The Lykken on Lending program will feature our Weekly Mortgage Updates with Adam DeSanctis and his MBA Mortgage Minute, and then Les Parker’s TMSpotlight, a macroeconomic perspective on the economy with a music parody. That leads to Matt Graham of MBS Live providing you a rate and market update, followed by David Kittle, Chief Executive Officer at Cypress Mortgage Capital, to discuss mortgage originations. Then we have Alice Alvey of Union Home providing a regulatory and legislative update, then Allen Pollack giving us a Tech Report on the latest technology impacting our industry. Finally, we wrap up the first half of the program with Marc Helm, Senior Executive Partner at Transformational Mortgage Solutions, talking about Loan Servicing and the “Agencies.” All the while Jack Nunnery, who has a 38-year career in mortgage banking, and David will be expounding on each of the regular segments.
Weekly Mortgage Updates With Adam, Les, Matt, David Kittle, Alice, Allen, Marc Helm, Jack, And David
It’s good to have you with us. This show is created by mortgage professionals. It is for mortgage professionals and we are so grateful to have you. Our commitment is to bring you timely information. We’ve got our Apple Podcast back up and running. We’ve had an explosion of downloads. It’s amazing. We had over 20,000 downloads of our show. Thank you to all of you who are sharing this show out and about. It’s wonderful news. We’re grateful to have that.
I’m excited about what is happening in the world of mortgage lending and the role we are playing in helping people stay up on all that’s going on. I want to say a special thank you to our sponsors, Finastra. Fusion Mortgage bot does a great job. They have a seamless platform because the entire platform is housed in the cloud. Borrowers have the flexibility to complete their application in one channel or move seamlessly between various channels. Mobile, desktop, iPad, smartphone or however you go get into their system. It’s great. Consumers love it.
Also, FormFree. We’re so pleased to have them as a sponsor. They have completed over $3 trillion in loan verifications that help lenders lower operating costs while improving their borrower experience. It’s an amazing product. Check out FormFree. Also, Lender Toolkit. I love these guys for what they do. They bring so much innovation to the industry and I was talking to Brent and Brett about some of the things we have planned for the show moving forward. They are very innovative.
Snapdocs powers over three million mortgage closings a year for lenders, title companies, and notaries. Check out all the Snapdocs and use the tools that they’re helping lenders with as well as how they can help your borrower. There is a significant difference there. Also, Total Expert. This is a very purpose-built CRM and customer engagement platform that allows you to create growth and loyalty for modern lenders and financial institutions.
Check out the interview we did with Josh Lehr. It goes into how this can also support your recruiting efforts. Also, SimpleNexus. I’m hearing more and more about SimpleNexus. There’s another company out there that’s doing a lot of layoffs, cutting back, losing market share, and they’re losing it to SimpleNexus because they’re so affordable. They do everything that Brand X, which is one of the biggest brands out there does. Check out SimpleNexus.com.
Also, go to Mortgage Bankers Association. Make sure you register for the upcoming annual conference. Also, Lenders One and The Mortgage Collaborative. Both of these coops do a great job of helping lender members and lender vendor members get together in more of a community, right-size companies. They line you up with your peers. I enjoy the relationship we have with these two coops. Also, SuccessKit as well as The Knowledge Coop, Mobility MMI, Modex, and DW Consulting. All of these along with each of our sponsors. Let’s get over to Adam DeSanctis and get an update with MBA Mortgage Minute.
I’m Adam DeSanctis. Welcome to the Mortgage Minute. The latest news from the Mortgage Bankers Association. FHFA and Ginnie Mae jointly released the long-awaited final capital, liquidity, and net worth requirements for sellers and servicers of loans backed by Fannie Mae, Freddie Mac, and Ginnie Mae issuers. These requirements will apply to all IMB sellers/servicers and Ginnie issuers with certain additional standards being placed on large servicers. Those with servicing portfolios greater than $50 billion.
MBA appreciates FHFA and Ginnie Mae for their collaboration on this proposal, which reflects a significant amount of our feedback on the existing and previously proposed rules. On our particular note, we are pleased that FHFA will now allow a significant portion of the unused committed agency servicing advanced lines of credit to count toward the liquidity requirements. In addition, the agency has significantly reduced and recalibrated the origination liquidity requirements to better reflect expected margin call risk.
Importantly, FHFA and Ginnie Mae also extended the implementation timeline to provide servicers sufficient runway to adjust to these new requirements. MBA appreciates that FHFA and Ginnie Mae will now align most, although not all, of their standards. Additional analysis will be needed to fully assess the impact, and MBA will work with members, FHFA and Ginnie Mae to ensure the requirements are properly calibrated. That’s it for Mortgage Minute. Thank you for tuning in.
Be sure to go to the App Store and download the Mortgage Action Alliance app so that you can get signed up to have your voice heard on the hill. You do not have to be a member of the MBA to have your voice heard, although you should be and you should be attending these conferences. This particular conference is going to be interesting, especially when you hear what’s going on.
Coming out, and we’re talking to you about it on the show, was Wells Fargo’s Correspondent Division backing away. Anyway, let’s get all over to Les Parker with this week’s Macro View of the Markets from his TMSpotlight newsletter. He has this great newsletter. You’ve got to be reading this. Let’s get over there and learn from what Les Parker has put together for us.
TM Spotlight Sound Bites is brought to you by PowerSeller making hedging easy. The bulls and bears are sucking the markets dry with their conflicting trends in the long-end, short-end, and related markets. How do they deal with China’s economic dark shadows? What about the death of QE and blood-sucking QT led by Count Jerome? Post-pandemic data continues to befuddle analysts about how to normalize abnormal data. Bewilderment goes beyond the usual debatable outlooks among rival economists. Stay disciplined. Sideways, back, hang tight. Relax with wild sideways action at TMSpotlight.com.
You can also sign up for Les’s newsletter. I read this every morning. I give him a lot of bad time about not reading it because it’s less talk. Sometimes it can get a little overwhelming when you’re trying to figure out the markets and his analogies in that, especially his music parodies. I got to tell you, this is such a powerful newsletter. Sign up for TMSpotlight. You can do so. Forget the paid version for free, and then when you sign up, go to where the sign-up code is. Put POWER and you’ll get the paid version for free. Les Parker, thank you so much. Good job, Les. Matt Graham is here. I love having him on the house joining us here. Matt Graham, MBS Live has got such cool stuff.
I should burn through the important stuff pretty quickly because I might need to dash if the market gets any crazier, but that dovetails into this day’s discussion. Things are deteriorating fairly quickly than they have been, but it’s unpleasant nonetheless to see that continue. If you look at it up close and without the benefit of much hindsight, it looks pretty bad. If you take a few steps back, everything sort of fits into this volatile sideways range that we started talking about in late May where we were sensing perhaps the leveling off of 2022’s big old rate spike.
There was a little bit of a CPI surprise in June. That stretched that range, but apart from that negative surprise and the positive surprise of that range getting broken on the low end at the end of July, it’s been pretty flat. I like to approach ranges from a ten-year treasury standpoint, even though that’s far from a perfect indicator of mortgage rates. It’s how I like to follow technicals in the bond market. Those would be levels between say 2.71 and 3.17, depending on where you want to put the ceiling.
Technical levels come into play a little bit. We had 2.91 as an upper limit ceiling that had not yet been prodded in recent weeks, but we talked about hitting that last Monday because we hit it the previous Thursday. Last week, it was tested yet again and for very European reasons there were two inflation reports in Europe that “rocked” the bond market.
We’re going to talk about trading that occurs and this big picture range being worthy of such words, but the first was on Wednesday and it was UK inflation data. It surprised the upside. It’s a big reaction in UK bonds and European bonds that pulled US Treasury yields up by a slightly smaller amount. On Friday, we’re talking about freaking out about 10%, give or take 9% year-over-year inflation in the US. Did you happen to catch what Germany’s producer price index came in at on Friday?
No. What was it?
If 10% is freaking us out, take a guess at what freaked the market out in terms of Germany.
That’s a very good guess. It was 36%.
You go for one number just slightly above the last time you gave a number. That’s crazy.
To the credit of analysts, they were forecast at 34%. They were pretty close but to see it come in even higher and for a month where US inflation indicators have been a little bit more tractable has the market thinking, “Maybe we’re getting a little bit ahead of ourselves on declaring the death of inflation and maybe July’s CPI number was largely a factor of fuel prices, which we already knew that, but people nonetheless hoped that the shift in fuel prices and oil prices would be broadly helpful for inflation.
Now, there’s a little bit of reconsideration of that or at least fear that it’s premature. We’ll get to hear Fed Chair Powell’s take on it at the Jackson Hole Symposium. We’ll also get PCE inflation for July on Friday. It’s not as big of a market mover as CPI because it’s covering the same timeframe, but another potential flashpoint or at least another inflation indicator for bonds to digest.
Here’s the interesting thing about digesting inflation reports. Because the market is generally expecting things to ebb and they have been since May, it’s not a surprise when these reports come in low or lower than expected, and the trading has borne that out. For instance, when we had great inflation reports in the past few weeks, it was worth a little bit of a bump in a friendly direction for bonds, but not a very big one.
Conversely, when we’ve had inflation reports come out much weaker than expected, especially these ones in Europe, there was a much more noticeable reaction and a much more durable reaction in that. It’s an asymmetric risk as we would say in market jargon. That means that a bad inflation report will hurt us, whereas a good one doesn’t help us very much.
Markets need to see successive months of stability and improvement in that inflation outlook both at home and abroad before they’re going to calm down on that stuff. In the meantime, we’re readjusting our Fed rate hike expectations in the future back up to where they were before. There’s not this drop-off in mid-2023 now. That’s what August 2022 has been all about.
We’re almost all the way back to where we were after that fateful May CPI reading in the month of June, heading into that Fed announcement. Bonds are back up into their previous average range. It feels like a big selloff if you’re looking at the screen a little too closely. It’s a big old range if you’re looking at the right distance and it’s unpleasant. Mortgage rates are heading back up relatively quickly. That’s where we’re at now.
The rates are reacting. Not only do you help people recognize these moves and all the trends, but it’s also a great amount of information that comes across. One of the things I heard from loan officers is they were saying, “I’m so grateful for MBS Live because I discovered they have this chat feature up there so I started submitting questions about how to structure a deal and how to work on it. Does anyone know about this program and that program?”
There are so many features, but that is one that helps loan officers. If you’re not aware of it, check it out. You can do so by going to MBSLive.net and using the sign-up code LOL. You’ll get an extended trial period without a credit card. That’s great stuff. Matt, I love what you’re doing up there and how you’re helping loan officers not only digest the market but also structure their deals but also letting us talk to each other. Great job
Thank you, Dave.
I appreciate it. Now, I know you need to go raise back to the markets. I’m thrilled that you dial in here each and every week. Many of you know that we’re now updating our show. We’re adding several segments to it. David Kittle is one of those individuals who will be joining us each and every week to give us an update on mortgage loan originations. Unfortunately, David cannot join us. This is the second time on the show that he has not joined us. It’s unfortunate.
John Courson, to whom David is very close. I think I can say it. It’s fairly well-known out there that John has had an unfortunate accident and is in a hospital right now. David flew out there to be with him. What a great friend David Kittle is. David, and we wish John and Marcia well in their recovery. David Kittle is the kind of person that if you have him as a friend, will jump on an airplane to hold your hand and encourage you through that.
David Kittle, thank you for being our great friend to John and Marcia, as well as being our good friend to me and this show. We miss you on this segment but it is what it is. You’re keeping your priorities. Thank you, David. Alice Alvey is normally here with us live. Unfortunately, she could not be here live, but she did send in a recording. Let’s get an update from Alice Alvey. Here it is.
Thanks, Dave. Hello, everyone. I am here to talk to you about House Bill 8616. It is referred to as the VALID Act of 2022 which stands for VA Loan Informed Disclosure Act of 2022. The headline about this bill in the Military Times said, “Why comparing VA home loans to other options might soon get easier?” It goes on to talk about the bill might change the disclosures of two borrowers to help them understand VA in comparison to FHA and conventional.
When you read the bill, it’s short. It’s one sentence essentially. The idea in the bill is to take the existing FHA-informed consumer choice disclosure that’s buried in the 35 to 75 forms in an FHA loan, and add a footnote to it that says basically, “Don’t forget to compare VA.” For those of you who aren’t familiar with that disclosure, the informed consumer choice disclosure is designed to compare the FHA MIP costs to a conventional loan with PMI.
That is a great comparison. You can get close to apples-to-apples on that with a few exceptions for a consumer, but I’m not sure that borrowers read the form. I’m not sure loan officers do a good job of presenting it to them to make sure they see the comparison of MIP to PMI, especially in some cases where it’s not possible for the borrower to qualify for a conventional loan and they have to go FHA.
Putting it on the disclosure and putting a footnote in that says, “Don’t forget to compare VA,” I’m not sure it’s going to have much meaning. If they were proposing to create a third column and say, “Compare VA’s funding fee costs to your conventional and FHA, that might be meaningful for our veterans and borrowers who qualify for VA. That’s a much smaller population, whereas both conventional and FHA, that comparisons would apply to all consumers.
I think there’s some work to be done to make sure we’re doing this as an industry. In my opinion, this bill doesn’t move the needle on that. Let’s take another look at the fact that the bill is only being introduced now and Congress’ session ends on December 31st, 2022. Anything that doesn’t get approved by then wipes the slate clean and we start fresh on January 1st, 2023 with a brand new session of Congress. We’ll watch this. Hopefully, the individuals involved present this again back in 2023 with some new refinements to make it more meaningful. That’s my two cents on this episode, Dave. Back to you. Have a great day.
Thank you, Alice. I appreciate it very much. Have a great rest of your day. Alice Alvey, who is CMB Vice President of Education and Training at Union Home Mortgage. Thank you so much. Allen Pollack is here live.
How are you, friend?
I’m getting so much feedback on all your commentary. You’re getting people to laugh. What are you getting us to laugh with now?
Thank you for that. It’s more of a cool tech thing that’s going on in the world now. Less than a mortgage joke or anything like that, but I think we’ve even talked about it a long time ago, David. Germany started it and I can only imagine this is going to be a company or already is somewhere in the United States. It will likely take off and be a great investment and probably recession-proof, to be honest with you, because it has to do with your own personal risk management, which is one of the things I promised that we will talk about in this episode, but warning lights for smartphone addicts.
We’ve all been there. We’ve done it ourselves or we’ve bumped into somebody that’s on their phone. They either stop dead right in the middle of the walkway or on the sidewalk or they’re not paying attention. These are warning lights that light up and detect the smartphone and they flash in front of you. The picture that I see online is red. It’s like a dashed line across the road, sidewalks and such. It’s pretty cool. Who knows, maybe that’s something to come. If you’re looking to retire from mortgage and get into something new, maybe I gave you a great business idea. It’s something to think about.
You are an entrepreneur.
Let’s talk about more exciting things, Dave. I was trying to think like, “What do we talk about now?” It’s funny because I went back to one year ago now to look at what I did talk about. As I was doing that, Simon Sinek came up and you get those automatic ads anyways. You don’t need Simon Sinek’s YouTube, TikTok, or Instagram videos that everybody is forwarding to give you motivational information that basically says, “If you put your mind to it, it can be done.” We’ve all heard that.You don't need Simon Sinek YouTube or Instagram videos that everybody's forwarding to give you motivational information. If you put your mind to something, it can be done. Click To Tweet
Going back to my comment, David, somebody at Google sat in a room and said, “We should drive down every single street in America and we should map it all out.” Somebody said, “That’s a great idea,” and they did it. They overcame it. Now, you can get it even on real estate listings. When you’re looking at a property, not only do we now have mortgage payments connected to real estate listings, which as hard as that is, we’ve had that for a few years now. I was part of that process early on. It was a very difficult thing to do, but you now can click and see the street in front of just about most properties. Gated communities are hard to find, which is cool.
When you’re thinking about your technology and how you overcome where you need to go, what do you do with that staff? If you sit down, you map it out and you think about where you need to be, maybe talk to your peers. The benefits of places like The Mortgage Collaborative and Lenders One are you’ve got people that are in the same boat or have been there or just friends you have. If you put your mind to it, you can easily overcome your challenges.
If anything, you may become more automated and drive more profit in this type of environment than if you were just crazy busy and didn’t have the time to think about it. Remember that if Google did it, you can do it too. David, what I wanted to get into this episode is what I said last time about the cost of a data breach and risk management. That’s where things come down to. Jack and I were chatting about risk mitigation and the cost.
If you don’t correctly integrate with those vendors, the cost of a vendor was to disappear, but data breach. You are spending your money, your time, and your effort on your relationship. You’re working to determine how to drive more business to your organization, and also your cost basis overall. The cost of risk management and vendor management, and that’s not just managing integration, but that’s managing the security policies and information that your vendors provide you when you initially bring them on board and the ongoing maintenance of that.
Your vendors may take your database. That’s part of their multi-tenant system and may drive that to a new server. You don’t know any information except that they migrated your systems. Right now, I can tell you that there are all kinds of information on the internet. The average cost of a data breach hit an all-time high of $4.35 million in 2022, which is 2.6% up from 2021. It doesn’t seem like a high amount, but from 2020, it’s almost a 15% increase.
It’s going to continue to go up and up. The average cost of a data breach for your average size company was $9.4 million. Think about that. You have all these leads coming in. You’re collecting all this information on your point of sale. You’re working with a CRM. You’re generating leads. Your staff may be emailing spreadsheets back and forth. You are looking at a multimillion-dollar risk. It’s a price tag if you’re not managing it correctly.
I looked at some other information online, David, and it’s hard. Our industry is so closed. We’re stuck in finance and banking overall. As soon as you start looking for mortgage banking or mortgage financing or all these terms, the results start to dissipate. I can tell you this in general, 80% of organizations believe that vetting third parties is critical. We could all nod our heads to that. However, 60% of organizations believe they’re only somewhat or not effective at vetting third parties.
That’s because we’re not working with either consultants or companies that don’t cost a lot of money in order to make sure that they got our backs. Get this. Enterprises, meaning companies, only take action on 8% of the assessments they receive. That means you may be getting information from your vendors. You may have 20 to 30 vendors involved in the entire mortgage transaction, and you’re possibly only moving forward to rectify or work on only 8% of the assessment that you received.
I’m going to get down to some other generic numbers, which gets interesting. The cost of a data breach. I went over those numbers. In finance, the cost can be anywhere between $200 and $400 per record, and healthcare is even higher. What that means is that cyber insurance, legal fees, and insurance costs are going to go up. All these different things are going to occur. If you can’t determine the breach, you have to go to when you assume the breach. What if you had 5,000 records at $200 to $300 per record?
The cost to mitigate that upfront is that much big of a deal. You have to think about what happens to your organization and recruiting employees. This becomes public information. Investors and shareholders, industry partners, and other vendors may or may not want to work with you or may want to tighten down how you interact with them, and then think about the industry media, and even the personal data breach cost. Without getting too far into the details, you can see that the cost far outweighs the upfront risk mitigation cost.
I’m doing some math on the numbers that you’re giving there. What was the $9 million number?
The average cost in general was $9.44 million.
That’s a hit right out of your income and your cash. It’s so good that you drive that point home.
David, here’s the scariest part. I’m willing to bet that not a lot of people have the tracking systems or the vendors do. They may have it, but they didn’t activate that feature. We’ve all heard that. Imagine you have a borrower where whose Gmail account gets hacked. It’s been monitored for a year and the funding instructions are not the real ones. They wire money somewhere else. You’re going to be involved in that process.
You’re going to have to start taking the resources that you’re now thinner on and figuring out how you start investigating what or what did not happen. If you have to hire a third party to help you, you have to still allocate somebody internally and externally. It takes longer because you have to train them on your business, your process, your systems, and all that stuff. Risk mitigation is so important up upfront.Risk mitigation is so important upfront. As an old saying goes, an ounce of prevention is worth a pound of cure. Click To Tweet
That old saying, “An ounce of prevention is worth a pound of cure,” that’s so true. That’s expensive. We got to look at this stuff and be paying attention. When you’re looking at reducing your staff, right-sizing your company, which everyone is doing and needs to do, and probably even more so right now, be thinking about this. When it comes to cybersecurity, what are your risks? Allen, good job. Now that he’s brought up his house, he’s got to give us weekly updates. Have you found a house yet?
It’s funny you ask. I did. We put an offer in and I told you someone came in with a full cash offer. They haven’t even seen the home. The homeowner took it. It turns out they had the inspection done and they backed out. My realtor was able to get me a copy of the inspection. It’s back and now, I refused to put an offer on the house based on some things I knew.
What the inspection report found is that this homeowner is overpricing the home, especially in a market where things are normalizing let’s call it. He’s either going to have to fix things himself to re-list it or he’s going to have to significantly come down on price. I told my realtor, “This is the number. If they’re interested, I’ll put an offer in,” but the reality is that this may not be the house for us. The house is sitting there without any offers at the moment.
You got spared. Have a great one. Thank you so much, Allen, for being here. He’s a great resource to anyone who’s looking at technology. I am very excited to have you here, Allen. I need to talk to you about Bret Taylor who’s joined our team. I got to talk to you about him. He’s doing a great job with some things. We’ll get him dialed in with you.
Another segment that we’ve now started adding is the loan servicing segment. We have Marc Helm, who’s the Senior Executive Partner here at Transformational Mortgage Solutions talking about loan servicing. We’re also having him comment on agency approvals. He heads up Fannie, Freddie, and Ginnie Mae’s approvals here for our firm. He’s got a wealth of information. He could also not be here but he send in this report. Marc, what do you have for us?
David, I’m glad to be on your show. I’m so sorry I have to do this by phone because I’m traveling but I wanted to set the stage for what we’ll be talking about in future presentations on loan servicing. What we’re basically going to talk about is the pros and cons and opportunities of loan servicing. I’m going to break it down into five steps, which I’ll discuss in a little bit of detail. The first is the approval process.
The approval process for service loans from the GSEs is not for the faint at heart. They had some detailed requirements you have to meet, certain financial performance, certain net worth, servicing, oversight, and people on board, to name a few. Also, a detailed review of your resume, your work-house relationships, and all of those things that make you able to be able to originate loans, and keep those loans in your portfolio.
It’s very important that you provide someone who can lead you through that process so you’re sure to put your best foot forward. That’s what it’s all about. As you write narratives about your company, and the business plans or you explain the exceptions that are in their guidelines, and you understand what would be an exception and why something is the way it is, you got to do a detailed process. You need to sign off on them saying that whoever signed off on it committed that this is a correct representation of what we’re submitting for approval.
The second thing you need to look for in servicing your own loans is the metrics that are involved to determine whether you should be a servicer. Most of you have at least a single-state and some multiple-state footprints. It’s important to decide where you are going to retain servicing. I’m going to talk about that a little bit later. Once you decide you’re going to retain servicing, you need to be thinking about how soon you can meet the requirements of having a portfolio that can be cost-effective for you to service.
There are two ways you can service those loans. Through a sub-servicer or servicer. Most of you will probably end up in a sub-servicer relationship for a period of time and maybe forever until you have critical mass enough to bring that servicing at any cost. There’s no doubt in my mind that you want to give your customers the best service possible. What you’re going to want to do for sure is find the best service available to you for the volume of loans you have.
Make sure that when you bring that servicing back in-house if you do, you have adequately trained and educated personnel to be able to take care of your customers in a way that they will see a smooth transition from sub-servicer to servicer, and that you can do right by your customers. It does bring along some opportunities and I’ll talk about those in just a minute. The third thing you need to do is whether you’re in a sub-servicing or you service your own loans, you have a requirement to oversee your portfolio.
Most people figure when they hire a quality control company or a sub-servicer, they’re done. Those people are going to take care of everything. That does not relieve you from the agencies nor the GSE requirements that you oversee and make sure a good job is being done on your portfolio. If you’re being sub-serviced, you’re going to have to have a servicing oversight group. If you service your own loans, you’re not only going to have to have your servicing personnel but you’re going to have to have a quality control area to make sure the work is being done adequately, and your customers are being taken care of.
That’s staffing issues. Those are easily said than they are accomplished because right now, finding quality servicing personnel in all areas of the country is somewhat hard to do. What we suggest you do is consider remote employees that have years of experience in servicing that can be your oversight people on a remote basis. That’s a new position that has grown out of the COVID environment in the last few years. There’s a lot of remote servicing.
They do have to be however full-time for your servicing oversight for your sub-servicer. You need to have full-time employees servicing your oversight and your servicing portfolio internally. Those are the things you need to keep on your calendar and make sure you have adequate time to develop that before you bring people internally. There are certain benefits of service. There is servicing income and what it does in a positive way, hopefully, all the time with your balance sheet, but there are other things too.
One of those things is that when rates change, you have the benefit of looking at your portfolio on a direct basis, either through your sub-servicer or through yourself to manage people that now have an opportunity to reduce the rate on their loan. Also, make a better-performing loan and give a benefit to your bar through a refi. The agencies don’t particularly care for you going out soliciting and holding your portfolio.
When a borrower comes back into you and says they’re going to go somewhere for a loan, and they’re going to do a payoff statement because they’re going to refile their loan, that gives you an opportunity to step in where you enjoy the income of originating that loan. You have the opportunity to keep that loan in your portfolio. That’s very important that you do that. Most companies have a very detailed process where the servicer or a sub-servicer is taking care of the notifications to the production division when somebody is requesting a refi so that you can step in and do that loan together.
There are some ups and downs in the process as you get into it relative to the mark in your portfolio. Your portfolio has a book value. It is based on delinquency, escrow balances, and numerous other characteristics like the size of loans or to who the loans were sold. Your portfolio is going to vary in value, particularly with interest rate sensitivity and the possibility that the loans could refi or runoff. You don’t want to give a high value to something if half your loans are going to refi and run off later down the road because you’re going to book a value, and then you’re going to have to write it off down the road.
It’s very important that you have people on your staff or you use an appropriate third party who are professionals to mark the mark in your portfolio. You still have a responsibility to review it. It’s a very detailed process that you go through internally or externally. Usually, what I recommend is you develop the expertise in-house over time, use a third party to get there, and have your people internally review it. Make sure you’re on board with it because it is your financial statement you’re dealing with. You need to take control and ownership of that.
Last but not least is the financial reporting that you have to do. You’re going to have to report to the GSE at the end of each monthly cycle what you have in your portfolio as far as balance, what’s paid off, what’s in default, and certain loss mitigation parameters. That is not hard to do because most of the sub-servicing people out there have that process set up. If you servicd internally, the system provider provides you with a system that would have those things built into it.
It’s critical you go through that and make sure you got a system that’s got all the bases covered, and you’ve got a sub-servicer who’s used to servicing the type of loans you’re dealing with. There might be a sub-servicer who does a better job with conventional loans, maybe not so much with government loans. If you’re doing government loans and selling the Ginnie Mae, you need to make sure they have a good rating with Ginnie Mae and Ginnie Mae likes what they do, etc. You can do a little bit of intelligence gathering on the folks that you decide to select and the process to make sure things are going the right way for you. What I recommend you do is do a good job of looking at these five elements I discussed. I look forward to talking to you in the future.
Good job, Marc. I appreciate the wealth of information there. Go back and read that over and over again. I want to give a shout-out again to Josh O’Leary from Lacey Washington way up there in the Pacific Northwest. He’s one of our listeners and still dials in with the phone. There are a number of you who are tuning in through the various links. We’re going to continue providing a live episode. At some point in time here in the near future, we’re shifting over to broadcasting live on three primary channels. The first channel will be LinkedIn. It’s the most preferred way we can get the word out. They have the ability to now accommodate live podcasts. We’ll be broadcasting on LinkedIn.
Also, we can be broadcasting live on our YouTube channel. Finally, we’ll be doing Facebook. I’m not a big fan of Facebook, but it’s there and we’re going to use it, and as other channels become more popular, we’ll continue to do that. We’ll give you plenty of notice of where to go on that. At some point in time, we are going to move over to those platforms. We’re in the process of setting all the infrastructure up behind the scenes to do that.
We appreciate you being here, everyone. We’re going to have the Hot Topic segment. We break that out separately. We got another hot topic coming up with you so stay tuned. You’re going to enjoy all that we have that’s so much lined up for us as we continue to grow the show. I am very encouraged by the massive number and increased spike in downloads and listens to the show. That means we’re bringing a message to you and to mostly the mortgage community.
We have consumers listening. I want to find out what’s going on in the mortgage industry, and give them insight and what’s happening. As we say here in Texas, “We’re grateful for you all.” I’m from the Pacific Northwest where I started my career 48 years ago. Thank you to those who are sending me text messages and wishing me a happy birthday. Thank you so much.
I will be staying in the industry and working for a good number of years, another twenty years or more. I love what we do and this show has become a big part of your lives. It’s certainly something we enjoy doing. Have a great week, everybody. I look forward to seeing you back. Be sure to go to the website, look at lending and you’ll see the publication on a downloaded basis. Thanks so much. Have a great week, everybody. See you back here next time.
- Lender Toolkit
- Total Expert
- Josh Lehr – past episode
- Mortgage Bankers Association
- Lenders One
- The Mortgage Collaborative
- The Knowledge Coop
- Mobility MMI
- DW Consulting
- Adam DeSanctis – LinkedIn
- Mortgage Action Alliance
- Matt Graham – LinkedIn
- David Kittle – LinkedIn
- Union Home Mortgage
- Allen Pollack – LinkedIn
- Transformational Mortgage Solutions
- YouTube – Lykken On Lending With David Lykken