Podcast: Mortgage Cadence Users Conference

In this podcast, I share some information from our recent users conference in Vail, Colorado. I posted a bit about this last week when I was still at that event. After taking some time to think about what happened at the show, I realized I was still excited.

Putting on a good show is not easy but my team made it look easy and I'm very proud of them. I'm also proud of the Mortgage Cadence customers who came out for the event. They have the right attitude for getting us through this downturn and on to a better future.

I'll tell you more when you click on the start button below.

Program length: 2:30.

Finally! It’s all about the Data

Fannie Mae and Freddie Mac, along with their primary regulator, the Federal Housing Finance Agency, are rolling out a new Uniform Mortgage Data Program.

The former GSEs, companies that invested billions in securities backed by risky subprime loans, are now saying that better data is the answer to better loans and plan to put the new standards into place later this year. Freddie Mac vice president Patricia McClung spoke about the new standards on Freddie’s blog on Monday.

McClung said that better data will lead to better loans. She said the new program would identify potential defects earlier in the mortgage process, improving the quality of the company’s mortgage purchases and reducing repurchase risk for lenders. She’s right. Mortgage Cadence has been preaching that it’s all about the data since 2003.

It’s never been about the forms. Recording into the public record is important, but it’s always been about the data integrity, that’s what allows for the creation of quality loans. Systems like Mortgage Cadence have been built with sophisticated data models and proprietary rules engines that allow lenders to systematically check for data that has changed or is missing throughout the life cycle of the loan. Our vision has been to provide a clear data trail to our lenders from the time it’s just a lead, all the way through to the time it’s sold off into the secondary market and beyond.

Having the confidence that comes from having that clear data trail will help the industry originate a higher quality product. That’s only possible with auditing capabilities built into the software that lets everyone know what the information is, where it came from and who has altered it. That capability has been in Mortgage Cadence since 1999.

Quality originations will be the only ones that satisfy secondary mortgage market investors in the future. I’m glad to see someone else is finally singing the same tune.

Another Successful Users Conference Ends

Another successful Mortgage Cadence users conference has come to an end. It was truly a great week.

Because we offer an enterprise solution, we had clients from all parts of the mortgage space, originators (of course) but also servicers, reverse lenders and investors. Plenty of partners made it out to the show as well, including companies that most readers of this blog will know well.

It was great getting to spend time with people who are not afraid to work hard in a business that so many others have already written off. Falling loan volumes, serious servicing problems, a tidal wave of legislation and a new regulator just getting ready to join the party are plenty of reasons to get depressed. But I didn't see that here this week.

Sure, the venue was terrific, the weather beautiful, the exclusive dinner at Kelly Liken's restaurant worked out just right. But it takes more than just an enjoyable conference to put this kind of passion for the business into people. It was in them before they ever got off the plane in Vail. It's part of what makes them great. I am so proud to work with and for these people.

I was extremely pleased that we were able to book Paul Sperry, author of the Great American Bank Robbery, to speak. (You'll find a link to his book in the sidebar). He was very engaging and well received by our attendees.

I was also very happy to see my team, some of the absolute best technologists in this industry, help our clients get more power out of every tool we offer. The clients loved it and so did I.

But the best part of this show was seeing our clients come together and solve problems together, sharing tips and tricks for technology, recruiting and management. It was great to see so many hard working professionals networking in a way that clearly offered them so many benefits.

It's back to Denver now to continue the work. You can expect my feet to touch the ground any time now. I'm already reading news that has my blood pumping again. I'll tell you more about that next week. Have a great weekend.

Mortgage Cadence users conference in full swing

I'm enjoying our annual users conference with clients and friends in beautiful Vail, Colorado, this week. I'll tell you more about it in a future post, but suffice it to say that I'm thrilled with the passion I'm seeing in our users, the competence evident in my own team and the generally positive approach to our future.

I use this blog to point out a lot of problems I see in the world around us, which I think is one of its purposes, but it's meetings like this that make me want to stay involved in this industry for the long haul.

Wish you were here.

Still Manipulating the Markets

People disagree about whether the government should have stepped in to bail out the big banks and Wall Street firms. That’s water under the bridge in my book. Now, it’s all about recovery, getting Americans back to work and banks back to lending. There is still a lot of pain we have to live through to get to that point.

Free markets have a way of re-stabilizing themselves if given a chance. Unfortunately, it appears that our federal government isn’t quite ready to quit manipulating the markets yet.

Those of you who also follow me on Facebook saw that I posted this gem earlier today.

S&P lowered its outlook on US debt on Monday, something the Treasury Department has been lobbying against for some weeks, according to The Washington Post.

As the reporter pointed out, this isn’t the first time a government or company has pushed back against a ratings agency, but the US Government has not taken this tact in the past.

A lower rating means the government will pay more on it’s debt--and when I say government, I mean we taxpayers. How do you feel about this?

What I'm Listening to Now

The rapid rise in US equities and what it means to us

I’ve been in the mortgage technology business for a long time. We work with bankers and because our software has to help them make sense of their surroundings, I’ve learned a great deal about the economic indicators that point to risk and reward in the U.S. market. This is the environment that bankers live in and they take it very seriously, gleaning information for every possible indicator of economic health to help them manage risk in their enterprises.

Most Americans are not like that. Not even close. While many have heard of national unemployment numbers, average housing prices, home starts and some of the other indicators the government uses to determine our economic health, most Americans rely on just a few key indicators.

(1) Do we have jobs? If Americans don’t have jobs, you’ll find it very difficult to convince them that the economy is not doing poorly.

(2) What’s the status of our 401(k)? For those Americans that still have money in a retirement account, knowing how that has changed since the last time they looked will be a key indicator for them. But, since most retirement accounts are invested in stock funds, the key economic indicator for most Americans is:

(3) Where is the Dow? And that’s a problem.

Dan Norcini had an excellent post on this not long ago where he talked about how much fun he’s having watching analysts try to explain this market.

“It is always fun listening to some of these analysts scratch around for reasons to explain this stock market strength especially when some of these same people will point to the poor labor markets and broken housing market as reasons for concern. Some go as far as expressing great hesitation over further strength given the sharp rise in crude oil and related energy prices. They sluff that off however and will point to the global growth factor as reasons for the rally in the US equity markets with that overiding everything else.”

In truth, the Fed has its printing presses running day and night, pumping billions more into the economy in the sure knowledge that once it gets into the hands of the banks, it will find its way swiftly into the stock marketing, bumping up the Dow even more and convincing Americans that the economy is alright, despite all evidence to the contrary. This ties right back to our discussion of the Fed’s balance sheet in my last post.

This is artificial. The analysts can’t explain it because they are not trained to identify market manipulation. We’re not creating wealth in America anymore. We’re printing it. And that’s not sustainable.

The more US dollars we print, the less the rest of the world will want them. It might have been alright when Japan was the biggest purchaser of US Treasuries, but who will take them off our hands after we buy them all back to provide the liquidity required for Japan to recover from the recent calamity?

I don’t see any good outcome from the administration’s current monetary policy. But when things change, it will be like switching off a light.

Bank reserves hit record high

I caught a very interesting post on the Zero Hedge blog the other day. Scary, but interesting. Blogger Tyler Durden pointed out that that “the Fed's balance sheet hit a fresh all time high of $2.55 trillion, primarily as a function of increasing Treasury holdings.”

Anyone that is paying attention can see that the Fed’s holdings are ballooning rapidly. I think this will lead to a period of hyperinflation soon that will have serious ramifications for all of us.

As Durden pointed out:

“This week, the Not adding today's $7.2 billion POMO to the total holdings, the Fed's total Treasury holdings increased by $22.8 billion W/W, even as MBS posted their first decline in two weeks now that repurchases have materially slowed down as mortgage rates are substantially higher than at the start of QE Lite. This means that net of today's monetization, the Fed owns 7.2% more Treasurys than even the adjusted Chinese holdings of $1.16 trillion.”

Add to this another $1,296 billion in excess reserves and another $116.1 billion in “other assets” and we may have to redefine our concept of too big to fail. And, if we’re not careful, other things will get redefined as well.

Cartoon Credit.

Banks are not lending in this environment, not when they can invest the millions they get from the government (for almost nothing) into a stock market that is rocketing skyward like there’s no end to the demand. Even a minor return on their money is worth millions to the banks. Much more than they could get from lending it out to small business owners or first time home buyers.

The government is not pursuing a wise strategy. Eventually, it will catch up to them, and to all of us. I’ll tell you more about why I believe that in my next post.

The vaporization of wealth in America

I’ve spoken before on this blog about how Americans have been watching their single biggest asset wash away before their eyes like a sandcastle on the beach as their home depreciate. We all know what a serious problem that is, but not all of us know what it means in dollars and sense. A new report solves that problem.

I saw the news on CNN’s website under the headline: Household wealth down 23% in 2 years - Fed. In the story, reporter Charles Riley describes how the average American family lost 23% of it net worth between 2007 and 2009, according to a study by the Federal Reserve.

In dollars and sense, the average family’s net worth in 2007 was $125,000. By 2009, it had fallen to $96,000. It’s should come as no surprise that these numbers are very close to the amount of equity the average family had in their homes, in both years. Most people’s wealth is tied up in their homes. It’s the only real asset that most people have in this country. The value of primary real estate holdings, according to the report, fell by an average of $18,700.

That’s not to say that some average families don’t have stock portfolios. According to the survey, those that did own stock found the value, on average, to fall more than a third, from $18,500 to $12,000 over the same period.

But depreciating assets weren’t the only plagues visiting our countrymen during this time period. The survey shows that the average family took on an additional $5,000 in debt and saw the median household annual income fall $300.

Since 2009, things have gotten much worse for homeowners here. But not for banks. I’ll talk about that in my next post.