4.12.23 Inverted Yield Curve Explained; SimpleNexus' Jay Arneja on eClose; Latest Inflation Reading

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This morning I head from Seattle to Atlanta for some MBA/STRATMOR Peer Group meetings. Seattle has its share of hipsters, and sometimes one needs a translator to figure out what they’re talking about. The Urban Dictionary defines, “Situationship” as, “Let’s just chill, have sex, and be confused on the fact that we are not together but have official emotions for each other.” It is a type of “relationship,” defined as, “The way in which two or more concepts, objects, or people are connected, or the state of being connected.” Mortgage pricing is related to the yield curve, and anyone who cares about ARM, 15-year, or 30-year home loan pricing may want to check out STRATMOR’s current blog, “The Yield Curve Is Inverted: Should Lenders Care?”. And we all have a relationship with the environment and the climate. Whether or not you believe in climate change, or in what causes it, is of no concern to me, but you can’t ignore it and it is impacting the pricing of home loans in certain areas. And so Climate Alpha launched HOMES, a free tool pricing the impacts of climate change into the future value of more than 100 million American homes and “forecasts financial gains or losses due to climate change between now and 2040.” (Today’s podcast can be found here and is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender. Nexus Closing delights homebuyers with a convenient, single sign-on experience that makes it possible to close on a loan from anywhere. Hear an interview with SimpleNexus’ Jay Arneja on the evolution and adoption of eClose.)

Employment and transitions

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“Why are you reading Chrisman ads? Is it because you’re looking to level up your career? Then, boy, do we have the boss level for you. (Literally. You could be the boss). When you own a Motto Mortgage franchise, you own a business that can 1-up the competition. Our mortgage brokerage model allows you to find highly competitive rates for your borrowers while you create a business of your own. We provide professional marketing content, product mix, wholesale lender relationships and compliance support. From. Day. One. It's time to control your own endgame with a Motto office. Email us for all the details.”

“How do you THRIVE in this industry today? Consistently doing the right thing. This takes quality people. Our community is what makes us Thrive! We are growing by attracting quality people who want to innovate, create, and execute on the most unique value propositions in the industry so that our clients win. Having just launched our new Broker-Retail models like “Model X,” as well as uber-competitive pricing strategies like our “Partner Value” program, we can give the advantages of an IMB, Broker, and Bank models all in one! We are proud and thankful to add new partnerships in GA, TX, IN and KY recently because of our forward thinking. All while being recognized again as a “Top 5 Mortgage Company To Work For” proving our people are our greatest asset! Contact Randell Gillespie, EVP, National Sales if you are a team looking for the most unique opportunity to Thrive today!”

Cenlar FSB announced that Marlon Groen has joined the company as Chief Compliance Officer, and Jennifer Rowen, who formerly served as Chief Compliance Officer, has been promoted to SVP, Core Operations.

Lender and broker services, programs, & software

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“New payment deferral options for delinquent borrowers are coming! Are you ready? Are your systems designed to introduce changing requirements and programs without delay? Don’t keep innovation on pause! Position your operational team and system processes with the information and modernization they need when they need it. Our recent blog, “Are You Ready to Offer Your Borrowers New Payment Deferral Options?” provides information about FHFA’s upcoming payment deferral opportunity. CLARIFIRE® can immediately assist you in delivering intelligent real-time workflows that create a seamless servicing environment so you’re ready to offer payment deferral to distressed borrowers. Uniquely positioned to help you surpass the competition, CLARIFIRE delivers advanced loss mitigation and servicing software 24/7 from any device. Contact us at eClarifire.com or directly at 866.222.3370. CLARIFIRE, truly BRIGHTER AUTOMATION®.”

“Can’t wrap your mind around a time-consuming and inefficient onboarding experience? Neither can we. Afterall, the whole point of working with a third-party is to free up your time, not take up more of it. At wemlo®, we are committed to facilitating a smooth, stress-free onboarding experience so you can start submitting loans for processing ASAP. Moving your processing pipeline over to wemlo starts with booking a quick 1:1 demo call, creating your wemlo profile, meeting your processing team, sharing your workstyle preferences, and then submitting your first loan through the wemlo platform. Get up to speed on wemlo's third-party processing services – book your 1:1 meeting today.”

“Verus Mortgage Capital is the country’s largest buyer of non-QM loans since 2015, offering innovative lending solutions to help you qualify more borrowers. With Verus, you can provide clients with DSCR options that go beyond the typical minimum requirement, including DSCR less than 1.00 percent and no minimum DSCR options, as well as alt doc options for self-employed clients, unlimited cash-in-hand options, and loans ranging from $100K to $4MM. Verus also offers financing for non-warrantable condos and condotels, DSCR options for 1-4 family, or 5-8 multi-family and 2-8 mixed-use properties, and interest-only options. Short-term rentals for DSCR include the use of AIRDNA reports. Verus is dedicated to helping lenders throughout the U.S., with loans purchased in all fifty states, offering delegated, non-delegated and bulk delivery alternatives available. Partner with an industry leader and strong ally. Meet us at the Texas MBA or contact Jeff Schaefer, EVP – Correspondent Sales, at 202-534-1821 to learn more about growing your business.”

Going to Black Knight Information Exchange next week? Drop by the Covius-sponsored Economist Super Session: Navigating the Year Ahead Tuesday, April 18, and contact Danny Byrnes to schedule a meeting to learn more about Covius’ full suite of servicing solutions. Covius is trusted by 8 of the top 10 lenders and servicers, 14 of the top 20 banks and thousands of settlement agents and attorneys, with solutions designed to help servicers control risk and assure compliance. These solutions include default title, loss mitigation, title curative, REO & auction, document prep, compliance solutions and more.

Any mortgage lender aiming to compete in 2023 has an online mortgage application. How is that application's performance measured? Good question. Read How to Audit Your Online Mortgage Application to ensure that your prospective homebuyers are converting with ease. The article concludes with a look at what just 25 additional leads a month could do for your team's volume - making a pretty good case for why you should obsess over your online application.

EXCLUSIVE DATA: Maxwell Q1 Quarterly Lending Report, featuring market insight from data covering $200B+ in loan volume. Want to understand the latest trends impacting today’s fast-moving mortgage market? Maxwell’s new Quarterly Mortgage Lending Report arms lenders with data that helps overcome the current sizable market challenges. Including analytics and insights from loans transacted within the Maxwell platform, this report provides a market perspective based on trends over more than $200 billion in loan volume. With your free download, you'll get unique insight into loan activity, borrower trends, and forecasts from our team of tenured mortgage experts. Want a real-time view of 2023’s mortgage market? Click here to download your free copy of Maxwell’s Q1 Quarterly Lending Report.

Investors and lenders react to F&F conventional conforming news

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The majority of loan production is underwritten to guidelines set by, or sold to, Freddie Mac and Fannie Mae. And when they make changes, large and small investors react.

The Agencies even give us surveys. For example, late last week, Fannie told us that its Home Purchase Sentiment Index® (HPSI) increased 3.3 points in March to 61.3, but it remains only slightly above its all-time low set late last year. “Overall, four of the HPSI’s six components increased month over month, most notably those associated with home-selling conditions and consumers’ sense of job security. While the former component remains slightly positive on net, in March 40 percent of consumers reported that it’s a bad time to sell a home, down from 44 percent last month, and 21 percent expressed concern about losing their job in the next 12 months, down from 24 percent last month. Year over year, the full index is down 11.9 points.”

The Federal Housing Finance Agency (FHFA) recently announced a new effective date of the DTI ratio-based fee to August 01, 2023. Pennymac will update the ‘DTI > 40 percent’ LLPA effective for Best Effort Commitments based on lock commitment days as shown in PennyMac Announcement 23-22.

AmeriHome Mortgage General Announcement 20230312-CL summarizes previously published changes made during March, additional changes made with this announcement, and recent Agency and regulatory news.

PRMG Product Update 23-20 provides multiple clarifications including potential exceptions for private transfer restrictions for certain shared equity transactions for conventional loans sold to Fannie Mae. FHA Standard and High Balance Data Entry for No Score/Non-Traditional Credit Borrowers in FT360 requirements. CA CalHFA Dream for All Conventional clarifications. FL Housing Single Unit Approvals FHA Products.

AmeriHome Mortgage is providing another valuable resource to Sellers exploring recently expanded list of Temporary Buydown options. The AmeriHome Buydown Agreement Model Document and Temporary Buydown FAQs are now available as resources to Sellers.

View AmeriHome Product Announcement 20230308-CL.

PennyMac Correspondent - Announcement 23-25: Updates to Conventional LLPAs

Pennymac Correspondent Group posted 23-27: Conventional Credit Fee Cap – System Support.

PennyMac Correspondent - Announcement 23-24: Fannie Mae and Freddie Mac COVID-19 Related Updates.

PRMG Product Update 23-21 includes multiple clarification such as Conventional MCC requirements, Onyx Jumbo income requirements for Trust Income and income from Estates and Trusts. Appraisal Condition rating of C5/C6 or Quality rating of Q6 is not permitted on CA CalHFA and Florida Housing Products. Payable fee information on CA CalHFA Dream for All Conventional.

Citizens Correspondent National Bulletin 2023-09 announces the following: retirement of remaining COVID-19 interim guidance and permanently adopting the COVID-19 suspension of the tax transcripts requirements.

Fifth Third Correspondent Lending News, Edition 2023-3-4.5.23, has the following topics:

All Agency Products: DTI LLPA changes, annual lender recertification reminder and insurance effective date clarification.

Capital markets: inflation news is front and center

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“The Yield Curve Is Inverted: Should Lenders Care?” is the current STRATMOR blog. Obviously economic readings and what Federal Reserve officials think about them impact the slope of the curve, speaking of which… Ahead of today’s Consumer Price Index release for March, we’ve had a chorus of Fed officials continue to beat the drum that more needs to be done to get inflation down despite broader financial and economic stresses. Chicago Fed President Goolsbee did say yesterday that the Fed should be careful about raising rates too aggressively until there is more evidence about progress in taming inflation. The Fed’s overall insistence that there remains work to be done to re-establish price stability leads one to believe that more pain will need to be felt before we get a true reversal in Fed policy.

With the 30-year fixed mortgage rate at the lowest level in two months, we learned today that mortgage applications increased 5.3 percent from one week earlier, according to data from the Mortgage Bankers Association. We’ve also had the all-important March CPI report, clocking in at +.1 percent versus expectations to increase 0.3 percent month-over-month and 5.2 percent year-over-year versus 0.4 percent and 6.0 percent previously. The core reading increased .4 percent when it was expected to rise 0.4 percent month-over-month and 5.6 percent year-over-year.

Inflation is still more than double the Fed's 2 percent inflation objective. The monthly increases in CPI for January and February also do not inspire confidence that 2 percent is just around the corner. Most of the “smartest guys in the room” think another 25-basis point rate hike will likely take hold at the Fed's May meeting, which fed funds futures are largely pricing in, bringing the policy rate target range to 5-5.25 percent. Markets are expecting the Fed to pause rate hikes in June.

Later today brings a Treasury auction of $32 billion reopened 10-year notes. In a “reopening,” the U.S. Treasury issues additional amounts of a previously issued security with the same maturity date and coupon interest rate or spread as the original security, but with a different issue date and usually a different purchase price. This afternoon also brings the minutes from the March 21/22 FOMC meeting, and remarks from Richmond Fed President Barkin and San Francisco Fed President Daly. Tomorrow we will receive the latest reading of inflation at the wholesale level in the form of the Producer Price Index. We begin the day, after the consumer inflation reading, with Agency MBS prices better .125-.250 and the 10-year yielding 3.37 after closing yesterday at 3.43 percent; the 2-year yield is at 3.93.

With the MBA’s Advocacy Conference coming up next week, it reminded me about the time I'd lobbied a Congressman in his Washington D.C. office when I stopped to use the rest room.

After washing my hands, I stepped up to the hand dryer and noticed a note pasted to it. The note said, "Push button for message from Congress."