04-25-2022 Weekly Updates with Alice, Allen, Matt, Les, and Rob PART 1

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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 PART 1

This show is created by mortgage professionals. It is for mortgage professionals. We are grateful to have you as our reader. Our commitment to you each week is to bring you timely information in a blog format that you can read anytime and anywhere. There is no better example. We got Josh O’Leary out in Olympia, Washington area, Pacific Northwest, reading and dialing in. He dials in every single week to get an update. I’m going to give Josh O’Leary a big shout-out. If you are reading, please let me know. I love giving our readers a shout-out.

During the hot topic segment, we got Christopher Brown, the software solutions architect at Fiserv. He will be sharing some of his thoughts about financial institutions, where they are at and where the markets are heading in the bigger picture, as well as the role of financial institutions. I have been in this industry for many years. By the time you start seeing the financial institutions start coming in, it defines the end of a cycle. The IMBs are the first end of the cycle, and there are the financial institutions. They come in a little bit toward the end of the cycle. It is what we are going to read about.

We have Fiserv now. We had Finastra last episode. It is one of our sponsors of the show. We are getting some perspective on financial institutions for you to read and pay attention to this. They do have clear strategies. They spend a lot of money looking at what is going on. You will benefit from Christopher Brown’s talk about what is going on at Fiserv, one of the true leaders in the mortgage market when it comes to automation, technology, and FinTech.

Allen Pollack even dialed in now and is glad because he used to be at Fiserv. We are going to have a great conversation in the hot topic segment. Stay tuned, and follow the way through to the end. I want to shout out to the Industry Syndicate. Check out all the shows on IndustrySyndicate.com. They do a great job. I want to say thank you to our sponsors, the Mortgage Bankers Association of America. Be sure to sign up for the Mortgage Action Alliance App, which is MAA, and you can get that in your Google Play Store or Apple Store. Pick up that, get signed up and have your word heard on the hill.

Allen is going to talk a little bit more about the tech show and what he learned at the tech show. There is interesting feedback coming out of that. Finastra is a sponsor. We are thrilled to have them as a sponsor. They maximize convenience with post-closing functions, including funding, collateral tracking, shipping, ensuring and guaranteeing, and as the interim servicing and account, there is much that they do. We had Troy Anderson of Finastra last episode talking about this. We are going to continue that conversation with Christopher Brown with Fiserv.

Special thank you goes out to Lenders One and The Mortgage Collaborative. These two co-ops do a great job of helping lenders and vendors get together in a smaller and more intimate setting where we get together to talk about what is going on in the trends of the industry. I encourage you to be a member of both of them. Select at least one of them, but that should not negate your membership with the MBA, which is numero uno always.

Total Expert is the leading FinTech software company that delivers purpose-built CRM technology and creates customer engagement for modern financial institutions. Go back and read the interview we had with Joe Welu on March 14th, 2022. They got a great cohesive platform that brings together experience. If you are here to do some recruiting, this software also has some nice features for connecting with loan officers. When you identify them through either Modex or Mobility MI, both of these companies are sponsors. We appreciate both of them. I use both of them to help our clients with recruiting. Check out both these companies.

If you are looking for training, check out Knowledge Coop. Kan Perry and the group there do a great job. They released a new platform on April 1st, 2022. We are broadcasting on that platform. Snapdocs have a great eval solution, and it will make it simple to get started with eNotes. If you are not in the eNote program, you can do and transact across multiple partners.

A lot of people say, “Everyone has APIs, but it is difficult to use.” You talk to the folks at Snapdocs. They will make it clear on that. Briana Ings, we hit her on March 28th, 2022. Check that out. As well as SuccessKit, Julian Lumpkin is doing one of the most amazing jobs at helping you tell your story. It is an effective way to reach your audience, not through your own words. It is much more effective to use the words of your clients, and that is what we do. We get a lot of client testimonials as a result of that. We get a lot of traction with this. Check out SuccessKit.io. You can use that as a loan officer, as a mortgage company, and tech company. It is across the board.

Also, Lender Toolkit, Brett Brumley, we had him as a guest on March 14th, 2022. My good friends were there, Brent Emler and Brett Brumley. They are great guys with great technology. As well as FormFree, they do a great job. Brent Chandler was on with us in February 2022, as well as SimpleNexus. We had Lori Brewer on March 21st, 2022. We also encourage you to check out the interview we had with Debbie Wemyss that we did on the show. We will help you with your LinkedIn profile.

Those are a lot of sponsors, and we are grateful for all of them. There are even more sponsors on our web page. Go to LykkenOnLending.com. Check out all of our sponsors. Especially a thank you goes out to Alice, Allen, Matt, Jack, Rob and Les for their contributions each week. Rob was unable to get MBA Mortgage Minute into us. We are going to go right on into Les Parker’s TMSpotlight and the macro view of the market. Les Parker, what you got for us?

The bond market produces a hawkish fed. The rapid rise in rates happened because bond investors felt the Fed was behind the curve. They think the Fed will usher in a recession. With the ten-year not able to close above 295, the bull show they can push rates down 50 basis points by mid-May 2022 after the Fed increases rates by 50 basis points on May 4th, 2022. Growing expectations of a recession in 2023 keep short-term rates rising, and long-term rates can fall. Who is still standing, fools or fairs? These deals are my own. Find us at TMSpotlight.com.

Industry Updates: The rapid rise in rates happened because bond investors felt the Fed was behind the curve.

Gary and Les Parker team up to turn out a great segment on that. That is timely. Check out TMSpotlight.com. You can sign up for their page subscription, and you can do it for free if you insert the word POWER in the signup subscription area. For a few decades, I have been reading Les’s write-ups. We are thrilled to partner with him on this show. Matt Graham is here, Founder and CEO of MBS Live. Good to have you here. There is a little improvement here, a little bit of a rally. Is this going to hold, or like what Les said, we are going to see them take this down? What are your thoughts?

Bond sellers are always thinking of new ways to try to trick unsuspecting loan officers into floating the loans. We never know. Part of the thesis is that with each additional wave of selling, we have that much more technical pressure building up on the other side of that oversold condition. We are periodically going to get these pops back in a stronger territory.

Every time we set a new high in yields and see one of these pop back toward lower levels, that could be the time when we are finally reversing the course process. That takes days, if not weeks, to confirm. We have seen a couple of head fakes so far. One of them was fairly compelling and almost big enough and long-lasting enough to suggest that that was a ceiling. It was promptly crushed in the following week.

Let’s talk recap real quick. It is boring. Homebuilder confidence, as expected, has been declining a little bit. Expectations over the next several months are lower, as you would expect, given the rate environment and the supply or inventory environment. Housing starts holding strong as expected. Building permits, same story. Mortgage applications and refi demand continue to be bouncing along long-term lows there.

Purchases are still resilient. It is down a little bit. It is complicated somewhat by the fact that it was a holiday-shortened week and that the Good Friday holiday varies significantly in terms of the date of the month it arrives. Existing home sales are close to forecast. There is nothing interesting there. The more interesting stuff happened away from economic data, and there were several Fed speakers, as Les alluded to.

Chicago Fed Evans characteristically, a mega dove and bond friendly in his comments over the years, had what I would call down-the-middle commentary on the rate outlook, but coming from Evans, the market as hawkish or unfriendly for rates. He said, “In a nutshell, we could have two 50-basis point hikes and 25-bit hikes from there on out.” That is right in line with what the Fed fund’s futures are suggesting. It is no surprise and not an overly hawkish message, but markets didn’t love it. Combine that with an active day of corporate bond issuance, which also puts upward pressure on rates in the short term.

That was enough for a big selloff to new long-term highs on Tuesday. The bond market did a fairly good job of moderating after that. On Wednesday, there is a nice little correction back to the lows of the week, but not back into the previous week’s territory. This is how they get you a big selloff followed by a big rally. The rally seems good, but it doesn’t get you back to the previous week’s levels. You are tricked into thinking that things are good. On Thursday, that rule was proved true with a big selloff yet again, and it is driven by central bankers.

It was interesting because the market was waiting for Fed Sheriff Powell and ECB President Lagarde in the afternoon at an IMF function. Well before that, Bank of England’s Mann and also Fed’s Mary Daly were out with comments that, I wouldn’t say, they rocked the bond market, but they put significant upward pressure on rates. The bigger of those two deals was Daly’s comments. She said, “25, 50 or 75 bits are the three options for rate hikes.”

Nobody is talking too seriously about the 75-bit hike potential, but at times, it has been on the table. It is something that may be discussed. The market doesn’t think the Fed would pull the trigger on it. As unlikely as it is for it to be mentioned, it is going to hit the market a bit. She also said that it is an open question as to how far above we settle at above 2.5% in terms of the Fed funds rate.

All of that sent yields much higher. Friday was flat. Looking at the week ahead, more home-related economic data, housing, home prices, and pending home sales. With us, as always, for MBA applications, we have a 2, 5 and 7-year treasury auction cycle. We had a little bit of action last week around the twenty-year bond auction. It is not unreasonable to think we could see some more volatility surrounding the auctions.

The biggest deal of the week in terms of data would be Friday’s PCE inflation. That is a counterpart to CPI. The Fed’s preferred inflation index. It is more stale than CPIs since we already have CPI data. It might be a little bit anti-climactic if it comes in similarly, but if it paints a significantly different picture, that could be a meaningful takeaway for the market, especially if it paints a picture of even more moderation and inflation.

The big unknown that remains there, whether they are two of them, number one is the fact that the commodity price spike may still be working its way through the market and could yet be seen in the inflation indices. We might not have seen all of that pass through yet. It is likely we haven’t. The other unknown is the COVID situation in China, with lockdowns and a drop in oil prices as a result. That drop in oil prices is more than offsetting the expectations for supply chain disruptions that would push inflation higher.

Inflation expectations and oil prices both dropped significantly as a result. Equities indices in China are way down, and that is what is behind our bond gains. I would say that a little bit of fuel is added to that fire due to the oversold nature of bonds heading into the day. It adds a little bit of extra emphasis when you have that much short base stacked up and a little bit of a short squeeze for bond sellers. The bigger picture is yet another opportunity to bounce and another time where we need to wait and make the market prove itself before we are convinced that it is happening.

The bigger picture is yet another opportunity to bounce and another time where we need to wait and make the market prove itself before we are convinced that it is happening. Click To Tweet

There are many people that are trigger-happy now, Matt. It is crazy. I was talking to one company who said their loan officer, who is a sophisticated guy. He has a client who, even though he made him sign a statement that says, “You are floating at your own risk. The applicant was waiting. Rates are going to go down. I know they are going to go down. I know what I’m doing because I’m a smart guy. I have a PhD in Finance.” They hung on. He said, “No.” He is coming back and suing the company because they did not make him lock. Thank God.

They used that form that says, “You do know you are floating, which means interest rates could change suddenly. In the event that they change, you will be paying a higher rate. You understand that and sign. Signify this statement by signing below.” He did sign it. He is still coming back and suing them. Jack, I love to get your thoughts on this brilliant analysis by Mr. Matt.

One of the things I wanted to talk about real quick is we throw the term soft landing out a lot here on this show. Just so we all understand what a soft landing would mean in these economic times, with inflation running from 7.5% to 8%, the Fed’s target is 2% to 2.5%. The challenge for the Fed is how they reel inflation back down to the target range without causing excessive contraction in the economy that would put us in a recession.

To make sure everybody knows what the term soft landing and that challenge are for the Fed, are we going to see a miracle on the Hudson, where solely brings it in or is this going to be more like the Denzel Washington movie called Flight, where the plane is upside down? I don’t know, but the question I get a lot is, “What is going to happen to housing valuations? Are we going to see something similar to what we saw in 2007 and 2008?”

I want to share a little bit of good news with our readers. There are three reasons why we won’t get there again. We have better credit quality now. As much as people complain about regulation, Dodd-Frank and the ability to repay has us in a much better place now than we were back in 2006, coming into that recession.

The second reason is the residential properties are not as levered as they were back in ‘07 and ‘08. We had 100% LTVs on many loans back then and even some greater than 100%. We had 125% LTV caps on negatively amortizing ARMs back then. Residentials are not nearly as leveraged. The third reason housing inventory still remains in balance. There is a shortage of housing inventory. For those three reasons, I don’t look to see a valuation collapse like we saw back in ‘07 and ‘08. I wanted to share some good news out there in a volatile market, David.

I know you are busy sitting there watching the markets, and you are cranking out these three caps on what is happening. A valuable part of the MBS Live platform, Matt, is how you are attuned to the markets, looking at everything and you are pushing those out constantly. I get them, and I tell you, it allows me to twist around, which is loaded up with MBS Live data flashing away in real-time. It is amazing. You folks can sign up for this. You get an extended trial period with no credit card required if you use the code LOL, Lykken On Lending if you sign up. Matt, anything else you want to share with us? Words of wisdom.

The main takeaway, whether it is wise or not, is to wait and let the market prove itself before you get your hopes up too much about a top. It is true that the higher we go, the closer we are to the top.

Industry Updates: The main takeaway, whether it is wise or not, is to wait and let the market prove itself before you get your hopes up too much about a top. It is true that the higher we go, the closer we are to the top.

You have a little of that urge in you there, and I love that. Don’t get too excited. This may change too. Matt, you are brilliant. I love you. You are an awesome contributor here. Thank you so much. Jack, thank you for rays of hope there because I agree with you. Overall, there are reasons to think bullishly about this market and even though what Matt is reporting on is a little discouraging here with the rise and spike of rates. Thank you both for your commentary on the markets. Many appreciate it. Let’s get over to Alice Alvey, who is a CMB Vice President of Education and Training at the marvelous Union Home Mortgage. She got a legislative update. Did you say it is light news, Alice?

I was looking at the legislation that is pending and some of the things that are open for comment. There wasn’t anything brand new to report on. I love to comment and add to what Jack said. I completely agree with what he said. This is nowhere near the same series of events in real estate. The credit quality is the big one. We were doing no income and no asset verification loans. It was crazy stuff. People couldn’t pay us back. We all have stories of riding with a cab driver who is going, “I own four houses just looking.” We were like, “Is this the only job you have?” They were like, “Yes, this is the only job I have.”

Now, we are seeing all of the numbers from the COVID forbearance. That was impressive positive news. I don’t have the percentage off the top of my head, but it was a significant percentage. Most borrowers were able to get themselves restarted back again after the forbearance when they came out of forbearance. Whereas, as an industry, we were all holding our breath. It was going to be an ugly number of customers who couldn’t get themselves back on track with making their payments.

Granted, the industry did a lot of modifications, but at the same time, that part all worked out well. We don’t have that hanging over our heads anymore. It is the outcome that is coming out better than planned. I wanted to add to that. I thought Jack’s comments were terrific. The whole comment about a floating interest rate, that is your debt.

We are responsible for everything we say and don’t say to customers. We told borrowers don’t have the responsibility to read and understand all the disclosures. It becomes up to us. It is an interesting world we live in. I’m going to throw in VUCA since we are talking about volatility everywhere. This has been around for a while. It is an acronym that we use in leadership and management training. V for Volatility. U as your Uncertainty. C Complexity and A Ambiguity. That is the world we are all trying to manage, a volatile, uncertain, complex and environment full of ambiguity.

VUCA: V for Volatility. U as your Uncertainty. C Complexity and A Ambiguity. Click To Tweet

The word that helps offset that is if you say, “For volatility, I have to combat that with clear vision. For uncertainty, I have to make sure I’m creating understanding. For complexity, I have to make sure I’m adding clarity. For ambiguity, start to embrace being flexible, help your teams become flexible to be able to do job rotations, cross-training and that type of thing.” It is a chance to re-engineer your business process and help people’s ideas come to the table to be more effective and efficient. In all of this change going on in the market, that is how you turn it to have it be positive for the people that you have working with you. I will leave that message, David.

Jason Stenger, who is the CEO at Movement, is texting me. He says, “Dave, you recommended the book to me, The Motive by Patrick Lencioni. I read it over the weekend. It is such a good book.” These are times when we need to look at how we are managing and leading. As the book suggests, what is our motive for doing so? It is a good time to be looking at what and why we are doing it. I encourage you to read The Motive. Thank you, Jason, for texting me that you enjoyed that book. I appreciate it. I got many good readers out there. We are pleased to have all of you here. Let’s get over to our good friend Allen Pollack with the tech update.

David, how is it going?

You are excited to have Chris on. You used to work at Fiserv.

I can’t wait to talk to Mr. Christopher. We had a lot of fun back in the day, especially as we spent time working together. That will be a great piece of the segment coming up in a moment. Getting back to some of the funny tech news that we always go to, we have a couple of weeks off from that. The first one is a cop stopped a driverless car. The driverless car flees, and there is a whole bunch of confusion. If you want to learn more about what happened, you can Google it and check it out. The factual statement is that a driverless car was stopped and pulled over by a cop, with a lot of confusion as to what to do next. When the car flees, you let it go and mark down the license plate.

You can stare into the camera and go, “Who is driving this crazy thing?” That is hilarious.

Let’s also talk about big tech. Probably moving the focus away from Facebook, but definitely on Twitter. There was a big meeting with Twitter’s board. It looks like they are nearing a deal. The decision will likely come now. Their earnings report is due on Thursday. What Musk has said is that he is offering $46.5 billion. He said, “They are only worth $37 billion.” He also made a giant comment. He said, “That is his best and final.” There are all kinds of news about it all over the internet. If you haven’t heard about it, you are way too focused on our industry, but check it out. We will hear what is going to happen with that deal.

For industry news, Snapdocs and Maxwell are now partnered together with ICE Mortgage Technology and Gateless. This is one of those folks that I saw at the conference. They are a smart underwrite platform. They are using new tech. It’s all of this AI and OCR technology that is out there, and it seems like everybody is getting their hands on it now. They are partnered with Google tech called Google AI. It is a version of mortgage document data extraction that Google is partnered on. They are also connected to Fannie and Freddie. Their goal is to reduce the timing and limitations in the entire loan process. Gateless is a new name that is out there. Check it out.

Here is something funny, David. I met with a broker, and I asked him, “What technology are you using?” There is one point of sale, and 1 or 2 LOS platforms are used. Do you know what his actual comment was? He was like, “I don’t like technology. It doesn’t help me, but I rely on educating the borrower, the data that I get about the property and the relationship.”

If you remember, several years ago, I had spoken with somebody who was an originator. He said, “It takes thirteen touches to bring in that deal, to bring the fish in the boat.” I asked him that question, and he told me he was using CRM. That is his number one tool, but too many of the CRM systems, this was his opinion, do too much.

He goes, “It is simple. You got to be able to have constant connection and communication with the borrower, and you got to use a phone call. You can’t leave it all to technology.” While we are here touting technology, that is how a broker’s opinion is. He is not popular on LinkedIn. You are not going to see his posts every day, but he knew what he was talking about, and he has a successful brokerage that he owns. Many of you may be thinking the same thing, but let’s move on to other news.

Industry Updates: “It is simple. You got to be able to have constant connection and communication with the borrower, and you got to use a phone call. You can’t leave it all to technology.”

David, we talked about it at the conference, advances in data management and some of the cool things going on. I saw one thing that was interesting. I noticed more consulting companies that had more connectivity to the industry and more lenders that are relying on them to help integrate all of their tech solutions.

One company I met myself was a company called ATI. What I found very interesting is that they are working on behalf of many lenders to integrate their backend tech systems or, within their tech partners, each of those solutions together. That gets into exactly one of the things we’ve been talking about. It is how to be successful with all these tech solutions. We spent all this money. There are layoffs. There is a contraction in the market. No one knows what is going to happen with rates and property values. I agree with what everyone has been saying on the show so far, but I do think that they are going to slow down. I don’t think we are going to see a contraction in that.

ATI is one of those companies. I would look at your consulting company, who you are working with and think about what we talked about MoSCoW method has become successful with the projects you are working on. With that, David, what did we promise? We are going to get into what tech to watch in 2022. There was an article out there that we referenced a couple of times. The article was in Mortgage Finance Gazette. If you want to check it out, you can go there.

Here is the best thing. They talked about a couple of items. We will get to one of them now. We will extend it into the next episode and maybe the episode after because some of them are good points. The first one is the increased use of automated data sources. We are at a point where you can get access to data. You can easily take that data, and you can use it whether you are creating a risk or you are using it to make a decision.

If you have data from a credit report that doesn’t meet the criteria that you are looking for, why run flat or work number? Why do things that are going to cost money that doesn’t make any sense? How do you use that data to make the experience more personal? Especially if you think about our conversation with Christopher, we are going to be talking about Fiserv, open banking and personalized experiences. Data is going to be the big topic now.

Data is going to be the big topic now. Click To Tweet

How do you use those automated sources? As the lender, you may not have the ability to take that data and do anything with it. You got all of your vendors and partners to work with, but you want to be asking those questions. Ask those folks that you integrated with. Maybe it is three years old. What additional data do they now have available that maybe they didn’t have a while ago? As I said, automation increase the use of data that is becoming available. Make that usable, and what can you do with it? Next episode, David, we will talk about digital IDs and conversational experiences. I’m looking forward to the hot topic. If anybody wants to get a hold of me, here is how you do it. It is [email protected].

You are talking about the MoSCoW method. Alice is talking about VUCA, and there are all these acronyms, but this is a time to be thinking about how we are approaching technology, management and all the above. I appreciate you for being here as a part of the show each and every week. I can’t wait to have you involved in the hot topic segment, especially with your insights with Fiserv. Have you been there for a good amount of time?

That wraps up this weekly update of what we are talking about in the first half of the show. Next episode, we have Kristin Messerli coming on from Experience.com. If you understand Experience.com, they measure the success experience you have with your customer. It is a great product and program. The reason we are having Kristin on is she is there. We belong to the Seveney Mastermind Group together, along with a number of others. Kristin always has great content.

What Kristen will be talking about next episode is she will be announcing who won and who is doing the best job. You hear the criteria that Kristin will be relaying. It is going to challenge you. Come on back, be sure to join us next episode, and read to the hot topics, where we have Kristin Messerli of Experience.com.

I want to say a special thank you to our sponsors, Finastra, Lenders One Mobility MI, Modex, the MBA, Knowledge Coop, the Mortgage Collaborative, Snapdocs, SuccessKit, Lender Toolkit, Total Expert, FormFree, TMC and SimpleNexus. It is good to have you all with us, everybody. Have a great week. I look forward to having you back here next episode.

04-25-2022 Weekly Updates with Alice, Allen, Matt, Les, and Rob PART 1

Weekly Updates with Alice, Allen, Matt, Les, and Rob PART 1

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