Mortgage rates are greatly influenced by supply and demand. And if both the U.S. government and individuals need to borrow money, the government usually wins. Total U.S. household debt hit an all-time high of $13.15 trillion at the end of 2017. That’s up $193 billion from the previous quarter. Mortgage debt is at $8.88 trillion, up $139 billion. The Fed Funds futures are now predicting an 83% chance of a hike at the March meeting. By the end of 2018 the odds are good we’ll have seen 3 hikes this year taking overnight Fed Funds rate to 2.0% – 2.25%. And if the slope of the yield curve remains constant, we can expect the 10-year note to yield in the mid-high 3% area, and IF mortgages tag along, 30-year rates will be in the low 5% area. Ready for all that?
“Compass Analytics, a leading provider of pricing software, mortgage analytics and risk management services to the mortgage industry, is growing! Our Irvine office is looking for a Mortgage Pricing Analyst to work with our product and pricing engine team. CompassPPETM (CPPETM) is revolutionizing the way home loans are priced and sold using innovative real-time technology that we support with services, expertise and guidance. We are looking to add a team member who will configure, test and support clients with their CPPETM set up and activity. The ideal candidate will have a background in secondary marketing and experience implementing mortgage technology platforms. If you’re interested in joining our collaborative, high energy team that supports this innovative pricing engine, send your resume to Smitha Menon.”
“If you’re reading this, you are most likely in the top group of mortgage originators in the nation and know how to see beyond the noise and hype and get to the deal – so do we. Assurance Financial is quietly growing into a nationwide leader in lending. Yes, our compensation structure is excellent, and yes, our back-office support is second to none – 16 years of working, changing, and perfecting it. And yes, we have a full-service marketing team at your disposal with a budget and commitment to helping you do what you do best. And yes, we have an unwavering mission to close loans on time, every time! We have immediate openings for proven, successful producing Branch Managers and MLOs in Wilmington, Charlotte, Denver, Austin, and many other branch locations throughout the country, as well as an Eastern Regional Production Manager for our expanding East Coast operations. For immediate consideration and more information, contact Paul Peters, CMB, Assurance Financial, Recruiting Manager (225-239-7948).”
“PrimeLending’s newest branch in Gilbert, Arizona is giving the area’s nickname — Valley of the Sun — a new meaning. That’s because Branch Manager Andrew Augustyniak and his team are blazing a trail of success with their scorching start. Andrew saw his opportunity in this thriving Phoenix suburb, the most populous incorporated town in the U.S., and he knew PrimeLending had the winning formula to take his team’s success to the next level, which is exactly what’s happening. This team of 7 mortgage professionals is already operating at full speed, thanks to PrimeLending’s seamless onboarding process and award-winning training program. Are you ready to put your career on the fast track? If you’re a top LO waiting for the opportunity to discover your best, your time has arrived. Contact Dudley Strawn at (469) 737-5743 to start down a new path.”
“2018 continues the biggest digital revolution that our industry has ever seen. No time for static thinking, it is a time to be dynamic and tactical with your business. A time to be different and write a new book about a mortgage experience for today’s consumer. Where Loan Officer websites and marketing are integrated with the latest social technology to build relationships. One that includes coaching programs and media tactics inspired by thought leaders like Gary Vaynerchuk. Where partnerships with innovators like Blend and Social Survey are common place. And finally, a book that is founded on a Consumer Experience framework developed in Silicon Valley. This message of being different is what our Chief Strategist Jason Frazier delivered on stage at Inman Connect New York to a captive agent audience. This is the book that MasonMac is writing in 2018 and we invite you to be a part of it here.”
Stearns Wholesale has invested millions in technology to equip Brokers with a better way to do business. SNAP 2.0 features numerous enhancements over the last 18 months, including fast, free and secure Instant VOI. Using just a Social Security number, this 24/7, on-demand service delivers results in 60 seconds. bSNAP is our consumer mobile app branded with yourlogo. This app simplifies and expedites the application process for your Borrowers. Featuring a Digital 1003 and the ability to e-sign forms, it’s also easy to upload documents by snapping a quick photo. Borrowers can view their loan details, receive reminders, check loan status 24/7 and view the tentative closing date. Stearns Wholesale is streamlining your business and giving you a better way.
This is your last chance to sign up for the American Pacific Mortgage VA Financing Boot Camp in San Antonio, TX or St. Louis, MO. Become informed, inspired, and educated about the unmatched benefits of VA home loans and how you can better serve the VA community. Jeff Wilson, a national expert on the VA Loan Guaranty program having served for over 27 years with the Department of Veterans Affairs will dispel some of the common myths about VA financing. Click here to register!
With the MBA’s servicing conference concluding last week, attendees got proof that the servicing industry has finally stepped up its game. Companies can either innovate or get left in the dust by game-changing companies like The Money Source (TMS). TMS looks at the bigger picture and focuses on the relationship with the borrower. While there needed to be innovation in the origination process, the change can’t stop there. The change needs to carry into servicing, and TMS is committed to making this happen. Thanks to TMS’s servicing solution, SIME, it’s able to maintain a relationship with its customers, creating a lifelong partnership. SIME provides real-time transparency into a lender’s loan portfolio and borrower data. It’s time for the servicing industry to step into the high-tech revolution, and the way to do this is through technology like SIME.
The practice of loan officers attending closings seems to have lost steam in recent years, but according to STRATMOR Group, LOs who don’t attend closing run a serious risk of disappointing their borrowers, consequently losing recommendations and referral business. STRATMOR’s MortgageSAT National Benchmark data shows that when the loan doesn’t close at the expected rate and fee, the Net Promoter Score drops 51 points, which means 51 fewer people out of 100 will recommend the LO. In this month’s MortgageSAT Tip, STRATMOR’s Mike Seminari examines both defensive (problem mitigation) and offensive (referrals) reasons for LOs to attend closings.
Taxes, the budget, and the home loan biz
Intaxicaton: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.
Donald Trumps proposed 2019 budget has an 18% cut in HUD’s budget, with the cuts largely coming from the end of the Community Development Block Grant program. But experts know, and we should understand, that this budget is a messaging document and has 0% chance of becoming law as-is.
But taxes, and the budget, do impact residential lending. For example, Fannie Mae had a $6.5B Q4 loss. Fannie Mae stated that it will need $3.7 billion from the Treasury Department. Timothy J. Mayopoulos, president and CEO of Fannie Mae, blamed the government-sponsored enterprise’s dismal fourth quarter data on a “one-time accounting charge” tied to the recent tax reform legislation. Of course, unfortunately the headlines focus on Fannie turning to taxpayers rather than the reason for the loss. For some reason the press cut Freddie more slack after Freddie Mac suffered its loss and mentioned the accounting reason.
Taxpayers continue to come out way ahead with respect to the GSEs’ conservatorship agreement, even after the draws that will be needed to cover 4th quarter losses. Both had one-time write-downs arising from accounting changes in response to the new tax bill – not that the current gfees and business model isn’t sufficient and that has been returning a significant amount of money to US taxpayers.
Both Freddie Mae and Fannie Mae posted strong full-year incomes for 2017 despite that both also suffered fourth quarter losses courtesy of the new tax law. Fannie’s comprehensive income was $2.5 billion after a loss of $6.7 billion in the fourth quarter. Freddie Mac’s numbers for the two respective periods were $5.6 billion and a $3.3 billion loss.
Fannie Mae said its full-year results were down from $12.3 billion for all of 2016 although its 2017 pre-tax net was higher, $18.4 billion versus 18.3 billion. The $6.5 billion net loss for the quarter was down from net income of $3.0 billion in Quarter 3. The fourth quarter loss was the result of a remeasurement of the company’s deferred tax assets due to the enactment of the Tax Act. The result was a one-time $9.9 billion provision for federal income taxes.
How can a builder lose money in this environment? Hovnanian attributed its $337 million loss in the recent quarter to a decline in community count and losses related to tax allowance and debt extinguishment hit the bottom line.
But to remind everyone, the tax plan that was passed hit citizens of the United States. For mortgages taken out after December 15, 2017, only interest on up to $750,000 in acquisition debt is deductible, for both primary and secondary homes. (Interest on up to $1 million in acquisition debt incurred on or before December 15, 2017 is still deductible.) The $1 million limit will still apply to anyone who refinances existing qualified residence debt that was incurred before December 15, 2017 to the extent the new loan does not exceed the old loan. The interest deduction on home equity debt is eliminated. This is any debt that is secured by a qualified residence other than acquisition debt. Deductions for state and local income tax, real property tax, and sales tax is limited to an aggregate of $10,000. The deduction for mortgage insurance premiums (PMI) was not reinstated.
Effective January 23rd, to accurately report borrower income to the IRS, Wells Fargo Funding is updating its W-9 form requirements for all Loans as follows: W-9 form is required for every borrower who has a tax ID number. W-8 form is required for every borrower who does not have a tax ID number.
Ditech’s approved Delegated Clients: should note that USDA has suspended its requirements regarding obtaining IRS Form 4506-T tax transcripts for all adult members of the household. It is no longer necessary to complete or process an IRS 4506-T for the borrower(s) or for any other adult member in the household prior to funding. Verification of adjusted annual household income continues to be required and documentation must be retained in the loan file. The following is still required at closing for each borrower: 4506-T for each borrower whose income is used to qualify (regardless of income type) must be signed at closing. 4506-T for the business tax return transcript(s) must be signed at closing when business returns are used for qualification.
Turning to capital markets, most U.S. Treasuries ended Thursday higher after being hit hard on Wednesday. That was a response to the myriad of data released, headlined by January PPI meeting expectations, while core PPI was better than expected. Rising prices will increase concerns these costs will be transferred from producers to consumers.
The February Empire Manufacturing survey and Philadelphia Fed survey showed upward pressure on prices, but a negative Industrial Production report for January kept investors from complete optimism. The downturn in production was entirely attributable to a decrease in mining output. Additionally, the U.S. Treasury sold $7 billion in 30-yr TIPS with a high yield up from the previous sale. Low initial jobless claims reflected a tight labor market as we are in a period of increased demand when employers don’t normally make cuts to staff.
Today’s calendar includes Housing Starts and Permits (+9.7% and +7.4%, strong but January is known to be volatile), Import Prices (up a strong 1%), and the Michigan Sentiment numbers. Finally, there is a Class C Notice and a Class A FedTrade Operation scheduled for $1.015 billion of 3.5% and 4%. Heading into the holiday weekend we find the 10-year yielding 2.89% and agency MBS prices are better by .125 versus Thursday’s close. There will be no commentary Monday due to the holiday.
Puzzle of the day from a grade school teacher.
“I am the beginning of everything, the end of everywhere. I’m the beginning of eternity, the end of time and space. What am I?”
“The guess from one of my 1st graders was ‘death,’ and such an awed, somber, reflective hush fell over the class that I didn’t want to tell them that actually the answer is the letter ‘e’ which just seemed so banal in the moment.”
Our thoughts and prayers go out to the families and survivors from the horrific shooting at Marjory Stoneman Douglas High School in Parkland, FL.
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, “Servicing: All It’s Cracked Up to Be?” 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 over 300 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 2018 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.)
- Dec. 31: Rates, the Fed, world economies, affordability, and the shutdown – all tied together - December 31, 2018
- Dec. 29: FEMA reverses flood ruling; cybersecurity notes; observations on general housing trends - December 29, 2018
- Dec. 28: Doc automation product; FHA & VA changes around our biz; Agency deals continue to share risk - December 28, 2018