Weekly Updates From Adam, Les, Matt, Alice, And Allen
Welcome, everybody. It is Monday, June 27th, 2022. Jack, it's good to have you join me as the cohost here. I appreciate you. We've got another great episode, Jack. This show is created by mortgage professionals. We do that for mortgage professionals and we're grateful to have you as our audience. Our commitment is to bring you timely information that you can tune in to anytime and anywhere. Jack and I are going to do a special next episode and talk about the economy, where things are at and what's going on in leadership. I'm very excited to be doing that. It's great content. For this episode's hot topic segment, we've pre-recorded a session with Shane Westra and Jay Arneja. They are with SimpleNexus. We're so excited to have them as guests. I enjoyed doing this interview with them. What I love about our sponsors is they're more interested in sharing best practices and thought leadership rather than just pushing out their products. That's one of the things we value about having them as special guests. We got into some excellent stuff. You're going to enjoy this interview in the Hot Topic segment. Tune in for this episode's Hot Topic. I want to say a special thank you to our sponsors. Finastra, use your mortgage bot solution and personalize a loan application path based on borrower-specific information in a workflow and type that works. We had the head, John Weinkowitz, on the show on June 6th. Check out that episode.Also, FormFree. Patented account checks and passport products open doors to more exclusive credit decisions by revealing each customer's true empirical ability to pay, ATP. We had Christy Moss on. That was June 20th, along with Freddie Mac. It was a fun interview. Be sure to check that one out. Also Lender ToolKit, Brett Brumley and Brent Emler. We’re getting them back on the show. They do a great job with their technology. Snapdocs, with the old man. They do so many things. Over three million mortgage closings in 2022 for lenders and title companies and that's eClosing. They do a great job. Go check that out. Briana Ings, we had her on March 28th. Also, TotalExpert. We had the Accelerate Conference up in Nashville. It is outstanding. They've built the best CRM for lenders that have the intelligence for understanding their unique needs. Josh Lehr and I presented at the conference and then we had him on the show on May 9th, 2022. Check that out. Also, SimpleNexus, which is what we're going to be talking about on the show. Also, other sponsors, the Mortgage Bankers Association of America, LendersOne, the Mortgage Collaborative, Success Kit, Knowledge Coop, Mobility MI, and Modex. I love those two products. I love all our sponsors and their products. We use them all. Also, Mortgage Advisor Tools and DW Consulting, which does a great job helping you with your LinkedIn profile. Also, a special thank you goes out to Adam, Les, Matt, Alice, Allen and my cohost, Jack Nunnery. Let's get over the MBA Mortgage Minute with what Adam has uploaded to us. We heard Rob VanRaphorst has joined David Stevens. They are working together and David Stevens reached out. We're going to be having him on the show. We're doing a fun interview with them. Hopefully, they're going to work it out where we have them live but if nothing else, we'll pre-record it. Without further ado, let's get over to hear what Adam DeSanctis has to say about the MBA with this episode's MBA Mortgage Minute.
I'm Adam DeSanctis. Welcome to the Mortgage Minute, the latest news from the Mortgage Banker's Association. In response to a letter submitted by MBA and other trades, FHFA provided additional details on its plans to update the credit score model requirements for Fannie Mae and Freddie Mac. FHFA's response offered a timeline of implementation depending on the number of credit score environments and noted that the agency and the GSE are committed to engaging with stakeholders. MBA has advocated for a deliberate implementation process and timeline and will work to ensure a smooth transition.
Mortgage Updates: In response to a letter submitted by MBA and other trades, FHFA provided additional details on its plans to update the credit score model requirements for Fannie Mae and Freddie Mac.
Also, MBA and the National Fair Housing Alliance announced a new online toolkit for mortgage lenders interested in developing Special Purpose Credit Programs or SPCPs. The online toolkit, which was developed with technical assistance from the Home Ownership Council of America with input from the Urban Institute provides background information, best practices, industry examples, data and other useful links to help mortgage lenders in their work in developing SPCP. Go to SPCPToolKit.com to access the toolkit. That's it for this episode. Thank you for reading.
Thank you, Adam. I appreciate it very much. I appreciate our partnership with the MBA. I'm going to be giving a presentation to some of the leading CEOs in the Austin market. We're talking about housing, the economy, where the mortgage rates are going and all that. I want to say a big public thank you to Mike Fratton who shared his slides from the Arisa presentation he did with me. We're going to be talking about those next on the show. Thank you to the MBA for all that they do. Be sure to sign up for the Mortgage Action Alliance app. Through that app, we can support all the things they're doing on the Hill for us and that is much. We need to have our voices heard. We're too small of a trade organization to be silent. We need to have the few of us that are here making our voices known. You do not have to be a member of the MBA. I've stressed that before. I'll stress that again. You should be a member of the MBA but you don't have to access and take advantage of the Mortgage Action Alliance app. Let's get over to Les Parker with this episode’s TMSpotlight and a macro view of the markets.
TMSpotlight sound bite is brought to you by PowerSeller making hedging easy. Bonds can dance every dance with the trend that gives them the eye. The financial markets continue their electric dance while traders go to work, as bonds chacha with the bears trying to take it back from the bulls, oil and gold slide. At the ECP, its leadership crisscrosses ambiguity and certainty over the size of its looming rate hikes. Meanwhile, housing seems to hop along but supply goes left and demand goes right. Will a dollar freeze turn it out or lead to a stop? Will bond save the last dance for the bull? These views are my own. Catch the bond dance moves at TMSpotlight.com.
That's Parker and Gary teaming up to do a great job on that segment. I love it. There is so much information cramped in that sound bite. That is short to the point. You could listen to that a dozen times as you pull out everything that's out of that. Be sure to sign up for Les's newsletter, the paid version. You can get it for free by going to TMSpotlight.com and putting in the word Power for PowerSeller in the code and signing up for it. We've got Matt Graham here. It's always good to have you. I love your screens. I love what you do and what you have behind us. What I have on my screen back here with all the information is nothing less than outstanding. I want everyone to sign up for your service at MBSLive.net. We've got Matt Graham, CEO and Founder of MBSLive.net with us with a market update. What have you got, Matt?
Dave, it's great to be here. The bond market is not necessarily feeling the same but we'll get to that in a second. Last week was generally good for the bond market because it helped yields and rates or reject the super-high ceiling that was seen in the middle of June 2022. As a reminder, that ceiling came in response to the market's response to the CPI data consumer price index from the previous Friday.
I know we're going way back in time here Dave because I wasn't with you last week. CPI came in hotter than expected. That was Friday the 10th and then markets freaked out heading into the Fed announcement from two weeks ago. Once the Fed confirmed the 75 basis point hike, then that marked the ceiling in rates. We were hoping that's what we were going to see. We were hoping the market was freaking out and that was going to moderate, especially in light of the fact that in current economic data, most of the rate hike cycle is priced in fairly well at those levels.
That afforded bonds the opportunity to carve out this new high sideways volatile range that we've been looking for. There were some gains but they weren't exuberant gains so it acted like a confirmation to whatever extent you can have a confirmation of something so uncertain. Why is it uncertain? It's because the trading range is only as good as the inflation-related economic data that comes in and the Fed's response to it.
[bctt tweet="The trading range is only as good as the inflation-related economic data and the Fed's response to it." via="no"]
Speaking of the Fed's response, we heard from a million Fed speakers and it was as if they were all given the same script and the bullet points on that script. I mean it was uncanny. The wires that were coming across, you could change names out and they were all the same. There were no fewer than seven Fed members that said the same four points. The first was that they're super-strong committed to their inflation goal. That's job number one. A couple of them used those words, job one.
The second point was that it makes sense to hike rates faster at first so we can level off sooner and need less tightening overall. They all said some iteration of the job market and labor market being extraordinarily great and tight and all the rest of it. We're not worried about jobs and then they all said something about raising rates does increase recession but we think we can do this without a recession. We're still aiming for a soft landing. Away we went and the market was like, “Neh.” It looks like the Fed is about where we thought they were and it didn't cause any market reaction.
Powell's prepared remarks at the Senate testimony. No major reaction there, if anything, is slightly positive for the bond market. The biggest gains followed at PMI data purchasing manager's indices, like little mini GDP reports that come out every month. Europe was the big market mover overnight on Thursday. During the day on Thursday, we had PMI data in the US, at 9:45 AM. Also, we can expect it to show a deceleration of inflation. Bonds reacted favorably to that, hitting their best levels on Thursday, bouncing with ten-year yields, not able to make it any lower than 3%.
What this means in the bigger picture is we were looking for a certain sideways range to bookend this big spike in rates that was taking place in 2022. We knew that at some point, that would level off. It looked like that was probably happening after early May and then it bounced at 3% and took off again. We were hoping to see those early May levels hold up. That was when ten-year yields hit 3.2 by the way.
All that CPI drama I mentioned at the beginning caused rates to break up over 3.2. Suddenly, we're adrift again, trying to identify the next sideways range. That's what this week is all about. It's a holiday-shortened week. It might not be as well traded from a liquidity standpoint as we would hope when we're trying to identify these sideways ranges but it's pretty wide and pretty volatile. Mainly, I would love to see bonds continue to hold under 3.5%. A lot of smart people out there think that has a good chance of being the ceiling for the year and potentially longer. As I said at the beginning and as they say, when they make these claims, it does depend on how inflation comes in.
To that end, the last thing I got for this episode, PCE prices come out on Thursday. That'll be our key data point, the biggest potential market mover. In the meantime, treasury auction supply put a bit of a damper on a few minutes before I started talking. Five-year treasury auction came in weaker than the previous averages would like it to come in at. Bonds are reacting negatively. Yields are up a bit. MBS is down a bit. Some lenders are going to repress for the worst. That is all I got for now.
We're not done with you though. Jack has always got a few comments to put in here. Dr. Nunnery.Quick question for Matt. Do you think that the market has baked in another 75 basis points increase in the Fed funds rate for the month of July?
Fed fund future would suggest that that is a fairly decent chance. It’s a little bit better than a real 50% chance that that's going to happen. Based on the Fed’s comments, it seems like that is probably something they'll do. This is what makes Thursday so volatile. If the PCE data is noticeably hotter than expected, it all guarantees that. If CPI data falls off in the same way that some of the PMI inflation components suggested, then they might play things a little bit slower.
I do think it's notable. It seemed like they were all reading off the same script. One of the talking points in that script was that it made more sense to get to their destination quicker than slower. That seems to suggest that they would like to do 75 and then maybe take off 25 bits of the hike that they may have planned for in the future.
Powell can certainly do that and deliver that message. They can hike 75 bits even to the surprise of the financial market and then Powell can come out in the press conference and say, “I see that bonds are tanking and stocks are tanking.” You’d think we're being too aggressive but remember we said this stuff about getting to the destination early. This is what I'd like to call a dovish 75-bit. Don't worry we're doing 75 and then we're not going to do one of the 25 that we may have had planned later in the year. Don't worry about it. We want to get there like what all of you guys on the internet were talking about we should have a long time ago. Let's see what happens.
David, I saw that the median single-family home price in May rose to $414,200. I went out to the MBA site where they had the mortgage finance forecast. I was looking at revisions to 2022 and then revisions to the forecast for '23 and '24. Earlier in the year, the forecast for '22 was around 2.5 to 2.7. Now it's dropped to $2.4 trillion for 2022 and they revised the forecast down for 2023 to $2.2 trillion and returning to $2.5 trillion in 2024. The underlying message here for our audience is we're going to be in this for two and a half more years based on what the forecast models are saying. It's not a short-lived downturn in the market. This is the three-year forecast out to 2024. It looks about the same as it does now.Mortgage Updates: We're going to be in this for two and a half more years based on what the forecast models are saying. It's not a short-lived downturn in the market.You look at these numbers. These numbers are still strong origination numbers. What feels so dramatic about this is the precipitous drop from ridiculous highs and unusual highs.
If you're high heavy, it sucks. There's no way around that. That's always going to be the case when you have a boom like that.
Those collapses of the refinance market and it does feel like a collapse. It's a lot of interesting perspectives. I recorded an interview with Ron Vaimberg. We're going to do that next episode with some more commentary about how we should be looking at this. Good stuff, Matt Graham. You do such an outstanding job. I appreciate the services you do. Everyone, you can sign up for MBSLive.net by putting in LOL as a sign-up code. You get an extended trial period with no credit card required. Give it a try. Be sure to do it. Matt, thank you for being here, friend.
Thanks, David. Have a great rest of your week.
You bet. We’re glad to have you here as always. Alice Alvey is in the house. She's here. She's CMB and Vice President of Education and Training for Union Home Mortgage. We're always so glad to have her here with a legislative update. Alice, it’s good to have you here.
Thanks, Dave. It's great to be here.
What an outstanding job you did on the pre-recording last episode. You talked about Juneteenth. You gave us some history on it. It was wonderful and I got a lot of comments on that. People said, “Thank you, Alice. That was informative. She does do well at education and training,” which you do there at Union Home. Thank you. You got a lot of good feedback.
You're welcome. It's a newer Federal holiday. It's only been our second one. Some people that I was speaking with didn't know the origin or why they had heard from TV and how maybe some stations were describing it. As I was hearing what they were saying, I thought, “That's not what it is.” It has a strong meaning something that is meaningful to all Americans. I thought it would be a nice thing to share. I'm glad you got some good feedback from it.
We did. What do you have for us?
It's all mortgage. Interestingly enough, thank goodness that Fannie and Freddie did finally publish some guidance related to the Equifax credit score issue. There still are a few loose ends but at least we did get from Fannie and Freddie that if we've sold the loan to them, we are not required to obtain a new credit report, re-under bright loans or go through any reassessment. For those of you who maybe haven't heard about this, Equifax had a period, a few weeks, March 17th to April 6th where there was something wrong in the algorithm of their score.
You can imagine the complexity if that Equifax score was the represented score you used for not only the underwriting but also the pricing on the loan. From a credit underwriting standpoint, lenders are good. We don't have to go back and redo loans. We don't have to worry about losing reps and warrants. Fannie and Freddie did come to the table on that part. What we're still waiting on is whether they'll be running a report and regulating credit scores, like a retroactive type score based on at the time the loan was delivered for the loans that they have in their portfolio.
They'll be sending out lists to lenders. At that point, they'll be telling us about any possible repricing. Hopefully, those lists are small and easy to get through but you can imagine for any lender and I'm not speaking for Union Home, this is in general, when we've looked at our numbers, we're fine. My brain starts going crazy. There's got to be companies out there that very often do lower credit score borrowers and may have a lot of loans that were on a bubble from a pricing standpoint. Who owes whom money?
Fannie and Freddie have confirmed that they'll be sending the money back our way as a lender. What do you do as a lender for reconciling that with the borrower? Legal counsels are very busy with that one. For those of you who haven't heard about this or seen this, Fannie's lender letter is 2202. Freddie has talked about it as well. It's worth making sure you're prepared. Even originators and customers hear about this on the street. They've heard Equifax had their credit scores wrong. Ultimately, it was a very short window of time. Odds are that a lot of loans may not have relied on that score for their loan decision. Trying to encourage customers to think forward is a good strategy.
[bctt tweet="Trying to encourage customers to think forward is a good strategy." via="no"]
The other two things I wanted to point out that were in MBA's news link are they brought up again about this hundred billion dollar bill that Maxine Waters is proposing. I brought this up in the previous episode. The House Financial Services Committee did a markup of ten bills and they talk about this. This bill is for first-time homebuyers and first-generation homebuyers. It has a five-year recap for a borrower who could get up to $20,000 in an equity share arrangement for the down payment on a house. It would go with an FHA, VA or USDA. It's a super expensive program. It's hard to see that any of it goes anywhere.
Last but not least, also on the money front, as we watch HUD and others try and figure out their fiscal year budgets for 2023, it's difficult to see twelve appropriations bills making it through the legislature by September 30th. We can all expect that they'll be looking for some stopgap for continuing resolution to keep the government operating. That was MBA's thought on that. I would agree with them. That doesn't look like we have a cooperative group over there that's going to keep things running and will be in stopgap measure mode again. Back to you, Dave.
Good job, Alice. This is interesting. I want to talk a little bit about I know you believe in the importance of the Mortgage Action Alliance app and how that works. Could you expound a little bit on that, with some of the things going on with Maxine Waters and what they're doing in there? I'm all for helping first-time homeowners, stimulating that part of the growth. There's been a huge hill that they have to climb to get into a home. That cost of home price appreciation has been a thing. The elevated interest rates, all these things are obstacles. It's so important that we have our voices heard. Alice, explain a little bit again for our audience from your educational perspective the importance of using the Mortgage Action Alliance app, also known as MAA.
It is super easy. There are no excuses. My voice can't be heard. With the Mortgage Action Alliance, you can easily go to MBA's website. You can google Mortgage Action Alliance and Mortgage Bankers Association. It'll take you right to the link to be able to sign up. You do need to sign up every year. That's the way it works when it's something related to politics in this case to make sure that they've got you in their database. What happens is you receive an automated text or email when there is legislation that needs your support.
It's already queued up for your Congressional representatives and Senate representatives, depending on where the bill is at. You simply hit whether or not you want to agree with MBA's position or even if you want to hit your own. They make it super easy to follow mortgage thinking and mortgage-related policies that are pending. I encourage all of you to participate. It is going to be legislation-related. You still need to keep tuning in to this show.
Good job. We appreciate it so much, Alice. Thank you so much for being a part of the show for all these fourteen-plus years we've been doing this together. It's amazing. Isn't it exciting that we're going to hear from our old friend David Stevens? He's going to be coming on here to get a chance to chat with us. I’m excited about it. I like that. My folks had a saying in their front foyer. It says, “Make new ones. Keep the old. One is silver, the other's gold.” I'm grateful for the golden longstanding relationships you and I have, along with your husband. I adore you both as a couple.I also love David Stevens, the leadership he brought to the MBA for many years and all the things he's up to. He published an article. We're going to be talking about that. It’s about the merger of both Black Knight and ICE. What are the consequences of that? What does that mean? Lot's of good critical thoughts to be shared on that. Alice, thank you so much. Great job.
You're welcome. Thank you.
You bet. We would normally be going over to Allen Pollack but he got a delayed flight and missed coming in here. We're going to give him a bad time about that but we do miss it. We love his tech updates. You could go onto the website and listen to each one. Go look at LykkenOnLending.com. On the second menu item up on the bar, you could drop those as podcasts and it drops out all the various segments. You want to listen. Each one of our segments is loaded up there for you to binge away and I encourage you to do so. That wraps up this mortgage update. Next, Jack and I are going to be here. We're going to be talking about the latest trends and some of the things going on. He and I are going to gather around on the 4th of July. We may have some barbecue going in the background somewhere. We're thrilled to come with you. Jack, I want to say thank you in advance for taking time on your 4th of July to come on and share your thoughts with me about leadership, how we should be looking at these markets and what we help others do to look at it and lead their organization. We're very excited about it. I want to say a special thank you to our sponsors, Finastra, FormFree, Lender Toolkit, Snapdocs, Total Expert and SimpleNexus. They do all such great jobs. We're so grateful for them. Also, the Mortgage Bankers Association of America, LenderOne, the Mortgage Collaborative, Success Kit, Knowledge Coop, Mobility MI, Modex, the Mortgage Advisory Tools and DW Consulting. I appreciate you all. Have a great week, everybody. I look forward to having you back here. Keep the comments coming in. We love your feedback. Text them to me at (512) 632-2900 or you can go to LinkedIn and share them that way. I appreciate you all. Have a great time, everybody. Thank you.
