Weekly Updates From Adam, Les, Matt, Alice, And Allen
This is Monday, June 6th, 2022. In this week's hot topic segment, we've got John Weinkowitz with us. He's the Global Head of Product Marketing for Universal Banking at Finastra. He's going to be talking about one of my favorite topics. The fact that this is a topic that came in as a result of a request from one of our clients. We're going to be talking about transformation, what it means and the right vision. It means many things. `Creating the right vision is key and transformation means change. One of our readers, Bobby Miles over at Altro Mortgage, said, “I'd love to hear you guys talk about how people are handling change.” The bottom line is we're thrilled to have you here with us and you're going to want to stay tuned to the hot topic segment. Let's get over to the MBA Mortgage Minute with Adam and see what's going on from the MBA's perspective.
Here's the latest news from the Mortgage Banker's Association. MBA and the Housing Policy Council responded to the US Department of Housing and Urban Development's proposed 40-year modification while supportive of HUD's proposal to add the 40-year modification to FHA's loss mitigation toolkit. MBA has recommended keeping the 30-year modification as a core component of loss mitigation, allowing a modification of up to 480 months while providing additional opportunities to help consumers facing long-term hardships while also addressing the unique challenges of future adverse market conditions. BA will continue to work with FHA and Ginnie Mae to ensure secondary market certainty for extended-term modifications. That's it. Thank you for reading.
Thank you. If you haven't signed up for MBA's Mortgage Action Alliance app, please do so immediately. Also, become a member if you're not already there. Much can happen with that Mortgage Action Alliance app. It's so important. Let's get over to Les Parker with the TMSpotlight and a macro view of the markets. Les, what you got?
Treasury Secretary Yellen said, “We were wrong about inflation being temporary.” Janet Yellen has been wrong about major economic policies before. She denies contrary trends until reality hits the front page of the Washington Post. She's set up Russia to default on its dollar-denominated debts. Inflation hurt 64% of Americans living paycheck to paycheck. When people are hurt, they love new leaders. If you got a long list of ex-leaders, Joe tells us we're insane. We've got a blank space put to us and we'll write new names. These views are my own. Know what lights ahead at TMSpotlight.com.
[bctt tweet="Inflation hurt 64% of Americans living paycheck to paycheck. When people hurt, they love new leaders." via="no"]
Good job, Les Parker. The intersection of economics and politics has begun. I listened to Janet Yellen. Some of the things and some of their interaction with our current president are quite amazing. We could go on about that. I try to avoid politics but sometimes when they intersect as they seem to be, it's hard to avoid it.Check out Les Parker's TMSpotlight Newsletter. He does a great job. You can subscribe for free and to the paid version by putting the word POWER in there, which stands for PowerSeller. Great job, Les and Gary. They team up for that segment every week. Matt is here with us. The Founder and CEO of MDS Live, will bring us the news we don't want to hear but need to hear. He does a great job with his excellent website, MBSLive.net.
Here’s the news you don't want to hear. If you want, we can do fake news and I can say rates are even lower than they were and everything is great. That would indeed be fake news.
We had the highs back then. It was 2.87% and it looks like we could be checked in close to testing those highs. Do you think that's going to happen?
That's going to depend a lot on CPI on Friday and maybe the ECB announcement on Thursday to some extent. Whether we do or we don't, we'll talk about what the general trend is here in a second. Let's get caught up quickly first off on the data front. There are a couple of interesting things going on. We had Case-Schiller and FHFA home prices both come in, still scorching in terms of year-over-year price appreciation. Case-Schiller set a new record for 21.2% year over year and FHFA for 19%. The big caveat to these numbers is the fact that this refers to March home sales.
If it was sold in March, then it was probably negotiated in January or February, depending on how quickly it closed. The point being is that we can safely say that the 20% price increases year over year will ebb shortly based on what's being reported on the purchase side of the market. Chicago PMI and consumer confidence both surprised to the upside. This was a theme throughout the week for several reports, which were slightly stronger than expected. That surprised the market.
It didn't necessarily surprise economists in every scenario but market participants were expecting to see a little bit more impact from inflation and rising rates start to take a toll on the economy. It's not taking as much of a toll as they thought. One thing that I thought was interesting was the fact that the market is starting to react to economic data that it didn't react to for most of the past year. Change inflation has been the driving narrative and things like employment-related data, especially things ADB employment. They haven't made a dent but then on Wednesday morning, we did see a little positive reaction to a lower-than-expected ADP number.
We saw a negative reaction to a higher-than-expected ISM manufacturing number. That was the centerpiece of the week in terms of economic data moving the bond market. It was so overt that it forced us to ask what was going on with that. It goes back to something we were talking about, which is that bonds can only gain so much ground in an environment where we're waiting to see what's going on with inflation. We happened to gain a little bit more ground after we talked but then indeed, that 2.72% technical level and treasuries acted as a floor and we're settling into what we bought would be a volatile sideways range, fingers crossed at sideways. We have to see how high yields go.
While we're in that sideways range or what we hope will be a sideways range, we have these fine-tuning adjustments that will account for the volatility inside that range. It's the inflation trends that will shape the big-picture trend for rates and the Fed's policy response. The economic data allows for those fine-tuning adjustments and the volatility inside that range. The takeaway was that the economy is doing a little bit better than the average trader thought it would be given the inputs in terms of inflation and rates.
Mortgage Updates: It's the inflation trends that will shape the big-picture trend for rates and the Fed's policy response.
The last piece of that puzzle was Friday with the jobs report. It hasn't been a huge market mover but it did move markets more than most people would expect, given the details of the report. It was only 390 jobs for 90,000 versus 325 forecast. The unemployment rate ticked up. Earnings ticked down 1/10th of a percent from the forecast. It was a lackluster report apart from the payroll headline. Nonetheless, rates jumped higher on the news and only recovered with some help from ISM non-manufacturing.
Another important top shelf report, maybe not the highest shelf but the second highest. The takeaway is that there is some attention being paid to economic data in a more significant way than has been the case in recent months. Looking ahead, it's still all about inflation. Big CPI report coming up on Friday. No Fed speakers. They're in their blackout period ahead of the Fed announcement. The announcement is guaranteed to have a 50 BIP at a rate hike. We'll talk more about this soon but traders will be getting in position for that throughout the week and then potentially huge reaction to CPI. Any CPI report is a potentially huge market mover.
We want to see if that thing continues to cool down or if it is starting to have second thoughts about cooling down. That will decide whether or not we stay in the sideways trend. If it is much hotter than expected, we're probably going to move up and out of that range you asked me about at the beginning and 10-year yields would be able to test 3.2% in that scenario. Let's hope they don't. We can escape the next week and confirm that this indeed is a sideways range, not just a pause before continuing toward even higher rates.
Les, you're a studier and observer in the market. Do you have thoughts on that?
David, it seems like we're operating in an alternative universe. In this alternative universe, the money center, bank, chairman and CEO become meteorologists and rappers become economists. I'm talking about Jamie Dimon who came out at an investor conference and said, “Brace yourself for the economic hurricane.” He cited a couple of drivers of this. The first of which he threw out was that it's possible, potential, that oil could hit $150 to $175 a barrel.
More importantly, he spent a lot of time talking about the quantitative type and his concern about pulling money back out of the system and how we will fare with this aggressive QT. We've talked about QT on the show before but here you've got Jamie assuming the role of a meteorologist and then rapper Cardi B questions whether or not the US is in a recession over Twitter. thought I was in an alternative universe.
Matt, you're chuckling up there in Portland as you listen to this. You got to be.
Yes. If he's going to mention Cardi B, that's worth a chuckle.
There's a lot of concern about where we're at and what's going to happen to the markets. Lot is reading out several articles over the weekend. Smart Money is moving out of the equities. They are quietly pulling back. What's that going to do? We're going to find out because Matt got it all. You can have it, at least the bond market stuff. It's all there and it's great information. I love what you do. Jack, I love your perspective. That is good. It’s an alternative reality we are in, very much. Gentlemen, thank you so much for that great report. Let's get over to Alice Alvey with the legislative update. Alice Alvey, CMB, is Vice President of Education and Training at Union Home Mortgage. It's good to have you here with us.
[bctt tweet="There's a lot of concern about where we're at and what's going to happen to the markets." via="no"]
Thanks, Dave. It's interesting that Jack brought up about the Jamie Dimon comment because that person can say those statements. It can resonate with everybody and influence the market. We'll see what happens. For me, it's pretty simple. Congress isn't super focused on us, which is nice. The one thing we do have out there is a joint notice of the proposed rule of making. The pre-discussion before there's a proposed rule coming from the OCC Federal Reserve and FDIC. It covers most of our mortgage banking and independent banks out there. If you think of, “If these folks are going to have to start thinking about rules for CRA for the banks, are we on the list?”
Even as independent mortgage bankers, we should be paying attention to this rule and get our comments in. They're overhauling CRA. A lot of folks don't have any big opposition to the proposals within the CRA to include more mobile banking credits. A lot of it is how to give the banks more credit for the work that they're doing. Comments are due by August 5th, 2022. Everybody get out there and get your voices heard.
From my perspective, Dave, one thing that I was looking through is a couple of areas in the MBA Newslink that I thought was important for folks to spend a couple of minutes on. Go back and check them out. MBA Newslink posted on June 1st, 2022. They had the Case-Schiller index showing that appreciation was sitting up around 20% still, whereas CoreLogic had reported that they thought, throughout 2023, things were going to go down. The answer is to flip a coin and you're probably right about what's going to happen next in the housing market.
It's interesting data that MBA had in their news link. The other one was the head on May 27th, 2022. The third chart of the week was the production revenue cost. I thought this one was terrific and looking historically at how they talked about we were tight in the first quarter. Margins had shrunk. That's common in Q1, as we all struggle with your volume. Historically, it is always a little bit lower in those winter months and then it picks back up.
You get your buy and share of your profits, hopefully, during the summer months. It’s interesting to go check that out as well. Dave, I'm going to close with a comment that I've pulled out lately from Albert Einstein, “We cannot solve our problems with the same thinking we used when we created them.” That's where we're at. It’s a new territory.
I related to that quote by Einstein. I read the book called The American Iconby Bryce Hoffman. It's about the phenomenal, unbelievable story of Alan Mulally, who turned around Ford. It is one of those stories that I recommend everybody tune in to this show and anyone you could influence. Get that book because of what Alan faced. He had come out of his successful career at Boeing and turned around the aircraft manufacturer. Many said, “What is an aircraft guy in the car business?” It's a whole lot different.American Icon: Alan Mulally and the Fight to Save Ford Motor CompanyHow he approached to it was so iconic because it was Alan Mulally's style, what he did through that very difficult period, like the housing crisis, all the economic data, bad, horrible numbers and circumstances all over the place. How did he do that? How was Ford the only company to not take bailout money? You lived up there in those days, Alice. I was thinking, “I can't wait for the episode. I got to get Alice's perspective on that.” Do you remember those days when you were up there in the Detroit area and all of the big turnaround?
Absolutely. It was a big deal that Ford did not take bailout money. I'm going to go have to read that book. I'd forgotten about that. Thank you for the reminder. It is a great story.
It is one of those stories and I recommend it to everyone, especially in the mortgage industry. “Dave, why do we want to read a book about a car guy turning Ford around? That's not the mortgage industry.” You'd be amazed at the parallels between the car industry and what Ford faced under the leadership of Alan Mulally. It was extraordinary. Alice, I wanted to put that in your old hometown. Remember when you took me through and we were up there driving through, you said, “Do you want to see part of Detroit as to wherever we were going?” I said, “I’d love to.”She said, “Yeah,” and then we took a wrong turn. You go, “We need to run some lights here because we don't want to be staying in this area.” I'll never forget that. It was unreal. Troy has gone through so much. Quicken has done in that market. UWM is doing this in the market to bring so much attention to the mortgage industry. We wish them all continued success. Go get that book, everybody. It's a must-read. What the mortgage industry is going through and what they went through at Ford are quite honestly many parallels. It's about leadership and what is your guiding principles by which you operate. You will not go wrong. Everyone who has read that book has written me and said, “That is just the best book. It’s so applicable.” Alice, thanks for your comments on that. Jack retired. He lives down on the Coast. He goes fishing in the middle of the day. He'll probably get his fishing boat to go out fishing here after this episode and then gives us a report. He sends me pictures from the boat. He was like, “Look what I caught. How's work going for you.” I appreciate you, Jack. You are so much fun and I truly value you being a co-host on this show.
David, it's fun to torture you from time to time.
Keep it up. I love it. Live vicariously through all my retired friends. Let's wrap this up. This ends the weekly mortgage update. In each one of the segments we covered, you can read it and we're talking about a new format. It’s the same thing. How we approach, this format is going to be changing in the weeks ahead. Stay tuned. I’m very excited about what we have coming up. It's come out of several reader suggestions but I went to Jack and Jack has got some great perspectives. We're going to be bringing in some previously ignored parts of the industry, namely production, servicing some and other areas. We're going to be bringing those into the first half of the episode and go, “How do you do that? You're already got a full show.” We're going to do it because you want to hear about it and many of you have told us as much. We're going to do that. In the next episode, we're pre-recording our interview and sharing it with Brandon Weiss and Amy Moses of EscrowTab. We were talking a little bit about why is it that the whole digital experience moving at such a ridiculously glacial speed. We're going to be talking to two experts on this. Brandon and Amy used to work at MERN. That's when I first met Brandon. Amy seemed such a good friend and she talked about how she respects Brandon as a leader. We're going to get some great contact from a leadership perspective. We're also going to be talking about the latest technology. Transformation is taking and it's going to be playing on nicely to what we talked about with John. I want to say special thank you to our sponsors Finastra Fusion Mortgagebot Solution, FormFree, Lender Toolkit, Snapdocs, Total Experts, SimpleNexus, the Mortgage Bankers Association of America, Lenders One, the Mortgage Collaborative Success Kit, Knowledge Coop, Mobility MI, Modex, Mortgage Advisor Tools, as well as DW Consulting. We appreciate you. Check out all our sponsors. We're grateful to have you here. Have a great time. I look forward to having you back here in the next episode.
Vice President of Communications at Mortgage Bankers Association
About Les Parker
Making individual lives better drives me. By transforming consumer lending across the globe through transparency, quality, and connectivity investors invest with confidence, which ultimately gives individuals the confidence to borrow safely and understandably. RegTech clarifies FinTech.
About Alice Alvey
The front line is where the action is and where training efforts can be measured. I am excited to be working with a great team of partners at Union Home Mortgage to develop their training program across sales and operations. The industry is moving rapidly to embrace new technology that constantly changes the way we operate. This in turn changes what, when, why and how we must learn the new ways of business. Education methods and content must change just as fast to keep the team ahead of the curve, efficient and deliver world class service.
Vice President of Communications at Mortgage Bankers Association
Making individual lives better drives me. By transforming consumer lending across the globe through transparency, quality, and connectivity investors invest with confidence, which ultimately gives individuals the confidence to borrow safely and understandably. RegTech clarifies FinTech.
The front line is where the action is and where training efforts can be measured. I am excited to be working with a great team of partners at Union Home Mortgage to develop their training program across sales and operations. The industry is moving rapidly to embrace new technology that constantly changes the way we operate. This in turn changes what, when, why and how we must learn the new ways of business. Education methods and content must change just as fast to keep the team ahead of the curve, efficient and deliver world class service.