Mortgage Capital Trading

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Incenter plans to soon put their new mortgage servicing rights platform to work, adding to the increased attention technology in this space has gotten as higher interest rates have raised the business line’s profile.

Incenter aims for the eMSR Exchange to have its first loans committed for co-issue transactions by Sept. 1.

The venture adds to other examples of investment in MSR technology from the past year, which also include Mortgage Capital Trading’s launch of functionality for co-issue sales and Voxtur’s purchase of the Blue Water Financial Technologies’ loan/servicing platform.

The rights to handle cash-flows from mortgages aren’t completely standardized assets, which added to the challenge of setting up an exchange for them, said Tom Piercy, president of national enterprise development.

“We feel we have come as close as we can to commoditizing this asset, which will never be commoditized entirely,” said Piercy, who also is a managing director at Incenter Mortgage Advisors, the company’s capital markets and trading subsidiary.

The eMSR Exchange, which was announced alongside a new Incenter due diligence and document management affiliate in May, aims to both help match buyers and sellers based on price and relieve operational burdens involved in co-issue servicing transactions.

Incenter’s MSR exchange ecosystem.

Incenter is starting with a focus on co-issue deals, which typically involve splitting off servicing from loans sold to the GSEs so that a separate investor can buy the MSRs.

Its technology is primarily aimed at small- to medium-sized originators. Bigger ones may have their own proprietary technology.

Freedom Mortgage, for example, has its own co-issue platform. 

“We have a large network of correspondent lenders, and we have a platform capable of acquiring large quantities of MSRs,” said David Sheeler, president of residential servicing and correspondent lending at Freedom Mortgage.

“We’ve been able to use that platform to assist other investors interested in owning MSRs,” he added. “We basically take care of all the sales, marketing and the operations for the loans, and then transfer the MSRs to a partner or investor of ours.”

In contrast to Freedom, more moderate-sized companies don’t often have the secondary trading units that bigger players do. As a result, they may find platforms like Incenter’s appealing — with some caveats.

“Tools like that are great in terms of facilitating a more efficient diligence process for buyers,” said Toby Wells, president at Cornerstone Servicing. “I would tell you the counter to that, though, is that while MSR trading sometimes is as simple as the best price, buyers and sellers still need to know one another.

“You need to know what one another’s capable of, making sure you have an efficient process to transition the consumer from one platform to another,” he added.

And consumer data in servicing also has proved sensitive to data breaches. 

Incenter limits which parties handle borrower information and heavily outfitting its system with cybersecurity, said Jessica Pejka, vice president, transaction management, when asked about this risk.

“We don’t take in borrower data at Incenter proper. Our system houses the information needed to price loans to track delivery of them, but the actual borrower information goes to our subservicer directly,” she said. 

Piercy declined to identify the subservicer involved.

“Right now, we’re dedicated to one and they’re absolutely a partner in managing and supporting standardization,” he said.

Incenter’s system can take in MSR data and documents from multiple sellers through the subservicer. That information then gets circulated through the exchange entity, due diligence and Incenter Mortgage Advisors. After that, the MSRs are matched with buyers.

“This would be very difficult to do without the technology on all sides, especially this pricing/ recording piece that is inherent to MSR, which is proprietary for us,” said Pejka.

The platform consists of a mix of time-tested technology and newer automation, and was primarily developed in-house with the exception of the subservicing functions.

“The base technology has been used by us for over 10 years in managing our co-issue transactions,” said Piercy. “It’s all technical development by our in-house programming.”

The pricing component in particular requires finesse, Piercy said.

“When you have underwriting guides for a loan, you go to the screen, you can get the [to-be-announced securities] price. That’s all commoditized. Servicing is never that way because you have a different approach by every buyer with regard to how they service loans and how they perceive certain characteristics of loans,” said Piercy.

The pricing in the system is customized by investors to address differences between buyers, and is live so that it can be changed at any time as the market shifts, he said.

“It is not disclosed to any other party, so that there is no competitive disadvantage. There is no disclosure of how you’re pricing to other buyers,” added Piercy.

And the due diligence done as part of the eMSR exchange also is specialized, said Pamela Hamrick, president of the Incenter affiliate focused on this area. That affiliate, Incenter Diligence Solutions, was built following the company’s acquisition of EdgeMac last year.

“The elements of the review are important for an MSR buyer, which are different from the elements that are important to rating agencies review, for example,” Hamrick said.

The big picture

The Incenter platform acknowledges the broader existence of technology developed in the market to handle mortgage servicing rights and seeks to improve on it, according to Pejka.

“We have selected vendor partners both in our subservicer and Incenter Diligence Solutions who are doing innovative work in their spaces, to help us move those forward,” she said.

The Incenter affiliate has collaborated with other technology providers in the space such as LauraMac and LoanLogics.

Due diligence for MSR deals has been a space ripe for automation that’s been evolving in recent years, said Bob Fulton, CEO of LauraMac.

“There really wasn’t a tool that I could find that allowed the user to create workflow, create tasks, and standardize the work,” Fulton said.

Bob Fulton, CEO of LauraMac

Artificial intelligence and other technology have reached a point where providers feel they can produce offerings that fulfill both goals.

“We’ve implemented document AI so that documents can be read automatically,” Fulton said.

Buyers also have increasingly been using technology to identify where document shortfalls exist, noted Craig Sylvestre, senior vice president, sales, at LoanLogics.

“What we’re automating is the review of that loan file to make sure that everything is present and that loan is ready to on-board to servicing,” Sylvestre said.

Technology also helps buyers remedy any lapses, said Terrell Cassada, executive vice president, digital operations, architecture and innovation at LoanLogics.

“They can see the results of what documents may be missing on those loans, and facilitate the collection of those missing documents from their seller,” Cassada said.

And the industry has been responding to the need not just to have effective automation for this purpose but to have technology available at the right price point, other players in the market said.

“Clients are trying to understand the risks on a given pool with minimal investment and without materially destroying the economics,” said Mike Margolf, managing director, secondary market technology at SitusAMC, in a video blog.

The MSR valuation component also has been a key part of the value proposition when it comes to technology efforts in this space, said Al Qureshi, managing partner at Blue Water Financial Technologies.

“We have a patent pending around our key core technology, where we can take anybody’s valuation and deliver it in real time,” he said.

“We provide investors with a machine-learning driven approach to understanding how they can be more competitive,” he added. “We never shop other investors’ prices, we would never do that, but we use machine learning to understand preferences vis-a-vis win/loss, and we’re able to help them price better, and drive towards more volume or less volume, depending upon what they’re trying to solve for.”

Meanwhile, on the other side of the trade, “we’ve got all the different pieces in place for that seller to slot their loans from a price perspective and a transfer perspective,” Qureshi said. “Because we digitized all this, the lift that’s required is very democratized.”

The GSEs, Fannie Mae and Freddie Mac, also have co-issue platforms.

“The agency exchanges are very good, and what they’ve created is a great efficiency, but it requires each individual buyer and seller to create their relationship, and then they’re utilizing the platform to run that relationship,” said Piercy. “What we have is much different in the sense that any seller has the ability to look into the exchange, look at pricing, get a sense of what it is. And if they’re interested, they go through an application process, same with buyers.”

Incenter also has designed its reporting capabilities on things like portfolio performance to be a competitive edge, he said.

“That, in turn, is generating much more interest to where I feel we will have, based on not formal commitments but preliminary indications, a far greater number of buyers that could create greater opportunities for sellers than other platforms,” said Piercy.

Source: nationalmortgagenews.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.

While free origination tools are tempting, they can come with hidden costs, including slowing down the mortgage process, increasing turn times, and halting productivity. Blend’s robust, comprehensive features, intuitive personalization, and automated workflows have proven results: 37% increase in transaction speed, 7 days cut from the loan lifecycle and 34% increase in pull-through. Click here to find out how Blend’s Mortgage Suite helps deliver value during every step of the process.

Problem! Your employees are wasting valuable time on tasks that aren’t generating your business revenue! Solution! Automate the time-consuming parts of the mortgage origination process with Velma Connector! Connector is an easy-to-use, rules-based automation tool that enhances your LOS! Need to put your ECOA process on autopilot? Connector takes the human element out of it. Want to know which loans need attention before it’s too late? Connector will send you the report. Want to automate borrower communications and info collection? Connector hits the send button for you. Stop wasting time and money on manual processes! Get Velma Connector today!

“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.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

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MCT said additional rate hikes are anticipated and may hamper origination volume, which they said is at “a new normal.”

MCT’s June data also shows a nearly 8% drop in total lock volume year over year. After hitting lows at the beginning of the year for purchase, rate/term refinance, and cash out refinance, each production type continues to creep slowly upward, MCT said.

Rhodes noted that economic reports will continue to have an outsize impact on the Federal Reserve’s decision making. The labor market is gradually moderating, but conditions remain too hot for the Fed’s liking.

Job gains were relatively solid yet again in June, with total nonfarm payroll employment reaching 209,000 jobs, compared to 339,000 in May, according to data released Friday by the Bureau of Labor Statistics. 

“If labor markets cool off, that could give the Fed a reason not to
raise rates in July,” Rhodes said. “This would provide a nice
bounce in the markets, but I’m not holding my breath.”

Fannie Mae reported earlier this month that recent housing market data suggests prospective borrowers have come to terms with high rates.

MCT’s Rate Lock Indices present a snapshot of rate lock volume activity in the residential mortgage industry broken out by lock type (purchase, rate/term refinance, and cash out refinance) across a broad diversity of lenders (e.g., sizes, products/services offered, business models) nationally.

Source: housingwire.com

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Automated AOT, TPO, Appraisal Fee, LOS Products; Labor Data Pushes Rates Higher

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Automated AOT, TPO, Appraisal Fee, LOS Products; Labor Data Pushes Rates Higher

By:
Rob Chrisman

Thu, Jul 6 2023, 10:35 AM

Apparently China is not paying interest on its sovereign debt… What is it waiting for? If you’re waiting for lower rates to give your business a “shot in the arm,” the next few months may be difficult, but there is good news. The persistence of stubborn inflation is causing U.S. and European officials to tighten monetary policy. With both the Federal Reserve and the European Central Bank expected to raise interest rates in July, an aggregate measure of borrowing costs indicates a peak of 6.25% in the current quarter, highlighting a shift from the previous projection of 6%. Despite that, new home sales are surging, home prices are rising, and prospective buyers are engaging (as if they ever stopped) in bidding wars again. But U.S. housing prices have led to higher shelter costs and complicate the Federal Reserve’s fight against inflation. Barron’s discusses this in, “How a Housing Rebound Could Impact the Fed’s Path Forward.” Is the huge overhang of housing supply from the 2000-2007 housing bubble not fully absorbed? Yes, higher rates have impacted affordability, but, historically, LOs know that high rates don’t necessarily impact peoples’ desire to own a home. If rates go up a lot, good LOs will help with good programs, and some people will buy smaller homes. But they will still buy homes. (Today’s podcast can be found here and this week’s is sponsored by Gallus, the premier business intelligence tool for the mortgage industry. With hassle-free insights and user-friendly functionality, Gallus empowers you to make faster, data-driven decisions for enhanced profitability. Hear an interview with Jeremy Potter on the shift toward innovative lending practices and new underwriting standards.)

Lender and Broker Software, Services, and Products

Studies show that 78% of salespeople who use mortgage social media marketing outperform their peers. Of course, you’ll want to be up to speed on social media best practices and a few dos and don’ts to get the best results. The Black Knight team behind the Surefire, CRM and Mortgage Marketing Engine, has developed a free toolkit on Social Media Success to help you develop social media campaigns that reach the right audience at the right time and with the right message. Download it now to start connecting with more homebuyers.

Do you love your LOS? Byte clients do. And now they have even more to love with access to the digital closing automation and efficiencies of the Snapdocs eClose platform. The Byte LOS platform and Snapdocs have an integration that seamlessly helps lenders close loans faster, reduce operating costs, and improve the borrower experience. If you’re an LOS control freak, you’re going to love the exceptional level of control and customization you have with Byte. Watch the Byte – Snapdocs integration demo or visit bytesoftware.com to learn more about Byte’s free 30-day LOS test drive.

“Are you leaking revenue from uncollected appraisal fees? Book a complimentary consultation with one of Reggora’s mortgage solutions specialists to calculate how much you’re losing in fees each year. We’ll calculate your annual losses, benchmark them against 2023 mortgage industry averages from STRATMOR Group and show you how to eliminate that leakage.”

Explore Kind Lending’s Non-Delegated offerings! The KIND of service you expect: From seller, underwriting, disclosing, closing, funding, and to purchase, we’re here to help you every step of the way. Experience the Kind difference today: Speed & Price, Options, Support, Communication, Marketing & Training, Products, & so much more!

Planet Home Lending can now purchase conventional loans closed with an eNote for the Best Effort, Delegated Correspondent, Bulk Purchase, and Co-Issue programs, which means doing business with us just got even easier. Clients who close and fund with eNotes realize fast loan delivery and purchase, and shorter warehouse times on loans held for sale, simplifying and streamlining delivery. Commitment to and investment in leading-edge technology is just part of our dedication to growing your business. Contact your Regional Sales Manager for more details or reach out to SVP Correspondent Sales Jim Loving (414-270-0027). Improve your execution. Put Planet to work for you.

Webinars, Events, and Training

A list of upcoming conferences and major events can be found here under the “Conferences” tab. Meanwhile, there’s plenty going on next week… the 11th is crazy!

If you’ve ever wanted to get a book published on Amazon, you’ll want to attend this webinar! Join Ginger Bell’s Live Webinar on July 11th at 11 am PT. Discover the secrets to effortlessly publishing your own book and unlocking the power of having a published book on Amazon. Reserve your spot today and unleash the potential of being a published author!

Learn more about a Rocket Pro TPO partnership, and save the date for the next IGNITE Live on Tuesday, July 11th at 2PM ET. Mike Fawaz, EVP of Rocket Pro TPO, is sharing some lesser-known facts about Rocket Pro TPO that can benefit your business! Sign up with the link here!

Join AGENT U on July 11th at 12:30-1:30pm ET for the next installment of its free monthly webinar. This month, the hosts are speaking with top-producing agent Josh McGrath to learn about his strategies for building a reputation in one’s hometown to improve lead generation. In this fast-paced world of real estate, the game is constantly changing, and you have to adapt. BUT, some things will ALWAYS be the same for your marketing methods. Plus, get your questions answered during the live Q&A session.

National MI July 2023 webinar sessions: Creating Infinite Referrals ​​​​​with Rebecca Lorenz – July 11th at 1pm ET. The 4 Faces of Frustration ​​​​​​with Andrew Oxley – July 12th at 2pm ET. How to Reduce Rate-Shopping Behavior ​​​​​with Dr. Bruce Lund – July 13th at 1pm ET.

October Research, LLC will host the next webinar in the Economic Forecast Series featuring Brandi Snowden, director, member and consumer survey research, National Association of Realtors (NAR) at 2 p.m. July 11th. Register today to learn the latest on home sales, pricing, market conditions, generational trends and more. Hear expert insights on the economy in just 30 minutes. Register today at DoddFrankUpdate.com.

Which direction will the economy go next? What trends are we seeing in the housing market? The National Association of Realtors (NAR) Director of Member and Consumer Survey Research Brandi Snowden will be sharing her insights on those questions and more. Join the next edition of the Economic Forecast Series on July 11th at 2:00 p.m. ET

Register for Appraiser eLearning 3hr Live-Zoom CE Course on Tuesday, July 11, Attorney Peter Christensen will offer 15 takeaways and lessons from legal situations and cases involving appraisers. What can appraisers learn from their colleagues’ legal misfortunes?

Diehl’s FHA Underwriting, Processing and Origination Live Webinar, July 11, 13, & 14, 1-5pm EST, is a comprehensive course designed and presented in a no-nonsense format. We will guide you through over 500 pages of material in the handbook including basic rules, regulations, and changes issued by HUD along with all the topics listed below. This course is divided into three 4-hour interactive webinars. Attendees will be able to download the presentation for notetaking along with calculation worksheets for a variety of scenarios.

Is your organization ready to get into Home Equity lending? If you’re already lending, are you trying to find new ways to save time and reduce costs? Join experts from Stewart Lender Services and Curinos online at 4:00 PM on July 12th, Emerging Solutions in Home Equity – Title, Settlement and Closing. The panel will go over everything you need to know about Home Equity lending and provide detailed insights into what it means for you and your organization.

Join MMLA Southeast Chapter at the Federal Reserve Bank – Detroit Branch on Thursday, July 13th, 11:30AM-1:30PM to hear from speaker, Martin Lavelle, senior business economist. Martin will provide insight into what’s really going on with our economy and what it means for our business. Get an exclusive tour of the building after lunch. All registrations need to be made before July 9th for security purposes.

On July 13th & 14th, Appraiser eLearning is hosting a workshop in Nashville for AeL faculty and aspiring instructors. Learn how to design great presentations, write great marketing copy, keep a classroom engaged, and offer your fellow professionals something they need and want.

On Friday, July 14, learn about PRMG’s non-QM Alternative AUS Solution product which provides options for conforming and jumbo loans amounts for using DU Findings to qualify, along with options like non-warrantable condos and condotels.

Join the California Association of Mortgage Professionals for the 2023 Annual Convention and Gala Extravaganza, July 14th and 15th. Education, engaging speakers, network with the area’s top mortgage professionals, a robust expo hall, & of course a good deal of fun.

Friday the 14th at noon PT is the next edition of The Mortgage Collaborative’s Rundown with Melissa Langdale and me. We’ll will be covering current events in the mortgage market for 30 minutes starting at noon PT in “The Rundown”.

Capital Markets

Mortgage Capital Trading, a leading mortgage hedge advisory and secondary marketing software firm, announced recently that it has automated the process of digital TBA trade assignment during the loan sale process for both mortgage lenders and participating correspondent investors. This automation makes assignment of trade loan sales (AOTs) faster, more convenient, and easier for investors to offer, and is expected to further expand on the $19.5 million in cumulative savings experienced by MCT’s lender clients as a result of AOTs in 2022. AOTs enable mortgage lenders to save the bid-offer spread on the to-be-announced mortgage-backed securities (TBAs) used to hedge their open mortgage pipeline. Due to market volatility these bid-offer spreads have been historically wide, averaging 11.3 basis points in 2022. Participating MCT lenders saved an average of $97,538 each through AOTs in 2022. Read the full press release to learn more or join MCT’s newsletter for timely market content.

In bond news, we had hoped that moderating inflation would have a positive impact on rates by the middle of this year. Nope. While inflation has shrunk, the interest rate environment has not cooperated, as any LO can tell you. With no points, the conforming 30 year fixed is now solidly entrenched above 7%. This, despite news that should have moved rates lower, such as the Federal Reserve’s favorite measure of inflation, Personal Consumption Expenditures hit 3.8 percent year-over-year and 0.1% month-over-month. This was great news to illustrate an improving inflation picture, but the bond market didn’t care, instead focusing on the red-hot labor market.

Did someone say labor? The Federal Reserve views increased joblessness as key to reducing inflation to their target rate of 2 percent but there are 10 million + job openings with only about 6 million people looking for work.

Everyone outside of capital markets thinks we speak a different language. For example, at the end of yesterday “crossing the tape” was this message: “U.S. markets returned after plus-or-minus one day break only for bonds to get crushed as a belly-led Treasury market selloff unnerved investors as yields tagged their highest levels since early March, 4.95 percent and 3.95 percent in the case of 2s and 10s, with damaged technicals leading to further liquidations and a pop in vol ahead of Friday’s payrolls report.” What does that mean? Well, bond prices were pushed down (and yields up to the highest levels since early March) as investors noticed that prices moved below previous “support” levels with signs that the global economy is not slowing and markets pricing in additional rate hikes from the Fed and ECB. The 2s/10s yield curve spread remains inverted by over 100 basis points.

Investors received some additional insight yesterday into the Fed’s thought process at the June Federal Open Market Committee meeting, when there was less consensus than the unanimous decision suggested in leaving rates unchanged. Some officials favored rate increases but went along with the move to leave policy unchanged, despite concerns that core inflation hasn’t moved downward much in the last six months.

Whatever the disagreement among Fed officials, it’s fair to say the key takeaway is that more hikes are coming, as almost all officials said that additional increases would likely be appropriate. We did learn last week that Core PCE inflation is still running hot, but it did edge slightly lower to 4.6 percent year-over-year in May. The annual increase in the PCE Price Index ex-food and energy (the core rate) is the Fed’s most important inflation indicator and has flitted back and forth between 4.6 percent and 4.7 percent this year. Personal spending did stall in the second quarter, which will be welcome news to the Fed. “The smartest guys in the room” think that the Fed is going to hike 25 basis points on July 26.

Mortgage applications from MBA kicked off today’s calendar, decreasing 4.4 percent from one week earlier, with mortgage rates and yields both climbing during the reporting period. We’ve also received some labor market updates ahead of tomorrow’s payrolls report starting with layoffs from Challenger, Gray & Christmas for June: U.S.-based employers announced 40,709 cuts in June, down 49% from the 80,089 cuts announced in May but up 25% from the 32,517 announced in the same month one year prior. We also had the ADP employment for June (+497k, double expectations), and weekly jobless claims (248k, also higher than expected, 1.72 million continuing claims). Later this morning brings the final June S&P Global services PMI, ISM non-manufacturing PMI for June, JOLTS job openings for May, and remarks from Dallas Fed President Logan. We begin the day with Agency MBS prices worse .250, the 10-year yielding 4.03 after closing yesterday at 3.95 percent, and the 2-year up to 5.06 on the strong labor market news.

Jobs

“At AFR Wholesale®, we are still looking for experienced and eager Account Executives for both our Wholesale and Correspondent Divisions! Knowledge of construction and renovation is a plus. If you have an overall desire to bring more families home and to make a difference, we would love to speak with you! We like to offer a close community that feels like home to thrive and make dreams become a reality. We are looking for experienced candidates because at AFR, we recognize that some scenarios can be challenging, and we want to provide a home for all possible circumstances. That is why we do what we do. At the end of the day, it’s about being proud we made it possible to turn a house into a home. AFR is an equal opportunity employer. Apply now! Contact AFR by going to www.afrwholesale.com, email [email protected], or call 1-800-375-6071.”

“Are you a Wholesale Account Executive wanting to make a change? FLCBank is looking to expand our mortgage division team in the northeast, southeast, central and northwest. If you are looking for a company with a tenured mortgage culture of collaboration, team-based success, and the security of working for a federal bank, then it’s time to contact FLCBank’s Bob Eisendrath, Strategic National Account Manager (414.350.3986). FLCBank is agency approved, offers a suite of bank and jumbo products with IO options on both conventional and jumbo loan balances. Our AEs work with Brokers, Non-Delegated Correspondents and can even offer warehouse lines to customers. FLCB cultivates a fun team environment where both sales and operations staff are passionate about delivering exceptional customer experiences with every loan. We offer competitive compensation, an energized culture, and an experienced operations & support staff. FLCBank is an Equal Opportunity/Affirmative Action Employer.

“USA Mortgage announces new leadership roles for three executives! Employee-owned national mortgage lender, USA Mortgage, has promoted three senior executives to new leadership roles. Doug Schukar, who formed DAS Acquisition Company, LLC, (marketed as USA Mortgage nationwide) in 2001, is handing off his duties as CEO to current President and COO, Linda Pring. Schukar remains Chairman of the Board. Assuming the role of President is Ron Mueller, currently Executive Vice President. Dani Ploch, Chief Administrative Officer succeeds Pring as the company’s COO. USA Mortgage is a full-service mortgage bank known for its entrepreneurial spirit and commitment to superior customer experiences. Recognized as an industry leader, it has been named to 50 Best Companies to Work For, St. Louis Titan 100, Top Workplaces Excellence Awards, St. Louis Post-Dispatch Top Workplaces, Top Lender, along with several Scotsman Guide awards, and many more. For a confidential conversation about joining us, contact Brooke Anderson at 609-500-1520, or visit us here to learn more.”

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Source: mortgagenewsdaily.com

Apache is functioning normally

Fewer buyers rushed to lock mortgages last month amid a rapid climb in long-term mortgage rates, reflecting home affordability concerns, reports from Mortgage Capital Trading and Black Knight showed. 

Total mortgage rate locks by dollar volume were down 5% in April from the previous month, according to MCT’s monthly Mortgage Lock Volume Indices report. Compared with the same period last year, the number of rate locks by mortgage volume was down 25.4%. 

The average 30-year conforming mortgage rate climbed to 5.27% last week, marking the highest average since 2009, according to Freddie Mac PMMS. Black Knight’s Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association, finished the month of April at 5.42%.

Refinancing has seen the biggest impact of the rising-rate pressure. Rate locks for rate-and-term refinances, which is driven primarily by a drop in interest rates to lower monthly mortgage payments, were down 36.4% in April from the previous month. Compared with April 2021, rate-and-term refinances were down 89.2%. 

Cash-out refinance activity, in contrast, is led by increasing home values by homeowners seeking to tap into their home equity. In April, cash-out refinance rate locks were down 31.1% from March and slumped 51.7% from a year earlier.

Black Knight’s monthly originations market monitor report showed a similar downward trend of mortgage rate locks. Rate lock production volume activity was down 20.3% month over month, driven by a 50% drop in rate-term-refinance lending activity.

Cash-out refi locks dipped 40% in April as homeowners likely sought other products including Home Equity Line of Credits [HELOCs] or second linens, to access tappable equity without sacrificing historically low first-lien mortgage rates, which were secured with real estate as collateral.

In a traditional home equity product, the lender disburses a lump sum of cash upfront to the buyer, who then pays the loan back in fixed-rate payments. A HELOC, by contrast, is a revolving line of credit that allows borrowing as needed, with a variable interest rate. 

April’s decline in rate lock activity is “hardly surprising,” said Scott Happ, president at Optimal Blue, citing half of all mortgage holders holding current first lien rates below 3.5%. The combined decline in refinance locks pushed the refi share of the market down to 20% last month, marking the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. 

“That being said, while purchase locks were down somewhat from March, they remained flat from last April, reflecting consistent and resilient demand from homebuyers,” Happ said in a statement. 

Purchase rate locks measured by MCT, however, were up 2.2% month over month in April and 7.55% from a year earlier, “a bright spot even as mortgage rates have increased rapidly in 2022.”

MCT, founded in 2001, launched its first monthly mortgage lock volume report on Monday. The indices are based on the actual dollar volume of locked loans, not the numbers of applications. 

“Especially in a tight purchase market. Applications are a less reliable metric for the mortgage industry as there is a higher likelihood of having multiple applications per funded loan,” the MCT report noted. 

Black Knight’s monthly market monitor reports provide origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. The New York-Newark-Jersey City regions had the highest rate lock volume at 4.1% in April. The Los Angeles-Long Beach-Anaheim regions had the second-highest lock volume rate (3.9%) trailed by the Washington-Arlington-Alexandria (3.8%) region. 

Source: housingwire.com

Apache is functioning normally

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The real estate market is cooling down, observers say.

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The real estate market is cooling down

Reports released this week by several respected market observers point to less good and increased bad and ugly ahead for the housing market.

For some of the good, a U.S. Census Bureau report released late last week spurred a bout of optimism when it revealed that new-home sales jumped by nearly 11% month-over-month in May on a seasonally adjusted basis, after declining by 12% in April. 

Moody’s Investors Service, in a housing-market report released this week, puts some ugly back into the home-sales figures for May, however.

“At 696,000 units, May new home sales were around 17% below the recent peak of 839,000 units in December last year,” the Moody’s report notes. “[On June 21], the National Association of Realtors said that existing-home sales declined for the fourth consecutive month. 

“Existing-home sales fell in May by 3.4% on a seasonally adjusted basis to 5.41 million, the lowest since June of 2020 and similar to pre-pandemic levels.”

Those figures, along with “sharp recent increases in mortgage rates” and other supporting data, lead Moody’s to conclude that the “U.S. home-price boom is over.” The firm, which rates securitization offerings and provides other capital-market services, predicts “material declines” in both new- and existing-home transactions this year, compared with 2021.

Supporting the ugly outlook for the housing market is the release today, June 29, of the quarterly CFO Survey, conducted jointly by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The survey of more than 300 U.S. financial executives conducted between May 25 and June 10, shows optimism about the broader U.S. economy continuing to decline.

The average index score for the current survey was 50.7, compared with 54.8 in the prior quarter and 60.3 two quarters ago.

“Price pressures have increased, real revenue growth has stalled and optimism about the overall economy has fallen sharply,” said John Graham, a Fuqua finance professor and the survey’s academic director. “Monetary tightening [by the Federal Reserve] is one of several factors dampening the economic outlook.” 

The CFO Survey’s findings are echoed by a revised first-quarter 2022 gross domestic product (GDP) estimate released Wednesday by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA). It shows that a drastic economic slowdown is already underway.

“Real gross domestic product [a measure of all goods and services produced in the economy] decreased at an annual rate of 1.6 percent in the first quarter of 2022 …,” the BEA report states. “In the fourth quarter of 2021, real GDP increased 6.9 percent.”

The BEA’s first-quarter GDP estimate, it’s third to date, was revised downward from -1.4% and -1.5% in the two prior estimates. The grim data led Mortgage Capital Trading (MCT), a San Diego-based capital market software and services firm, to broach the “R“ word in its daily market-overview report.

“Concern over a slowing economy and aggressive interest rate hikes from the Fed are beginning to dominate market sentiment,” the MCT report states. “This morning’s GDP release [on June 29] came with a downward revision for the last reading, further supporting views that a recession is either in progress or coming soon.”

What does all this mean for the housing market in the months ahead? The Moody’s report attempts to frame some of the expectations.

“We expect some increases in existing-house prices over the next 18 months, though for appreciation to be well below the general rate of inflation,” the Moody’s report states. “After that, we expect home appreciation to settle in at levels somewhat lower than the rate of overall U.S. inflation.”

The report even indicates that there “is risk that existing home prices will have a minor correction over the next two years, similar to housing markets in many other developed counties facing risks after recent booms.” 

The “moderation” in the U.S. housing market is ongoing and the full effects of recent rate increases have yet to be fully realized, the Moody’s report adds, especially with respect to housing prices.

Moody’s predicts that housing demand will “dampen significantly” in the months ahead due to the doubling of rates for 30-year fixed mortgages since the start of the year, which is fueling a huge jump in monthly mortgage costs. Freddie Mac’s most recent Primary Mortgage Market Survey shows the average 30-year fixed rate mortgage at 5.81% as of June 23. 

“The monthly costs of new mortgages on existing homes sold at median transaction prices [are] more than 60% higher than a year ago,” the Moody’s report states. “Although higher mortgage rates do not always drive home prices lower, they typically affect sales activity and drive down the rate of price appreciation. 

“We also expect higher rates to restrict for-sale supply because current homeowners will be reluctant to lose low-rate fixed borrowing costs.”

So, in effect, moderating or even declining home prices could be neutralized by rising borrowing costs, leading the housing market toward stagnation — the doldrums — in the worst-case scenario.

There is some good news mixed in with all this bad and ugly, however. Moody’s points out that some “fundamental housing strengths” will likely help to mitigate the degree of any market correction, at least over the next 12 to 18 months.

Those strengths include “favorable demographic trends, solid underwriting of outstanding mortgages and lingering housing supply constraints from a period of underbuilding,” according to the Moody’s report. Also on the bright side, according to Moody’s, is that a moderate decline in housing prices could be good for the market longer-term. That’s assuming the Federal Reserve wins the fight to tame inflation, now running at 8.6%,  without causing a major spike in unemployment, which was at 3.6% in May for the third month in a row, according to the Bureau of Labor Statistics.

In short, the housing market has reached a fork in the road, based on the Moody’s analysis — with one path leading to the doldrums, or even decline, and the other toward resurgence and a new normal.

“If U.S. home prices were to decline modestly, it would increase affordability for potential homebuyers and improve demand, including for individuals who were priced out of the market in the recent months because of rapidly rising interest rates,” Moody’s reasons in its report. “However, sustained large increases in mortgage rates or a material weakening in the labor market could lead to sharper declines in housing activity and prices.”

Source: housingwire.com

Apache is functioning normally

Swiss bank UBS Group AG plans to wind down a business in its US mortgage unit that focuses on “to-be-announced” (TBA) trading, Bloomberg reported late last week.

The decision is part of UBS’s strategy to focus more on financing mortgage originators, the outlet said, citing an anonymous source discussing non-public information who asked not to be identified.

“We are fully committed to our lending business, which supports independent mortgage originators,” UBS spokesperson Erica Chase told Bloomberg in an email. 

The number of positions affected by the closure is unclear. However, the unit’s managing director, Michael Sudnow, will be leaving, according to Bloomberg.

UBS didn’t respond to HousingWire‘s request for comments.

Mortgage-backed securities in the U.S. are generally traded on a TBA basis. The term TBA is derived from the fact that the MBS that will be delivered to fulfill a TBA trade is not designated at the time the trade is made. 

In a TBA trade, the seller agrees on a price, maturity, coupon, and face value of the bonds without specifying what securities will be delivered to the buyer on the agreed upon closing date. 

The mortgage-trading decision comes on the heels of UBS working to integrate the operations of Credit Suisse Group AG.

Switzerland’s central bank offered Credit Suisse liquidity assistance on March 15 after its involvement in a series of corporate collapses spooked clients, who began withdrawing money, which led to a drop in share prices.

In less than a week, Swiss National Bank announced UBS would buy Credit Suisse for 3 billion Swiss francs – or $3.4 billion — in stock and assume a loss of as much as 5 billion francs. 

A recent filing from UBS showed the Swiss bank was rushed into buying its smaller rival, a deal in which UBS took a hit of about $17 billion due to the takeover.

Source: housingwire.com

Apache is functioning normally

Inflation is expected to continue “to decline across all horizons” over the next year while home price growth, too, is projected to decline “sharply” to the lowest level since July 2020, according to the most recent Survey of Consumer Expectations (SCE) released by the Federal Reserve Bank of New York.

The median one-year inflation expectation, the August SCE report shows, fell to 5.7%, down from 6.2% in July. Median home-price growth expectations fell by 1.4 percentage points in August compared with July, to 2.1%, which is the lowest SCE reading since July 2020.

“The decline was broad-based across demographic groups and geographic regions,” the August SCE report states.  “Home-price expectations have now fallen by nearly two-thirds since the April 2022 reading of 6.0%.”

The SCE report is based on a nationally representative, internet-based survey of a rotating panel of some 1,300 heads of household. The report’s findings for August echo analysis of home-price data released in July by Black Knight Data & Analytics.

“Annual home-price growth shifted from deceleration to decline in July as the median home price fell 0.77% from June – the largest single-month decline since January 2011…,” Black Knight reported in its July Mortgage Monitor report. “Escalating declines in June and July have total tappable equity down 5% over the past two months, suggesting a sizeable reduction is likely in Q3, which would mark the first quarterly decline in three years.”

The Black Knight report notes that some of the most significant declines in tappable equity are occurring in equity-rich West Coast markets.

How will non-QM perform for the rest of 2022?

With inflation and rising rates, non-QM lending has spent the last few months in choppy waters, with some lenders closing their doors. However, the outlook for non-QM for the rest of 2022 is relatively optimistic, according to Acra Lending CEO Keith Lind.

Presented by: Acra Lending

“From April through July, San Jose lost 20% of its tappable equity,” Black Knight Data & Analytics President Ben Graboske said. “Seattle followed, shedding 18% of tappable equity over that same three-month span. 

“Likewise, San Diego (-14%), San Francisco (-14%) and Los Angeles (-10%) have all seen double-digit declines since April.”

The amount of tappable home equity nationally hit $11.5 trillion in the second quarter of this year — after accounting for homeowners retaining at least 20% equity, according to Black Knight.

“With prices continuing to correct and our … HELOC data showing home-equity lending at its highest level in 12 years, we will keep a very close eye on equity positions in the coming months,” Black Knight’s July Mortgage Monitor report states.

Goldman Sachs, in a recent white paper titled “The Housing Downturn: Further to Fall,” projects that new and existing home sales are expected to drop by 22% and 17%, respectively, in 2022. 

Still, despite the dour projections for the housing market ahead as we enter the third quarter of 2022, home prices through the second quarter of year reached a high plateau. Average home prices were up significantly in the second quarter of this year, to $525,000, compared with $440,600 for the same period in 2021, according to the Federal Reserve Bank of St. Louis. The median sales prices in the second quarter of this year was $440,300, compared with $382,600 for the second quarter of last year, the report shows. 

“Higher home pricing and mortgage rates continue to curb homebuyer demand,” states Mortgage Capital Trading in its September 12 daily market report. “Mortgage rates climbed from 3.1% for a 30-year fixed in June 2020 to 5.8% on June 23, 2022, based on Freddie Mac’s rate-survey data. 

“With a 3% down payment, this has pushed the average mortgage payment from roughly $1,900 to over $3,400 a month, taking home price and rate increases into consideration.”

Even if the inflation rate is finally moderating, however, don’t expect a break from the aggressive upward rate push by the Federal Reserve’s Federal Open Market Committee (FOMC) in its battle to stem rising inflation. Its next meeting is slated for September 20-21. 

A recent “Fed Chatterbox” report from investment bank Goldman Sach’s Economics Research unit states that “several participants suggested that the FOMC could hike [rates] by either 75 or 50 basis points in September.”

“Chair Powell noted that, following the two 75 basis-point hikes in June and July, ‘another unusually large increase could be appropriate’ at the September meeting,” the Goldman Sachs report continues. “Last week, the Wall Street Journal reported that the FOMC ‘appears to be on a path to raise interest rates by another 0.75 percentage point this month,’ a likely hint from the Fed leadership that a 75 basis-point hike is coming at the September meeting. 

“No FOMC participant has argued against delivering a 75 basis-point hike, and a few participants indicated that they preferred to frontload rate increases.”

Source: housingwire.com

Apache is functioning normally

Denver, Colorado-based Incenter Mortgage Advisors (IMA) on Thursday announced the launch of a new digital mortgage servicing rights exchange. The marketplace, known as eMSR Exchange, connects buyers and sellers of co-issue flow offerings online and provides pricing 24/7. 

Co-issue loan sales, also known as flow-based mortgage servicing rights sales, are three-way transactions involving the sale of loans to one of the agencies, with a simultaneous sale of the MSRs to a separate third party. These transactions gain momentum when markets are difficult – with lower volume and tighter margins – and cash flow management becomes essential to originators. 

However, trading MSRs in the co-issue market can take up to 90 days from the first communication between the parties around pricing to the moment the loan is committed, according to Tom Piercy, managing director at IMA. The fact that it takes so long can be challenging for originators seeking liquidity, mainly small and mid-size companies. 

“With the exchange, participants have a daily commitment of MSRs that will settle at the end of each month,” Piercy said. “We are now coming as close as we can to commoditizing the MSR asset.” 

Other companies are also developing new platforms as the agencies, Fannie Mae and Freddie Mac, have been pushing for co-issue loan sales in recent years. In November, Mortgage Capital Trading, Inc. released a marketplace for co-issue loan sales dubbed BAMCO. At that time, MCT said that co-issue transactions represented 16% of all loan sale types by MCT’s lender client base in 2022.

Trading an MSR in the traditional co-issue market requires resources from the parties. Buyers face the process of communicating with the sellers, creating pricing strategies and going through diligence and agreements. Meanwhile, sellers have to find buyers but typically do not gain access to the entire market because they don’t have resources or don’t fit the buyers’ criteria, such as the volume level or the loan profile.  

“It’s a very cumbersome process. It’s not very efficient. But it’s the manner in which this market has worked,” Piercy said. 

Incenter’s exchange allows buyers to access the MSRs that match their characteristics with loan-level precision instead of bidding on the rights to more heterogeneous asset pools.  Buyers provide their pricing and required standards to the exchange, which works as a ‘one-stop shopping.’

In turn, sellers can upload their MSRs and the platform will step in as an intermediary, acting as the one counterparty to the buyers on the back end. 

Incenter’s eMSR Exchange provides the optimum allocation of MSRs among multiple buyers. Each loan is matched with buyers’ pricing grids and “directed” to the most desirable buyer in seconds based on the loan characteristics acquirers seek, according to IMA. 

Piercy said buyers will offer price matrices and only pay that price, which is calculated off of their pricing grids. To sellers, there’s a fee per loan netted out of the funds reconciled at the end of each month. The exchange’s fee is comparable to the one paid in the traditional market, Piercy added. 

Two buyers are already committed to Incenter’s platform, but it can handle an unlimited number, according to Piercy. The exchange can also take 50 sellers as it exists today because it has to go through compliance processes, such as diligence and counterparty analysis. 

Incenter’s marketplace suits any buyers, including banks, non-banks, private equity and real estate investment trusts of any size. On the sell side, it’s appealing to small and mid-size originators, Piercy said.

Source: housingwire.com

Lock activity increased across the board in March: MCT

Rate lock volume activity in the residential mortgage industry increased in March after a lull the prior month, but remains below 2022 levels.