On this date in 1867, 150 years ago, a few years before I started trading MBS, Seward’s Folly was created. Put another way, on this date a treaty was signed where the United States purchased “Russian America” (Alaska) for $7.2 million in gold bricks, or two cents per acre. Many called it worthless, which of course it isn’t, illustrated by the Klondike gold rush in 1896 when the population doubled (but only 8% of the newcomers were women – unfortunately kind of like the senior management ranks of some lenders) and the discovery of North America’s largest oil field at Prudhoe Bay on the Arctic Coast in 1967.
In terms of product news, Simplifile is a leading provider of real estate document collaboration and recording technologies for lenders, settlement agents, and counties, announced integration with Ellie Mae’s Encompass Mortgage Management Solution and LendingQB. Paul Clifford from Simplifile writes, “There’s a growing need in the mortgage industry for solutions that facilitate real-time collaboration between mortgage lenders and settlement agents. In the past three months, we’ve announced integrations with the industry’s two leading LOS providers (Ellie Mae and LendingQB) to deliver our Collaboration and Post Closing services to their users. These integrations enable both LendingQB and Encompass users to seamlessly work with their settlement partners on documents and disclosure data from pre-closing to post-closing. We’re seeing lenders who utilize these services experience less miscommunication with settlement on fee data, documents and transaction details, which leads to fewer errors and ultimately creates a more positive borrower experience.” To learn more, visit https://simplifile.com/or call 800.460.5657.
“Bank Statement, Asset Qualifier, Investor, and Foreign National programs are HOT. That’s why the volume at Impac Mortgage Corp. is exploding! This is a rare opportunity that offers Account Executives the ability to sell across all channels (Wholesale, Correspondent & Non-Del). Claim your Region! Impac is looking for AEs to cover Arizona, Alaska/ Washington, Hawaii, New Jersey, New York, Nevada, Oregon, and Utah.” Submit your resume to me for these and future opportunities.
On the retail side, Norcom Mortgage is expanding. “If you are a home improvement centered Loan Officer that is looking to join an experienced team with the industry’s best 203k program, please contact Steve Harris today! Our 203k process will help distinguish you from your competition, build stronger relationships with your referral partners, and help you grow your business. Licensed in 32 states with 34 branches, Norcom continues growing. Norcom’s focus is on residential mortgage lending and is a direct Fannie and Freddie seller and Ginnie Mae issuer. Norcom President and CEO Phil DeFronzo noted, ‘The Norcom Mortgage ‘203k Concierge Desk’ has been a huge success!’ Inquiries should be sent to Steve Harris.”
Argus Lending of Walnut Creek CA. announced the hiring of industry vet Bob Nutcher as V.P. of Sales, tasked with expanding the Argus Market share through its current approved states of California, Nevada and Washington. “I’m thrilled to be working with an experienced group of Mortgage Banking execs who share the same vision of change for the Mortgage Industry that we all think it’s ready for. We have had a great response from top producing agents on the opportunity we are offering. My top priority is the Reno Nevada Market.”
New York adopted the first of its kind, rigorous cybersecurity regulation on March 1 for the state’s financial services industry, including mortgage originators and servicers. Companies need to start planning now, as the first of four compliance deadlines is September 1, 2017. Richey May, an accounting and business advisory firm recognized as a leader in the industry, is helping originators and servicers understand their obligations under this new cyber regulation and working with you through the upcoming deadlines to ensure compliance. Reach out to Seth Cohen for more information, and view a recording of a webinar they recently hosted here.
Lenders Compliance Group launched is “Servicers Compliance Group,” a new practice area offering regulatory compliance support to Mortgage Servicers. “The unique feature of the new practice area is its concentration on interacting with clients monthly, continual compliance maintenance, and fulfillment of compliance management system requirements. Additionally, this practice area offers a full range of project initiatives involving audits, due diligence, risk assessments, subject matter expertise, ‘mock’ regulatory examinations, assistance as ‘first responders’ for those institutions that may be experiencing negative actions from regulators, and support with business start-up for servicing. The company has appointed Michelle Leigh, CRCM, MBA as Executive Director and Michael Pfeifer, Esq. as Director. Together, they will offer regulatory compliance support for providers of residential mortgage servicing, subservicing and master-servicing.
ARMs are for hugging
Sorry – flashback to the anti-nuclear demonstration era. But adjustable rate mortgages have become a topic of interest in the last several months. The product is not well liked in the secondary market (just ask your Freddie or Fannie rep about securitizing them), nor are they well-liked by pipeline hedging companies since hedging them is…problematic, to say the least.
Yet in the primary markets good LOs are only too happy to ask potential borrowers, especially first-time home buyers, how long they’re planning on staying in the house, and then showing them intermediate ARM rates. Last week the average contract interest rate for 5/1 ARMs decreased to 3.30% from 3.41%, and yesterday the MBA told us that the adjustable-rate mortgage share of activity decreased to 8.5% of total applications, down from 9% in the previous week, which was the highest level since October 2014.
Once again, the MBA’s “Chart of the Week” captured what many in the industry are paying more attention to – namely the uptick in interest in adjustable rate mortgages. The world-ranked research team of Lynn Fisher, Mike Fratantoni, and Joel Kan, supervising scores of researchers, tells us, “The ARM share of mortgage applications has increased to 7.2 percent of all applications in February 2017, led by 7/1 ARMs and followed in share by 5/1 and 10/1 ARM products. The ARM share has increased for both purchase and refinance applications, although in different contexts. In early 2017, purchase applications have been flat to slightly increasing on a year over year basis, but the number of purchase ARM applications increased at a more rapid rate. Over the same period, refinance applications fell on a year over year basis but refinance ARM applications did not decline as quickly, leading to an increase in share.
“Historically, the ARM share has increased when entering a purchase market and as rates rise. Home buyers in a strong housing market tend to look for ways to extend their purchasing power, and ARMs are one way to do that. While the ARM share got as high as 35 percent pre-crisis, however, it is highly unlikely it will climb that far again given the QM regulation which effectively prohibits many types of ARMs that were prevalent pre-crisis, and simply tighter credit in general. Additionally, mortgage rates are more than 2 percent lower than when the ARM share peaked.” (One can always check out the Chart of the Week page.)
For any loan officer who hasn’t been in the business during any kind of ARM market, there are a few issues often discussed with borrowers that can help make a more informed decision when considering an adjustable rate mortgage. The first is “How do ARMs work?” Most ARMs have an initial note rate that is fixed for a period, after which the mortgage interest rate would change based on adding the “then” current index to the margin. An ARM note will show that the index (LIBOR, T-Bill) can change but the margin cannot.
An LO will ask the borrower about their timeline for living in the house or refinancing. ARMs generally have a lower interest rate than fixed rate loans, and in recent years with rates having come down many ARM borrowers have seen their rates drop. The risk, of course, is that the rate on an ARM could go up in the future after the initial fixed period. The LO must ensure that the borrower understands the index selected for the ARM so that the client knows what could cause their interest rate to go up or down in the future.
As a reminder, NYCB’s Jumbo Portfolio, Jumbo Fixed 30 Year and Jumbo Standard ARM programs sometimes require two appraisals to be completed on the subject property. Both reports must be ordered, completed and reconciled prior to delivery, by the same Appraisal Management Company (AMC).
Effective with new locks Friday, March 24th, Flagstar Bank will be making 3 loan level price adjustments that apply to state tier adjustments, Escrow Waiver (not applicable to Jumbo Advantage) and VA Fixed & ARM.
Refinances dropped to 43% of all originations in February, according to Ellie Mae. Refis have been falling due to the change in VA IRRL securitization treatment and rising rates. The refis that still make sense however, are refinancing old ARMs into 30-year fixed rate mortgages, as LIBOR (which is what the interest rates is pegged to) is definitely going up, while longer term rates may or may not increase. The other trade is refinancing out of FHA loans from a few years ago, where the borrower has enough equity to qualify for a conforming loan with no MI.
Investor & lender fee and pricing changes
The MBA’s Chief Economist Mike Fratantoni stated that if people look at the cost to produce a loan a decade ago, it was around, $4,000, and now it’s around $7,000 and $8,000. And that doesn’t help volume: unless purchases pick up through more inventory, estimates for 2017 may come down from the current forecast of $1.63 trillion (down from $1.89 trillion in 2016).
Effective with MI applications received on or after April 10, MGIC is refining its LPMI Single rates for loans with amortization terms greater than 20 years. MGIC is also removing the rate adjustment add-on for rate/term refinances.
On April 1st, U.S. Bank is reducing the charge for tax service fee at the time of loan purchase for its correspondent lenders. AZ, CA, CO, DE, ID, MT, NE, NV, UT, WA, WV $21.50. All other states $58.00.
Effective on all applications as of April 3rd, Equity Prime Mortgage’s underwriting fee will increase from $895 to $995. This is Equity’s first increase since 2010.
U.S. Bank Home Mortgage announced that effective Monday, April 3, it offers per day extensions for all loans, regardless of when they were locked or which website they reside in. The cost for extensions will be 2 basis points per day with a maximum of 30 days, provided the original lock period was 30 days or greater. All original lock periods of 15 days will have a maximum extension period of 15 days. There is no maximum number of times a loan can be extended, provided the total number of days does not exceed the maximum stated. The rate lock may not expire on a non-business day for U.S. Bank Home Mortgage. Extensions will be automatically extended to the following business day following a weekend or federal holiday. FICO, or LTV adjustments will be applied in addition to the above stated extension fees.
PennyMac will revise SRP grids effective for all commitments taken on or after Monday, April 3.
Effective with loans locked in Mandatory commitments and Best Efforts locks on or after April 3, Nationstar Mortgage will update the values on its State and Loan Amount Adjusters. Click the link to view details.
Angel Oak Capital Advisors, LLC announced AOMT 2017-1, a $146.4 million securitization rated by both the Fitch and DBRS rating agencies. This transaction, backed by non-Qualified Mortgages (non-QM), marks Angel Oak’s third securitization since 2015. All three securitizations are backed by mortgages originated through the firm’s two affiliated residential mortgage lenders – Angel Oak Mortgage Solutions LLC (wholesale) and Angel Oak Home Loans LLC (retail). “We are able to show that we can finance and securitize our production through the coordinated efforts of our affiliated companies. Angel Oak will continue to be a leader because of our expertise and commitment in the non-QM space,” says Mike Fierman, Co-CEO of Angel Oak Capital Advisors. Angel Oak’s loan production reached an all-time high in 2016 of over $1 billion from loans originating in 33 states.
In terms of interest rates, despite higher short-term rates the longer end (like 10-year and 30-year Treasury yields, or 15 or 30-year mortgage rates) continues to do nicely. Yesterday we had plenty of intra-day price changes for the better, and this was despite learning that pending home sales rose at the fastest pace in six years during February. The 5-year, 10-year, and agency MBS prices all improved between .125-.250.
This morning we’ve already had Initial Jobless Claims (-3k to 258k) and the final 4th quarter GDP figure (2.1%, revised higher). Coming up is another bevy of Fed speakers, and they’ll probably say the same thing as the other speakers this week: 2-3 more short-term increases this year. Yes, the U.S. economy is doing that well. To start the day rates are slightly higher versus last night with the 10-year yielding 2.39% and agency MBS prices worse “a few ticks.”
Thanks to Bob F. who sent:
What did the bra say to the hat?
“You go on ahead, and I will give these two a lift.”
(Copyright 2017 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