Mortgage-backed security

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Fun fact: your mortgage lender—the bank or company that granted you your loan—probably isn’t cashing your mortgage payment check each month. That’s because almost immediately after you closed on your loan, they turned around and sold it.

With the housing bubble that caused the recession still on everyone’s mind, it’s more important now than ever for home buyers to know how the system works—and how it went so wrong.

What many homeowners and buyers don’t realize is that there’s an entire secondary mortgage market where the lender becomes a seller. Here are the basics to help you understand how that market influences the primary mortgage industry and the rest of the economy.

What is the Secondary Market for Mortgages? 

Once you close your loan, your bank takes it to a marketplace, where a variety of investors can purchase it. Sometimes, the final purchaser is lined up before you even close and the paperwork at your signing includes a statement as to who they will be.

The largest investors by far are Fannie Mae and Freddie Mac, two corporations that are owned by the United States government. They were designed to provide backing on the secondary market for low-income and very-low-income home purchases, and they have expanded under the Obama administration to take on more and more purchases.

There are other investors on the secondary mortgage market, and often those investors will purchase the loan and bundle it together with other loans into a fund called a mortgage-backed security, or MBS for short.

Understanding How Mortgage-Backed Securities Work

If your mortgage is bundled into an MBS fund, the investor or investment entity that created it then sells out shares of the fund to other investors in the same way they might sell shares of a mutual fund or a company’s stock.

Investors then buy the shares of the fund knowing that as the loans are paid, a portion of the returns (a.k.a. your interest payment) comes back to them. How large a portion depends on several factors, including how many shares of the security they bought, how many mortgages are bundled into the security, and how many of those loans are performing as expected.

The reason why such a large number of mortgages are bundled together? Reduced risk.

After all, if more mortgages are part of the fund, then when a few have repayment difficulties, that relatively small number is outweighed by the larger number of still-performing mortgages and the fund as a whole remains profitable.

For this reason, MBSs were, historically, one of the most secure investments available.

MBS Funds and the Financial Meltdown

Many homeowners are rightly wary about mortgage-backed securities on the secondary mortgage market in light of what happened with the financial meltdown of 2007-2008.

Here’s how it worked: private equity investors grouped higher- and lower-risk mortgages in separate categories, called tranches. They then sold these without disclosing the risks of investing in a particular tranche to the investors.

In fact, during this period, investors were rarely told about the tranches, leading to situations where investors were misled about the risks. When these funds began to fail, it affected many of the investors involved, and for many, it was the first time they fully realized which risk category their investment had fallen into.

The results are history.

MBS Funds in Today’s Secondary Mortgage Market 

After the financial meltdown, the Obama Administration unveiled a comprehensive plan for reforming the mortgage market, one that put Freddie Mac and Fannie Mae front and center. The plan sought to achieve a few key changes to the market:

  • To use the government-backed corporations to underwrite mortgages and provide stability, so ordinary people could purchase with confidence again.
  • To expand the programs to cover most American home purchases in the short term.
  • To use FHA measurements to ensure that housing was being provided to low-income and extremely-low-income families who qualify.
  • To stabilize the market so banks could continue to offer mortgage loans with confidence.
  • To eventually scale back these programs as the private equity market regains strength, BUT
  • To fund all of the programs’ commitments for the duration of the loans they underwrite.

As a result of these clear policy goals, today’s secondary mortgage market is dominated by Freddie Mac and Fannie Mae, who acquire around 90 percent of all new mortgages between them.

MBS funds do still play a role in the marketplace, especially when it comes to jumbo loans, commercial real estate loans, and mortgages that do not meet Fannie Mae and Freddie Mac requirements.

As time goes on, they are also growing in popularity again, and the new regulations on their structure and constitution have restored some consumer confidence in their use.

Source: totalmortgage.com

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The average U.S. rate for a 30-year fixed mortgage this week is 3.13%, matching last week’s rate that was the lowest on record, according to Freddie Mac.

Mortgage rates remained at the record low as the three most populous U.S. states – California, Texas and Florida – hit new highs for COVID-19 infections, driving money managers to seek fixed-income investments like mortgage bonds in a “flight to safety,” said Keith Gumbinger, vice president of mortgage-data firm HSH.com.

“With the rising incidents of COVID-19 in some states, there’s definitely a little bit of a shift to safety, a shift into bonds as investors wait to see how the story unfolds,” Gumbinger said.

Low mortgage rates have been a bright spot in the U.S. economy since the Federal Reserve stepped into the bond market in March and began buying fixed assets to boost competition and shrink yields. Fed Chairman Jerome Powell has pledged to keep purchasing Treasuries and mortgage bonds for as long as support is needed.

The low interest rates have helped to support home prices. When rates are cheaper, the size of the mortgage borrowers can get becomes bigger because monthly payments shrink as financing costs go lower. That means people can bid higher for a home they like.

Prices for homes in April that were bought with mortgages backed by Fannie Mae and Freddie Mac increased 5.5% from a year earlier, which matched the annual gain seen in April 2019, long before the pandemic emerged.

Rates aren’t expected to jump any time soon. Fannie Mae, the larger rival to Freddie Mac, said in a forecast earlier this month that the average 30-year fixed rate for 2020 probably will be 3.2%, down from 2019’s 3.9%. This would be the lowest annual average ever recorded. For 2021, Fannie Mae said it expects the average rate to drop to 2.9%.

Source: housingwire.com

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Non-bank originator Change Lending lost its Community Development Fund Institution (CDFI) certification, according to a report from Barron’s.

Change Lending was removed from the CDFI Fund’s list of certified program lenders last week, the outlet reported. Its parent company, The Change Company CDFI, remains as one of the certified program originators. 

The CDFI certification is a designation given by the U.S. Department of Treasury CDFI Fund to specialized organizations that provide financial services to low-income communities and people who lack financing. At least 60% of a lender’s financing must target low- and moderate-income borrowers or customers in underserved communities. 

Since becoming a CDFI in 2018, The Change Company has funded over $25 billion in loans to more than 75,000 families, according to the firm. 

Because CDFIs provide credit and financial services to underserved Black, Hispanic and low-income communities, they are exempt from certain mortgage regulations.

In particular, the CDFI designation exempts lenders from complying with the Consumer Financial Protection Bureau’s ability-to-repay rule, which requires mortgage lenders to document a borrower’s income, assets, employment and credit history. 

The Change Company faces a lawsuit by a former high-ranking employee accusing the firm of retaliation after he notified executives of employees “mischaracterizing loans” to apparently skirt federal reporting requirements. 

When Adam Levine – CEO Steven Sugarman’s former chief of staff – reported illegal activity by the company’s employees in 2023 to Sugarman and other executives and board members, leadership terminated his employment, according to a suit filed by Levine in Superior Court in Orange County, California in June.

Levine also accused The Change Company of false representations to investors about the underlying characteristics of the mortgages it securitizes.

The former chief-of-staff is seeking damages for alleged wrongful termination, whistleblower retaliation and breach of contract. 

Bloomberg reported that the Securities and Exchange Commission (SEC) is probing The Change Company over its mortgage-backed securities and the regulator is also looking into some of the actions of Sugarman, citing people with direct knowledge of the matter.

Sugarman was the former chairman and CEO of Banc of California before resigning amid a SEC probe in 2017. 

The SEC declined to comment on the existence or nonexistence of a possible investigation. The Change Company nor Change Lending responded to requests for comment. 

Source: housingwire.com

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Average mortgage rates for 30-year and 15-year mortgages fell to all-time lows this week, Freddie Mac said in a report on Thursday.

The 30-year average is 2.86%, breaking the prior low of 2.88% set in the first week of August, and the 15-year average is 2.37%, beating last week’s record low of 2.42%, the mortgage financier said.

The rates are driving demand in the housing market, helping to counter-balance an economic slowdown that showed signs of worsening after the COVID-19 pandemic flared in some of the nation’s largest states in recent months, said Sam Khater, Freddie Mac’s chief economist.

“These low rates have ignited robust purchase demand activity,” Khater said.

U.S. home sales surged at a record pace in June and July as purchases that were delayed during pandemic lockdowns were shifted later in the year.

Seasonally adjusted existing-home sales jumped 25% in July, beating the prior record monthly gain of 21% set in June, the National Association of Realtors said in an Aug. 21 report.

The supply of homes on the market was the lowest for any July since NAR started tracking the data about five decades ago, said Lawrence Yun, NAR’s chief economist.

Existing home sales in 2020 likely will total 5.4 million, a gain of 1.1% from last year, Yun said. Sales of new houses probably will rise 17% to 800,000, Yun said.

Early in the pandemic, before it was clear the Federal Reserve’s intervention in the bond market would drive mortgage rates to all-time lows, Yun projected home sales in 2020 would plummet 15% this year.

“The buyers are coming in because of the low interest rates – that’s the No. 1 reason in my view,” Yun said in an interview.

Source: housingwire.com

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The average U.S. mortgage rate for a 30-year fixed loan is 2.88% this week, falling from last week’s 2.9%, Freddie Mac said in a report on Thursday. The rate is now two basis points from an all-time low set three weeks ago.

The average fixed rate for a 15-year mortgage was 2.36%, falling from last week’s 2.4% to a level that’s one basis point away from the record 2.35% set two weeks ago, the mortgage giant said.

It was the tenth consecutive week average mortgage rates have been below 3%, boosting demand for homes and driving up prices, said Sam Khater, Freddie Mac’s chief economist.

“As a result of low mortgage rates that have stayed under three percent since July, the housing market has seen a strong, upward trajectory during a very uncertain time,” said Khater. “We’re seeing potential homebuyers who now have more purchasing power.”

Pending home sales, measuring signed contracts to purchase properties, soared 8.8% in August to a record high, the National Association of Realtors said in a report on Wednesday.

“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”

The housing market typically plays a counter-cyclical role during recessions because economic slowdowns tend to push mortgage rates lower, Yun said. However, this time surpassed his expectations, he said.

“While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly,” Yun said.

In March, the Federal Reserve started buying bonds – Treasuries and mortgage-backed securities – to prevent a credit crunch and make borrowing cheaper. Since then, the central bank has bought about $1 trillion of bonds backed by home loans, according to Fed data.

Source: housingwire.com

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Let me be contrarian: Get ready, because mortgage rates are going to rise in 2021. Now before you respond, just read the rest as to why.

The Mortgage Bankers Association in its most recent forecast sees two things that stand out. First, 2020 will prove itself to be the second biggest mortgage year in history. Topping $3 trillion will put it only behind 2003 in single family mortgage production history.

Second, the MBA joined the GSEs and other economists who forecast a significant drop in mortgage production in 2021, with most estimating declines in the range of $700 – $800 billion year over year.

Some will try to argue, “but wait, Powell said the Federal Reserve would keep rates low for the foreseeable future! You must be wrong.” There is a difference here. Yes, the Fed will likely keep short rates low, but mortgage rates and some longer-term Treasuries likely won’t enjoy the same ride.

Here are the reasons why upward pressure on mortgage rates could stall the refinance wave and cut overall national originations volume in 2021:

1. The Fed: The Federal reserve is the single biggest buyer of agency mortgage backed securities (MBS) in the world. According to the Urban Institute, “In March the Fed bought $292.2 billion in agency MBS, and April clocked in at $295.1 billion, the largest two months of mortgage purchases ever; and well over 100 percent of gross issuance for each of those two months. After the market stabilized, the Fed slowed its purchases to around $100 billion per month in May, June and July. Fed purchases in July were $104.6 billion, 35 percent of monthly issuance, still sizable from a historical perspective.”

The question is what happens after a covid vaccine and a normalization of economic activity which is expected next year. The Fed is already being very careful not to commit to MBS purchases after the end of this year, a lack of commitment very different to their clear stance on fed funds. If the fed continues to slow or stop, something which is inevitable, the supply imbalance will force rates higher as MBS prices drop in search buyers to take up the excess.

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2. The Debt: The national debt is now at 100% of GDP, the highest level since WWII. Per

CBO’s September paper, “By the end of 2020, federal debt held by the public is projected to equal 98% of GDP. The projected budget deficits would boost federal debt to 104% of GDP in 2021, to 107% of GDP (the highest amount in the nation’s history) in 2023, and to 195% of GDP by 2050.”

The CBO’s projections for the U.S. deficits looking forward and the mounting debt load threaten the nation’s ability to do many things, as the majority of spending will be to mandatory expenditures that include interest on the growing debt load. Inflationary pressure will result from the need to finance these deficits through new issuance of treasuries, thus putting upward pressure across the stack of interest rates, a far different outcome than what the Fed may do to keep short rates low.

3. The GSE Capital Rule: The FHFA just closed off the comment window on the proposed capital rule for Fannie and Freddie. This rule is a critical component to FHFA’s plan to release the GSEs from conservatorship. The proposed rule is considered onerous by many with the consensus view stating in comment letters that rates would rise between 20-30 bps. Former Freddie Mac CEO Don Layton, former Arch MI CEO Andrew Reppert, and Fannie Mae each stated the same in their comment letters.

4. The Adverse Market Fee: This arbitrary add-on for most refinance mortgages from the GSEs of 50 bps equates to roughly an increase in rate of .125. This goes into effect on Dec. 1 of this year.

5. Release from Conservatorship: FHFA Director Calabria is working feverishly to release Fannie and Freddie from conservatorship and moving at a pace to lock in as much of this as possible quickly given the risk of an administration change. There have been outcries from MBS investors, including some of the largest buyers.

As reported, in a letter to Mark Calabria, director of the Federal Housing Finance Agency, PIMCO said freeing the companies by executive fiat would be interpreted by investors as an end to the government’s guarantee of the MBS. “That would boost mortgage rates and force some investors to sell the bonds,” the PIMCO executives said. Investors would demand a higher return for the increased risk. “Mortgage rates will increase, homeownership will likely suffer and the national mortgage rate will no longer exist,” the executives wrote.

For those in the mortgage industry, it doesn’t take all of these things to result in the forecasted 700-800 billion drop next year. Frankly just the slowing of MBS purchases and the implementation of the capital rule alone would do it. In fact, MBA’s forecast of the volume decline assumes only the slightest increase in mortgage rates, remaining in the low 3% range next year. In my conversations with economists, the view is that we will end the year with a good first quarter in 2021 simply based on year end overflow.

The second quarter may start off well, but the general sense is that by the third and fourth quarters the market will reflect the impact of coupon burn out and any of these events above beginning to take shape. One thing for certain is that the Fed does not like being in this deep, we saw that following QE activities during the Great Recession.

As MBA’s Fratantoni states in his recent Housing Wire article, “2020 has been a banner year for mortgage originators and the millions of households who have benefitted from record-low rates through refinancing. The industry will enjoy this boom for a while longer, but our expectation is that the refi wave is cresting.”

“Make hay while the sun shines” is an old expression. The sun is clearly shining on our industry this year. But it’s important for mortgage banking executives to not misread the statements of Chairman Powell as a commitment to anything more than short rates. The rally you are experiencing this year is due to interventions in the market due to a pandemic recession. Normalization will take out buyers, eliminate the supply “short,” and inflation will ultimately do its thing on rates just enough to cut the market by 25%-30% in 2021 and a bit more in 2022.

Planning ahead for that environment is critically important as market contractions will reduce spreads as well as volume. Thinking about the appropriate right sizing and forward-looking market strategies now will separate the winners from the rest.

Source: housingwire.com

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The average U.S. mortgage rate for a 30-year fixed loan fell to 2.81% this week, the lowest in Freddie Mac’s survey history, the mortgage giant said in a report on Thursday. The rate fell six basis points from the week prior and is now five basis points lower than the original all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.35%, falling from last week’s 2.37% — matching the record set three weeks ago.

There have now been 12 consecutive weeks when average mortgage rates have been below 3% and this is the tenth record broken this year, said Sam Khater, Freddie Mac’s chief economist.

“Low mortgage rates have become a regular occurrence in the current environment,” Khater said. “Many people are benefitting as refinance activity remains strong. However, it’s important to remember that not all people are able to take advantage of low rates given the effects of the pandemic.”

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Although mortgage applications fell seven basis points last week, purchase applications have now boasted 21 weeks of year-over-year gains.

In September, the Federal Reserve predicted that rates will remain low through 2023.

Source: housingwire.com

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The average U.S. mortgage rate for a 30-year fixed loan is 2.9% this week, up from 2.87% last week, Freddie Mac said in a report on Thursday. It’s the ninth consecutive week the rate has been below 3%.

The average rate for the less-popular 15-year mortgage was 2.4%, rising from last week’s record low of 2.35%, the mortgage giant said.

Sub-3% rates are boosting real estate demand and fueling bidding wars. U.S. home prices jumped more than 2% between May and July, the largest two-month gain on record, as Americans emerging from COVID-19 lockdowns bought real estate, the Federal Housing Finance Agency said in a Wednesday report.

“Historically low interest rates are the primary driver behind the strength in housing demand that we’ve seen in recent months, and that has led housing to be a bright spot for the overall economy,” Robert Dietz, chief economist of the National Association of Home Builders, said in an interview.

Rates started tumbling after the Federal Reserve committed to buying mortgage-backed securities in March to keep credit flowing amid the worst pandemic in more than a century. Because of that, the average U.S. rate for a 30-year fixed mortgage, as measured by Freddie Mac, has hit new lows nine times since COVID-19 first started spreading in America.

Sales of existing homes rose to a 14-year high of 6 million at an annualized pace in August, the National Association of Realtors said in a report on Tuesday.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, last month’s sales were 11% higher, NAR said.

The median existing-home price last month was $310,600, up 11.4% year over year, and prices rose in every region, according to NAR.

Source: housingwire.com

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The average U.S. mortgage rate for a 30-year fixed loan fell to 2.8% this week, another record low, Freddie Mac said in a report on Thursday. The rate fell one basis points from the week prior and is now six basis points lower than the original all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.33%, falling from last week’s 2.35%.

After this week’s dip, there have now been 13 consecutive weeks when average mortgage rates have been below 3%, and rates have broken records 11 times this year.

“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” said Sam Khater, Freddie Mac’s chief economist. “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”

In March, in an effort to buffer the economic blows from the shutdown, Federal Reserve Chairman Jerome Powell announced the Fed would start buying bonds to prevent a credit crunch and make borrowing cheaper. According to Fed data, the central bank has bought over $1 trillion in bonds backed by home loans since then.

While purchase loans are seeing record-low rates, the adverse market fee imposed on refinance loans by the FHFA in August make record lows for those loans unlikely.

During this week’s Mortgage Bankers Association annual event, the heads of Fannie Mae and Freddie Mac discussed the adverse market fee.

“As you know, safety and soundness is one, two, and three for us,” said Fannie Mae CEO Hugh Frater. “And for us to play our role in all markets, good and bad, markets small and large, we have to do it safely and soundly with long-term risk management in mind. And that’s the rationale for this change, as the GSEs are shouldering significant risks associated with the pandemic — as the principal risk taker, we have to price that risk appropriately.”

He added that while the housing market has demonstrated real resiliency, “many millions of borrowers are under stress, there’s still significant risk caused by economic uncertainty both in the near term and the longer term. And we’re required by law and regulation to be compensated for these risks and these costs.”

Freddie Mac CEO David Brickman struck a similar tone, saying that the GSEs have provided “extraordinary support” to the market.

“Costs have changed, risks have changed. What we put in place is an appropriate and prudent response to that change in the external environment for us to support struggling homeowners.”

They both noted that with interest rates still low, borrowers will realize savings, even with the 50 basis point refinance fee factored in. “But obviously, anybody who’s refinancing their mortgage at a lower rate is already beginning to save in terms of their mortgage payments, this only means they save just a little bit less than they would have otherwise,” said Brickman.

Source: housingwire.com

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Manufactured, HELOC, Automation, Home Insurance Products; Wholesaler Earnings and News; Inflation and Rates

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Manufactured, HELOC, Automation, Home Insurance Products; Wholesaler Earnings and News; Inflation and Rates

By:
Rob Chrisman

Thu, Aug 10 2023, 10:02 AM

A general discussion topic of those here at the MMLA conference in Michigan is the ups and downs we’re all facing. While mortgage applications drift down, and industry headcounts go down, and towns on Maui like Lahaina burn down, here’s something that isn’t going down: credit card debt. Talk to any underwriter or loan officer and they will tell you that loans have become more difficult, in part because of borrower debt loads, and sure enough credit card balances hit $1.03 trillion in the second quarter. And it ain’t going down. The number is up 4.6 percent from $986 billion in the preceding three-month period. For some good economist’s perspectives and interest rates in general, and one capital markets guy’s, tune in to “Unparalleled Insights into Trends and Bold Predictions” with Selma Hepp (CoreLogic’s Chief Economist), Michael Fratantoni (MBA’s chief economist), and Rob Chrisman” on Wednesday August 16th at 1PM ET/10AM PT, sponsored by TrustEngine. (Today’s podcast can be found here and is sponsored by SimpleNexus, an nCino Company, developer of mortgage technology uniting the people, systems, and stages of the mortgage process into one seamless, end-to-end solution. Hear an interview SimpleNexus’ Jay Arneja on closing technology initiatives, standardization, and digital transformation impacting the industry at the moment.)

Lender and Broker Software, Products, and Services

Mortgage leaders: The home insurance market is facing unprecedented volatility with carriers declining new business and increasing premiums to an all-time high. This can delay closings and even lead to DTI exceeding acceptable limits once accurate insurance costs are factored in. Matic, a home insurance marketplace built for the mortgage industry, helps borrowers save time by shopping multiple A-rated carriers at once and providing transparent pricing and coverage options. With flexible integration options for your company, Matic adds visibility and control, allowing lenders to foresee potential issues that could result in delayed closings. To learn how mortgage enterprises can gain efficiencies and add a new source of revenue with Matic, book a demo today. For more strategies on how to navigate the next phase of the housing market, get Matic’s latest report.

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“Turn fixed costs into variable costs on a dime. When the market zigs, lenders need the flexibility to zag. Richey May Advisory brings the mortgage industry expertise and agility you need to convert fixed costs into variable costs. Our difference maker is your ability to outsource services to highly trained experts in a model that fits your needs. Whether that means loan-level accounting, advisory, business intelligence, compliance support, cyber services, internal audits, or underwriting automation, we have the tools, knowledge, and experience to deliver value and improve your financial performance unlike any competitor, anywhere. You’ll feel it almost immediately in your day-to-day operations. Even better, you’ll notice the difference in your bottom line. Reach out or visit our website to learn more about how we can help your operation.”

TPO Programs for Brokers and Correspondents

“Going to California MBA’s 2023 Western Secondary conference? Let’s get together and innovate! Deepen your product lineup with Planet’s Renovation and Manufactured Housing loan programs. Help your clients address today’s housing challenges by adding buydowns and USDA loans to your product mix. We make it easy and profitable to offer niche products. Reach out to Regional Sales Managers Tiffany Ta / 714-376-3214 or Jennifer Salsbury Caldwell / 909-225-8444 to explore new products to build your sales.”

Looking to gain a competitive advantage in today’s tough market? Lenders across the industry are catching wind of HELOC benefits and leveraging this tool to increase their book of business. Let us help you get a leg-up on the growing competition. Symmetry’s Piggyback, Post-close, and Stand-alone HELOCs are unlike any other HELOCs on the market, offering service, speed, simplicity, and pricing that stands up against the competition. Here are just five of the ways Symmetry’s HELOC solutions can help you win and keep more borrower business: cash for borrowers, jumbo avoidance, more second home business, increased condo business and client retention. Symmetry is ready to help you build a strong, resilient growth strategy: Contact your area manager or email us to get started!

Wholesaler Earnings and TPO News

Someone in residential lending is making some coin besides Freddie Mac and Fannie Mae ($2.9 and $5.0 billion respectively in the 2nd quarter).

Last week we learned that Rocket Companies (which, as the name implies, contains several companies) generated total revenue, net of $1.236 billion and net income of $139 million. “Generated total adjusted revenue of $1.002 billion and adjusted net loss of $33 million, or an adjusted loss of $0.02 cents per diluted share.”

Focusing on mortgage banking, “Rocket Mortgage generated $22 billion in mortgage origination closed loan volume with a gain on sale margin of 2.67 percent. Rocket gained purchase market share in the quarter, both year-over-year and quarter-over-quarter. Servicing book unpaid principal balance, which includes subserviced loans, was $504 billion on June 30, 2023. As of June 30, 2023, our servicing portfolio includes 2.4 million loans serviced. The portfolio generates approximately $1.4 billion of recurring servicing fee income on an annualized basis.”

Yesterday United Wholesale reported second quarter earnings with origination volume climbing to $31.8 billion, was up 43% compared to the first quarter and up 6.4% compared to a year ago. “Gain on sale margin compressed to 88 basis points in Q2 compared to 92 in Q1 and 99 a year ago. Purchase volume was 88% of total volume. UWM is guiding for third quarter volume to come in between $26 and $33 billion, and gain on sale to range between 75 and 100 basis points. Adjusted earnings per share came in at $0.11, which covers the $0.10 dividend. At current levels, the stock has a dividend yield of 6%.”

Speaking of UWM, “spec pools” are indeed a thing as certain investors pay up for certain loan attributes that the investor desires. In this case, UWM announced “sharper pricing on loans under $200,000, in addition to major enhancements to its Control Your Price program on non-agency Jumbo loans… UWM has removed loan-size pricing adjustments on loans under $100K and will be paying up premiums for market-based pay-ups on 30-year fixed conventional loans $200K and below.”

“UWM also announced it has increased the number of Control Your Price basis points brokers can apply to Jumbo loans, up to 40 basis points. UWM will also double or triple the Control Your Price basis points brokers apply on all non-agency Jumbo loans, up to 120 basis points.”

The FHFA, which is the conservator of Freddie and Fannie? FHFA Working Paper 23-04: How Do Students Value an Elite Education? Evidence on Residential Location and Applications to NYC Specialized Schools.

Pennymac is aligning with the adoption of Fannie Mae/Freddie Mac Form 1103, Supplemental Consumer Information Form (SCIF) as announced in FHA ML 2023-13. Use of the form is effective with FHA loan applications dated on or after 8/28/2023. View Pennymac Announcement 23-51 – FHA Mortgagee Letter 2023-13 SCIF for details.

CBC Mortgage Agency (CBCMA), a Native American wholly owned and federally chartered housing finance agency, has been approved by the U.S. Department of Agriculture to provide 30-year mortgage loans for borrowers outside of urban and suburban areas. Because the USDA loan program offers 100% financing, CBCMA enables correspondent lenders to help low- to moderate-income families in rural areas achieve homeownership. USDA loans provide low- and moderate-income borrowers with “the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas,” according to the agency. Up to 90% of the original principal amount of USDA-based 30-year notes are guaranteed by the agency.

AmeriHome Mortgage Announcement 20230707-CL summarizes previously published changes made during July, additional changes made with this announcement, and recent Agency and regulatory news.

Recently, the GSEs announced updated policies addressing critical repairs, deferred maintenance, and special assessments in projects with five or more attached units effective for loan applications dated on or after September 18, 2023. View AmeriHome Correspondent Product Announcement 20230801-CL for additional information.

PRMG Product Update 23-36 includes clarifications regarding FHA Standard and High Balance cash out transactions on Manufactured Homes, borrowers living rent free requirements on Investor Solution, self-employment verifications requirements of Ruby Jumbo and Express Jumbo. Additional updates and clarifications for Ruby Express and Onyx Jumbo.

Capital Markets

A slide in big tech equities yesterday due to President Biden’s Executive Order announcement prohibiting investment in certain Chinese technologies, as well as higher energy prices, helped mortgage-backed security “sentiment” and further flattened the yield curve, which at this point is to say it increased in inversion: “bear flattening.” Fortunately, MBS prices were not very reactive to the initial selloff in Treasuries which tightened spreads further. Investors squared positions ahead of today’s Consumer Price Index inflation data that will help shape the outlook for the Fed’s next steps.

What was the result of all this noise? The U.S. 10-year note and the 30-year bond prices, along with them MBS, pushed to fresh highs in the afternoon after the completion of the day’s solid $38 billion 10-year note offering while 5-year notes and shorter tenor prices slipped to fresh lows as the market prepared for July CPI. Some movement was driven by European equities rebounding after Italy walked back Tuesday’s windfall tax announcement, saying the tax would be capped at 0.1 percent of assets.

Today brings the CPI report for July, as expected. Headline CPI increased .2 month-over-month and () year-over-year when it was expected to increase 0.2 percent month-over-month and 3.3 percent year-over-year compared with 0.2 percent and 3.0 percent in June. The core reading, ex-food and energy, was .2, as expected, and 4.7 percent year over year versus 4.8 percent previously. Weekly jobless claims have also been released: 248k, higher than expected, 1.684 million continuing claims. Later today brings a Treasury auction of $23 billion 30-year bonds, and remarks from Atlanta Fed President Bostic and Philadelphia Fed President Harker. We begin the day with Agency MBS prices better by .125-.250 and the 10-year yielding 3.96 after closing yesterday at 4.01 percent after the inflation data.

Employment and Transitions

“Attention homebuilders and other potential joint venture partners! In today’s volatile market, a reliable lending partner is non-negotiable. Enter PrimeLending, backed by the strength of Hilltop Holdings and PlainsCapital Bank. We’re not just surviving; we’re thriving. With over 37 years in the mortgage industry, we bring more than stability and experience. We bring game-changing insight to boost your revenue. Join us at PrimeLending Ventures Management, LLC. Our proven track record, streamlined operations, and cutting-edge technology speak for themselves. Imagine this: together, we’re not just about making profits, but about evolving your brand. What are you waiting for? Reach out to Mike Matthews today to talk about a partnership built on shared success.”

Mortgage Capital Trading, Inc. (MCT®), the de facto leader in innovative mortgage capital markets technology, today announced the appointment of Steve Pawlowski as Managing Director, Head of Technology Solutions. Mr. Pawlowski will be responsible for expanding upon MCT’s proven record of driving efficiency and liquidity in the secondary market. “MCT was the fastest and most comprehensive technology partner I worked with on API development while at Fannie Mae,” said Steve Pawlowski, Managing Director, Head of Technology Solutions at MCT. “I couldn’t be more excited to apply my institutional expertise to this agile and committed technology development team.” Mr. Pawlowski will provide leadership on all MCT technology development. He brings extensive industry experience to MCT, including 30+ years with Fannie Mae’s Capital Markets and Single-Family Digital Products and Services organizations. Read the full press release or join MCT’s newsletter to stay up to date on recent news and educational content.

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Source: mortgagenewsdaily.com