Some view the end of one year and the beginning of another as an artificial construct, created by human intervention. Others take careful note of what happened during the year. For those in the latter category, Freddie Mac tells us that at the end of 2018 the average interest rate on a 30-year fixed-rate mortgage was 4.55%. Every borrower out there, however, still wants the 3.31% we saw in November 2012, the record low for the national average. In the good news column, however, was that, for the first time since 2006, the FDIC tells us that no bank failed in 2018. On top of that, researchers at the Federal Reserve have found that extra capital that banks must carry to comply with US stress tests has increased lending. The finding contradicts claims that the Dodd-Frank Act has reduced credit.
The MMBBA Professional Development Program is a leadership development program for future and emerging leaders working in the residential mortgage lending industry, providing opportunities for future leaders to develop advanced industry expertise, gaining access to direct mentor opportunities with local industry leaders, meeting with peers, building leadership skills, and participating in the Maryland Mortgage Bankers and Brokers Association. Tomorrow’s game-changing executives are today’s Future Leaders, and this program provides the connections and exposure needed to take the next step in advancing their careers.
Government Shutdown Continues to Impact Borrowers
Do you have borrowers that need a USDA rural housing loan? Here’s what borrowers are reading in the press about their problems under the shutdown.
The Federal Government shutdown has no direct impact on Freddie Mac. It will continue normal operations without interruption during the shutdown. Review its 2018 system and customer service hours of operation for Freddie Mac technologies. Borrowers who may be impacted by the shutdown are eligible for relief options, including forbearance, as detailed in Chapter 9203 of the Freddie Mac Single-Family Seller/Servicer Guide (Guide).
Remember that The FHA has issued FHA Info Bulletin #18-52 which provides additional clarity for HUD mortgagees regarding which systems are operational, and which FHA customer support operations are functional, though limited. The FHA’s reverse lending program has been put on hold along with USDA mortgage insurance endorsements.
First Community Mortgage Wholesale posted announcement 2018-21 Regarding the Government Shutdown.
Mortgage Solutions Financial posted Announcement 32-18C regarding the Federal Government Shutdown.
Remember that this spring, 2019, FHA buyers of newly constructed single-family homes will no longer be required to purchase 10-year protection plans on high loan-to-value ratio mortgages. The Department of Housing and Urban Development recently issued the final rule, streamlining single-family home-warranty requirements for FHA insurance.
As a result of the Federal Government shutdown due to a lapse in appropriations, until further notice the Federal Housing Administration’s (FHA) Office of Single-Family Housing and its mortgage insurance program will be operating with limited services. As was the case in previous shutdowns, under a lapse in funding, FHA’s actions and decisions about which operations continue, or not, are governed by the Constitution, statutory provisions, court opinions, and Department of Justice (DOJ) Opinions, which provide the legal framework for how funding gaps and shutdowns have occurred in recent decades. A full descriptions and details can be found in the Department of Housing and Urban Development’s (HUD) Contingency Plan for Possible Lapse in Appropriations document posted on HUD.gov.
The Treasury yield curve has flattened further, and traders view that as an indicator that the US economy is close to recession. (The flat curve is an indicator; by itself it does not cause a recession.) The spread between three-month and 10-year yields narrowed to 18.6 basis points earlier this week, the tightest compression since the financial crisis. Investors widely appear to be betting that swings in the market and changes in hiring and consumer spending could stall economic growth and hold interest rates steady through 2019. The Federal Reserve predicted two more rate hikes in 2019, but federal funds futures show a 91% chance the rate will be the same or lower at the end of the year.
This morning we had the December jobs data. Is there a “natural unemployment rate” upon which economists agree? The natural unemployment rate has generally trended lower over the past forty years, although it does tend to edge higher when the economy enters recession. Current estimates have the figure around 4.1%, above the 3.8% unemployment rate averaged during Q3-2018, but below the 4.6% estimate of the Congressional Budget Office. Rather than putting weight in a precise estimate of the natural rate, it is better to conceptualize it in terms of a range (e.g. currently 3.6% to 4.6%).
If the actual unemployment rate (3.7%) is still within our estimated range, the Fed likely can continue to raise rates at a gradual pace (25 bps at every other FOMC meeting). If the actual unemployment rate were below the bottom end that range, the Fed may find it necessary to undertake a more aggressive pace of rate hikes, but because the actual unemployment rate is near the bottom of that estimated range, the Fed probably has a few more rate hikes to go. Although wage growth has trended higher in recent years, it is still well short of rates that prevailed at this point in previous cycles. Therefore, there is the risk that limited slack in the labor market could lead to further wage acceleration going forward, which could cause inflation rates to move markedly above the Fed’s target of 2%.
But lenders are more interested in the U.S. 10-year dropping a whopping -11 bps to 2.55% as Treasuries across the curve ended Thursday all in the same direction in response to Apple’s first revenue guidance cut since 2002, which was blamed on weak demand in China. Is Apple’s revenue drop an isolated case, or will other companies have to tone down expectations of their own? White House Council of Economic Advisers Chair Kevin Hassett said he expects more companies with exposure to China to follow in Apple’s footsteps, cutting their guidance. On the bright side, we were witness to a much stronger than expected ADP Employment Change report (actual 217K; expected 170K) ahead of today’s release of the Employment Situation report from the Bureau of Labor Statistics.
The market is starting to believe in the prospect of a rate cut before the end of 2019, as the implied probability of a rate cut in December jumped to 46.1% from just 9.6% on Wednesday. Fed Chairman Jay Powell’s remarks today will be watched closely for signs of a change to the Fed’s outlook. Finally, British Prime Minister Theresa May met with European officials yesterday, including EU Council President Donald Tusk, German Chancellor Angela Merkel, and Dutch Prime Minister Mark Rutte. Ms. May is seeking to secure concessions regarding the Irish border ahead of the Brexit withdrawal bill vote expected during the week of January 14.
Turning to today, here are the December payrolls figures. Nonfarm payrolls, expected to increase 185k versus 155k previously, were strong at +312k. Hourly earnings were +.4% (+3.2% year over year, very strong), and the Unemployment Rate clocked in at 3.9%, up a shade, as was the participation rate. Markit Services PMI will be released at 9:45am with expectations for a slight downturn. We’ll have a lot of “FedSpeak” with Fed Chair Powell (participating in a joint discussion with former Chairs Yellen and Bernanke), Atlanta Fed’s Bostic, Richmond Fed President Barkin, and St. Louis Fed Bullard. After the unemployment data we find rates higher versus Thursday’s close: the 10-year is yielding 2.62% and agency MBS prices are worse .250-.375.
Lender Services and Products
Are you looking for a USDA One-Time Close product that can be sold to your correspondent investor right after closing and before construction has begun? Spare your borrowers the hassle of going through multiple closings. And, bundle their building costs and mortgage costs into one loan. It’s a win-win and saves you and your borrowers much-needed time. Check out the new USDA One-Time Close purchase option TMS Correspondent recently rolled for its partners.
In response to a slowing market, we are seeing a resurgence in joint ventures, as mortgage lenders and realtors join forces to build relationships and revenue. While RESPA is still very much in force, there is undoubtedly opportunities for mortgage lenders and realtors to “become one.” But how do you meet the compliance challenges of real estate and mortgage joint ventures? How do you help protect your investment? JVerify can help you achieve a successful, lucrative and longstanding joint venture. JVerify is a premier compliance management system from Strategic Compliance Partners (SCP) designed to help keep joint ventures compliant and competitive, with protocols that prevent unlawful steering, annual risk assessments, and much more. Contact SCP to learn how JVerify can protect your joint venture.
“As promised, Parkside Lending, LLC continues to expand its product offering! We’ve added more Non-QM products, including a new Asset-Income program that allows for asset depletion over 7 years vs the typical 10 years with a MAX DTI of 47%, a 12-month Bank Statement program with utilization of either Business or Personal bank statements, One Year Tax Return program and a NO FICO program. With Parkside’s simplified process, automated Loan Estimates, state and federal disclosures delivered electronically, access to underwriters, and a plethora of products, it is easy to see why brokers love working with Parkside. Parkside will continue to expand our new products in 2019 and will continue to enhance our systems to make the lending process as efficient as possible for our customers and their borrowers. To find out more about these programs and experience the Power of Caring, or are interested in working with Parkside Lending, contact your Account Executive or Sales@ParksideLending.com.”
Employment and Promotions
CMG Financial is proud to announce the addition of Regional Sales Manager, Mark McCauley, and his team. Mark will spearhead growth throughout New England and oversee recruiting and onboarding. Mark has over thirty years of experience and has served the greater New England area in distinguished leadership positions for two decades. “My team and I are excited to partner with CMG Financial and gain access to a wide menu of innovative loan programs to grow our market share,” said Mark McCauley. CMG’s culture of strong loan officer support and superior customer service combined with proprietary products have created an environment to attract and serve the nation’s top originators and resulted in a 41% year-over-year growth in production. If you’re in the Northeast and would like to grow your business in 2019, contact Mark McCauley (603-315-0673).
11 MORTGAGE is pleased to announce the addition of yet another industry champion, J.D. Meadows, to its exclusive team. J.D. come with 13 years of TPO under his belt. He will assume the role of Northern California Area Sales Manager.
National MI is expanding its sales team and adding an additional Sales Account Manager who will reside in the Indiana and Kentucky area. Responsibilities include promoting the sale of National MI products, services, and programs to clients through a consultative selling approach via personal sales calls and email/phone contact, assisting in sourcing new business from originators, and will manage the relationships of specific clients by serving as a customer advocate, educator, and loan issue problem-solver. Experience in client relationship management and training is imperative, and strong research, process improvement, and presentation skills are required. National MI is a U.S.-based, private mortgage insurer enabling low down payment borrowers to realize homeownership and has great culture, compensation and benefits. For the complete job posting, see National MI’s careers page.
LoanLogics, focused on loan quality technology for mortgage manufacturing and loan acquisition, announced that David Parker has joined the company as SVP of product management. Congrats!