“Then came the advent of technology like LP and DU, which changed the game. I vividly remember spending around six hours trying to figure out how to run LP for the first time. Eventually, automation kicked in, and that’s when technology started to make its mark in our industry. In 2001, I graduated with a degree in finance and transitioned from the back end to the front end, and my brother gave me a real challenge – handling all the manufactured home packages. It was a steep learning curve, but I tackled it head-on.”
However, Volpe’s journey isn’t just defined by technological shifts; it’s a story intertwined with market turbulence and resilience. The seismic events of 9/11 and the 2008 market crash cast their shadows, adding layers of complexity to his narrative.
“When the financial crisis hit, it was a tough time for the industry. However, we weathered the storm because we didn’t focus on risky loans like many others did,” he said, revealing the mindset that carried them through the market chaos. “Our approach during that was pretty lean and focused.”
The allure of stated-income subprime loans held little appeal for Volpe’s team. Instead, they embraced a strategy of one loan at a time, minimizing risk and ensuring their longevity even as others faltered.
“Had we chosen that route, we might not have survived,” he said. “Many companies went under because they had a plethora of loans tied up in warehouse lines without investors to support them. Despite the challenges, our team, which we humorously dubbed the ‘bulky team,’ remained the top originating team in Arizona and even among all loan officers nationwide during those years. It was a period of keeping our heads down, finding innovative solutions, and continuing to assist clients.”
Best Ex, Cybersecurity, Audit, LO Profile, Credit Reporting, QC Products; Better.com IPO is Today; FOMC Minutes
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Best Ex, Cybersecurity, Audit, LO Profile, Credit Reporting, QC Products; Better.com IPO is Today; FOMC Minutes
By: Rob Chrisman
1 Hour, 8 Min ago
“I’m not a fan of elevator music. It’s bad on so many levels.” Whether or not you think that the environment and value of owning stock in lenders and vendors has been “bad” over the last year or two, it certainly has been dicey. If you want to “be long” lenders or other mortgage-related companies, you could put some of your hard-earned savings into RKT, ICE, GHLD, UWMC, HMPT, LDI, PMT, FOA, or COOP. Now you’ll have a new vehicle: BETR. Yes, Better.com is going public, in what many would term a “challenging” environment. In a combination of stock market news, along with the reminder that making predictions about markets is like throwing darts, an ETF that was started on March 1, 2023 to track Jim Cramer’s stock picks has only garnered $1.3 million in assets and is closing. Maybe this is the free market saying that Jim Cramer is full of fluff and no value. (Today’s podcast can be found here and this week’s is sponsored by PHH Mortgage. For over 30 years, PHH Mortgage has provided industry-leading mortgage services and helped countless homebuyers and homeowners find financing solutions to meet their needs.)
Lender and Broker Software and Services
Are you attending IMN’s 6th Annual NPL, Notes & Default Servicing Forum in September? If so, be sure to check out the session “How Do You Determine the Pricing of Distressed Deals?” where Velocity Servicing’s President, Matt Stadler, will be moderating! During this session, Matt will lead panelists through the nuances of pricing distressed loans, including the following: Where are distressed deals coming from, and how can you source them? What impacts are inflation and interest rates having on distressed product pricing? What factors determine the pricing of distressed deals? Important due diligence factors to consider when pricing. And more! If you are interested in scheduling time to meet with Matt during the conference, contact [email protected]. Click to learn more or call today at 646-361-6808 to partner with Velocity Servicing™, a LoanCare® division, for your specialty servicing needs.
Free AML Module to staff and MLOs! Optimize Compliance (MtgEd) is dedicated to IMB Educational Compliance, org cost cutting, and audit preparedness. The Client Portal hosts the MOST ROBUST Tracking and Audit Center, built from IMB Compliance team input. MLO CE is not enough to satisfy regulators- our solution solves for that. For the free AML promotion, contact Dave Olchek. For TMC members, see ya’ in Nashville.
Feeling constrained by your current down payment assistance options? At Click n’ Close, we make DPA available for all with no income restrictions or first-time homebuyer requirements. These are just some of the many reasons why Highland Mortgage chose Click n’ Close. As Highland’s Director of Capital Markets Morgan Clemm notes, “With Click n’ Close, we not only get superior DPA programs that follow AUS and allow for qualification under a ‘blended credit score’ option, but we also have access to a full suite of other innovative loan products and hands-on customer service with quick response times and the ability to structure deals with our account executives.” Click n’ Close’s SmartBuy DPA programs also have newly enhanced options for manufactured homes to help borrowers secure a more affordable home AND mortgage. Contact our wholesale (Adam Rieke, Kerry Webb and Soliman Martinez) or correspondent team (Julas Hollie) to learn more.
“AFR Wholesale® (AFR) is here to calm the chaos of an uncertain rate environment. We recognize the effort it takes to keep up with the latest rate information, which is why we consistently evaluate our offerings to provide you with multiple options in a clear and concise manner. Our Quick Pricer feature grants clients access to detailed rate quotes for each scenario, while the AFR Loan Center ensures you stay informed about the most current rates and market changes. Additionally, our comprehensive AFR Resource Center supplies up-to-date information whenever you need it. Here at AFR, our commitment lies in offering competitive pricing and serving as a partner to help grow your business. Partner with AFR today to start taking advantage of these impactful features and so together we can bring more families home! Contact AFR by going to afrwholesale.com, email or call 1-800-375-6071.”
Discover how Thrive Mortgage eliminated its reliance on manual QC processes. Thrive automated their entire QC processes across both its servicing and origination lines of business using ACES Flexible Audit Technology®. “ACES has made my life so much easier from a QC perspective”, said Kelly Cooper Spencer, QC Manager at Thrive Mortgage. I’ve never used a portal for exception responses before, and I love it. I would never go back. It’s life-changing”, concluded Cooper. Watch Thrive’s success story.
Xactus, the leading verification innovator for the mortgage industry, recently announced the next generation of its proprietary technology platform, Xactus360, further modernizing the mortgage process for lenders. Xactus360’s game-changing features empower them to work more efficiently, improve automation, and streamline workflows. Lenders are especially excited about the platform’s single login that allows them to quickly access Mortgage Credit and Pre-Qualification reports, saving precious time. They can swiftly unmerge and re-pull a single bureau to a tri-merge report. Xactus360’s new tagline, “Revolving Around You,” perfectly represents its ultimate purpose – to serve the evolving needs of the customers who use it. See how Xactus’ next gen tech can transform your operations. Email us. Did you miss yesterday’s webinar on Advancing Innovation with the Next Generation of Xactus360? Stay updated on upcoming webinars and news by following Xactus LinkedIn page.
What if you could see the production numbers of any LO? With Mobility Market Intelligence (MMI)’s new LO Quick Profiles tool, you can do just that. MMI is giving mortgage professionals like you limited public access to some of the same LO production numbers that its members use to stay ahead of their peers. With the LO Quick Profiles, you simply enter an LO’s NMLS and, in the click of a button, view up-to-date production metrics including loan production volume, transaction types, loan types, top buy-side & list-side agent partners and top regions based on performance. Want to know where you stand against the competition? Take a peek at your competition’s numbers and see who their top agent partners are.
It may feel like the distant future, but your 2023 audit is right around the corner. Will you be ready when the time comes? The mortgage accounting experts at CWDL ensure that our clients are audit-ready every month, resulting in a smooth and uncomplicated annual audit. When we onboard a new client, we use our proven industry-specific methodologies to clean up books and streamline processes, allowing for accurate and timely monthly financials that both management and auditors can rely on. Being proactive versus reactive makes all the difference not only for your audit, but also for managing the financial health of your business. Your annual audit doesn’t have to be painful – reach out to Kasey English or 619.302.0010 or learn more here.
Click links, ask questions later. The most common attack vector for a cyberattack is the human element. It’s what phishing emails, phone calls and text messages all have in common. Yet while it’s the weakest link, the human element could be your organization’s greatest prevention layer if trained correctly. In an industry that incentivizes people based on sales goals, every mortgage lead has bottom line potential. And in the current market, it’s only human to go after leads without stopping to consider their legitimacy. But recent data shows just how risky clicking without thinking can be. According to ISACA, in 2022 social engineering (tricking humans) was the #1 attack vector – and even the best teams are vulnerable. Learn how to do a better job at testing and training your team to identify legitimate leads. Talk to Richey May’s cybersecurity experts for help assessing and defining your cybersecurity training needs.
Capital Markets
In any market scenario, it is crucial for lenders to analyze the best execution options to maximize profitability when selling loans in the secondary market. Determining what execution is most efficient and profitable will have a big impact on the bottom line. In MCT’s latest whitepaper, Optimizing your Best Execution Loan Sale Analysis, they provide insight into determining your company strategy, delivery options, retain release decisions, and more. Download the whitepaper or join MCT’s newsletter to stay up to date on the latest educational content.
Shelter inflation is currently 90 percent of core inflation. But there are other things going on impacting the markets. Yesterday bond prices rallied, and yields fell, the most in a single day since June yesterday with European Central Bank and Bank of England terminal rates falling in the process, a welcome relief for originators. The rally began in the morning as a partial retracement of the recent drop in bond prices but was followed by gains extending due to weakening domestic Manufacturing and Services PMI readings. The S&P Global U.S. Manufacturing PMI fell further into contractionary territory in August from July while the S&P Global U.S. Services PMI also fell in August but remained in expansionary territory. Tech industry standout Nvidia gave another stunningly strong quarterly revenue forecast, fueled by surging demand for its AI processors in data centers, which drove some investor sentiment. Yet the day’s $16 billion 20-year bond auction met tepid demand.
Those hoping for lower mortgage rates should start cheering for the 2-year Treasury note to rally. Without a rally in shorter durations across the yield curve, 10-year yields and mortgage rates will continue to reject any short-term improvements. Speaking of bond yields, tomorrow is Fed Chair Powell’s keynote speech at the Jackson Hole Symposium, with pricing in fed funds futures now implying a marginally lower probability of an additional 25 basis points rate hike in 2023 versus earlier in the week. The Minutes from the Federal Open Market Committee’s (FOMC) July meeting indicated a move toward a “wait and see” mindset. While this gives the committee the flexibility to raise or hold rates steady, the uncertainty leaves markets to themselves to determine if another hike is on the table. Powell is nevertheless expected to map out the final steps in the central bank’s campaign to finish off inflation, which comes as policymakers enter what he’s called the most difficult stage of the inflation fight: knowing when to stop.
After existing home sales data was released on Tuesday, we learned yesterday that new home sales rose 4.4 percent month-over-month and a whopping 31.5 percent year-over-year, according to the Census Bureau. The median sales price fell 9 percent to $436,700 and the seasonally adjusted annual rate of new sales now sits at 714,000 units. New home sales activity, which is measured on signed contracts, increased versus the prior month, and was driven by sales of more moderately priced homes as higher building costs hurt the supply of lower-priced homes while higher mortgage rates contributed to affordability pressures.
Today’s calendar is under way with durable goods orders (-5.2 percent, but ex-transportation +.5 percent), weekly jobless claims (230k, a little less than expected; 1.702 million continuing claims), and the Chicago Fed National Activity Index for July. Later this morning brings Kansas City Fed manufacturing for August, Treasury announcing month-end fixed coupon supply consisting of $45 billion 2-year, $46 billion 5-year, and $36 billion 7-year notes, a Treasury auction of $8 billion reopened 30-year TIPS, and Freddie Mac’s latest Primary Mortgage Markets Survey. We begin the day with Agency MBS prices worse a few ticks (32nds) from Wednesday night, the 10-year yielding 4.23 after closing yesterday at 4.20 percent, and the 2-year is at 5.00.
Employment
“Attention Visionary Branch Managers! When you’re running a successful branch, flexibility is more important than ever when it comes to building your team, defining the model, and making decisions on where to spend your resources. That’s why PrimeLending offers three different branch structures to empower you to be more than a manager so you can truly lead and grow your team in the way that best fits their strengths and goals. If you’re not satisfied with the status quo, and you want to explore all the options available to grow your branch and your career, it’s time to look at PrimeLending. We’re focused on the future and always hiring talented, driven mortgage professionals ready to take the next step. Contact Nic Hartke today to find out more and position yourself for success in this ever-changing environment!”
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The new week begins with bond yields at the highest levels since 2007 in what has been a broadly linear uptrend since late July. Up until that point, rates had been holding in a narrow range for months more than 50bps below current levels. If the Fed was/is “data dependent,” and if the most recent NFP/CPI reports were arguably bond-friendly, why has the trend been so unfriendly?
Data has indeed mattered, but the bond market’s strategic shift has mattered more. In early July, markets returned from the Independence Day holiday to find a hawkish Fed Minutes release on Wednesday and a glut of unfriendly data on Thursday (including that ADP that came in at 497k). This culminated in the first of two “apprehensive and defensive” sell-offs highlighted in the chart below.
In both cases, the selling pressure was driven by data and the Fed in the run up to NFP. In both cases NFP helped calm the bond market’s nerves with CPI solidifying the friendly bounce in the following week. In the most recent example, the post-CPI resolve lasted only a few hours before bonds were blasting back toward the previous week’s highs. At the time, losses were exacerbated by Treasury supply concerns and foreign central bank selling in China/Japan.
Fed policy is hurting long-term rates due to the yield curve. Short-term rates are now high enough to hold mostly flat. Until now, stronger data was able to do more to push Fed rate expectations (and 2yr Treasury yields) rapidly higher. Higher rate expectations + the reality of tighter policy were like offsetting penalties for longer-term rates, thus allowing them to remain in a range. But with the Fed shifting gears on short-term rates, bond market influences have a more direct impact on longer-term rates–all at a time when supply is increasing, foreign governments are selling, and the Fed is saying it’s fine cutting short-term rates in the future while continuing to shrink the balance sheet.
To all of the above, add the fact that other economic data suggests the economy continues to chug along. Some of the data suggests things are quite a bit stronger than expected. The balance of all the available econ data adds general pressure (i.e. it supports the strategic shift to higher rates).
Last but not least, there is buzz around the topic of the “neutral rate” or “R-Star” moving higher (the imaginary level of the Fed Funds Rate that keeps inflation and growth in a balanced homeostasis). Some of the proponents of said buzz think Powell will discuss this Friday in Jackson Hole. While a discussion wouldn’t be a surprise, it would be a surprise if Powell were to say something about it moving higher. If anything, there’s an opportunity for Powell to put some of the rumors to bed by reiterating recent Fed communications regarding the absence of any change in the R-Star outlook. At the very least, that would let us know how much this sentiment has affected the uptrend in yields recently.
Mortgage rates only kept climbing in the last week. Buyers in this real estate market notice these affordability changes, and so we can see in the data fewer home purchase offers, slightly climbing unsold inventory, and slightly more price reductions for the homes that are on the market. This is the same pattern as we talked about last week. The first half of the year had surprisingly resilient sales, but that is slowing again. Mortgage rates are at their highest level in 20 years because the economy just keeps reporting strong data. And every uptick in mortgage rates leads to a downtick in the number of home buyers in the market.
Rising rates make more inventory. So how much inventory will we add this fall? Well as of now, these slowing signals are subtle. This housing market is much different from last year at this time. Last year, rates climbed dramatically and so did inventory. Now rates are inching up, and so is inventory. If mortgage rates jump to say 8%, that’s when we’d see big changes in inventory and home prices. Keep watching these numbers here.
Inventory
Inventory of unsold homes on the market is ticking up. It now doesn’t look like next week will be the peak of inventory for the season. It looks like inventory will keep climbing into September. There are now 495,000 single-family homes unsold active on the market. Inventory rose by just under 1% again this week.
This inventory climb at the end of August is not unusual. It’s not a rapid rise, but it also doesn’t appear to be leveling off. Inventory often peaks the last week of August, the fall has fewer sellers and it keeps shrinking through the holidays. Now because mortgage rates have been notably climbing for the last several weeks, we also expect inventory to keep climbing into September as fewer buyers make offers on the existing inventory.
There are 10% fewer homes on the market now than last year at this time. Last year inventory spiked from March through July with spiking mortgage rates. Then it leveled off a bit. So this week inventory lost ground on last year. The inventory gain week to week was more than it was last year at this time. That’s the first time this happened in many months. Last week there were 10.5% fewer homes on the market, this week that’s only 10% fewer. This is one of the subtle signals that higher mortgage rates have slowed this year’s home buyers again.
To understand the future of housing inventory in this country remember the Altos Rule. The Altos rule says that the more available inventory of homes to buy is the result of higher mortgage rates. If rates climb, so does inventory. If rates fall, inventory will fall.
There are 365,000 single-family homes in contract now. That’s up a fraction from last week and 10% fewer than last year at this time. New pending sales of single-family homes going into contract this week came in at 63,000 vs 70,000 last year. In this chart, the height of each bar is the total number of homes in contract that week. The light red portion of the bar represents those newly in contract. The sales rate has slowed since rates did their latest jump of over 7%. In fact, I’d expect the NAR headlines to keep falling on the pending sales measure as well. We could see the sales rate tick down to four million annually on their seasonally adjusted annual rate in the next couple of months.
I’m looking forward to the time when the real-time data starts to grow and the sales rates look more bullish than the headlines, but that’s not happening yet. As we watch the new pending home sales data each week, the next trend we’ll be looking for is how quickly the new pending sales rate shrinks this autumn. See in the chart how the light red portion of each bar shrank so quickly last fall. We had some recovery in the first half of this year. We started the year with 30% fewer homes in contract.
That gap narrowed to just 10% fewer. But we’ve been unable to get closer than that. The market was accelerating this spring, but it is not doing so now. I suppose these negative swings are the other side of the coin for what I’ve called a soft landing in housing. Housing demand cratered, but home prices didn’t crash. Home prices declined in July and September last year, and recovered a bit in the first half of this year. Now demand is softening again and that will keep home prices from appreciating much from here.
American homebuyers are very sensitive to mortgage interest rates. And while higher mortgage rates have hurt affordability for so many, it’s really the change in rates that spur changes in demand. Early this year we had more home buyers than sellers, even with rates in the six-percent range. When rates jump to 7.2% that’s when we see the demand data react accordingly. So it’s not the absolute level, it’s the change in rates that we should be paying attention to.
Price
And we can see it in the home price reduction data too. Price reductions are about to inch above 2018 and 2019 again. 35.5% of the homes on the market have had price reductions. Price cuts always tick up late in the summer, and this year’s seasonal increase is speeding up just a bit with the recent higher mortgage rates. Each week we have slightly fewer buyers, making slightly fewer offers, so slightly more sellers cut their asking prices.
Watching this price reduction curve has been so valuable lately. So insightful. In this chart, each line is a year. You can see last year’s light red line started climbing in March. That told us the pandemic frenzy was over. In September last year, price reductions spiked again with mortgage rates. This year, the dark red curve showed us how rapidly the market was recovering. That told us there was a floor on how far home prices could fall. It really highlights how effective this stat is for understanding the future of home sales prices. Right now 35.5% of the homes on the market have had a price cut.
This is a totally normal level. It is rising, not rising fast, it’s not a strong signal, but it is rising faster than in recent years for August. That tells us that sellers are seeing fewer buyers than they anticipated. This buyer slowdown means any home price appreciation we’ve had year over year is weakening and may be in jeopardy.
Tracking price reductions on the listed homes on the market is really insightful at the local level too. Right now we can see for example that Austin Texas has the most price reductions of any big market and that seems to be climbing. You can use the Altos data to understand local differences which are so important right now.
The median price of single-family homes right now across the country is $449,900. That’s basically unchanged from last week and from last year. Prices tend to cluster around the big round numbers, in this case, $450,000, with a big group priced just under that for search purposes. So home prices are at this $450,000 plateau for a while. That’s the dark red line on this chart. See at the far right end the little plateau. Home sales prices in the future are falling because we can see the ask prices are very stable. Much more stable than they were last year at this time.
The median price of the newly listed cohort this week is $399,000 again that’s also unchanged from last week. That’s the light red line on this chart. The price of the newly listed homes is 1.3% higher than last year at this time. This is when homes go on the market, the sellers and the listing agents know where the demand is, where the buyers are and they price accordingly. So the price of the new listings is an excellent leading indicator of where home sales prices will be out in the future.
We’re in this tricky space looking at year over year home price changes now. Last year the market was slowing so quickly that the comparisons now to last year start to look easier. Prices were falling last year with frozen demand. This year the market is slowing gradually. You can expect that the annual home price appreciation would continue to improve even though the momentum is a bit negative right now. It looks like we’ll end 2023 with home prices up a few percent over where 2022 ended.
And when we look at the price trends for the homes going into contract, we can see the earliest proxy for the sales which will actually close and get recorded in September and October. You can see that the last several weeks have put a little downward pressure on what home buyers are willing to pay. See how the dark red line was above last year for a few months and then in recent weeks, the dark red line is compressing closer to the light red line. That’s sales prices giving up their annual gains with higher mortgage rates.
The median price of the homes that went into contract this week is $378,000. That’s up a tick from last week and over last year, but you can see in the chart the dark red line is drifting lower. Now, the sales comparison gets a lot easier in September when we had that big rate spike in 2022. So assuming we don’t have another mortgage rate spike, the annual price appreciation will continue to improve. On the other hand, if we see 8% mortgage rates, there’s no reason to believe that home prices can’t gap down again like they did last year.
Again this is a very clear reaction to the latest surge in mortgage rates. We have fewer buyers and those buyers are willing to pay just a little bit less. The opposite is true too. If rates were to drift lower, you can expect more buyers, less inventory, fewer price cuts and higher prices in data measures like this one the price of the newly pending sales each week. The data is very clear right now.
During the initial wave of the banking crisis in March, I published “Truist: Immense Unrealized Bond Losses Threaten Core Equity Stability.” At the time, Trust Financial Corp. (NYSE:TFC) had suffered the most significant drawdown among the top-ten US banks. Roughly five months ago, I was among the few analysts with a definitively bearish outlook on the bank, while many had viewed it as a dip-buying opportunity. My perspective was that although TFC’s “bank run” risk was low, the vast extent of its off-balance sheet losses left it with little safety for a potential rise in loan losses. Further, I expected that growing net interest margin pressures would substantially lower the bank’s income over the coming year, potentially compounding its risks.
Since then, TFC has declined by an additional ~11% in value and recently retraced back near its May bottom, associated with the failure of the Federal Republic. I believe the most recent wave of downside in at-risk banks is a notable signal that the market continues to underestimate systemic US financial system risks. Of course, following TFC’s most recent bearish pattern, I expect many investors to increase their position, viewing the company as significantly discounted. Accordingly, I believe it is an excellent time to take a closer look at the firm to estimate better its discount potential or the probability of Truist facing much more significant strains.
Estimating Truist’s Price-to-NAV
On the surface, TFC appears to have considerable discount potential. The stock’s TTM “P/E” is 6.3X compared to a sector median of 8.7X. Its forward “P/E” of 7.7X is also below the banking sector’s median of 9.3X. TFC’s dividend yield is currently at 7.2%, nearly twice as much as the sector median of 3.7%. Finally, its price-to-book is 0.66X, considerably lower than the sector median of 1.05X. Based on these more surface-level valuation metrics, TFC appears to be around trading around a 25% to 35% discount to the banking sector as a whole. Of course, we must consider whether or not this apparent discount is pricing for the bank’s elevated risk compared to others.
Importantly, Truist is one of the most impacted banks by the increase in long-term securities interest rates, giving the bank huge unrealized securities losses. Based on its most recent balance sheet (pg. 12), we can see that Truist has about $56B in held-to-maturity “HTM” agency mortgage-backed-securities “MBS” at amortized cost, worth ~$46B at fair value, giving Truist a $10B loss that is not accounted for in its book value. That figure has remained virtually unchanged since its Q4 2022 earnings report through Q2 2023; however, it will rise with mortgage rates since higher rates lower the fair value of MBS assets. Truist’s Q2 report also notes that all of its HTM MBS securities are at due over ten years, meaning they’re likely ~20-30 year mortgage assets that carry the most significant duration risk (or negative valuation impact from higher mortgage rates).
Significantly, the long-term Treasury and mortgage rates have risen in recent weeks as the yield curve begins to steepen without the short-term rate outlook declining. See below:
From the late 2021 lows through the end of June, the long-term mortgage rate rose by around 4%, lowering Truist’s MBS HTM assets fair value by ~$10B, while its available-for-sale securities lost ~$11.9B in value (predominantly due to MBS assets as well). Accordingly, we can estimate that the duration of its securities portfolio (almost entirely agency MBS) is roughly $5.5B in estimated losses per 1% increase in mortgage rates. Since the end of June, mortgage rates have risen by approximately 35 bps, giving TFC an estimated Q3 securities loss of ~$1.9B. Around $1B should show up on TFC’s balance sheet and income, while ~$900M will remain unrealized based on its current AFS vs. HTM portioning.
For me, we must value TFC accounting for both. Total unrealized losses and estimated losses based on the most recent changes in long-term interest rates. That said, should mortgage rates reverse lower, Truist should not have that $1.9B estimated securities loss in Q3; however, should mortgage rates continue to rise, the bank should post an even more considerable securities loss. At the end of Q2, Truist had a tangible book value of $22.9B. After accounting for unrealized losses, that figure would be around $12.9B. After considering the losses associated with the recent mortgage rate spike, its “liquidation value” is likely closer to $11B. Of course, Truist has a massive ~$34B total intangibles position due to goodwill created in its acquisition spree over the past decade. Although relevant, I believe investors should be careful in accounting for goodwill due to the general decline of the financial sector in recent years.
While much focus has been placed on unrealized securities losses, the risk associated with those losses is vague. Truist can borrow money from the Federal Reserve at par against those assets, partially lowering the associated liquidity risk. However, the Fed’s financing program is at a much higher discount rate (compared to deposit rates) and only lasts one year, so it is not a permanent solution. Further, the unrealized securities losses are on held-to-maturity assets, meaning it will recoup the losses should the assets be held to maturity. Of course, that means it may take 20-30 years, and Truist may need that money before then.
Further, Truist has a substantial residential mortgage portfolio at a $56B cost value at the end of Q2 (data on pg. 48). Those loans had an annualized yield of 3.58% in 2022 and 3.77% in 2023; since the yield did not rise proportionally to mortgage rates, we know the vast majority of those loans are likely fixed-rate long-term. Since they’re not securities positions, Truist need not publish their changes in fair value; however, should Truist look to sell its residential mortgages, they would almost certainly sell at a similar total discount to its MBS assets, considering its yield level is akin to that of long-term fixed-rate mortgages before 2022. I believe the unrealized loss on those loans is likely around $10B.
The rest of Truist’s loan portfolio, worth $326B at cost, is predominantly commercial and industrial ($166B), “other” consumer ($28B), indirect auto ($26.5B), and CRE loans ($22.7B). Excluding residential mortgages, all of its loan portfolio segments have yields ranging from 6-8% (excluding credit cards at 11.5%), with those segments’ total yields rising by around 3-4% from June 2022 to 2023. Accordingly, it is virtually certain that most of its non-mortgage loans are either short-term or fixed-rate since their yields rose with Treasuries, meaning they do not likely face unrealized losses based on the increase in rates.
Overall, I believe that if Truist were to liquidate its assets, its net equity value for common stockholders would be roughly zero, technically $1B. That figure is based on its current tangible book value, subtracting known unrealized losses on securities (~$10B), estimated recent Q3 realized and unrealized losses (~$1.9B), and estimated unrealized mortgage residential loan losses (~$10B). While the bank does have some MSR assets, worth ~$3B, that are positively correlated to rates, I do not believe that segment will offset unrealized losses in any significant manner. Together, those figures equal its tangible book value and would lower the total book value to about $34B. However, in my view, intangibles are not appropriate to account for today because virtually all banks have lost value since its 2019 merger, making its goodwill an essentially meaningless figure.
From a NAV standpoint, TFC is not trading at a discount and is most likely trading at a significant premium. Further, based on these data, Truist is, in my view, seriously undercapitalized. Although TFC posts a CET1 ratio of 9.6%, which is also relatively low, its common tangible equity would be essentially zero if its loans and securities were all accounted for at fair value. To me, that is important because most of its losses are on ultra-long-term assets so it may need that lost solvency sometime before those assets’ maturity. Further, even its 9.6% CET1 ratio is close to its new regulatory minimum of 7.4%, so a slight increase in loan losses or a realization of its estimated ~$22B in unrealized losses would quickly push it below the regulatory minimum.
Truist Earnings Outlook Poor As Costs Rise
To me, Truist is not a value opportunity because it is not discounted to its tangible NAV value. Even its market capitalization is around 65% above its tangible book value, which does not account for its substantial unrealized losses. However, many investors are likely not particularly concerned with its solvency, as that could not be a significant issue if there are no increases in loan losses, declines in deposits, or sharp NIM compression. If Truist can maintain solid operating cash flows, that could compensate for its poor solvency profile.
Of course, TFC cannot continue to try to expand its EPS by increasing its leverage since it is objectively overleveraged, nearly failing its recent stress test. On that note, poor stress test results are essential, but “passing” is somewhat inconsequential, considering most of the recently failed banks would have passed with flying colors, as the test does not account for the substantial negative impacts of unrealized losses on fixed-income assets. That is likely because, when “stress testing” was designed, it was uncommon for long-term rates to spike with inflation as it had, and banks had much lower securities positions compared to loans. Thus, it is quite notable that TFC nearly failed a test that does not account for its substantial unrealized losses.
Looking forward, I believe it is very likely that Truist will face a notable decline in its net interest income over the coming year or more. Fundamentally, this is due to the decrease in Truist’s deposits, total bank deposits, and the money supply. As the Federal Reserve allows its assets to mature, money is effectively removed from the economy; thus, total commercial bank deposits are trending lower. Truist’s deposits are trending lower in line with total commercial banks. I expect Truist’s deposits to continue to slide as long as the Federal Reserve does not return to QE. As Truist competes for a smaller pool of deposits, its deposit costs should rise faster than its loan yields. Today, we’re starting to see the spread between prime loans and the 3-month CD contract, indicating that bank NIMs are declining. See below:
Truist’s core net interest margin has slid from 3.17% in Q4 2022 to 3.1% in Q1 2023 to 2.85% in Q2. Truist’s deposits (10-Q pg. 48) have generally fallen faster than its larger peers, so it needs to increase deposit costs more quickly. Over the past year, its total interest-bearing deposit rate rose from 14 bps to 2.19%, with the most significant rise in CDs to 3.73%.
Notably, Truist has increased its CD rate to the 4.5% to 5% range to try to attract depositors. However, the bank continues not to pay any yield on the bulk of its savings account products, causing a sharp increase in customers switching toward the many banks which pay closer to 5% today. Over the past year, the bank saw around $10B in outflows for interest-bearing deposits and about $25B from non-interest-bearing deposits, making up for those losses with new long-term debt and CDs. Problematically, that means Truist is rapidly losing more-secure liabilities to more fickle ones like CDs and the money market. While this effort may slow the inevitable decline of its NIMs, it will also increase Truist’s solvency risk because it’s becoming more dependent on less secure liquidity sources as people move money between CDs more frequently than opening and closing savings accounts at different banks.
Truist also faces increased expected loan losses due to a rise in late payments last quarter. That trend is correlated to the increase in consumer defaults and the sharp decline in manufacturing economic strength. See below:
Consumer defaults remain normal, but I believe they will rise as consumer savings levels continue to fall and should accelerate lower with student loan repayments. The low PMI figure shows many companies face negative business activity trends, increasing future loan loss risks on Truist’s vast commercial and industrial loan book. Of course, Truist also has a notable CRE loan portfolio, which faces critical risks associated with that sector’s colossal decline this year.
The Bottom Line
Overall, I believe Truist has become even more undercapitalized since I covered it last. I also think Truist faces an increased risk of recession-related loan losses and has a more sharp NIM outlook. Even more significant increases in mortgage rates recently exacerbated strains on its capitalization, while its low savings rates should cause continued deposit outflows. Further, its increased CD rates should create growing negative net interest income pressure.
If there was no recessionary potential, as indicated by the manufacturing PMI, then TFC may manage to get through this period without severe strains; however, its EPS should still decline significantly due to rising deposit costs. That said, if Truist’s loan losses continue to grow due to increasing consumer and business headwinds, its low tangible capitalization leaves it at high risk of significant downsides. If its loan losses grow or its deposits decline, it will need to realize more losses on its assets, quickly pushing its CET1 ratio below its new regulatory minimum. Personally, I strongly expect TFC’s CET1 ratio will fall below the 7.5% level over the next year and could fall even lower if a more severe recession occurs.
I am very bearish on TFC and do not believe there is any realistic discount potential in the stock besides that generated by speculators. Since there is a significant retail speculative activity in TFC and some potential for positive government intervention due to its larger size, I would not short TFC. Although TFC downside risk appears significant, many factors could create sufficient temporary upside that it is not worth short–selling. That said, I believe Truist may be the most important financial risk in the US banking system due to its solvency concerns combined with its size and scope. Accordingly, regardless of their position in TFC, investors may want to keep a particularly close eye on the company because it may create more extensive financial market turbulence than seen from First Republic Bank should it continue to face strains.
Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats
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Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats
By: Rob Chrisman
Fri, Aug 18 2023, 10:49 AM
As numbers approaching a thousand head to Orange County, CA, for the California MBA’s Western Secondary, keeping an eye on the remnants of a hurricane, it is not an easy lending environment with mortgage rates at 20-year highs, firmly in the 7’s. Thomas Edison believed, “Vision without execution is hallucination.” Many owners of lenders and vendors had very good vision and execution some years ago when creating their companies. But thinking that 2020 and 2021 would continue indefinitely would have been classified as a hallucination, and obviously things have become much more difficult with many wondering where things go from here. I don’t have a crystal ball, but a certain percentage of those owners who deferred being serious about exploring a sale, waiting, until after the cycle was obviously on the downside, they’ve perhaps undermined an opportunity for negotiating more favorable deal terms. It can be argued that the smarter entrepreneurs engaged in company sale negotiations while industry mindset is mostly driven by prosperity. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades.)
Lender and Broker Software and Services
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“Salesforce is committed to partnering with mortgage lenders to drive their technology transformation with modern solutions that are already in practice and serving many of the top mortgage lenders in the country. As part of its efforts to drive the industry forward through the adoption of a modern tech stack, Salesforce identified UMortgage to establish the precedent of utilizing its mortgage and lending software to its fullest potential to facilitate better client experiences. Using customized task management systems and automations within Salesforce, UMortgage has been able to achieve 300% year-over-year growth and near-perfect 95 net promoter score (NPS), an indicator of a best-in-class client experience. Check out the following link to learn more about the innovative technological systems that are helping UMortgage Loan Originators maximize their lead generation & conversion. With an investment in intuitive solutions, UMortgage is driving the mortgage industry towards a better future that enables brokers to thrive.”
We’re hearing that lenders are ramping up their tech stacks and (most importantly) focusing on the quality of the data powering that technology. If you’re considering taking your company’s tech stack to the next level, look for a property data provider that delivers the most comprehensive data through the best channels to meet your unique business needs. That’s why we’re highlighting First American Data & Analytics and its repository of more than 8+ billion recorded documents. First American is more than just a data provider. It offers end-to-end solutions for the mortgage lifecycle. From detecting fraud and risk to providing valuation solutions, First American powers lenders to make informed, data-driven decisions. If you’re ready to have access to the most accurate, complete, and current data, reach out to the team and get a data sample now.
“Lenders, the home insurance market is facing unprecedented volatility. We want to hear if it’s affecting your business and the closing process. Take our five-minute survey to share your thoughts. As a thank you, you can select to be entered to win a $100 Amazon gift card, compliments of Matic Insurance. Click here to begin the survey. Matic is a home insurance marketplace built for the mortgage industry. Learn how mortgage enterprises can implement a new revenue stream that helps borrowers navigate the insurance buying process. Book a demo today.
Wholesale lending is undergoing a transformation that will leave those who cling to outdated processes behind. Using bargain CRMs as electronic phone books or even worse, spreadsheets to track brokers, is a clear sign that your sales process is holding you back. Modern CRM technology like OptifiNow provides a comprehensive, out-of-the-box solution that helps wholesale lenders create a sales and marketing process that drives broker engagement and significantly increases loan volume. Download our guide to finding the right CRM for wholesale lenders to learn how to transform your wholesale business and stay ahead of the competition!
What’s an internal audit anyway and do you need one? An internal audit acts as a third line of defense for your mortgage operation. It provides comprehensive assurance based on the highest level of independence and objectivity to evaluate the effectiveness of management’s internal controls. This function should advise your mortgage operation on plans to achieve the company’s strategic, operational, financial and compliance goals. An effective internal audit should go far beyond just checking a compliance box; it should be an integral part of protecting your company. If you want to ensure you’re adhering to regulatory requirements and demonstrating good faith business practices, a Richey May internal audit is a good fit. If you’re looking to be Fannie Mae approved in the future or want to maintain your approved status, it’s required. If you’re unsure whether you need an internal audit, ask one of Richey May’s experts today or learn more here.
Pricing Products and Programs
“Lender Price introduces Composable Pricing UI, an innovative user interface that empowers lenders to effortlessly customize their pricing engine using No Code or Low Code options. With a variety of skinning options and increased flexibility, Lender Price users can now easily create a personalized pricing experience with an abundance of options to choose from. Surpassing the limitations of single UI platforms seen with competitors, the era of rigid, one-size-fits-all PPE’s is over. With a flexible pricing engine like Lender Price, users now have the ability to tailor their interface based on their individual needs and preferences. Composable UI represents a paradigm shift in digital lending technology UX, liberating both individuals and organizations from the constraints of single UI platforms,” said Dawar Alimi, Lender Price CEO. “With an abundance of options and unparalleled flexibility, users can personalize and take charge of their pricing experience.” Email us or request a demo today.”
In this market, hustle is everything. You can’t afford to waste a single deal or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check ReadyPrice out today.
STRATMOR Comp Information and Survey
Yesterday I published, “What do underwriters and processors and LOs make? STRATMOR has the information, spelled out in a recent Perspectives piece.” Several wrote to say that there is a wide disparity in pay based on experience, at every level, and that averages may not be telling the whole story. Point well taken, although the drop in volume/units has not been matched by the drop in personnel. Stay tuned…
Information is critical in making payroll decisions. STRATMOR Group’s Compensation Connection® Study provides valuable insight into compensation components, incentive plan structures, role specifics and more, aggregated by company type, annual volume, and region. Prior three-year trending is also included on most metrics. Get the compensation data you need: sign up for the Fall 2023 Compensation Connection® Study today!
Lenders can Relive the 2nd Quarter of 2023
Spoiler alert: Losses continue but at a slower pace. The MBA has crunched the numbers of those surveyed and calculated that independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $534 on each loan they originated in the second quarter of 2023, an improvement from the reported loss of $1,972 per loan in the first quarter of 2023.
Marina Walsh, CMB, MBA’s Vice President of Industry Analysis and overall good person, summed up the Quarterly Mortgage Bankers Performance Report. “After 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan. Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black… Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, most mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”
Once again, servicing income helped big time. Think about that as companies sell it off. When the MBA looked at both production and servicing, 58 percent of companies were profitable last quarter, an improvement from 32 percent in the first quarter of 2023 and 25 percent in the fourth quarter of 2022. Still, the average pre-tax production loss was 18 basis points (bps) in the second quarter of 2023, compared to an average net production loss of 68 bps in the first quarter of 2023, and down from a loss of 5 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 47 basis points.
“Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 328 bps in the second quarter, down from 358 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,510 per loan in the second quarter, down from $11,199 per loan in the first quarter.
“The purchase share of total originations, by dollar volume, increased to a study high of 89 percent in the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 80 percent in the second quarter, with the average loan balance for first mortgages increasing to $343,386 in the second quarter, up from $329,159 in the first quarter.
It ain’t cheap to do a loan. “Total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) decreased to $11,044 per loan in the second quarter, down from a study-high $13,171 per loan in the first quarter of 2023. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,236 per loan.
“Servicing net financial income for the second quarter (without annualizing) was $94 per loan, up from $54 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $105 per loan in the second quarter, up from $102 per loan in the first quarter.”
For all the stats, there are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Contact Falen Taylor (202-557-2771). The reports can also be purchased on the MBA’s website.
Capital Markets
At this point it can be argued that the Fed doesn’t want to see higher long-term rates. But bond yields continue to rise across the board, impacting mortgage rates of course, continuing an upswing that began nearly three months ago at the beginning of the summer. In fact, the yield on the benchmark 10-year Treasury (US10Y) closed at 4.25% on Wednesday, the highest level since 2008. The upward march this week follows the release of the latest Federal Open Market Committee minutes, which stressed that additional interest rate hikes might be needed.
“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy… Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening... and emphasized the importance of communicating as clearly as possible about the Committee’s data-dependent approach to policy and its firm commitment to bring inflation down to its 2% objective.”
Stronger-than-expected economic data continues to pour in, helping stock market prices, especially if you think the Fed to end its hiking cycle soon. Others say 10-year yields above 4 percent still present a good buying opportunity, in contrast to the potential rewards from pricey stocks and multiples that might not be as appealing. But it seems that bond investors have shifted to a “higher-for-longer” narrative coming out of the Fed, causing nominal rates and real rates to keep moving higher. Not good for housing affordability.
Strong economic data continued yesterday with initial jobless claims -11k and Philly Fed beating expectations by 22 points. That helped to lift benchmark 10-year U.S. Treasury yields above 4.30 percent as MBS once again sold off across the coupon stack. The recent surge in U.S. mortgage rates to anywhere between 10-month and two-decade highs, depending on who you ask, has pushed housing affordability to the lowest level in nearly four decades. Yesterday also brought another troubling sign for the Chinese economy as Beijing authorities are said to have told state-owned banks to step up intervention in the currency market in a push to prevent a surge in yuan volatility.
With no major data releases or Fedspeak today, the market will be left to its own devices. We begin the day with Agency MBS prices better from Thursday afternoon by .250, the 10-year yielding 4.22 after closing yesterday at 4.31 percent, and the 2-year at 4.91: yield curve inversion is alive and well without a recession.
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Everyone Thinks Rates Should Go Lower. Is That Why They’re Rising
The GFC (great financial crisis) shaped and reshaped the worldview of any market-watcher that lived through it. The 70s/80s were increasingly seen as a one-off aberration against a baseline of generally low, flat long-term rates in the 1-3% range. Due to that paradigm, the post-covid volatility in inflation and rates has been accepted only slowly and painfully. The paradigm continues informing the belief that 4.3% in 10yr yields is too damn high and buyers surely have to be lining up. Unfortunately, when too many investors are on one side of the trade, the market often moves in the opposite direction.
At least that’s one of the old sayings. Other variations include things like “the market will do what it must in order to prove the maximum number of traders wrong.” But a closer look at
It’s true that their net long position is the highest it’s been in a long time, but not much longer than it was at the end of 2018. It was also the longest in years in the middle of 2015 and the market did nothing to punish the imbalance. In fact, bonds rallied to all-time low territory by the following summer.
There are plenty of other traders who are short bonds. Interestingly enough, leveraged accounts are net short 1,287m contracts. That goes a long way toward offsetting the net long among money managers of 1.303m contracts.
Long story short (no pun intended), glib witticisms about what the market “always does” are never as simple as they sound. Bonds are adjusting to a new normal with shorter-term yields more anchored by Fed Funds Rate expectations (thus putting pressure on longer-term yields to un-invert the curve). Additional pressure comes courtesy of a particularly heavy imbalance of Treasury issuance versus revenues as well as foreign governments selling Treasuries to prop up their devalued currencies.
As has been and continues to be the case, short term yields need to fall significantly before long term yields get significant relief. That won’t happen until the Fed signals a willingness to cut and that won’t happen until inflation and econ data do a lot more than they have to show the impact of the Fed’s policy tightening. For inflation, that could merely mean repeating the recent 0.2% m/m core performance, but for econ data, things are going to have to start looking a lot more contractionary.
Today’s Fed Minutes were uneventful with a volume spike that didn’t even eclipse those seen after today’s 8:20am CME open or the 9:15am Industrial Production data. That puts them in very forgettable company among potential market movers. Nonetheless, bonds sold off moderately into the afternoon. This has less to do with things that happened today and more to do with the general trend. Inflation is moving into the ensemble cast while growth, issuance, and the yield curve are getting more lines.
Housing Starts
1.452m vs 1.448m f’cast, 1.434m prev
Building Permits
1.442m vs 1.463m f’cast, 1.441m prev
Industrial Production
1.0 vs 0.3 f’cast, -0.5 prev
10:12 AM
Weaker at 8:20am CME open, but stronger now. 10s down 1.6bps at 4.203 and MBS up 3 ticks (0.09).
11:49 AM
Giving up some ground now with MBS down 2 ticks (0.06) and 10yr yields up 1.4bps at 4.233.
01:35 PM
Weakest levels ahead of Fed Minutes. 10yr up 2.9bps at 4.248. MBS down an eighth (.125).
02:17 PM
Slightly weaker after Fed Minutes, but not a huge move. 10yr up 3.5bps at 4.254. MBS down 7 ticks (.22)
04:18 PM
More selling. 10yr up 5bps at 4.268 and MBS down just over a quarter point.
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The Federal Housing Finance Agency’s move toward advanced credit scores represents a big change for two mortgage-related government-sponsored enterprises and home finance. While many in the mortgage industry fear that the planned timeline for implementation isn’t sufficient, those who have worked with those measures in other industries share the FHFA’s more optimistic view.
“They’re going to have two years to do this, it’s not like they were given a week,” said John Ulzheimer, a professional witness who previously worked in the credit reporting and scoring industry. “It’s a matter of prioritizing programming and risk management resources.”
That said, it’s a bigger deal for the mortgage industry than others to shift to FICO 10T and VantageScore 4.0, those outside of it acknowledge.
“It’s a pretty considerable change,” Ulzheimer said. “The entire industry is going to catch up on basically two decades of technology when they flip the switch.”
The move to advanced scores is more complex for the FHFA because it is less a lender-by-lender decision but involves a large player that serves as a central hub for many stakeholders, said Joanne Gaskin, vice president of scores and data analytics at FICO.
“There’s a difference in how the mortgage industry is interconnected, versus the credit card lenders, where there’s one party that has to make the decision,” she said. “With mortgage lending, you’ve got the originator, GSEs, investors, and maybe there’s a broker, rating agency or private mortgage insurer. It’s just much more complex.”
But this isn’t the first time the mortgage industry has had to deal with a change in the broader credit reporting system and some of that past experience is somewhat heartening because it boosted leads for home loans.
Consumer Financial Protection Bureau found increases in first-lien mortgage inquiries during the first quarter after medical collections records were removed from the credit reports from the three main bureaus. Inquiries also went up during the last quarter in which a medical collection tradeline gets reported.
With the change estimated to remove one medical collections tradeline from 22.8 million people and remove all such records for 15.6 million, it appears it likely has or is creating a group of more mortgage-ready customers in cases where that’s enough to raise their scores sufficiently.
That suggests VantageScore’s claims that it could bring in at least 10 million mortgage customers in line with FHFA use of the model and FICO’s estimate for a 5% increase also could materialize, depending on the execution.
Granted the medical collections change was much different than the larger transition underway at the FHFA, the former being a largely a matter for the credit bureaus rather than the mortgage industry, for one. And mortgage professionals interviewed for this series had mixed opinions about whether it made a difference as far as borrower interest.
But it does show how moving some ad-hoc practices used in mortgage underwriting into credit reporting and scoring can be a natural progression.
While the medical reporting removal does have its skeptics who think its longtime inclusion in reporting and scoring may mean it has been predictive of credit concerns, mortgage lenders say they had some comfort with it because there have been some exceptions for it in underwriting.
“The Federal Housing Administration in particular and conforming markets as well have stated some conditions where medical collections don’t apply in their credit risk factoring,” said Dustin Martin, a mortgage underwriting training manager at Embrace Home Loans.
Fannie Mae, the larger of the two major government-sponsored enterprises buying U.S. mortgages and one the FHFA’s charges, has used the kind of trended data and rental payment information and on a one-off basis in underwriting.
That could give the industry some comfort in the FHFA transition. Those two types of data primarily distinguish the advanced credit scores the FHFA will be adopting and other consumer finance industries like credit cards have been using them to good effect, Gaskin said.
“We know that rental data, assuming the consumer is paying as agreed, can be a real positive,” Gaskin said, noting that the same is true for trended data, which involves tracking the payment histories in credit accounts over time rather than based on snapshots of activity.
Updating the scores is much more powerful than just using certain new data elements within them separately in underwriting, said Rikard Bandebo, chief product officer at VantageScore.
“The first thing [lenders] check is a person’s credit score, then they go through the underwriting process. So if all these people that have rental data, but it wasn’t included in the credit score yet, they can’t get past whatever the threshold is. Let’s say it’s a 620 and they had a 605. They can’t get past the point, right? That’s why so many millions of consumers are being excluded today from this system,” he said.
There are generally certain trends seen when credit measures get updated in consumer finance, according to Ulzheimer. While mortgages usually have a higher payment priority than other loan types that could cause them to differ, they’re likely to follow the same pattern.
“Normally, the way it works, when you compare score distributions from newer versions relative to older versions is there’s this flattening of the curve, where you have more people scoring in the tails and fewer people scoring in the meaty part,” said Ulzheimer.
Inside: Dreaming of ways to make money fast as a woman? Stop dreaming and take action. These are genius ways of making money online and at home.
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How can I make a lot of money in hours?
Making income in a matter of hours for a woman is entirely feasible with a blend of freelancing, leveraging gig economy platforms, and capitalizing on your skills or assets. Here’s a quick guide for you:
Consider freelancing: Establish your writing, graphic design, or programming services on platforms like Fiverr or Upwork.
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Take online surveys or join market research groups on sites like Swagbucks for a rapid source of income.
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How to Make Money Fast as a Woman
No matter who you are, making money can be tough. But if you’re a woman, it can feel impossible.
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Identify your marketable skills, such as cake baking, freelance writing, bookkeeping or even organizing spaces.
Brainstorm which of these services people could pay for.
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Freelancing is a savvy way for women to stack up earnings fast, offering flexibility and complete control over the workload. It’s a ticket to dodge conventional office politics and punch above your earning potential.
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As a woman, becoming a virtual assistant could be your fast lane to earning a substantial income.
This is especially a great option if you’re excellent in organization and time management along with the need for flexibility.
For many becoming a virtual assistant with no experience is possible. And very lucrative.
Finally, for your best shot at success in this field, taking a course to improve your learning curve is extremely helpful.
Potential to earn up to $43,000 per year.
5. Sell Your Crafts
Ladies, have you thought of turning your love for crafts into a profitable venture?
Find out what crafts are in demand. The higher the demand, the more profitable it would be to make and sell these crafts.
Remember, profitability hinges on what you sell and how much you sell. Happy crafting!
While you are limited on what you can earn by what you can make, it is possible to make money doing something you absolutely enjoy.
6. Stock Trading
Stock trading may seem daunting but it can be a quick route to financial independence, especially for women.
With the right tools, information, and mindset, you can swiftly navigate the market and amplify your earnings. In fact, this is something Teri Ijeoma did herself.
Educate yourself on the basics before you invest. This is exactly what I did and my investment has paid off.
Always be aware of the risks involved in stock trading and proceed cautiously. However, building up an investing education is a wise decision.
Learn how fast can you make money in stocks.
7. Babysit
Babysitting is a versatile side hustle offering flexible hours and good earning potential.
It’s an ideal opportunity if you’re seeking quick, extra income and enjoy children.
Obtain optional certifications like CPR and first aid to enhance your appeal. Visit platforms like Care.com, Sittercity, or Urbansitter to create your profile and connect with clients.
8. Transcriber
One field that remains highly overlooked is transcription.
A transcriptionist listens to audio files and converts them into written documents.
Gain a thorough understanding of the industry. Check out this free webinar to get the basics right.
Consider specializing in legal or medical transcription. These niches often fetch higher wages.
You could easily make $3000-$4000 monthly, working on your own schedule.
Remember, practice and precision can help you achieve a lucrative transcription rate.
9. House Cleaning
Cleaning can be a rewarding gig, especially if you like tidying spaces.
Despite recognizing the need for a clean home, many people often struggle to find the time or energy to routinely clean their homes. This is where the prospect of a housecleaning business arises.
Busy homeowners, parents juggling work and childcare, elderly individuals needing assistance, and even businesses needing regular cleaning services are all potential clients for a housecleaning business. This demand provides a consistent income flow for those offering cleaning services.
In fact, individuals transitioning into this field of work can negotiate their wages with clients, potentially earning more than $15 an hour based on the complexity and demands of the job.
10. Sell Printables on Etsy
Selling printables is an effective and lucrative method to generate passive income.
Once printables such as planners, calendars, and journals are designed, created, and listed for sale on platforms like Shopify or Etsy, they can consistently produce income without requiring continual input or maintenance.
According to several experts, one of the keys to making substantial profits from printables is to differentiate your products.
Building upon this idea of making money from printables, the free Printables Workshop by Gold City Ventures offers comprehensive insights into the process of creating and selling aesthetically pleasing printable products online. This accessible course can be an excellent starting point for beginners looking to navigate the printables market.
Selling printables on Etsy might be the perfect venture for you!
11. Dog Walking
Looking for a fun-filled way to make some quick bucks?
Dog walking could be the right side hustle for you, especially if you’re an animal lover.
Easy to find jobs for dog walking.
Suitable for people with flexible schedules.
Offers an active way to earn money.
Option to select your rates with platforms like Rover.
High demand especially due to increasing pet adoptions and busy pet owners.
You can work when you need to and not take clients when you don’t want too.
12. Make Money Blogging
Blogging is a popular and prevalent way to earn money. Many blog owners are women who want the flexibility to earn significant money at their own pace and schedule.
Earning money through blogging allows you to focus on something you’re passionate about. Any topic that can provide value to an audience can be blogged about. Targeting a niche that has been overlooked by existing blogs can increase your blog’s potential earnings.
Starting a blog doesn’t require formal training, but it does require a willingness and ability to write effectively for an audience.
By employing monetizing avenues, like affiliate marketing and advertising, a blogger can boost their earning significantly.
Despite the vast number of existing blogs, the industry is very accommodating toward new voices, especially female voices. Thus, knowing how to monetize a blog can offer women many opportunities.
Remember, blogging is not just about earning fast bucks, it also needs consistent efforts. It’s rewarding but can start slow.
13. Ride-Sharing
Ridesharing is an excellent opportunity for women looking to make fast money. With apps like Uber and Lyft, you can earn an income simply by offering transportation services.
Here are a few tips to increase your earnings:
Consider driving during peak hours, weekends, or during special events to cash in on higher demand.
Choose busy locations such as city centers and nightlife spots to increase your chances of getting rides.
Maintain good customer service and ensure safe driving to uphold your rating and receive more ride requests.
14. Office Cleaning
Considering the hustle and bustle of the daily grind, office cleaning can be an untapped treasure trove for women seeking quick cash. Given the high demand and flexible hours, it’s an ideal source of extra income.
You must identify office premises needing cleaning services. Reach out to the owners or management, and propose your services.
Think about offering your services to offices in your local area. It’s a fast way to make extra money while managing your other commitments.
15. eBay Arbitrage
Looking to earn some quick money? eBay Arbitrage could be the game-changer you need.
Aimed mostly at women who love shopping, it’s about buying products cheaply and selling them on eBay for a profit.
First, hunt for bargains in thrift stores, sales, or online markets.
Go with high-demand items; electronics, collectibles, or brand sneakers are a good start.
Then, create your eBay store and list your finds at a competitive but profitable price.
Track each item’s demand through keyword research and buyers’ reviews.
Remember to calculate potential profits inclusive of shipping costs and eBay fees.
Armed with the right strategies, you can start earning with eBay in no time!
16. Freelance Writing
Did you know your writing passion can become a quick buck-making engine? That’s right, freelance writing is a gold mine you ought to tap.
First, identify a writing niche you love. It’s easier to excel when you’re passionate about your work.
Continually hone your writing skills. The more you practice, the better you become and the more valuable your skills. Finally, don’t be shy to market your skills. Reach out to small businesses and startups—they often need freelance writers.
Remember, quality over quantity will earn you a solid reputation in the long run. Now, go turn those wordy wonders into wealth!
17. Online Surveys
Curious about making a quick buck? Engaging in online surveys can be a fast money-making method just for you!
You don’t earn a huge amount per survey but when taking multiple surveys, it will add up fast.
Here are the top legit survey platforms:
Use your free time wisely. Take surveys during work breaks or leisure hours.
Redeem points for PayPal cash or gift cards.
18. YouTube Channel Building
Building a YouTube channel can be an interesting and rewarding venture.
It provides an incredible platform to share your content, express your creativity, and engage with a global audience. Whether you want to showcase your talents, teach something unique or simply entertain, having a YouTube channel opens up many opportunities.
Effective engagement with your audience is vital.
Last but not least, patience is something you will need in abundance. Building a successful YouTube channel takes time, so don’t lose hope if you’re not seeing immediate results.
Remember, there’s no limit to what you can achieve with your YouTube channel. It all comes down to how creatively you can use this platform to engage with your audience and grow your presence.
19. Bookkeeper
In our increasingly digital age, online bookkeepers are in high demand, with more businesses choosing to move their financial operations to the online platform. This shift in business operations has created a robust opportunity for those trained in bookkeeping to tap into the market and earn income while working from the comfort of their homes.
To be successful as web-based bookkeeper, you need to be well-organized and have previous experience dealing with numbers. However, even without a formal accounting education, individuals can take advantage of online learning platforms like Bookkeepers.com to learn and sharpen their bookkeeping skills for free.
Becoming a virtual bookkeeper is not just a fantastic full-time job opportunity; it’s also an excellent side hustle for women and mothers proficient with numbers. It provides flexible hours and allows the freedom to work from anywhere, making it ideal for those juggling multiple responsibilities.
The financial compensation for an online virtual bookkeeper is quite significant. On average, bookkeepers can earn at least $50000 a year helping business owners manage their finance and bookkeeping online.
20. Start a Dropshipping Store
Dropshipping is a viable option with low startup costs that lets you run an online store without handling any physical products.
There is still plenty of time to get into the dropshipping business.
Start by deciding what products to sell. Find a niche you’re passionate about for a higher chance of success.
Remember, a successful dropshipping venture involves effective marketing as well. So invest time and effort into perfecting your advertising tactics.
21. Do Clerical Work
Clerical work offers flexible, remote opportunities for women to make quick money.
With adequate admin experience and internet access, you can explore roles like Virtual Assistant, Online Data Entry Professional, or Court Transcriptionist.
This is one of the best non phone work from home jobs.
Experts tip: Perfection and punctuality are key. Attention to detail and meeting deadlines can make you stand out.
22. Resell Clothes
Reselling clothes online is a savvy way to turn your clutter into cash, especially if you love digging for hidden gems.
It’s a popular method for fast cash flow, with Poshmark and Facebook Marketplace being perfect platforms. One of my friends is very successful with this!
Begin with your own closet, and sell kids clothes they have outgrown too.
Reinvest your earnings, by buying second-hand clothing to resell can boost your profits.
Don’t forget quality. Run a quick check for authenticity and brand labels.
Visuals sell. Stage items and capture high-res photographs.
Providing a great customer experience is key, ensuring prompt shipping and maintaining politeness.
Play your cards right, you could earn anywhere between $100 to $1,000 a month or even reach a six-figure yearly income.
23. Do Home-Based Child Care
Home-based child care is a viable option to earn money, leveraging the natural maternal instincts and caregiving skills of many women. It can be a lucrative side hustle and a means to financial independence.
This is especially a great avenue to pursue when you are already at home raising your own children.
Make sure to follow any state regulations about running a daycare out of your home.
Begin by determining the number of children you can handle at a time, taking care not to overbook.
24. Podcasting
Podcasting is a wonderful opportunity for delivering narratives. It enables you to weave compelling stories while inspiring, instructing, or simply entertaining your listeners.
The unique format of podcasting lets you connect with your audience on a personal level. They listen to your voice, engage with your thoughts, and feel a stronger connection to you.
By starting a podcast, you are joining an increasingly popular trend, with the global number of podcast listeners has grown to 464.7 million listeners in 2022 (source).
Podcasting also opens up doors for networking and collaboration. You can invite experts, artists, or like-minded individuals as guests on your show, thus expanding your network.
There’s a potential to earn from podcasting. With affiliate marketing, sponsorships, and advertising, the commercial possibilities of podcasting are extensive.
25. Merch by Amazon
“Merch by Amazon” is a print-on-demand service that allows you to design and sell your merchandise.
It’s a great money-making alternative as it offers massive exposure and doesn’t require any upfront costs.
One of the significant advantages of using Merch by Amazon for passive income is that you are not required to maintain inventory or deal with shipping. Amazon handles these aspects, allowing you to focus on the creation process and customer satisfaction.
Amazon’s royalty system ensures that you get paid instantly whenever your merchandise is purchased. This allows you to earn money passively with every sale.
When your designs meet the current market trends and the preferences of your customers, they are more likely to be popular, leading to an increase in sales, hence, higher passive income.
26. Become an Influencer
Becoming an influencer is a smart, quick way for women to make money. While most people just stumble upon becoming an influencer, you can decide to pursue this avenue.
With earning potential that is unlimited, this opportunity is flourishing, requiring no specific degree or job experience.
Remember, platforms like TikTok, Instagram and YouTube reward new, engaging creators.
Dedication and consistency could lead you to major earnings where you make thousands for each post.
27. Work as a Translator
Having mastery in more than one language opens up a world of opportunities, particularly in the realm of translation services. The ability to translate language effectively and accurately is a skill that’s in high demand in the current globalized world.
A top benefit of being a freelance online translator is the flexible work environment. You have the freedom to choose when, where, and how much you want to work. This flexibility for work-life balance is more appealing now than ever, especially in the unsteady job market.
Freelance translators also have access to a wider client base. Unlike full-time translators who work for specific organizations or agencies, freelance translators can work with various clients from all over the world, widening their potential income streams.
The need for translators is projected to grow substantially. In the United States alone, the U.S. Bureau of Labor Statistics reports that employment for interpreters and translators will increase by 20% from 2021 through 2031, which is much faster than the average for all occupations.
Among other freelance professions, translation can often provide a more stable income.
As most sectors including education, legal, business, medical, and technological firms continue to globalize, they regularly need translators to bridge the language gap, making freelance translation services a steady income source.
31. Become a Flipper
Becoming a flipper is a high-return, low-investment way to make money fast. It involves buying low and selling high, perfect for those wanting a profitable side hustle.
Here are actionable steps to kickstart your flipping journey:
Identify items to flip: Popular options include toys, clothes, electronics, books, and furniture. Pro-tip: Sell things you have around your house to start risk free.
Choose a selling platform: Sell locally via Facebook groups or Craigslist, use reselling apps like Decluttr, or open an online store on eBay.
Price it right: Pricing items competitively garners buyer interest and maximizes profit.
Learn more: Free webinars, like Flipper University and the Flea Market Flipper, offer insights for a successful flipping business.
Remember, flipping can be more than just a side hustle; it’s a potential full-time career.
32. Micro-Tasking
Micro-tasking offers a quick way for you to earn money by completing short and simple tasks.
As its popularity grows, so does the list of platforms where you can find micro-jobs. Here are the popular platforms.
This allows your the flexibility to work whenever you want. Plus no special skills or degrees are needed.
Just note… This is not a stable income source
Tips for Finding the Best Way for You to Make Money
As you can see, there are many different ways to make money fast as a woman.
You can find the best way for you by considering your skills, interests, and the amount of time you have available.
Here are some helpful tips to make sure you are earning money quickly.
1. Identify Your Skills and Offerings
You’re already gifted, let’s transform those skills into fast cash.
Make a list of your skills, passions, and expertise; you can tap into anything from programming to knitting.
That is where you want to start.
From personal experience, I can tell you it is way easier to work on a side hustle or business when you are passionate about the topic.
Remember, the digital world is your playground, so play, innovate and cash-in.
2. Research the Best Ways to Make Money
Now, that you know the skills and experience, look at the list above and determine which ones match up.
You will need to spend time watching a free webinar to learn more.
Compare different money-making ideas. From part-time jobs to freelancing, there’s a plethora of options. You need to pick what works best for you.
Remember, generating a consistent income requires effective strategies and the right mindset. So choose wisely!
3. Try Different Ways to Make Money – Not Just 9-5 Jobs
It’s vital to explore different money-making strategies as a woman for financial stability and independence.
Just because one avenue didn’t work out doesn’t mean you should throw in the towel.
Remember, the key to success is perseverance, so pick something you’re passionate about and stick to it. Try not to jump from one idea to another out of impatience; success takes time.
Also, as your revenue increases, start building a lifestyle business for passive income.
4. Focus on the Things You Are Good at
Unlock your financial potential by recognizing and utilizing things you’re excellent at.
To cash in fast:
Identify your standout skills. These could range from writing, fine arts, math, e-commerce to digital marketing or even passions such as sports and hobbies.
Assess the viability of earning via your skills. Research shows that the digital economy is filled with opportunities.
Exploit platforms that cater to your expertise. For freelance gigs, you can try platforms like Upwork, Fiverr, or Guru.
There are so many ways to make money online as a beginner. So, indulge in the digital playground, embrace exploration and innovation, and let your skills earn for you.
5. Find Opportunities That Allow You to Work Flexibly
You can choose when to work and when not to, rather than being constrained by a 9 to 5 workday. The flexibility to create your schedule means you can operate at your most productive times, whether that’s early in the morning or late at night.
Working from home or any location across the globe enables a better work-life balance, reducing stress and improving productivity. This is particularly beneficial for those who have families or are committed to other obligations.
When working for yourself, you may have the potential to earn more than traditional salaried roles.
Lastly, making a living from your passion is huge!
You are being paid to do what you love anywhere, anytime which is rare and precious.
6. Consider Specializing in a Niche Subject
Specializing in a niche subject can elevate your earning potential quickly, owing to smaller competition and a personalized audience.
Being a subject matter expert in a specific area can provide you with an edge over your competitors.
Specializing in a niche can help you stand out and garner a dedicated audience, ultimately leading to faster earnings.
Remember, the key to making money faster in your specialized area is persistence and patience. It may take time to build a strong following, but once you do, the financial rewards can be substantial.
Stick to your chosen area, continuously learn and improve, and consistently deliver high-quality content to make your mark in your chosen niche.
7. Take Advantage of Trending Opportunities
Jumping on trending opportunities can be a gold mine, especially for women who want to make money fast from home. These ever-evolving trends tap into various skill sets, interests, and experiences, potentially translating into a lucrative gig.
For many, it may have been TikTok when the company first started.
Remember, the digital world holds limitless potential. Just needing to innovate and execute your ideas!
8. Invest in the Right Tools and Equipment
The key to making money, either online or offline, is making an informed investment of your time into the right tools, equipment, and learning resources.
While this can initially seem like an expenditure rather than a money-making step, it is, in fact, a cornerstone of your financial growth strategy.
Investing time in learning and increasing your knowledge base is vital. This could mean spending your time reading about new insights in your area of work, attending webinars, or enrolling in online courses. The ROI of this proactive learning is immense.
Consider this an opportunity or a catalyst that speeds up your journey toward substantial income generation and financial freedom.
9. Commit to Consistent Efforts
Commitment to consistent efforts is the cornerstone of any successful endeavor, more so when running your own side hustle.
One of the fundamental principles for making money is the dedication to keep improving your craft, always learning, and always evolving.
This continual effort involves a long-term commitment to staying updated with the latest writing trends, styles, and industry standards.
With persistence and patience, the fruition of your investments will lead you toward the fulfillment of your financial dreams.
10. Utilize Social Media Platforms to Promote Your Business
Social media platforms are powerful tools for business promotion, and when used strategically, they can lead to fast monetary gains.
Understanding how to effectively utilize these platforms can drastically enhance your chances of making quick bucks.
Start by creating a robust online presence for your business on various social media platforms. Remember, consistency is key to building your brand.
Engage with your audience frequently and respond to their comments. This boosts engagement on your posts.
Post content that is engaging, relevant, and aligns with your business values.
Always monitor your performance using social media analytics to understand what works best for your audience.
Which side hustles for women have you tried?
Personally, here are the side hustles I have done or currently do:
Stock Trading as a swing trader
Online Content Creation
Social Media Influencer
Online Consulting
Pet Sitting or House Sitting
Teaching Dance Lessons
Personal Organizer
However, I know many people that have tried the ones listed above.
So ladies, which of these enticing hustles appeals to your skills and schedule the most?
FAQ
Stay-at-home moms have numerous opportunities to earn money from the comfort of their homes. Plus being able to bump up your household income while juggling parenthood is the perfect combination.
Find the best jobs for moms specifically!
Any of these opportunities requires dedication and consistent effort, but with time they can all yield substantial returns.
Thankfully, there are many ways for women to make money online.
Above we covered all of the interesting ways and many are online.
Remember, opt for an avenue that suits your skills, interests, and time availability.
Well. the answer to this will depend on who you speak with.
Personally, I find ways to build passive income with your side hustle as the best option. Then you aren’t trading your time for money.
As a woman, many opportunities are right at your fingertips. The most popular and profitable include:
Start a blog: With consistent readership, you can make thousands from ad revenue and sponsored content.
Virtual assistant: Services can fetch around $10-30/hour.
Social Media Management: Businesses are willing to pay up to $1000-2000 per month for proficient managers.
Bookkeeping: On average, freelance bookkeepers earn around $34/hour.
Selling products online: Sites like Etsy, Amazon FBA, or your own platform can earn you a substantial income with a successful shop.
Trading Stocks or Options: by improving your investing knowledge, you can quickly increase your net worth.
Remember – it all starts with a step. Your side hustle could turn into a full-time passion!
This is How to Make Money from Home as a Woman
In conclusion, as a woman, there are plenty of genius and fast ways for you to make money.
The article underlines the significance of grabbing the reins of your financial future.
Through the strategies shared – including investing in stocks, working from home, or using budgeting hacks, you can boost your income significantly.
One of the concepts, I’m big on is making sure you know how to make your money work for you.
With wise decisions and being open to possibilities, your financial independence is within reach.
Remember – the ball is in your court, so make sure to take that shot and score your financial goals. It’s high time to cash in on your potential!
Know someone else that needs this, too? Then, please share!!