Doug Duncan to deliver the economic forecast at HousingWire Annual


Economists are having a moment. Their ability to model likely future scenarios has always been important, but during a once-in-a-lifetime event like a global pandemic, they are invaluable. Understanding what businesses should expect next quarter, next year and in the next five years has never been more important — or more unclear.

That’s why we’ve invited Doug Duncan, senior vice president and chief economist at Fannie Mae, to give the economic forecast at our HousingWire Annual event on Oct. 8.

At Fannie Mae, Duncan is responsible for forecasts and analyses of the economy and the housing and mortgage markets. He also oversees strategic research regarding the potential impact of external factors on the housing industry — which this year include a global pandemic, nationwide stay-at-home orders, unlimited Fed bond-buying and the lowest interest rates on record. Duncan also leads the House Price Forecast Working Group reporting to the Finance Committee.

Under Duncan’s leadership, Fannie Mae’s Economic & Strategic Research Group (ESR) won the NABE Outlook Award, presented annually for the most accurate GDP and Treasury note yield forecasts, in both 2015 and 2016 – the first recipient in the award’s history to capture the honor two years in a row. In addition, ESR was awarded by Pulsenomics for best home price forecast.

Named one of Bloomberg/BusinessWeek’s 50 Most Powerful People in Real Estate, Duncan is Fannie Mae’s source for information and analyses on demographics and the external business and economic environment; the implications of changes in economic activity on the company’s strategy and execution; and for forecasting overall housing, economic, and mortgage market activity.

Prior to joining Fannie Mae, Duncan was senior vice president and chief economist at the Mortgage Bankers Association. His experience also includes work on the Financial Institutions Project at the U.S. Department of Agriculture and service as a LEGIS Fellow and staff member with the Committee on Banking, Finance, and Urban Affairs for Congressman Bill McCollum in the U.S. House of Representatives.

Duncan will be joined by other housing luminaries at HousingWire Annual, including Ed DeMarco, president of the Housing Policy Council, Cindy Waldron, vice president of research and analytics at Freddie Mac, Laurie Goodman, vice president of the Urban Institute, Robert Dietz, chief economist at the National Association of Home Builders, and many more.

We’re focusing this virtual event on The Great Acceleration — the disruption speeding through the business landscape, upending traditional strategies and agendas for those in housing. We’ve got sessions on the future of regulation, business strategy during times of social upheaval, increasing homeownership in underserved communities, green housing, capital market appetite by channel and much more.

HW+ members can attend for free by registering here. Not an HW+ member yet? You can sign up for free attendance plus get the amazing premium content we publish digitally and in the print magazine. Regular registration can be accessed here.



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CoreLogic stockholders will decide board’s fate on Nov. 17


On Nov. 17, stockholders of CoreLogic will get to cast their vote on whether to replace the current board of directors with nominees proposed by Cannae Holdings and Senator Investment Group at a special meeting.

In a letter to stockholders, CoreLogic urged them not to sign a proxy card sent by Senator or Cannae and reminded them that only their last vote on the matter would count. Stockholders who had already signed a proxy card for Cannae or Senator can reverse that vote by sending in a new proxy card, the letter said.

The battle for CoreLogic started on June 26 when Cannae and Senator, who jointly own 15% of the company’s stock, submitted an offer to acquire the company for $65 a share, for a total of $7 billion. CoreLogic rejected the proposal on July 7, saying the bid undervalued the company and raised regulatory concerns, labeling it an “opportunistic proposal.”

In a series of defensive measures, CoreLogic raised its 2021 and 2022 financial guidance, while increasing share reauthorization to $1 billion. Adopting a “poison pill” strategy, Corelogic approved a shareholder-rights plan that prevents investors from acquiring 10% or more of the company’s common stock, or 20% in the case of certain passive investors.

On July 29, Cannae and Senator issued an open letter to fellow shareholders announcing that they had initiated a process to call a special meeting of shareholders to elect nine “independent and highly accomplished directors” to the CoreLogic board of directors. The companies said their goal was to replace the majority of the board with “nominees who will act in best interests of shareholders” who have no affiliation or association with Senator, Cannae, or any of their affiliates.

It’s unclear which way stockholders will vote. CoreLogic’s stock took off on the news of the takeover bid, jumping 25% to $66.33 on June 26, and was at $66.37 as of close of market on Friday, Sept. 4. 

The chairman of Cannae Holdings is Bill Foley, the chairman of Fidelity National Financial, which is also majority owner of ServiceLink. In addition, Foley is executive chairman of Black Knight Financial Services — a direct competitor of CoreLogic.

The vote on Nov. 17 concerns the removal of these board directors:

  • David Chatham, president and CEO of Chatham Holdings Corp.
  • Douglas Curling, principal and managing director of New Kent Capital
  • John Dorman, private investor, formerly CEO of Digital Insight
  • Paul Folino, chairman of the board, and former executive chairman at Emulex Corp.
  • Thomas O’Brien, former CEO and president at Insurance Auto Auctions
  • Pam Patenaude, former deputy secretary of HUD and co-founder of the J. Ronald Terwilliger Foundation for Housing America’s Families
  • Vikrant Raina, managing partner at BV Investment Partners
  • Michael Shepherd, chairman of Bank of the West
  • David Walker, former director of the program of the accountancy at the University of South Florida.

In their place, Cannae and Senator propose appointing:

  • W. Steve Albrecht, the Gunnel Endowed Professor in the Marriott School of Management at Brigham Young University and former chairman of Cypress Semiconductor
  • Martina Lewis Bradford, founder, president, and CEO of Palladian Hill Strategies, a government relations firm
  • Gail Landis, founding partner of Evercore Asset Management, where she served as managing principal from 2005 until 2011. She has been on the board of Morningstar since 2013
  • Wendy Lane, who has served as chairman and founder of Lane Holdings, an investment firm, since 1992
  • Ryan McKendrick, the former president and CEO of AMCOL International
  • Katherine “KT” Rabin, who served as CEO at Glass, Lewis & Co., a provider of global governance services, from 2007 to 2019
  • Sreekanth Ravi, co-founder and executive chairman of the board of RSquared, a cloud-based artificial intelligence (AI) platform in the workforce intelligence market
  • Lisa Wardell, chairman and CEO of Adtalem Global Education, a workforce solutions provider
  • Henry W. “Jay” Winship, president and founder of Pacific Point Capital, a real estate investment firm 
At this point CoreLogic plans to hold the special meeting in person, but said it has contingency plans in place for a virtual meeting if necessary.  



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Is the FHFA about to delay the refi fee?


According to reporting by the Wall Street Journal on Saturday, the Federal Housing Finance Agency has been communicating with mortgage industry groups about delaying the implementation of a fee which would add a 0.5% surcharge to refinance mortgages sold to Fannie Mae and Freddie Mac starting Sept. 1.

According to the article, the FHFA is considering a delay to the adverse market fee implementation date, but is not planning to rescind it. The FHFA has been widely criticized both for the reasoning given for the fee and the short three-week notice to lenders and homeowners already in the middle of a refinance process.

Dave Stevens, former president and CEO of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration, told HousingWire on Saturday that, “If true, it seems clear that Director Calabria listened to industry concerns about the impact of this short time frame to implement. And while the logic of the fee remains in question, this is a good sign and hopefully will lead to a change in behavior going forward where impact assessment conversations can take place prior to major policy announcements.”

Following the FHFA’s announcement of the fee on Aug. 12, the mortgage industry organized a full-out campaign to get the FHFA and GSEs to reconsider the fee, with national and state lender associations mobilizing members to reach out to FHFA and congressional leaders.

On Aug. 20, the heads of Fannie and Freddie addressed industry concerns, but the response did nothing to quell opposition to the move and this week Capitol Hill joined the fray.

On Wednesday, a group of prominent senators including Sherrod Brown, (D-OH) and Elizabeth Warren (D-MA) sent a letter to FHFA Director Mark Calabria questioning the decision to add the fee on such short notice and asking for specific feedback on the FHFA’s reasoning behind the action.

The group of senators asked specifically for FHFA to describe the market conditions they are trying to address with this fee, and how “a direct charge to homeowners was determined to be the most appropriate way to address those conditions.”

The Senators also asked why the FHFA and GSEs “believe that individual homeowners are better suited to bear part of the cost of this economic downturn than the Enterprises.”

On Friday, 41 bipartisan members of Congress signed a letter to Calabria outlining their objections to the fee.

“In announcing this new ‘Adverse Market Refinance Fee,’ Fannie Mae and Freddie Mac (commonly referred to as government-sponsored enterprises, or the GSEs) cite market and economic uncertainty, along with higher risk and costs,” the letter states. However, when this policy was announced, no further explanation was provided to justify the additional cost to homeowners.

“On the contrary, homeowners saving hundreds of dollars per month on their mortgages are reducing their debt-to-income ratio, which reduces risk to investors. Furthermore, lenders report reverifying employment within 24 hours of closing, further reducing credit risk,” the letter continues.

“Fannie Mae, Freddie Mac, and Federal Housing Finance Agency (FHFA) have taken crucial steps throughout this pandemic to protect homeowners and our economy. That is why we were surprised by this announcement that will make refinancing a mortgage more difficult and more expensive for even the most creditworthy homeowners.

“The best thing we can do for the fiscal position of the United States is to allow the economy to recover as quickly and robustly as possible. To that end, we request that FHFA and the GSEs reconsider this fee as our country recovers from COVID-19.”

The White House weighed in shortly after the fee was announced, saying it had “serious concerns.”



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What would it take to see mortgage rates go below 2% on a 30-year fixed?


Since 2015, my forecasting models have predicted the 10-year Treasury yield would stay in the range of 1.60% to -3%. Tangential to this, the next recession treasury yields, and thus mortgage rates, would fall because lower growth would drive yields and rates lower. The four-decade prolonged downturn in the rate of growth in the economy and inflation mirrors falling bond yields and mortgage rates.

Before the pandemic, it was hard work trying to convince other economists that we would see a 30-year fixed mortgage rate below 3%. In 2018, a crafty photographer caught the bemused look on my face when one of my colleagues chastised me for predicting rates would go lower instead of higher. 

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Logan Mohtashami, HW Housing Data Analyst, at the 2018 Orange County Economic Throwdown Conference, being told rates have to go higher.  (10-year yield on this date was 3.24%) 

Evangelizing a consistent thesis for years on end is a bit boring, but I would rather be dull and steady than the alternative. I admit I am a big fan of sticking to economic models that allow for reliable predictions, repetitive as they may be, until different variables change the course of the economy. 

Today, in the middle of a world pandemic, my bond market model is allowing for a 30-year fixed mortgage rate as low as 1.875%  – but the questions remain, will it, and what will it take to get there?

10 year
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“It’s a naked ploy to drum up racial fears and white resentment”


Early on, the Trump administration signaled it would target regulations related to the Fair Housing Act for changes, first delaying implementing the Affirmatively Furthering Fair Housing provision of the Act — put in place under President Obama — then proposing changes, and finally, last week, abolishing the AFFH rule altogether.

In the week since the rule was abolished, both HUD Secretary Ben Carson and President Donald Trump have commented officially and through social media about their reasons for abolishing the rule. I sat down with Julian Castro, HUD Secretary under Obama from 2014-2017 — to talk about the AFFH and what future he sees for it.

Sarah Wheeler:  Let’s talk about the AFFH provision of the Fair Housing Act, which President Trump struck down last week. What was the original intent of that provision?

Julian Castro:  We implemented AFFH as a piece of unfinished business of the Fair Housing Act of 1968. The intent was to hold communities across the country more accountable for ensuring fair housing opportunities for everyone — no matter what they looked like.

Unfortunately,  even in the 21st century, so many years removed from the Fair Housing Act, people still face discrimination in the housing market and we wanted to address that and provide greater opportunity for people.

SW: When Secretary Carson announced HUD was abolishing AFFH, the reasons he listed included that the AFFH regulation was “unworkable and ultimately a waste of time for localities to comply with.” What was your experience with communities as they worked under the rule? Did they find it difficult?

Castro: The process of coming up with AFFH involved a tremendous amount of outreach to communities throughout the U.S. to get their input to make this a workable, pragmatic but effective rule. So we did a lot of work making sure that this was something communities could comply with, that’s why I don’t put much stock in Secretary Carson’s view.

SW: After the formal announcement, Secretary Carson tweeted out that the AFFH rule was “a ruse for social engineering under the guise of desegregation.” What do you make of that?

Castro: That’s all about ideology and fear-mongering. What we were looking for was a partnership with local communities to create a better and more equal housing opportunity for everyone. AFFH was about allowing communities to come up with stronger plans to ensure fair housing opportunities — not about the federal government telling communities how they had to achieve better opportunities, but allowing them to come up with their own strong plans and evaluating that.

SW: President Trump went even farther, tweeting two days ago: “I am happy to inform all of the people living their suburban lifestyle dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood…Your housing prices will go up based on the market, and crime will go down. I have rescinded the Obama-Biden AFFH Rule. Enjoy!” What was your reaction to that statement?

Castro: Trump sounds like a small-town sheriff or mayor from 60 years ago. It’s a naked ploy to drum up racial fears and white resentment about people of color a couple of months before an election that Trump knows he is losing. He is losing the suburbs to Biden and this is his embarrassing ploy to try and get people back on his side — acting like it’s 1950 instead of 2020. Although this racism may appeal to some people, I think the vast majority of people are going to reject it.

SW: What are we missing if we don’t have neighborhoods that have a mix of housing types?

Castro: Millions of American families are being blocked from living in higher-opportunity areas with access to better jobs, schools, healthcare — it runs the gamut. Research done by Raj Chetty offers a powerful analysis of the benefits of living in a higher-opportunity area. This should inform our policy going forward, as right now a lot of people are losing opportunity simply because they earn a lower income.

Q: You launched a PAC this year called People First Future. What is the goal for that organization?

Castro: We’re committed to helping build a strong progressive bench of policy-makers at federal, state and local levels by supporting programs and candidates in 2020 elections. It was motivated by the realization that it’s not enough to only have progressives at one level, in the House or Senate for instance. We need people that are district attorneys, who want to work on criminal justice reform, we need mayors and state attorneys general. So we are identifying and supporting fantastic progressive candidates that will create a bench of lawmakers that have a vision of serving the most vulnerable Americans. We announced a new round of people yesterday, so we’re now supporting a total of 22 people.

SW: Anything else you’d like to add?

Castro: One of the first orders of business for the next HUD secretary is to get the AFFH back on track, beginning Jan. 20, 2021.

SW: You’ve already served as HUD secretary… If Biden wins, is there another role you would like to work in?

Castro: Right now my focus is on doing what I’m doing, which is supporting other people. I’m not aiming for any office.



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In the midst of crisis, servicers need to communicate early and often


As the United States battles simultaneous public-health and economic crises, COVID-19 has presented some unprecedented challenges — many are familiar to borrowers, regulators, servicers and investors who recall the financial crisis in 2008.

In this time of “certain uncertainty,” several recent trends that were seen in 2008 point to imminent financial losses and increasing complexity of existing systems, at a rate that is testing the industry’s resiliency once again. Some of the trends that point to the added complexity that requires businesses to adapt to the ‘new normal’ include:

  • Aggressive but uncoordinated response from federal, state, and local agencies, resulting in a confusing web of new regulations and moratoriums posing a challenge for the servicing industry and creating unique risks for borrowers, investors and servicers.
  • The need for remote workforces to service clients, which results in additional costs for communication and management tools to be effective.
  • Call center volumes, which have spiked past the capacity to respond to incoming calls.

In addition, a number of factors point to a state of political and economic instability that analysts are comparing to the 2008 market crash – unprecedented unemployment rates, decreasing home prices, a high bankruptcy rate among small and medium businesses, high rates of forbearance and urgent government measures intended to save entire sectors from collapsing (aircraft and travel, manufacture, food and hospitality, etc.).

In a time of crisis, communication between borrowers, servicers, regulators and investors is critical. Servicers can play a pivotal role across these stakeholders to flag inconsistent and conflicting regulatory guidance, identify reputational and financial risks for investors, and work through the complicated loss-mitigation process with borrowers. To do this effectively, servicers will need to communicate with all stakeholders early, often, and clearly.

Our perspective is drawn from more than a decade of fieldwork on high-stakes investor/servicer and master servicer/subservicer litigation disputes, regulatory enforcement actions, and significant settlements in mortgage history including the Independent Foreclosure Review, National Mortgage Settlement, and Residential Mortgage Backed Securities Settlements.

Serious losses and litigation are potentially on the horizon

In the aftermath of the previous financial crisis, the industry experienced massive losses and litigation that continue today.

  • Settlements of credit crisis-related litigation between 2007 and October 2013 totaling more than $32 billion.
  • Settlements related to mortgage repurchase claims by Fannie Mae and Freddie Mac exceeding $18 billion to date.
  • The U.S. government has recovered more than $34 billion in settlements of its claims against various banks in relation to allegations of improper foreclosure proceedings and other consumer finance issues such as fairness in mortgage lending.

We believe that data from regulatory bodies and analysts points to a serious, credible risk that the industry may experience challenges like those witnessed during the financial crisis of 2008. The abundance of conflicting, ambiguous, and rapidly evolving regulations coming from multiple, often uncoordinated sources may present challenges like past financial crises.

HUD alone has issued 14 mortgagee letters since March 18 in response to the COVID-19 crisis, a volume and velocity of regulatory change that is similar to the financial crisis — but has still not answered many of the central questions that servicers face today.

For example, HUD has not opined on extension requests, or whether they will be more forgiving to delays directly or indirectly caused by COVID-19’s impact. And while HUD has provided temporary relief on the so-called First Legal and Reasonable Diligence Milestones, significant ambiguity exists in the interpretation of the guidelines.

Additionally, HUD has been silent on the 30-day Conveyance deadline. Foreclosure moratoriums and reduced property preservation capacity will put properties at risk of deteriorating conditions and put strain on servicers trying to meet conveyance requirements. Shelter-in-place and other work restrictions will affect property preservation work, and likely result in delayed timelines and increased holding costs. Yet HUD has offered no guidance for servicers facing these COVID-related delays.

HUD is also facing the same challenges as other entities, managing remote contractors who are working at less than 100% capacity. This may only exacerbate the timeliness and consistency of requests for common activities such as extensions, clarifications, approvals, and over-allowables.

Meanwhile, state regulators are issuing their own regulations, which often contain additional ambiguities.

For example, in New York, the governor is implementing a new executive order, effective for 60 days starting in late June, that suspends eviction for borrowers who can demonstrate either that they are eligible for unemployment insurance or benefits, or that they are facing financial hardship because of COVID-19.

This executive order is narrower than the current pandemic eviction moratorium, which barred all residential and commercial evictions, but that only heightens the potential risks for servicers, who will need to determine exactly what documentation New York expects for demonstrating the borrower’s hardship, implement procedures to comply with these new documentation standards, and communicate the state policy to agencies, insurers, and investors when seeking relief from foreclosure milestones and timelines.

All of these inconsistencies and ambiguities create substantial risk for all stakeholders involved. A servicer acting on their “best interpretation” of these regulations is squeezed between foreclosing too quickly, hurting borrowers and subjecting the servicer to significant regulatory exposure, and foreclosing too slowly, jeopardizing any guarantees or insurance on the loan creating a different type of regulatory exposure.

As we saw in the financial crisis, these risks are heightened by the likelihood that the servicers’ decisions may be questioned years later —when the crisis is a distant memory, but the financial losses are a present reality.

What can servicers do?

Right now, servicers, investors, regulators, and borrowers can likely all agree that some “crisis-response” changes are needed — though these may need to evolve once the crisis is over. Building consensus about how to handle the crisis now, and memorializing any agreements reached, will help keep stakeholders satisfied while resolving disagreements that could arise later.

During the crisis response, the focus remains on protecting borrowers and keeping them in their homes. As the industry starts to emerge from the crisis and losses are realized, the focus will shift from customer care to accounting for losses incurred on the balance sheet. The financial crisis from a decade earlier has demonstrated that the guidance to keep borrowers in their homes will become a distant memory when the hard reality of potential claims — and losses — come due. Default servicing processes, agency timeliness, and penalties will be front-and-center again.

Thus, it is imperative that servicers be transparent and proactive today, with communications that identify the challenges and explain the response plans, which they regularly send to regulators, investors, master servicers, and borrowers.

For example, they should proactively communicate with regulators when gaps and inconsistencies are identified, and document any responses. These communications can guide subsequent conversations with investors, master servicers, and vendors, about plans for providing borrower relief, suspending foreclosures, delaying repairs, and other crisis-response plans as they are being implemented. All parties will need to understand that any service-level agreements in place may need modification for the current crisis (indeed, many may be impossible to adhere to under current state regulations), but documenting precisely what changes are expected will help avoid challenges in the future.

Conclusion

Servicers play a pivotal role in the mortgage industry. They are responsible for implementing regulatory obligations, managing investor requirements, navigating borrowers through the processes, and coordinating with title companies, insurance agencies, property vendors, and virtually all other participants in the process. They can use effective crisis communication to identify where opportunities exist, and where breakdowns occur, in a way that other stakeholders cannot. By effectively communicating these issues and building consensus around a response, they may help to avoid some of the worst difficulties from the previous financial crisis.



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With record-low mortgage rates, originators and real estate agents aren’t taking a holiday anytime soon


There is nothing normal about this July Fourth holiday. With COVID-19 cases spiking in the biggest states, the slow creep back to normal has been put on hold in many places, and the usual Independence Day celebrations are few and far between.

But, if you work in real estate or mortgage, you wouldn’t be taking time off anyway. The low mortgage rates we’ve seen since March when the Fed began its bond-buying spree are now setting all-time records, down to an average of 3.07% for a 30-year fixed as of this morning.

Those low rates are fueling a sustained refi boom as well as an increased demand for home-buying that is making this summer one for the record books.

Accordingly, loan officers, underwriters, real estate agents, appraisers and those working in title and settlement offices are continuing to work the long hours that have become the norm since March.

Not that they’re complaining.

When I asked our HW+ audience (those who have a membership to our premium content) about their vacation plans, they laughed at the idea of taking time off right now. This was typical of the comments I got:

“Who is taking off??? We’re in an on-demand society and the world is flat! If consumers are taking off then that may reduce some of the workload, but every front-end professional I know is running on all cylinders through the weekend.”

This particular reply was from an origination leader who oversees a bunch of top performers, so I asked if his perspective might be skewed. His answer: “What’s interesting is that even under-performers who are typically reactionary rather than proactive at driving business are overloaded with requests right now. Especially refinance requests. Basically every past client is searching for advice about the cheapest mortgage money in history.”

Earlier this week I listened in on a call between mortgage coach Joel Epstein and several dozen originators from some of the biggest lenders in the country and most weren’t even planning to take the weekend off, much less extra vacation time. Epstein, who also hosts The bigJOEL Show podcast, was incredulous at the very idea of a vacation this summer.

“The number of purchase contracts people are writing right now is massive — even in places that were on full lockdown several weeks ago. Their June might be the best June they’ve ever had. This is not the time for originators to take a vacation. It is game on — now is the time to make hay while the sun is shining, you absolutely should not be taking time off right now!” 

It’s not just lenders working overtime, of course. Working on weekends, weeknights and holidays is pretty normal for real estate agents, but the shortage of housing inventory has ratcheted up the pressure to get an offer in as early as possible. Bidding wars have increased in many metros, and the shortage of homes means agents, lenders, appraisers and others have to work in concert to get their borrower to the closing table.

Christine Beckwith, president and CEO of 20/20 Vision for Success Coaching, works with sales and marketing leaders across mortgage and real estate and noted how those she is working with have stepped up to the opportunity. “I see the longer hours, the record-breaking funding months and staggering volume. These professionals are up for the challenge…they know markets like this come and they go so they are strapped in and buckled up, forgoing vacations in some instances to truly assist homeowners in so many ways.”

There’s no doubt July fourth will be a working holiday for many, but the bigger question is how long will this heyday last? With no end in sight for lower rates and continued pent-up housing demand, will mortgage and housing pros be spending Labor Day weekend the same way?



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Barbara Yolles to speak at engage.marketing in June


Barbara Yolles is a force of nature. Her 25-year career includes everything from launching the Dollar Menu at McDonald’s to driving global growth for advertising agencies and clients as CMO at McCann and Campbell Ewald. Within the mortgage space, Yolles’ resume includes building world-class marketing teams at both United Wholesale Mortgage and TMS.

In 2019, Yolles launched LUDWIG+, a brand transformation and business acceleration company. LUDWIG+ provides full-service strategic consultancy, brand positioning, architecture and identity, creative, media, and production services across every media platform (owned, earned, paid).

Yolles was motivated to launch the company after seeing the gap between advertising agencies and in-house marketing departments. The brilliance of ad agencies doesn’t always translate into the needs to run and accelerate a business. 

On the flip side, in-house marketing departments aren’t always able to attract world-class talent. The LUDWIG+ sweet spot is the convergence of creative, strategic consultation, and go-to-market brilliance, that transcends every inch of a company to ignite the brand internally and externally.

In a matter of months, LUDWIG+ landed 15 clients, including global healthcare, packaged goods, and financial services, with some of the largest players in the industry.  In many of these relationships, LUDWIG+ uniquely serves as the client’s marketing department.

Which is why we’ve invited Yolles to share her hard-won expertise as part of our engage.marketing virtual summit June 11-12. HousingWire Editor in Chief Sarah Wheeler will interview Yolles on a topic that is more important than ever: How to Make Marketing a Revenue Center.

While not everyone can start a whole new agency, Yolles will discuss ways marketers can add value in ways that make them indispensable to their companies.

It’s all part of our focus on The Agile Marketer — someone who collaborates across teams with nimble creative execution and the ability to pivot quickly when priorities or market conditions shift.

It’s the skill set marketers need in this unprecedented environment, and HousingWire has designed every facet of this virtual summit to deliver the expert insights and connection you need to succeed now.

Reserve your spot here.



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[PULSE] Forbearance 2020: Standing on the precipice


In response to the pain Americans have been hit with from the coronavirus, Congress put forth legislation, turning this into a tsunami for housing, and the administration seems to be betting that only a few mortgage companies will be swept away.

Why on earth would they take the chance when the housing market could be swept away, too? The administration, FHFA, and regulators have put policy in place that could wreak long-term havoc on the entire mortgage market if they don’t finish what they started.

David Stevens,
Guest Author

By virtually eliminating any barrier to entry to obtain forbearance, policymakers have created outrageous moral hazard with potential costs that are unfathomable. To be clear, unlike the last recession when borrowers had to prove hardship in order to qualify for a forbearance plan, a move made to make sure that taxpayers were only helping those who truly were in need, the current regime has opened this up to any and all homeowners with a loan from the GSEs or the GNMA programs.

This means that even people still employed, earning their regular pay and able to make the payment on their home, can simply opt in for a free “put” provided by the federal government to be paid for first by private industry and backed up by the taxpayer.

But in doing so, policy makers thrust billions of dollars of liquidity risk right on top of the financial services sector that may take down the system entirely if they don’t adhere to their responsibility. Here is why: when a borrower enters a forbearance plan under the new guidelines the servicer still has to send the Principal and Interest payments to the MBS investor, still make sure the insurance payments are made, and pay all property taxes for that borrower.

To put this in perspective, the Mortgage Bankers Association stated in their March 22 letter to Treasury Secretary Mnuchin and Federal Reserve Chairman Powell, “that if approximately one-quarter of borrowers avail themselves of forbearance for six months or longer, advancing demands on servicers could exceed $75 billion and could climb well above $100 billion.” The MBA went on to state that policy makers must state that, “they will provide liquidity to otherwise solvent companies in order to support borrowers through this challenging time.”

The fact is that while congress and the administration were moving quickly to save homeowners from concern, they went too far by opening it up to all, regardless of need, and risk taking down the entire mortgage finance sector with it. In short, it is as though Congress called in the fire department to put out the fire, but asked someone else to pay the multibillion dollar water bill. 

This is fixable, but regulators at FHFA and Treasury seem to be casting a blind eye to this massive risk exposure they created by putting into place a program filled with moral hazard and without any consideration to the burden placed on the private sector.

GNMA already stepped in and broadened the scope of a facility that could provide liquidity for the FHA, VA, and USDA programs by advancing the funds needed to pay the MBS holders on behalf of servicers.

In addition, once the 180-day period is over, or 360 days if the borrower gets an extension, the servicer can file a partial claim with HUD and get reimbursed for all those advances, thus making GNMA and the servicer whole. It’s not perfect, but it’s a far better model than providing zero support.

But the GSEs have yet to step in. It’s not that hard, really. They need to do two things with absolute clarity:

First, they need to create an advance facility for servicers to tap into in order to advance the P&I to investors until the forbearance ends. This could be done with the servicer pledging their MSRs and it could be specific to each respective GSE.

Second, they need to be clear on the options post-forbearance in order to replenish the advances provided. Whether a second lien held on the GSE’s balance sheet, a loan modification, a payment plan established, tacked on the end of the loan similar to a partial claim that FHA uses — something they have available to implement now, or put into the advances account, there are options that must be announced and executed for market players.

By not acting, or by leaving the industry less than certain about the enormous burden potentially thrust on the private sector by this legislation and supported by the administration, they are violating standard commercial sensibilities and have already added an enormous tax on the mortgage system.

Bid-ask spreads have widened, servicing bids have all but dried up or are being severely curtailed, lenders are having to pull back on minimum credit score, maximum DTI, certain loan products, and more. The Jumbo market is all but gone, especially in the third-party channels. In short, any prospective homebuyer right now is more likely to find fewer or no options for mortgage financing. This is greatly the outcome of the massive uncertainty surrounding the rollout of these federal interventions.

The urgency around this obligation for the administration to support the problem they helped create is severe, and the current apparent deafness toward this need is alarming. “Act now” needs to be our industry’s battle cry.

The administration seems to think that only the first one or two dominoes will fall. Given what we went through just a decade ago, why on earth take the chance?



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Did non-QM just disappear from the market?


The latest victim of the coronavirus might be non-QM lending. After seeing an increase in activity over the last two years, a number of wholesale lenders have suspended non-QM funding this week or they tightened their standards on acceptable FICO scores.

theLender is the latest company to announce that it is out of non-QM altogether, and put out this statement Friday afternoon on their website:

“With U.S. interest rates at historic lows, unprecedented Government stimulus, and the re-entry of the Fed into the agency and Government lending markets, we recognize that there is now not enough capacity in the agency markets to serve a hurting America. With our mission statement declaring that theLender is about ‘delivering customer-centric solutions to help clients realize their dreams,’ we have decided to put the full force of our platform behind the American people. To support the U.S. economy and be a beacon of hope during challenging times, theLender will be prioritizing QM loans for as long as America is in need.

“As of today, effective immediately, we are suspending all non-QM loans. That includes funding any further NonQm loans, locking or registering. We understand this is a burden for our broker clients and their customers but hope they understand this decision during this incredibly difficult time in America.”

Nations Direct Mortgage and Orion Lending are also shuttering their non-QM programs. Justin Simpers, a senior account executive at Orion, posted a video on the topic on Friday.

“Non-QM loans are gone,” Simpers said in the video. “It is sad, but it’s just the hard truth. Liquidity — no one has it. Just like the crash in ‘07-‘08, non-QM is gone.”  

AmWest sent a statement to brokers that they have repriced their portfolio products to market-clearing rates.

Angel Oak Mortgage Solutions is one of the lenders still offering non-QM but tightening standards. The company sent out this message on Friday:

“Angel Oak is financially stable with a strong balance sheet. In order to allocate those resources most efficiently, we have made changes to our rates and guidelines moving forward. If you have active loans in the pipeline with us, please coordinate with your account executive to work through them. For all loans going forward, your account executive stands ready to assist.
 
“I want to stress that this is not a credit issue – these are solid loans that are performing. Unfortunately, the pandemic has caused a state of flux in financial markets that is impacting the entire real estate industry. Angel Oak was formed to provide access to capital for those shut out of the agency market. That mission will continue.”

Also on Friday, Parkside Lending communicated to brokers that they will not be approving any loans with a qualifying credit score of under 660 for all loan products. Previously, the company had been at 580 for government loans and 620 for conventional. Parkside also communicated that they narrowing their jumbo product offering and not offering non-QM.

These companies joined others who shut down non-QM earlier in the week, including Mega Capital Funding, which sent out a message to brokers that stated: “Due to retractions in the financial markets as a response to the coronavirus pandemic, and the uncertainty in the non-Qm space, MCDI will suspend funding on any and all of our non-QM and non-QM related products. This includes registering, locking or pre-locking loans. Any loan with docs signed, we will fund. Any loan without signed docs will be suspended for the foreseeable future or until market stability returns.”

HomeXPress Mortgage Corp. sent a letter that explained they would be “pausing all loan activity in order to complete a proper assessment of market conditions and allow us to create programs suitable for all constituents in the home loan process.”

Meanwhile, Citadel Servicing, which was purchased by HPS Investment Partners in February, continues its non-QM program unabated. But the evaporation of numerous non-QM funding sources means borrowers outside the traditional credit box have fewer options than ever.

This is a developing story.



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