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 Monday, November 29th, 2021. I hope you had a great Thanksgiving holiday. I caught a nasty little cold that sucked all the energy out of me and my appetite. I lost weight over this Thanksgiving holiday. That’s the first but I’m going to be still overcoming it. Fortunately, I shared the cold with my wife, the Cook, after Thanksgiving, so I still had some great food, and now she’s dealing with what I’ve got. I hope you are all feeling well and healthy and everywhere that this latest strain of COVID is not coming your way. We are going to see what it’s done to the market. Let’s talk a little bit later to Matt and get his perspective on it. Les will have something to say about it as well. We are excited to have you here.
This show is created by mortgage professionals. It is for mortgage professionals. Correct me if I’m wrong. Let me know. We are the only live show in the industry in the nation. There are a lot of great podcasts out there, and I encourage you to check out all the shows over at IndustrySyndicate.com but we are the only live one. We are the first and the only one still producing that course.
Our commitment is to bring you timely information. We are always grateful for our readers and the feedback I’m getting. You can text me at (512) 632-2900 if you want to send me feedback as you are reading or put in questions. That’s always great. Also, I have LinkedIn messages up. You can send messages via LinkedIn and send them to @DavidLykken. Look at. Anyway, looking forward to it and getting into this show.
We’ve got a special hot topic segment. Brent Emler, who has been with Velma for years. He is now the Director of Sales at Lender Toolkit. He is here with a special gift. Keri Rogers, who is SVP of Strategic Planning at Lennar Mortgage. I’m very excited to have both of them on the show, especially Keri. We always love having Brent on, and he is going to be sharing a perspective of what Lender Toolkit is focusing on and some of the solutions they are bringing.
I’m interested in Keri’s perspective because, as SVP of Strategic Planning, they’ve got a successful digital mortgage initiative going on. How does this fit in? What’s your vision? How does Lender Toolkit fit into that? We are going to be talking more about that in the Hot Topic segment. Stay tuned to the rest of the show. We are grateful to have you here.
I want to say special thank you to our sponsors, the Mortgage Bankers Association of America, as well as Finastra Fusion Mortgagebot Solution. You can tap into the robust features such as user-defined groups for processors, underwriters, and closers and rely on automated email notifications for various stages of the loan process. Check out all the features and get real-time pipeline information.
That’s some of the other systems but the way they go about it, Finastra, is a bit unique. I encourage you to check them out. Check the episode with Karen Jenkins on October 4th, 2021, talking about strategic vision and the overall user experience as well as customer experience, UX and CX, which is so critical.
A lot of the focus is on Finastra. Also, their open architecture, which is very interesting in how they are making interfaces works so successfully and a big part of their recent growth. Also, Lenders One and The Mortgage Collaborative are two co-ops doing a great job of helping lenders and vendors like ourselves. We are members of both of these, and we are thrilled with the results we get out of these. There’s a great reason to be a part of one or both of these. More people are becoming members of both because of the uniqueness of the two. They do operate in basically the same space but have slightly different focuses and programs.
Check out Lenders One and the Mortgage Collaborative. I’m thrilled to have them as sponsors, as well as the Community Mortgage Lenders of America and Insellerate. Josh Friend does a great job over there helping with his CRM solution in the engagement platform. I’m looking forward to having Josh back on and talking about that. Check out his episode from June 2021. Knowledge Coop’s Ken Perry and the learning management system do a great job at helping you educate your people, keeping them current and all that’s going on. Also, Mobility MMI and Modex. We had Modex before the Dale Larsons, Dale III and Dale Jr talking about how powerful Modex can be and the technology that’s there.
I love the feedback we are getting regarding artificial intelligence on the predictability of a loan officer. That were some comments that they made that caught a lot of people’s attention. Having artificial intelligence and a predictive model on how long a loan officer will stay and how successful it will be. Check out both Mobility MMI and Modex for all the solutions they provide. I’m also thrilled to have Snapdocs as one of our sponsors. They do a great job of helping with the digital mortgage experience. Check them out. Be sure to do so.
Check out Vishal Rana, who was our guest on September 13th, 2021. There is some exciting stuff going on over there. Everyone notices how your customer referrals can close and mold business than anything else. We signed up with SuccessKit. If you are a vendor or a lender and you want testimonials on your website or you have some material created for your market material to support your marketing effort, you need to check out SuccessKit. I have been thrilled with what they’ve done for us in our consulting business, and I’m assured they will do the same for you.
Julian does an amazing job of compelling content and drawing it out of people. Check them out at SuccessKit.io. Lender Toolkit is one of our newest sponsors, so I’m thrilled to have them as a sponsor. In this episode, a special thank you goes out to Rob, Les, Alice, Allen, Matt and Jack for their contributions each and every week to the show. Let’s get over to Rob Van Raaphorst with this week’s Mortgage Minute. Rob?
President Biden announced his intent to nominate current Federal Reserve Chair Jerome Powell for a second term and current board member Lael Brainard for Vice Chair. If confirmed by the Senate, Powell would bring continuity as the Fed begins its process of tapering accommodative asset purchases. Brainard is expected to further emphasize the Fed’s analysis of climate-related risk and the development of a modernized CRA framework.
Also, MBA submitted comments to the FHFA in support of its proposed changes to the capital framework of the GSEs. The adjustments would generate greater incentives for the GSEs to engage in credit risk transfer. They would lower the likelihood that its risk incentive leverage ratio serves as a binding capital constraint. That’s it, and thanks for joining me.
I encourage you to become a member of the MBA and get signed up for the Mortgage Action Alliance. There is so much that the MBA does for us. One of the things is having our voices heard on the hill. There are not that many of us, so we need to join together. You can do so by using the Mortgage Action Alliance app to get signed up, and then they send you notifications of what the bills are and what’s pending.
You can then add your signature to that if you agree with their position. I agree with what they are doing, and I encourage you to step up, download this app, and have your voice heard as well. I’m grateful for all that the MBA does and for Rob Van Raaphorst for bringing us his report each and every week. Thank you, Rob, very much. Let’s get over Les Parker with the TMSpotlight and this week’s macro view of the markets. Les, what do you got for us?
Fear of governments overreacting to another variant turned Black Friday into a dark day for stocks propelling treasuries higher. However, the volatile action did not change the trend to higher mortgage rates. Get used to wild moves. Expect to see mortgage rates over 3.5% and below 2.5% over the next eight months. Omicron is one of many variants. Odds favor lower rates of death and hospitalizations, which is the normal degeneration of viruses. Coughing, COVID in the air, and everywhere, it comes in colors. These views are my own. Sign up for a kaleidoscope of views at TMSpotlight.com.
If you tuned in to the last episode, Les dialed in and said, “Do you want me to add some color to this?” Alice had written down the fact that Les had been so accurate, and he had said that interest rates would be up over 3% by December 2021. He nailed it again and again. Les was reading in, he dialed in, and that’s when he said, “We are going to see interest rates back below 1% over the next twelve months.” I go, “The volatility is going to be crazy.”
We are seeing more evidence of that. COVID will be contributing to that and the various variants. You can sign up for the paid version of Les’ TM Spotlight Newsletter. You will get that for free also like Matt Graham is here. For those of you signing up for the MBSLive.net service, put in LOL, and you get that for an extended period without a credit card. Matt Graham, it’s good to have you here. Matt is the Founder and CEO of MBS Live with the market update.
The latest variant messes these things up a little bit. It throws a little rock in the middle. The typical mortgage person moral dilemma where the bad news for society is good news for rates. Les covered that, and that was the big story last time. I will get to that in a second. Holiday shortened week always makes things a little bit weird for financial markets due to lighter liquidity and, in some cases, lighter volume.
The big to-do at the beginning of the week was treasury supply. We had a condensed auction cycle with all three auctions taking place by Tuesday, and that’s normally a Tuesday through Thursday process. Asking primary dealers and other market participants to bid on that much treasury supply in a condensed timeframe puts upward pressure on rates even though they know it’s coming.
That was arguably the case. At the beginning of the week, I saw a linear move toward higher yields, the one that was consistent with defensive pricing and additional supply. The uncertainty is heading into what is effectively a four-day weekend. The weekend wasn’t truly four days because on Friday, we had a chance to trade a half day rather aggressively. We should mention that Fed Minutes came out on Wednesday.
There was some speculation that the Fed might say something a bit more forceful about how it could accelerate tapering or bring forward the rate hike outlook. Nothing in the minutes was sinister in that regard. Markets breathed the collective side of relief, and yields were cooling off by Wednesday afternoon. It fell to Friday to bring all the drama. I post it in my newsletter.
If you look at a chart of Google Trends of the variant name, the original B 1.1. whatever it was didn’t exist until Thanksgiving Day, and then the day after Thanksgiving exploded in the wee hours of the night. When it did, then bonds rallied immensely in Europe. The rally continued in the domestic session, all-in-all over 16 bits and tenure yields dropping from a low’s 1.64-ish on Wednesday afternoon all the way down to 1.47 in change by the end of Friday.
It’s a crazy big rally. It’s the same story for MBS, and all due to Omicron. This is all objective connecting the dots. There’s no value judgment as to whether or not it’s warranted. Could it be a knee-jerk reaction based on fear and uncertainty of what could happen? Yes, absolutely. Could it blow over? Yes, it could. There was another variant a couple of months ago, the Mu variant, that had some people concerned and then some epidemiologists were saying, “Don’t be concerned about this.” It blew over fairly quickly.
Those same epidemiologists are seeing a little bit more concern this time around. That’s why markets are paying more attention. They are all saying it remains to be seen. We are going to need a couple of weeks to figure out what impact this is going to give where it’s more contagious but the symptoms aren’t as severe, and ultimately, it doesn’t end up being as big of a deal as people were worried about on Friday.
Based on the way markets are trading, the concerns are still on the table. We had a little bit of weakness at the start of the session but I view that more as the return of liquidity and pricing out a bit of the “grease skids rally” that happened on Friday. We are a few bits higher in tenure yields and only an eighth of a point lower in MBS, even after the significant rally on Friday.
That has been good for lender rate sheets so far. We will continue hanging on to every last word of any significant Omicron updates. Of course, we have economic data. It’s the big week of economic data on any given month with the ISM reports, and those are on Wednesday and Friday. We have the big job report on Friday. It’s another non-market related but definitely mortgage market-related. An interesting headline will be FHFA releasing updated conforming low limits.
That is because that relies on Q3 expanded seasonally adjusted HPI, and then on the calendar to be released since August 2020. There was a lot of debate about when it would come out in 2021 but it is coming out and that should be somewhere around 650,000, give or take, 5,000. We will see, but anywhere in that neighborhood is going to be a huge upgrade from the previous limit. It might be the most interesting thing that happens if markets stay relatively paralyzed. That’s all, Dave.
Chances of it staying paralyzed, any of you want to go there?
I don’t want to go there because what you do will fall of. Jack, I love that you fell in love with that. He does not go on the limb. He goes, “Nothing but the facts.” He plays it right down the middle of the fairway.
He does plays it safe. You could tell he’s a risk management guy. Jack, what are your thoughts when you look at this Omicron variant?
It’s more of a question for Matt. Did the market react to the virus or the government’s reacting to the virus?
Those are one and the same, honestly, because the virus isn’t going to infect computers and make traders make different trades in the first place. It’s always the implication of the virus, and those implications can go to the realm of lawmaker policy and trade-related stuff, import and exports as far as travel bans for themselves for people flying on airplanes, maybe not as much as import-export situations.
Also, perhaps some measure of anticipation about everyday citizens’ fear of doing stuff and going out and doing things. If that is inhibiting the free flow of the global economy, then that’s going to have an impact on markets, obviously. More than anything, when something comes out or a new variant comes out, it looks like it might be Delta.
We think back to how Delta surprised us and took the pandemic from being something that was like, “This might be going away. It’s great. Let’s go out and do stuff,” to, “COVID is still with us.” It’s the buy bonds first and asks questions about why we are buying bonds later. As markets sorted that out, that’s one of the reasons we had a little bounce, and if it continues to look less and less owners, yields will drift back up as long as econ data plays ball with that. As Les said, there’s a wide spectrum of potential volatility for a variety of reasons, not just Covid but policy response definitely matters.
One of your friends texted us here. I would love to know who’s behind this phone number. They said, “Matt is always unflappable. You can throw him questions. He is Mohammed Ali of that.” You can dodge around everything so well. You got fans out there. You do a great job, and I love your website because what it does is brings so much information to us on a single screen.
We can look at it on our mobile app or an iPad. No matter where you are, you can take a look at what is going on in real-time in the markets. I appreciate that, and I love the approach that you take to it. You try to do nothing but the facts bam as much as you can like in the old Drop Dead series. You get to the facts and focus on that. You let the website and all the stories that surround the markets speak for themselves.
You post everything up there. I love it, and I encourage people to check out MBSLive.net. If you sign up, use the code LOL and no credit card trial. Matt, you do a great job. Thank you so much. I get so much feedback on you and your excellent job. More people have gotten turned onto your website as a result of you being on the show. They all go, “This is good. I love this stuff.” You got fans and a growing number of fans.
Thanks, David. You have a fan here too.
We fan away here on each other. I appreciate you. Have a great time up there in the Portland area. Alice Alvey is here, and she is CMB Vice President of Education and Training at Union Home Mortgage legislative update. Alice, did you have a good Thanksgiving?
I did. I had a great Thanksgiving, and as a matter of fact, I spent the weekend immersed in the book, The Leader’s Guide to Unconscious Bias: How to Reframe Bias, Cultivate Connections, and Create High Performing Teams. It was written by Pam Fuller and Mark Murphy with Anne Chow, who’s the CEO at AT&T Business. It does a great job of weaving the leadership practices that you will find taught through Franklin Covey within a different framework. It’s not a typical book. Everybody in leadership is looking for solutions, ways to educate their teams, and how you bring the subject of unconscious bias into a conversation.Everybody who's in leadership is looking for solutions and ways to educate their teams. Click To Tweet
This is a great book. It has us reframe the word bias into simply the word preference. That, in and of itself, is an eye-opener. The word bias can have a lot of negative connotations, and people shut down and don’t listen. If you think of it as a preference and listen to the examples in the book, there are some great takeaways for leadership at a company. We are looking through the material and content. We want to make sure that we can get our partners engaged through our diversity, equity, inclusion, and belonging efforts. I wanted to share that book with everyone. It’s a great read. They put some great information in it.
I’ve heard several people talk about this book. It is being touted. Everyone who has read it said, “This is really good.”
It’s a business read but it’s not trying to get political or get people emotionally charged in any one direction. It’s very neutral and tries to bring up awareness in the conversation about preferences overall. There are definitely some great stories in there as well that many people can relate to. It’s a great book for leaders. Changing subjects quickly, which you have to do in five minutes. Did you see the MBA Chart of the Week? I love this annual bit that they do with the price of turkeys. It’s a good one to take a look at the time of year.
Fran and everyone over there at the MBA do a great job bringing out that every year. It’s hilarious.
They do. It’s a good one. Last but not least, the agencies are resuming their enforcement under RegEx. As a reminder, this came out a little while ago and if you think about all the different things that fall under but still a lot within servicing. The fact that all of those enforcement provisions, specifically the mortgage servicing rules, were put on hold over the COVID period. That’s all gone.
Now lenders need to make sure that they are watching all their compliance. Most companies didn’t take huge advantage of that but there would be some gray areas definitely as we were coming in and out of different forbearance rules. A heads up for companies that all of that forgiveness is gone, and the enforcement is back. That’s my update, Dave.
We have questions from our audience. We had a great announcement at the MBA, and it has been crickets since then. Have you heard anything, Alice, about what we can anticipate from Fannie Mae and Freddie Mac, GSEs, on how appraisal waivers?
It’s a great question, and the answer is still crickets. We haven’t heard anything, so we are still watching. We will let you know as soon as we hear something.
Here on the show, I had not seen anything, Alice. It’s at the forefront of everyone’s mind. Especially since it came up over Thanksgiving Day, my oldest daughter was thinking, “Maybe I should become an appraiser.” They were looking at the hurdles and requirements. Does this change everything? The answer is no. We are going to need appraisers. That’s going to be for certain. We need as many to come into the market but the market is growing so much. We will see if we don’t have some new technology solutions as we look at alternatives and statistical evaluations.
We are working with a couple of other people to come on the show after the first year to be talking about possible other solutions. There are some good solutions out there. We will be talking about those after the first year. Pay attention to what we have on the docket coming up. Alice, thank you so much. It’s good to have you on the show each and every week. I look forward to having you participate in the hot topic segment. Let’s get over to Allen Pollack, who dialed in to join us. It’s good to have you here, Allen. He’s with us for a weekly update.
It’s good to be here, as always, David. A little fun fact since we talked about Thanksgiving. It takes 10 hours and 2 minutes. It’s the length of time that the average American male would need to spend on the treadmill to burn the 4,500 calories consumed in the average Thanksgiving meal. That doesn’t include late-night Turkey sandwiches and second-day Thanksgiving festivals.It takes 10 hours and two minutes on the treadmill for an average American male to burn the 4,500 calories consumed in the average Thanksgiving meal. Click To Tweet
It sounds like you are in an airport. Are you traveling again? Are you out and about?
I am out and about but I’m not traveling. It’s the quietest place I can find.
It makes live from Allen, wherever he is at. Both Alice and I have done these on the road traveling. We’ve done our show while in airports so that works. Where’s Waldo? What else have you got?
If you want to participate in the industry, David, always brings up different ways of participate. I’m going to tell you about MISMO. They are searching for participants for their closing initiative. They are going to be focusing on standardizing the pre-closing title document data sets. If you want to get involved, go to the MBA site or google MISMO. You can participate and share some love and knowledge with everybody else.
David, here’s the technology solution. I like these guys. They’ve done a lot, and it continues to pop up in my data feed. HousingWire spoke with the cofounder at Homebot. It was talking about how to make clients’ life in using their technology and how to help through not only the entire home buying process but being able to help with the life of the loan.
What they talk about is keeping a loan officer connected with their past clients after the transaction. How Homebot does is track home values and loan equity, and then they are helping the consumer understand all of that. They are called a financial optionality with their home. They said, “At the end of the day when’s the best time to sell, rent, remodel or refinance?” Check it out at Homebot.
They got some cool technology. If you are a technology company and want to add more value to your lenders because you want to help them with the life of the loan, check out what they are doing. David, do you have what’s called FOMO? It’s a type of anxiety that stems from the belief that others may be having more fun or doing better when you are not there.
Garth and our friends over at Stratmor have said that our industry has a lot of FOMO. Their most recent research has found that mortgage lenders are not immune to sitting around or not sitting around. Here’s what they said, a couple of quick little things, “Better technology does not mean better profits.” They said that people are forced to implement tech with a fear that they will be left behind.
We were forced to digitalize with COVID. They used twenty years of data to come up with this analysis. What they ultimately found is that there is zero correlation between how much a company spends on technology and a lower fulfillment cost per loan or a higher net production income for banks and independence.
If you feel you are missing out, spend the money and get the right technology in there but it doesn’t end there. Moving on to a separate topic. I mentioned it last time, and this is all on the same thread. Technology can’t replace the human touch. This was an article in 2017, and they said, “A machine can perform a given task often more efficiently than we can. It lacks the artistry in the activity that the unique human ability to cater to the needs of the individual.” How much do we keep talking about that in our industry? The fact that you will never replace loan officers. You may use data or enhance the experience but people still matter.
We should start a new hashtag, #FOMOPSM, Fear of Missing Out and People Still Matter. Buy the technology but the people still matter. The other thing is like a saying, “The proof is in the pudding.” We will get this from ICE Mortgage Technology. Nowaday’s borrower expects the mortgage industry to be timely, customized and digital like we expect. Much so that 63% of consumers feel an online mortgage process would be easier than an in-person process, according to their most recent survey.
You will need an offer, a personalized consumer direct lending experience through the devices and communication channels that are omnichannel their preference. We have been talking about this. We know this is the case. EY.com says, “Mortgage lending reaches an inflection point. Lenders need to harness their data and leverage innovative technologies to deliver an efficient and personalized home-buying experience.”
We are singing the tune. I’m not going to read all the points that EY mentioned but I’m going to tell you this. They said, “It’s a critical time and decisions made will determine the winner and the losers, especially with being so competitive on rates but ultimately leverage data.” That’s our biggest point. Use the data to prefill applications and personalize the experience. The same thing that Ellie Mae and Garth were saying. Use this data. Data is king, as we always talk about.It's a critical time in the lending industry, and decisions made will determine the winner and the losers, especially with being so competitive on rates. Click To Tweet
EY.com, ICEMortgageTechnology.com, StratmorGroup.com and HousingWire.com. Check out all those great articles. Next time, we are going to talk about who are the right leaders in your company to determine the technology that you need to do. Also, your end-of-year health check that we talk about every December, as well as how to rotate called Rotating Your Tech Team. We will talk about that next time. Otherwise, I hope everyone has a fantastic week.
Thanks for joining. It’s so good to have you here, Allen. I appreciate it. Thanks for the tech update and all the information and insights. Good job. Folks that ends the weekly mortgage update part of the show. We are now going to go into the hot topic segment. For those of you tuning in on a downloaded basis, move on to the next show because we break the live show into two shows. For the next episode, We’ve got Odeta Kushi coming in from First American. I met Odeta going down the escalator at the conference after the Empower Event, and I struck up a conversation with her. I was so impressed with her comments.
She is the Deputy Chief Economist at First American, so I invited her to come out of the show and share what she sees coming up as we look into the New Year. We will get some new perspective on that. I’m looking forward to having Odeta join us, so be sure to come back here next episode. I want to say special thank you to our sponsors, Finestra, CMLA, Lenders One, Insellerate, Mobility MMI, Modex, the MBA, Knowledge Coop, the Mortgage Collaborative, Snapdocs, SuccessKit and Lender Toolkit, our special guest. It’s good to have you with us, everybody. Have a great week, and I look forward to seeing you back here next episode.
- @DavidLykken – LinkedIn
- Lender Toolkit
- Lennar Mortgage
- Mortgage Bankers Association of America
- Finastra Fusion Mortgagebot Solution
- Karen Jenkins – Previous Episode
- Lenders One
- The Mortgage Collaborative
- Community Mortgage Lenders of America
- Josh Friend – Previous Episode
- Knowledge Coop
- Mobility MMI
- Dale III and Dale Jr – Past Episode
- Vishal Rana – Previous Episode
- Lender Toolkit
- Mortgage Action Alliance
- Rob Van Raaphorst – LinkedIn
- Les Parker – LinkedIn
- Union Home Mortgage
- The Leader’s Guide to Unconscious Bias: How to Reframe Bias, Cultivate Connections, and Create High Performing Teams
- Allen Pollack – LinkedIn
- ICE Mortgage Technology
- First American