matchbox State of the Market-June 2023
Hello everyone and welcome to Summer 2023. Coming back from the MBA Secondary
conference, I have many thoughts that I wanted to share with you about the state of
the market. I also want to share some subsequent information that has made me want
to write about some key thoughts on my mind; some of which I find so challenging
from my vantage point.
Secondary Snippets
The conversion to Ginnie Mae’s new single family pool delivery module (SFPDM) is
finally among us. The Ginnie Mae file extract functionality is now available within
Encompass via their PDD form but is not without some challenges or questions that
have been learned through testing and ongoing releases. We have learned a bit about
been helping clients with these updates and making their transition to this new portal
less stressful and much more efficient. Let us know if you are having any trouble with
automation, workflow or validation errors/edits. We are now in a mandatory testing
period and an extended cutover is only 5 months which will be here in no time. Ginnie
Mae is without question monitoring testing efforts in their validation portal and calling
lenders out if they’re not active.
LLPAgony Part II – The much maligned DTI component of the FHFA LLPA changes was
cancelled a few weeks back. While widely cheered and a great thing for the industry, it
does not speak to many clients who were proactive with the updates to be ready and
spent time and money that was for not. While we know these changes are not easy to
implement (and roll back), it is also very difficult for lenders to be proactive and invest
real time and money on supporting these changes, especially in this market. The
impact of this specific change was very challenging as it impacted workflow, various
departments, systems, and would have had dramatic impact on
Clients/Members. These were not just programming time and effort here, it is valuable
time in internal meetings that employees have spent determining the impact and
implementation of these changes.
MSR portfolio sales are increasing and often with a tight timeline and deadlines. To
assist lenders, we are deeply engaged in data and documents transfers to the
contracted buyer. We have a number of streamlined offerings for those in need of
quickly extracting and delivering thousands of loans within a tight window. From data
discrepancies to image corruption to server capacity for documents on thousands of
loans, there are a good number of unique challenges throughout thee projects.
With large investors shifting or exiting the market and causing irregularity in many
areas, Non-QM seems to be making a large impact on lender offerings. We have seen a
large increase in requests to assist in adding these products to template sets, business
rules, closing docs not to mention the PPE. Many of these products have different
requirements, qualifications, and require the ability to support multiple scenarios to
help the client truly understand what is available. These are not just new products to
add to an LO arsenal; to be successful there’s an entirely different sales approach
needed to engage in a successful origination strategy. Additionally, unlike agency
product, every investor will have slightly different guidelines and qualification guardrails
to follow.
Agency applications seem to be on the rise. Lenders are using this time to submit their
Agency application(s) to diversify their offerings and gear up for the next wave of
originations. We have helped over a hundred clients with their Agency Applications and
can assist you with yours. Fun fact, most companies wait until they are in the height of
a volume boom and running out at capacity and then look to submit their Agency
application, having to wait behind all others who waited. Now is the perfect time to get
your application submitted.
There is a wave of increased Secondary based tech items that can really drive
efficiency and reduce exposure with new LOS and PPE options. Now is the time to
automate your lock desk and improve your Secondary workflows using these new
offerings. We have implemented many new options that have made a real difference
for clients. Shifting margins, shifting product, shifting investors, shifting competition,
shifting hedge advisors, shifting PPEs and shifting volume and allocation per channel,
oh and shifting Secondary personnel; is there anything that hasn’t dramatically shifted
over the last 6-12 months? How dialed in is your Secondary? In a market where most
lenders have lost money over the last two quarters, it is mission critical to bounce back,
and quickly!
Breaking News – Technology Works!!
Amid the current volume reductions and reset to the new normal of origination levels,
there continues to be many ongoing discussions about the value of technology within
mortgage companies, and a continuous debate of whether the tech that is in place is
worth its cost. This is not a new debate; it is just heightened in the valleys of profit
reductions and month-on-month expense reviews.
I am continually puzzled as to why, in this market, there continues to be executives
spending money to go to conferences to try to find this seemingly elusive answer to
whether their current tech or new tech is worth the investment. While I understand the
debate, there are multiple layers to it, and I wanted to expand on them this month.
Let me start with the fact that Technology works. It may not be perfect, it may not be
widely accepted, and it may not be worth the cost, but let’s start with the initial fact
that technology works. It works in all industries and is a growing part of everyday life.
For some reason, there is widespread believe that technology within Mortgage is an
outlier and does not work.
The truth is that with each mortgage system or application, you will find customers
that fall into 3 categories and sentiments:
– It works incredibly well, and it has provided most, if not all, all intended
benefits
– It works ok – does the job but not a game changer, but not willing to make
a change
– It is not acceptable and needs to be removed or replaced
Not knowing the exact numbers, few companies fall into the first category and the
majority will fall into category 2 & 3. What is the difference between all three listed
above? Most blame the tech and in some cases, that is accurate, but in many cases, it
is the user or client that pose the challenge. Many companies do not want to hear it,
but it is true. Why does the same tech work well for some companies with the same
business model and they can’t live without it, while others cannot get it implemented or
adopted.
In many instances, I see where a company is questioning a tech solutions value, there
are a flurry of reasons about why the tech is not working. While that question should
be asked, I would counter with the following initial questions that could doom a project
or system before it gets started:
– Has management made the commitment to the technology, and deemed its
adoption as required?
– Has management provided the right resources to customize and train the
new system?
– Has management really invested time into what the system can or cannot do,
or just become frustrated when the application does not do what it is not
capable of doing?
And most importantly-
– Has management taken the time to educate the staff and the
reasoning for the new tech application and how it will be a benefit
them, or have they left it to the interpretation of their staff which
often is tilted toward a feeling that the new tech is their
replacement?
What is the value of technology? In the simplest of answers,
– It is meant to make required processes easier and more efficient.
– It is meant to help companies scale their business so that can increase
volume with less resources.
– It is meant to create a better Client or Member experience.
– It is meant to be the foundation for your company’s processes, policies, and
procedures.
– It is meant to better support your business and clients and is constantly
evolving.
This should be part of the message to your team when introducing a new system.
Quite often, none of this is stated, the tech decision is made in a vacuum, and the staff
is left with a message that you have to use this or else. Go anywhere in life right now,
and there are influences of tech improvements everywhere. Each part of life is getting
easier with some level of technology. Each day companies are implementing new and
improved pieces of technology that make them more efficient. Take a sampling of how
many things can be done over a weekend that is easier than it was 3-5 years ago due
to tech advances,
Tech works and when it does, it makes your life much easier
– Go to store and you can check yourself out
– You can deposit checks with your phone
– You can turn lights on and off with an app
– You can ask questions to a speaker and get information in seconds
Yet we on the mortgage side struggle with seeing the value of having new and
innovative applications get implemented. Why is this the case? It is because companies
are not looking at tech as a force multiplier for success, but rather an option to stay
current. There are multiple instances of this in your daily life, and while some may
have been a challenge at first, they become such the norm, we are unsure how we
survived before it existed.
Tech works- It just needs to be understood and supported.
The mortgage business, like no other, works in cycles and it repeats itself.
When Volume is down, companies feel they do not have the money to invest in new
projects, so they get put on hold. Volume increases and then projects are started in
the midst of high volume. In the interim, staffing becomes more challenging and more
expensive, and projects do not get fully adapted or implemented due to the high
volume.
In the process, contracts get signed that aren’t fully vetted or understood, and staff is
overpaid in the areas where resources become scarce, like Processing, Underwriting,
and IT. These are the main areas that all companies are trying to automate and
upgrade in this downturn. Do you see a trend here? You cannot upgrade and
implement tech when you are going to pull the plug on it in a downturn. It is
somewhat ironic, isn’t it?
What does this all mean? I have been writing to revisit and review your tech stack.
That means doing a full review to make firm (and tough) decisions on your systems.
Determine if they are a fit for what you need to scale your business.
Determine if it is able to do what you need it to do more than it is not? Just because it
cannot support all aspects of your business does not mean it is not a good solution.
Determine if you have marketed the benefits of its adoption to your staff and ensure
that it will make them better and not replace them.
Determine if you have built a strong training process.
Determine if you have built a strong support system so that when your users call, they
can get answers easily.
For all of those who are looking for answers, the answer is right in front of you- Tech
works.
