earnings

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Mortgage banking results at JPMorgan Chase and Wells Fargo were slightly weaker than expected given the higher volume produced, an initial take from Keefe, Bruyette & Woods said.

“While the results suggest that volumes increased on seasonality, gain-on-sale margins did not benefit,” wrote analysts Bose George, Alexander Bond and Thomas McJoynt-Griffith. “These results suggest that mortgage banking likely remains under pressure.”

That volume problem is likely to extend to the upcoming second quarter results for the publicly traded independent mortgage bankers that KBW covers, it said, namely Rocket Cos., UWM Holdings, PennyMac Financial Services, Rithm and Mr. Cooper.

Chase’s second quarter 91-basis-point gain on sale was 41 basis points lower than in the first quarter. Meanwhile at Wells Fargo, margins fell 25 basis points to 90 bps.

“These declines were slightly surprising as we expected gain-on-sale margins to continue to trend higher as volumes increased in the second quarter versus the first,” KBW said. “JPMorgan Chase may have sacrificed some margin to recapture share, but the reason for the margin decline at Wells Fargo is less clear as the mix shift to the higher-margin retail channel suggests the margin should have increased.”

Wells Fargo announced it was shuttering its correspondent business in January.

Chase reported production income of $102 million, up from $75 million in the first quarter but down from $150 million for the second quarter of 2022.

Total volume for the most recent period was $11.2 billion, including $1.1 billion picked up when JPMorgan Chase bought First Republic.

This compared with $5.7 billion in the first quarter and $21.9 billion one year ago.

That means the quarter-to-quarter percentage gain in volume of 96% far outstripped the 36% rise in production income.

Wells Fargo’s net gain on sale was $70 million in the second quarter, versus $76 million in the first quarter and $134 million in the second quarter of 2022.

Volume of $7.8 billion, nearly all of it retail, was up from $5.6 billion in the first quarter (including $1 billion from correspondent) but down from $34.1 billion one year prior. The second quarter 2022 numbers include $14.5 billion of correspondent purchases and $19.6 billion of retail production.

Net servicing income at Wells Fargo fell 26% quarter-to-quarter, to $62 million from $84 million, and 19% year-over-year from $77 million for the second quarter 2022.

Meanwhile, Chase’s net servicing revenue of $172 million was a 16% increase from $148 million in the prior quarter but a 24% year-over-year decline when it earned $227 million in the second quarter of 2022.

While not doing the same deep dive on the mortgage results at Citi, KBW noted its second quarter volume was up 36% from the prior three months in formulating its read across for the nonbanks.

Citi branches produced $4.5 billion, versus $3.3 billion in the first quarter and $4.1 billion in last year’s second quarter.

In a separate line in the quarterly supplement, mortgage originations from Citi’s wealth management business were $2.9 billion in the second quarter, versus $1.8 billion for the previous three months and $5.3 billion for the same time last year.

Source: nationalmortgagenews.com

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The slower housing market at the start of the year was not enough to prevent Fidelity National Financial from turning a profit. 

During the first quarter of 2023, the Big Four title insurer reported revenue of $2.474 billion, down from $3.167 billion in Q1 2022, and a net income of $59 million compared to $400 million a year prior. Fidelity’s title segment reported revenue of $1.6 billion for the quarter, down from $2.4 billion a year ago, and a net income of $128 million, a decline compared to $191 million in the first quarter of 2022. 

“We are pleased with our solid performance in the quarter as we continue to navigate a volatile and challenging environment,” Mike Nolan, the CEO of Fidelity, told investors and analysts on the firm’s first-quarter earnings call Thursday morning.  “Starting with our title business, the focus remains on providing our customers exceptional service, protecting our policyholders and building our business for the long term.”

However, as Nolan acknowledged, these strong financial results came at a cost. In 2022, Fidelity laid off 26% of its field staff net of acquisitions, one of the largest cuts in the company’s over 175 year history. The headcount reductions continued into 2023, as Nolan reported that Fidelity laid off an additional 2% of its staff in Q1. 

Thanks to these cuts, however, personnel costs for the quarter were down 23% year over year in the firm’s title segment alone. 

This was good news for a segment that recorded sizable annual decreases in the number of purchase orders opened per day (29%), the number of refinance orders opened per day (67%), and the number of commercial orders opened per day (27%).

In addition to the drop in order count, direct title premiums fell 44% from a year ago to $428 million, agency title premiums were down 50% year over year to $550 million, and commercial revenue posted a 36% annual decline to $241 million. 

Among all of these yearly decreases, however, there was some positive news. The number of purchase orders opened during the quarter was up 20% compared to the fourth quarter of 2022, and the average total fee per file was up 19% year over year to $3,446. 

Executives also noted that in April, despite being down 23% year over year, purchase order volume was the best Fidelity has seen since August 2022. 

“We expect the volatile market environment will continue to provide both headwinds and tailwinds for market participants,” Nolan said. “On the residential side, although there is not yet firm footing for rates in home affordability, there are solid fundamentals, such as pent-up demand, a growing working age and first time buyer population, that are expected to support a rebound once rates move downward and sellers and buyers more fully return to the market.” 

One interesting item of note during Fidelity’s call came in response to a question on executives’ thoughts on the rumored Fannie Mae pilot program and the attorney opinion letters. 

“We have talked with Fannie Mae and FHFA through ALTA [American Land Title Association] and even ourselves, and in regards to the rumor on the potential pilot with some kind of title waiver, we have not seen a proposal or anything that we could evaluate and respond to. But we have been really trying to impress upon the agencies that those kind of programs are untested and could lead to more uncertainty,” Nolan said. “At this time, we don’t know if there is a proposal that will come out or not. And then, with the acceptance of AOLs, there has been very little uptick on that, as they have indicated, and we don’t think that it is a lower cost alternative. It may even be more expensive — and we certainly think it is a lesser value product.” 

Source: housingwire.com

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“People want to make money fast, but it doesn’t happen that way.” — Warren Buffett

Over Christmas, I read Roger Lowenstein’s fantastic biography of Warren Buffett, one of my financial heroes. Because I currently prefer to invest through index funds, it was fascinating to read how Buffett has been able to make billions by purchasing individual stocks.

Next, I picked up the new book from David and Tom Gardner: The Motley Fool Million Dollar Portfolio. It was the perfect follow-up to reading about Buffett. “This book is about picking great stocks,” write the authors in the introduction, and it’s true. Over the subsequent pages, they describe a variety of techniques for finding individual stocks that are worthy of investment (and not just speculation).

Stocks that don’t suck
I don’t write much at Get Rich Slowly about investing in individual stocks. For one thing, I have a pathetic track record in choosing good companies. In the past, I’ve been a speculator and not an investor. Some of my choices include:

  • CRA, at its peak
  • PALM, on the day of its IPO
  • WAMU in the autumn of 2007
  • SHRP, last January

Fortunately, I’ve never had huge sums to invest in these speculative bids. All the same, I’ve lost thousands of dollars in bids to get rich quickly in the stock market. Because of my experience, I’ve come to admire the virtues of indexed mutual funds.

All the same, I recognize that it is possible to build a great investment portfolio from individual stocks. Many GRS readers are interested in doing just that. And I, too, would like to allocate some portion of my money to buying stocks — now that I have the urge to speculate out of my blood. In their book, the Gardners write:

If you have the time, ability, and interest, individual stock investing is the single best way to build you own million-dollar portfolio.

Though the authors advocate picking individual stocks, they’re as wary of fees as any index fund investor. They believe active trading is dumb. They’re advocates of buy-and-hold. The Gardners also write that there are two components to investing well:

  1. Picking the right stocks.
  2. Building a balanced portfolio (i.e., diversifying).

“In the end,” they write, “you want 100% of your money invested in companies that don’t suck, and 0% in companies that do.”

Investment strategies
Each chapter of Million Dollar Portfolio explores a specific investment strategy. The authors note that “each [strategy], practiced well, can and does beat the market.” Some of the methods covered include:

  • Dividend investing, which involves buying stocks that produce consistent income through the use of “dividends”. MDP argues that dividends are the investment world’s “allowance”. When you own a dividend stock, you receive a periodic payment just for investing.
  • Value investing focuses on buying companies trading for less than what they’re worth. It’s about buying good companies at a great price. “The excitement of blue-chip value investing comes from looking at long-term charts of what value stocks do as a group over a period of decades.”
  • Small-cap investing attempts to find “hidden gems” — stocks from smaller companies that tend to be ignored by large institutional investors.
  • Growth investing. Growth stocks are those expected to produce above-average earnings over the near future. Increased earnings lead, in theory, to increased profits, and to higher share prices.
  • International investing, which allows you not only to diversify, but also to find stocks in other countries that might be better than those in our own.

The authors lay out the basic techniques of each style, and then provide case histories. Along the way, they explain investing concepts like P/E ratios, book value, “market cap”, rebalancing, and more. Though they write about individual stocks and not index funds, much of the advice is familiar: buy and hold, diversify, etc.

Million dollar portfolio
Million Dollar Portfolio includes more than just information about choosing stocks. The book also features:

  • A chapter about CAPS, the Motley Fool stock-researching tool (which Get Rich Slowly has covered before).
  • A discussion of asset allocation and diversification.
  • A short section on the financial collapse of 2008. The Gardners look at the causes, the reactions of big investors, and the prospects for small investors like you and me.

The Gardners also stress the importance of investing as soon as possible. They write that the biggest mistakes that American investors make are:

  1. Never starting.
  2. Starting too late.
  3. Picking poor stocks.

As many have argued, the best time to begin investing is now, whenever now may be. Because of the power of compounding, time is the investor’s best friend.

I was ready to hate this book, but I didn’t. I found it fascinating. I loved the information about how to evaluate stocks. I’m not ready to abandon index funds, but I am eager to learn more about dividend investing, the method that seems best suited to my personality and goals.

I also like that the book doesn’t just tout successes. Each chapter describes a particular investment strategy, explains the method, and then illustrates it with two or three successes. But each chapter also includes a real-life mistake the authors have made. These examples of choices gone wrong are often more instructive than the picks that worked!

Note: I recently had a chance to interview author David Gardner. Look for an excerpt from that conversation later today.

Source: getrichslowly.org

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Enjoy complimentary access to top ideas and insights — selected by our editors.

As we look forward to the start of Q2 2023 earnings, financials of all descriptions  are facing rising levels of liquidity risk. Banks are fighting to keep deposits on the books, while independent mortgage banks (IMBs) worry about low volumes and access to wholesale warehouse credit. But these short-term considerations may be missing the big picture staring us all in the face.

Over the past several decades, increasing volatility in interest rates caused by the manic policy swings of the Federal Open Market Committee, caused a structural change in the mortgage market. Refinance opportunities became more frequent and larger in terms of volumes, allowing the industry to carry more overhead per dollar of volume. Veteran mortgage executive Bill Dallas provided some insight into that question in an interview by Maria Volkova in National Mortgage News: 

“What’s interesting is almost none [of my clients] have a lot of perspective about the mortgage business. A lot of them have never been in an environment that is predominantly purchase. I was raised in that environment. I spent my first 20 years in an environment where we didn’t have refinances really. Everything was a purchase. I think they’re struggling with that. And then the second shoe that hit them all is margin compression, and product compression, which they weren’t expecting. Almost everybody’s business model that I saw underestimated the amount of compression on the gross revenue side of their business.”

Remember the glib characters who were talking about an end to Fed rate hikes and 5% mortgage loans earlier this year? Now, with home prices again rising and the U.S. consumer essentially ignoring the FOMC, the question comes as to how much higher do interest rates need to go in order to cool off the housing sector? Moreover, there is a growing sense among economists that low single-digit interest rates maintained by the Fed during 2020-2021 may have caused more damage than benefit. 

For mortgage lenders, the prospect of interest rates staying at or above current levels suggests a return to a business model that is predominantly focused on purchase mortgages. Since the cost of closing a purchase loan is three to four times the cost of a refinance loan, the expense structure of the industry must change to accommodate. For many lenders accustomed to reaping profits from refinance transactions, a return to purchase lending likely means the end of the road.

Adding to the already substantial challenge facing lenders in the shift to a purchase loan market is the continuing distortion of the money markets caused by the Fed. Because the FOMC so far refuses to sell its $3 trillion portfolio of mortgage-backed securities, the shape of the yield curve is inverted, with the yields for securities around 10-12 years in maturity far lower than short-term rates. The $3 trillion in MBS owned by the Fed is a dead weight holding down long-term bond yields.

What this means in layman’s terms is that lenders are losing money on loan sales into the secondary market. Since the price for Fannie Mae 6s in July is above current prices, lenders are losing money on every loan they carry from close to secondary market sale – the opposite of a normal market. This inverted or “contango” market is usually seen in physical commodities when prices rise suddenly, but by “going big” in 2020, the Fed has managed to disrupt the term structure of interest rates to an alarming degree.

When lenders do actually sell the mortgage loan into the secondary markets, the execution is likely to be less than a point premium.  Indeed, many lenders are forced to sell the servicing with the loan in order to enhance the overall sale proceeds. Given the toppy valuations for mortgage servicing rights, selling is not the worst thing in the world, but the list of IMBs monetizing MSRs is growing as operating cash flows fall. 

For example, United Wholesale Mortgage completed two bulk MSR sales as well as two excess servicing strip sales in the first quarter of 2023, based on servicing assets with a total UPB of approximately $98 billion. Net cash proceeds approximated $650 million from MSR and excess sales in Q1 2023 or 66 bp on the total UPB.  

UWMC reported an operating loss of $138 million in Q1 2023 and a negative mark on the firm’s MSR over $330 million – due to falling interest rates!  The machinations of the FOMC have actually increased market volatility so much that firms like UWMC are taking negative marks on MSRs when interest rates are supposed to be rising. What’s wrong with this picture?

The mortgage industry faces several threats. In the near term, rising rates are hurting volumes and pricing refinance transactions out of existence. Secondary market execution is poor and likely to get worse, especially as lenders see carry on closed loans forced deeper into the red. How much money will mortgage firms lose before they simply shut their doors?

“The Federal Reserve’s Dot Plots indicate that up to two more hikes could be on the table for 2023,” writes Erica Adelberg of Bloomberg. “If this occurs, mortgage carry could be even further challenged relative to funds, which could push forward mortgage prices even higher relative to current months.” 

But perhaps the bigger existential question is whether the post-COVID world will be one with less interest rate volatility from the FOMC and an effective floor under interest rates that is well above the past decade. How will the industry look a year from now if mortgage rates stay at or above 7% for an extended period of time?  Will the growth in market share of IMBs be reversed over the next decade as they slowly sell servicing assets to survive?  

With interest rates rising slowly and inflation measured by home prices remaining stubbornly elevated, the world of mortgage lending in 2024 and beyond may look more like several decades ago than the past five years. If the FOMC takes the proper lesson from the errors of the COVID period, then the future movement of interest rates is likely to be muted. 

As opportunities for refinancing existing residential loans shrinks relative to the overall business of mortgage lending, the structure of the industry and the flow of mortgages into the capital markets will change. Expenses per loan will rise, headcount in the industry will fall and prepayments on existing loans will fall dramatically. And once again, the mortgage finance industry will be forced to remake itself to fit this new reality. 

Source: nationalmortgagenews.com

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Wells Fargo is taking bigger precautions on its office building loans, setting aside more funds to cover potential losses as the sector continues to deteriorate.

The office market “continues to be weak” in many cities, Chief Financial Officer Michael Santomassimo said Friday. But he also argued that general trends can be misleading, and said the bank has been doing a property-by-property analysis to see where its specific risks lie.

The warning from one of the country’s largest banks hints at signs of trouble that smaller banks may share as they start reporting earnings next week. Office loans make up about 3% of Wells Fargo’s total loans, but many smaller lenders have bigger concentrations.

Wells, which has $1.9 trillion of assets, continued to conduct a deep dive into its office loan book in the second quarter, which prompted it to set aside more reserves to absorb potential losses later on.

After stress testing its commercial real estate loans, the bank’s allowance for credit losses in the CRE sector jumped to $3.6 billion in the quarter — up 64% from a year earlier. Office vacancy rates have climbed as remote work has shown staying power.

Wells Fargo executives, who also boosted CRE loan reserves in the first quarter, didn’t rule out adding more reserves as conditions evolve. But they said their current analyses covered just about every risk they can see at the moment.

“We’ve gone through a number of stress scenarios and feel like at this point, we’re appropriately reserved,” Santomassimo said on the bank’s second-quarter earnings call.

JPMorgan Chase also bumped up its reserves during the quarter due to office loans, though its executives cautioned against reading too much into the buildup, given the bank’s limited exposure to the office sector. JPMorgan Chief Financial Officer Jeremy Barnum said the company wanted to get “ahead of the cycle,” but he noted that most of the bank’s CRE portfolio is tied to loans backed by multifamily buildings.

Wells Fargo and other large banks have manageable exposures to office buildings and other commercial real estate, said CFRA research analyst Kenneth Leon, pointing to the resilience those banks showed in this year’s stress tests. Leon credited Wells executives for displaying strong “credit risk control” and closely monitoring its CRE loan portfolio.

Wells Fargo’s CRE team is focused on “surveillance and de-risking,” Santomassimo said. The bank highlighted diversification in its portfolio, with an investor presentation showing that office loans make up 22% of its CRE book. 

Loans backed by apartments, a sector that Santomassimo said is performing “quite well,” account for 26% of Wells Fargo’s CRE book. Warehouse, hotel and retail loans make up smaller chunks.

Nearly a third of Wells Fargo’s office loans are in California, and the remainder are spread across several other states. San Francisco, where Wells is headquartered, has been a source of worry in the office market, given that tech companies have embraced remote work more than many other firms. One office building there has reportedly seen an 80% drop in its value.

Asked about office-related risks in California, Santomassimo said that worries are not “isolated to California” and “you see weakness in a lot of cities these days.” He also cautioned against focusing solely on geography.

“Even in California, we’ve got as many examples where clients are actually reinvesting in buildings, even if lease rates are low or even empty in some cases, as they are going into a workout,” Santomassimo said. 

Wells CEO Charlie Scharf said it’s “a very big mistake” to think that a building’s geographic location is the only factor that will determine whether losses occur.

“We have examples in cities that are struggling where the structure of our loan is quite good — the underlying property has very high lease rates for an extended period of time,” Scharf said. In markets that are doing well, specific properties may be at more risk due to a large amount of upcoming lease terminations, he added.

“That’s the level of detail that we’ve used to come up with what we think the appropriate level of reserving is,” Scharf said. “We’ve tried to be as diligent as we can.”

Source: nationalmortgagenews.com

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TPO, Outsourcing, DPA, MSR Transfer, Compliance Products; Company and State Events

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TPO, Outsourcing, DPA, MSR Transfer, Compliance Products; Company and State Events

By:
Rob Chrisman

Fri, Jul 14 2023, 10:48 AM

“If they raise the interest rates one more time, you’re going to hear Janet Yellen.” Much of the talk in the hallways here at the California Association of Mortgage Professionals event near San Francisco revolves around the Federal Reserve likely raising short term rates on July 26th due to the need to raise interest rates further to bring down inflation that is still too high. But the end to its current monetary policy tightening cycle is close. Compliance may be the new focus. “Tawny Johnson gave me the best mortgage I’ve ever had!” We’ve all seen reviews like that and wondered about them. Anyone who repeats reviews should know that the FTC announced its Endorsement Guides, which provide guidance to businesses to ensure that advertising using reviews or endorsements is truthful and complies with the FTC Act, have been revised. In other Federal Trade Commission news, it has opened an investigation into ChatGPT, released by Open AI which is backed by Microsoft, over the technology’s potential harm, possible false information, and security practices. (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, the homeownership platform that unites the people, systems, and stages of the mortgage process into one seamless, end-to-end solution that spans engagement, origination, closing, incentive compensation, and business intelligence. Interview with Speech-Language Pathologist Ailsa Falck on how Robbie can improve the auditory experience for his podcast listeners.)

Lender and Broker Software, Services, and Products

In 2023, people are watching, on average, an eye-watering 17 hours of video a week, with 75 percent of viewers saying they watch short-form video on their mobile devices. Especially for lenders targeting homebuyers aged 18 – 42, video content should be a marketing cornerstone. An effective video marketing strategy puts you in a great position to catch the attention of young, tech-savvy consumers who prefer to do every transaction on their mobile device and watch A LOT of videos. Through the Surefire CRM and Mortgage Marketing Engine solution, Black Knight offers the Surefire Power Video tool that can help you quickly create videos you can post to your own websites or external sites and embed in emails and text messages. Black Knight has also developed a free guide to crafting engaging video content. Download it now to jump start your video marketing journey.

Did you know most burglars enter homes through unlocked doors and windows? Hackers are no different, except instead of looking for easy entry points into your home, hackers search for the weakest link in your systems. As an increasing number of organizations take advantage of API functionality to connect systems, it’s important to be mindful of potential cyberthreats. In fact, every connection and transfer of data using an API can provide a door for hackers trying to steal data or carry out malicious acts. Subba Ayyagari, chief technology officer at Black Knight, has outlined several steps you can take to stand prepared and keep hackers out. Read more in Black Knight’s blog post, “Securing Your APIs From Threats.”

Do regulatory environment and enforcement actions keep you up at night? With ComplianceEase, staying compliant has never been easier or more efficient. ComplianceEase, by SitusAMC, is the leading web-based, automated compliance management system, facilitating comprehensive loan-level reviews of federal and state laws based on license types, exemptions and preemptions, as well as TRID (multi disclosure) tolerance testing. Findings are displayed in an interactive report in our RiskIndicator dashboard, listing results in key risk areas with five different severity levels to easily identify and correct issues. Gain efficiency with automation and streamline workflow. Integrated with top LOSs, investor, and regulatory platforms, and ComplianceEase onboarding client support teams provide seamless support. Most importantly, using ComplianceEase helps mitigate regulatory risk by identifying errors, so they can be corrected prior to closing. For a demo, contact us.

“Blue Water continues to revolutionize the MSR space by solving problems and creating customized solutions to alleviate operational burdens for our customers. One of Blue Water’s premier products is SuperTransfer™: Its agnostic (any client using any broker or LOS can plug into SuperTransfer™), provides in app exception remediation capabilities with severity tiers, uses OCR+ Blue Water proprietary models for document identification, is flexible & customizable, is lightning fast and provides a robust dashboard to support your team, and is affordable. “I recently completed an MSR sale with the team at Blue Water. Its technology is a game changer, and the knowledge and responsiveness of their team is simply amazing. In thirty years of selling bulk MSRs this was by far the easiest and fastest way to transact. I highly recommend them and will be utilizing them for future trades.” This is all achieved via a secure cloud-based environment accessible on your desktop. Connect with our Veteran Sales Team today and see how Blue Water can save you time and money across a variety of your Mortgage Asset needs. Services provided by Blue Water Financial Technologies Services, LLC.”

“Looking for an easier DPA program? Click n’ Close has you covered. Thanks to its simplicity and competitiveness, our SmartBuy DPA program has helped over 4,000 borrowers finance their home purchase. From start to finish, SmartBuy DPA offers a streamlined process for all parties. With lower capital requirements and short turn times, Lenders can be up and running with SmartBuy in a snap. In addition, wholesale loan program information is available in today’s leading PPEs, including Optimal Blue, MeridianLink’s Price My Loan, Lender Price, and Polly, and unlike state/municipal bond programs, brokered SmartBuy DPA loans are all processed, submitted, underwritten, closed & funded in one setting with CNC. With no maximum income requirements and other innovative features, such as a repayable option with a 30-year amortization and a 2-1 buydown, SmartBuy lives up to its name. Contact Adam Rieke, Soliman Martinez or Kerry Webb (wholesale) to get started today.”

“Turn fixed costs into variable costs on a dime. When the market zigs, lenders need the flexibility to zag. Richey May Advisory brings the mortgage industry expertise and agility you need to convert fixed costs into variable costs. Our difference maker is your ability to outsource services to highly trained experts in a model that fits your needs. Whether that means loan-level accounting, advisory, business intelligence, compliance support, cyber services, internal audits, or underwriting automation, we have the tools, knowledge, and experience to deliver value and improve your financial performance unlike any competitor, anywhere. You’ll feel it almost immediately in your day-to-day operations. Even better, you’ll notice the difference in your bottom line. Reach out or visit our website to learn more about how we can help your operation.”

TPO Channels for Lenders and Brokers

Are you a Non-Delegated Correspondent looking for solutions to help you easily control your company’s loan profitability at the loan officer level? This week, Rocket Pro TPO launched Target Profit Control, a new feature that enables principals to set desired profit targets using a loan-level price adjustment at the loan officer level, ensuring margins are achieved every time, regardless of loan changes. Available only from Rocket Pro TPO, Target Profit Control eliminates misquotes or loan adjustment errors and saves time monitoring loans for margin targets. This offering is the latest addition to Rocket Pro TPO’s Correspondent Assist Program, which provides a broad range of fulfillment options by leveraging Rocket Pro TPO technology for all your disclosure needs, including closing documents. Interested in learning more about a Broker or Non-Delegated Correspondent partnership? Contact Rocket Pro TPO to get started.

It’s no secret: Loan officers need to dig deeper into their toolbox to find new ways to stand out in today’s competitive market. One option is to position yourself as a government mortgage expert, especially if your lending partner is Flagstar Bank. For 35 years, Flagstar has made the government lending process easy. Flagstar has minimal overlays and allows for 580 or even no FICO score on USDA, VA, and FHA loans with multiple borrowers. They also offer VA loans up to $4 million and manual underwriting for borrowers with less-than-perfect credit. Their seasoned AEs, skilled underwriters, and insightful training programs can guide you through the nuances of government lending products so you can educate your borrowers with confidence. Contact your Flagstar Account Executive to learn more or sign up with Flagstar.

Conferences, Events, and Training

The kind of news you want to know, VIBE 2023, a very important broker exchange, is here! What is VIBE 2023?* The biggest growth mindset event for Mortgage Brokers featuring a VIP lineup of some of the most influential speakers in the country! Join us at the Westin South Coast Plaza in Costa Mesa, CA on 10/24/2023. Register to attend using your UNIQUE CODE**, provided by your Kind Account Executive. Learn more by visiting here. *VIBE 2023 event is open to all licensed Mortgage Brokers in the United States. No commitments to establish a partnership with Kind Lending are required to attend. **Unique Codes are provided by your Kind Lending Account Executive. If you do not have an account executive or are not yet working with Kind TPO, email us to learn more.

Millennials and Gen Zers represent the largest group of first-time homebuyers. In less than 10 years, 3.1 million will have entered the market. Of these buyers, roughly 75 percent of them report checking social media daily. Making social media a necessary strategy for loan officers. Join Homebot’s VP of Marketing, Ashley Remstad and Mortgage Advisor Sosi Avila as they discuss key strategies and tactics for using social media to your advantage. Register for the webinar here.

Sure, it’s mortgage tradeshow season. But if you’ve got to pick one, it ought to be the Greatest Mortgage Conference in The Known Universe. That’s the modest description for Originator Connect, the nation’s largest LO conference. A huge exhibit floor and tons of sessions that will help loan originators bulk up their pipeline, it’s also got special events such as The Non-QM Summit and the Private Lender Forum. Looking to start your own brokerage? There’s an entire half day Build-A-Broker program. And attendees can also get their federal NMLS license renewal class done while you’re there. It’s all free to NMLS-licensees and their support staff. Just go here and register using the code CHRISMANFREE. And if you want to know what’s coming your way, don’t miss keynote speaker Lawrence Yun, the chief economist for the National Association of Realtors.

The California MBA’s Western Secondary will be August 21-23 at the Waldorf Astoria at Monarch Beach in Orange County. “Explore the possibilities of the 2023 Western Secondary Market Conference – a unique in-person event that brings together the most influential players in the secondary market.”

The Mississippi Mortgage Bankers Association is holding its fall conference September 7-8 in Jackson. Our theme for this year is “Building a Strong MS” We are focusing on building relationships, strategies, and opportunities for the real estate housing industry in MS. Our fall conference is open to loan originators, realtors, and other industry affiliates. Realtors will receive Continuing ED (CE) credits for attending the Fall Conference.

Save the dates of September 10-12 and join lending professionals from the Pacific Northwest at the Riverhouse in Bend, Oregon, for the Pacific Northwest Lenders Conference. This event promises to be a catalyst for professional growth, offering a unique platform to expand knowledge, build valuable connections, and elevate lending businesses in the region.

Register for the AzAMP Annual EXPO, Luncheon, and 8-Hour NMLS CE Class on September 27th and 28th at the We-Ko-Pa Resort and Casino. Don’t miss Luncheon Speakers Allen Beydoun, UWM EVP, and Rob Chrisman, The Chrisman Commentary Daily Mortgage News. Stay the night at the resort and attend all the events.

TMBA is working through the summer planning outstanding events including the 6th Annual Mortgage Symposium, November 6-7 at the Westin Dallas Southlake Hotel in Southlake TX. The Texas Women Mortgage Bankers event will be held on November 6 at the Westin Dallas Southlake Hotel.

Capital Markets

Economists and investors continue to ruminate on how the consumer price index increased 3% year over year and 0.2 percent month over month in June. The year-over-year increase marks the lowest rate of inflation since March 2021. Too early for the Federal Reserve to do a “victory lap” or a true soft landing?

Yesterday brought another strong rally in treasuries following more favorable inflation news, with the yield curve steepening extending further as investors ramped up bets that the Fed will hold rates steady through year end following a 25 basis points hike later this month. At the producer level, both headline and core inflation slowed more than analysts anticipated, another sign that inflation continues to moderate. Producer prices barely rose in June from a year earlier to post the smallest increase since 2020.

Before we get too far ahead of ourselves, San Francisco Fed President Daly said yesterday that it is too early to declare victory over inflation, reminding us that there is a 12-24 month lag in the transmission of monetary policy. And on the Fed front, St. Louis Fed President Bullard announced his resignation, effective immediately, though he will remain at the Fed in advisory capacity until August 14.

But back to inflation. The Federal Reserve’s mandate is to contain inflation and help the economy. It misjudged the early strength of inflation, which got out of control, though the June CPI showed inflation is moving toward the Fed’s target. Decelerating consumer prices could lead to lower mortgage rates, which would steadily lift home sales and increase home production. The Fed’s latest Beige Book that was released this week indicated that the economy is cooling, with modest growth and slower wage increases. Subsequently, the Fed’s July rate hike will probably be the last of this cycle unless the U.S. is hit by another inflationary shock.

Today’s calendar is a light one but does include more inflation-related reports in the form of import and export prices for June that didn’t move rates. Later this morning brings preliminary July consumer sentiment. Big bank Q2 earnings releases (JPM, Citi, and Wells Fargo) are all coming in better than expected. We begin the day with Agency MBS prices roughly unchanged from Thursday’s close and the 10-year yield’s unchanged at 3.76 percent. In the last week or so the yield on the 2-year has dropped .5 percent to 4.66!

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Source: mortgagenewsdaily.com

Apache is functioning normally

average two-year fixed mortgage rates have just hit a 15-year high of 6.66%.

UK two-year fixed mortgage rates hit highest level since 2008Read more

Here’s what to expect, from the committee:

The cross-party Committee of MPs will examine the current state of the mortgage market, including levels of mortgage stress, arrears and forbearance, and the outlook for the market in light of higher interest rates.

The Committee will question mortgage providers on consumer behaviour following recent rate rises, the impact on house prices and the wider housing market, and mortgage affordability and availability.

Government support schemes and the recently agreed ‘mortgage charter’ are also likely to be discussed, as are buy-to-let mortgages and the rental market, and the take-up of long-term fixed rate deals.

Here’s the panel:

  • Andrew Asaam, Homes Director, Lloyds Banking Group

  • Bradley Fordham, Mortgage Director, Santander UK

  • Charlotte Harrison, Interim CEO (Home Financing), Skipton Building Society

  • Henry Jordan, Home Commercial Director, Nationwide

  • Nigel Terrington, Chief Executive, Paragon Banking Group

Time for a recap.

UK borrowers continue to be hit by rising interest rates as the fight against inflation continues, and there may be more pain ahead.

Average two-year mortgage rate have risen over their peak last autumn, averaging 6.66% today for the first time in 15 years.

UK two-year fixed mortgage rates hit highest level since 2008Read more

MPs have heard that rising mortgage rates are causing financial stress to customers, and that the situation will worsen. However, lenders also reported that they have not seen a significant pick-up in arrears yet.

Bradley Fordham, mortgage director at Santander UK, told the Treasury Committee the bank had seen a “small tick up in arrears, still 20% below pre-pandemic, 70% below 2009 post-financial crisis, so relatively low levels”.

He said mortgage customers coming off deals and going onto new ones were seeing payment increases of “over £200 per month”.

But, the UK could be approaching a ‘tipping point’ where mortgage rates rise to levels where borrowers cannot fully protect themselves by extending the terms of their loans or moving to interest-only deals.

The International Monetary Fund warned that UK interest rates may need to keep rates higher for longer, to fight inflation.

The financial markets are anticipating that UK interest rates will hit 6% by November, up from 5% at present.

The latest labour market report has shown that UK wages increased at a faster rate than expected in May.

Earnings growth hit 7.3% in the three months to May compared with a year earlier, driven by the strongest rise in private sector pay growth outside the pandemic period of 7.7%, the Office for National Statistics said. It was the joint highest since modern records began in 2001.

Record UK pay growth adds to pressure for interest rate riseRead more

And with unemployment rising, number of job vacancies down, jobs growth slowing and more people looking for work, there are signs that the UK labour market is starting to slow.

UK interest rates likely to rise again despite slowing labour marketRead more

And in other news…

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialistRead more

Britain’s retailers recorded a sharp rise in spending in June as hot weather prompted consumers to buy summer clothing and outdoor goods, despite growing pressure on budgets from the cost of living crisis.

UK retailers report sizzling sales in hot June weatherRead more

Morrissey has written to Jet2holidays urging the tour operator to drop its association with marine parks that continue to use captive orcas and dolphins for entertainment.

Morrissey: Jet2holidays must cut ties to marine parks over orcas and dolphinsRead more

https://t.co/FFaoEzL7Ky pic.twitter.com/EsaH4hzcWk

— TRADING ECONOMICS (@tEconomics) July 11, 2023

On a monthly basis, prices fell – by 0.08% – the first deflation registered since September of last year.

This may encourage Brazil’s central bank to consider cutting interest rates from their current six-year high of 13.75%….

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Rate cut expectations are gaining momentum as Brazil's annual inflation reaches its lowest point in almost three years.

&mdash; Roensch Capital News (@RoenschNews) July 11, 2023

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.

“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialistRead more

mortgage costs hitting their highest level in 15 years with an average rate of 6.66% will worry people further, at a time when “mortgage pressures on ordinary households are huge”, says Douglas Chapman, SNP MP for Dunfermline and West Fife.

Following today’s Treasury Committee hearing on the mortgage market, Chapman says:

Research this month from Citizens Advice Scotland reveals that around 11% of people always run out of money before payday, with a further 14% saying that this happens to them “most of the time”.

This percentage will surely rise given today’s Committee panellists’ discussing averages of £235 increases on monthly mortgage repayments due to large interest rises and deals coming to an end, which on top of a crippling cost of living crisis, consistently high energy prices and rampant inflation explains why many people feel their financial resilience is being pushed to the limit.”

“In addition, there was little encouragement for first time buyers today, who it appears need to spend longer amassing a larger deposit or tap into the Bank of Mum and Dad (which isn’t an option for everyone), and then also choose from a narrower portfolio of smaller properties in order to meet monthly mortgage payments and pass banks affordability stress tests.”

the increase in fixed-rate mortgage costs today is a sign of “Tory economic failure”

“Too often, families who are saving for their first home but getting no closer to buying it feel like they’re doing something wrong.

“But the fact of the matter is that the Tories have inflicted households with a mortgage bombshell, let renters down and failed to build the homes we need.

“Millions are feeling the pain from this Tory economic failure.

“Labour has a plan to start fixing this crisis. We would stop households missing out on the mortgage support they need by making measures mandatory, we will give greater rights and protections to renters, and we will take the tough choices to get Britain building.”

A chart showing Nationwide house prices

Andrew Asaam from Lloyds Banking Group told MPs house price falls could leave some mortgage holders in negative equity (owing more than their property is worth).

But MP also heard there is less risk than in previous financial crisis, as loan-to-value rates are relatively low.

Asaam told the Treasury committee this morning

“The place that this probably bites most is for first-time buyers, who will be typically at higher LTVs (loan to value rates).

“It’s a completely individual situation, but we still think owning a home for most people is better than renting.

“And therefore we want to keep products available at higher LTVs for first-time buyers.

“But we need to make sure that those first-time buyers are resilient, ie they can afford to stay in their homes through a two-year period where house prices might be falling, for example, and they are aware that they could end up in negative equity.”

Source: theguardian.com

Apache is functioning normally

Financial market participants are still dealing with the comments made by President Trump about steel and aluminum tariffs. These trade war concerns are pushing down both stocks and bond yields, keeping mortgage rates down to kick off the week. Later on in the week, we could see rates adjust when the monthly jobs report for February comes out. Read on for more details.

[embedded content]

Market Outlook 3.5.18 from Total Mortgage on Vimeo.

Where are mortgage rates going?                                  

Trade war concerns still influencing investors

President Trump made some comments late last week about implementing tariffs on steel and aluminum imports. Unsurprisingly, nation’s facing these tariffs did not appreciate hearing this news, leading investors to fear a possible trade war.

Already we’ve seen several proposals from the European Union for tariffs on U.S. products. Investors are still dealing with the jitters, as all of major market indexes in the U.S. are trading in the red.

The yield on the 10-year Treasury note (which is the best market indicator of where mortgage rates are going), is currently trading at 2.84%. That’s down slightly from its opening position. Mortgage rates typically move in the same direction as the 10-year yield, so rates are flat to lower as we begin the week.

Monthly Jobs Report Big Report Out This Week 

Looking ahead to the rest of the week, the main economic report for investors will certainly be the Employment Situation (a.k.a. the monthly jobs report) for February.

That report is always one of the biggest market movers each month, and there’s no reason the believe that this time around will be any different.

Financial market participants will of course be looking at the headline reading of jobs added; however, they will be especially interested in the average hourly earnings reading to see if there is any upward inflationary pressure.

Analysts are calling for a monthly uptick of 0.2%, so anything above that mark would be notable. At this point, these are the indicators that investors are looking at to help gauge what they think Federal Open Market Committee members will do at upcoming meetings.

We already have a quarter-point increase to the federal funds rate as a virtual lock at their next meeting in three weeks (86.0% chance of happening according to the CME Group), but after that, the future for monetary policy gets a little murky.

The dialogue has been back and forth as pundits clash about inflation and if it will increase at a pace that will necessitate a faster tightening schedule than previously anticipated.

At the start of the year, the general consensus among market participants was that there would be three rate hikes in 2018. Then we got a string of inflation reports that began to sway many investors into the position of four rate hikes in 2018.

The situation has settled somewhat the past two weeks but the groundwork has been laid for a surge in optimism if and when we do get some more strong inflation readings.

Rate/Float Recommendation                 

Lock now before rates move higher

We saw mortgage rates rise for the eighth consecutive week in the Freddie Mac Primary Mortgage Market Survey on Thursday. That brought the average rate on a 30-year fixed rate mortgage up to 4.43%. That’s a jump of forty-eight basis points since the start of the year.

Learn what you can do to get the best interest rate possible. 

There is still a lot of talk about mortgage rates rising throughout the year, with several analysts calling for rates to his 5% by the time 2019 rolls around. Given this expectation, we think it makes sense for a lot of borrowers to lock in a rate on a purchase or refinance, sooner rather than later.

Today’s economic data:                                 

PMI Services Index

The PMI services index hit 55.9 in February. That’s exactly what analysts had expected.

ISM Non-Mfg Index

The ISM non-mfg index hit 59.5 in February. Analysts had predicted a mark of 58.8.

Fedspeak

Fed Vice Chairman Randal Quarles at 1:15pm.

Notable events this week:                

Monday: 

  • PMI Services Index
  • ISM Non-Mfg Index
  • Fedspeak

Tuesday:    

  • Fedspeak
  • Factory Orders

Wednesday:      

  • Fedspeak
  • ADP Employment Report
  • International Trade
  • Productivity and Costs
  • EIA Petroleum Status Report
  • Beige Book

Thursday:        

  • Jobless Claims

Friday:       

  • Employment Situation for February
  • Fedspeak

*Terms and conditions apply.

Carter Wessman

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

Source: totalmortgage.com

Apache is functioning normally

Kinecta Federal Credit Union in California had total shares and deposits just below $6 billion at the end of the first quarter, down 3% from a year earlier.

Credit unions saw savings account balances plunge in March, as members withdrew funds to cover daily needs and to search for higher yields.

The average credit union member had $13,818 in total savings deposits in March 2023, down from $14,104 in March 2022. The $286 year-over-year drop is the biggest in credit union history, according to a new report from TruStage (formerly CUNA Mutual Group), an insurance and financial services company that monitors the credit union industry.

The company said the dip was due to partly to middle-income members withdrawing savings to spend on hotels, airfares and restaurants now that the COVID-19 pandemic is coming to an end. 

At the same time, some high-income members are withdrawing deposits in search of higher yields. 

“This disintermediation of deposits is a big concern for credit unions and the economy in general, as falling deposits could lead to a credit contraction and slower economic growth,” said Steve Rick, chief economist for TruStage.

Overall for the first quarter, total shares and deposits rose by $37.6 billion, or 2%, over the year to $1.89 trillion, according to National Credit Union Administration data. But regular shares declined by $44.3 billion, or 6.5%, while other deposits — led by share certificate accounts — increased by $76.3 billion, or 9.8%.

Kinecta Federal Credit Union in Manhattan Beach, California, is one institution that has seen a dip in deposits and also a shift in the mix. 

The $6.7 billion-asset credit union had total shares and deposits just below $6 billion at the end of the first quarter, down 3% from a year earlier.

Kinecta CEO Keith Sultemeier said there has been a consistent, gradual decline in demand deposits due to increased spending, as members are having to pay more for their daily purchases as prices increase.  

“This is the primary driver of overall deposit declines,” Sultemeier said. “There is some discretionary spending of remaining COVID-19 stimulus, but this is mostly gone today.”

Kinecta’s deposit balance per member is down about 2.4% year over year, and the company has also seen a shift from demand deposits to time deposits — mostly from money market accounts to certificates of deposit, as those rates have increased.

“In our markets, we’ve seen competition for deposits heat up considerably. Banks and credit unions have increased rates to remain competitive, protect their existing deposit base and insure they maintain adequate liquidity,” Sultemeier said.

And net interest margins are getting squeezed as a result.  

The scale and velocity of Federal Reserve rate increases and an inverted yield curve haven’t helped, but Sultemeier said the situation is manageable.   

Kinecta is planning ahead for two additional rate increases from the Fed, but inflation has reportedly cooled, Sultemeier said. He is hopeful members will benefit from slower price increases, and the credit unions demand deposit decline should slow accordingly.

“We are comfortable with our liquidity and plan to keep our rates competitive, but will likely not seek high deposit growth this year,” Sultemeier said.

The news hasn’t been any better for banks, although there may be some hope on the horizon.

Deposits plummeted across the banking sector in March following the collapses of Silicon Valley Bank and Signature Bank. Depositors shifted funds from their savings and checking accounts to U.S. Treasuries and other safe havens amid the worry caused by the deposit runs that hastened the failures.  

The U.S. banking sector lost 2.5% of its deposit base in the first quarter, according to S&P Global Market Intelligence data.

Federal Reserve data showed that most banks posted substantial deposit recoveries by April, and funding across the industry started to stabilize by May. Still, analysts are awaiting second-quarter bank earnings reports this month to get firm data on where deposits stand relative to the start of the year — prior to the failures.  

Analysts widely expect that banks will report deposit levels are in steady recovery mode, but with interest rates high and competition fierce, the cost of that funding is widely projected to jump. This would cause net interest margins to contract, eating into profits. 

“The deposit panic from several months ago appears to have subsided across the industry, as evidenced by stable-ish deposit levels,” said Piper Sandler analyst Matthew Clark. “A lasting impact, however, is that depositors have woken up to how much they can earn on their money, which has accelerated the shift into higher-yielding products.”

Geoff Bacino, a consultant and former NCUA board member, said the drop in credit union savings mirrors that of the rest of the financial industry. With the cost of most things going up, credit union members are experiencing the same hardships that many Americans are facing.  

Even everyday items such as groceries are now being purchased through buy now/pay later programs, he said. 

“There may not be much that credit unions can do to mitigate it, as these are factors beyond institutional control,” Bacino said. “But credit unions have to consider these factors when addressing issues with members such as collections and delinquencies.”

Source: nationalmortgagenews.com