Lykken on Lending

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 PART 4

Welcome to the show. It is Monday, May 16th, 2022. Let’s get into the episode here. We’re so thrilled to have you here with us. This show is created by mortgage professionals for mortgage professionals. We’re always grateful to have you as our audience. We’re creating meaningful content. This episode could not be a better representation of the content we desire to bring you. I was on a phone call with a good friend, David Kittle. David and I have been friends for many years. You are known by the company you keep so don’t judge David. Badly for him, he could come to me and judge me well for having good company with him. I don’t mean to be self-crazy but it’s good.

David Kittle is going to be joining us on the Hot Topic segment. I’m excited about the discussion because we’re all veterans here. We’re going to have a bit of a round table discussion for you, regulars, that have been around for years reading the show. We have a topic and it’s how to make tough decisions in contracting markets such as what we’re in, what to be doing about it and what to be focusing on it. I’m looking forward to this discussion in the Hot Topic segment.

I want to say a special thank you to Industry Syndicate. They do a great job helping get our show published and awareness about it. Check out all the episodes at IndustrySyndicate.com. I want to also say a special thank you to our sponsors. We’re so grateful for our sponsors. We have the Mortgage Bankers Association of America. What’s going on at the National Secondary Marketing Conference? It’s a well-attended conference in New York. A lot of people are there. I wish all of them that are there to enjoy it. I can’t wait to hear the reports from that. I was going to go but was unable to for some personal reasons. Kudos to all of you attending it.

Finastra’s Fusion Mortgagebot Solution is an entire platform that’s housed in the Cloud. You go, “Isn’t everything in the Cloud?” The way this is done is it’s through open APIs. It’s an open architecture that Finastra has led the way to. Maybe that’s why they are the number one FinTech company in the world. It’s largely because of how they’re structuring things and going about things. Be sure to check out Fusion Mortgagebot POS. I talked with one of their sales representatives. We had Troy Anderson on April 18th, 2022. Go check out that episode. Troy is a great guy and heads up sales nationally in North America.

There’s also Lenders One and The Mortgage Collaborative. We’re a part of both of these coops. Both of these organizations do a great job of you getting up close and personal with your peers. I love what they’re doing. They have collaborations. David Kittle is one of the Founders of The Mortgage Collaborative. He is our Hot Topic guest. We’re excited to be hearing more about the collaborations. I’m sure he’ll be weaving some of that in.

There is also Lenders One. We have a good number of our audience and clients who are members of both coops because they have slightly different approaches. I’m excited about our membership in both. I encourage you to consider doing so. Neither membership does away with the need to be a member of the Mortgage Bankers Association of America. The MBA is critical. It’s important that we support them through membership as a result of all that’s going on. As you’re there, check out the Mortgage Action Alliance app at the MBA.

I also want to say a special thank you to Total Expert for being a sponsor. They’re a leading FinTech software company that delivers purpose-built CRM and customer engagement for the modern financial institutions of mortgage bankers in the world. The Total Expert experience platform unifies data marketing, sales and compliance solutions to provide a cohesive experience across the customer lifecycle. What they have built into this thing is a piece of the product that’s included when you get the license on recruiting. You got to check out Total Expert.

Knowledge Coop does a great job of helping you train your people through a great learning management platform. Check that one out. There is also Mobility MMI and Modex. Both of these companies help you recruit based on intelligence and real market data of what’s being done by loan originators, not what they’re purporting to be doing. It is not that a loan originator would ever stretch the truth at all but it does happen. That’s how you can get to the facts. Use both of these. We use both of them and advise our clients on recruiting.

Snapdocs does a great job with over three million mortgage closings a year and doing so on eMortgages. Check out Snapdocs and all that they can do for you. SuccessKit does a great job of helping you tell your story on the internet. Lender Toolkit has got a suite of products that fit nicely all around your LOS. I encourage you to check out all of them. We could mention each one of them but be sure to check out the entire product suite. As well as FormFree. Brent Chandler and the team there are doing so many things. It is innovative as is SimpleNexus.

We’re so grateful for these sponsors and we’re grateful to have you here with us. A special thank you goes out to Rob, Les, Alice, Allen, Matt and Jack for their contributions each week. I am looking forward to getting into it. Let’s head over to the MBA Mortgage Minute. We don’t have Rob Van Raaphorst. We have a guest speaker. I’m sure Rob’s at the conference. Let’s get the MBA Mortgage Minute.

I’m Adam DeSanctis. Welcome to the Mortgage Minute, the latest news from the Mortgage Bankers Association. The US Senate confirmed several nominees that will affect the real estate finance industry in the coming years. Federal Reserve Chair, Jerome Powell, overwhelmingly secured a second term and Philip Jefferson was confirmed to the Federal Reserve’s Board of Governors. He is the third of President Joe Biden’s nominees to secure a spot on the Fed seven-person board along with Lisa Cook and Lael Brainard.

The Senate narrowly confirmed Julia Gordon to be the Department of Housing and Urban Development’s Assistant Secretary for Housing and Federal Housing Administration Commissioner by a vote of 51-50. At FHA, Gordon inherits a department that ensures over $1.2 trillion in single-family forward in-reverse mortgages. FHA has been without a confirmed commissioner since January 2021. That’s it for this episode. Thank you for joining me.

Not having a commissioner since 2021, what does that say about what’s going on the hill? That’s why we have to support the MBA. We’ve got to have them in there supporting us in every way. They do such a good job. Rob Broeksmit, the whole team and Marcia Davies are excellent at what they do. I encourage you to get signed up and become a member. Get signed up also for the Mortgage Action Alliance. Let’s get over to Les Parker with a TM Spotlight and a macro view of the markets. Les?

Do the bulls have hope? Yes, but the bears are stubbornly backed by hot inflation winds. Think about high gas and the war in Europe that is spread basket. A wet planting season in the US threatens to keep corn prices high. Will first-time home buying slow while new mothers seek formula rather than a home with a nursery? Volatility remains wild in mortgage rates and spreads to treasuries. As a result, consumers suffer from sticker shock when they see their new payments. Bulls got to feel some traction. These views are my own. Get on the move at TMSpotlight.com.

I like that Gary Catrambone and Les Parker are teaming up for another good segment. You’ve got some interesting information there talking about sticker shock on what’s going on. I can’t wait to get into a discussion about what’s on the calendar. Before we do, we remind you to sign up for the TM Spotlight at TMSpotlight.com. You can subscribe for the paid version by going to that link and putting in the word POWER SELLER and you’ll get the paid version for free. Matt Graham is here with us. Matt is the Founder and CEO of MBS Live. He’s got a market update, what’s on the calendar and what we got to have to go on. We’ve got a little bit of recovery. The ten-year Treasury is at 2.879%. What do you have, Matt?

That’s all I was going to report. The ten-year is at 2.879%. Thank you. Have a great day. You nailed it.

We’re always encouraging you to be short, sweet and to the point.

I can expound a bit. To that point, 2.879% is a nice place to be after staring down at 3.2%. It is a pretty substantial move. The higher we go in rates, the bigger the impulse gets to move back in the other direction for technical reasons. That doesn’t necessarily connote a long-term pushback toward lower rates but it makes for volatile little swings that can be friendly at times.

We went into it with a heavy focus on CPI, the Consumer Price Index. It is one of the two biggest inflation reports. Inflation is the key issue for the Fed and the Fed is the key issue for rates. A lot was riding on this. It was a little bit of a mixed response and an interesting one if you ask me. Let’s talk about it. With CPI, there are two different key components of CPIs. The audience may or may not know. There’s the headline, which includes everything. There’s the core, which factors out food and energy, chiefly oil in this case.

When you factor out your food and energy, the line is a little bit less volatile. That’s the one the Fed likes to look at more than the headline. Sometimes, it makes for interesting considerations as to how they are behaving differently. At the headline level, month over month, it is 0.3% versus 0.2%. That’s a little bit hotter but it is down significantly from 1.2%. It was a very big month arguably sideways or maybe even slightly positive but the market was expecting that result.

The core rose a little bit versus the forecast. That concerned me when it first came out. It concerned the bond market when it first came out because the initial response was for rates to shoot higher and for stocks to shoot lower. That’s exactly the Rorschach inkblot that we expect to see when something happens in economic data. It is likely to lead the Fed to be less accommodative, consider hiking more quickly or pull back on bond-buying more quickly. It is not that they’re going to make significant changes based on one report but if subsequent reports were to sing a similar tune, then the market might start to be afraid of that.

In the bigger picture, year over year, we had a nasty month of inflation drop out of the calculation. That allowed the annual numbers to decline from previous levels. The core is still a little bit higher than expected, which is 6.2% versus 6.0% but it’s down from 6.5%. The headline is an 8.3% versus 8.1% forecast. It is down from 8.5% previously. It is a movement in the right direction.

Subsequent months will need to start to beat their forecasts a little bit better to continue those trends. The market finally decided after 20 to 30 minutes of weakness that this was not bad enough to freak out over. Stocks recovered and bonds recovered. Stocks and bonds did what they did, which was to do that conventional wisdom lock-step correlation where stock prices and bond yields generally followed each other. Looking at things tick by tick and second by second, it seems that the stock market set the tone to a greater degree. Bonds were biding their time and following stocks.

Notably, when stocks suggested that the bond yields should continue to rise at a faster pace, bonds instead held their ground and didn’t follow stock prices higher in a panicked way. That was the most encouraging moment in my opinion. It is simply that bonds didn’t take an excuse for rates to correct back toward an even higher level. We stopped before tenure went back over.

Even though stocks are holding steady, bonds are rallying. A big touchstone for analysts is global growth concerns as it has been at other times in the past, especially concerning China, COVID-related lockdowns and the general economic fallout. That is expected from global central banks doing what they need to do to combat inflation. Some central banks have been arguably behind the curve. That’s one of the reasons that the dollar is as strong as it is because the Fed is leading the charge. As other central banks do that, it alleviates a little bit of the burden from the Fed to be as aggressive. It also implies lower global growth. That is ultimately good for rates.

Mortgage Market Updates: A big touchstone for analysts right now is global growth concerns.

Do we have a chance to level off? Is this the ceiling we’ve been looking for? We’ll remind everybody that we’ve had at least three solid attempts to carve out such a ceiling. None of them have panned out in a way where we’re like, “This could be the one.” It’s the same story here. We haven’t seen enough to say, “This could be the one.” Looking at some bigger picture technicals and if bonds were to rally, then it’s going to be a lot more compelling. That’s especially if we break below some key technical targets in treasuries. These technicals don’t predict the future but they would help confirm that something is happening. The ones I’m looking at specifically would be 2.83% and 2.72%. It is pretty close to the first one but it is not quite as close to the second one.

Mortgages are in a world of their own. Spreads are very blown out. That is partly due to the Fed’s balance sheet normalization. One of the feathers in the cap of the bond market and especially for mortgages was the fact that several Fed speakers reminded us, “We’re normalizing the balance sheet but that’s a finite process. We’ll get to a certain point where we’re not needing to do that anymore. The level of reserves will level off. We will be back to reinvesting the proceeds from the bond market.”

It remains to be seen what they do with MBS. They probably won’t be reinvesting MBS or they will be reinvesting MBS into treasuries. That’s still better than letting it roll off. The most interesting comment in that regard was the balance sheet leveling off in the $1 trillion to $2 trillion range. What’s $1 trillion between friends? It might be $1 trillion or $2 trillion but it’ll level off somewhere around there. It goes to show you the magnitude that the words of these people and the decisions of the Fed members can have in the global economy.

Nothing too crazy came up that I can see as far as what’s on the schedule in terms of economic data. We’re watching how traders are trading this out and how technicals are shaping up. We do have a good amount of housing data. I wouldn’t consider that to be market-moving. In this case, the biggest potential market movers from a traditional sense would be retail sales but that hasn’t been a big market mover. Philly Fed. That’s about it as far as upper-shelf reports. Other than that, the smattering of housing data builder confidence and housing starts and existing home sales. With us as always are MBA apps every Wednesday at 7:00 AM. That’s all I got for this episode.

How are those apps looking?

Refi apps are as you would expect. They are near long-term lows. It is not as low as they were in the distant past but as low have been in many years. Purchase apps have declined from the highs but they were doing that even before the rate spikes. They are still in respectable territory, which is what we normally see during rate spikes. It is for the purchase market to show some sign that it cares but not to freak out like the refi market.

That’s the point I wanted to bring out. That’s very good. Jack Nunnery, let’s get your comment as you do each and every week on this economic data. What are your thoughts?

All I can say is Matt did a comprehensive job of reviewing what’s become in the marketplace. He touched on everything germane to potential market moves. We’ll see a little less volatility since we’ve got a lot of capital markets folks at the Marriott Marquis on Broadway. Hats off to Matt. He touched on everything.

I love what you’re doing. You do a great job. You bring up the most critical information. You present it in a way and then we can wheel around and look at it or have it up on their screens, their mobile devices or their iPads. In market times like this, how do you live without MBSLive.net? Matt, I appreciate you. I get a lot of feedback. What’s so much fun about some of the feedback I’m getting on you is, “Matt’s coming alive on this show. His personality is delightful.”

You called me Eeyore so I got to compensate in the other direction. I got to bring it back.

You still have that dry Matt Graham sense of humor. Don’t ever let that go. Thank you so much for your contributions each and every week. Thank you for the service you provide. You can get signed up for an extended trial period without a credit card if you put in LOL as a signup code at MBSLive.net. Matt, any parting words? Is there anything you want to say?

Thank you for having me every week. It’s a pleasure to be here.

I appreciate you. Let’s get over to Alice Alvey. She’s here with a legislative update. Alice is a Master CMB and Vice President of Education Training at Union Home Mortgage. Alice, it is good to have you here. What do you have for the legislative update?

Thanks. I have two things. One is a bit of legislation and the other one is a follow-up on appraisal quality monitoring. The first one is House Bill 7735 and Senate Bill 4208. Both are coming out at the same time with no tax. There was a summary from one of the congressmen involved who’s publishing this. This is trying to get a VA to allow appraisal waivers more frequently and desktop appraisals. It’s always interesting to me when I get a bill that is coming in from both chambers. We have that there’ll be some extra extension on both sides of Congress and the Senate so that we can maybe see something get through on this one.

It is wrapped around the idea that this is good for veterans. Anytime you put that wrapper on it, it gets a little more attention. The VA has some of the same procedures that they did when I got into the business in 1982. Do they still have the same net residual income number that they did back then? I don’t know about you but my costs have gone up since then. We still qualify them the same. I was hoping that there is some other stuff being thrown in here. Maybe we can open it up to more appraisers but it doesn’t have any of that. It’s focused on being able to streamline some of the appraisals.

It is interesting that it takes legislation to get VA to change. I’m sure they need some money. Part of getting the legislation approved would be to also see if they can get some money appropriated in the budget to help them do that and have the access to the technology. We’ll see but that’s one piece of legislation that we’re going to watch for you.

Another thing that I wanted to advise folks on is Fannie Mae published their appraiser quality monitoring in May 2022. It’s an FAQ. They talk about appraisal monitoring all the time but the original memo on this topic is from 2013. What’s interesting in this FAQ is as lenders, you’ve got to have a heads up. Loan officers and everybody out there have got to be aware that Fannie Mae maintains a list but they also have direct contact with our appraisers. They go straight to them if they have an issue. At the same time, they may not tell us if they have an issue with a particular appraiser until it has gotten worse.

Mortgage Market Updates: Fannie Mae maintains a list, but they also have direct contact with our appraisers.

There are lots of important information in this FAQ. If you’re on the QC side or the writing side, make sure you read this and review it. They’re saying, “Not only are we looking at appraisers more closely but we expect you too also.” We aren’t necessarily seeing an increase in appraisal transactions. Fraud still is number one, it looks like but an interesting FAQ is to make sure everybody doesn’t miss that. It’s time to get you to dust off your appraisal fraud and all kinds of mortgage fraud training. It’s a good time of year to catch up on that. That’s my report. Dave, back to you.

It’s a good point that you bring up the mortgage fraud because we’re seeing a real surge in it. Every time we have one of these tightening cycles, we see this resurgence of fraud. Why do people go there? I’m looking forward to your participation in the Hot Topic segment. How do you manage in tough times, which is what we’re going to be talking about, in a contracting market? One of them is to watch the fraud. What are you doing stressing it and communicating by it? Alice, I’m interested in what your better practices are there at Union Home and what you’re doing to reinforce that. I’m looking forward to your contribution to the Hot Topic segment. Alice, thank you so much for being here each and every week.

You’re welcome.

Let’s get over to Allen Pollack. It’s good to have you out here. What do you have for the tech update for us?

I’m going to take it easy. First, let me bring up Google. Ninety-seven percent of people, I don’t know if you can say you’re in that percentage, use Google as your spell checker.

I don’t. That’s interesting.

The first word to ever be autocorrected was teh. Instead of the the, teh was being misspelled. It’s crazy news but let’s talk about some other things. I was scrolling through some of the episodes that we’ve done in the past. I went back to March 2018. We were talking about the same things, which were data, analytics, AI, what blockchain security is, how to transform legacy systems and even what is your tech strategy. Fast forward many years later and we’re talking about the same thing. Let’s talk about some of those things.

I want to bring up one thing I mentioned. Sometimes, I get text messages or emails but I got a phone call from somebody that said, “You have to mention that again because it’s one of the smartest things you’ve ever said,” which is a comment about the user interface. Why don’t elevators have better UI interfaces? Think about it. You’re a consumer. You’re in an elevator and you hit the wrong button. You are going to wait. You can’t unclick the button and get out because the doors are closed.

With the user interface, think about the elevator experience as you’re trying to figure out what you’re going to put out there. Even more importantly, with these times, there are a lot of layoffs in the industry. There is a lot of focus on process, procedure and cause. We also should be focusing on training and who the customer is. It’s not always the homeowner. The customers are our loan officers. It’s our operational staff. Have you ever thought about sending them a survey?

Instead of them telling you when things go wrong and whispering down the lane, you hear that someone’s complaining about your technology and they hate it. Maybe they came from another system and they refuse to use what you have. You’ve heard all that before. Survey them. Figure out where the data and the numbers bring you to. Where are the most important areas that you may need to train? It may not be that you need to buy new technology. You may have everything you need. You’re working on the integration strategy but you don’t have your teams trained correctly. You may open up calls where you may have to make some revisions or changes to how things work.

I’ll give you a perfect example. It may be that you have point-of-sale technology and you’re emailing support for things. If you contacted that vendor and knew that was a pain point for your staff because of how many people are getting access and removing access to different systems, maybe if you had administrative access or dedicated one person, everybody’s experience would be a lot better. People would be happier. That is because your loan officers would realize that the customer service you’re providing them is much faster. Sometimes, little things mean a lot.

Training is huge as you think about your tech strategy, remembering what the strategy was and the mission and helping your staff re-engage with that. Let’s move on. I want to talk about one other thing, which is fraud. Fraud continues to be huge, not only for your staff. I know that you usually probably have your year leader or biannual security reviews where they have to join a Zoom meeting for an hour and watch a presentation about a guy telling you things that most people already know. Fraud is up. People are getting text messages saying that their Amazon account was hacked.

Even better, they’re more mischievous. They do things like, “Click here to view your receipt.” You didn’t buy something and you’re wondering why you got a message that says that you click on it. It asks you to enter your information to confirm and then they have your Amazon information. People are doing that with iCloud and anything.

It’s also a good time to remind your borrowers. One of the weeks that you were at a conference and Jack was hosting on his own, I brought up one topic which had to do with password security. That’s important but more importantly, you have to help your customers and borrowers remember that their email accounts are being scanned. They’ve been scanned for years. Their password, more than likely, is their dog or their address.

It doesn’t mean that because you have an exclamation point at the end or two @ symbols that that’s not hackable. The second that a loan transaction or something of worthiness to that hacker comes through, that’s when they enact access to your account. They’ve been prepared and waiting for your borrowers to decide that we’re going to wire money somewhere. Those scans, if you google it, they’ll still go on every day. Sometimes, they can’t get that money back. This is a good time to think about your tech strategy. More importantly, think about your customers, which are internal customers and external customers. That’s it for this episode.

Regina Lowrie’s got a great product on that. We’ll talk about that in a minute. David Kittle knows that person well. What’s the name of Regina’s company that covers that so well?

Dytrix.

Thank you. They do a great job of covering that risk. You bring up a good point, Allen. We got to be watching the mortgage fraud. It’s going up, up and away. They are looking for those opportunities. It’s quick money and it’s gone. You cannot get it back. There have been a few instances where it’s gotten clawed back but very rare. That’s good. Can you stick around and hopefully participate in the Hot Topic segment? I’d love to have your participation.

I wouldn’t miss it.

That wraps up the weekly mortgage update. In the next episode, we have Andria Lightfoot coming on of SimpleNexus along with Selene Kellam of Thrive. I’m looking forward to this discussion. We’re going to be talking a lot about what’s going on. Andria bringing on Selene is because of what successes Thrive is having. We’re going to be getting in and talking about the mortgage letter. This is one of the things that TMC does at the collabs well. They bring in and talk with each other about what’s happening.

Tune in on the Hot Topic segment as Andria and Selene will be talking about the things that are making it work for Thrive and how they’re doing it with SimpleNexus. They’re a sponsor but those are important tips that we can get in here about what’s happening. A special thank you goes out to all of our sponsors, Finastra, Lenders One, Mobility MMI, Modex, MBA, Knowledge Coop, The Mortgage Collaborative, Snapdocs as well as SuccessKit, Lender Toolkit, Total Expert, FormFree and SimpleNexus. We appreciate all of them. We thank you for being here with us. Have a great time. We look forward to having you back here in the next episode.

Important Links

• IndustrySyndicate.com
• Mortgage Bankers Association of America
• Finastra
• Fusion Mortgagebot
• Troy Anderson – Past Episode
• Lenders One
• The Mortgage Collaborative
• Mortgage Action Alliance
• Total Expert
• Knowledge Coop
• Mobility MMI
• Modex
• Snapdocs
• SuccessKit
• Lender Toolkit
• FormFree
• SimpleNexus
• TMSpotlight.com
• MBSLive.net
• Union Home Mortgage
• Dytrix
• Thrive Mortgage