10.5.26 Demographics and Financial Literacy; Mortgage Education Institute’s Andrew Conner on CE; MBS Issuance

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include Demographics and Financial Literacy. How can agency MBS issuance be increasing? And my interview with Mortgage Education Institute's Andrew Conner on helping loan officers and small to mid-sized mortgage companies turn requiring continuing education and compliance from a burdensome, reactive, check-the-box exercise into engaging, practical training, and proactive support they can understand and apply. Here, take a listen to a little preview. Robbie ChrismanWhat about compliance, training, mortgage education appeal to you? You've been in the industry for decades. What about this facet of it? Was something that said I want to have a career on that? Andrew ConnerA passion to help because I see the mistakes happening, whether it be a regulator that's causing a loan officer grief or a loan officer sitting through CE class. None of us want to sit through CE and have somebody read slides to us, or worse, take an online class that AI can't even pronounce P-I-T-I and don't get me started. And I want to make a difference. And I'm extremely passionate about teaching. And I love compliance. So we take this practical understanding of compliance, making it something people can, number one, understand. But number two, actually use in your day-to-day mortgage practice. And I think that's the missing component to our NMLS continuing education, as well as even compliance today. Robbie ChrismanThanks for today's podcast sponsor, Floify, the mortgage industry's leading point of sale platform. Dynamic apps, which can be seen at Booth 600 during MBA annual next week, lets lenders create fully customizable loan applications for any type, including HELOCs, construction, agricultural lending, non-QM, and more without custom development. To learn more, visit Floify.com. Technology Adapts. My spam has gone from car warranties through home warranties to texts from random numbers saying, want to grab some Chinese tonight? Or why are you blocking my calls? I'm at the MBA of the Carolinas conference where demographics, technology, and building a team are on the agenda. My dad is at Michigan Mortgage Lenders Association conference in Ypsilanti. And tech is certainly on the serving platter in the sessions, but so is how originators should best use what they have to their advantage, which includes knowledge. For example, here's something simultaneously sobering and hopeful for lenders. Per the Census Bureau, in 2024, 58% of men and 56% of women ages 18 to 34 live with their parents. About 2.6 million U.S. parents provided $26.6 billion in financial support to 3.7 children. 3.7 million children. So you don't have to break out the calculator. That's about $7,200 per kid. Think of all those potential homebuyers. The latest Next Gen Home Buyer report, put on by my friend Kristin Messerli, is live on our website and it takes a different approach to how we think about expanding the pool of homebuyers. What if the buyers that reach your office are only a slice of the available and interested market? The study, How You're Built to Buy, is a continuation in a series that has surveyed over 10,000 millennials in Gen Z, sponsored by National MI and conducted by First Home IQ. According to the study, over half are anxious or avoidant with their finances, and nearly nine in ten experience real shame around their finances. To me, the most interesting part of the study was that it didn't matter whether they made good money or had perfect credit and savings, at least half of them are held back by feelings of overwhelm, distrust, and anxiety. U.S. Treasuries ended the week once again weaker despite an initial rally that followed a sharply disappointing September jobs report, with non-farm payrolls rising just 29,000, unemployment increasing to 4.2%, wage growth slowing, and back month revisions lower. The weak labor data increased expectations for an October Fed pause, but it has not resolved what is keeping long-term rates elevated. Inflation remains above target, energy costs and sovereign debt concerns persist, and the Fed remains cautious about easing too quickly. The takeaway is that while hiring is clearly cooling, subdued layoffs and resilient consumer spending and business investment suggests the economy has not weakened enough to drive a sustained decline in rates, leaving the mortgage market caught between softer employment data and persistent inflation and growth pressures. Long-term yields, with agency mortgage-backed securities tagging along, returned toward their highs by Friday's close, with the tenure reaching 5.28% after touching 5.34%, the highest level since 2002, earlier in the week. The yield curve steepened and agency mortgage-backed securities posted its worst monthly excess return, which is the return investors earn for mortgage-backed securities above the return they would have earned from a comparable duration U.S. Treasury, capturing compensation for taking mortgage-specific risks such as prepayment, credit liquidity, and spread volatility. It came in at 96 or negative 96 basis points, the worst level since March 2023, pressuring specified pool payups, lender margins, mortgage rates, and applications. Rising treasury yields, a 47% increase in volatility, weaker institutional demand, and longer duration weight on prices. As most of you already know, the mortgage market is increasingly driven by purchases rather than refinancing, with agency mortgage-backed security supply reaching $111 billion last month, despite refinance activity falling to its lowest level share in a year. Conventional purchase issuance rose 13% year over year, while refinance issuance was essentially flat. Ginnie Mae refinance issuance fell 13% at the same time, and UMBS 30-year issuance increased to $62 billion, with production shifting toward 6% and 6.5% coupons, as higher mortgage rates pushed borrowers further from refinancing opportunities. Higher rates have also created a large pool of deeply out-of-the-money 30-year mortgages. About $2.4 trillion of conventional mortgage-backed securities and $746 billion of Ginnie May 2 mortgage-backed securities have little incentive to refinance, producing unusually stable prepayments and more predictable cash flows. The trade-off is greater duration risk, meaning these securities may offer attractive relative value, but remain vulnerable if rates continue rising or volatility stays elevated. For today's interview, I wanted to welcome to the show Mortgage Education Institute's Andrew Conner to talk about helping loan officers and small to mid-sized mortgage companies turn requiring continuing education and compliance from a burdensome, reactive check-the-box exercise into engaging, practical training, and proactive support they can understand and apply. You can visit mortgageeducationinstitute.com for more information, and Andrew will discuss an upcoming webinar on October 15th that I recommend you sign up for. Robbie ChrismanI want to talk about NMLS continuing education with you today. And it seems good timing or perfect timing for this because we're in the middle of NMLS continuing education season. A lot of loan officers feel like it's a chore, it's dreadful, it's a burden, it's a hassle. Pick whatever word you want. They put it off until the last minute. And I'm I'm wondering what would need to change. Is there a solution to this that could cause LOs to actually look forward to continuing education? Andrew ConnerWell, that's interesting that you say, of course, right now it's the timing, but we hear from loan officers that loan officers continually tell us that they feel this way, of course. And yes, they don't look forward to continuing education. And there are some underlying reasons we keep hearing. They say we're not learning anything new. Some of the things loan officers tell us is they're they're actually reteaching the SAFE Act of 2008, year after year after year. Nothing new, nothing fresh. Another reason, the courses don't provide anything they can actually use in their mortgage practice. So there's nothing new to look for. They tell us there's nothing worse than sitting through eight hours of CE and learning nothing. So there's nothing to look forward to. Another one is there's no engagement. So CE becomes that chore they have to take every year. And it's boring. So eight hours of CE can sometimes take 12, 15, even 20 hours. So there's no hurry to get it done because they're not looking forward to anything. Loan officers actually wish they could learn something without wasting their time. So our industry, unfortunately, has created this perpetual problem where the industry has created this mindset that there's very little reason to expect anything more from their annual CE. So CE has simply turned into checking a box and naturally wait until the deadline and then just drudge their way through it when they get to it. So here's the solution. Since loan officers already have to take these required CE hours, why can't they leave with knowledge and information they can actually use in their mortgage practice and give loan officers an opportunity to engage throughout the course, which can even make the CE an enjoyable experience? Something they can actually look forward to every year. And when that happens, CE stops feeling like a chore and starts feeling like something that can actually help them. But this is where when training is live, engaging, covers current useful topics, and is interactive, and gives real-world examples and takeaways, totally changes the experience. A good CE class is where loan officers can engage by asking questions, interact by making comments, even giving their opinions, where they're actually involved in the class. People actually learn when they're involved. We believe it has to be taught by someone who understands the mortgage industry, not someone just reading regulations or worse, simply reading slides. When these pieces come together, NMLS CE, well all training for that matter, stops feeling like a burdensome chore and actually feels like professional development they can look forward to. So at Mortgage Education Institute, we offer live, engaging, interactive classes with live webinars and live in-person classroom CE around the country. We've been to Arizona, we're going to New Hampshire later this year, we go in California, Washington, we go to Texas, Minnesota, Missouri. We're growing. And we also offer private CE classes and company compliance trainings. So we also believe, and this is important, is the loan officer's time is valuable. Since loan officers are already required to spend the eight hours of CE, those hours should respect the loan officer's time and the experience of the mortgage professional. So we take those required CE hours and turn it into live practical mortgage education that keeps people engaged and gives them real-world takeaways they can actually use in their day-to-day. Because loan officers can ask questions, engage, and actually enjoy their CE experience, we actually have students that tell us at the end of class they can't wait till next year. I would say we take a practical approach to mortgage education and we teach compliance people can actually understand and use. What do you mean by that? Well, I'll answer with a couple of observations first. What we see is with small to mid-sized mortgage companies is that they face the same compliance expectations as larger companies, but they usually don't have the same internal compliance resources larger companies have. And many times they just don't know what they're missing until, unfortunately, a regulator or examiner asks for it. The other issue is compliance is often presented as an abstract legal exercise instead of practical operating guidance. In other words, a company doesn't just need to know what the law says, they need to know what it means in real mortgage operations, what to update, what to document, what to train on, and what to do when a regulator asks for documentation. We make compliance understandable and usable. We provide policies and procedures, plain understanding for compliance guidance, regulatory exam support, and live compliance training. But it's unique that we tailor our compliance training to meet the company's specific needs, not just an abstract training. And we also provide BSA/AML independent audits. Simply put, practical mortgage compliance they can understand, manage, and apply. In other words, we help companies go from reactive compliance to prepared compliance. Robbie ChrismanReactive to prepared is always a good thing. What's an example of something that tends to catch small and mid-sized mortgage companies by surprise? Andrew ConnerProbably one of the biggest items that we see, other than outdated policies, is not performing the required annual BSA/AML independent audit. We often hear from companies when they're already in the middle of an exam and they realize they don't have what they need. When the regulator asks for the BSA/AML audit along with the BSA/AML policy, we find companies' policies haven't been updated to reflect their current operations and risk profile or the latest state requirements. But even more so, the company was unaware that they needed to complete their annual BSA/AML independent audit. We've heard of smaller companies hiring another mortgage lender under a hate to say quid pro quo situation where we'll do your independent audit if you do mine, and they write up on a piece of paper that they had their audit completed, but without covering any of the requirements for the independent audit. While some companies think, oh, we can do this ourselves, but that doesn't meet the requirement of independence. And the AMLCO, anti-money laundering compliance officer, can't perform a self-audit on themselves. Because one of the purposes of the audit is to evaluate the AMLCO so that it's like the what the foxwatch in the hen house. The risk assessment involved in the audit is not being properly done. And states are rejecting these BSA/AML audits because they're either not truly independent or they simply don't meet all the requirements. So we can provide these audits along with practical mortgage compliance support. We help these small to mid-sized mortgage companies meet their compliance needs. So I say to people, don't wait until you're in the middle of an exam to find out what you're missing. Mortgage Education Institute can help mortgage companies move from that reactive compliance to the prepared compliance. Robbie ChrismanSo for people looking for best next steps, or you sound pretty upbeat, somebody they want to work with and do continuing education with, where can they go? What are places to find you? Andrew ConnerSo you can reach us at uh mortgageeducationinstitute.com, mortgageeducation institute.com and go across the menu. We got the live classroom, we've got the live webinar. A little over to the right on the menu, we got our compliance support services. You can contact us at info at mortgageeducationinstitute.com. We have a live NMLS CE webinar on October 15th. So a live webinar, mortgageeducationinstitute.com. And uh just look across the tabs, live education got webinars. We also have classroom education as well. So, but on our next coming up class, there's still time to sign up for live NMLS CE on October 15th. Robbie ChrismanLove that. Andrew, the enthusiasm is evident in your voice. I can tell you have a passion for what you do, and I uh very much appreciate you making the time today. Thank you, sir. Andrew ConnerThank you. Robbie ChrismanFor those wondering how agency mortgage-backed security supply is rising year over year, it's not the same thing as new mortgage origination volume. MBS supply measures loans that are actually pooled and securitized, and several factors can keep that number high even when overall origination activity is falling. Agency mortgage-backed security supply measures loans being pooled and securitized, not the level of new mortgage originations in real time. So issuance can remain high even as origination activity falls. Refinancing has collapsed because elevated rates make it uneconomical, but purchase lending remains active and is increasingly concentrated in higher coupon loans, while mortgages originated in prior months can continue moving through the securitization pipeline. In short, the market is producing fewer loans overall, but a larger share of those loans are still flowing into agency mortgage-backed securities, keeping supply relatively elevated even as the composition shifts away from refinances and toward purchase mortgages and higher coupons. Looking at this week's economic calendar, the September ISM services index, due out to today, is expected to ease modestly while continuing to signal expansion. Particular attention will be paid to whether price pressures remain elevated. Other releases of note include the August trade balance, minutes from the September FOMC meeting, August consumer credit, August wholesale inventories, and preliminary University of Michigan consumer sentiment. Treasury auctions will be headlined by $58 billion of three-year treasury notes, $39 billion of 10-year treasury notes, and $22 billion of 30-year Treasury bonds. We begin the week with agency MBS prices, little change from Friday's close, the two-year yielding $4.82, and the 10-year yielding 5.29% after closing last week at 5.28%, up 10 basis points over the course of last week. Let's wrap up with a joke and some housekeeping. I tried to steal spaghetti from the shop, but the female guard saw me and I couldn't get pasta. Thanks again to Floify for sponsoring this week's podcasts. Floify is the mortgage industry's leading point of sale platform, and dynamic apps, which can be seen at Booth 600 during MBA annual next week, let lenders create fully customizable loan applications for any loan type, including HELOCs, construction, agricultural lending, non QM, and more without custom development. To learn more, visit Floify.com.