Originator and Customer Satisfaction Surveys, Upcoming Events and Training, Walter and Reverse Mortgages

By rchrisman@robchrisman.com

(Thanks to Stephen S. for this one.)

A lawyer named Strange passed away. His friend asked the tombstone maker to inscribe on his tombstone, "Here lies Strange, an honest man, and a lawyer."

The inscriber insisted that such an inscription would be confusing, for a passerby would tend to think that three men were buried under the stone.

However, he suggested an alternative. He would inscribe, "Here lies a man who was both honest and a lawyer."

That way, whenever anyone walked by the tombstone and read it, they would be certain to remark, "That's Strange."

As the old adage goes, "Women spend more time wondering what men are thinking than men spend thinking." But certainly women spend a good deal of time thinking about other things, like...thinking about the global economy. Federal Reserve Chair Janet Yellen says blockchain "could make a big difference to the way in which transactions are cleared and settled in the global economy" and notes the central bank is exploring possible use of the technology. "We are looking at it in terms of its promise in some of the technologies that we use ourselves," Yellen said. And if there's an industry that cries out for the efficiencies and data integrity that blockchain tech promises, it's undoubtedly the US residential mortgage biz, also heading down the blockchain path.

Vendor information, surveys, and trends?

 How old are your originators on average?  Should you change your name to Methuselah Mortgage? STRATMOR Group is rolling out its 2017 Originator Census Survey which will cover 2016 data. Last year's Census Survey (covering 2015 results) contained some surprising results. For example, would it surprise you to learn that the average age of the Top 20% is roughly equal to the average age of the Bottom 20%? So you thought the old folks were booking all of the loans while the youngsters were scrambling to keep up! The sample size has been growing each year and last year contained over 16,700 originators. This information enables participating lenders to understand their sales force demographics vs. peers with respect to productivity, turnover, age, tenure, gender, ethnicity, etc. For full details, visit STRATMOR's website at 2017 STRATMOR Originator Census Survey or contact Nicole Yung.

 "For LOs looking for affordable ways to increase production in 2017, consider reaching consumers on mobile devices and those searching for home buying information online. There are two new consumer portals that offer innovative ideas for home pros. YourHome1Source.com is a nationwide home resource portal that reaches millions of home owners. At $39 per month you upload your logo, up to 20 company and community photos, up to 20 product flyers, cycle video messages and post special deals for home buyers and home owners to browse. The website is like an online home show - informing people on home-related products & services with colorful images. It's free for consumers - with no registration required - and no questions to answer. The site allows home pros to engage shoppers through product announcements. And there is Your Home Savings App which is free and already lists over 100,000 businesses and is projected to reach 150 million mobile users in 2017. The App is now available for home pros who can accept payments in the field; i.e. inspectors, HVAC, repair contractors, interior design, home furnishing, home security, home warranty, etc. The App will expand to home builders, real estate agents and mortgage lenders in March, 2017, allowing eGifts at closing."

 Private Eyes, CEO, Sandra James spread the word that, "We have added top executives with decades of multi industry experience and relationships to expand our market share nationwide this year! With exciting new programs like the Fannie Mae 1 Day Certainty to start 2017, we are continuing to provide best-in-class turnaround time and service for VOE's, 4506-Transcripts and pre- and post-employment background checks. For more information, view our press release and www.4506-Transcripts.com. Please contact our new sales team to find out more at sales@pebackgroundchecks.com."

 InSellerate, in another effort to help the consumer direct mortgage industry, has released its three year comprehensive study on how lenders are responding to customer inquiries online. This study includes data from 1,940 mortgage companies and over 3,000 inquires. It's a white paper on a summary of 3 years of our MBA contact study See how we are doing as an industry and some key best practices.  Download the study here.

 Company-specific news

 We've heard about, and will continue to hear about, changes in the forward mortgage market. One shouldn't forget the changes in the reverse market either, and with 10,000 people a day turning 62 this market will only heat up. But in the flurry of "forward mortgage" news I plum forgot this news: Walter Investment Management Corp. exited the reverse mortgage origination business. Both the Reverse Mortgage Solutions and Security One Lending brands are being shut down, though the servicing of existing reverse mortgages will continue. Additionally, loans already in the pipeline will be fulfilled.

 Events and Trainings

 Starting with something fun, the 2017 Hurt Mor Ski Trip is coming up in Park City, Utah from March 8^th-12^th. "The Wasatch Range in Utah is enjoying an epic year this 2017 ski season: Alta just received a 3-day storm total of 7 FEET!!! We picked this week to not conflict with SIFG Conference in Vegas and the MBA Mid-Winter Depends Conference in Beaver Creek. The event offers skiing within 45 minutes of the Salt Lake City Airport as well as the very best powder in North America." If interested, please contact Dave Hurt (202-437-5235) or Jeff Moran (720- 641-6259).

 Nations Direct Mortgage has partnered with MGIC to sponsor a webinar highlighting their "Affordable Lending" purchase initiative for 2017. Per the Mortgage Bankers Association, the purchase market is projected to increase by 11% to $1.1 trillion this year, and Nations Direct Mortgage is ready to help brokers capture a significant share of that business!  "62% of our business was purchase in 2016, in a heavy refinance market. We understand the purchase segment and are prepared and excited to help brokers around the country claim their fair share of this business" said Martin Warren, Director of Lending. Join Martin Warren and Jim Labbé of MGIC on February 8^th at 9:30 am PST for the webinar that could change the way you do business this year. Register here.

 Today is the last day to secure the early bird registration discount for The Mortgage Collaborative's Winter Conference at the Omni Resort & Spa at Montelucia in Scottsdale, AZ March 1-4. Always interactive and innovative, TMC's Winter Conference will feature several notable general session speakers, over 40 breakout sessions, and a host of different networking sessions and events. The full agenda and additional details on the event can be found here or you can contact Rich Swerbinsky. See you in Scottsdale!

  Join the Silicon Valley Chapter of CAMP for its February 10^th breakfast meeting at the Pizza Factory. Donna Chetner, Renovation Loan Specialist from Plaza Home Mortgage will be discussing the benefits of Home Renovation Loans. 

 MGIC offers free training webinars every month. Check out its training calendar and just click on the topic that interests you. 

Capital Markets: Pretty Quiet Out There

 Mortgage backed securities got beat up last week after Brookings released an article by former Fed Chairman Ben Bernanke that discussed ending the practice of re-investing the cash from maturing bonds and MBS back into the market. The good news is that we always knew this would happen, and the markets have plenty of lead time to adjust, right?

 The Fed's balance sheet has been stuck at $4.5 trillion since QE ended, and they purchased about 360 billion worth of MBS last year to maintain their exposure. Given that total originations were probably around $2 trillion, that number is not insignificant. Does that mean spreads will widen once the Fed ends this practice of re-investing maturing proceeds? The short answer is "probably not" The spread between the 10 year and the mortgage rate is about 165 basis points or so. Prior to QE (Quantitative Easing), it was around 166, and you didn't really see any decrease in that spread when QE was active. The end of reinvestment should be a nonevent for the mortgage market. 

We started off the week with some U.S. Treasuries trading higher, the 10-year unchanged, and the 30-year bond lagging behind. The long end of the curve is dependent on supply and demand, and yesterday news hit that Microsoft would be selling $17 billion in a debt offering across 7-maturities from 3-40 years. And we are part of a global economy: sovereign debt yields of Eurozone periphery countries traded sharply higher after the IMF said that Greece's public debt burden was unsustainable. The IMF's participation is considered a prerequisite by some Eurozone countries for their agreement to continued debt relief for Greece

 This morning we've already had the first of the week's three central bank decisions where the Bank of Japan held steady on policy, as expected. In this country, we've seen the Q4 Employment Cost Index (+.5% in the 4^th quarter, below forecasts). For anyone interested in home prices from back in November we'll have the S&P/Case-Shiller Home Price Index. Chicago PMI for January will be released at 9:45AM ET, and then Consumer Confidence. And day one of the two day FOMC meeting will get under way in Washington, DC. We start the day with the 10-year at 2.49% and agency MBS prices up a shade compared to Monday afternoon.

Home Point Buys Stonegate and Citi Bails on Servicing Biz, Minority Demographics Helping Lenders

by rchrisman@robchrisman.com

Being a teenager and getting a tattoo seem to go hand and hand these days. I wasn't surprised when one of my daughter's friends showed me a delicate little Japanese symbol on her hip. "Please don't tell my parents," she begged.

"I won't," I promised. "You're 18 now, so I guess it's your choice. By the way, what does that stand for?"

"Honesty," she said.

I certainly am hearing some dire numbers from appraisers out there - like their business, which kind of gets the ball rolling for a loan so could be considered a leading indicator, is down upwards of 50%. Let's hope it's a temporary blip. What if your appraisal was off by a couple mil? Rocker Stevie "Guitar" Miller may have something to say about values of hard to appraise properties. And no, it's not even a yurt.

 How much is your company worth?

 If you own a multi-channel lender doing about $800 million a month, and earning about $17 million a month in revenues on that, what is your company worth? Answer: $211 million. I am, of course, simplifying things immensely, but those are the stats in the Home Point Financial Corp. deal to acquire Stonegate Mortgage Corp. in an all-cash transaction. Willie Newman, the Ann Arbor, Michigan-based Home Point's CEO, stated that as a result of the combination, the business will have full national coverage across all channels of mortgage origination, as well as vertical integration across the mortgage value chain. Stonegate's current HQ is in Indianapolis, did $2.62 billion in volume in the 3^rd quarter of 2016, up 12% from the prior quarter, and total origination revenues reaching $51.8 million, up 35% from the prior quarter. It's been a year and a half since Stonegate's founder and former CEO Jim Cutillo abruptly announced he was leaving the company.

 What does it mean? Well, it won't be the last big company news of 2017 (see below). John M., an industry vet, wrote to me saying, "They probably should have sold in 2014 when their stock price was 15.  Still, a nice premium over the $5-$6 range the last few months, I am guessing the NOL carryforward of $163.5 million was of particular interest to Home Point. Lesson learned...when you run out of MSRs to sell you just sell the whole company!" It summed up several other comments that I received on the deal.

 And in other company news, Citigroup announced its "strategic exit" from mortgage servicing by the end of 2018 and the sale of its servicing to NRZ. "Citi has executed agreements that will accelerate the transformation of the U.S. mortgage business by effectively exiting servicing operations by the end of 2018 to intensify focus on originations. The strategic action is intended to simplify CitiMortgage's operations, reduce expenses, and improve returns on capital."

 Citi has seen its origination market share slide over the years, and it has gained the reputation for being "in the market, then out of the market." But what does the deal say about New Residential? NRZ announced that it was acquiring $97 billion of agency mortgage servicing rights (MSR) from Citibank. Since the end of 3Q, the company has announced roughly $250 billion of acquisitions. The company also announced a 49.2 million share common stock offering to fund the acquisitions. NRZ has announced several significant MSR acquisitions since the end of 2Q including a $72 billion MSR acquisition from PHH announced in December 2016. Servicing UPB at the end of 3Q16 was $354 billion. Since then the company has announced roughly $250 billion in UPB of servicing acquisitions.

 Analysts expect the company can fund the MSRs at around 50% debt, and the advances at around 90% debt. NRZ will be using Nationstar (NSM) to subservice the Citi portfolio.

 Know your borrowers

 While we're on the topic of trends and shifts, one of the additional HMDA fields is "borrower's age." Many lenders are trying to expand their offerings to capture borrowers in their 20's as well as Baby Boomers. Fool.com reports the average college graduate this year will have $37,112 in student debt, a 6% increase compared to last year. At the other end...some view reverse mortgages as the last chance to lend to this generation, born between 1946 and 1964. The youngest are 53 this year! And 10,000 a day of those codgers are turning 62 - eligible for reverse mortgages. Regardless of race, creed, color, or age, it is important for residential lenders to have a working knowledge of the demographics of their client base.

 The Pew Research Center gives us an examination of mortgage-market data indicates some of the continuing challenges black and Hispanic homebuyers and would-be homebuyers are facing.  

 Meanwhile, years ago Asian all-cash buyers rocked the market in certain local communities, but in some areas that has nearly vanished.

 Research done by Bank of America Merrill Lynch finds that millennials are the #1 workforce demographic in the US and account for $1.3 trillion in direct annual consumer spending. Meanwhile, millennials will account for 75% of the workforce by 2025. Millennials want to live closer together and that dense urban living is better for our economy and our environment, they seem to be drawn to communities that have access to all the amenities but also integrate "naturally" into denser cities, and that the freelance economy is allowing many, including millennials, to select where they'd like to live. Smaller/medium cities in North Carolina, Oregon, Colorado and Kentucky have seen an influx in these types of workers. Anna Loehr wrote in Fast Company recently that many freelancers are moving even further out into rural settings. Our digital economy allows workers to live pretty much wherever reliable internet service can reach.
Jeremy Potter points out that, "We're shaking up old notions of household formation, home ownership, economic centers and even so-called work-life balance. Not just millennials, everyone. Hispanic and Asian households can span generations and/or include extended family in addition to nuclear family. The digital economy has us reworking solutions and efficiencies. The traditional economy is evolving and considering bringing manufacturing back to American towns. The period of questioning has begun and is in full swing. I think housing and home ownership are just two issues that top the list for most people."

 Builder Magazine reports that Canuso is introducing large, multi-generational homes in New Jersey that feature more than 3,000 square feet of living space.

 By 2035, more than one in five people in the U.S. will be aged 65 and older and one in three households will be headed by someone in that age group, according to Projections and Implications for Housing a Growing Population: Older Adults 2015-2035, a report released recently by the Harvard Joint Center for Housing Studies (JCHS).

 Do rising mortgage rates pose a problem for millennials entering the housing market? Sure they do, but higher rates impact all borrowers regardless of age. The interest rate move in November and December has lowered the median-sized mortgage that borrowers can qualify for by 9%.

 Companies are certainly following the demographic shifts. For example, National Mortgage Insurance Corporation (National MI), is helping to educate mortgage lenders on how to best reach out to multicultural borrowers. The company is educating lenders through speaking engagements, webinars and social media. For the second year, National MI has joined forces with Kristin Messerli, founder of Cultural Outreach Solutions.

 Changing demographics in the U.S. are leading to an increase in the number of millennials as well as a more ethnically diverse population, per Messerli. One in three home purchases today are made by Millennials, who comprise the most ethnically and racially diverse generation in the U.S. Hispanics are the fastest-growing group in the U.S. home buying market, according to a Freddie Mac report. And per the MBA by 2024 there will be 33% more new minority home buyers.

 Multicultural home buyers represent an important market for mortgage lenders as they look to grow their purchase loan originations business, notes Christina Bartning, VP of marketing and product development with National MI. "It's also critical that private mortgage insurance companies work to help address the multicultural segment, as some of those borrowers may not have a 20% down payment to purchase a home."

 Interest rate news?

 Regarding current origination volume, Fannie's trading desk reports that, "The continued light supply reconciles with what the desk has heard from customers who reported that overall lock activity was down about 5-10% week over week. Primary rates continue to be posted in the 4.125-4.375% range on most rate sheets.  Using 4.375% as the prevailing rate, the primary/secondary spread is ~117bps which is pretty much flat from the previous week.  The primary/secondary spread is the spread between the 30yr primary rate and the interpolated MBS par coupon. It is used as a rough proxy for trends in originator margin." Well said.

 Friday rates improved both Durable Goods and U.S. GDP growth for the fourth quarter were slightly lower than expected. Despite the bond market sensing the Fed won't move overnight rates until June, there is plenty of scheduled news this week to nudge long-term rates one way or another. Jobs and housing constitute a huge portion of the economy, and we'll have our fill of updates this week.

 This morning we've already seen Personal Income and Outlays/Spending/Consumption (+.3% & +.5%, respectively, as expected) as well as the core PCE (Personal Consumption Expenditure) figures (+.1%). Coming up is Pending Home Sales.

 Tuesday has the Employment Cost Index, S&P Case-Shiller Home Price Index from November, Chicago PMI, and Consumer Confidence. Wednesday brings the usual MBA mortgage applications, ADP Employment Report, PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending and the FOMC meeting announcement (don't look for any change). Thursday brings Challenger Job-Cut Report, Jobless Claims and Productivity and Costs. Friday closes out with the big boy Employment Report, Factory Orders and ISM Non-Manufacturing Index. The 10-year is currently yielding 2.49% and agency MBS prices are pretty much unchanged from Friday's close.

Lender's Appraisal, Pricing, and Disaster Updates

By rchrisman@robchrisman.com

Recently a routine police patrol parked outside a bar in Austin, Texas. After last call the officer noticed a man leaving the bar so apparently intoxicated that he could barely walk.

The man stumbled around the parking lot for a few minutes, with the officer quietly observing.

After what seemed an eternity in which he tried his keys on five different vehicles, the man

managed to find his car and fall into it.

He sat there for a few minutes as several other patrons left the bar and drove off.

Finally, he started the car, switched the wipers on and off--it was a fine, dry summer night, flicked the blinkers on and off a couple of times, honked the horn and then switched on the lights.

He moved the vehicle forward a few inches, reversed a little and then remained still for a few more minutes as some more of the other patrons' vehicles left.

At last, when his was the only car left in the parking lot, he pulled out and drove slowly down the road.

The police officer, having waited patiently all this time, now started up his patrol car, put on the flashing lights, promptly pulled the man over and administered a breathalyzer test.

To his amazement, the breathalyzer indicated no evidence that the man had consumed any alcohol at all!

Dumbfounded, the officer said, I'll have to ask you to accompany me to the police station. This breathalyzer equipment must be broken.'

"I doubt it", said the truly proud Redneck. "Tonight, I'm the designated decoy."

Recent weather has renewed the disaster declarations from lenders. As always many take their cue from FEMA's disaster declaration site. Here is a smattering of updates.

In response to the wildfires in Tennessee and in response to a Federal Disaster Declaration, M&T Bank will enforce the Disaster Re-Inspection Policy for all properties located in the affected parishes in the counties of Sevier.

 Federal disaster aid with individual assistance has been made available to counties in the State of Georgia to supplement individual, state, and local recovery efforts in the areas affected by Severe Storms, Tornadoes, and Straight-line Winds beginning January 2. Current active disaster declarations in Georgia includes Baker, Calhoun, Dougherty, Early, Mitchell, Turner, and Worth counties. Prior to closing and funding, ResMac, Inc. will require a property inspection for any loan secured by a property in the affected area. If the subject property is in one of the impacted counties and the appraisal was completed prior to the incident period end date, ResMac will require a post disaster inspection confirming the property was not adversely affected by the disaster.

 AmeriHome re-inspection requirements are in effect for 4 counties in the state of Mississippi affected by severe storms and tornadoes January 20-21, 2017.

 With the bond market shifting, companies are tweaking their fee and loan level price adjustment schedules, and in some cases, lock policies. And even the way money is handled. As an example...

 To maintain proper disbursement schedules and data uploads for determination of payment due dates and calculations, Pacific Union has revised the window for prepaid collections and final settlement payment.  Specifically, Correspondents are now required to collect or verify payment of any unpaid tax disbursements that will be due and payable within 60 days of the loan closing or 30 days from the Pacific Union Purchase Date.

 LDWholesale has done away with escrow waiver fees for all conforming Fannie Mae and Freddie Mac products. Program Highlights are available on its website.

 For new Best Effort commitments taken on or after Monday, January 23^rd, PennyMac will reduce the minimum extension term to one (1) calendar day. Correspondents will be permitted to extend the commitment delivery due date of a Best Efforts commitment for the maximum cumulative term of the lesser of thirty (30) calendar days or the original (or relock) commitment term. PennyMac will reduce the commitment price by the extension fees as noted in its announcement.

 Effective Monday, January 23^rd, PennyMac will be making changes to values in select LLPA grids. No structural changes are being made at this time.  Sample rate sheets highlighting the changes were placed onto PennyMac's Portal on Wednesday, January 18^th, at approximately 6 PM PST. Clients should have reviewed the sample rate sheets, and notify their pricing vendor of the changes.

 Effective immediately, Flagstar Bank's Marketing Department is now able to lock loans that are in underwriting, at an increased interest rate, without sending the loan to an underwriter for approval first.

 As the industry know, the MIP change was temporarily suspended. Mountain West Financial published that its management foresaw that, and that the most recent MIP reduction (as published in HUD Mortgagee Letter 2017-01) would be rolled back. "This change will likely be effective immediately, and could create significant operational challenges for lenders and their customers. Given this information, if this reversal is implemented, Mountain West Financial, Inc wants its customers to know that we are preparing the contingency steps necessary to unwind recent changes due to the reduced MIP rates."

 U.S. Bank has updated its portfolio interest only ARM notes and riders to reflect a lifetime floor rate equal to the margin. The new loan documents may be used immediately and are mandatory for U.S. Bank interest only ARM loans with notes and riders dated on or after February 1, 2017. The updated product forms are available in its Seller Guide.

Flagstar posted updates regarding The USDA has clarification that a Realtor Administrative Fee is an unallowable fee for the borrower to pay at closing.  The fee may be paid by the seller and/or lender credits may be used to offset this fee and must be reflected in the Paid by Others column on the CD. Also, noted, Pro-rations reflected in Section L cannot be utilized towards the borrower's investment.  

 Penny Mac has updated requirements regarding Trailing documents and Unmatched data fees.

 What about changes in appraisal requirements and evaluating collateral?

 A recent Citibank bulletin referenced general credit policy updates that include Age of Appraisals, Citibank Assessment Areas, Detached / Site Condominiums: Limited Project Review Requirements, Property Inspection Waivers, Condominium Projects: Mixed Use Space. Clarifications include: Proof of TILA Error Corrections, Self-Employed Business income, Verifying Assets and Student Loans.

 Wells Fargo Funding will no longer require a project review on site condominiums that meet Fannie Mae requirements and secure conventional Conforming Loans underwritten by Fannie Mae Desktop Underwriter® (DU®) effective for loans purchased on or after January 24^th.

 Nationstar Mortgage posted the continuation of Appraisal oriented deficiencies trending within the loan submissions received. In this best practice, Nationstar's focus is on its Appraisal Review process and provide top trends, tools and resources that are available.

 Capital markets & rates

 Hunt Mortgage Group, a leader in financing commercial real estate throughout the United States, announced it provided a Fannie Mae loan facility in the amount of $5.3 million to enable the acquisition of a manufactured housing community located in San Andreas, California.  The final loan covered approximately 75% of acquisition costs. Oak Shadows Mobile Home Park is comprised of one, one-story community building and 105 pads. The property was developed in 1977, is situated on a 17.8acre parcel and offers 230 parking spaces. It is age-restricted to 55 and older and is 100% occupied.  Property amenities include the leasing office and clubhouse with a kitchen and fitness room. Outdoor recreational activities include a swimming pool and spa. All the pads at Oak Shadows are double-wide. Some of which can accommodate "triple-wide" homes.

 Yesterday morning the bond market started off with losses but then recovered after we saw a plunge in new home sales for December and solid demand for the 7-year Treasury auction. On top of that, Initial Jobless Claims reportedly rose more than expected last week (but the absolute level of claims remains near historic lows and unemployment is a lagging indicator anyway), but the job market remains quite healthy. By the end of the day agency MBS closed higher in price (about .125) and spreads to risk-free Treasury securities mostly tighter, and the 10-year's yield at 2.51%.

 This morning we've seen the first look at Q4 Gross Domestic Product (+1.9% but there are always revisions the next two months) and final sales (+.9%), and Durable Goods (-.4%, ex-transportation +.5%). Coming up is January's Michigan Sentiment. After the GDP and Durable Goods data, which are very complicated numbers, we find the 10-year's yield wandering around 2.51% with agency MBS prices better by a smidge versus Thursday's close.