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!
Weekly Updates With Alice, Allen, Matt, Les, And Rob
It is good to have you here. It’s Monday, November 22nd, 2021. This show is created by mortgage professionals. It is for mortgage professionals. We are grateful to have you as our reader. When you hear the date, November 22nd, 2021, what comes to mind? For those of you that have been around for a while or study history in Dallas, JFK was shot in Dallas on this notable day in 1963. It is not one of the better moments for Texas. It is also one of those dates that stand out. We all remember where we were at. Jack and Alice, do you guys remember where you were when you got the news that JFK was shot?
Yes, I was in third grade.
I was in sixth grade. Alice, you do.
I was three. I don’t remember.
It was a notable day, but another tragedy took place. Our hearts go out to those in Wisconsin. Unimaginable, someone is driving through a crowd running over older people, grandmas, and babies. I hear some of the statistics on that. Our hearts, thoughts and prayers go out to those deeply impacted in Wisconsin. There is much going on in the world, and it rips your heart out when you hear these stories.
We got a heartwarming story this day on November 22nd, 2021, here in Austin, Texas. We got Dale Larson and Dale Larson Jr. We got Junior and the third joining us in the Hot Topic segment. They both Cofounded, partnered and investors in Modex. They are one of our sponsors. I’m excited about it because we are talking about data accessibility and how it is enhancing recruiting and industry transparency, especially as we look into 2022.
I’m looking forward to having them on the show. A lot of great information we were sharing with them. I love these two because it is a father and son team, and I love these stories. Father and son team stories touch my heart as a family, especially as we get close to the holidays. It is timely that we are going to have them on. It is going to be a great interview in the hot topics segment
We are thrilled to be a part of the Industry Syndicate. Check out all the shows on IndustrySyndicate.com. Shout out to our sponsors, the Mortgage Bankers Association of America. We are grateful to have their sponsorship as well as Finastra Fusion Mortgagebot Solution. It is a great solution these days. Check out the episode we did with Karen Jenkins talking about UX, user experience, CX, and the importance of that. Check that out on October 4th, 2021. A lot more is coming out about that. That is getting downloaded a lot. Call your attention to that episode because others are reading it and going, “What is the number one FinTech company in the world?” Think about UX and CX, customer experience and user experience. You want to plug into that.
Lenders One and The Mortgage Collaborative are co-ops that help you and get up close and personal. It gets you to know other lenders or vendors. We are part of both of these organizations. We are pleased to be affiliated with them. The Community Mortgage Lenders of America and Insellerate help lenders grow to the consumers they engage with. They do a great job of engaging borrowers in a more effective way, developing prospects into customers and engaging previous customers.
Ken Perry and the group at Knowledge Coop do a great job of what they are doing at helping you learn and train your People. Check out KnowledgeCoop.com. Mobility MMI as well as Modex. We got Modex on here. The two fit nicely together. They both complement each other. They both help you in recruiting. We are going to be talking with Dale and Dale of Modex. We are pleased we have both of them as sponsors.
Snapdocs, check out Vishal Rana’s episode from September 13th, 2021. Our newest sponsor is SuccessKit. The most effective way to reach your audience is not necessarily through your own words but through others. There is an old proverb that says, “Let another man’s mouth praise you. Not that of your own.” It is a principle that I operate on. Find people who talk about you and what you have done for them. You can have a much more effective way.Let another man's mouth praise you. Not that of your own. Click To Tweet
We are using SuccessKit both in the show and in our consulting business. They are doing an amazing job of collecting written and video testimonies from our customers and having them tell our stories. It is the most powerful thing. Check out SuccessKit.io. We will learn more and talk a lot more about it in the months ahead.
Lender Toolkit, we always call them LTK, but they are known in the industry for being innovative. We are excited about having them as our newest sponsor. Check out all the sponsors on our sponsorship page. I’m looking forward to telling you more about both of our new sponsors. Special thank you goes out to Rob, Les, Alice, Allen, Matt and Jack, my co-host on this show, and we appreciate you being here. Let’s get over to Rob Van Raaphorst with the MBA Mortgage Minute and what Rob has got for us.
Welcome to the Mortgage Minute and the latest news from the Mortgage Bankers Association. The big news was that FHA sent its annual report to Congress, and as expected, FHA is doing well. The capital ratio for its mutual mortgage insurance fund was over 8%. This is a several-year high. Much of this success can be attributed to the recovery of the reverse mortgage program. Despite the good news, FHA is not planning to cut insurance premiums, at least not at this time. Instead, they are waiting to see what happens with the delinquencies in the FHA portfolio and borrowers who are in forbearance.
MBA was quick to release a statement saying that the strength of the FHA MMI fund is a welcome development, and it shows the strong financial stewardship of the fund by HUD and other stakeholders, including lenders. MBA also pointed out that HUD should examine reducing FHA premiums, especially because premiums have been at their levels for several years. That is it for now. Thanks for joining me.
It is important that we try to get these premiums down and make the programs as affordable as possible. I defer to the MBA. They got their good finger on the pulse of what was going on. What you can do is sign up for the Mortgage Action Alliance App. You can do this on any of your smartphones. You can have your voice heard in DC.
You cannot imagine the importance of when we are supporting Bill Killmer and the team there at the MBA and Bob Brooks Smith with what they are trying to do and communicating our interests on the hill. We are a little outgunned by the NRA, the National Association of Realtors, and the home builders even. We need to have our voices heard. When we combine and do this through this Mortgage Action Alliance App, you get your voice heard on the hill. It does make a difference. Be sure to get signed up for that. Let’s get over to Les Parker with the TM Spotlight and Macro View Of The Markets. Les, what do you got for us?
Are bulls raining again? Markets know it is hard to pretend. Are the bulls on the verge of raining again? From mid-July to late October, bears anticipated normal functioning markets. They saw the Fed coordinating with the other central banks in the days before COVID. The bulls saw a bridge too far. The data show slowing growth with no more pretending and Friday’s close in the ten-year yield below 155. Our 138 target looks like it will arrive by Christmas. Bulls have hearts again. These juice are my own. Read how the bulls get back up again at TMSpotlight.com.
Alice, we were talking before the show, and you are famous for writing down what is predicted. Share your thoughts, share with our audience what you wrote down at the beginning of 2021 and what is come to pass.
I wrote down back on January 18th, at the beginning of 2021. I bounced forward to my calendar and wrote a note that said, “Les Parker predicted interest rates would be over 3% by the beginning of December 2021.” Here we are. We have been watching rates. In January 2021, it was unpredictable. You have to remember the environment we were in was still uncertain. We didn’t have a vaccine yet. There were many uncertainties at that point to understand where we might be. There you go. Les’ prediction was correct.
Good job Les Parker. You got fans. I love the fact that Alice writes these things down and keeps you accountable. Shout out to Les. Thanks, Alice. I appreciate you sharing that. Matt Graham is here with us on a recorded message. He is the Founder and CEO of MBSLive.net with his Market Update. Thanks for being here. What have you got for us?
It was a mix of good and bad for the bond market, with things starting off in a relatively negative fashion. Yields were moving higher as a part of the corrective move that began in the previous week. The first day of trading, Monday, November 15th, 2021, was sharply higher, with yields getting all the way up to 1.63% in terms of ten-year yields.
Part of the motivation for that was the ramp-up in corporate bond issuance. Something that is always a behind-the-scenes market mover for the broader bond market. Corporate bonds necessitate some hedging with treasuries that can involve treasury sales at the beginning of the process. We will talk more about what happens at the end of the process in a moment.
The middle of the week saw the corporate pipeline clear and decreased pressure from the supply side of the equation. We saw some banks buying back their hedges. When those corporate bonds are hedged with treasury sales, those hedges can be bought back in certain situations. Yields came down starting on Wednesday. It has a pretty nice rally on Wednesday. That accelerated into the end of the week, with Friday being the sharpest rally. That was driven by European COVID concerns, for lack of a more interesting way to put it.
The most interesting development as a part of that broader European concern was Austria’s announcement of fresh lockdown measures as well as a vaccine mandate. There was a clear reaction between stocks, bonds and volume when that Austria news came out. In addition to Austria, several other European countries are parabolic in terms of their COVID case counts. While we can only speculate as to what that will do to the economy, in general, the market is still treating COVID as more of it is better for bonds and worse for stocks.
The counterpoint to that, and something that we have been discussing on MBS Live a bit, is the extent to which COVID-inspired economic weakness has a dual implication for inflation because the more COVID locks down the economy, the more it can create supply-side constraints. Inflation is bad bonds. It is a little bit of an offsetting factor, or at the very least, it could serve to limit the improvement in the bond market that can be driven by COVID.
The other consideration may be a little closer to home. Remains to be seen is the connection between ambient attempts. We are talking about weather and COVID case counts. There is a strong correlation there. It is starting to get colder in the US. There is some hesitation to run up rates quickly on the part of US traders for that reason.
Fed chair Powell will remain Fed chair. That is the big news at the start of the week. There was a lot of speculation as to how that would go down. He was the odds-on favorite. There was some possibility that Brainard would get the nod. She is the more dovish of the two candidates. When Powell was announced, bonds weakened a little bit.
It wasn’t dramatic. It was a token weakening for the less dovish of the two candidates being selected. It is not the thing that’s going to have a lasting impact on the bond market. If anything, this weakness is being driven by supply concerns, with the week’s treasury cycle being condensed into the first two days of the week. That has to do with the Thanksgiving holiday. We will have two-year notes and five-year notes today, seven-year notes tomorrow, as well as two-year floating rate notes. All of the week’s economic data will be in by Wednesday with core PCE. Inflation is the headliner, arguably on Wednesday at 10:00 AM.
After that, activity will die down rapidly. Friday will be a closed day of trading even though it is only an early close officially. We will be waiting until the following week to assess the market’s stance as far as bonds are concerned because this week is a throwaway week. When you look at historical examples, sometimes we get big moves in one direction or another direction. They can be completely erased, or things can accelerate in the following week.
It is a little bit of a wild card. We want to be careful about reading too much into anything that happens this week unless it is happening due to a clear catalyst with a clear message. That will do it. As always, remember that the show’s readers get double the free time on their MBS Live trials with no credit card requirement and is a streamlined signup process by using the code LOL in the signup screen on MBSLive.net. Back to you, Dave.
Be sure to sign up for this service. I got it on behind me all the time. It is watching what is going on in the markets. I leave my office, and I pick it up right on my cell phone and iPad. It is always with me. It is a great tool. It is effective. I love this service. Thank you, Matt Graham. It is good to have you here. Let’s move on to Alice Alvey. It is good to have you here. Alice is CMB Vice President of Education training at Union Home. She got a Legislative Update. I’m interested in some of the things she is focusing on, especially into the end of 2021. Alice, what have you got?
As you heard from the MBA from Rob Van Raaphorst, HUD issued their actuarial report or their annual report. I love going through this to see what the trends are in the industry. You learn a lot as a lender. I recommend everybody take a look at it. What is interesting to me are a few points about the way the FHA portfolio looks now. FHA’s cash looks healthy. The fund is sitting at over 8%, which is high, a big cushion over where its minimum mandate has been.
You have to remember this group saw some tough times during the more challenging economies over the last several years and became concerned about whether or not taxpayers, for the first time, have to supplement the fund. They still remember all of that. It is not going to be anything quick from our vantage point anyway as a lender for FHA to take any action on dropping the premium.
When you read the report, they are sitting at under 400,000 borrowers that are sitting in forbearance. They got around 300,000 who are in serious delinquency and forbearance. It is trying to see how that is going to all play out in the coming winter months. We will need a good several months and into next year to see what happens. Lots of factors play into it.
As far as what is safe to originate, that is the other thing I look at. How low are the scores that they are seeing? This continues to drop when you look at the number of loans that are below a 619 credit score continue to drop. As lenders want to be in that space of manual underwriting, be aware and watch that you are in a very thin space and FHA is watching closely. If you like being on the radar, FHA loans with scores as little as 619 is an interesting place to be.
We are seeing DTIs also level off where there was a long trend for DTIs to keep reaching above the average DTI to hit that 44 range. In 2021, the number of FHA DTIs was around 50%. It was only 23% of the loans. Lots of loans to increase that are relying on a gift. Close to 40% of FHA loans are relying on some form of down payment assistance, whether from your state HFA bond programs or from a family member.
There is interesting data to understand the product. The best one that mortgage lenders love is that they are over 91% of the market. Depositories are about 9% of the market, and that has dropped dramatically since 2010. There is a lot of good data in there to understand your FHA borrowers and the best place to be in the market. That is what I wanted to share with everyone, Dave.
Next episode, I will save my leadership discussion since there was so much to unpack here with the fund and the data that is in there. I love to share with our readers how we are managing the growth that Union Home is going through and the development of leadership. We will share some more with that in future shows.
I got to get you on the show and get an interview with you there because I love the leadership you bring to the industry and to Union Home. We got Les Parker, who dialed in, and his ears were burning. He texted me. He was going, “Do you want me to talk about rates?” It is good to have you here.
That is sweet of Alice to share like that and mark down the calendar. We are above 3%, and we were headed in that direction. I might give you a sneak preview of what we are looking at for 2022 since you guys were bringing up that topic. I put it in my newsletter now. I do appreciate those signing up. We do have ways for people to get the full version free if they put in POWER when they check out with the code. It gives them a lot of information. They can cover it quickly, or they can dig in on different parts.
The rest of this year and next year is going to be wild. We are set up for some interesting times. I was on an airplane flight, and I watched part of a new Disney movie out called Cruella. They used 30 different songs throughout the movie. It made me think of what I do with song parodies in a newsletter. They have all of these actions going on, and they said it to different music from the ‘60s and ‘70s that was all on the London music scene during that time for the movie.
I was listening to it. Whisper Whisper was the first one that I did now. If people want to follow that, I’m going to try and use most of the songs, probably not all, but over the next few weeks, the next twenty newsletters. I will use those songs to be able to have a hint now a clue. I know people try to solve the brittle every time. You might say good things ahead of perspective.
Did you talk about craziness? That is good for the bond market. Driving rates lower if it is ridiculous, scary crazy. There is a flight to quality which usually has a positive impact on interest rates. Are you telling us we are going to be back under 3%? Is that what craziness brings?
I do think there is a very good chance for that.
Should Alice write that down, or did you hedge in that statement? It sounded like a hedge to me, Jack.
You can’t be a secondary marketing guy and not always hedge. The one thing I am confident of for the next several months, certainly even out to the end of next 2022, is volatility will be higher. We are not going to see calm times. We did if you cut out that large piece for a couple of months there before the Fed came in and aggressively intervened in March and April of 2022, we went right back to calmness.You can't be a secondary marketing guy and not always hedge. Click To Tweet
Before that, we had calmness because the central banks were aggressively in the marketplace. They are intervening. Forget the direction of rates. What it does is put a wet blanket on everything. Everything gets muted. They are lifting the wet blanket. With that change, they are still buying bonds and mortgages, but they are buying a few of them. That is setting up for some significant changes.
There are some things. Matt Graham is on the line now. I know he likes technical. If you listen to the whispers, that is if you look at the charts and the way rates are trading now, we are setting up for a major conflict between the bulls and the bears within the next few months. We are going to break significantly one way or the other.
We have a good chance of seeing the ten-year above 210. We are sitting at 161 now. We have a good chance of being at 210, but we also have a good chance to break down to below one in the ten-year. I don’t know when, but we are going to see both of those within several months. Hold on to your seat because it is going to be wild.
I appreciate you boxing in on what the future may look like. Is the key driver to the volatility in your mind the tapering by the central banks or by the Fed? Yes,
Intervention by major government or central bank. You can have a significant fiscal stimulus or even a contraction of spending. If you have major changes in tax policy, major changes in spending policy, or you have major changes in central bank policies, those are things that will increase or decrease volatility. Many of the next year’s central banks to the G10 is we are seeing them all moving towards less accommodation. The answer is yes, Jack. I do see increased volatility because the markets are going to be less constrained. They are not going to have major powers coming in and trying to push things one way or the other.
I draw a big question mark and say, “We don’t know what the true market looks like because of all of the intervention by the Fed and central banks.” As we begin to peel off that intervention in layers, we are going to get some insight into what the real market is.
We talk about transparency in markets. The greater transparency you have, the greater truer values you will see in the marketplace, whether it is in stocks or bonds, fixed incomes, or equities. These central banks are moving towards the economies functioning more with less intervention. They are never completely gone but with less intervention. With less intervention, the marketplace has to figure out what value is, not what other forces think the value should be, and that is going to create an increase in volatility.
We could make a whole episode have that. Les, we got to have you come back to talk about this.
We are going higher, lower, or both. We are going to do both over the next several months, and it will be a fun ride.
He stuck with the philosophy of if you are going to give a rate, don’t give a time. If you are going to give a date, don’t give a rate.
I had dinner with him a few weeks ago during the convention. He does say that one a lot, doesn’t he?
It is always great to talk with you guys. Jack, it is great to have you on the broadcast. You bring some wisdom to the broadcast that is comparable to Alice’s. I leave it at that. We let Dave keep moving the ball. Have a good one, Dave.
Allen, he left you and me out. I don’t know what that means for you and me, but we got Allen Pollack here for the Tech Update.
He didn’t say anything. That is the only reason why I demonstrate. Allen is within a blockchain. He is constrained. He can’t do anything.
Allen, it is good to have you here. I appreciate you joining us.
It is great to be here. I’m going to keep my segment short because it is always good to hear the experts talk about expert and fun stuff. A couple of quick announcements, David. Some interesting things are going on now. I don’t know if everybody saw the news, but Ncino and SimpleNexus. We heard of SimpleNexus. We know who they are because they acquired LBA Ware.
If you don’t know who Ncino is, they are an end-to-end leader in cloud banking. They are a company that provides full transformation end to end for banking. Everything from in-branch to online and cloud banking, account opening, you name it. SimpleNexus get this for $1.2 billion. That is a huge amount of money and valuation. Congratulations to them.
When I was in online banking, Ncino was an amazing company with a lot of technology. I have been saying this for the longest time that there is an untapped market. It’s about 10,000 financial institutions out there. Blend made an announcement that they were going in that direction. When Ellie Mae was sold, I said that they were going to go down that path. Here you go.
I took the bull by the horn. This makes perfect sense for them. Congratulations to everyone on that side of it. If you are a bank but want to become online, or you are a technology company that wants to become a bank, go check out Ncino. There are tons of integrations and stuff. That is an unsolicited advertisement for them, but I have known their technology for some time, and they got some great stuff.
Talking about financing, David, I’m sure we will hear a couple more deals come out before the end of 2021, especially when no one knows what is going to happen with taxes in 2022. Maxwell took $52.5 million in financing. Floify was sold to Porch, which is a real estate technology for $90 million. Roostify on the conversation of point-of-sale platforms. Roostify and Lender Price have a new integration, getting pricing eligibility and all those fun things to the front side of the transaction there.
I will talk about something cool. I saw online, David. I’m shifting a little bit here. You have heard of Forbes magazine. They have an awesome article called Tech Is Humanizing Mortgage And It’s Exactly What The Industry Needs. Go check it out. I’m not going to give you any pieces from it. Maybe we will save it for a different day. It is a cool article. Read that.
The next item we have is Doorvest. It is a technology company. They acquired a Series A for $14 million. They are brand new. They are from their garage. Now they have a team of over 30 spread around. They are from San Francisco, where a lot of FinTech companies are born. They have grown fourteen times in the last several months. They have partnered with hundreds of customers.
Here is the reason why I mentioned them. It is not because they got $14 million in cash. Think about what everyone’s getting nowadays. It doesn’t seem like a lot of money. This is what I like the best. They are a technology platform that provides access to real estate. Customers sign up online. They specify the type of home that they are looking for, they place an initial deposit, and Doorvest handles the rest. They are finding and acquiring the home, renovating, placing tenants, managing the property, and the customer purchases the home from Doorvest. They become a new owner and starts collecting monthly rental checks. All are managed with technology.
It is a great story. If you want to read a good FinTech story about how somebody who wasn’t in mortgage but couldn’t find a home and needed a technology solution created this company at their garage, which we don’t think happens that often these days. Check out Doorvest. David, I’m going to leave the rest of the items off. I want to mention one thing that we will get into next episode. There is an article and report. It references the Strathmore survey. It talks about how better tech doesn’t mean better profits. We will talk about that next episode. I hope everyone has a great week. Thank you for being our readers. We appreciate it and looking forward to the Hot Topic.
It is a great way to end the Mortgage Industry Update with Thanksgiving. We are thankful for our readers. Thanks, everybody, for being there. Allen is thoughtful. If you ever see me set up at one of these conferences, it is stress city. Allen was trying to be helpful one time. He was there unwrapping course. I didn’t know that he worked in a TV studio, radio studio or wherever it was, but he had experience, and he was willing to help. I was stressed out at the time. He was appreciated. I find people like Allen who love to give. That is why I got him on the show. He is giving out great information. Allen, I appreciate you, but I am going to have to record the song Who Let The Dogs Out because your pups do interrupt.
Thank you, David. I appreciate you as well.
Thanks for being here. Thanks to all of our readers. As Allen said, “We appreciate you being here for all of the show.” I’m grateful to have you as our readers. We are grateful for all of our sponsors, Finastra, CMLA, Lenders One, Insellerate, Mobility MMI, Modex, The MBA, Knowledge Coop, The Mortgage Collaborative, Snapdocs, SuccessKit and Lenders Toolkit. We are going to be having the next episode on Brent Emler with Lenders Toolkit, talking about some of the latest and greatest things. This is one of those companies that snuck by me when Brent moved over to the company from Velma. I’m excited about it, and now I know why. We are going to read all about it next episode.
Special thank you also goes out to Jack, my co-host, as well as Alice, Allen, Matt, and all of you who make this show. Thanks to Les Parker for dialing in. You wrote that down, Alice. Got that written down. We know what interest rates are going to be doing. It was a crazy year in 2022. Have a great week, everybody. I look forward to having you back here next episode. Share this show with others. I appreciate it. Bless you.
- Dale Larson – LinkedIn
- Dale Larson Jr. – LinkedIn
- Mortgage Bankers Association of America
- Industry Syndicate
- Finastra Fusion Mortgagebot Solution
- Karen Jenkins – Past Episode
- Lenders One
- The Mortgage Collaborative
- The Community Mortgage Lenders of America
- Knowledge Coop
- Mobility MMI
- Vishal Rana – Past Episode
- Lender Toolkit
- Rob Van Raaphorst – LinkedIn
- Mortgage Action Alliance App
- National Association of Realtors
- TM Spotlight
- Alice Alvey – LinkedIn
- Union Home
- Allen Pollack – LinkedIn