Daily Mortgage Commentary
Feb. 18: Wholesale team available; upcoming events & training; primer on why rates go down when bond prices go up
February 18, 2019
So much going on!
The economy? Discount shoe store Payless will close all 2,100 of its locations in the United States and Puerto Rico in the coming months.
The Agencies? Former Congressman Mel Watt “misused” his position as director of the Federal Housing Finance Agency (conservator of Freddie & Fannie) by attempting to “coerce or induce” a relationship with a female employee seeking a promotion.
M&A? Any time a major bank grows unhappy with the earnings and margins of its residential lending arm and servicing portfolio and decides to shop it around, well, that attracts attention. (Rumors of AT&T, Sprint, T-Mobile, Verizon Wireless showing a big jump in cell minutes as competitors called HomeStreet branches are unconfirmed, but what LOs and branches will be left, and what will the buyer actually be buying, when the dust settles? Stay tuned!)
Government? Stockton, CA, “America’s Foreclosure Capital, is sending debit cards loaded with $500 to a select group of residents as part of a closely watched experiment in universal basic income. Glad we’re not socialists! (Recall that Stockton was the largest city to seek bankruptcy protection before Detroit’s 2013 filing.)
Wholesale team available
For companies looking for wholesale talent, a seasoned group of wholesale mortgage veterans with operations in Northern California and AEs throughout the West is looking to join an established wholesale mortgage banker or bank. The group’s footprint covers the Western states. Members of the group include Account Executives, regional managers, underwriters, customer service reps, funders/closers and set-up. The mortgage banker/bank should be financially stable, customer service driven, and want to expand its presence in the Western US. If you are a mortgage banker/bank who shares a commitment to providing exceptional client service and increase your monthly fundings. Interested parties should contact Anjelica Nixt; principals only please and specify the opportunity.
National MI has some training for the remainder of February: 2/20 (How Attractive is Your Brand? The 90-Day Marketing Plan), and 2/21 (How to Underwrite the Self-Employed Borrower AFTER Tax Reform). For the full calendar, please visit the MI University page.
MGIC & MBA of Greater Philadelphia are presenting “Rethink Your Social Media Strategy” on Wednesday, February 20, from 1-2PM ET. “You have a Facebook Business Page, you regularly connect with people on LinkedIn and know the difference between a hashtag and a hash brown. What’s next to take your social media game up a level? We will cover: How obsessed we are with our mobile phones and how you can harness that for your business growth. What’s the fastest growing content segment and how you can incorporate it into you marketing. Ideas for cross-marketing so your network promotes you, giving you more online visibility. While there’s many social media platforms, we will specifically focus on examples using Twitter, Facebook and LinkedIn, and touch on using these same strategies on other platforms.”
There is still time to register for Plaza’s Wednesday, February 20th webinar: Understanding the Different Generations: Selling to Millennials.
Join Plaza on Thursday, February 21st for a free webinar to discuss different types of income and how to document and calculate for qualifying purposes. We will review income sources such as Public Assistance, Disability, Tips, Foster Care, Social Security, etc.
Freddie Mac is offering a variety of upcoming virtual class webinars…seating is limited for all trainings. Note: To register for Freddie Mac instructor-led sessions or self-paced learning, be sure to sign up for Freddie Mac Learning. (Your organization must have a Freddie Mac assigned Seller/Servicer or TPO number.) Need help signing up? Watch this short video.
February 28th – Investor Reporting Change Initiative Implementation − Learn about loan transactions, edits and drafting of funds, as well as what you can do to prepare for the May 2019 implementation of the Investor Reporting Change Initiative.
March 19th or April 10th – Reviewing Rural Properties − Find out how our general property eligibility requirements apply to properties in rural areas using case studies, tips and best practices, and look at common misconceptions around rural properties.
March 12th – Realize the Possibilities with HomeOneSM Mortgages − Discover HomeOne, our low-down payment option for first time homebuyers that offers more flexibility while providing a 97% LTV with no income or geographic restrictions.
March 21st – Self-Employed: Beyond the Basics − Self-employment is a watchword for the Borrower of the Future®. We’ll walk through case studies that analyze business tax returns, applying Guide requirements, and look at factors that can affect qualifying monthly income.
The Lenders One’s March 2019 Summit is in Austin, TX, March 3-6 which is already seeing a record number of registrants. Contact Lauren Ketchum, Director of Member Experience for more information on these programs or how to become a member.
NMMLA welcomes The National Real Estate Post as its luncheon guest speaker on March 12th. Register now.
On March 13th the Mortgage Bankers Association of Kentucky is hosting its Education Conference in Louisville. Joel Kan (MBA), Scott Weghorst (Diehl & Associates), Sue Woodard (Total Expert), Marla Guillaume (Century Lending), and myself will be speaking.
Registration is now open for Ellie Mae Experience 2019. The conference will be held March 10-13 in San Francisco and will encourage attendees to take the digital mortgage journey while participating in exclusive training, hearing the latest in new tracks and sessions and networking with visionaries innovating on behalf of the mortgage industry. From URLA changes to HELOC opportunities to engaging homebuyers at the point of interest, Experience 2019 has it all.
On Thursday March 14th the Nashville Mortgage Bankers Association will be hosting its March luncheon. I am fortunate to be attending – registration is open.
Register for the California MBA’s Annual Legislative Day and join fellow mortgage professionals and execs on March 18th in Sacramento as industry visits the state capitol and speaks with policy leaders about the critical nature of California’s real estate finance industry. Note – this is a one-day (fly-in, fly-out) event, on March 18th only, that gives you an opportunity to have a face-to-face meeting with key members of the Assembly Banking & Finance Committee and Senate Banking & Financial Institutions Committee. These are the critical policy-making entities for the mortgage industry. Make sure you help your fellow mortgage colleagues communicate our message to lawmakers.
Register for the March 18-22 Independent Community Bankers of America’s ® (ICBA) 2019 National Convention, ICBA LIVE®! Held in Nashville, this is the largest, most comprehensive educational and networking event for the nation’s community bankers with more than 60 learning labs and seven tracks including lending and deposits, risk regulations and exams, and technology, payments and innovation.
You are officially invited to be a guest for the 11th Annual Great New England Credit Union Show at the New MGM Springfield on March 29th. For a limited time, you and your staff can register to attend this record-breaking event as a guest. Just go to this link, and follow the registration prompts on the "Attend" tab. Use the promo code CUFREE19, and you’ll save $195 per person (restriction apply). But don’t wait. This code won’t last forever.
When running capital markets, I was talking to AEs and LOs on a daily basis about bonds and rates. I always had to make sure I was talking about one or the other. Why? Because a fundamental principle of bond investing is that interest rates and bond prices generally move in inverse directions. When market interest rates rise, prices of fixed-rate bonds fall, aka interest rate risk. But why?
When you buy a bond or fund a mortgage, you’re lending money to the bond’s issuer, or borrower, who promises to pay you back the principal on the bond’s maturity date. Like a mortgage! Before the bond is due, the issuer also promises to pay you periodic interest payments to compensate you for the use of your money based on the stated interest or coupon rate, which is generally fixed at issuance.
The answer to why the inverse relationship exists lies in the concept of opportunity cost. Investors constantly compare the returns on their current investments to what they could get elsewhere in the market. Market interest rates are changing constantly. The fixed interest rate on a bond becomes more or less attractive to investors based on its relation to market rates. For example, a $1,000 new issue of bonds, or a mortgage, carrying a 5% coupon pays you $50 a year in interest.
Now let’s suppose that later that year, interest rates go up and new $1,000 bonds, or mortgages, are paying a 6% coupon, or $60 a year in interest. Who is going to pay the $1,000 face value for your 5% bond seeing as they can get 6% elsewhere? Why would I, or some money manager in Tokyo, want to only earn 5% instead of 6%? So, in order to sell, you’d have to offer your bond at a lower price, a “discount,” that would enable it to generate approximately 6% to the new owner. In this case, that would mean a price of about $833.
Similarly, if rates dropped to below your original coupon rate of 5%, your bond would be worth more than $1,000. It would be priced at a premium, since it would be carrying a higher interest rate than what was currently available on the market.
Obviously, many other factors go into determining the attractiveness of a particular bond, or a mortgage: the length of time until the bond matures or loan pays off, whether or not its interest is taxable, the creditworthiness of its issuer or the borrower, the likelihood that the issuer or borrower will pay off debt early, and so on. But the important thing to remember is that change occurs in market interest rates virtually every day. The movement of bond prices and bond yields is simply a reaction to that change.
For interest rates today, for any companies taking locks, the bond markets are closed. The stock markets are closed. Even though they are not required to, most private banks tend to close on federal holidays due to the fact that the Federal Reserve system won’t be operating. (Eleven states don’t observe Presidents Day in February – Delaware, Georgia, Iowa, Indiana, Kansas, Kentucky, Louisiana, North Carolina, New Mexico, Rhode Island and Wisconsin.) But there is no mail delivery, there is UPS & FedEx, most public schools are closed, all government offices are closed, as are courts
Retire to the South. Y’all kin say whut y’all want ‘about the South, but y’all never heard o’ nobody retirin’ an’ movin’ North, have ya? (Thank you to Rhonda M., who lives in the South, for these; Part 1 of 5)
A Florida senior citizen drove his brand-new Corvette convertible out of the dealership in Jacksonville. Taking off down the road, he pushed it to 80 mph, enjoying the wind blowing through what little hair he had left.
“Amazing,” he thought as he flew down I-95, pushing the pedal even more.
Looking in his rear-view mirror, he saw a Florida State Trooper, blue lights flashing and siren blaring. He floored it to 100 mph, then 110, then 120. Suddenly he thought, “What am I doing? I’m too old for this!” and pulled over to await the trooper’s arrival.
Pulling in behind him, the trooper got out of his vehicle and walked up to the Corvette. He looked at his watch, then said, "Sir, my shift ends in 30 minutes. Today is Friday. If you can give me a new reason for speeding, a reason I’ve never heard before– I’ll let you go."
The old gentleman paused then said, "Three years ago, my wife ran off with a Florida State Trooper. I thought you were bringing her back."
"Have a good day, sir," replied the trooper.
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “How are You Going to Compete.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)
February 16, 2019
I know Monday is a national holiday, like Thanksgiving or the 4th of July, so who’s checking emails this Saturday? Darned if I know, but it’s a quick read. (When I was a kid, we had both Lincoln’s and Washington’s birthdays off – those were the days!) There continue to be lots of issues in residential lending, so let’s get going. LO Comp: the issue that just won’t go away That whole LO comp thing is “all put to bed,” right? Wrong. I am still hearing that there are issues out there, ranging from companies trying to fine tune their own plans all the way to finger pointing and name calling at other companies, and saying things like, “I heard that some attorney said point banks are just fine!” In a timely note mortgage attorney (who also does
Feb. 15: Sales jobs, business opportunities; construction, marketing products; impressive Agency earnings
February 15, 2019
Huh? Radian was recently in takeover talks? I only know what I read in the newspapers! Sometimes I wonder if everyone isn’t in M&A talks to one degree or another, and rumors continue to swirl about a publicly-held bank in the Northwest spinning off its mortgage division. There’s a lot going on in our biz, especially with Freddie & Fannie in the present & future – more below. Even my cat Myrtle is silent, ignoring my questions about what she’s been up to lately. Jobs, promotions, personnel moves Are you in need of sales management expertise? Are you looking to take your existing team to the next level? Or, is your company looking to expand into Third Party Origination (Correspondent and Wholesale) or add Non-QM products? A seasoned Sales Executive is seeking a new opportunity to help lead a mortgage company in achieving