Mortgage Banker Magazine August 2021

NON QM DIRECTORY

CA MORTGAGE EXPO

DATABANK AUGUST 2021

MortgageBanker MAGAZINE

TALENT ON TRIAL WHY LENDERS NEED TO RE-THINK THEIR WORKFORCE

TECH CITIES BUCK BUYING TREND STATES REVISIT WFH REGS

A PUBL I C ATI O N O F A M E R IC AN B U S IN ES S M ED IA

WHAT MLOs

NEED TO KNOW ABOUT

COMING INFLATION

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REGULATORY CORNER FEDERAL COMPLIANCE AGENCIES TO ACT JOINTLY ON CRA RULES MODERNIZATION The FRB, the FDIC, and the OCC issued an interagency statement on CRA Joint Agency Action. The agencies said they are “committed to working together to jointly strengthen and modernize regulations implementing” the CRA. “Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.”

The OCC announced it will propose rescinding the CRA rule issued in May 2020 and is committed to working with the Federal Reserve Board and the FDIC to put forward a joint rulemaking that strengthens and modernizes the CRA. The decision to propose rescinding the 2020 rule follows the completion of a review initiated

by Acting Comptroller of the Currency Michael Hsu shortly after he took office.

FHFA CANCELS ADVERSE MARKET REFINANCE FEE The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will eliminate their controversial Adverse Market Refinance Fee for loan deliveries effective August 1, 2021.

To allow families to save more money, lenders will no longer be required to pay the Enterprises a 50-basis point fee when they deliver refinanced mortgages. The fee was designed to cover losses projected because of the COVID-19 pandemic. The success of FHFA and the Enterprises’ COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee. FHFA’s expectation is that those lenders who were charging borrowers the fee will pass cost savings back to borrowers.

AGENCIES PROPOSE RISK MANAGEMENT GUIDANCE FOR 3RD-PARTY RELATIONSHIPS The federal bank regulatory agencies (Board of Governors, FDIC, and OCC) on Tuesday requested public comment on proposed guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology-focused entities. The proposed guidance is intended to assist banking organizations in identifying and addressing the risks associated with third-party relationships and responds to industry feedback requesting alignment among the agencies with respect to third-party risk management guidance.

Banking organizations that engage third parties to provide products or services or to perform other activities remain responsible for ensuring that such outsourced activities are conducted in a safe and sound manner and in compliance with all applicable laws and regulations, including consumer protection laws.

Comments must be received by September 17, 2021. · Joint agency press release · Fed Board memo with Executive Summary of proposed guidance

MortgageBanker OUR MISSION Mortgage Banker magazine is dedicated to providing quality informational/educational content that betters the mortgage process at every step. The content is oriented to help professionals progress their understanding of the residential mortgage banking business and develop their skills at improving the efficiency and profitability at all levels.

VINCENT VALVO, CEO, Publisher & Editor-in-Chief vvalvo@ambizmedia.com ASSOCIATE PUBLISHER Beverly Bolnick bbolnick@ambizmedia.com FOUNDING PUBLISHER Ben Slayton BSlayton@ambizmedia.com EDITOR David Krechevsky davek@ambizmedia.com STAFF WRITER Katie Jensen kjensen@ambizmedia.com SENIOR EDITOR Jill Emerson Jill@ambizmedia.com ADVERTISING David Hoierman David@ambizmedia.com GRAPHIC DESIGN MANAGER Christopher Wallace cwallace@ambizmedia.com MARKETING MANAGER Michael Castro mcastro@ambizmedia.com GRAPHIC DESIGN Stacy Murray smurray@ambizmedia.com HEAD OF ENGAGEMENT AND OUTREACH Andrew Berman andrew@ambizmedia.com DIRECTOR OF STRATEGIC GROWTH Alison Valvo avalvo@ambizmedia.com ONLINE CONTENT DIRECTOR Navindra Persaud npersaud@ambizmedia.com USER EXPERIENCE DESIGNER Billy Valvo bvalvo@ambizmedia.com MARKETING & EVENTS ASSOCIATE Melissa Pianin mpianin@ambizmedia.com

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MORTGAGE BANKER | AUGUST 2021 3

MB ST R AT E GI E S

VALUE PROPOSITION

WHAT MLOs NEED TO KNOW ABOUT HOUSING AND INFLATION

T

By R O B CHR IS M A N, M ORTG AGE BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER

op loan originators, whether at a depository bank, mortgage bank, brokerage, or credit union, all have a wide variety of tools at their disposal. And their jobs encompass a wide range of disciplines: marketing, sales, economics, small business administration, psychology, math, and organizational behavior all come into play on a daily basis in varying degrees. Good MLOs know what to focus on and where to spend time, and what isn’t as important for their clients. They also know how to use the tools, and enough about each discipline to help borrowers.

With this is mind, and as we move past the summer of 2021, one of the key topics influencing mortgage rates is inflation.

Economists disagree (of course) as to the extent of current and possible inflation. But every MLO should be prepared to discuss the topic with their borrowers and explain it. After all, in today’s global economy, fears of inflation are front and center after the massive government stimulus in response to the COVID-19 pandemic. And so, we find MLOs being asked by clients about inflation, the direction of interest rates, and the economy in general. MLOs understand that their clients should comprehend the ins-and-outs of inflation, how it might impact their mortgage decision, and how it might impact their long-term view of housing.

PRICE DISCOVERY

We are all constantly doing price discovery.

What does a gallon of gas cost at the corner station? How much is that favorite bottle of wine? How much is a new pair of jeans, or my Value Meal at McDonalds? We may

4 MORTGAGE BANKER | AUGUST 2021

not be purchasing a load of 2x4’s economic recession, consumers every week, but we watch the don’t spend like they usually do price of our Dunkin’ Donuts’ and instead opt to save. We saw coffee go up and down. Inflation, that in 2020 as the savings rate usually measured by the price of moved above 20 percent, nearly a basket of goods and services, is unheard of. (In a “typical” year an economic term that refers to a it tends to hover around 3-4 general rise in the price of goods percent.) Consumers expected and services in an economy. A a potential loss in consumptionROB CHRISMAN rise in prices causes the dollar to ability, like losing a job or falling lose purchasing power. That cup real wages, so stopped spending of coffee that is $2.00 today and $2.10 in a and began savings. year is a 5 percent increase.

That is a double-edged sword, as MLOs The inflation rate is a proxy for have seen. Sure, it adds to the coffers of understanding how much the average potential home buyers, increasing their household’s cost of living rises per year down payments. But if consumers aren’t by quantifying how much more it costs to spending, business production declines, buy everyday goods, such as gas, groceries, employees are laid off, and people make toilet paper, toothpaste, and other common fewer investments, possibly creating a consumer goods costs relative to how downward spiral for an economy. much they cost in the past. Returning to That is where the U.S. Federal Reserve the coffee example above, if coffee was up and central banks around the world (Bank 5 percent but your client’s salary has gone of England, Bank of Japan, etc.) often try to up 6 percent, well, that is not a big deal. If counteract the withdrawal of consumers by your client’s salary went up 4 percent, that’s increasing the money supply to stimulate a potential problem. consumption and investment. By banks pumping more money into the economy SAVED and reinvigorating it, consumers will have As the pandemic rolled along in 2020, the the confidence to spend more in businesses uncertainty or hardship caused consumers that, in turn, can invest in new or existing to hunker down. Given the prospect of an products and services.

INFLATION EFFECTIVELY REWARDS BORROWING, WHETHER IT IS AN INDIVIDUAL, A COMPANY, OR A GOVERNMENT. BUT IT DISINCENTIVIZES LENDING.

So, inflation is good, right? No, but your clients should know that sometimes it can be. First, keep in mind that money can enter circulation without causing inflation, and that increased investment can do things like enabling technical innovations that are generally deflationary since goods and services are produced at a lower cost and are more efficient. Your clients may use “new” money to save or pay down debt. Money can be used to hire new workers, give bonuses, or raises to existing employees, and make their company more stable.

HOME THINKING

MLOs should also be able to talk to clients about the impact of inflation on their homes. Economists have seen time and time again that “normal” levels of inflation (thought to be 2-3 percent per year) increase in value of scarce asset holdings such as real estate. Put another way, if someone is holding on to cash, earning .25 percent on their bank account, and that cup of coffee is going up 5 percent, that is not a good situation. High inflation is a good thing for debtors because the money they pay back gradually becomes less valuable. If Mr. & Mrs. Nguyen borrowed $300,000 from the bank with a 3 percent annual interest rate and suddenly the economy experiences 10 percent inflation, the Nguyen’s would see their debts at a 7 percent discount in terms of purchasing power.

So, inflation effectively rewards borrowing, whether it is an individual, a company, or a government. But it disincentivizes lending. When inflation expectations are high, assuming no central bank intervention, nominal rates will rise to offset the long-term decline in currency value for lenders. Most central banks, including our Federal Reserve, closely monitor the inflation rate and set an annual inflation target of roughly 2–3 percent, which they believe promotes a certain level of spending while stimulating sustainable economic growth.

HEDGING THEIR BETS

Meanwhile, your clients should be made to understand that investing in real estate is a popular inflation hedge because property values tend to increase. (Inflation aside, we’re seeing the results of demographics as millions of people in their 20s and 30s have entered the home buying age, bidding up the limited supply of homes.) An increase in property values is due to input costs, like lumber, concrete, nails, going up. Builders demand higher home prices to offset borrowing costs. All of this creates a cycle that is a boost for property owners.

Is a lot of inflation good? No. And one wonders if the constant talk of it in the mainstream press is warranted.

The Federal Reserve has done a fine job in keeping the economy stable despite the pandemic, and along with it, inflation has been relatively tame. MLOs should be able to explain inflation to clients, why it can be a very good thing for homeowners, and how the economic stability has helped them. Let’s hope it continues.

MORTGAGE BANKER | AUGUST 2021 5

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THE ‘OM-BOBS-MAN’

Flexibilities Move Forward

T

By B O B NIEM I, M ORTG AG E BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER

here’s been a lot of discussion on progress with state mortgage regulators on remote work and modernization of branch licensing.

The pandemic provided both licensed mortgage companies and state regulators with real life remote work experiences. This understanding and MBA efforts have states reviewing regulations that mandate originators operate only from a licensed location.

The Mortgage Bankers Association has been working with a team of licensing advocates to expand mortgage licensing flexibilities and allow the mortgage business to provide access to more homebuyers. The main pillars of the effort are removal of in-state brick and mortar branch requirements, remove commutable distance limits and repeal regulations requiring work only from a licensed location.

In my last column, I mentioned Arkansas, Maryland, Vermont and Washington as states that have already taken action to amend regulation and provided expanded work from home. These four successes are a good start, but four more states have recently published their expanded remote work efforts.

Connecticut: On July 1, 2021, Commissioner Perez issued an order establishing requirements for conducting business from a remote location. The 100-mile commutable distance rule was also removed. Connecticut did include the need to maintain records identifying the dates and locations of authorized remote office activity along with other requirements consistent with previous state agency guidance on remote work during the pandemic.

Kansas: On June 30th the state issued public guidance to allow remote work with a plan to introduce language in 2022 legislative session to codify this policy that originators and processors are not required to only work from a licensed office. Like all state actions, CML-2021-1 should be reviewed in detail, but the guidance states that mortgage

companies should be mindful of the best practices offered for remote workers during the pandemic.

Massachusetts: On July 12th, the Division of Banks provided guidance to formally authorize the continued option for personnel to operate remotely from non-licensed locations, but subject to nine conditions detailed in the memo. While eight aligned with previous requirements from other state flexibilities, information regarding the specific activities conducted by personnel via remote work must be maintained and available upon request by the Division was also included.

We encourage you to review the Guidance to Licensees and Registrants Regarding Employee Remote Work for full details.

Texas: Texas passed House Bill 3617 which removes the previous requirement for mortgage companies under section 156 to maintain a physical office in Texas. However, offices in Texas that conduct mortgage business will still need to be licensed. This goes into effect on September 1, 2021.

Key state regulators have acknowledged the need to modernize and recognize how the mortgage world operates. The effort continues with several bills in the legislative process and more efforts to introduce branch licensing flexibility and allow remote work for all mortgage staff. These efforts began more than two years prior to the pandemic but will continue as advocacy pushes for modernization and increased access to credit.

For more information and how you can advocate for flexibility in your state, visit www.mba.org/ LicensingFlexibility/

MORTGAGE BANKER | AUGUST 2021 7

8 MORTGAGE BANKER | AUGUST 2021

MORTGAGE BANKER | AUGUST 2021 9

10 MORTGAGE BANKER | AUGUST 2021

Renters Get Priced Out

BUYING A STARTER HOME IS MORE AFFORDABLE THAN RENTING IN NEARLY HALF OF THE BIGGEST U.S. METROS

A

s rents continue to hit new highs and mortgage rates remain low, buying a starter home now costs less per month than renting a similar-sized unit in 24 of the 50 largest U.S. metros, according to the Realtor.com Monthly Rental Report.

The top markets where it’s more affordable to buy a starter home versus rent one include: Birmingham, Ala. (33.1% lower), St. Louis, Mo. (29.4% lower), Pittsburgh (27.7% lower), Orlando (25.9% lower) and Cleveland (25.7% lower).

Nationally, rents continued rising at an unusually fast pace in July, up 9.8% over last year and 12.2% since 2019. All unit sizes tracked by Realtor.com® posted rent gains and hit new highs: Two-bedrooms at $1,802 (+10.9%), one-bedrooms at $1,495 (+9.5%) and studios at $1,315 (+5.6%).

“Rents hit new highs in 40 of the 50 largest U.S. metros this July and grew at an almost double-digit pace – the fastest yearly rate we’ve seen in the last 18 months,” said Realtor. com Chief Economist Danielle Hale. “Skyhigh rents and historically low interest rates have made the monthly cost to buy a starter home lower than renting one in nearly half the markets across the U.S. While this is good news for first-time buyers in these metros, there are plenty of other factors to consider when deciding whether to become a homeowner, including making sure it’s the right time for you and your family. But if the monthly costs have been holding you back, data suggests it’s worth exploring in many markets, and although it’s still hard to find entry-level homes, we are seeing more smaller homes coming on the market.”

COVID EFFECTS

Hale added, many of July’s highest rent gains were seen in secondary markets where rental demand has exploded during COVID, driven in part by remote work enabling employees to escape crowded, expensive big cities – at least temporarily. With the future of remote

work uncertain for many Americans, first-time homebuyers saw less of a frenzy than renters in a number of July’s highest-priced rental markets. This has helped keep monthly starter home costs an average 15.5% ($216) lower than rents in nearly half of the 50 largest U.S. metros. (See methodology below.)

RELATIVE AFFORDABILITY

In the top 10 metros that favored first-time homebuying over renting in July, monthly starter home payments were an average 24.3% lower than rents, driven in part by lower median listing prices ($192,000) than the national average ($297,000). The types of starter homes for sale also play a key role in monthly payments, with active inventory in these buyer-friendly metros including nearly two times the share of single-family starter homes (56.1%) than in condo-heavy markets that favor renting.

In July, the top 10 markets that favored buying over renting were: Birmingham, Ala. (33.1% lower), St. Louis, Mo. (29.4% lower), Pittsburgh (27.7% lower), Orlando (25.9% lower), Cleveland (25.7% lower), Tampa (22.9% lower), Baltimore (20.5% lower), Indianapolis (20.4% lower), Virginia Beach (19.2% lower) and Riverside, Calif. (18.5% lower).

Many of these metros also posted sizeable rent gains over last year in July, led by Riverside (+29.7%), where the median rental price of $2,230 was 18.5% ($413) higher than starter home payments, at $1,817 per month. Even with the surge in prices, Riverside rents were relatively lower than in nearby Los Angeles ($2,742), making the metro an attractive option to big city renters looking to save during COVID. Compared to Los Angeles, first-time homebuyers in Riverside saw 51.5% lower asking prices and nearly three times the share of single-family starter homes, at 75.1% of entry-level inventory in July.

TECH CITY TRENDS

Typically some of the nation’s most expensive housing markets, big tech hubs largely favored

renting over buying a starter home in July, partly attributed to higher condo HOA fees.

Among 0-2 bedroom homes in these top 10 cities, over seven-in-ten (71%) were condos, on average, compared to 58% nationwide, while median HOA fees of $334 among homes that had this fee were 27% higher than the U.S. median ($263).

Seven of the top 10 markets where monthly starter home costs were higher than rents are tech-heavy areas, including: Austin, at 79.2% higher; San Jose, at 47.5% higher; San Francisco, at 44.4% higher; Seattle, at 44.2% higher; Boston, at 40.9% higher; Los Angeles at 39.4% higher; and New York, at 32.0% higher.

While rental prices have surpassed preCOVID levels in the majority of U.S. markets, rents in many of the biggest tech cities have yet to catch up to historical peaks. Among the 50 largest U.S. markets, the only four where rents declined from last year in July were all big tech hubs: New York (-6.1%), Boston (-3.7%), San Francisco (-2.9%) and Chicago (-1.4%).

Leading the list of metros that favor renting by a wide margin, at $1,228 higher monthly starter home costs than rents, Austin is currently one of the nation’s most competitive housing markets. While costs like median HOA fees are relatively lower in Austin compared to other big tech cities, at $104 versus $1,222 in New York, first-time homebuyers are competing for limited affordable options, with 0-2 bedroom home inventory down 59% year-over-year and prices up 17.5% to a median $431,000 in July.

“Emerging tech hubs like Austin have seen a surge in housing demand in recent years as more Silicon Valley companies have opened or expanded offices in these areas. Relocating employees, including many millennials, can see their housing dollars go much further, with rental costs roughly half as high as in San Francisco and San Jose and starter home costs more than a third lower. With growth expected to continue in Austin, there’s a premium on real estate, but California transplants may find that relative affordability creates first-time homebuying opportunities,” Hale said.

MORTGAGE BANKER | AUGUST 2021 11

Jun-21

Month-overmonth change

Year-over-year change

4.37%

-7.62%

-42.39%

0.27%

-1.73%

-24.23%

4,400

15.79%

-25.42%

Monthly Prepayment Rate (SMM):

2.28%

6.23%

-14.11%

Foreclosure Sales as % of 90+:

0.12%

0.39%

160.52%

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​ Total U.S. foreclosure pre-sale inventory rate:​ Total U.S. foreclosure starts:

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​ Total U.S. foreclosure pre-sale inventory rate:​

Number of properties that are 30 or more days past due, but not in foreclosure:​

Total U.S. foreclosure starts:

2,320,000 1,550,000

-119,000

Louisiana

7.40%

-36.81%

Hawaii

6.46%

-37.16%

Oklahoma

6.24%

West Virginia

6.11%

-3,000

2,320,000

-191,000

-1,714,000

-119,000

Number of properties in foreclosure pre-sale inventory:​

2,466,000

● Peak

-193,000

30.43% 13.04%

● Date of Peak Oct-05

Total U.S. foreclosure pre-sale inventory rate:​ Total U.S. foreclosure starts:

Oct-05

Washington

2.80%

-41.99%

0.39%

Feb-10

14.54%

Jan-10

● Peak

● Date of Peak

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​

-49.79% -44.98%

Top 5 States by 90+ Days Delinquent Percentage 90+ Delinquency % 2005-Current Jun-21 Y/Y Change

Louisiana

4.59%

-14.63% -13.84%

Hawaii

4.14%

-4.51%

Nevada

4.14%

-15.47%

Maryland

12 MORTGAGE BANKER | AUGUST 2021

4.08%

-7.42%

9.55%

160.52%

6.23% 5.99%

1.41%

-26.37%

10.94%

-25.42%

Feb-10

Total U.S. foreclosure pre-sale inventory rate:​

Feb-10

145,000

-191,000

4.63% -3,000

Jun-21

4.37%

-1,760,000

Foreclosure Sales as % of 90+:

0.12%

-42.39%

2.19%

Jan-12

0.39%

160.52%

1.67%

Confidential, Proprietary and/or Trade Secret

8.54% Feb-10 Number of properties in foreclosure pre-sale inventory:​

1,550,000

Number of properties that are 30 or more days past due or in foreclosure:​

2,466,000

10.59%

Jan-10

● Peak

● Date of Peak

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​

10.18%

13.30% 6.04%

Dec-05

Total U.S. foreclosure pre-sale inventory rate:​ Total U.S. foreclosure starts:

Dec-05

145,000

0.27% 4,400

-1,760,000

-42.39%

-25.42%

160.52%

2.28%

6.23% 1.19%

0.12%

0.39%

Aug-20

0.13%

2,320,000

10.05% Feb-10 Number of properties in foreclosure pre-sale inventory:​

1,550,000

Number of properties that are 30 or more days past due or in foreclosure:​

2,466,000

Feb-10

145,000

-24.23%

15.79%

Foreclosure Sales as % of 90+:

-191,000

0.34% -3,000

-14.11%

-1,714,000

-119,000

-324,000

-193,000

-1,760,000

0.58%

Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, or an affiliate. © 2021 Black Knight Data Analytics, LLC. All Rights Reserv ed.

Page 1 of 1

Jan-20

● Date of Low

Year-over-year change

-7.62%

Monthly Prepayment Rate (SMM):

Jan-20 Jan-20

-47,000

Month-overmonth change

1.14% -1.73%

Number of properties that are 90 or more days past due, but not in foreclosure:​

5.85%

-193,000

1.63% -3,000

Number of properties that are 30 or more days past due, but not in foreclosure:​

-1,714,000 -324,000

● Low

4.37%

Jan-20

-119,000

1.79%

Jun-21

-25.42% -14.11%

© 2021 Black Knight Data Analytics, LLC. All Rights Reserv ed.

12 Month Trend

Jan-20

-24.23%

6.23%

Number of properties that are 30 or more days past due, but® Trademark(s) not in foreclosure:​ -191,000 TM SM of Black Knight IP 2,320,000 Holding Company, LLC, or an affiliate.

Mar-00

● Date of Low

Year-over-year change

15.79%

Number of properties that are 90 or more days past due, but not in foreclosure:​

-47,000

-7.62%

-1.73% 2.13%

Mar-06 Mar-00

-193,000

Month-overmonth change

4,400 2.28%

-1,714,000 -324,000

● Low

0.27%

Monthly Prepayment Rate (SMM):

Mar-00

-14.11%

-119,000

4.75%

12 Month Trend

Mar-00

-24.23%

15.79%

0.12%

2,466,000

-49.16%

-42.39%

2.28%

11.21% Jan-10 Number of properties in foreclosure pre-sale inventory:​

2.84%

Year-over-year change

-7.62%

Foreclosure Sales as % of 90+:

Number of properties that are 30 or more days past due or in foreclosure:​

Utah

4.89%

4,400

● Date of Low

Month-overmonth change

5.56% -1.73%

0.27%

-24.32%

7.50%

-47,000 -1,760,000

● Low

4.37%

-324,000

-3,000 -193,000

Monthly Prepayment Rate (SMM):

Total U.S. foreclosure starts:

Mississippi

Jun-21

1,550,000

-38.92%

2.40%

2,466,000

2,320,000

3.09%

Idaho

145,000

-1,760,000

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​

23.24%

-25.42%

1,550,000 -47,000

0.12%

Number of properties that are 90 or more days past due, but not in foreclosure:​

Montana

2.75%

-24.23%

15.79%

Number of properties that are 30 or more days past due, but not in foreclosure:​

Bottom 5 States by Non-Current Percentage Non-Curr % 2005-Current Jun-21 Y/Y Change

Colorado

-1.73%

4,400

-14.11%

Number of properties that are 30 or more days past due or in foreclosure:​

-36.01%

0.27%

12 Month Trend

-324,000

Number of properties that are 30 or more days past due or in foreclosure:​

7.97%

-42.39%

160.52%

Number of properties that are 90 or more days past due, but not in foreclosure:​

Mississippi

Year-over-year change

-7.62%

0.39%

Number of properties that are 30 or more days past due, but not in foreclosure:​

Top 5 States by Non-Current Percentage Non-Curr % 2005-Current Jun-21 Y/Y Change

Month-overmonth change

4.37%

6.23%

Number of properties in foreclosure pre-sale inventory:​

145,000

Jun-21

-191,000 -1,714,000 Monthly Prepayment Rate (SMM): 2.28% Foreclosure Sales as % of 90+:

Number of properties that are 90 or more days past due, but not in foreclosure:​

12 Month Trend

-47,000

12 Month Trend

May-00 May-00 Jun-06 Mar-06 Jun-06 Page 1 of 1

DATABANK

Top 5 States by 6-Month Improvement in Non-Current Percentage Non-Curr % Change in 2005-Current Non-Curr % Jun-21 ● Peak Arizona

-31.53%

Rhode Island

3.54%

-31.45%

● Date of Peak

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​

17.03%

5.02%

Jan-10

Total U.S. foreclosure pre-sale inventory rate:​ Total U.S. foreclosure starts:

15.31%

Jan-10

5.26% 5.19%

Number of properties that are 30 or more days past due or in foreclosure:​

Vermont

-19.91%

5.78%

15.65%

Feb-10

25.35%

Jan-10

Number of properties that are 30 or more days past due, but not in foreclosure:​

Number of properties in foreclosure pre-sale inventory:​

16.81%

Dec-12

-19.92%

5.07%

● Date of Peak

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​

Jan-10

District of Columbia

-20.49%

North Dakota

4.44%

-21.65%

2,320,000 1,550,000 145,000 2,466,000

160.52%

-3,000

-47,000 -1,760,000

Mar-06

-42.39%

Foreclosure Sales as % of 90+:

0.12%

-1.73% 2.29%

0.27% 4,400

15.79%

2.38%

2,320,000

Number of properties that are 90 or more days past due, but not in foreclosure:​

10.43% Feb-10 Number of properties in foreclosure pre-sale inventory:​

1,550,000

Number of properties that are 30 or more days past due or in foreclosure:​

2,466,000

Jun-20

May-05

-324,000

-193,000

3.44%

Dec-04

-1,714,000

Year-over-year change

9.55%

5.35%

3.47%

-119,000

-7.62%

2.28%

Jan-10

-191,000

Month-overmonth change

Monthly Prepayment Rate (SMM):

8.16%

1.53%

Mar-05

-14.11%

● Low

Number of properties that are 30 or more days past due, but not in foreclosure:​

3.71%

-25.42%

145,000

● Date of Low

0.39%

160.52%

-191,000

-1,714,000

-119,000

-324,000

-193,000

-1,760,000

2.01%

Apr-18

-25.42% -14.11%

2.35% -3,000

12 Month Trend

-24.23%

6.23%

2.41%

12 Month Trend

Mar-06

-24.23%

15.79%

4.37%

Total U.S. foreclosure pre-sale inventory rate:​

Dec-12

● Date of Low

Jun-21

9.33%

Total U.S. foreclosure starts:

Nebraska

4,400

0.39%

-31.10%

4.15%

2.07% -1.73%

0.27%

6.23% 2.55%

Florida

-19.90%

-42.39%

0.12%

Number of properties that are 90 or more days past due, but not in foreclosure:​

Minnesota

Year-over-year change

-7.62%

2.28%

3.22%

Top 5 States by 6-Month Deterioration in Non-Current Percentage Non-Curr % Change in 2005-Current Non-Curr % Jun-21 ● Peak

Month-overmonth change

Foreclosure Sales as % of 90+:

-31.24%

-30.93%

● Low

4.37%

Monthly Prepayment Rate (SMM):

California

New Jersey

Jun-21

-47,000

Apr-04 Mar-00 Jan-20 Mar-16

Twelve‐Month Price Changes – Prior Year vs. Most Recent Year Purchase‐Only FHFA HPI (Seasonally Adjusted, Nominal)

Price Change: 04/2019 ‐ 04/2020 22.0%

Price Change: 04/2020 ‐ 04/2021

20.6%

Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, or an affiliate. © 2021 Black Knight Data Analytics, LLC. All Rights Reserv ed.

20.0% 17.6%

18.0%

16.3%

15.7%

16.0%

Page 1 of 1

18.0%

14.0%

14.1%

13.2%

13.0%

16.0%

14.8%

12.0% 10.0% 8.0%

7.3% 5.9%

6.0%

6.2%

5.5%

5.5%

6.1%

6.1%

Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, or an affiliate. © 2021 Black Knight Data Analytics, LLC. All Rights Reserv ed.

5.9%

5.3%

5.8%

Page 1 of 1

4.0% 2.0% 0.0%

U.S.

SOURCE: FHHA

Pacific

Mountain West North West South East North Central Central Central

East South New England Central

Middle Atlantic

South Atlantic

Source: FHFA

MORTGAGE BANKER | AUGUST 2021 13 -3-

COV E R STO RY

Our Forbearance

FUTURE

WHAT TO DO WITH ALL THAT TALENT?

By B O B M ANS U R , S PEC IA L TO M ORTGAGE BAN KE R M AG A ZIN E

W

here were you on September 15, 2008? On that date, Lehman Brothers filed for bankruptcy protection. The results included the worst global recession since the Great Depression and an implosion throughout the mortgage industry.

If you were working for a mortgage company at that time, you might have seen it coming. We had laid the seeds of our own demise with exotic loan products, silly investment vehicles, and imaginative hiring. The resulting shakeout took a lot of good loan production professionals and some lesser dedicated, perhaps unscrupulous, mercenaries (think of some of the LOs we hired) out of their jobs. >>

14 MORTGAGE BANKER | AUGUST 2021

WHAT ARE YOU DOING TO PREPARE PEOPLE TO WORK IN YOUR SERVICING DIVISION WHEN YOU NO LONGER NEED THEIR LOAN PRODUCTION TALENTS? What happened to those people who were committed to the mortgage world but abruptly had no loan applications to work? Many of them found refuge by moving into loan servicing. It was an area that became desperate for warm bodies almost overnight. And those people who could spell mortgage with a “t” in the middle were especially valuable.

Do you remember that time? Or maybe you’ve heard about it.

DROPPING OPTIONS

With the coming end of forbearance plans, we are very probably headed for a similar situation, albeit not to such an extreme. The MBA’s July projection for loan volume in 2021 is almost $3.6T with a drop of more than $1T for next year (MBA Mortgage Finance Forecast, July 21, 2021).

Once again, given our industry’s current capacity for loan production, we’ll be looking at a lot of people scampering to maintain consistent income.

Although it won’t be anywhere as deep as what we survived twelve years ago, we’re also likely to experience another surge in loan servicing. How big? We’re not yet sure.

But according to CoreLogic, the 150-day delinquency rate just hit its highest level in two decades.

Per the MBA’s Marina Walsh, “Notwithstanding the welcome improvement in mortgage delinquencies and the positive job outlook, the delinquency rate this past quarter (Q1, 2020) still remains 105 basis points higher than its historical quarterly average of 5.33 percent. We continue to see seriously delinquent loans - those loans that are over 90 days past due or in the process of foreclosure - at elevated levels, particularly for FHA and VA borrowers.”

So, if your company services loans, what are you doing to prepare people to work in your servicing division when you no longer need their loan production talents? How will your company retain those folks and maximize their value as loan counselors, customer service agents, modification specialists, and maybe even foreclosure administrators?

What can do now to ensure you have, as Jim Collins says in “Good to Great”, the right people on the bus? Some ideas: · Be honest with your people when you see layoffs in the foreseeable future. Explain how the inevitable decrease in applications may eventually impact their jobs. · Tell them you expect to have a need for additional people in your Servicing Division and how you plan to fill those positions. · Produce short explanations – written, audio, video, or in group gatherings – about the duties of the servicing positions you expect will come open. Invite your existing production staff to use these resources for identifying roles that might appeal to them.

· Start today to identify those individuals who have the capacity and are likely to have the desire to work in the servicing world. One question to ask is, “Does this person have a commitment to our industry and our corporate values? A “yes” answer represents someone who is more likely to stay with you as they struggle through the changes this kind of job change will generate.

OPEN QUESTION

What, however, can you do for your soon-to-be unemployed staff if you’re a lender without a servicing division? Or even if you do service loans, how will you help those people who may not have chairs when the production music stops? You can start by acting on the first bullet point above: tell people the truth. Doing so will demonstrate your appreciation for them and perhaps increase the likelihood of these folks returning to your firm when you might eventually need them.

And what about your local loan servicing companies?

Maybe they’re not mortgage servicers, but they do handle other forms of consumer credit. There are individuals – often senior leadership -- in your organization who know people in these collections, credit card, and auto loan businesses, right?

When the time is appropriate, reach out to their leaders to explain that you have well-prepared talent that understands consumer lending and will soon be available for them to hire. Consider it “bread upon the waters” to help those team members who have helped you be successful.

After all, won’t you want to be treated with this respect and assistance if you end up on the outside when the production treadmill slows down?

Bob Mansur, CMB, AMP, is a 25-year mortgage industry veteran and the Managing Partner of Credit Employee Performance Solutions.

MORTGAGE BANKER | AUGUST 2021 15

NON QM Showcase

Angel Oak Mortgage Solutions Atlanta, GA www.angeloakms.com Angel Oak Mortgage Solutions is the leader in the non-QM mortgage space. We offer alternative specialized mortgage solutions for brokers throughout the country helping borrowers who don’t fit conventional guidelines. Our innovative nonQM products include: Bank Statement, Platinum Jumbo, No Income Investor Cash Flow, "Just Missed" Portfolio Select and Asset Qualifier. We are pioneering a fresh approach to today’s mortgage lending challenges helping partners to grow their business.

Visit https://angeloakms.com/programs/ for details on our products that can help you grow your business.

LoanStream Mortgage Irvine, CA

www.LoanStreamWholesale.com Programs Include: Full Doc / Alt Doc, ITIN, DSCR, Bank Statement, Fixed, ARM, and Interest Only Programs, High LTVs and Lower FICOs, Business Owners, Investors, Licensing - LoanStream (lsmortgage.com)

FundLoans Encinitas, CA www.fundloans.com Insignia is our Jumbo Prime program. Apex Prime is meant to meet the needs of your alternative doc borrowers with a focus on self-employed borrowers. Montage Prime is great for your near miss prime borrower. Spectrum Prime is the perfect tool for your seasoned investor borrowers.

We focus on jumbo and super jumbo loans.

Arizona, California, Colorado, Florida, Georgia, Wyoming, Connecticut, Hawaii, Idaho, Illinois, Montana, Nevada, Washington, North Carolina, South Carolina, Oregon, Texas, Utah, Tennessee

NATIONWIDE except: AK HI ID MA MO NY VT

Luxury Mortgage Corp Stamford, CT

www.luxurymortgagewholesale.com The Simple Access® NonQM suite of products was built around the idea that it doesn’t have to be complicated to finance a home. We have created a diverse selection of borrower friendly programs that are simple, innovative and flexible.

For information on our Correspondent division, visit www.luxurymortgagecorrespondent.com.

AL | AR | AZ | CA | CO | CT | DC | DE | FL | GA | IL (no IO loans) | MA | MD | ME | MI | NH | NC | NJ | NM | NY (no subprime) | OH | OR | PA | RI | SC | TN, TX | UT | VA | WA | WI Properties

16 MORTGAGE BANKER | AUGUST 2021

Oaktree Funding Corp.

Chandler, AZ

www.oaktreewholesale.com Non-Agency & Investor Advantage

Temple View Capital Bethesda, MD

www.templeviewcap.com

The Non-QM experts Oaktree Funding are proud to offer innovative solutions for diverse borrowers.

We offer products and services through our three channels of operation: Wholesale, Correspondent and Retail Lending. Oaktree is not tied to any one investor securitization, which allows us to consistently offer flexible and expanding guidelines to adapt with borrower’s needs.

Our business purpose loan products, Fix & Flip, Fix & Hold, Bridge and Long-Term Rental Investments for single-family, 1- 4 units, Condos, Townhomes. Our Rehab Loans & Bridge allow for the monthly Payments to be Rolled into the Loan. With our Long-term rental, we offer 30 Year Fixed, ARM and Interest-Only.

The borrower is LLCs, LPs, and Corporations. ( 58 words)

Full product line at: www.oaktreewholesale.com

We are a nationwide lender

AZ | CA | CO | CT | DC | FL | GA | ID | IL | IN | MD | MA | MI | MN | MO | NJ | NM | NV | NC | OH | OR | PA | SC | TN | TX | UT | VA | WA | WI

T

O

G

E

T

H

E

R

A

G

A

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O C T. 1 7 – 2 0 • S A N D I E G O C O N V E N T I O N C E N T E R

Next Stop, San Diego!

We’re so glad it’s time for us to be together again — in person — at MBA’s Annual Convention & Expo 2021. The industry event of the year, MBA Annual21 takes place October 17–20 at the San Diego Convention Center. We can’t think of a better place to reconnect and recharge as we lead the way toward a bright future for our industry and the communities we serve.

Make your plans to be TOGETHER AGAIN at MBA Annual21!

Register today.

22590

MBA.ORG/ANNUAL

MORTGAGE BANKER | AUGUST 2021 17

L EGAL

MORTGAGE BANKING LAWYERS These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.

Thomas King Attorney

Mitchel H. Kider Managing Partner

Gregory S. Graham Co-Managing Partner

Ja Mort

tking@ravdocs.com 713-980-9521

kider@thewbkfirm.com 202-557-3511

ggraham@bmandg.com 972-353-4174

jbrody

Thomas (Tom) King’s practice is focused on federal financial servicesrelated regulatory and compliancerelated issues. He advises small and medium-sized mortgage and consumer lenders and servicers on a broad variety of topics including, among others, implementation of Dodd-Frank Act requirements, compliance program development and management, examination preparation, employee regulatory compliance training, general counseling, transactional work and loan level advice. King has a juris doctorate, cum laude, from The Thomas M. Cooley Law School where he was notes editor of the school’s law review. He has a bachelor of science from Michigan State University with majors in Psychology, Sociology and Political Science. Licensed to practice in Michigan; not licensed in Texas; practice limited to federal regulatory law.

In his 35 years as a practicing attorney, Mitch has represented banks, mortgage companies, residential homebuilders, real estate settlement service providers, credit card issuers, and other financial service companies in a broad range of matters. Mitch represents clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Veterans Affairs, Department of Justice, Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities and Attorneys General offices. In addition, Mitch acts as outside general counsel to smaller companies and special regulatory and litigation counsel to Fortune 500 companies.

Black, Mann & Graham Co-Managing Partner Gregory S. Graham has practiced in the areas of real estate, litigation, and bankruptcy law since 1989, and is currently licensed in Texas and admitted to practice before the United States District Courts for the Northern and Eastern Districts of Texas. Mr. Graham is also currently licensed to practice law in Georgia and has been since 2017. He received his Juris Doctor degree from Southern Methodist University School of Law in 1989 after receiving a Bachelor of Arts cum laude from UT Dallas.

18 MORTGAGE BANKER | AUGUST 2021

Mr. Graham’s affiliations include the Dallas MBA, where he previously served as a Director & Chairperson of the Legislative Committee; DFW Mortgage Brokers Association, where he previously served as Legal Counsel; MBA; NAMB; Texas AMB prior to its closure; and Texas MBA.

James Br the compl litigation, matters fo Brody’s e legal issu originatio loan secu bankruptc indemnifi his B.A. in from Dra his J.D., w in Advoca of the Pac of Law. H American Whitney A practice l been adm the Unite the Centr Southern addition, lead litiga mortgage related di and feder or on a pr FL, MD, PA, TN, a

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ames W. Brody, Esq. tgage Banking Practice Group Chair y@johnstonthomas.com 415-246-3995

rody actively manages all lex mortgage banking , mitigation, and compliance or Johnston Thomas. Mr. experience centers on those ues that arise during loan ons, loan purchase sales, uritizations, foreclosures, cy, and repurchase & fication claims. He received n International Relations ake University and received with a certified concentration acy, from the University cific, McGeorge School He was a recipient of the n Jurisprudence BancroftAward. He is licensed to law in California and has mitted to practice in front of ed States District Courts for ral, Eastern, Northern, and Districts of California. In Mr. Brody has served as ation counsel for numerous e banking and commercial isputes venued in both state ral courts, in a direct capacity ro hac vice basis, in AZ, CA, MI, MN, MO, OR, NJ, NY, and TX.

Marty Green Attorney marty.green@mortgagelaw.com 214-691-4488 ext 203 Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.

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MORTGAGE BANKER | AUGUST 2021 19

20 MORTGAGE BANKER | AUGUST 2021