who had worked for more than 30 years at Ocean First Bank, in Toms River, NJ, as a residential loan officer, sales manager and vice president, passed away. “He was a force unto himself as a record-setting loan producer who helped thousands to achieve their dreams of homeownership and forged many lasting friendships along the way.”