Lenders aren’t likely to eliminate their owners or senior management, nor do they want to eliminate producers (who are meeting minimum thresholds) or slash their compensation. And good Ops staff is worth its weight in gold. In this time of margins being squeezed, what’s left? There is this note: “Given lender profits and LO commissions, I think one factor is a lot of expensive middle managers who do little or nothing to help improve, increase, or drive production. Lenders need to evaluate their role.” There are many great and talented individuals at that level, but yes, I am already seeing companies doing exactly that.
Come celebrate with Angel Oak Mortgage Solutions! As the leader in non-QM lending, it’s growing rapidly and happy to announce the Grand Opening of the newest Operations Center in Dallas. To celebrate management is hosting a Town Hall meeting and Open House on Tuesday, June 19th. The Town Hall discussion will kick off at 4:30 with the Open House following at 5:30. Mingle with senior executives from Angel Oak along with local Account Executives and learn more about non-QM and how brokers and correspondents can grow their pipelines. For more information and to RSVP, click here.
When you hear the term “Millennial,” does your mind conjure up an image of a Martian with a smartphone at the end of their wrist instead of a hand? Do you assume that the only way to reach a Millennial is through social media and sort of shudder at the thought of having to possibly alter the way you currently do business in order to attract these creatures? Well, Sierra Pacific Mortgage is hosting a webinar to help you push past any barriers when selling to Millennials. Register for this free session on June 19th which can help you understand this customer a little better and how to market to them, communicate with them, and, ultimately increase your customer base.
“Just us Thursday, June 14, at 2PM EDT for a DealDesk focus on Bank Statement Programs. Each DealDesk webinar is product focused and only presented by lenders that have unique and/or proprietary loan programs. This DealDesk offers mortgage professionals an opportunity to discover how other successful originators use bank statement loans to close more loans. Our featured lender, Fund Loans, will review scenarios live. Sign-up and submit your bank statement program scenario here.”
The rates offered to borrowers in the primary markets is determined by the value of that mortgage in the secondary market. And there is a lot going on in the secondary markets that originators should be aware of.
It was announced yesterday that BofA’s Merrill Lynch has settled a case with the SEC about traders and salespeople over-charging bond buyers between 2009 and 2012.
Inflation continues to hover around the Fed’s 2.0 percent target and in addition to increasing gasoline prices, the core PCE index increased 0.2 percent to 1.8 percent and is also approaching the Fed’s inflation target. This has made the need for stronger wage growth more relevant for workers. Although hourly earnings only increased 0.3 percent in May, hours worked have ticked up and when multiplied by earnings has led to a 5.4 percent annualized pace over the last three months.
I pay 10% more for a set of tires, but they last 10% longer. Is the price increase inflationary?
All this caterwauling about inflation led me to do a little research. We should all remember that no one knows exactly what causes inflation, what effects it has, what is the best measure of it, what a normal rate is, and how to move it up or down. The Fed’s Tarullo stated, “We do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policy making.” Of course, prices don’t all rise or fall in unison. My gasoline prices don’t mean that my dry cleaner is going to cost more, or my printer cartridges. Most economists will tell you that “inflation” is a weighted average of the ups and downs of the prices of all goods and services in a basket that reflects the spending of all American consumers. Prices changes due to technology, consumer preferences, the cost of imports, speculation, etc. The impact depends on your age (put another way, what you buy changes with your age), the sales channel (online versus retail outlet), whether you buy more goods or services. But the Fed’s monetary policy treats the services side and the goods side of the economy the same. (“The average of landing at two airports is called a crash.”)
Even if the Fed does nothing, inflation may increase if banks make more loans and if the money circulates through the economy faster. The Fed is in tough spot and must keep an open mind and an eye on the data. Janet Yellen stated, “You have to keep an open mind and not assume you have a monopoly on truth.”
What have Federal Reserve officials been saying about rates? After all, they’re in the driver’s seat. Fed SF President Williams said the Fed may increase interest rates above the so-called neutral level if the economy continues to expand and inflation is at or above the 2% target level. Fed Governor Brainard projects US GDP will pick up this year, encouraging the Fed to continue rate increases, though at a slow pace. She furthered that the Fed “will want to see inflation coming in around target on a sustained basis after seven years of below-target readings.” Cleveland Fed President Mester concurred with other Fed speakers that the economy is still doing well and supports gradual rate increases. She said she could accept “a couple” of inflation readings above 2%. Dallas Fed President Kaplan said four more rate hikes are likely to occur before the Fed funds rate reaches its desired level. He also said that the inflation rate could go above 2% as that happens, but that any such upward drift should happen gradually. Fed Chairman Powell said he doesn’t believe rate hikes will upset the economy even though rates have been kept low for an extended period. Richmond Fed President Barkin said the economy is “remarkably strong” and gives the Fed reason to continue with rate hikes.
JPMorgan projects the Fed will raise rates at the June meeting and again in September and December given such strong economic conditions.
The 10-year closed unchanged at 2.96% yesterday as investors put the U.S. – North Korea summit in the rearview and turned their attention to the trio of central bank decisions that close out this week. Despite Kim Jong Un and Donald Trump signing a document pledging to work toward peace on the Korean Peninsula, markets moved little in response ahead of today’s release of the June policy statement by the FOMC. We did observe a slight flattening of the yield curve due to reports that the Fed is considering conducting press conferences after every policy meeting, a move some saw as preparation for the Fed to accelerate the pace of its rate hikes.
A rate hike is a near certainty, but of interest will be if both the upper and lower end of the range will be increased 25bps. Based on the May minutes, some market participants are expecting a 20bps hike in the upper band versus the standard 25bps (so 1.75% to 1.95% instead of 2.00%). Also of note will be the continued use of “accommodative” in describing the current monetary policy stance in the statement. Finally, investors will look to the dot plot for increased odds for an additional rate hike this year. Futures have September odds of a hike at about 65% with odds for another hike in December at just under 40%.
As far as Tuesday’s economic releases went, a CPI reading in line with expectations had a minimal impact on markets, though it further validated expectations of a 25bps rate hike and provided some backing for the prevailing expectation among Fed members that there will be at least three (possibly four) rate hikes in 2018. There are only four FOMC meetings a year that also have updated economic projections – March, June, September and December – and these meetings are seen traditionally as ‘live’. The market view is that if Powell communicates after every meeting, all eight FOMC meetings will be considered as ‘live’, where policy changes can occur.
Looking at today, the FOMC statement and related events are clearly the highlight of the calendar. The statement and updated Summary of Economic Projections are both due out at 2PM ET, followed by Chair Powell’s press conference. Already out this morning is the latest mortgage application data from the MBA for the week ending June 8 (-1.5%) and May’s Producer Price Index (+.5%, core +.3%, both higher than expected). We start the day with the 10-year yielding 2.96% and agency MBS prices little changed versus yesterday’s close.
Job Opportunities and Lender Products
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Motto Franchising recently announced that 80 Motto Mortgage franchises have been sold, with more than 50 offices now open across the U.S. As the first and only national mortgage brokerage franchise in the country, Motto Mortgage is focused on improving the consumer experience by increasing competition and providing personalized guidance to borrowers with more clarity and less jargon. The brand, which launched in October 2016, has offices in 27 states and the District of Columbia. “This a tremendous achievement for the Motto Mortgage team and network,” said Motto Franchising President Ward Morrison. “We knew from the beginning that our unique brokerage model was needed in the industry. It’s a very exciting time for all of us at Motto Mortgage.” Loan originators in the Motto Mortgage network work close by – and closely with – real estate agents to deliver a one-stop solution, and they have access to quality loan options from various sources. Anyone interested in purchasing a franchise or joining the network is encouraged to visit mottomortgage.com/franchises.
Promontory MortgagePath is pleased to announce several senior level hires to its bank relations, technology, and fulfillment teams. Paul Katz, veteran American Bankers Association executive, has joined the company as Head of Bank Relations after serving the ABA in a host of senior level positions spanning nearly two decades. Scott Stein joins as Regional Vice President of Sales for the company’s technology unit, PromonTech. Previously, Stein was the Vice President of Sales & Business Development of Maxwell Financial Labs. David Sears joins as Regional Sales Director of Promontory Fulfillment Services. Prior to joining the company, Sears was a Regional Account Executive with Gooi Mortgage.