Overheard last night at a bar here in Austin, Texas: “It’s hotter than the hinges to the gates of hell.” Not so hot, as residential lenders know, are volume and mortgage rates (which some believe may drift down during the final five months of 2023). No one can predict interest rates with any degree of accuracy or confidence, so originators should optimize the current situation with the cards they have been dealt, which aren’t always good. Speaking of which, an owner of a non-bank lender who was doing $40 million a month a few years ago and who is now doing $10 million a month wrote, “Rob, are you hearing that, in the acquisition of a lender, that all the premium is gone, and that deals are comprised of just an earn out over 2-3 years?” Yes, I am hearing that, for lenders doing $10 million a month. But every deal is different, and for companies that were doing $80 million a month and are now doing $30 million, then there might still be a premium
Notes to start off the week?! First off, there are some darned clever people around, and this ditty (thank you to John H. for sending) sung to “American Pie” and lamenting the loss of the refi biz, ranks right up there for quality! (“… I can’t remember if I cried, when I read my client’s DTI, now considered too damn high…”) Second, lumber prices have dropped as the mortgage market has slowed. Lumber now comes in at $829 per 1,000 board feet, down 39 percent from its 2022 high of $1,357 in March. (To keep your perspective, today’s price is still nowhere near pre-pandemic levels of $300 – $500; One can always increase timber cutting on Federal land or reduce tariffs on Canadian lumber.) For bad news, last week investors focused on inflation with Treasury yields climbing higher, and back-to-back inflation reports showed prices posting record advances. On Thursday, the benchmark risk-free 10-year U.S. Treasury yield ramp