Lykken on Lending

The first half of the Lykken on Lending program will feature our Weekly Updates. Go to our website to read more about our regulars and weekly updates!

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Weekly Updates With Alice, Allen, Matt, Les, And Rob

Good to have you with us. It’s another fine week, halfway through November, November 15th, 2021. It’s Monday. We are so glad to have you joining us. This show is created by mortgage professionals. It is for mortgage professionals, and we are grateful to have you as our reader. Again, our commitment is to bring you timely information in a blog format that you can read anytime and anywhere. Many of you are doing that and telling others about it. We can’t thank you enough. Downloads are crazy on the show. A lot of it has to do with the first part of the format, how we give you a lot of information.

Try to tighten all that up a little bit so we get it done in a timely manner. Also, the Hot Topic segment is getting downloads and traction. We’ve got Peter Paglia, Chief Strategy Officer and Chief Revenue Officer for HomeBinder. If we look at the industry and the market, the refinances are going away. How can we stay more in front of the customers? This industry has got a terrible track record on repeat business and customers. It’s usually across the board. Some are doing better than others. The purpose of this show and having Peter on is to talk about something you can do to stick with and keep holding on to your customers. Joining me on the microphone is my co-host, Jack Nunnery. Jack, good to have you back, friend.

David, Good to be here.

We also have an Industry Syndicate and are grateful to be a part of that syndicate. Check out IndustrySyndicate.com. Also, want to say thank you to our sponsors, the Mortgage Bankers Association of America, Finastra, and their Fusion Mortgagebot Solution. You can experience the power of a fully integrated approach to mortgage lending. It simplifies the borrowing experience and streamlines the process for employees and customers. Right behind that is Insellerate.

They do a great job through their leading-edge technology of connecting mortgage experts and their borrowers through pre-signed campaigns. Josh Friend has a great approach to it, and when you combine these two technology solutions, excellent things start happening. Also, Lenders One, check out what they are doing. Justin Demola was on June 2021. I was just talking to him, as well as our friends over at The Mortgage Collaborative, TMC had a great conversation. Tom Gallucci and the team there are doing a great job. Mortgage Collaborative, of course, so as Demola. Check out both of these coops. We belong to both of them and encourage you to do the same.

Community Mortgage Lenders of America is a great association as well as Knowledge Coop, which says a great job with helping you teach and train your people through a Learning Management System. Learn about LMS from Alice Alvey years ago. The importance of having a good LMS system or a Learning Management System cannot be understated, especially at this time when we have so much knowledge we have to transfer out to our people.

What solution are you using? Check out KnowledgeCoop.com. When it comes to recruiting, we have two sponsors that do a great job at helping in your recruiting efforts. Mobility MMI, Mortgage Market Intelligence, as well as Modex. Both of these companies we use both of them, and many others use both of these. Like the two coops, the Mortgage Collaborative and Lenders One, these two works nicely side by side, working with you to help recruit top and lows.

Also, getting metrics on your market or markets, and here’s the most important part, markets you are considering going into. “Who are the top real estate companies in the area? What are they doing for business? Who are they doing business with on the mortgage side?” All of that is inside these two pieces of technology. It’s powerful, especially as you are looking at who don’t want to recruit, as this recruit that’s sitting here in front of me that I like so much, produced what he says he does.

We got to have these tools folks so important. Snapdocs do such a great job. We are working when it comes to eSignatures. When you see the name Snapdocs, it can be slightly misleading. Go back and read the interview that we did with you back on September 13th. It will give you insights. This is one of those leading technology companies that is coming up. Pay attention to what’s happening at Snapdocs.

Amy Moses and I are good friends, and we text back and forth and all the latest developments. We got to get them back on talking about it. A special thank you goes out to my co-host Jack, Rob, Les, Alice, Allen, and Matt, for further contributions to this show each and every week. We are missing an update from Rob Van Raaphorst at the MBA.

He was unable to get a report to us but we are grateful for the MBA. We want to say this, become a member of the MBA. Open Doors Foundation is one of those things I give into, and I encourage you to do so. The most powerful thing is what’s going on on the hill. Through the Mortgage Action Alliance App, you can have your voice heard on the hill. Over to Les Parker with this week’s macro view of the market and his music parody that’s going down the same line. Les, what have you got for us?

“Here comes the Hi Stepper. It’s the CPI gangster, and we are in CPI danger. Still, CPI, that TMSpotlight Sound Bites is brought to you by PowerSeller, making hedging easy.” The rapid CPI rise is extraordinary, like last year’s huge drop. Only the 5-year and 3-year treasuries managed to post a new high yield on Friday. The ten-year yield in Fannie Mae rates remains pointed to lower rates.

The continued deterioration of Chinese real estate developer debt keeps China’s economy weak. When coupled with dollar strength and oil weakness, look for lower rates. Will the ten-year yield visit 170 or 138 first? One hundred thirty eight looks like an easier target since 161 to 169 is a significant barrier. Traders are yelling, “Lift the ask, buy it.” These views are my own. Find them at TmSpotlight.com.

I love that Gary and Les Parker teaming up to create another great segment. Joining us live is Matt Graham, Founder and CEO of MBS Live. A must-have application that sits on your desktop, on your iPhone, and anywhere and every device possible to get the latest market updates. Unfortunately, Matt, what you are doing, as I was showing on your screen, is not lower rates. It’s going the wrong way. What’s up?

I believe less it will turn around. It has to. CPI was a big deal. It was an interesting day on Wednesday with an interesting week due to the Veterans Day holiday, 1 of the only 2 holidays, and the first time in 2021 that we had a midweek Federal holiday. That always creates some weirdness when it comes to how traders participate. It makes the following Friday a bit weird, as we have seen time and again in the past with Thanksgiving.

It meant that Wednesday was the day when everybody wanted to get out of town, either literally or figuratively. That can exacerbate some of the moves, and it did, to some extent, during the middle of the day. CPI came along in the morning much higher than expected but notably, the market didn’t react to it in an extreme way at first. It built-in weakness gradually heading into the 30-year bond auction.

That’s what traders were even more defensive about on Wednesday. On Tuesday, the ten-year treasury auction didn’t go super well. That gave us the impression that the previous week’s rallying, if you remember that, was the one that was driven by short covering and the Bank of England comments that tenure auction suggested that we may have found the bottom of the current range and needed to head back in the other direction or we had exhausted the good graces of the short covering short squeeze rally that we talked about.

Rates yields rose heading into the 30-year auction, and then the 30-year bond auction was terrible. It was the biggest miss in terms of the actual auctions yield award versus the 1:00 PM win-issued yield, which is the market’s running expectation of where the auction should land. It was the biggest miss since 2011. Other stats of the auction were exceptionally weak, and all that followed a big backup in yields throughout the course of the day. Those big backups in yields tend to make the auctions easier to bid on, not harder.

The fact that it was weak it underscored the reality that the previous week was too strong. Too much driven by short covering and a reaction to Bank of England comments. It was time to head back into the late October or early November range. That’s what we did. In the current week, we are continuing to be weaker. As far as the economic data coming up, we had New York Fed Empire State Manufacturing, not a big market mover. The retail sales, probably the headline of the week affected at 1.2 versus 0.7 previously.

Housing starts building permits on Wednesday. Philly Fed and jobless claims on Thursday. There’s criticism of the Fed. “Are they behind the curve? Are they making the right decisions with respect to inflation?” there’s a lot of discovery to happen and to play out. COVID case counts leveled off and maybe rise again, and that could help underpin a supportive environment for rates. We are waiting with bated breath, let’s put it that way, to see how things shake out for this transitory inflation narrative, as that is going to be a big market-moving consideration for 2022.

Transitory inflation, there you go. That’s a good one. It’s true. Les has been more right than wrong, and a lot of these calls that he’s made. There’s sometimes when you see some of the data that’s out there, the trends seem counterintuitive. He has been more right or wrong, and so have you. Your screen is always hot. That’s great. What else do you have for us?

That’s all I got now. Other than the Lykken on Lending Code.

Go put in LOL in the code or signing up, and you get what, Matt?

You get double the free time and streamlined signup process. No credit card is required. We should probably tell them what we are talking about to MBSLive.net.

Matt, I appreciate you. You got a great product and service. It is valuable. Let’s get Jack Nunnery in here. Come on, Jack. Did you get a comment and opinion about these rates?

First of all, it’s noteworthy to point out that in the week ending November 11th, your fixed-rate dip back under 3%, David, the 2.98%.

That’s Freddie Mac’s take but that should always be noted that it lags behind reality, and it’s a Monday versus Monday report. By the time that came out, rates had already jumped back up. The average lender is well over that now, and it’s sometimes a little frustrating that it lags reality as much as it does. It can create some confusion when borrowers come to flown officers and say, “Where’s my 2.98%?” You could have gotten that four days ago, maybe but not anymore.

That’s a good point. The borrow confusion issue. Matt, the one thing that I dove into was trying to find the correlation between transitory inflation and an increase in yield in the bond market. I saw some graphs that overlaid the two from 1870 all the way up to 2021, and there were periods of a quick burst or surge in transitory inflation in 1880, 1900, and 1920, World War II, the Carter administration.

It was only during World War II and the Carter administration that we saw a strong correlation between an increase in the bond market with a correlating to a substantial burst in inflation. I thought that was interesting. As I try to put all this together and look forward in this market, there was absence of a strong correlation between the two.

I don’t know. It’s a tough one. 2009 is probably a good case study, and it has been for a lot of reasons with the big moves post-COVID. Now the big uptake in inflation followed a big drop due to some shock. In 2020, it was COVID and in 2009 was a financial crisis. It occurred in late 2008. In 2009, yields and inflation rose together with a strong amount of correlation, stronger than the current one. I don’t know what else to say about it other than 2009 is the only other real good example I see, and even then, how do you compare COVID to an economic crisis? When the economic crisis was its own root cause, and COVID was the root cause, not an economic crisis but a lot of market turmoil.

It’s true, and I’m sitting thinking about Les’s report, which is projecting where he sees things going forward, and then I see you as Sergeant Joe Friday of the old track that series. Nothing but the fact here’s what’s happened that’s cheap. It’s not boring. It’s important. We have the facts, and then it’s fine to those, the prognosticators, that do so. That’s good. Get signed up for it. I appreciate you, Matt, for being here. Have a great week up there.

We talked earlier before the show started. Alice was talking to us, and we are going to go to Alice Alvey, who’s CMB Vice President of Education and Training at Union Home Mortgage, for the legislative update. Before we started the show, Jack talked about how he had to put on sunscreen, and Alice said, “We had our first touch of snow,” this is the North versus the South when we are dealing with other changes. Alice Alvey, you got your warm and woolies on up there, and Jack is putting on sunscreen. What can you say? Good to have you here with the legislative update.

Thanks, everybody. Yes, not that he’s listening but happy birthday to my husband. I’m doing the radio show, and I’m out of here even if it’s a little cold and wintry. Winter showed up, as I said. Anyway, a quick update. The main thing, in a lot of press about Zillow’s issues and how that hit their balance sheet, some of the interest focused on general business and the reliance on an algorithm to make your business decision.

In our world, the condition of the property at the end of the day is not something that an algorithm can necessarily see. As we all look at the appraiser challenges, getting appraisals timely, having enough appraisers in the market, and wanting Fannie and Freddie to step up to the plate to give us more property inspection waivers, that works to a point.

As lenders, there’s always a bit of caution in there. For the great loans and ones, we have lots of loans to the market but we have a lot of market dynamics going on where buyers are potentially overpaying, and we are not sure how long the values are sustainable. This challenge of how much we can rely on the algorithm versus seeing property. Business lessons there that we are all going to keep watching. There are still players in that market. That was a big hit, an eye-opener for still getting eyes on a property in Ohio that was closed. The second thing. It’s another piece in the news, the lessons learned.

The National Community Reinvestment Coalition filed a complaint with HUD, two lenders. This is when matched pair testing, which we’ve talked about for years that the matched pair testing the idea. As a nonprofit, I’m going to test lenders in a particular market and send out one buyer who’s a minority and another prospective buyer who’s a non-minority.

Weekly Updates: The National Community Reinvestment Coalition filed a complaint with HUD to lenders.

Give them names so that based on the names but an individual may have a perception of the racial or ethnic background may be of that individual and see if I’m treated differently by a simple over-the-phone discussion. My talk here isn’t about those two lenders doing anything in particular. It’s about as an industry as a whole. We have to be aware of this that we have to treat people fairly, all the way down to, “How timely am I returning people’s phone calls? How am I treating them in servicing and making sure I’m offering everybody similar products as they make these inquiries?”

Two lenders are going to make the headlines because this is being brought up by a nonprofit. What they do is present their case to HUD. HUD has not picked this up yet. It’s under review. That’s a real important distinction that it’s not a Federal agency that’s citing the lenders for any wrongdoing but it’s a real good reminder. As lenders everywhere, we have to talk to our teams regularly about, “How to match care testing works and how our responsibility to consumers is to treat them all equally.” When we use the term equal and fair lending, loan officers have to have good habits of doing the same thing over and again, with similar products being offered to everybody.

I will leave it there, Dave, for everybody to have a gut check on their fair lending and take a look at it. Make sure you understand your hum to data and your rates of withdraw, and that’s the customers to focus on and survey to find out, “Why didn’t you go with my company and what do we need to do better to make sure we keep your business?” I always say, “Good compliance is simply great customer service.” Back to you, Dave.

It’s a good job, Alice. I did want to interrupt because I was hanging on to every word you said. You are going to celebrate your husband Andy’s birthday. That is awesome. Be sure to wish him a happy birthday for me. We had so much fun with Alice and Andy when we were together up there in Michigan, where they used to live. We have had some of the best times. These are both dear friends of mine and Alice, be sure to give him my best. What a neat guy he is. I love that guy. You guys were married for how many years? Has it been like you guys married to high school or out of high school or something?

Yes, we have been married for 43 years.

Such a great story. Again, I wish him a happy birthday and can’t wait to get up there and see him again. Go break some bread and have a glass of wine with him. He never has a boring memory.

Come on up in January.

It reminded me why I live down South. “Come up North. It will remind you why you live South.” Anyway, Alice, thanks so much. I appreciate it so much. Allen Pollack normally would be here with us, and the text segment you texted me says, “I’m sorry I can’t make it. I’m stuck in a tech outage.” Now when the head of the tech update is stuck on that tech outage, what can you say?

Anyway, I’m going to tell you a couple of things that we were texting back and forth. Jack, you could jump in on this. One of the things Allen and I love chatting about is innovation. During a workout Saturday morning and I loved tooling around YouTube when I was listening to this one particular technology channel. They talked about several companies in there that are taking drones and delivering rapid deployment of medical supplies.

The company in Southern California and I was texting Allen, “You got to look at this.” I was on that. There’s this one company called Zipline, which started in Uganda. Now, both of our daughters have gone to Rwanda and do missionary work over there. They were cool in helping when they were in college and traveling the world. There’s nothing like the experience of being there with the people, and we are living there with them. It caught my attention. “What are they doing there?”

It is very mountainous, and Kigali is the main city, very modern, up to date but you get outside of Kigali, the roads deteriorate. You try to get there, and they talked about the story about how long it takes to get medicine from Kigali and get it into the backcountry where someone’s there, and they showed several times where it takes up to four hours.

This guy graduated and created this drone delivery service. They designed a unique delivery system. It shows what can happen in an unregulated industry in one country. Again, there are regulations when it comes to flight but it’s not like we have here in the US where the FAA, Federal Aeronautics Association looks on and controls what goes on, what can fly, where can fly, and all that stuff. Whereas in Rwanda, there is a bit less. It’s the same thing.

They then expanded and launched these pretty decent-sized airplanes with immediate supplies, and they can launch within fifteen minutes of getting the order. These things fly autonomously through the mountains, and they move through the countryside. They get over the spot and open the doors, and out comes this parachute. It drops it right there where it needs to.

The medical staff goes out and gets that medication and takes another person that needs it. They are responding in almost all cases. They can get supplies out there in 45 minutes versus 4 hours. That’s life or death. There’s another company now that’s doing logistics delivery through smaller drones in Australia. You can order up a hot cup of coffee. I was talking to Jack, and he was out on the fishing boat. He said, “I would love to take your call, Dave, and I’m out here.”

I was thinking about you, Jack, because you could have had a hot cup of coffee, sushi delivered some warm muffins or something. It flies it out there, and it has a cable system, and it drops it down. It hovers 20 feet above the location that drops the home, and then it drops it by a cable unhooks and leaves the package. There you go, Jack. You can be out in your boat if you are in Australia and get hot coffee delivered to you. Isn’t that wild?

David, for the readers, I did have a risk manager from a prominent warehouse lender with me on the boat and doing a little discussion on some of the issues that are out in the space.

You work as Andy Alvey, Alice’s husband. He has so much fun. He’s out in the wild. Alice has done more shows from a fishing boat with manuals open. I still wanted a picture of this and Andy’s out there fishing. You are out there doing work on a boat with one of the top warehouses. That’s a surprise seeing as your Nunnery and warehouse centering are almost synonymous with all that you’ve done. I thought that was an innovation to what we can do out there.

The point is that folks when you look at what is going on and what keeps innovation from happening, it’s highly regulated areas in countries. Innovation is being stifled because of the regulations. As Alice said, she brought out in her segment, “It’s so important that we have some of the regulations, especially when it comes to fair lending because there have been fair lending issues.”

I look at this but we are in desperate need of innovation. When you see what’s going out there, what a potential is, I look at how this could reinvent our industry. I believe we are going to be seeing out-of-the-blue stuff that you never could imagine before, and it’s coming to us. We miss Allen Pollack on the show. Alice, thinking of you. Maybe you could sit out in the back of the boat. What have you and your husband are going to be doing for fun? You imagine having a drone ordering up a hot cup of coffee and surprising him having a drop from 20 feet above you. That would be cool.

Weekly Updates: We are in desperate need of innovation. When you see what’s going out there, what potential technology has that could reinvent our industry.

That would be fun. I wonder if they deliver beer.

For Andy, it would be a six-pack for sure. Anyway, so good stuff, Jack. You may see a drone hovering overhead. We will practice our new logistics delivery system for Lykken on Lending. Folks that wrap up the first half of the show. Get in when you are listing on a downloaded basis. It is broken into two halves. The weekly mortgage update is where we cover all the stuff we covered, and then we move into the Hot Topic segment, which we are going to do now.

If you are reading, stay right here. We are going to move right into the Hot Topic segment with this little transition. Thanks for being here with the Lykken on Lending Show. We are going to have Dale Larson III and Dale Larson Jr. Now, it’s a father-and-son team that started Modex, one of our sponsors. We are going to have them come off our talking about recruiting some of the latest stuff that’s going on in this area because many people are looking at this next coming season.

Who are we going to be recruiting to? How can we do that? We’ve invited Dale Junior and Dale III to come on the show and talk to us. Talk about some of the latest developments in that area. I look forward to all your feedback, readers, for what you are wanting on the show. We are getting a lot of what we do. We respond to specific requests, and we love the feedback.

Be sure to share this with others. I want to say a thank you to our sponsors Finastra, the CMLA, Lenders One, Insellerate, Mobility MMI, Modex, MBA, Knowledge Coop, Mortgage Collaborative, and Snapdocs. Check them all out on our website. LykkenOnLending.com. We will look forward to having you back here. Everyone, have a great week. Talk to you soon. Thank you.

 Important Links

• IndustrySyndicate.com
• Mortgage Bankers Association of America
• Finastra
• Insellerate
• Lenders One
• Justin Demola – Past episode
• The Mortgage Collaborative
• Community Mortgage Lenders of America
• KnowledgeCoop.com
• Mobility MMI
• Modex
• Snapdocs
• Open Doors Foundation
• Mortgage Action Alliance App
• TmSpotlight.com
• MBS Live
• Union Home Mortgage