Wholesale and Correspondent News; STRATMOR’s Tech Survey; M&A Alive and Well; CA Fires Impact

In Los Angeles County, with 4,058 square miles of land (more than Delaware and Rhode Island combined) at least ten people have died, and more than 10,000 structures have burned and hundreds of thousands of residents are under evacuation orders in what will be the costliest wildfire disaster in American history. Lenders and mortgage servicers doing business in California have implemented policies and procedures in dealing with borrowers, lending, inspections, and fundings, given FEMA’s response, disaster declaration, and financial assistance. Assistance and shelter reconstruction are what is needed, not finger pointing. But on X, Elon Musk suggested that the fires were spreading due to the city fire chief’s commitment to diversity, equity, and inclusion policies, and president-elect Trump is discussing policies and politics regarding water and smelt. I personally know several people impacted directly or through their families; help is needed, not blame. Of course, replacing or repairing existing housing stock doesn’t help new housing numbers, or inventory levels. Human lives, obviously, are irreplaceable. (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. CoreLogic gives mortgage professionals the tools they need to establish long-term relationships with their clients, helping them keep future business in-house and transforming the way they do business. Hear an interview with attorney Brian Levy on the waning days of Director Rohit Chopra’s tenure in charge of the CFPB.)

Lender and Broker Services, Software, and Products

“Saddle Up for 2025! Axos Bank is heading to IMB in Austin, Texas. Axos Bank’s Wholesale & Correspondent and Warehouse Lending teams will attend the IMB Conference January 26–29. You’re invited to contact our experts! Wholesale & Correspondent: Led by J Shoop, our team offers innovative mortgage solutions, including Super Jumbo ($3MM+), buy-before-sell options, unlimited cash-out (up to maximum LTV), pledged assets, and cross-collateralization. Explore our Quick Pricer for competitive rates. Warehouse Lending: Led by Eric Nelepovitz and Justin Castillo, our Warehouse Lending division provides the flexibility and liquidity you need to stay competitive. With stable funding, extended cutoff times (6:15 p.m. ET), and expanded product eligibility, Axos Bank is committed to supporting the industry. We look forward to connecting with you at IMB. To schedule time with either team, please send them an email or call 888-764-7080. Let’s make 2025 your best year ever!

“As the year begins, eRESI want to express our gratitude for your continued partnership and extend warm wishes to you and your loved ones. We’re excited to kick off 2025 with fresh Non-QM opportunities and are hitting the ground running in January! eRESI’s Lisa Schreiber will join panelists at the IMN 2nd Annual Residential Lenders Forum on DSCR & RTL in Aventura, FL. Also, meet with Amer Ahmed, Kris Willoughby, and Lisa Schreiber at the IMB25 Conference in Austin, TX, to explore our latest Non-QM growth strategies. We’re excited to continue our journey together in 2025 and remain committed to delivering the exceptional service you have come to expect from us. For more information, please get in touch with your eRESI Representative or email [email protected]. Here’s to a joyful holiday season and a prosperous new year ahead.”

A&D Mortgage, a leading innovator in mortgage solutions, announced a powerful new addition to its Artificial Intelligence in Mortgage (AIM) Partner Portal: the Self-Disclosure feature, designed for seasoned brokers working with Conventional, Jumbo, Government and Non-QM loans. Responding to direct broker feedback, this update enables confident, experienced brokers to streamline the creation and management of disclosure packages, saving both time and resources.

STRATMOR and Technology

STRATMOR’s Technology Insight® Study is now open! Digital innovation and automation are revolutionizing the mortgage industry. But are your digital capabilities keeping pace with peer lenders? To understand where you stand, take the Digital Innovations module of STRATMOR’s Technology Insight® Study. This module evaluates your progress on essential digital capabilities and the expected benefits of a fully digital mortgage process. STRATMOR has been conducting this lender-only Technology Insight® Study since 2014, and as always, participants will receive a summary report in Q1 2025. Don’t miss out… Ensure your digital strategy is aligned with industry trends. Take the survey today.

Mergers and Acquisitions are Expected to Continue Through 2025

The reasons why companies, big and small, want to acquire, merge, or be acquired run the gamut from purely economical to purely psychological. There is no reason to think that they will stop and will range from headline-grabbing deals down to branches moving from one lender to another.

Lower’s newest acquisition is Neat Labs, a company “renowned for its end-to-end mortgage origination software. Lower is proud to integrate Neat Labs’ software into LowerOS to deliver a world-class borrower experience and reduce the time and cost to produce a loan.” “Founded in 2015, Neat Labs developed a cutting-edge platform that streamlines the mortgage process from pricing to loan approval and closing. Neat Labs originated over $1 billion in loans, taking borrowers from application to funding in as little as 10 days.”

Zelman, a Walker & Dunlop Company, served as Exclusive Sell-Side Investment Banker to Liberty Home Builders on its successful company sale to McKinley Homes. “Liberty Home Builders, founded in 2013, has built and closed over 2,000 homes in Houston and San Antonio, Texas. Known for creating affordable custom homes in desirable communities, the company has earned a reputation for excellence in the Texas homebuilding industry. McKinley Homes, founded in 2016, is a fast-growing land developer and home builder based in Atlanta, GA specializing in real estate development and vertical construction including commercial and residential communities, townhomes and single-family subdivisions, office buildings, apartment complexes, and multi-family high-rises.”

Lender and Investor News

This Commentary tries to group investor and lender news in decipherable bites, like Agency news or non-Agency, or government programs. But sometimes it’s a hodge-podge, like today. Who’s doing what out there?

Due to evolving legal landscape & changes in the framework of administrative law, Federal Reserve Board will soon seek public comment on significant changes to improve transparency of bank stress tests & reduce volatility of resulting capital requirements. Read the Federal Reserve press release for additional information.

The National Association of Local Housing Finance Agencies (NALHFA) released its 2025 National Policy Agenda. This document outlines NALHFA policy positions on important issues affecting the housing finance industry. These stated positions are focused on preserving and expanding the tools and resources that are critical to combatting the affordable housing crisis in the United States.

AmeriHome Mortgage posted 20241202-CL Disaster Announcement regarding DR-4851, West Virginia declaration of federal disaster aid. Release number HQ-24-323 declared federal disaster aid with individual assistance to West Virginia’s Mercy County affected by Post-Tropical Storm Helene. See the AmeriHome disaster announcement 20241202-CL for inspection requirements.

In addition to the previously declared counties, Mercer County in West Virginia was added to the disaster declaration DR-4851. Go to the PHH company library to view the announcement for all disaster declared counties, requirements, procedures, and conditions.

Pennymac posted Announcement 24-125, Update to Properties Located in CBRS or OPA.

Pennymac Announcement 24-134 describes AUS Jumbo Product Profile Update on 2-Unit Properties.

One of the features of the Citi Correspondent Lending Special Purpose Credit Program is Closing Cost Assistance (CCA). CCA can be an impactful benefit to a borrower and has minimal requirements. View the Citi Correspondent Lending complete announcement, which provides a detailed explanation of eligible fees and how to appropriately disclose these fees for reimbursement of up to the $1,500.00 allowed.

Plaza Home Mortgage® updated its Jumbo Champion Depreciating Markey List.

Kind Lending announced an upcoming fee adjustment for Verification of Employment (VOE) services on Wholesale and Full Service Non-Delegated transactions, effective January 1, 2025. The VOE fee that will be disclosed on the Initial Loan Estimate (LE) is increasing from $179.85 to $199.35. Kind will attempt to complete the VOE verbally on every file, which comes with no charge. Visit Kind Lending for additional details.

Capital Markets

Yesterday’s market activity was subdued due to an early close in observance of the National Day of Mourning. Several Federal Reserve officials spoke, all agreeing against a rate cut in January. However, there were differences regarding the timing of future rate cuts. Boston Fed President Collins suggested that while easing would eventually be necessary, it should be more gradual, emphasizing a patient, data-driven approach. Other Fed officials, such as Governor Bowman, indicated support for a pause in rate cuts, noting that a rate cut in December was likely the last in the recalibration phase. Fed funds futures markets showed a slight decrease in the probability of a May rate cut, down to 50.4 percent.

In broader market developments, strong demand for government debt followed a recent Treasury selloff, supporting mortgage rates. Concerns over tariffs and inflation have resurfaced in the new year, alongside rising global bond yields. The Fed remains cautious about aggressive rate cuts, wary of further heating up the housing market, and views current monetary policy as restrictive. The Federal Open Market Committee minutes earlier in the week highlighted uncertainty surrounding inflation and immigration, particularly in light of a potential second Trump presidency, supporting the case for keeping rates steady through March. While a Q1 rate cut remains possible, the Fed is expected to maintain a cautious, data-driven approach. The market sentiment is still somewhat hawkish, but no significant surprises are anticipated from the Fed’s messaging.

In December 2024, prepayment speeds for Fannie Mae 30-year mortgages slowed by 5 percent to 5.9 1-month CPR (Conditional Prepayment Rate – a metric that represents the annualized percentage of a pool of loans that is expected to be paid off earlier than scheduled, adjusted for the age of the loans, and reflects the likelihood of borrowers refinancing or paying off their mortgages early). That was the lowest CPR since April, primarily due to higher lending rates, which rose to 6.86 percent by the end of the year, the highest level since July.

While holiday distractions played a role, the real cause was the increase in interest rates, which dampened refinancing activity. Prepayment speeds for lower coupon bonds (1.5 percent to 5.0 percent) remained mostly stable, reflecting the lack of refinancing incentive for borrowers with rates higher than current market rates. The most notable changes were observed in the 6.0 percent and 6.5 percent coupons, which saw their speeds drop by 22 percent, driven by the slower paying 2023 vintages. Meanwhile, the Ginnie Mae II 30-year universe also saw a slowdown in speeds, falling 11 percent to 8.3 1-month CPR, the slowest since July. As of the end of December, only 2.6 percent of homeowners with Agency MBS had a significant incentive to refinance, keeping overall prepayment speeds low for the foreseeable future.

Today brings the all-important December payrolls report. Headline nonfarm payrolls were +256k when they were seen increasing 160k after a 227k reading previously. The unemployment rate was 4.1 percent when it was expected to be unchanged at 4.2 percent, and average hourly earnings were +3.9 percent year over year when they were seen increasing 4.0 percent year-over-year. Later today brings Michigan sentiment. We are near the end of a five-day workweek with Agency MBS prices worse .250-.375 from Thursday’s close, the 2-year yielding 4.35, and the 10-year yielding 4.77 after closing yesterday at 4.69 percent.