Mortgage Coach, a mortgage platform that enables lenders to educate borrowers with home loan presentations, announced that its platform will be integrated with Insellerate, a customer relationship management (CRM) platform.

The integration streamlines the sales process by enabling loan officers to generate and customize total cost analysis loan presentations with contact data directly from the Insellerate customer relationship management and lead management dashboard, Mortgage Coach said.

Insellerate’s platform, which has a built-in lead management and automated marketing, enables lenders to improve both the borrower and loan officer experience by leveraging tools such as phone, text messaging, email, direct mail, chatbots, and customer monitoring.

“This integration is able to benefit every managed contact automatically, which is especially powerful for both retail loan originators in a market where they must proactively pursue borrower relationships and for consumer direct LOs who cultivate a large volume of relationships over the phone,” said Joe Puthur, chief lending officer at Mortgage Coach.

The integration aims to have loan originators create custom loan comparisons based on borrowers’ financial and homeownership goals, enabling them to convert more leads to loans without leaving the Insellerate platform, Mortgage Coach said.

Mortgage Coach’s side-by-side loan comparisons targets to have borrowers make faster, more informed mortgage decisions while enabling lenders to consistently deliver a consultative home financing experience that increases borrower pull-through, repeat business and referrals. The firm has more than 300 lenders, including brokers, independent mortgage companies, credit unions and banks using its services, according to Mortgage Coach.

Founded in 1999, Insellerate’s mobile application enables loan officers to work on their files from anywhere, the firm said. Its latest solution, AgentConnect, which was rolled out in June, automatically delivers open house flyers, property websites and landing pages through MLS data real-time, aims to bring higher lead conversion rates and cut origination costs.

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Homebuilder confidence slid again in September, hitting its lowest level since May 2014 with the exception of the spring of 2020 at the onset of the pandemic, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) report, released Monday.

In September, builder sentiment in the market for newly built single-family homes fell three points from August to a reading of 46 points. This latest drop marks the ninth consecutive month of declines.

The NAHB/ HMI report is based on a monthly survey of NAHB members, in which respondents are asked to rate both current market conditions for the sale of new homes and expected conditions for the next six months, as well as traffic of prospective buyers of new homes. Scores for each component of the survey are then used to calculate an index, in which any number greater than 50 indicates more homebuilders view conditions as favorable than not.

“Builder sentiment has declined every month in 2022, and the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve that helped pushed mortgage rates above 6% last week, the highest level since 2008,” Robert Dietz, the NAHB’s chief economist, said in a statement.

As buyer traffic slows in many markets across the country, homebuilders are turning to a variety of incentives.

“In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions,” Dietz said.

According to the NAHB, 24% of homebuilders reported reducing home prices, up from 19% a month prior.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” Jerry Konter, an NAHB chairman, said in a statement.

Three other indices monitored by the NAHB also posted declines in September. The gauge measuring current sales conditions fell three points, month over month, to 54, while the component analyzing sales expectations for the next six months fell one points to a reading of 46 and the index charting traffic of prospective buyers posted a one-point drop, to 31 points.

Regionally, the three-month moving averages for HMI scores fell in all four regions, to: 44 in the Midwest, 56 in the South, 41 in the West and 51 in the Northeast.

Another survey, the BTIG/HomeSphere State of the Industry Report, also noted sizable decreases in homebuilder outlook. According to the survey, 61% of respondents saw year-over-year decreases in sales ordered per community in August and 53% reported a yearly decrease in traffic, which is up slightly from the 58% reported a month prior.

The BTIG/HomeSphere study is an electronic survey of approximately 50-100 small- to mid-sized homebuilders that sell, on average, 50-100 homes per year throughout the nation. In August the survey had 72 respondents.

This was the softest reading for the sales order metric and the third softest reading for the traffic metric in the history of the survey.

However, there is some good news for builders. The August BTIG/Homesphere survey contained a special question asking about which building materials have become easier to obtain and/or less expensive than a year ago. Although BTIG said there was quite a bit of variation in anecdotal responses, over half of respondents noted that lumber was less expensive and/or more available and 21% noted that windows were less expensive and/or more available. For 21% of respondents, however, “nothing” had improved.

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Demand for mortgage loans declined last week as mortgage rates reached their highest level since 2008, crossing the 6% threshold. 

The market composite index, a measure of mortgage loan application volume by the Mortgage Bankers Association, fell 1.2% for the week ending Sep. 9, compared to the previous week. It was also down 64% compared to the same week in 2021.  

The refinance index had a 4.2% decline from the previous week and fell 83% from the same week in 2021. Meanwhile, according to the MBA, the purchase index was down 0.15% from the previous week and decreased 28% from the same week in 2021. 

“The 30-year fixed mortgage rate hit the 6% mark for the first time since 2008, which is essentially double what it was a year ago,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. “Higher mortgage rates have pushed refinance activity down more than 80% from last year and have contributed to more homebuyers staying on the sidelines.”

Due to the Federal Reserve’s aggressive tightening monetary policy to combat persistent inflation, the housing market is expected to cool down. 

The Consumer Price Index (CPI) rose 0.1% from the month in August, after remaining unchanged in July, the Bureau of Labor Statistics reported on Tuesday. From a year earlier, prices rose 8.3%, a slight deceleration from July, driven primarily by the recent declines in gasoline prices. 

The hotter-than-expected inflation level ensures that the Fed will hike interest rates aggressively at its upcoming September meeting to tamp down inflation. Another 75 basis point hike could even be on the cards in October.

Consequently, mortgage rates surged on Tuesday. The 30-year fixed rate was at 6.28%, up 30 basis points from Monday, according to Mortgage News Daily.

According to the latest survey from Freddie Mac, the 30-year fixed-rate mortgage rose last week to an average of 5.89%, up from the previous week’s 5.66%. The index compiles only purchase mortgage rates reported by lenders during the past three days.    

MBA’s estimate, however, indicated the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 6.01% this week to the highest level since 2008, from the previous week’s 5.94%. Jumbo mortgage loans (greater than $647,200) increased to 5.56% from 5.46% in the same period. 

The MBA data shows the refinance share of all mortgage activity fell marginally to 30.2% of total applications this week from the previous week’s 30.7%. 

The Federal Housing Administration’s (FHA) share of total applications increased to 13.4% from the previous week’s 13.3%. The Veterans Affairs’s (VA) share of applications rose to 11.3%, from 10.8%, and the United States Department of Agriculture’s (USDA) share went from 0.6% to 0.7%. 

The share of adjustable-rate mortgages (ARM) applications increased to 9.1% this week, from 8.5% of total applications last week. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.83% from 4.81% a week prior. 

“The spread between the conforming 30-year fixed mortgage rate and both ARM and jumbo loans remained wide last week, at 118 and 45 basis points, respectively. The wide spread underscores the volatility in capital markets due to uncertainty about the Fed’s next policy moves,” Kan said.

The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.

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Pennymac and Finance of America followed the tracks of Rocket Pro TPO and United Wholesale Mortgage in raising conforming loan limits ahead of the Federal Housing Finance Agency‘s (FHFA) decision to do so in November.

Pennymac will be increasing conventional loan limits to $715,000 across all channels, said the country’s third largest mortgage lender, according to Inside Mortgage Finance. For loans locked starting from September 13, Finance of America will be temporarily raising its conventional loan ceiling to $715,000 as well, the firm said Friday. Finance of America ranked 30th on IMF’s list of the biggest purchase mortgage lenders by volume.

“We continue to support our customers and partners by providing them with the best options in today’s market,” a spokesperson at Pennymac said. Official 2023 conforming loan limit changes will be determined by the FHFA announcement, the spokesperson added. 

Amid increasing competition in a shrinking origination environment, lenders are being aggressive in offering loans that currently are too large to qualify for Fannie Mae and Freddie Mac, but will in a few months. Those loans today would otherwise be jumbo loans, which require higher down payments and more documentation.

“This move allows borrowers in high-cost counties to access conforming loan pricing – and competitive mortgage rates – at higher loan amounts that would normally require them to take out a jumbo mortgage,” Finance of America said in a release. 

Rocket Pro TPO preemptively raised conforming loan limits this week to $715,000 in anticipation that the federal government will raise the maximum limit for one-unit properties of $647,200 by at least 10%. UWM made the same decision the next day.

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Pennymac is the country’s largest correspondent lender, through which it originates most of its purchase mortgages.

The Housing and Economic Recovery Act established in 2008 determined a formula for increasing conforming loan limits for Fannie Mae and Freddie Mac. The law mandated that the baseline could only rise after home prices returned to pre-recession levels. 

That condition was met eight years later in 2016 when the FHFA increased conforming limits for the first time in a decade. Last year, the FHFA raised conforming loan limits by 18% for one-unit properties and to $970,800 in high-cost areas as well as Alaska and Hawaii. Those loan limits are expected to exceed $1 million for 2023 when the FHFA makes its announcement in late November.

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As mortgage interest rates crept back up in August after retreating the previous month, rate lock volume dipped to a four-year low. 

Total lock volumes were down 8.9% from July, led by a 13.9% decline in rate/term refinance locks, according to Black Knight’s originations market monitor report. Rate/term refi locks dropped 94.5% year over year. 

Cash-out refi locks fell by 8.9% from July and declined by 72.2% from the same period in 2021. While the purchase share of the market remained the same from July at 82%, volume fell by 14.3% from the previous month.

“Mortgage originators continue to feel the effects of interest rate and affordability challenges,” said Scott Happ, president of Optimal Blue, a division of Black Knight. “Facing headwinds of higher rates and a move into the traditionally slower purchasing months, rate lock volumes fell nearly 9% overall in August to their lowest level since December 2019,” he said.

The purchase lock count, which excludes the impact of soaring home values on volume, is down 30% from 2021 and off 16% from 2019, marking the second consecutive month the number of purchase locks fell below pre-pandemic levels.

Ahead of the Federal Reserve’s anticipated rate hike later this month, the 30-year conforming fixed-rate mortgage rates have been trending upward, closing out August at 5.8%, according to Black Knight’s Optimal Blue OBMMI pricing engine. 

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HousingWire recently spoke with Lee Smith and John Gibson at Flagstar Bank about what originators can do to align their products and services with the ebb and flow of the housing market.

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The Fed is widely expected to raise interest rates for the fifth time following the Federal Open Market Committee (FOMC) meeting on Sept. 20 and 21, based on comments by Chairman Jerome Powell.

“History cautions strongly against prematurely loosening policy,” Powell said at the Cato Institute on Thursday, the last scheduled public appearance before the Fed’s meeting. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.” 

Rising interest rates continue to have “profound effects on home affordability, which returned to near 35-year lows to close out the month,” Happ said. While home prices saw the largest single-month decline  since January 2011 at 0.77% in July from the previous month, compared to the same period last year, home prices rose 14.5%, according to Black Knight’s separate report.

The average purchase price among homes being financed fell by almost $12,000 in August and is now down by more than more than $43,000 since March. The average loan amount dropped $4,000 to $340,000 in August, marking the fifth consecutive decline as home prices fell month over month for the first time in three years. 

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Freddie Mac is unveiling its ninth credit-risk transfer transaction of the year via its Structured Agency Credit Risk (STACR) program — bringing the total note offerings through its two flagship STACR series programs to $12.2 billion so far in 2022.

This agency’s most recent credit risk transfer (CRT) offering, STACR 2022-DNA6, involves a $1.165 billion note backed by a reference loan pool of 112,865 residential mortgages with an outstanding principal balance of $35.6 billion, according to a presale report by Kroll Bond Rating Agency (KBRA). This latest transaction, based on a tally of deal data to date, brings the total volume of reference pool single-family loans to $305.8 billion for the $12.2 billion in STACR risk-transfer note offerings this year. The reference pools are composed of a total of nearly 1.1 million single-family mortgages. 

The offering totals were tallied across the agency’s two flagship STACR risk-sharing vehicles, which to date include six STACR-DNA and three STACR-HQA series offerings. The STACR-DNA series is designed for reference-pool mortgages with loan-to-value (LTVs) ratios ranging from 60% to 80% while the STACR-HQA series is designed for high LTV loans (80% to 97%), according to the agency.

Through Freddie Mac’s STACR transactions, private investors participate with the agency in sharing a portion of the mortgage credit risk in the reference loan pools retained by the agency. Investors receive principal and interest payments on the STACR notes they purchase, but if credit losses exceed a predefined threshold per the security issued, then investors are responsible for absorbing the losses exceeding that mark. 

“The STACR 2022-DNA4 … structure reduces the amount of counterparty exposure by limiting the payment obligations of Freddie Mac to reimbursements and indemnifications in the event that the trust assets do not yield sufficient cashflow to pay note interest and principal,” the KBRA presale ratings report states. 

The leading loan originators represented in the reference loan pool for STACR 2022-DNA6, based on a percentage basis, according to KBRA’s ratings report, are United Wholesale Mortgage (UWM), 11.9%; J.P. Morgan Chase Bank, 6.5%; Rocket Mortgage, 6.4%; and Wells Fargo, 4.7%. The average loan balance in the reference pool is $315,272, with the maximum balance at $1.56 million. 

The weighted average interest rate for the reference loan pool is 3.29%. The 30-year fixed mortgage rate averaged 5.89% this week, up from 5.66% the prior week, according to the most recent Freddie Mac Primary Mortgage Market Survey.

“CPRs [conditional repayment rates] may continue to slow and may remain low in such a rising interest rate environment as borrowers have ‘locked in’ low mortgage financing and have a reduced incentive to refinance,” the KBRA presale report states. “Lower prepayment rates extend the average life of mortgage portfolios and can generally cause a larger set of borrowers to be exposed to economic stresses, which can lead to increased levels of defaults and losses.” 

KBRA’s presale ratings report on the STACR 2022-DNA6 offering indicates that appraisal waivers were granted for 26.8% of the reference pool loans, which were assessed instead through the agency’s Automated Collateral Evaluator, or ACE, system. 

“Loans with appraisal waivers have comprised an increasing percentage of agency loans, including those in CRT reference pools,” the KBRA report continues. The report also notes that “a broad valuation haircut” is applied to such loans, primarily because a property review and valuation were not conducted for the mortgages originated with the appraisal waivers. 

The KBRA report also mentions that the loan reference pool for this latest Freddie Mac CRT offering has far more geographic diversity when compared with a typical prime-jumbo residential mortgage-backed securities offering. That diversity helps to mitigate the risk that an economic crisis or natural disaster will create disproportionate risk for the reference loan pool. 

“When considering the average California percentage in KBRA-rated prime jumbo pools (approximately 45% to 50%), the California concentration in STACR 2022-DNA6 is relatively low at 18.5%,” the KBRA report states. 

The initial STARC deal of this year, STACR 2022-DNA1, was a $1.4 billion note offering issued against a reference loan pool of 190,774 residential mortgages with an outstanding principal balance of $33.6 billion. In the second offering, STACR 2022-DNA2, the agency’s largest offering to date, Freddie issued a $1.9 billion note against a reference pool of 143,889 single-family mortgages valued at about $45 billion.

Since then, Freddie has issued seven additional STACR credit-risk sharing offerings through the STACR DNA and HQA flagship series, including the most recent offering, for a total of nine offerings to date. The leading originators for the single-family mortgage reference pools linked to those transactions are UWM, J.P. Morgan Chase, Wells Fargo, Pennymac, Rocket Mortgage, Amerihome and Newrez LLC, according to presale reports from KBRA and DBRS Morningstar bond rating agencies.

RPL and NPL offerings

In related news, Freddie Mac also announced its second Seasoned Credit Risk Transfer Trust (SCRT) offering of the year, SCRT 2022-2, which is a securitization of 3,105 reperforming loans (RPLs). The deal, Freddie’s 21st since the SCRT program was launched in 2016, entails a total note offering of some $537 million — divided into $492 million in guaranteed senior certificates and $45 million in mezzanine and subordinate certificates. 

“Advisors to this transaction are J.P. Morgan Securities LLC and Wells Fargo Securities LLC, as co-lead managers and joint bookrunners, and BofA Securities Inc., Citigroup Global Markets Inc., Nomura Securities International Inc. and Academy Securities Inc.… as co-managers,” Freddie Mac’s announcement of the offering states. “… The transaction is expected to settle on September 14, 2022.”

The initial deal of the year in the RPL-securitization series, SCRT 2022-1, involved a $1 billion note offering — also composed of guaranteed senior and nonguaranteed subordinate certificates — backed by a total of 6,677 seasoned reperforming single-family mortgage loans. Since 2016, Freddie Mac has issued $29.8 billion of guaranteed certificates and approximately $3.6 billion of nonguaranteed certificates through the SCRT program, according to the agency.

In yet another development, Freddie Mac’s sister agency, Fannie Mae, announced its second sale of nonperforming loans (NPLs) so far this year — and its 20th sale since the inaugural NPL offering in 2015. The whole-loan offering, dubbed FNMA 2022-NPL2, is carved into four pools composed of a total of 5,780 nonperforming loans valued at $959.1 million based on unpaid principal balance — plus a smaller Community Impact Pool (CIP) consisting of some 70 loans valued at $16.3 million.

“CIPs are typically smaller pools of loans that are geographically focused and marketed to encourage participation by non-profit organizations, minority- and women-owned businesses and smaller investors,” Fannie Mae stated in announcing the offering.

The sale of non-performing loans is being marketed with the help of BofA Securities Inc. and First Financial Network Inc., which are acting as advisors. Bids are due by October 4 on the four larger pools and by October 18 for the CIP pool.

Fannie Mae’s inaugural nonperforming loan sale of 2022, FNMA 2022-NPL1, was an offering carved into three loan pools — including a small Community Impact Pool — secured by a total of 3,440 loans with an aggregate unpaid principal balance of $525.9 million.

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Demand for mortgage loans declined last week as the markets continue to exert pressure on rates. With the 30-year fixed-rate hovering above the 6% level again, there’s no sign of a rebound in applications yet, despite a robust job market and growing housing inventory.

The market composite index, a measure of mortgage loan application volume, fell 0.8% for the week ending Sep. 2, compared to the previous week, according to the Mortgage Bankers Association (MBA). It was also down 63.4% compared to the same week in 2021.  

“Mortgage rates moved higher over the course of last week as markets continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a statement.

The MBA estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 5.94% this week to the highest level since mid-June, from the previous week’s 5.80%. Jumbo mortgage loans (greater than $647,200) increased to 5.46% from 5.32% in the same period.

Mortgage rates tend to reflect the Federal Reserve’s moves to combat inflation. At an economic policy symposium in Jackson Hole, Wyoming, at the end of August, Chairman Jerome Powell said the Federal Open Market Committee (FOMC) would continue to be tightly focused on bringing inflation back down to its 2% goal. 

“Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand,” said Fratantoni. “There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.”

According to the MBA, the purchase index was down 0.65% from the previous week and decreased 23.4% from the same week in 2021.

Meanwhile, the refinance index declined 1% from the previous week and fell 83% from the same week in 2021. Refinance share of all mortgage activity increased to 30.7% of total applications last week from the previous week’s 30.3%. 

The Federal Housing Administration’s (FHA) share of total applications increased to 13.3% from the previous week’s 13%. The Veterans Affairs’s (V.A.) share of applications fell to 10.8% from 11.1%, and the United States Department of Agriculture’s (USDA) share held steady at 0.6%. 

The share of adjustable-rate mortgage (ARM) applications remained unchanged at 8.5% this week. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.81% from 4.78% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.

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A coalition of 21 affordable housing groups on Wednesday said Fannie Mae and Freddie Mac made important improvements to their plans to offer housing financing in underserved markets, but still have a ways to go.

The Underserved Mortgage Markets Coalition, which includes the Center for Community Progress, the National Housing Conference, the National Council of State Housing Agencies, the National Community Stabilization Trust and the Lincoln Institute of Land Policy, on Wednesday released its scorecard on the government-sponsored enterprises’ 2022-2024 “Duty to Serve” plans, which were produced on April 27 after the prior plans were rejected by Sandra Thompson, the FHFA director.

The federal regulation requires that the GSEs prioritize and improve affordable housing opportunities related to manufactured housing, affordable housing preservation and rural housing.

“The scorecard recognizes significant improvement in the latest plans compared with the versions released a year earlier,” the UMMC, which is spearheaded by the Lincoln Institute, said in a statement Wednesday. “However, the scorecard finds that Fannie Mae and Freddie Mac failed to fully implement a majority of the improvements recommended in the Blueprint for Impactful Duty to Serve Plans, which the UMMC released January 20.”

In October 2021, affordable housing groups heavily criticized the GSEs for seeking to eliminate programs to purchase chattel loans and for reducing loan targets for manufactured housing, affordable housing preservation and rural housing.

Affordable housing advocates in particular have sought a stronger commitment from the GSEs on manufactured housing. On that front, the scorecard presents a mixed grade for the enterprises.

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“Neither Fannie Mae nor Freddie Mac is substantially increasing its commitment to help manufactured housing homeowners obtain real property loans,” the UMMC said in its scorecard, noting that Fannie Mae is targeting the purchase of 9,500 real property loans for manufactured housing by 2024 and Freddie Mac is targeting between 6,300 and 7,500. Those targets fall short of prior years. Fannie Mae’s 2021 target was 12,650 loans, and Freddie Mac’s 2021 target was 8,200 loans.

Freddie Mac, however, agreed to a pilot program to purchase between 1,500 and 2,500 manufactured homes not titled as real property, better known as chattel loans, which make up 42% of the manufactured housing market. Those loans tend to have fewer consumer protections than mortgages and higher interest rates. Fannie Mae has not yet committed to buying chattel loans, which the coalition encouraged.

The scorecard for rural housing finance was also mixed. Fannie Mae met the UMMC’s recommendation of 13 loans related to Section 515 property investment, a key financing program for rental housing in rural areas. Freddie Mac projects to make four transactions by 2024, below the UMMC’s recommendation of 13.

“The USDA anticipates 183 Section 515 properties will exit the program between 2022- 2024,” the UMMC said. “Fannie Mae’s significant loan purchase will substantially preserve affordability for rural renters. Freddie Mac’s lower targets will do much less to mitigate the loss of affordable housing.”

Neither of the GSEs adopted the UMMC’s recommendation to target 10% of their loan purchase to low- and moderate-income families in areas with high energy cost burdens.

However, both made some improvements related to single-family affordable housing preservation targets, notably in loan purchases for shared equity homes.

“Fannie Mae will increase loan purchases for borrowers of shared equity homes by 100% above its baseline by 2024 and is working to update its Selling Guide to promote standardization,” the UMMC said. Freddie Mac also updated its selling guide and is looking at ways to increase lender participation.

In a statement, the UMMC said it hopes that “both companies will work collaboratively to amend their DTS plans so that the UMMC can issue an updated DTS scorecard with higher scores.”

In response, Fannie Mae on Wednesday said it appreciates UMMC’s “continued interest in our DTS plan and the work we have underway to achieve our objectives. We look forward to our continued engagement with the UMMC members, other industry stakeholders, and our business partners to provide innovative solutions to expand access, explore options, and knock down barriers in these underserved markets across the country and help more families have an affordable place to call home.”

Freddie Mac responded: “Freddie Mac appreciates the input of stakeholders as we work toward the objectives set forth in our Duty to Serve plan. The plan builds on our first three-year initiative with ambitious but appropriate targets. We are continually evaluating what opportunities exist to do more in support of underserved markets.”

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As a financial technologist specializing in mortgage since long before “fintech” was a thing, I appreciate how tough market cycles force us to focus.

For some individuals and companies, this is your first mortgage down cycle. For others, it’s just a new chapter in your journey. But one thing is certain for all of us: without technical expertise, fintech is just a buzzword, and markets like this are when we earn our place serving America’s consumers.

So below, I highlight some beyond-the-headlines opportunities and offer tips to companies and individuals as we navigate this fintech winter of 2022.

Warm spots in the fintech & mortgage winter

We all know firsthand the pain of today’s sharp cut in mortgage activity. Refi volume and units from 3Q21 to 3Q22 are down 83.6% and 76.5%, respectively. Plus purchase volume and units are down 22.4% and 21.9% respectively in the same period. 

In crypto, the total sector market cap is down 61.8% from $2.5 trillion in 3Q21 to $954 billion now. And in broader financial technology, public company fintech valuations are down 70-80%.

These valuation declines hit category-leading software fintechs even though they have huge lender customers – and hit originator servicer fintechs even though they have hundreds of billions in volume and servicing portfolios.

But all is not frozen as winter approaches. The warm spot in mortgage and fintech this winter will be that our industry has $13.3 trillion in outstanding mortgages and will still originate about $2.3 trillion in new volume this year. There are plenty of opportunities for people and companies in an industry this big.

The $2.3 trillion in new volume this year is 6.6 million units, 67% of which are purchases. These may become refis as soon as next year when the MBA predicts rates will drop from current levels in the upper 5% range to the upper 4% to low 5% range by 3Q23. Yes, these projections are market dependent and change monthly,but they reflect broad macroeconomic and housing trends, so here are two takeaways: 

For originators, use these technicals to keep you focused on your purchase game, use your advisory skills to educate your home buyers on what’s going on beneath the headlines and use your fintech stack to remain engaged with your customers. 

For servicers, remember that 65.8% of occupied housing units in America are owner-occupied. These folks all need help optimizing financial plans using today’s record home equity, thinking about whether life events will cause them to need to trade homes or managing hardships that will inevitably hit some as the Fed’s inflation fight plays out.   

Now let’s look at how the cycle may play out for companies and individuals. 

Mortgage & fintech companies must focus

We’ll continue to see two things with companies from here. 

First, lenders will continue to adjust budgets and strategies. This will likely include continued headcount reductions to align with current volume and fine tuning of certain visions. Examples include some lenders reducing channels to those most strategically important for them. 

If a great full cycle retail shop added wholesale or correspondent in past cycles, they may pare back to their core strengths. Or if a great full cycle, consumer direct shop added non-mortgage or mortgage adjacent businesses to gain consumer wallet share in recent years, they may revert to mortgage-only for a while.

Second, software companies will continue reducing budgets, fine-tuning visions and seeking out smart deals. Some may reduce to absolute core platforms and some may lean into long-term visions. 

If a great POS or marketing firm was adding new mortgage channels and/or non-mortgage capabilities, they may refocus efforts on the most reliable products for customer success and recurring revenue. Or in the case of Sagent, we’ve been leading homeowner-first servicing modernization in America and we’re using this market moment to lean into our long term vision. This includes long term alignments like our cloud-native servicing software deal with Mr. Cooper. 

When executed well by mortgage and fintech firms, these actions help you focus and refine.

Mortgage & fintech pros must become utility players

In our case, we’ve used this market not just to focus on our long vision, but also to keep building talent for a market segment – servicing – that requires great technical expertise.  

The Sagent/Mr. Cooper deal wasn’t just about Mr. Cooper, one of America’s largest servicers, becoming a software client of Sagent. 

It was about combining the best of Mr. Cooper’s and Sagent’s servicing fintech platforms under Sagent to deliver the most modern core, consumer, and default servicing to our industry. 

So it included moving 200 Mr. Cooper fintech employees over to Sagent, and this is a landmark case study of mortgage expertise making people more versatile in fintech.

Because the Mr. Cooper team had so much mortgage experience from being inside a large lender/servicer, they are the gold standard for talent in our highly technical, highly regulated space.

With technical expertise, your optionality as a mortgage and/or fintech pro is simply huge.

It makes you able to easily switch between the lender/servicer and fintech software sides of our industry. And when the market moves like it has this year, the opportunities move as well. 

If you’re a utility player, these opportunities are yours.  So as this challenging cycle plays out further this winter, ask yourself: 

Is your mortgage resume relevant for the fintech era? 

For many, the answers come back to your technical skills, which then enable you to be a utility player. If this sounds like you, your opportunity set will stay warm. 

Best of luck to all companies and individuals this winter, and please reach out with your thoughts on this topic. 

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An influential banking trade group this week argued that the Federal Housing Finance Administration (FHFA) should not permit nonbank lenders and real estate investment trusts to become members of the $1 trillion Federal Home Loan Bank system.

In a statement issued Tuesday, Rebecca Romero Rainey, president of the Independent Community Bankers of America, said the FHLBs must “remain a strong, stable and reliable source of funding for community banks, including many agricultural lenders.”

The FHFA is conducting a comprehensive review of the 90-year-old FHLB system – currently composed of 11 regional FHL banks and about 6,800 member institutions – beginning in the fall. The FHL banks distribute money from global bond markets to members that include thousands of commercial lenders, thrifts, credit unions and insurers across the U.S. Member institutions are able to borrow money cheaply and can pass savings on to members.

The ICBA said it “strongly” opposes any efforts to “compromise” the system’s regional and cooperative structure, permit non-depository banks access to FHLB programs or services, or consolidate the system without the “grassroots leadership” of its member-owners.

The FHFA, which regulates the FHLB system as well as Fannie Mae and Freddie Mac, said it is specifically interested in receiving feedback in six key areas: The FHLBanks’ general mission and purpose in a changing marketplace; FHLBank organization, operational efficiency, and effectiveness; FHLBanks’ role in promoting affordable, sustainable, equitable, and resilient housing and community investment; Addressing the unique needs of rural and financially vulnerable communities; Member products, services, and collateral requirements; and Membership eligibility and requirements.

While the ICBA and the American Banking Association have spoken out against nonbanks gaining access to the FHLB system, other influential trade groups have sought a different outcome, arguing that the FHLB system is archaic, primarily channels government subsidies to large banks and doesn’t serve the housing market optimally.

The Mortgage Bankers Association notably has pushed for inclusion of nonbanks and real estate investment trusts. In a letter to then-FHFA Director Mark Calabria in 2020, the trade group said an expansion should “better reflect the diverse providers of single-family and multifamily housing finance throughout the country.”

Opening up membership to nonbanks and real estate investment trusts would require legislation and would likely take years.

Originally Appeared Here