Lykken on Lending

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

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

We have Ben Teerlink, who is here, who’s CEO, Founder of Mobility MMI, and MobilityRE. He going to talk about some of the latest trends that he is seeing with data and how LOs and originators are using his technology to more effectively connect with the purchase side of the business. We’re going to be all ears to that during the Hot Topic, so looking forward to having Ben on. We are pleased to have him as a sponsor. More pleased to have him as a friend. I’m very excited to have him here, joining us on the Hot Topic.

If you haven’t listened to Industry Syndicate, I encourage you to go out and do IndustrySyndicate.com. They got a list of a whole bunch of podcasts related to the mortgage industry and real estate industry. Also, a special thank you to our sponsors, the Mortgage Bankers Association of America. We’re so blessed and honored to have our relationship with them. You’re going to read an update here from Rob Van Raaphorst, as well as Finastra, one of the longstanding advertisers we’ve had for many years.

Love the partnership with them. Check out their mortgage bot solution, receive, manage, store, retrieve, and deliver loan files and electronic documents completely in a paperless environment. Go back and read Karen Jenkins, the episode we did on October 4th. Karen has a great roadmap of where they’re going with their technology. When you have the number one FinTech company in the world saying and publishing on a podcast where they’re going, that’s valuable information.

Read it. I think it’ll help you a lot. I love how transparent she was. I love the company. Lenders One and Mortgage Collaborative, we’re proud to be partnered with and have them both as sponsors. Two great co-ops. We belong to both of them. Encourage you to check out membership with all of them as well as the Community Mortgage Lenders Association of America.

Also, Insellerate, where the leading-edge technology of mortgage expertise is combined with pre-designed campaigns coming together to enhance the borrower engagement. Our friends at Knowledge Coop. Ken Perry and the team do a great job with their LMS or Learning Management System, and we’ve got, how about this Mobility MMI.

We are thrilled to have them as a sponsor and Ben as a guest. Also, we have Modex. I think these two companies are a complement to each other. I encourage you to check out both of these companies. More of our clients are standing above both of them because they see how the data complement each other. I encourage you to check it out.

Also, Snapdocs, I tell you, I love what Snapdocs are doing. They’re taking over the world when it comes to everything, eMortgage technology. You’ve got to check out Snapdoc’s eMortgage QuickStart program and all of the technology they’re building. We added the SuccessKit. What SuccessKit does is helping tell your story.

Let another man’s mouth speak your story, not that of your own. What SuccessKit is about is helping you successfully get your customers to give a good testimony of references for you. Finally, Lender Toolkit, LTK. I love my friend Brent Emler. We interviewed him on November 29th, 2021. Check out that interview. Finally, a special thank you to Rob, Les, Alice, Allen, Matt, and Jack Nunnery, our newest addition to the show. Good to have you here. Let’s get over to Rob Van Raaphorst with the MBA Mortgage Minute.

I’m Rob Van Raaphorst. Welcome to the Mortgage Minute, the latest news from the Mortgage Bankers Association. President Biden announced his intention to nominate Sandra Thompson to be the next director of the FHFA. MBA quickly released a statement applauding the White House and calling for a quick confirmation process.

Since assuming the position of acting director last June 2021, Thompson has addressed several top-line issues pertinent to our industry, including reversing the adverse market refinance fee, calling for the continuation of pandemic-related flexibilities, and overseeing the GSCs mission of creating equitable and sustainable solutions for affordable housing and rental opportunities. That’s it. Thanks for joining me.

I want to say sign up for the Mortgage Action Alliance app. Do that. Have your voice heard on the hill. Let’s get over to Les Parker with this week’s TM Spotlight and a macro view of the markets as well as the music parody. What do you have for us, Mr. Parker?

Around the world, Central Banks move with the Fed towards less quantitative easing and outright rate hikes, tax borrow and spend yells at the peaking growth as inflation momentum turns down. The Bond Bulls like it a lot, but not mortgages. With the ten-year yield near the middle of its 2021 range, which yield will we see first, 161 or 121? Listening to the screams of inflation and growth should blow. These views are my own. Understand the screams at TMSpotlight.com.

Thank you, Les. Sign up for TM Spotlight and subscribe for the paid version for free by putting the word POWER in there. Matt Graham, what’s your commentary on a no-sound segment there with Les, but more importantly, his thoughts on the markets?

The underlying content is right on and it overlaps a lot. What I’m about to talk about, Central Banks were in focus and it was impressive to see how well bonds ultimately did. There are a few reasons for that we’ll discuss. First off, PPI search Producer Price Index. It’s not the hugest market mover in terms of inflation reports put with these highest inflation readings in roughly 30 years, depending on which one you’re looking at. Weaker retail sales, not much of a market mover. Strong housing starts and builder confidence. That’s great for the industry. Also, not much of a market mover.

Markets were keyed in on the Fed and then the European Central Bank and Bank of England, I think Norway hiked rates as well, but nobody cares. The big focus was on the Feds. We talked last time about the high likelihood that the Fed was going to accelerate taping. Indeed, they did. There was a small chance that they may have accelerated at only a 50% pace, but it was likely they were going to double it, and that’s what they did.

With that revelation finally being on the table, it was worth a little bit of weakness for the bond market. The bond market was more properly reacting to the dot plot, and that just refers to the visual format with which the Fed conveys the rate hike forecast or the rate outlook. Every Fed member gets a vote. They say where they think rates are going to be at the end of 2023, 2024, and then longer term and 2022 for that matter as well.

It was a very obvious shift from indecision around a zero to being a quarter-point hike in 2022 to the median Fed member now seeing three hikes in 2022 and that’s a big shift. It affected the bond market, not in completely logical ways. It’s on the shape of the yield curve, and not for very long bonds managed to rally the next day, even after the Bank of England came out with a surprise rate hike.

It wasn’t a surprise to everybody, but the consensus was that they were probably going to hold off and they ended up not holding off. The European Central Bank, it wasn’t as unequivocally hawkish as the Fed or the BOE. It wasn’t dovish, either. No huge bond-friendly anecdotes from any of the Central Bank announcements. What we did have was a week’s worth of news cycle regarding COVID concerns, Omicron concerns, and Omicron uncertainty.

The Fed said, “This is still the biggest uncertainty that we’re facing.” That pushed back and rates ended up going out at the end of the week at the lowest levels other than one other day in the past three months. Impressive to be at 1.4%, 1.3%. Plus, given the state of inflation, given the state of Central Bank tightening.

Mortgage Updates: When the Fed said, “This is still the biggest uncertainty that we’re facing,” that pushed back, and rates ended up going out at the end of the week at the lowest levels other than one other day in the past three months.

That is a pure reflection of covid concerns and the resulting fallout on the economy, whatever it may be. It could be a little bit of a motivator and something to keep an eye out for. It’s just the weird nature of holiday week trading, especially in mid-December. People start to tune out. There can be big positional shifts that have very little to do with things that are going on in the market on a day-to-day basis.

We did see some evidence of asset allocation trading with money moving either out of the market altogether or shifting between stocks and bonds. It is important to keep in mind, it is a little bit atypical for a holiday-shortened week because the holiday itself is on Saturday, but we’re going to get a whole day off on Friday, and then a half day on Thursday.

That means that it’s essentially a three-day week, and because it’s a three-day week in December, it means it’s a no-day week from a trading standpoint. Yes, bonds will trade, but not with the same conviction, liquidity, or volume that they otherwise would. That greases the skids for a little bit more random volatility.

All of the data is condensed on Wednesday morning. None of it is extreme in terms of market movement potential. Realistically, we’re looking at the first part of January before we get a clean read on the collective conscious of bond traders. Even when we get back into the office, it’s still going to have everything to do with COVID and its economic impacts and everybody’s just waiting for that to clear up.

Jack Nunnery, come on in.

I think Matt is spot on. Three drivers out there right now. COVID, Omicron concerns. They’re weighing on the equity market. Inflation, we did hit the highest point. I think it was 7.7% per setback. Right then, the messaging by the Fed that we should expect or could expect three rate hikes in 2022. That helps me optically get behind a 4% interest rate at some point in 2022. Strong housing starts, but now we’re going to have issues around affordability, weigh in the inventory. We need strong housing starts. Inventory is down approximately 21% length year out there in the marketplace, so just a mad scramble here at the end of the year, David.

Let’s get over to Alice Alvey, who is a CMB Vice President of Education Training at Union Home Mortgage, and she’s got the legislative update. Alice.

For my updates, Congress isn’t doing a whole heck of a lot right now, thank goodness. We like it when they leave us alone. I just want to give everybody an update. I thought I’ll bring forward some of the deadlines that are coming up at the beginning of January. It’s a real common time of year to go, “Am I ready for this new regulation or Fannie Mae, Freddie Mac policy?”

One of the big ones is the condo changes. In light of the catastrophe that happened with the Florida condo project, Fannie’s lender letter 2114 that they published back in October 2021, everybody’s got to remember the fact that it was delivered. Stuff that you’re closing now has to be in compliance with their new condo requirements. Hopefully, when you got the lender letter, you jumped on it, you analyzed your pipeline and you took a good close look at those Fannie versus Freddie loans and are setting yourself up for. If you don’t have all the new information that they want on these condo projects for anything that’s deferred maintenance at all, there are a lot of certifications that folks have to make sure that they have in here.

Mortgage Updates: Hopefully, when you get the lender letter, you analyzed your pipeline and took a close look at those Fannie versus Freddy loans and are setting yourself up.

As you read the memo, I can see there are going to be some lenders who go “I’m just going to take what the appraiser says.” Fannie’s going to tell you that’s not the best practice. Having seen companies go through more audits, you can watch how the agencies, when they do come out and audit, do expect that you’ve done some due diligence. I encourage lenders out there to make sure that you’re aware of all the details that have to be pulled into the loan files. Effective for all your Fannie loans that are being delivered, closed now, essentially, and probably closed over the last couple of weeks if you’re going to be delivering them after January 1st.

If you’ve got loans that you can mark to Freddie Mac, you’ll have a little bit of an easier time. They’re not implementing the condo changes until February 28th. If you’ve got a PIW under Fannie, that’s not going to work for Freddy. You’ve got to rerun those loans under LP and obviously, we know sometimes things can change. Hopefully, lenders have got that organized well and are ready to handle the new condo changes.

The other thing I wanted to send is to let everybody know that, Dave, I’m sending a link that’ll be available on your website. That’s a misty little chart that the CFPB has made to determine if a transaction has to go on your HUM report. This is sometimes one of the toughest things to identify, and they redid their typical chart and it’s now more interactive.

It’s easier to identify If you end up in the, “No, I don’t have to report that loan bucket,” especially for our readers who are from the community bank sector or small lenders. You may not know if you hit that threshold or you’re doing a lot of correspondents, maybe not making a lot of your own underwriting decisions. This little interactive tool’s pretty helpful, and that’ll be available on your website.

There’s a lot of great information there, Alice. As always, I appreciate you being here. Thank you so much. Let’s get over to Allen Pollack. He is here and I’m glad to have you here, Allen. We’ve got the tech update, but first, I want to talk about our Lykken on Lending website was under siege and went down and Amazon was down. There’s a number of websites have been going down. Allen, could you give a little insight into what the heck is going on with all the technology issues?

They are unrelated. The Amazon outage was something quite large, and it’s something that affected so much of the industry, but it only affected one part of the country. You had the ability, their East Coast systems, if you have redundancy built into Amazon, you want to check with your vendors to make sure they do. You would’ve been okay. Redundancy just means that you have systems and services running in a different location than the East Coast systems, speaking in Amazon terms. Their systems are East Coast and West Coast. If your vendors or you use your own data centers for your own things, you want to have multiple data centers.

Ultimately, there are so many things involved in these types of outages, David. They weren’t based on a hacker. They’re based on the increasing usage of technology and the types of technology. AWS is one example. It continues as a land grab, just like Amazon. They started with books and now you can get new car seats for your automobile.

Amazon AWS now has every type of technology that you can think of that is cloud-based. They continue to add more, they continue to acquire companies, so it adds to a lot of complexity and at times those things can have outages, but you do the best to support your system so they’re not affected. There is, by the way, a lot of hacking and hackers and things like that going on. There are even websites that you can go to where you can type in your email address and it’ll tell you if your email has ever been part of a security breach. There is if not 1 billion different security breaches in there that it scans instantly for your information.

We could talk about that next tme, but David, two things. One, I wanted to make sure that we touched on it because I left quickly at the end of the segment, the Moscow Method. This is the year for the health check. You’re having a sway or a shift in the types of business or volume that you have, you staffed up, you have a lot of people, you may have taken on extra technology endeavors, or you put them on pause and you’re about to restart them. You want to look at the Moscow Method, it is four identifiers that you can add to your spreadsheet of items, or your whiteboard, or your stickies.

It is a must-have, meaning you must have this, you need to work on it, you need to set a date, you need to put some sponsorship behind it and move it forward. You should have it, meaning you should have it. It’s okay if you may not get to it right away. You’re going to do it. You may not know when you could have these things that need more detail.

You’re not sure if you’re going to do them. You’re not sure of the cost. You’re not sure of the impact. They need more research. You can do it. That’s why they’re called, “We could do it.” So far, we have, must have, should have, could have the last one, David, is “Won’t have.” We’re not going to do this. It’s not going to impact our business. It’s going to take more resources than we have, or it’s going to cost more money or it’s just something we’re not focused on this year. We have too many must-haves. Those are the four ways to slice up your spreadsheet of work and you want to check that out. Real simple. Moscow Method.

David, in the news, I was taking a look at some of the other cool stuff going on. This was a pretty interesting article. It was “Five Tech Trends for 2022 from Bank Rate.” They said, “This year is ending and starting the fresh year into cash buyers, I buyers,” which are instant buyers, for those of you that aren’t sure of that term. “Appraisals are going virtual. We’re trying to get to a faster yes for consumers,” and then they’re saying, “Not yet for blockchain.” That was their number five

Get this. What they’re saying is that the industry is focused on more mundane tasks shaving off a few days from the mortgage closing timeline. Haven’t we been talking about this for years? I did a little more research and Fannie always has these great charts and information. I found McKenzie and company, and they’ve got fantastic analytics and data. When they put something out there, they put their brain power behind it. They just put this out and I thought this was interesting. It’s a full article. You could just google McKinsey Mortgage Operating times or mortgage closing times, but they’re still stating that it’s about $9,000 on average, the cost of a loan, which doesn’t seem far off.

Mortgage Updates: We’re trying to get to a faster yes for consumers, and then they’re saying, “Not yet for blockchain.” What they’re saying is that the industry is focused on more mundane tasks shaving off a few days from the mortgage closing timeline.

We haven’t shaved much to that. If anything, we’ve added because of all the tech solutions and everything we’re looking to do. It’s still 45 days or greater on average to close alone due to low processor and underwriter productivity levels. Technology has not yet made enough of an impact. It still takes 10 to 14 mortgages per employee per month. That is all an underwriter can do.

They’re saying, “Every file has five touches per person.” When we think about that Moscow Method and our technology spend, maybe we’re trying to pay for something that doesn’t exist. As a lender, maybe. We’re trying to put a bunch of technology together. We’re putting the cart before the horse, and we need to get our process in place first and understand the team together, what we need prior to spending money and adding technology. That’s increasing the cost per loan and could be causing more touches where you thought you were efficient and no longer are efficient.

Of course, David, they’re saying, “The very last thing is 30% to 40% consumer satisfaction score differentiator between best-in-class mortgage industries.” They spoke to people across different segments of using different kinds of lenders, banks, and non-bank, etc. and they found that there’s a large sway between customer satisfaction. What it means is we’re all trying to rush and have the best solution. We’re trying to keep up with the technology-enabled market. We’re trying to hold onto referral business. We’re doing all these great things and be profitable, and we’re not there yet with the expectation of the consumer, what they think they want, and what we’re giving them.

David, there’s so much to talk about. Next time, I want to do a year in review. We’ll talk about some cool stuff there. I want to just mention the pursuit of happiness. Are we using our data analytics to get to the pursuit of happiness? The last thing is, what to do in the event of a data breach? As we close off the year, we’ll talk about those topics. Data breaches are a big deal. If your technology provider reaches out to you and says, “There has been a data breach,” what do you do?

That’s such an important topic, especially when you look at what was rolled out by the FTC and talk about technology and the regulations. The Federal Trade Commission published on December 9th, 2021, the safeguarding customer information, standards for safeguarding. They finally published it. Mortgage bankers are included in this, and we need to focus on this because there’s going to be some teeth in this one if we do not pay attention to it. I encourage you to do so. Good job, Allen. Looking forward to getting more insights into all of this.

To our whole team, I appreciate you all and your rich contribution to this show. Our readership is just exploding and continues to grow crazy. Anyway, that ends the Weekly Mortgage Update. We’re excited to have joining us next time, Joe Rojas, who’s RedSapiens. I’m excited. I met this guy and has so much energy I’m looking forward to having him on talking about his coaching. It’s so much about business development. Joe is just one of those magnetic personalities and you’re going to enjoy the interview.

I want to say special thank you to our sponsors as we exit out here, Finastra, CMLA, Lenders One, Accelerate Mobility MMI, the MBA, Knowledge Coop, the Mortgage Collaborative, Snapdocs, Success Kit, and LTK Lender Toolkit. Thank you all for listening. Share this show with others. I look forward to having you back next episode.

 Important Links

• Mobility MMI
• MobilityRE
• IndustrySyndicate.com
• Mortgage Bankers Association of America
• Finastra
• Karen Jenkins – Past episode
• Lenders One
• Mortgage Collaborative
• Community Mortgage Lenders Association of America
• Insellerate
• Knowledge Coop
• Modex
• Snapdocs
• SuccessKit
• Lender Toolkit
• Brent Emler – Past episode
• Mortgage Action Alliance app
• TMSpotlight.com
• Union Home Mortgage