The first half of the Lykken on Lending program will feature our Weekly Updates….to read more info about our regulars and weekly updates, go to our website!
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Weekly Updates With Alice, Allen, Matt, Les, And Rob
We are glad to have you with us. I got a couple of notes already and they have several things we want to talk about. This show is created by mortgage professionals. It is for mortgage professionals and we are so grateful to have you as our reader. Our commitment is to bring you timely information in a blog format that you can read anytime and anywhere. We got some interesting things to talk about. In the Hot Topic segment, we caught up with Shayna Arrington. She is Chief Compliance Officer at The Money Source and we are going to have her on the show talking about things that are related to things we can anticipate in 2022.
It’s so good to have you with us and check out all the podcasts over at Industry Syndicate. We are pleased to be a part of the Industry Syndicate. They do a great job of working with us on getting our show out as well as many others. Check it out as well. We are grateful to them as our sponsors. Thank you so much for the Mortgage Bankers Association. We are grateful for them. Check out the MBA. Also, Finastra Fusion Mortgagebot Solution does a great job of helping you at point of sale and origination. They interface with so many platforms. I love their open architecture. It’s one of the things that Finastra does extremely well. Also, Lenders One. Check out Justin Demola’s interview we did about the vision of Lenders One.
Check out The Mortgage Collaborative and Lenders One. These two co-ops do a great job. They do not compete with the MBA. That’s important. We have got to be a member of the MBA. These are two organizations that you can be a part of. They will help you get to know your peers and understand what’s going on in companies similar to your size. The IMB Conference can do that as well, but these two co-ops are smaller subsets and very active and I recommend them.
I also want to say Insellerate. They are doing a great job with leading-edge technology and mortgage expertise with predesigned campaigns that can help you enhance the borrower’s engagement. Also, Knowledge Coop, a wonderful learning management system, as well as Mobility MMI and Modex. Both of these companies help you connect with the right loan officers for your company.
Also, Snapdocs does a great job on the eMortgage experience, as well as SuccessKit. If you want to have your testimony told, no better way to get business in the door than to get people who are telling your testimony and telling that, “That’s what SuccessKit does. They help you get your story told well.” also, Lenders Toolkit. I love working with Brent Emler, brilliant software, and how they work with lenders. Check out all the services Lenders Toolkit offers. Our special thank you to Rob, Les, Alice, Allen, Matt, and Jack Nunnery. The MBA’s Mortgage Minute is not available to us. Rob is taking the day off. We are going to get right over into Les Parker’s TM Spotlight and the macro view of the markets.
No more auctions left to read. What to do about it? Let’s put out the screen and go to sleep. This 2022 expects wild rates as they double 2021’s range. Look for the bond buyer’s hope for February crude oil futures to find sellers near $78. It closed at $75.21. Meanwhile, the short-end and the five-year bears focus on central bank tightening and rising gross prospects. Who wins? Dogs, bulls, or bears? The flattening curve votes for both. Mortgages stand bewildered. What’s to do about it? Let’s put out the screens and go to sleep. These views are my own. Find out when to turn the screen on at TMSpotlight.com.
Market Bonds: No lower rates to feed, no more auctions left to read, and what to do about it? Let’s put out the screen and go to sleep this year. Expect wild rates as they double last year’s range.
Les Parker, I love their contribution to the show with what they do. Get signed up for Les’ newsletter. You can do so by going to TMSpotlight.com and putting in the word POWER to have access to his paid subscription. Check it out. We encourage you to do so. Matt Graham is here with us. Matt, Are we having a bond market falling apart here? What’s going on?
Bonds are tanking. This does sometimes happen when we begin a new week, month, or year. We are doing all of the above. London and Tokyo were out on holiday and that might seem completely insignificant to rates in the US but it’s one of several things that may seem insignificant. It is contributing to a bit of a snowball selloff, as we like to say. The way it does that is via illiquidity and we have this whole primer on that on MBS Live that I sometimes throw in the commentary there. We want to think about illiquidity as not volume but the volume at any given price. If London and Tokyo are out, there’s a lot less cash treasury trading in the overnight session and even in the early domestic session. More so with London being out.
That means that the skids are greased for easier movement if there happens to be an imbalance between buyers and sellers. Right out of the gate at the 8:20 AM CME open, we saw sellers lined up to sell. This seems like a very weird concept. It’s something that took years for me to appreciate and wrap my mind around. The fact that there are individual people that have an impact on the market when they have a trading plan to execute on any given day.
The fact that they can’t do that in many cases until 8:20 AM and that seems crazy that in this day and age of electronic trading that somebody couldn’t take action on that in the overnight trading session or a couple of hours before the opening. We see it time and time and time again. I have a chart commentary that even shows the huge surge in volume at 8:20 AM and a big pickup in selling. That was the heaviest selling of the day and we have had linear weakness since then.
Pretty sizable MBS down half a point, ten-year yields up 11 bits and change to 1.62%. That’s right in line with the technical level that we are watching at 1.62%. It’s also Fibonacci level for those that are into that thing. I think the question is why are we selling and what does it mean in the bigger picture? We are going to kill two birds with one stone and say we have been selling in general since August 2020.
It got a little bit carried away in early-2021 and then we rebounded with some help from the Delta variant, then selling pick back up, and got some help from Omicron. Now we are in this indecisive timeframe where Omicron is creating a lot of case counts, but there’s hope speculation that it will not create as much severe illness, hospitalization, or death, and does not have as much of a disruption on the economy.
Although that remains to be seen. There’s enough hope out there that it’s not doing the same thing to the market that Delta did. Every passing day that that continues to be the case, the bond bears continue to have a leg to stand on. The illiquidity and boatload of corporate bond issuance, which adds upward pressure on rates, generally speaking, while we are in the early phase of the corporate issuance process, it was more than enough to tip the scales to trip stop loss levels and create a little bit of a snowball sell-off in the bond market.
As for that bigger picture trend in consolidation, we are still in the middle of a consolidation pattern, meaning we have two converging lines making a triangle or a pendant pattern and the breakout from that triangle will be potentially informative as to the next leg of momentum. For those following along at home, if we are using ten-year yields, that’s going to be somewhere around 1.65% to 1.7% on the high end. If it were to happen now or in the next week or two, around 1.43% is on the low end. That would be the consolidation range in terms of ten-year yields right now.
MBS mortgages, thankfully, when treasury yields are rising as faster as they are, mortgages typically outperform. Now is no exception if we are looking at MBS yield spreads versus tenure yields. Even versus a 5 to 10-year blend, which is even less favorable compared to MBS. We are at the lowest levels since the beginning of December 2022, so in roughly a month, which is good news. It is right in the middle of the yield spread range going back to the beginning of 2021. No major drama to report on that note.
When treasury yields are rising as fast as they are, mortgages typically outperform. Click To TweetThere is potential drama in the sense that things could get worse before they get better. I would urge the audience not to read too terribly much into the first trading day of the year, especially when two key overseas markets were out of the office for the day. We are still waiting to get a read on what momentum is going to be like in the week ahead and the month ahead and the year ahead. Not a great way to start the new year. Hopefully, things will improve as the week progresses.
It’s interesting to see how harshly it has fallen. I wonder if it’s that or if there other contributing factors.
I always want to know what those other factors are in my whole life, especially the first 5 to 10 years I did this. I relentlessly sought to connect market movement to news headlines, economic data, and something that was happening. It’s the fact that the clock turned 8:20 AM, honestly, the fact that the market opened, and there’s corporate bond issuance. We are not seeing a discreet connection between an individual event, news headline, or piece of economic data and a surge in volume or selling.
The only connection in that sense is the 8:20 AM CME open and it’s not satisfying. I will be the first to admit that. I love to find those connections when they legitimately exist and we are not seeing any now. If there’s going to be a time of year or week or month, when that happens, the very beginning is nearly as good of a time as the very end. For those closing bells, especially annually and the opening bells, so the first day of the new year, we can often see volatility that doesn’t necessarily have a great explanation other than the general assumptions that I have run down a few times now.
It is the most interesting way to start the new year. Your service is outstanding. You are busily writing out notes and sending them out to all of us, keeping us informed as best you can. You do a great job. Thank God, in markets like this or days like this, we have a service like yours and encourage our readers to sign up. You can do so by going to MBSLive.net and putting in LOL for Lykken on Lending. That’s a sign-up code and get an extended trial without a credit card.
Matt, you are going to be a busy guy, it looks like, answering a lot of questions and reading some of the commentaries we are sitting here. I appreciate you very much. Alice Alvey, CMB Vice President of Education and Training at Union Home Mortgage. It’s good to have you here with the legislative update. Alice, do you have anything specific to start with? Otherwise, we will get into a discussion about the whole vaccine mandate that seems to be occupying a lot of people’s minds right now.
I think it’s a great topic to kick off here because that is one of the biggest pieces of legislation that’s impacting our companies, not necessarily mortgage regulations specifically. For 2022, look ahead, legislative, we don’t have a lot of rocky waters that we are aware of. As you all know, anything can happen on any given day and we will certainly watch for remote online notarization run to be able to continue to move forward.
Market Bonds: Anything can happen on any given day, and we’ll certainly watch for remote online notarization runs to be able to continue to move forward.
I would love to talk about what we are all faced with on January 9th, 2022. There’s the regulation that goes into effect that would require companies with more than 100 employees to have everybody either prove that they have been vaccinated and then fully vaccinated by February 9th or they are going through a testing regimen. If you are not vaccinated, you are then getting tested regularly somehow in order to meet the requirements.
I’m not here to talk through what the specific requirements are of the law, and how each company may have to go about it. I’m hoping the Supreme Court comes in and throws this thing out. From my vantage point, me personally not a Union Home thing, I think it’s a real impact on your company culture to now have to put front and center. People are very passionate about this issue. There are a lot of people who feel 100% right and have no understanding of the other side. When I say right, I don’t mean right or left politically. They feel that they are right or they are correct.
I respect that. I respect if someone feels very strongly that everyone should be vaccinated. I respect those who feel like, “No, do not force me. I do not want to be vaccinated. It’s unfair that I have to be tested when anybody is capable, at least from some of the things I read of, being able to transmit this flu virus.” Both sides have their arguments. That now puts it front and center at your company and for people to have to face when they are coming into the office and it becomes a cultural issue.
I want to get a little bit of discussion on this because it’s an interesting perspective on what’s happening out there. As soon as we saw the circuit court, it was that overturned the stay that was out there. This became a live issue and it surfaced as many companies sent out an email saying the vaccine mandate is policy and we are going to have to respect it.
I have read a number of companies on how they responded to this and some of them had said, “We are not going to comment on do we like this or not.” It’s a federal requirement, but anyone who’s worked in the mortgage industry in some way feels very much that oversight by the federal government. Many require that. I started hearing that we are starting to have a good number of resignations.
People are fed up with it. I don’t know if anybody that’s blowing it off. What this is doing is costing for the discussion to happen. Hopefully, we will see the US Supreme Court throw this whole thing out, get done with it, and get back to work so we can not worry about it. One provision that’s interesting here is the provision that if you work from home or if you are a remote worker, you are exempt from this. There are a number of people that are saying if this goes through and the Supreme Court does not, they are telling their staffs to go remote.
As they look at how to navigate through this, several companies are seeing this as an opportunity to recruit. Wherever you land on this, and we are going to get over to you, Jack, and get your thoughts on how you recently retired from Texas Capital Bank. That’s a federal institution. It’s one of those things. What are you hearing out there?
David, first of all, historically, there have been vaccine mandates before. I think the first one was in 1905. The state of Massachusetts mandated a vaccine for smallpox. In the ‘70s, the federal government started vaccinating children for polio, measles, and rubella. Those were seven common diseases that the federal government started initiating a mandate to have children vaccinated.
Now you can’t get your kid into school if they don’t have a certain list of vaccines before they start a school year. There is a historical precedent. There’s a lot of energy around the safety of the vaccine that maybe didn’t exist when it was measles, mumps, tetanus, and those diseases that we have known ever since we have been around. There is a historical precedent that has been established around mandating vaccines.
I know there have been, but this one is unique. It’s the political toxicity that’s in the political discussion discord on this and the opinions that are out there that are all over the map. We were out to dinner for New Year’s Eve with some friends and they were quoting some things as if they were facts. We had listened to a doctor who’s probably one of the most renowned epidemiologists. The bottom line is that they were quoting as if it was a fact with a fervor that one of the things was as once you have had COVID like I had COVID, are you forever immune or not?
This doctor who’s on there, we listened to this very renowned doctor, very celebrated, says, “You are immune for life if you have that.” At the dinner table, whether you agree with that or not, it’s a doctor who’s probably one of the leading top three doctors in the nation on this. Firstly, I’m going to go with that guy’s opinion on this, how I handle it. It’s the whole toxicity around this discussion and the opinions that are there. It’s going to create a challenge for many lenders out there. How do they navigate this?
Several are saying we are going to pick up all the employees that get that’s used to exit. We are taking an approach that if you are uncomfortable with this, you can work from home. Several companies are setting up testing facilities in their building or their office buying the kits and sending them out so that they can comply and saying, “Don’t worry about this. Get back to work.”
I think those that are going to take a proactive stance rather than what I’m seeing some companies do. I’m looking for one particular email from one company, whereas you got to comply. There wasn’t as much focus on the alternatives, working from home, getting tested, or what they were doing to help companies get tested as there are some other companies.
Some companies are going to seize on this and make a real opportunity out of it. It will be interesting. Let’s get to some of the questions that are coming in. Alice, I know you can’t, and nor would you, nor would I ask you to comment about Union Home policy on this, but have you heard what other companies are doing?
Just like you said, Dave, it’s not a lot of companies are putting their foot down. There’s always this, “Let’s wait for the Supreme Court decision on the seventh.” A lot of other companies are preparing for are we going to offer the tests for free for folks? Do we need to start buying those up to have them in supply? No way. Is any of this a reflection on Union Home at all? For me, for preparedness, if you decide as a company that you have got to put the testing in place and have the verification of the vaccine, you spend some time understanding how your partners and your team members feel about that. I love the idea of letting people work remotely. There you go. Problem solved. I don’t think this is permanent.
This is where we are at now with it, I hope, and maybe there’s some ability to have this repealed in the future, but I think that would be my note to everyone. Whatever policy you decide makes the most sense for your company, I would recommend making sure that you also talk to people about how they feel about it. I think you are always in trouble when you say, “I’m doing it because the law says I have to and I don’t agree with it.” That right there, if that’s coming from leadership, that sets the wrong toll. There’s got to be a way to say how we are going to do this, we are going to make it work, and how we are going to work together so that we are in compliance.
Whatever policy you decide makes the most sense for your company, make sure that you also talk to people about how they feel about it. Click To TweetJack, I know you are retired, so you probably don’t talk to as many people, but what are some of the companies you are talking to if you are doing on this point?
The couple that I have talked to is going to comply. The question in my mind is a number of states, different actions with regard to the vaccine mandate. Some prohibited employers in a state from requiring proof of vaccinations. Some states struck right to the heart and prohibited a vaccine mandate. I find that very interesting in as much that it says we are not prohibiting the mandate, we are just prohibiting the employer’s right to document that you have been vaccinated.
The January 7th, 2022 Supreme Court trial date will be interesting to see how it deals with about twenty states out there right now that moved against the vaccine mandate in some fashion or form. I will be in antenna up on January 7th. The solution that Alice put out on the table with work remote is a very eloquent solution to this. Unlike a couple of years ago, when the workforce wasn’t oriented to work from home, we are now. People got into the rhythm of working from home. I have always said anybody can work from home, but it takes you about a year to get very proficient at it. Now as a workforce, we have become proficient at working from home.
We got used to it much more quickly. I see this as an opportunity. We don’t know what companies are representing, but our company may come down and land on it hard. Our company’s leadership is more bent on a liberal stance on this. They are very supportive of this. They are seeing this as an opportunity. We have already started seeing some resignations as a result of this within our group. The branches are trying to figure it out. Many of them are going to start working from home.
It’s all over the map and it’s very predictable because it’s going down the lines of what we talked about earlier. This is one of those issues, very polarizing. You are either on the left or right on this one. A lot of people are putting in a lot of opinions out here. Get it. It’s not that much, not that big. Allen, what are you seeing in the tech world? What do you think?
On the tech side, it doesn’t affect very much other than the person-to-person, face-to-face relationship building, implementation, and training. When you think about it, the folks that support and build technology already like working at home in the dark and they work all hours of the day and night. I can’t say it doesn’t affect them, but business as usual for a lot of them. It’s the running of a business on the tech side that gets affected like everything else.
Alice, thank you for the update. Good job. Let’s get over to the tech update. We have got Allen Pollack with us for the tech update.
Good to be here. I’m happy to say ‘21, honestly, for me, was a fantastic year. I’m excited to have an even more fantastic year in ‘22. I will start with the surprise news. This is a super surprise. Officially, Blackberry is ending its mobile phone business. I don’t know if you even remember them, but they still are trying to be in the business and it’s all over. Getting back to the pandemic conversation we had on a separate topic, a lot of flights are being canceled. The first thing I think of is how AI is being used. There has to have been some type of data that can be matched up with other data. How often are the likelihood of people calling out of work sick?
The fact that you have X amount of travelers that may be sick and to be ahead of it right in front of it and have not people not stranded in the airport in an even more dire situation. I can’t answer that question but United Airlines is offering three times pay to pilots right now if they are able to be at work and can fly. We are definitely in an interesting position. I did see something that due to the pandemic and the new surge of cases that the airline industry is potentially going to bust. I don’t know if that’s true or not or if it was an opinion and op-ed, but that was interesting to mention. Let’s talk about more complex things.
2022, the last item I want to bring up, it’s a do-or-die year for Congress in big tech. There’s a great article at TechCrunch if you want to check it out. They are talking about all the proposals to update competition laws, online privacy rights, protection from kids, and even more importantly, protection from harm on the internet with children as well and hoping that there’s bipartisan support.
It will be a big and interesting year for how much power and control big tech have and can government step in and add some protection and privacy rights to all of us. Look out for that as the year continues. Everybody has seen TV ads that talk about unwanted subscriptions. Truebill is the name of the company. You can connect it to your bank accounts using a technology we all use in the mortgage, like the flag technology that connects to your accounts. You put in your username and password and it aggregates your data. Hopefully, by now, a lot of us are using data aggregation.
Market Bonds: It will be a big and interesting year for how much power and control big tech has, and can the government step in and add some protection and privacy rights to all of us.
Rocket acquired them for $1.275 billion. Truebill scans your bill and helps you deactivate it, but they also were a platform to help you negotiate better bills. There have been a lot of different advertising campaigns. They were doing about $50 billion in monthly transactions. They were tracking spending and helping people build budgets. They were also looking to help monitor and improve credit scores. They are the same but different from Credit Karma and LowerMyBills and a lot of these other ones out there.
In the end, Truebill’s CEO said that they are aligned with Rocket because they will leverage the power of technology to remove the friction of complex transactions. What is it to get into? We have talked about it a few times. Personalized experiences. Jack, I’m sure you are shaking your head up and down because know your customer, KYC. You do not have to be a financial institution to understand who your customer is and provide them with a personalized experience.
Looking at all of these non-bank lenders and looking at the technology, they are leveraging data. They are leveraging advertising and marketing, things that aren’t about the market transaction. They are using that to help people understand that there’s more to how facilitating better well-being beyond getting a lower rate on a refinance or buying a home that fits within your means.
You are going to see more of this throughout the year, but very interesting. If you didn’t hear the first part of that Rocket Mortgage has acquired Truebill for $1.275 billion, which is a huge number. Let’s move on. David, we talked last time. I missed last time, unfortunately, but I did talk about data breaches and real quick, we are going to spend the next couple of episodes going into it.
I’m talking about bringing someone into the program that is a cybersecurity data analyst. Somebody that gets into the data to help you understand exactly what you are going to do. Let me tell you, Housing Wire has an amazing article that talks about the headwind confronting mortgages in ‘22. They talk about operational risk and key performance indicators. What they don’t talk about, and we can talk about that article next time, is they don’t talk about the security of data. I think that’s a huge headwind that we have.
Every day, there are more data breaches. We have talked about this in the past too. Imagine your homeowner, your prospective new buyer wires money to a fraudster and winds up not being able to get that money back in time to close on that property. That’s another type of data breach. That’s something that you need to be very cautious of and you play an important role in this process.
What do you do in the event of a data breach? I’m going to start with the very first one. We will get into some of the other ones, but you need to identify the source and the risk, the extent of that breach. If you are a technology vendor, you need to figure out where it’s coming from and shut those services down immediately.
If you are a mortgage lender or a service provider that’s attached to any company that had a breach, you need to do the same thing. You need to immediately identify if is it a one-time event. Is it ongoing? Do you need to pause your systems? Do you need to move to a manual phone call process to take apps while you temporarily disable your site? These are things that you need to think about. It’s extremely important to minimize the risk and understand how it happened and where it happened. That’s the number one thing.
The second thing I will leave you with, David, and we will get into more details, starting with the second item next time, is you need to mobilize a team and you should know who the team members are before a data breach happens. The very first ones that you need to know is you need to know legal counsel, insurance, and forensics. You need to have these folks involved, your CISO or your CIO would be the one to put these together. We can talk in more detail about that next time. It’s a fantastic topic so it is a positive experience should anything ever happen to you. 2022 is the year of zero data breaches. Fingers crossed. We do need to be ready in the event that one does happen. Thanks for reading. We appreciate it. That’s all, David.
You need to mobilize a team and know who the team members are before a data breach happens. You need to know legal counsel, insurance and forensics. Click To TweetIf you want to get a hold of Allen, send your comments and things you would like to have him comment on or talk about to [email protected]. Allen, thank you so much for being here. That wraps up the first part of the show, which is the Weekly Mortgage Update. We are grateful to have the opportunity, readers, to be there with you. Next time, we are going to have Julian Lumpkin talking about SuccessKit and he’s going to be talking about his process.
I think it’s so important how we tell our story and I always say there’s a great proverb quote all the time. It says, “Let another man’s mouth praise you, not that of your own.” I think when we try to tell our own story, we don’t do necessarily the best job. I think that’s why I’m excited about our partnership with SuccessKit and hearing what Julian has to say.
We talk to you about that. Also, I want to say special thank you to our sponsors, Finastra, Lenders One, as well as Insellerate, Mobility MMI, Modex, the MBA, Knowledge Coop, Mortgage Collaborative, Snapdocs, and SuccessKit, as well as the Lenders Toolkit. It’s going to be an interesting one with the hearing that we have got coming up with the Supreme Court on the COVID vaccine mandate. Stay tuned. We will have lots of commentary on that next time. It’s great to have you with us, everybody. See you back here next time.