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 is February 7th, 2022. We got the Olympics going on. I’m enjoying that. I feel bad for the American skier who broke his leg across. It is fun to be watching the Olympics much going on in the world and with interest rates. I can’t wait to get into that with Les, Matt and Jack, all the stuff happening with mortgage rates.
We are going to dedicate one of the Hot Topic segments when we got coming up here in a couple of weeks to interest rates. Does everyone need to revise their predictions? We are going to be looking at that. This show is created by mortgage professionals for mortgage professionals. We are grateful to have you as our reader. Our commitment is to bring you timely information. I’m glad to have you with us.
It’s sunny here, and we are warming up in Central Texas. It has been down in the 20s at night. That is cold. Something that is hot in the Hot Topic segment is that we got Rich Swerbinsky, President and Chief Operating Officer at TMC, The Mortgage Collaborative. We are talking about some of the things going on there. We got the winter conference coming up in Fontainebleau, Florida but be sure to stay tuned for the Hot Topic segment with Rich and read all that is going on within TMC.
I want to say thank you to our partners, industry Syndicate.com. We are also partnered with DW Consulting. How did you go to our sponsorship page? We have Debbie on a sponsorship program but she is partnering and being on the consulting side. I’m impressed with what she does. I want to say thank you to the Mortgage Bankers Association of America. It is a great industry leader. How they lead our industry, and what they are doing with a Mortgage Action Alliance application. Check out the MBA’s website.
The Secondary Marketing Conference was another one of the conferences coming up in New York. Finastra Fusion Mortgagebot Solution, check out their decision software product that does great things. Chris Zingo is going to be coming on. He is the President of Americas Field Operation on Finastra. We are going to have him coming up here several weeks out for a guest appearance on the show. We have Karen Jenkins talking about how they are designing their products moving forward. It has to do with programming. A lot of great insights on the technology side and what is going on there.
We have sponsors, Lenders One and The Mortgage Collaborative. Again, The Mortgage Collaborative is featured in the episode now. Total Expert is one of our newest sponsors. I’m excited to be working with Total Expert and all that they have to offer. We talked to you more about them, and we got their agreement. They are official.
Also, Knowledge Coop does a great job of sharing knowledge within your organization through a Learning Management System, LMS. Check out KnowledgeCoop.com as well as Mobility MMI, their Mortgage Market Intelligence, along with Modex’s technology. These two platforms do a great job and help you recruit. I was talking to Bobby nicely over at ALCOVA Mortgage. Give Bobby a shout-out along with Billy and Rob, his partners in the business at ALCOVA.
One of the things we talked about is how you can use this tool effectively when you are competing against another loan officer. Do you want to get some intelligence on them? That is another way of using Mobility MMI, as well as Modex, to find out who is your competition and how much experience they have versus what you have. You can point out unique differences. I encourage you to check out these two products. Some have one or the other. You should have both of them because they are a great compliment to each other.
A big thank you to Snapdocs for what they do. They have tools that help you support and implement the eMortgage technology effectively, and they do that through the Snapdocs eMortgage Quick Start Program. Check them out. We got the information on our website as well as SuccessKit. Julian Lumpkin does a great job of helping you tell your story. Check out SuccessKit.io. Also, go to our website.
Lender Toolkit is another one of our new sponsors. They do a great job. They are going to be doing a mini-user group at the LMA Summer Conference. We will be getting together on their website, Lender Toolkit, to see how we can connect there. I will be there with the show microphone and talking to them. PennyMac is our new sponsor. We are thrilled to have them here with us. You have to check out the interview that we did with Kim Nichols on November 1st, 2022. Kimberly is talking about what they are doing at PennyMac to enter into the broker and third-party space. You get to see the programs. It is innovative. They are doing some great things. Check out PennyMac.
DW Consulting is our newest sponsor. It does a great job helping you with your LinkedIn profile. It stands out from the competition. Finally, I want to say a special thank you to Rob, Les, Alice, Allen, Matt, and Jack for their contributions each and every week. Let’s get over to Rob Van Raaphorst with the MBA Mortgage Minute.
I’m Rob Van Raaphorst. Welcome to The Mortgage Minute and the latest news from the Mortgage Bankers Association. MBA, the Housing Policy Council and the American Bankers Association submitted a letter to FHA on their proposed changes to the Servicing Defects Taxonomy section of FHA’s Single Family Housing Policy Handbook.
The letter expresses conceptual support for FHAs development of the Servicing Defects Taxonomy but it also emphasizes that the proposal lacks sufficient specificity to provide the increased clarity and certainty that servicers need to effectively manage FHA servicing risks. The letter makes specific recommendations regarding sources, causes of defects and the need for clear defect severity tiers and appropriate remedies, including for fraud and misrepresentation. MBA is holding its Servicing Solutions Conference & Expo from February 22nd through the 25th, 2022, in Orlando, Florida. To register, please go to MBA.org/conferences. That is it for now. Thanks for joining me.
Good job, Rob. I appreciate you putting that into us each and every week. Check out all of the upcoming conferences there at the MBA website. If you go to the website, go to conferences and conventions, and you will see their schedule. Great job, what they do. Check out the Mortgage Action Alliance App. If you don’t have that, go to the Apple Store and get all signed up. Let’s get over to Les Parker with a macro view of the markets. Les?
Recent job data show wages rising and workers returning to work. As a result, the ten-year yield effective objective remains at 2.08%. With oil rising on the back of the buck, rates remain on the rise but the flattening curve and major central banks reducing liquidity slow growth prospects. Consequently, the bear market is subject to the Fed spilling the punch bowl. The only time Fed is satisfied is when bonds aren’t drunk. These views are my own. Find out when the parties are over at TMSpotlight.com.The bear market is subject to the Fed spilling the punch bowl. The only time Fed is satisfied is when bonds aren't drunk. Click To Tweet
You need to get signed up with Les Parker’s newsletter. I was reading it. I’m looking at what the markets are and trying to get some insights into them. There is some great market intelligence in that piece. I encourage you to sign up for it. You could sign up for the paid version and get it free by using the word POWER. Check it out at TMSpotlight.com. Matt Graham is here to give us a live update on the markets. Matt, you haven’t been popular. Everyone is throwing things at their screens, so give us a report. Good to have you here.
David, how is it going? People needed to revise their rate forecast. I don’t make the forecast but we have been talking quite a bit about the rising rate environment. Collectively, we are hoping that the most recent run-up in rates hit some temporary ceiling at the very least but clearly, it did not. It’s because of that we need to talk about quadrupeds, AKA four-legged animals. In this case, an elephant and the next one will be revealed shortly.
The elephant in the room is the jobs report on Friday. That is the day when yields broke, multi-year highs and mortgage rates moved up near 4% depending on the lender. That is going to vary based on the scenario but close enough at this point, especially for those second homes in which pricing hits have been implemented. We talked about that before.
Jobs report hugely stronger than expected. The revisions to the past several months were hugely bigger than expected. If you look at these things at phase value, the way we normally look at jobs reports, it was staggering mismatched between expectations and reality. There was an explanation for that that didn’t get a ton of airtime, and it had to do with the annual benchmark revisions.
This is the Labor Department’s way of dialing in the seasonal adjustments and changing things up so that things line up better for the upcoming year. I don’t even know where to begin personally. I’m not smart enough and an economist enough to comment on how COVID may have thrown those revisions out of whack. What we do know is that the jobs totals and the payroll counts got revised significantly lower for the middle of 2021. Those jobs were shuffled off to the end of 2021 and now the beginning of 2022.
The net effect wasn’t huge in terms of the total swing in jobs but it made it look huge for the past few months and added to the shock factor that markets were seeing. It was covered enough that people started to look at other aspects of the jobs report. We got a lot of questions on the unemployment rate because the unemployment rate ticked up by a 10% but it was still good news considering the labor force participation rate ticked up three-tenths of a percent.
Those are the two that are always presented in tandem. Other sub-components of unemployment were also painting a rosier picture for the labor market, and last but not least, wages went up significantly. This is what probably got most of the airtime beyond the headline payroll count. The narrative here is that higher wages are going to stoke the fires of inflation further, and the Fed will have to get even more aggressive than it already has been when it comes to pulling back policy tightening, normalizing the balance sheet and all the rest of it.
When we looked at the Fed fund’s futures in the immediate wake of the jobs data, they, too, voiced a bit of confirmation for this. It was surprising. I know to me, to some extent, at the very least but too much of the market because we weren’t expecting to see such a big move after the jobs report. If we are going to say it was the job’s report that elephant in the room that moved markets, we have to narrow it down to two complicating factors.
Number one would be this consolidation pattern we have been talking about. These converging lines, a pennant formation, and a triangle. Call it what you will. We have a descending line and an ascending line resting along the high yield and low yields of the past several weeks. They were soon to converge, and yield had been bumping their heads against the ceiling.
All they needed was a little push. They got a little push from the jobs report, and we could say snowball momentum took over. Stop loss positions getting taken out, forcing more sales. Pushing yields higher, forcing the next potential seller in line to hit their stop loss levels. It is the classic snowball selloff. It is one explanation that isn’t terrible.
The other is more of a general take, which is that the market was infinitely prepared to digest bad jobs news. ADP employment on Wednesday granted ADP doesn’t always correlate with NFE, as we are painfully aware but there were multiple other employment anecdotes. A lot of research desks stack up 14 or 15 different sources every month to give a backdrop for the NFE.
This was one of the most negative months I have seen in a long time. The revisions changed things but the facts remained that the market was prepared to brush aside bad jobs news. It wasn’t as prepared to do anything with shockingly good job news. That is the other potential explanation but we are going to get to the other quadruped now, and that is a dark horse coming up around the outside, which is Europe.
The day before the jobs report, we had two central bank announcements. One of them was from the Bank of England, and the other one was from the European Central Bank. Bank of England raised rates, I wouldn’t say unexpectedly but it was not a given. The vote was split from 5 to 4. You don’t see that type of division when the Fed votes for policy changes. It speaks to the fact that it was not a given, and it surprised markets rates moved up.
The European Central Bank didn’t make an official change in the policy statement. Christine Lagarde, in the post-meeting press conference, had some talk about inflation, saying that it was a big concern for the rest of the council. Speculation picked up that the ECB could be moving to tighten policy in one of the upcoming meetings.
To be clear, that would involve tapering its bond purchases before it would involve rate hikes. It was not expected that they would be so quick to tighten, given they had not obliterated the markets with accommodation in the same way the Fed had. Whatever the case may be, European bonds on the week as far as German tenure yields, if you had to guess which went higher on the week and by how much between European and US tenure yields, what would you guess?
I’m going to guess the US.
I think everybody would. I would have, too, until I looked back, and I probably should have been looking more closely last time but almost twice as much, almost 28 bits. The US yields fourteen and change, which is a big move. You can see the correlation. There is always some level of correlation but what you see on Thursdays is you see European yields shoot higher significantly. That is where most of the weakness there occurred. You see, US yields hold off right at the ceiling of that consolidation range as if they are waiting to see, “We might have some trading strategy to execute after tomorrow’s jobs report. We are going to sit tight for now and make up our minds tomorrow.”
Where I’m getting with this dark horse thing is you had some pent-up selling potential that was going to be unleashed unless jobs were shockingly weak that they caused people to say, “That is too weak even for this Omicron business.” Europe, we are going to keep an eye on it. Yields are at the highest levels in several years. They haven’t had as big of a move overall as US yields but that is a factor of the Fed and the Fed’s bazooka in March 2020. It is a shift in sentiment out of Europe.
We are at the highest levels in a long time, and now it is pretty calm in terms of scheduled economic data. We have CPI on Thursday. That is the only big economic report. We can also get a fair amount of information from this week’s auction cycle with the three 10 and 30-year treasury auctions on Tuesday through Thursday, respectively. Those get most interesting for the bonds we are interested in on Wednesday and Thursday with 10 and 30-year auctions. Those will be at 1:00 PM in the afternoon. We will cover them on MBS Live and see what we see in terms of market reaction. That is all I got for now.
Jack, we always get your take on all of this. Any questions you have any questions for Matt?
David, I was reading the release of Fannie Mae’s Home Purchase Sentiment Index. The index dropped 2.4 points to its lowest level since May 2020. Who says it is a good time to buy a home? It decreased by 5% month-over-month. The net share of those who say it is a good time to sell decreased by 12% month-over-month.
The home purchase sentiment index is comprised of about 1,000 respondents surveyed by Fannie Mae. There was weakness in the younger potential home buyer segment. The big driver there, not coming as a surprise to anybody, is the affordability of homes. That could be an episode in and of itself. Linking what Matt said, rising rates and the Home Purchase Sentiment Index, there is some challenging news now.
There are many areas of volatility that can come from unexpected news. That is why you got to have a service like MBSLive.net. You got to have it. You get to sign up for an extended trial period without a credit card by using the signup code. Put in LOL for Lykken on Lending. Matt and Jack, thank you so much. Matt, I love your website. There is so much information here. I love how people respond and react. Sometimes it is hilarious. Sometimes you want to cry when you look at some of it but you do a great job. It is real, live and informative. I encourage everyone to sign up.
Let’s get over to Alice Alvey. She is here with an update on what is going on with the legislature and what is moving through. She is CMB Vice President of Education and Training in one of our favorite companies out there, Union Home Mortgage. Our good friends, Bill Cosgrove and Jill Ross, are smart enough to bring in Alice. It is good to have you here. Thanks for taking time out of your busy schedule to give us an update. What do you get?
I got a couple of things along the lines of the Conference of State Bank Supervisors, which is our group of state regulators that managed the National Mortgage Licensing System. You may have heard that there was this collaboration between all the regulators and 42 states that found 441 MLOs nationwide had faked that they had completed their continuing education.
It is a small number compared to the over 180,000 licensed MLOs there are across the country. The fact remains. They made this a big case. If you think about it, for this group, they haven’t published the names. They have to surrender their license for 90 days. How would you react to that if everything in your pipeline you now can’t get paid for? You can’t take applications for 90 days because you are no longer licensed. You have to try and restart your business, which will be a lag before they get processed and closed.
The fine and the penalty that goes with this start to feel that it would hurt somebody and have an impact. I hope the overall case has an impact on people. It is crazy that they are only asking you to take an eight-hour class, and somehow you got to cheat that. It makes no sense to try and cut that corner, at least from my perspective.
As folks look at this, it is a heads up as to the consequences that go with having a suspended license and as employers making sure that fall is fully aware of how to make sure they are not paying people and not going to pay them later. The SAFE Act has this buttoned up to make sure that people aren’t trying to circumvent during their nine licensed period. A heads up to everybody out there. It is always a good thing to learn. It is not a bad thing to tend to continue education. That is a heads-up in case you haven’t heard about that.
One good news was that Pennsylvania State does look like they are going to be changing and allowing work from home. We hope this happens in all of those brick and mortar states that are out there, as it does look like that work-from-home model is going to be something we need to keep for a while. It is good news to see some of the states getting onboard with making that a permanent fix and not focusing so much on brick and mortar.It looks like the work-from-home model is going to be something we’ll need to keep for a while. It is good news to see some of the states getting onboard with making that a permanent fix and not focusing so much on brick and mortar. Click To Tweet
Last but not least, Fannie and Freddie did loosen up the self-employed guidelines that they had put in place during COVID. We are happy to see that they are going to stop asking for bank statements. This is great. That was one of the sticking points as a loan officer, in particular, if you are trying to meet with the borrower, telling them you need the bank statements. Trying to judge by the deposit and withdraw flow on whether or not the underwriter is going to think that matches up with the P&L and the tax returns.
It was a dicey part of the loan application process, and we are all glad to see that piece gone. Some of the other temporary restrictions are still in place. Be sure you go and check out the Lender Letter and Bulletin. Fannie and Freddie are on the same page with this one, and it is effective immediately. That is my quick update for now. Dave, back to you.
Why would you try to skip out with something that is an eight-hour? It is like a traffic school. You get a ticket. You argue. I got a ticket. I haven’t had a ticket in a long time. I qualify for traffic school. You do it. It is beneficial, and there are many things that you get tuned up. Are you a professional? Take these classes. That is amazing. What was the number, Alice? Can you give us an actual number of people?
There were 441 loan officers who were on the list.
Maybe 441 out of 180,000. You may raise a good point. We got the vast majority of people complying. That is good. Manage these people. Alice, thank you again. You can go to the website, Lykken on Lending, read all of Alice’s or all of anyone or each one of our regular contributors have said and go through each one of them. They are listed out separately. Our team, Nikki and Paul, do a great job separating them. You can go back and binge on Alice. Good job. I appreciate it so much. Allen Pollack is here with the tech update. How are you doing, friend?
I am doing great. It is good to talk to you again and everyone reading. How was your weekend?
Good. I’m playing nurse made to my wife. We had dental surgery and a lot of it. She has been down for the count. I have to do the grocery store. I have to tell you, Allen, there must be better technology.
That is one of the hottest spots in tech now. There is a lot of contingent between companies that don’t want to pay the fees that these companies are charging to get the customers, and the folks are trying to do it on their own. There is a whole article about HelloFresh, not direct delivery from the grocery store but how they are killing it in the market now with the competition.
You also have Publix, Walmart and others doing direct delivery. It may not be in Texas, David or where you are but it is a hotspot now. How about closing alone in 25 days? I put in an offer on the house. I have been trying. There were eight bids in total. My realtor said, “We got to make this deal more attractive.” She said, “Can you close the loan in 25 days because that will be more attractive to the seller?” I spoke with my mortgage guy, and he was like, “We can, but we are not in control of everything.”
Technology doesn’t solve all of our problems. I don’t know how many people reading have had your borrowers come to you. I changed it to 45 days. I wasn’t going to put anyone in an unrealistic timeframe. It is going to bring me to the next part of our segment, where we are going to talk about a survey that went out where 89% of borrowers say, “The mortgage process remains too challenging.”
Before we get there, David, I want to tee off what I’m going to talk about because it is such an amazing topic. We are going to be talking about prototype creation. Why it is important to make sure you build a prototype if you are building your tech or you are working with a vendor that is building tech for you and how important it is for you as a lender to have your own UI designer. I will talk about that next time. It is a critical topic that people overlook.
Let’s get into something interesting. Axis Lending. They are in our industry. Paul Gigliotti started this, and there are a bunch of other people involved. I chatted with him briefly. They are in their 2nd class of 11 students. They are a nonprofit industry-based mortgage-specific educational system. Their 2nd class of 11 students is about to wrap up their education program and move into a paid internship, which is amazing.
Two of the learners that have started, their initial folks, have already been placed with permanent partners, meaning they have gotten jobs after going through the educational system access and in the efforts to further bridge the gap of education in the mortgage industry and continue to outreach. They have also initiated what they call their SEP, their Satellite Educational Program, which allows FinTech and solution providers the ability to empower their team members through education.
That is continued education but think about all the things that you don’t get from the MBA. The MBA has a fantastic continued educational program and some things Axis will never have. Axis is thinking of all the other areas in our industry where you can go to get additional learning and training. Think about the job opportunities you can get with your extra work-from-home time that you could have the opportunity to learn more about. Axis is doing some great things. Check on them. I will partner with them. They are a great group of people.
I want to talk about this company called Pathway Homes. They are a new rent-to-own startup. They committed $750 million to housing. They have three products. It is called a home start. That allows customers to move in with a security deposit due upfront. The customer can rent with the option to buy the home when they are ready. It is all driven by technology. Savings match, which enables customers to build a down payment while they rent with a deposit of 2.5% of the home’s value. Equity builder, which provides customers with the ability to buy half of a home at 5% down.
I’m not going to go into too much detail about them. It is not necessarily relevant to all of us on the call. It is more ingenuity ways that we are using technology in our industry to make homeownership more affordable and available to more people. The rents, home prices, and mortgage rates are rising. We got a trifecta of the perfect storm. They are doing something interesting about that and its potential as a lender. You may want to partner with a company like that because you may not be able to offer somebody a loan now, but it is a partnership. The long-term relationship that counts. Think about that. Pathway Homes is a company you want to talk to.
This was amazing. Finicity, which is now a MasterCard company, did a survey. The total is about 1,075 consumers. Most of them arranged from ages 18 to 45 years old. They said that 89% responded to this survey and said, “The loan application is more stressful or as stressful as the home buying experience itself.” That is saying a lot.
If you think about the fact that we have all this front-end digital technology and get this. They said that they consulted 1,075 people, and 72 respondents were very surprised that the volume of paper still existed in the mortgage process. They also said 12% of respondents indicated that they were uncomfortable during their personal financial data with a lender, so sharing it. The technology could help remove those woes. It is only 12% but that is still a lot.
They also said that more than half, 54% of respondents took between 30 to 60 days to move from the application to the closing table, with 16% saying the process took more than 60 days. We got all this great technology. We got the point of sale, CRM for the drip campaigns, all the right communication and phone calls, and we are doing all the right things but people are still uncomfortable sharing financial data.
People still come to the mortgage process thinking that it is going to be the worst experience of their lives. They still are feeling that it takes forever to close their loans. We got more work to do here. That was a fantastic survey. Remember, it is only 1,075 people but if you think of the 72% or the 15% that said that they didn’t want to share their financial data, that is 12%, that is a lot of people.People still come to the mortgage process thinking that it is going to be the worst experience of their lives. They still are feeling that it takes forever to close their loans. We got more work to do here. Click To Tweet
Look at 5,000, 10,000 or 20,000 people. My guess is those numbers aren’t going to fluctuate too much because we are not doing the best we can yet. It is because we are buying tons of technology solutions, and they are not all well integrated. The data is not shared between them, and we are still evolving as adopting data practices.
I leave that with everyone to think about it as you talk to your vendors and you think of ways to continue to build your technology. Eighty-nine percent of borrowers say, “The mortgage process remains too challenging.” On a happy note, let us get some stuff done and thanks for reading. We appreciate everyone. Don’t forget to check out Axis Lending.
There are many new innovative things going on. We are going to be releasing an episode that I want everyone to be paying attention to. It is one where I caught up with Allan Weiss on this. It was fascinating what Allan has developed in the way of automated value technology and where things are going and also recognizing trends. Be sure to go to our website and stay up on all the websites. We are producing more than one episode a week. We are going towards producing more than that on a regular, consistent basis. Check out the show. We got coming up, Allen. Thank you so much. I appreciate it. Congratulations on buying. Did your offer get accepted?
No, not even close, unfortunately.
My brother sold us a home up in Bellevue, Washington. They had a ridiculous number of offers. They sold it for $350,000 over the asking price. Some markets are like that.
They are waiving appraisals and home inspections. They are buying as is. They are paying cash. It is unique out there.
Thank you, readers, for being here for the first part of our show. Next episode, we are going to have Russ Anderson and Jack Nunnery on. Jack is always on each week. Russ is going to be talking to us about an important topic related to managing your money and if independent mortgage bankers can learn from what banks do. Jack and Russ work together at Texas Capital Bank, and both have retired. I’m excited to have them on the next episode. We will have a release. That will be out in parts 1 and 2 episodes. Part two will be released later.
I’m looking forward to having you all back here next episode. A special thank you to our sponsors again, PennyMac, Lender Toolkit, SuccessKit, Snapdocs, The Mortgage Collaborative, Knowledge Coop, MBA, Modex, Mobility MMI, Insellerate, Lenders One, Finastra and our newest sponsor, Total Experts. It is great to have them here with us. I’m thrilled to have all of these sponsors making this show possible. Have a great week, everybody. I look forward to having you back here next episode.
- The Mortgage Collaborative
- DW Consulting
- Mortgage Bankers Association of America
- Mortgage Action Alliance
- Finastra Fusion Mortgagebot Solution
- Karen Jenkins – Past Episode
- Lenders One
- Total Expert
- Mobility MMI
- ALCOVA Mortgage
- Snapdocs eMortgage Quick Start Program
- Lender Toolkit
- Kim Nichols – Past Episode
- Rob Van Raaphorst – LinkedIn
- Servicing Solutions Conference & Expo
- Mortgage Action Alliance App
- Les Parker – LinkedIn
- Matt Graham – LinkedIn
- Union Home Mortgage
- Conference of State Bank Supervisors
- National Mortgage Licensing System
- Allen Pollack – LinkedIn
- Axis Lending
- Pathway Homes