MSR Archives - Hanover Mortgages

Apache is functioning normally

September 18, 2023 by Brett Tams

HELOC, Manufactured, Technology, Marketing, and Digital Tools; Central Banks and Inflation

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HELOC, Manufactured, Technology, Marketing, and Digital Tools; Central Banks and Inflation

By:
Rob Chrisman

7 Hours, 56 Min ago

If you want something sobering, almost mesmerizing, here’s a short drone video of the flood damage in Libya (at the 15 second mark you can see how it tore through the city). Fortunately not so sobering are some stats out of the United States. The U.S. homeownership rate in 2022 was even higher than before the COVID-19 pandemic at 65.8 percent compared to 64.6 percent in 2019. That rebound was driven largely by those aged 44 and younger. And who says Millennials aren’t buying homes? Homeownership continued to climb from the foreclosure crisis (2004) and Great Recession (2008), when rates dipped as low as 63.4 percent in 2016. Homeownership rates recovered approximately half of the 5.6 percent decrease from 2004 to 2016. In Hawai’i the homeownership rate is 59 percent, I bring up the Aloha State because American Savings Bank, First Hawaiian Bank, and Central Pacific Bank joined Hawaiʻi Community Lending, a Hawaiʻi-based nonprofit community development financial institution, in pledging to provide mortgage forbearances to Maui families impacted by the recent wildfires. (Today’s podcast can be found here and this week’s is sponsored by the Trade-In Mortgage powered by Calque. Homeowners can buy before they sell, make non-contingent offers, and tap their home equity to fund the down payment on their next home. Lenders can help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Today’s podcast features Greg Korn and Ben Petit in an interview from the New England Mortgage Bankers Conference.)

Lender and Broker Software, Products, and Services

In an era defined by technological advancements, Dark Matter Technologies LLC emerges as a transformative force in the mortgage origination landscape, marking its evolution from Black Knight Origination Technologies. Under the Perseus Operating Group of Constellation Software Inc., Dark Matter Technologies remains steadfast in its commitment to pioneering innovation. CEO Rich Gagliano aptly sums up the company’s vision: “Dark Matter Technologies is on a mission to revolutionize the mortgage origination business by supporting, growing, and aggressively innovating new and existing products.” With over 1,300 dedicated mortgage technology experts and a portfolio that includes Empower, AIVA, Exchange, and more, Dark Matter Technologies is poised to lead the industry into a new era of unparalleled transformation. Learn more about Dark Matter Technologies and their mission, here.

There is approximately $9T in agency or government MSR outstanding. Billions of dollars are being transacted daily and this volume requires disciplined loan accounting processes to record loans accurately, produce investor reporting, and power business decisions. SBO from SitusAMC is a comprehensive loan accounting and master servicing platform that reconciles daily and monthly servicer cash collections down to the penny, aiding in the discovery of potentially misplaced funds and enhancing the financial integrity of the entire process. Servicers using SBO produce accurate and timely details providing confidence that their investor reporting obligations are being met. Schedule a demo of SBO with SitusAMC’s client-focused experts.

“Did you hear Capacity’s big announcement at TMC Fall? We’ve acquired Denim Social! Together, we’re building a support automation platform that helps you automate support, connect more authentically with your borrowers, and close more loans, faster. Read the press release to learn more! We also gave away a personalized AI Assessment worth $10,000 to help mortgage lenders identify opportunities for improving their business with AI. Plus, our new GSE Search feature pulls accurate, up to date GSE regulations within seconds using generative AI. Want to join the AI in mortgage revolution? Meet the Capacity team today.”

A new era in loan origination has arrived. Mortgage Machine Services, an industry leader in digital origination technology to residential mortgage lenders, announced the launch of its namesake platform Mortgage Machine™, an out-of-the-box, all-in-one LOS designed to accelerate lenders’ operational velocity and support an end-to-end digital origination process. Developed by digital mortgage pioneer and industry veteran Jeff Bode, Mortgage Machine utilizes intelligent automation, configurable business workflows and a cloud-based infrastructure to optimize the entire loan lifecycle and create a seamless lending experience. Key platform features include AI-powered task automation, a scalable cloud-based infrastructure, flexible APIs, pre-configured workflows for retail and TPO channels, integrated document management and POS functionality. Mortgage Machine also offers all-in-one eClosing capabilities, including an eClose room, eNotes, eVault and RON, and utilizes MISMO SMART Doc® data and security standards. Visit here to get started on your digital transformation journey.

Blend Labs continues to be the mortgage industry’s leading technology platform. Core to the platform is Blend’s unique integration with Desktop Underwriter® (DU®) and LPA. These integrations help streamline your approval process for borrowers, with all the conditions lined up for your fulfillment team. Add in intelligent and automated follow-ups and you’ll get to the closing table faster and more efficiently. Putting this information at the loan officer’s fingertips creates a streamlined process and eliminates manual work which equals lower costs, higher pull-through, and increased revenue. See more ways that Blend is committing to innovation and continues to lead the way.

Looking for timely advice on how to capture more loan volume and improve your bottom line in a down market? Now is the time to explore ways to tap into new markets. Expanding your mortgage footprint through new products and channels or by reaching new geographies insulates your business against economic and interest rate volatility by diversifying your sources of volume and revenue. By setting the groundwork to connect with new borrower markets now, you’ll open new revenue possibilities for when the market inevitably recovers, positioning your business to hit the ground running and beat out the competition. Download this informative eBook from mortgage solutions provider Maxwell for actionable advice, including how to create your expansion plan and choose the offerings best suited to the markets you want to pursue. Click here to download Growing Your Mortgage Footprint: How to Launch New Loan Products, Channels & Geographic Expansions.

Broker and Correspondent Products

Build your book with AFR Wholesale® (AFR)! Now, get the chance to listen from and ask questions directly to AFR and Freddie Mac to turn those prospects to active pipeline at the next Why Wait webinar series covering Manufactured Home Financing on Wednesday, September 20th at 1 PM EST. Register here today! Have you and your borrowers looked into Manufactured Housing as an option? With unbeatable affordability, customization options that are very tailored, quick installation and trusted quality, manufactured homes are worth exploring. Especially with a top lending partner in AFR who has been an industry leader for over 25 years. This is a live webinar, and a recording will not be provided so make sure to join and get great insight and have the opportunity to ask questions and listen to scenarios! Visit AFR Wholesale, email [email protected], or dial 1-800-375-6071. AFR Wholesale® – Don’t wait. Register today!

“With Cash-Outs on the decline during this high interest rate environment, it is important to present your borrowers with different cash-out options. That is why Vista Point is announcing a brand new HELOC product coming soon, in addition to our existing Closed-End Second. Our HELOC product is being designed as a complement to our Closed-End Second to provide a full suite of Equity Solutions. Our HELOC will provide a specific solution for borrowers that want the optionality of an interest-only payment, or the ability to draw up and buy down their line during the 5-year draw period with no Appraisals up to $250k. Just like on our Closed-End Second offering, with HELOC loan amounts up to $550K and combined lien amounts up to $2.5M, your borrowers can get the cash they need without sacrificing their advantageous 1st mortgage rate. HELOC will be available for full doc and bank statements on OO and 2nd homes. For more information, reach out to us, or meet us at the Philly MBA to discuss.”

Capital Markets

We learned last week that prices in August rose by the largest monthly percentage in 15 months. However, that month-over-month inflation was widely expected due to a surge in gasoline prices. Underlying oil prices are also pointing towards further increases in September. Meanwhile, core prices were up 0.3 percent and core goods prices declined by 0.1 percent. Over the last three months core prices have increased at an annualized pace of 2.4 percent, the lowest three-month pace since March 2021. Retail sales rose faster than analysts’ expectations in August, also due to higher gas prices. Many analysts expect consumer spending to slow as excess savings built up over the pandemic have materially declined and credit is increasingly costly and difficult to obtain. Additionally, the resumption of student loan payments is expected to cut into discretionary spending. It will take more than expectations of slower spending before the Federal Reserve feels inflation is firmly under control.

What could move mortgage rates this week? The U.S. Federal Reserve, Bank of England, Bank of Japan, and the central banks of Norway, Sweden, and Switzerland are all announcing rate decisions after a spate of recent inflation data shows that price increases are alive and well. The Fed’s Federal Open Market Committee (FOMC), the action arm of “the Fed,” is not expected to raise rates. It’s unlikely that the commentary around the commitment to keep fighting inflation and higher rates for longer will change either, but it could tilt a little more to the hawkish side after a stronger-than-anticipated inflation report for August.

The week could also see some extra drama on the political front as the countdown continues toward a potential government shutdown on October 1 in addition to the battle between the United Auto Workers (UAW) union and Detroit automakers. The auto worker strike could complicate Fed Chair Powell’s bid for a soft landing. Union leaders are asking for a 36 percent wage increase over four years, to match the similar recent pay increase for top executives. The union also wants pay to rise automatically with inflation in the future, as it did before the financial crisis.

This week brings the aforementioned FOMC meeting that begins tomorrow and concludes on Wednesday with the Statement, updated SEP (where fed funds projections will be closely scrutinized), and Chair Powell’s press conference. The treasury will also be in the headlines with more coupon auctions scheduled: $13 billion reopened 20-year bonds tomorrow and $15 billion reopened 10-year TIPS on Thursday. The only scheduled, probably non-market moving, news out today is the NAHB Housing Market Index for September. We begin the week with Agency MBS prices roughly unchanged from Friday, the 10-year yielding 4.34 after closing last week at 4.33 percent, and the 2-year is at 5.00 percent.

Employment

Are you more energized, more encouraged, and more motivated to succeed today than yesterday? Zig Ziglar famously stated, “People often say that motivation doesn’t last. Well, neither does bathing; that’s why we recommend it daily.” “As an industry leader, Thrive knows that motivation, discipline, and belief in your ability to succeed is critical,” stated Randell Gillespie, National Sales Leader for Thrive Mortgage. “There is no better time than now to find ways to continually motivate your team, which is why we put so much focus on daily opportunities like these at Thrive. Through our weekly High-Performance Coaching Calls, our very own nationally-recognized Marketing Master, James Duncan, leads these motivating and educational experiences for results. The biggest names in the mortgage industry and thought-leadership have been part of our Thrive Nation broadcasts. We want everyone to be better today than yesterday. Start a conversation with us and find out how.

“The fall season is here, and now more than ever is the time to build rapport with your referral partners and clients to maintain a steady stream of business. At Guaranteed Rate Affinity, not only do we have the greatest number of products, but we have the tech platform for our loan officers to do business from anywhere. With PowerVP, you can do anything from creating loan applications to sending pre-approval letters all from your mobile phone. Anything you could do from your desk, you can now do on the go with PowerVP. Gone are the days of being chained to your desk and missing out on important moments. Primarily, it gives you a work-life balance you never thought possible. Luckily, we’re hiring the best of the best loan officers to leverage our tech platform to grow their business. Ready to learn more? Contact Tim McGraw to get started.”

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

Source: mortgagenewsdaily.com

Apache is functioning normally

September 11, 2023 by Brett Tams

Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

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Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

By:
Rob Chrisman

4 Hours, 46 Min ago

One of the topics here in Tennessee is how lenders can help real estate agents or clients. Wanna maybe help your client or favorite real estate agent grappling with inventory? HUD has a “Home store” of houses. Worth a shot at 3.5 percent down properties! For something to really start your synapses firing on a Monday morning ahead of a five day work week, the CEO of the California MBA, Susan Milazzo, sent, “The latest effort to pass legislation to address California’s insurance crisis has died. Assembly Democrats felt that the bill favored insurance companies over consumers, and they wanted to add a provision that would prohibit insurance companies from not renewing any business through the end of next year. With no real guarantee of when the commissioner would do the emergency regulations or the contents of those regulations, it amounted to a poison pill.” (More insurance news below in the “disaster” section.) (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with J.D. Power’s Craig Martin on the U.S. Mortgage Servicer Satisfaction Study.

Lender and Broker Software and Services

Credit unions, it’s time to make your mark at the 2023 ACUMA Annual Conference from Oct. 1 – 4. Secondary marketing experts from Optimal Blue will be on-site and ready to discuss ways you can up your game and do even more to maximize success. Whether you’re working to get your members the best possible rates, trying to more effectively mitigate pipeline risk, or aiming to better understand the value of your MSR assets – we’re ready to help you reach your goals. Stop by our booth to learn more.

Your online loan application should win you business, not scare prospective borrowers away. Win borrowers here.

Attention TMC Members! Join Capacity CEO David Karandish and Mike Metz of VIP Mortgage for an exciting 3:15 p.m. session on Monday, September 11th. Learn how VIP Mortgage is springboarding their AI pursuits. Book one-on-one time with our team at TMC Fall, or join the session to learn about our personalized, in-depth AI Assessments. Whether you already use automation tools or you’re just starting to explore, Capacity’s AI Assessments offers a unique way to scale your tech initiatives. Over three meetings, our team will learn about your business needs, identify automation and AI tools opportunities, and provide in-depth resources to guide you through your AI roadmap. Want to jumpstart your AI journey? Meet Capacity at TMC Fall.

“OptiFunder Bringing the Primary and Secondary Markets Together. Nearly 15% of all warehoused loans now go through OptiFunder for warehouse selection and automated funding, shipping, and purchase advice. Since 2019, our mission has been to bring mortgage bankers and warehouse lenders together to optimize selection and streamline the historically manual process of funding mortgage loans. Nearing the top of Inc. 5000’s list of fastest-growing private companies, it’s safe to say we’ve been successful in that mission. As we continue to grow, we’re working on additional opportunities to bring the primary origination and secondary markets together. We’ve spent the last few years making the lives of originators easier; it’s time to put some focus on warehouses. Join the OptiFunder community on Linkedin to keep up with what we’re doing or visit our new website to learn more about OptiFunder.”

Does it feel like your current point-of-sale vendor has lost focus on mortgage? As a mortgage-specialized partner, Maxwell is committed to giving lenders a competitive advantage in a tough mortgage market. Compared to a top competitor, Maxwell Point of Sale averages a 5.9% higher pull-through rate from rate-lock to close. For the average lender using Maxwell POS, this equates to $42MM in additional loan volume. Maxwell also focuses on providing an excellent borrower experience, with a 17% faster turn-time from application submission to conditional approval. Schedule a call with the team to learn how Maxwell Point of Sale can start working for you and your borrowers quickly.

Are you tired of having to adjust head count every time the market changes? The Mortgage Automation Suite, brought to you by Richey May and Zoral, can help. With scalable automated solutions that improve accuracy while reducing repurchases and costs, your business will be well-equipped for any market cycle. Leveraging this powerful automation will allow your team to close loans more easily, helping to retain your best staff. Plus, it adds the extra layer of stability needed during difficult times; something we could all use a bit more of these days! Find out how the Mortgage Automation Suite from Richey May & Zoral can help you today. Email [email protected].

In this market, hustle is everything. You can’t afford to waste a single deal – or a single minute. That’s why ReadyPrice has launched Shop. Lock. Deliver.® It’s an innovative new platform designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders – and all on a single platform, at no cost to brokers. It’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check out ReadyPrice today.

Attention Lenders and Real Estate Appraisers: In a September 6th article found in Housing Wire, it was pointed out the 1/2 of all appraisers claimed “fee pressure” by AMCs was their biggest challenge this year. Also included were “technology fees” appraisers are forced to pay has become a major issue. AMCs are taking an increasing cut of the appraisal fees and at the same time selecting appraisers who are willing to work for relatively lower fees. The Private Asset & Management Group, LLC has launched its new platform allowing retail and wholesale lenders the ability to use they’re ‘own’ roster of approved appraisers, with realistic fees for their market areas, self-manage the process with 1 dashboard from a state-of-the-art software system with absolutely “NO” cost! And it reduces the appraisal fee to the borrower by 25%-35%. For further information contact David Cedar (631-319-6161).

TPO Programs for Correspondents and Brokers

In this most challenging of rate environments for the industry, Luxury Mortgage (“LMC”) continues to show steadfast commitment to all its business partners. LMC strives to offer competitive rates and products to assist brokers in closing more loans. Due to overwhelming popular demand, LMC is stepping up again and extending last month’s unprecedented purchase specials. Full and Alt Doc loans (including Bank Statement, 1099 Only, and Asset Qualifier) will receive up to a 100-bps price improvement (yes, you read that correctly!), and DSCR loans will receive a 50-bps price improvement! Click here for complete details of these special offers. If you are not yet an approved broker, now is the perfect time to become one. Click here to begin the process of becoming an approved wholesale broker.

Sometimes, your clients’ needs are as simple as a safety net. A HELOC is a perfect product to provide them with financial liquidity, stability, and support – especially in today’s market! Symmetry’s HELOC offers your borrowers the ability to purchase a home with less cash down, afford home renovations or repairs, purchase a 2nd home or investment property, consolidate and pay off debt, and many more benefits… Not sure how to best present Symmetry’s HELOC to your borrowers? Contact your area manager to build a plan that works for you!

Disaster Updates

Several top insurance companies (like Farmers, State Farm and Allstate) have reduced their footprint in California over the last several months. State Farm and Allstate say they’re not writing any new homeowner insurance policies in California moving forward due to it being too expense. And just ask a homeowner in a low-lying area of Florida, Louisiana, or the Carolinas how it’s going.

Last month the Biden administration urged a federal judge to reject a challenge by Florida and other states to an overhaul of the National Flood Insurance Program that has led to higher premiums for many property owners.

Meanwhile, the FDIC sent out, “The Federal Deposit Insurance Corporation, the Federal Reserve Board, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators, collectively the agencies, recognize the serious impact of Hurricane Idalia on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

“The agencies encourage financial institutions to work constructively with borrowers in communities affected by Hurricane Idalia. Prudent efforts to adjust or alter terms on existing loans in affected areas are supported by the agencies and should not be subject to examiner criticism. In accordance with U.S. generally accepted accounting principles, institutions should individually evaluate modifications of existing loans to determine whether they represent troubled debt restructurings or modifications to borrowers experiencing financial difficulty, as applicable. In making this evaluation, institutions should consider the facts and circumstances of each borrower and modification. In supervising institutions affected by Hurricane Idalia, the agencies will consider the unusual circumstances these institutions face. The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.”

FEMA Disaster Declarations are in the news. Georgia Hurricane Idalia – DR-4738-GA. Florida Hurricane Idalia – 4734-DR-FL, Amendment 001, Amendment 002, Amendment 003.

AmeriHome spread the word that on August 31, 2023, with DR-4734, the Federal Emergency Management Agency (FEMA) declared that federal disaster aid with individual assistance has been made available to counties in Florida to supplement recovery efforts in the areas affected by Hurricane Idalia from August 27, 2023, to September 4, 2023. On September 1, 2023, with Amendment No. 1, FEMA granted Individual Assistance to 6 additional counties. On September 3, 2023, with Amendment No. 2, FEMA granted Individual Assistance to 1 additional county.

On September 4, 2023, with Amendment No. 3, FEMA announced an Incident Period End Date of September 4, 2023. On September 9, 2023, with Amendment No. 5, FEMA granted Individual Assitance to 2 additional counties.

On 9/3/2023, with Amendment No. 2 to DR-4734, FEMA declared federal disaster aid with individual assistance has been made available to an additional Florida county, Pinellas, affected by Hurricane Idalia from 8/27/2023 and continuing. See AmeriHome Mortgage Disaster Announcement 20230902-CL for inspection requirements.

On 9/4/2023, with Amendment No. 3 to DR-4734, FEMA provided an Incident Period End Date of 9/4/2023, for Florida counties affected by Hurricane Idalia from 8/27/2023 to 9/4/2023.

See AmeriHome Mortgage Disaster Announcement 20230903-CL for inspection requirements.

On 9/7/2023, with DR-4738, FEMA declared federal disaster aid with individual assistance has been made available to 3 Georgia counties Cook, Glynn, and Lowndes affected by Hurricane Idalia on 8/30/2023. See AmeriHome Mortgage Disaster Announcement 20230905-CL for inspection requirements.

Capital Markets

There’s anxiety (isn’t there always?) over the Federal Reserve turning more “hawkish” and impacting investor sentiment, and therefore bonds and stocks. While the Fed is largely considered to be nearing the end of its hiking cycle, the “terminal rate” is still unknown, of course. Federal Reserve speakers, typically the presidents of each district, are in a blackout period ahead of the FOMC meeting scheduled for September 19-20, which will give this week’s economic reports extra weight.

So, what is the financial press yammering about? Student loans having to be repaid, the latest jump in oil prices in the past few days driven by longer-than-expected production cuts by key oil nations Saudi Arabia and Russia, and data showing a tight labor market in the form of initial jobless claims falling for a fourth straight week.

Think about it. Despite the rapid rise in interest rates and restrictive monetary policy, the U.S. economy remains resilient. August’s employment report and last week’s ISM Services Index provided evidence that the post-pandemic economic expansion continues. The ISM Non-Manufacturing PMI Increased From 52.7 in August to 54.5 in September, its highest level since February, highlighting continued growth in sectors accounting for the majority of U.S. economic activity such as: services, mining, construction, and public administration. This series has been in expansion territory for all of 2023. There was a small increase in the prices paid index due to higher fuel costs, indicating that services inflation is far from returning to pre-pandemic levels.

The Fed’s Beige Book also reported an uptick in economic activity from July to August. However, unlike the ISM indices, the Beige Book showed inflation moderating in some parts of the country. A revision to unit labor costs – which gauges wage inflation – showed a 2.2 percent annualized increase compared to the initial estimate of 1.6 percent while productivity growth was revised down to 3.5 percent from the initial estimate of 3.7 percent. It is likely not the last revision for these data series from the Department of Labor as they are difficult to measure in real time. Elsewhere, the trade deficit has narrowed over the last few months but remains wider than pre-pandemic levels.

Even with a slight decrease last week, mortgage rates have ticked back up over the last couple weeks. The market has priced in “higher for longer” rate expectations from the Fed and are about one percent higher than the lows seen in February. Mortgage applications have declined six of the last seven weeks as higher rates erode affordability. Mortgage purchase applications reach a low not seen since April 1995. This week includes the $99 billion mini-Refunding as well as key inflation reports with CPI on Wednesday, PPI and retail sales on Thursday, and import / export prices as well as Michigan sentiment on Friday. No Fed speakers are currently scheduled with the FOMC in blackout period ahead of the September 19/20 FOMC meeting. Today’s economic calendar is limited to a Treasury auction of $44 billion 3-year notes. We begin the week with Agency MBS prices slightly worse, the 10-year yielding 4.29 after closing last week at 4.26 percent, and the 2-year at 4.98.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

September 8, 2023 by Brett Tams

Hedging Webinar; Home Insurance Nightmare; GSE Changes; Interview with Henry Broeksmit on Youth in the Industry

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Hedging Webinar; Home Insurance Nightmare; GSE Changes; Interview with Henry Broeksmit on Youth in the Industry

By:
Rob Chrisman

Wed, Sep 6 2023, 9:59 AM

This morning I head to Dallas, Texas, where, if you ask Redfin, prices are up 5 percent for the year. Or Zillow will tell you prices are down 2 percent. Can’t we all agree on something? Certainly, we can all agree that inflation is simply too many dollars chasing too few goods. How about when too many houses are chasing too few insurance companies? No insurance company wants to be the last one standing. (Today’s “Mortgage Matters: The Weekly Roundup” at 11AM PT, 2PM ET, focuses on how LOs and brokers are dealing with the homeowners insurance nightmare.) In California, home to plenty of insurance companies dropping insuring homes, the Insurance Commissioner is an elected position. Ricardo Lara doesn’t want to lose his job, so doesn’t allow insurance companies to raise their premiums to compensate for risk. So, they drop out. “With the average premium priced over $1,400, some homeowners are opting to drop home insurance altogether. But this decision comes with some serious risks…” (Today’s podcast can be found here and this week’s is sponsored by LoanCare, a Fidelity National Financial (NYSE: FNF) division and award-winning developer of the most sophisticated mortgage servicing portfolio management tool, LoanCare Analytics, built to support MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with MAXEX’s Henry Broeksmit on youth in the mortgage industry and career paths out of college.)

Lender and Broker Products, Programs, and Services

In burro racing (yes, that’s a thing), people run behind, alongside, and sometimes carry pack donkeys across rugged terrain in a bid for a unique Triple Crown title. If you feel like you are dragging your tech vendor around the innovation track, it may be time to swap your burro out for a pedigreed racehorse like SimpleNexus, an nCino company. The SimpleNexus suite of mortgage solutions provides borrowers and loan officers with the modern, single-sign convenience of managing mortgage loans from anywhere. What’s more, SimpleNexus leads the pack when it comes to continuous product enhancements, having recently released a loan officer dashboard to help originators effectively manage their pipelines, special HELOC loan support, several native integrations, and much more. If you’re eager to leave your competition in the dust, schedule a demo today.

Make no mistake, 101 courses aren’t just for college freshmen. In fact, mortgage lenders of all experience levels can benefit from Optimal Blue’s upcoming webinar, Hedging 101: The Benefits of Mandatory Delivery. This session will be back by popular demand on Thursday, Sept. 14, at 1 p.m. ET. Pipeline hedging experts Jeff McCarty and Mark Teteris, CMB, will walk attendees through the theories behind hedging practices, various hedging instruments, best execution analysis and strategies to employ during market fluctuations. Whether you’re just entertaining the idea of transitioning to mandatory delivery, or you’re already a hedging veteran, you won’t want to miss this informative and directional webinar. Save your seat today.

Fannie and Freddie News

If you like acronyms, here’s a bone for you: the FHFA is cogitating on allowing IMBs to access the FHLB. Sure, many lenders and vendors are focused on surviving the autumn and winter with stubbornly high mortgage rates and stubbornly low inventory levels, but those with a long time horizon may want to pay attention to the future of the Federal Home Loan Bank system, and a good place to start is a write up of a forum held earlier this year.

Fannie Mae maintains a dedicated Disaster Response webpage which provides valuable resources including where to locate additional guidance and direction in the Selling Guide for loans currently in the process of being originated or loans currently being serviced. Mortgage lenders and servicers play a key role in helping borrowers and homeowners deal with the financial effects of hurricanes, fires, floods, earthquakes, and other disasters. With the frequency and severity of such events affecting communities nationwide, Fannie Mae provides the tools and flexibility lenders and servicers need to provide effective assistance, including payment relief, loan modifications, and even the additional recovery support provided by HUD-approved housing counselors at Fannie Mae’s Disaster Response Network.

Two reports were released by Federal Housing Finance Agency Office of Inspector General: FHFA Did Not Effectively Implement Records Management Training Controls for Onboarding Offboarding Personnel and Audit of the Federal Housing Finance Agency’s Privacy Program Fiscal Year 2023.

Beginning August 19th, Fannie Mae began accepting temporary interest rate buydowns on mortgage loans secured by standard manufactured homes (MH) and MH Advantage®. Now, lenders can help address affordability challenges with temporary interest rate savings. Refer to the buydown policies in the Selling Guide.

Fannie Mae updated LL-2023-05, Advance Notice of Changes to Master Servicing Processes and Systems, to include the effective dates servicers are required to submit borrower payment activity on summary reporting mortgage loans in Q2 2024 and provide notice that the Servicer’s Reconciliation Facility™ (SURF™) application will be retired on Oct. 31, 2023.

Brush up on your quality control (QC) basics with Fannie Mae’s new QC Fundamentals Boot Camp webcast. This session provides a detailed overview of Part D in the Selling Guide, which covers lenders’ QC processes. A robust QC program helps strengthen loan quality. Watch the webcast and revisit the fundamentals of QC.

The Uniform Closing Dataset (UCD) Submissions and Findings Report in Fannie Mae Connect™ can help lenders identify Phase 3B critical edits ahead of the Nov. 6 transition. Lenders who have access to the report can self-serve by pulling the findings to review the compliance of their submissions. Visit the UCD Critical Edits Transition Resources page.

Freddie Mac issued a reminder to homeowners and mortgage servicers of its relief options for those affected by Hurricane Idalia. Freddie Mac’s forbearance program provides homeowners mortgage relief for up to 12 months without incurring late fees or penalties. Freddie Mac’s disaster relief options are available to homeowners who have been impacted by an eligible disaster. This includes anytime the homeowner’s property experiences an insurable loss, and also covers instances where their homes or places of employment are located in Presidentially Declared Major Disaster Areas where federal Individual-Assistance programs are made available to affected individuals and households. Foreclosure and other legal proceedings are also suspended while homeowners are on a forbearance plan. More information is available on My Home by Freddie Mac where owners can read about the steps they can take to help recover from a natural disaster, including frequently asked questions related to disaster and mortgage relief.

Partnership Announced

FundingShield, a market-leading fintech providing plug-and-play solutions to manage risk, compliance, and fraud prevention, has entered a partnership with Tata Consultancy Services (TCS), a global leader in IT services, consulting, and business solutions. Together the partners hope to protect even more lenders, home buyers, and sellers from the rapid increase in wire and title fraud in recent years.

“As cybersecurity risks become more pervasive, lenders are focusing more on data integrity to ensure that data inconsistencies are resolved, and potential frauds are avoided. FundingShield’s live ecosystem of service provider source bank data is the largest in the industry with over 95 percent coverage. TCS clients can now benefit from direct access to FundingShield’s cost-saving and risk-mitigating ecosystem, allowing them to uphold superior standards in data integrity, bank account verification, and counterparty compliance.”

“TCS’s global presence, business acumen, and trusted relationships with the world’s largest financial institutions will allow FundingShield to deliver its innovative products straight to the banks who need them the most,” said Ike Suri, CEO of FundingShield. “The safest way to verify information is through automated, real-time, source-data verification, which is FundingShield’s expertise. We look forward to bringing our automations to more of the top US banks, GSEs, and to numerous other sectors where TCS has deep domain knowledge and experience.”

Capital Markets

The yield curve is a graphic depiction of U.S. Treasury yields from overnight to 30-year rates. The fact that it has been “inverted,” meaning short term rates are higher than long term rates, can be used to forecast the potential of a recession. So far that has failed.

Indeed, the yield curve “bear steepened” to open the week as investors weigh the resilience of the U.S. economy against slowdowns in China and Europe, while surging oil prices added further fodder to inflation concerns after Saudi Arabia and Russia extended temporary production cuts to the end of the year. The narrative that the U.S. economy is still expanding albeit at a slower pace floated around as markets continued to digest that there were 187k jobs added in August, though the prior two months’ of data were revised downward.

Looking back to last week, labor force participation in August was its highest since February 2020 at 62.8 percent. Additionally, the JOLTS report showed job openings declined to 8.8 million in July which was the lowest number since March 2021. As the supply and demand for labor returned to balance, wage growth cooled to 0.2 percent. Employment growth near its pre-pandemic rate and slower wage growth are welcome data points from the Fed’s perspective. Meanwhile, businesses continue to pull back on capital expenditures and the ISM manufacturing index remained in contractionary territory for the tenth consecutive month in August. Despite higher interest rates, new home construction increased in August as limited resale inventory and slowing material price inflation combined with strong builder incentives have boosted new home sales.

Despite a drop in mortgage rates, mortgage applications decreased 2.9 percent from one week earlier to the lowest level since 1996, according to data from MBA. That kicked off today’s economic calendar, alongside the July trade deficit. The deficit was expected to register $67.0 billion versus $65.5 billion in June. Later this morning brings the final August S&P Global services PMI, ISM non-manufacturing PMI for August, and remarks from Boston Fed President Collins and Dallas Fed President Logan. In between Fed speakers, the Beige Book will be released. Also of potential interest, the Bank of Canada will release its latest monetary policy decision later this morning, where rates are expected to be held steady at 5.00 percent. We begin the day with Agency MBS prices roughly unchanged from Tuesday evening, the 10-year yielding 4.25 after closing yesterday at 4.25 percent, and the 2-year at 4.95.

Employment

Evergreen Home Loans™ shines bright on Experience.com’s index, proudly ranking in the Top 10 for Large Division Mortgage Companies. Out of 300+ lenders, our distinction is evident. With over 50,000 loan officers indexed, our stellar associates and teams have clinched positions in the Top 1 percent in Customer Ratings: Corey Newell, Kendra Graybeal, Ruby Grynberg and Team Scott Reynolds. Exceptional customer service is the Evergreen hallmark. “Our dedication is to provide a WOW customer experience and deliver on time, as promised. It’s our brilliant team that turns this vision into reality, echoing our customer’s sentiments,” expressed Tamra Rieger, President of Evergreen Home Loans. Ready to be a part of our esteemed legacy? Visit: Careers at Evergreen.

“Stronghill Capital, LLC, an Austin, TX-based Wholesale and Correspondent Lender is HIRING! If you are an Account Executive with 3+ years of experience and an existing book of Correspondents and/or Brokers that you want to introduce to a dynamic company with a responsive management team that strives to provide world-class service levels, sharp price execution, and is committed to building the Non-QM ‘private money’ space, contact Matt Brammer. As we continue to expand, we are open to discussions throughout much of the United States.”

“At Homestead Funding, we understand the dynamic nature of the market, and we’re dedicated to equipping our team with the tools and resources needed to excel. We push the needle forward by discovering and delivering niche products that create more opportunities for homebuyers and allow us to better serve clients. Differentiate yourself in your marketplace: Join a team whose focus is on pioneering the future of home financing. We position our Loan Originators for success by providing them with cutting-edge resources, next-level operations support, and tailored marketing solutions built to drive engagement. Contact Michele Teague today to learn how you can elevate your career with a company that champions your growth, harnesses market trends, and empowers you to succeed.

The Mortgage Bankers Association (MBA) announced that George Rogers has joined the association as Vice President of Legislative Affairs, responsible for advocating on behalf of MBA’s legislative and policy priorities on Capitol Hill. Congratulations!

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

Source: mortgagenewsdaily.com

Apache is functioning normally

September 6, 2023 by Brett Tams

QC/Fraud, LO AI, MSR Financing, GNMA Programs; Disaster Updates and Guides – The CFPB is There for Us

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QC/Fraud, LO AI, MSR Financing, GNMA Programs; Disaster Updates and Guides – The CFPB is There for Us

By:
Rob Chrisman

Tue, Sep 5 2023, 10:40 AM

It was a rough weekend. My cat Myrtle, resting comfortably at the top of the food chain, was visibly miffed at me not nominating her (again) for the vaulted “40 under 40” award. I reminded her that she is way over that in cat years, but my explanation fell on her one deaf ear and her one good ear despite me telling her how much line-caught salmon we could buy with the nomination fee. (Hey, don’t get me wrong. I know some of those folks who were nominated or selected, and the industry is better off because of them!) If lenders would like a little good news, they should know that, despite the low interest rates we saw a few years ago, people are still moving, and that’s a source of business. Around 8.6 percent of Americans moved last year, slightly more than the previous year, but still below pre-pandemic levels. Accordingly, WalletHub released its report on 2023’s Best States to Live in. Chalk it up to complete East Coast bias, but Massachusetts, New Jersey, New Hampshire, and New York took the top four spots. Really? (Today’s podcast can be found here and this week’s is sponsored by LoanCare, a Fidelity National Financial (NYSE: FNF) division and award-winning developer of the most sophisticated mortgage servicing portfolio management tool, LoanCare Analytics, built to support MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with Flagstar’s Jason Lee on how capital markets departments balance volume and margin.)

Lender and Broker Products, Programs, and Services

Mortgage servicers of all sizes trust their portfolios to MSP®, Black Knight’s loan servicing system. In fact, Fahe (Federation of Appalachian Housing Enterprises), a nonprofit that serves the people and communities of Appalachia, recently signed a contract for MSP. In Black Knight’s recent announcement, Fahe states that top-tier technology will help it realize its mission and better serve its communities. Wondering if the MSP loan servicing system is the right fit for your servicing business? Learn why it’s the one loan servicing system for every mortgage servicer.

NEW: Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset, ft. advice from Maxwell Co-founder & CEO John Paasonen, Rob Chrisman himself, theLender EVP Chris Ledwidge, and more. Is your lending business prepared for a market reset? To thrive, lenders need a fresh game plan driven by home buyer trends, creative lead generation, and insightful data. Maxwell put this guide together to help you refresh your thinking for the market ahead. In it, you’ll learn ways to rebuild your pipeline, the borrower segments that are still rising in the housing market, and how to better leverage data to make confident business decisions. Lenders: The next five years likely won’t be anything like the last five. Now is the time to rethink your business. Click here to download your free copy of Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset.

Profitable Mortgage Companies are focused on the long-term value of the customer relationship. Essex Mortgage’s partners enjoy greater customer retention, GNMA pass-thru pricing, no overlays, no LLPA’s, NO EPOs and NO EPDs, as well as Tax Deferred asset growth and a long-term cash flow stream without having to be a GNMA issuer themselves. Please contact us to discuss how the Essex GNMA Excess MSR program can help retain and enhance your customer relationship, broaden guidelines, and expand into new markets. Please contact Kimberly Schenck.

“Your business can benefit from powerful national banking resources that incorporate personalized, one-on-one relationships with industry experts. Western Alliance Bank delivers stable, trusted treasury management and fraud protection services from cash management to financing to account security. These tools can help you keep operations running smoothly, conveniently manage custodial and payroll accounts, and originate streamlined online wire transfers. Our Specialized Mortgage Services team tailors mortgage finance products to your needs, including warehouse lending, MSR financing, note financing and corporate credit card services that offer speed to approval and certainty of execution. Discover how competitive rates, efficient cash flow cycles and a streamlined banking relationship can help you achieve your goals. Contact Mark Short (469) 702-6212, Nick Richards (646) 708-1211, Nicole Avey (720) 633-4759, Elizabeth Mix (480) 329-2122, Jim Karr (626) 390-8534 or Chris Martin (480) 341-5483. Western Alliance Bank, Member FDIC.”

Ready to mend your relationship with your loan origination system? Join the TRUE team on September 20th and hear directly from TruStone and V.I.P Mortgage on how they’re applying AI technology to solve the challenges related to their LOS platforms. The roundtable discussion will unpack the frustrations related to most of today’s more popular LOS platforms, the crucial importance of well-organized borrower data, and how applying AI at specific points in the document journey can dramatically change the way LOS platforms perform. Sign up today.

Capacity is heading to The Mortgage Collaborative’s “Music in My Ears Conference” in Nashville, TN, next week! CEO David Karandish will speak on Monday, September 11th, at 3:15 p.m. about our latest offerings: generative AI-powered Guideline Search and tailored AI Assessments. Get game-changing, personalized insights on successfully implementing AI and automation in your business! Be sure to stop by our session in Nashville or book one-on-one time with our team here. The mortgage industry desperately needs a platform that securely integrates with lenders’ key systems, providing loan officers with instant, actionable answers about borrower opportunities, loan statuses, guidelines, and more. Capacity reduces the time LOs spend logging into a sea of endless systems to find information. If this sounds familiar, why not find out how Capacity can save your team time and frustration? See how it works.

“TENA Companies, Inc. is your strategic mortgage Quality Control partner in the fight against fraud. Develop your strategy against evolving mortgage market fraud with help from our proficient and highly trained auditors. Fraud involving income and employment schemes, as well as occupancy-related deception, continue to impact risk levels for all lenders. As highlighted in Fannie Mae’s July 2023 Quality Insider: Reviewing your fraud controls in QC, a robust Quality Control plan is an integral component for identifying patterns that can be indicative of fraud. These insights enable lenders to proactively implement processes for fraud prevention. Safeguard your operations, ensure risk mitigation, and strengthen your Quality Control by partnering with TENA. Contact us today!”

Disaster News and Updates

Last year, U.S. disaster damage totaled $171.5B. Destructive weather and climate events, or bad forestation or building practices, factor into the mix of hurricanes, wildfires, tornados, and drought. Few are forecasting them to decrease or affect a smaller geographic range. Is your lending operation ready? What are you telling your borrowers about insurance? Major insurers say they will cut out damage caused by hurricanes, wind, and hail, not to mention along coastlines and in wildfire prone areas, suggesting that companies will just insure for liability and fire. So if that is the case, will insurance rates fall? Of course not. But where does all of this leave the mortgage servicers?

When disasters strike, lenders often postpone loan closings, impacting origination revenue and impairing the ability to fund new loans. Loans that have already been funded may be difficult to sell, further limiting liquidity. Black Knight has a piece worth skimming, or more, about how you can reduce your financial exposure, decrease costs, and better serve borrowers by preparing before, during and after a disaster. Download a complimentary ebook: Climate-Change and Weather-Related Disasters: How to Manage Mortgage Risk.

Nearly every part of the United States faces natural disasters, whether they be earthquakes, hurricanes, tornadoes, forest fires, drought, or volcanoes. A declaration by FEMA triggers lender and servicer policies and procedures.

Mortgage Quality Management & Research (MQMR) sent out Fannie Mae Disaster Relief – FAQ. Check out more equally insightful FAQs. (To learn more about Mortgage Quality Management & Research, download MQMR’s white paper.)

Recently we’ve had Florida Hurricane Idalia FEMA-4734-DR, Illinois Severe Storms and Flooding DR-4728-IL, Mississippi DR-4727, and Vermont DR-4720: Update to End Date of Occurrence.

Florida, Georgia, and the Carolinas were hit by Hurricane Idalia, causing damage from storm surge, flooding, and high winds. Recovering from a catastrophic event like this one can feel overwhelming. It’s not always easy to know where to turn for help and what steps to take. The CFPB put together a guide to handling finances that you can share with the people you serve, to help them manage the money decisions they face. View CFPB’s disasters and emergencies guide providing resources to help recovery, including how to tackle housing issues, protect finances, deal with property damage, manage bills, and ask financial companies for help.

Freddie Mac issued a reminder to homeowners and mortgage servicers of its relief options for those affected by Hurricane Idalia. Freddie Mac’s forbearance program provides homeowners mortgage relief for up to 12 months without incurring late fees or penalties. Freddie Mac’s disaster relief options are available to homeowners who have been impacted by an eligible disaster. This includes anytime the homeowner’s property experiences an insurable loss, and also covers instances where their homes or places of employment are located in Presidentially Declared Major Disaster Areas where federal Individual-Assistance programs are made available to affected individuals and households. Foreclosure and other legal proceedings are also suspended while homeowners are on a forbearance plan. More information is available on My Home by Freddie Mac where owners can read about the steps they can take to help recover from a natural disaster, including frequently asked questions related to disaster and mortgage relief.

Fannie Mae reminded homeowners and renters impacted by natural disasters, including Hurricane Idalia, of available mortgage assistance and disaster relief options. Mortgage servicers are also reminded of options to assist homeowners under Fannie Mae’s guidelines.

Under Fannie Mae’s guidelines for single-family mortgages impacted by a natural disaster:

Homeowners and renters looking for disaster recovery resources may visit FannieMae.com to learn more about addressing immediate needs. Fannie Mae also offers help navigating the broader financial effects of a disaster to homeowners and renters through disaster recovery counseling at 855-HERE2HELP (855-437-3243).

PHH Correspondent posted information regarding Illinois DR-4728: New Disaster Declared, Mississippi DR-4727, and Vermont DR-4720. Go to the PHH company library to view the announcement and for all disaster declared counties, requirements, procedures, and conditions.

On 9/1/2023, with Amendment No. 1 to DR-4734, FEMA declared federal disaster aid with individual assistance has been made available to 6 additional Florida counties affected by Hurricane Idalia from 8/27/2023 and continuing. See the attached announcement for inspection requirements. AmeriHome Mortgage 20230901-CL Disaster Announcement.

Capital Markets

It’s looking more and more like a goldilocks scenario for the Federal Reserve. Last week was crammed with key economic data on the labor market and inflation which will probably be instrumental in shaping the decision of the Fed’s monetary policy committee at its meeting later this month. Many of the indicators pointed towards cooling in the economy, strengthening hopes that it would be enough for the central bank to keep rates steady. Friday’s nonfarm payrolls report showed an uptick in the unemployment rate. Market participants took heart from the data, which suggests that the highly resilient labor market is finally cracking and that the effects of the Fed’s aggressive tightening campaign are showing up.

More specifically, we learned at the close of last week that U.S. unemployment rose to 3.8 percent in August, a significant increase from July’s rate of 3.5 percent and the highest percentage since February 2022, as the economy continued to lose momentum built up after pandemic lockdowns. Non-Farm Payrolls barely beat consensus (expected +170k, actual +187k) and previous prints were revised lower (June was cut from +209k to +105k). More people entered the workforce, increasing the size of the labor force by 736k, which will help bring supply and demand more into balance.

Keep in mind that increased hiring and slowing wage growth are key ingredients of the Fed’s fight against pandemic-era inflation, and the overall report was good news for the bond market, as it shows the Fed’s tightening is gaining traction in the labor market. In theory, this will take some of the pressure off the Fed to keep hiking rates and give the central bank some confidence to let previously enacted hikes work their way through the economy. The next Fed meeting is only two weeks away.

Though we’ve already received the latest rate decision from Royal Bank of Australia this morning, where rates were held steady at 4.10 percent, today is light on economic data. After this commentary goes out, markets will receive August employment trends and July factory orders. Highlights from the remainder of the week include September’s Fed Beige Book tomorrow and July Wholesale Inventories on Friday. We begin the trading week with Agency MBS prices worse .125-.250 and the 10-year yielding 4.22 after closing last week at 4.17 percent on no real news.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

August 29, 2023 by Brett Tams

Credit Report, Buyer Research, Broker Processing Products; Guild and First Centennial Deal

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Credit Report, Buyer Research, Broker Processing Products; Guild and First Centennial Deal

By:
Rob Chrisman

Mon, Aug 28 2023, 10:31 AM

As the rumor spreads that millions of women are lined up to be weighed at the Fulton County Jail, we head into late summer and early autumn, rarely a time for increased home sale activity. The National Association of REALTORS®’ total membership in July 2023 is 1.56 million. There are about 547k active listings. That’s one listing per three NAR members, which doesn’t even include non-NAR real estate agents. Analysts continue to point to the nationwide housing market struggling with low inventory levels and decreased affordability. While active inventory through the first six months of 2023 was higher than the record lows set in 2022, new listings have been lagging below 2022 levels. Just simply not enough homes? But Hawai’i’s Marcelle Loren writes, “I don’t agree with the reports of a lack of inventory. There’s just a lack of agents digging up properties to sell. For example, the death of Baby Boomers is a source of inventory: Rising costs are prompting more adult children to sell the homes they inherit from their parents. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with the company’s Conrad Ficca and Richard Lombardi on climate risk and how lenders can mitigate its impact through data.)

Lender and Broker Software and Services

“How will this solution improve the homebuyer or homeowner experience?” This simple question guides the way we develop and deliver products at Black Knight, a mindset we call “Think Customer.” By combining this mentality with a Scaled Agile Framework (SAFe), Black Knight aligns product development and delivery with end-consumer needs while staying ahead of the latest market and technology advancements. Learn more about the value this approach has brought Black Knight clients and their customers in the blog post “’Think Customer’ in an Agile World”.

In this market, hustle is everything. You can’t afford to waste a single deal, or a single minute. That’s why ReadyPrice has launched Shop.Lock.Deliver.® It’s an innovative new platform designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders, and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check out ReadyPrice today.

Free report: These growing borrower segments present opportunities for new business in 2023’s market. Wondering how to fill your pipeline when loan volume is scarce? New data from Maxwell gives lenders an exclusive look into home buyer groups taking on higher rates head-on. Did you know, for instance, that the share of 18 to 24-year-old borrowers has increased by 18 percent year-over-year? Now is the time to cater to these rising home buyers. For exclusive data and actionable takeaways, click here to download Maxwell’s Q2 Mortgage Lending Report.

Credit Products for Brokers and Lenders

In today’s competitive landscape, every dollar and interaction matter more than ever. Blend’s first-of-its-kind soft credit pull delivers a simpler pre-qualification process, reducing top-of-funnel friction, cutting approximately $50 per credit file, and safeguarding borrowers from tri-merge solicitation and negative impacts on their credit scores. For lenders, Blend’s soft credit pre-qualification streamlines the application process, reducing drop-offs and increasing conversion rates. It provides lenders with valuable insights without an expensive hard credit inquiry, improving risk assessment and decision-making. Blend seamlessly integrates soft credit checks into the mobile loan officer experience and self-serve processes, with widespread adoption, ultimately leading to substantial cost savings for our customers. For borrowers, soft inquiries remove barriers to accessing early eligibility information, protect borrower credit scores, and promote financial empowerment, encouraging more borrowers to engage with lenders. Soft credit pre-qualification is a game-changer in the lending industry and a true win-win for borrowers and lenders.

Fraudulent employment data in mortgage loan applications cause risks for lenders and borrowers. For many years, it has been common practice for mortgage lenders or brokers to ask for paper pay stubs to help verify loan applicant’s income. But in 2022, out of all mortgage loans that had a fraud investigative finding, 43 percent were classified as income fraud. Technological advances allow lenders to instantly and securely obtain reliable income and employment verifications from a trusted third-party provider. Available for use by credentialed verifiers with a permissible purpose under the FCRA, The Work Number® database is the leading commercial repository of employer-contributed payroll data. Unlock the power of our expansive database, instant access to 161 million current employment records directly from 2.8 million employers and payroll providers. With buybacks on the rise, why use paper-based processes that potentially increase repurchase risk at a time when proven GSE-approved options exist?

The Big Getting Bigger

Guild Mortgage further expanded its market share with the announcement this morning of the company’s acquisition of First Centennial Mortgage, a privately held residential lender headquartered in Illinois. Founded by brothers Steven and David McCormick in 1995, First Centennial will bring 15 branches and nine satellite offices to Guild’s growing national retail network. This acquisition is Guild’s third this year, following its purchase of Cherry Creek in April and Legacy Mortgage in February. (Guild was represented by the STRATMOR Group’s M&A team.)

Lenders tired of the rate volatility, the cost cutting, rates possibly trending higher with the Fed fighting inflation (until the Silicon Valley bank failure drove them down) may be looking at selling their company or merging it. “Valuing a Lender” was recently posted on the STRATMOR website.

Sure enough, STRATMOR’s M&A practice is on fire as big lenders have become small lenders, or brokers, and culturally paired lenders are wondering, “Why have two accounting teams? Two capital markets groups? Two underwriting staffs?” And so on. (Anyone interested in learning more should talk to David Hrobon or Garth Graham.) Of course, as has been mentioned in this commentary, larger lenders are also adept at simply hiring production staff away from smaller, thinly capitalized lenders.

Many owners of lenders around the nation are earnestly interested in making a decision about what to do with their company before a decision is made for them. I have received this question from a number of owners of small lenders. ‘Rob, is it only the lenders who have servicing who have any value? Or can small lenders with decent market share like mine have interest from buyers?”

Garth Graham replied. “Great question, Rob, and one we field nearly every day. We are hearing from lenders who are inquiring about the M&A space, and often trying to find out what is going on and what they should do.

“The answer is that there continues to be good deals for potential sellers, and the reason is that there are a lot of buyers we work with who continue to want to grow market share in a down market. We closed three deals in the last 60 days, and all had upfront premiums with solid earn outs, with a good cultural fit for the parties. Often the premium being paid is driven by the ability for the seller to add the production without having to add all the corporate expense, so it can be painful decisions about the corporate depts (secondary, HR, Risk, technology etc.), but the end result is that the production is worth more to the buyer than it is to the seller due to the cost savings. And that shows up on premium offers. And the seller gets the balance sheet plus a share of that financial benefit. So, it can be a potential win-win. Of course, it has to be a deal that makes sense for the LOs, and production staff too, so that is why culture matters so much.” Thank you, Garth.

To wrap up, in valuing a company, a potential buyer will look at the audited net worth and the discounted cash flows, usually for the next three years of estimated earnings. (The devil’s in the details and assumptions!) The value to a potential buyer will depend on different factors, and three main variables often used in an analysis are loan volumes, margins, cost structure, & profitability, and the current policies, procedures, & business model.

Of course, repurchase obligations are included, as well as existing or potential liabilities. Are there outstanding lawsuits? Is the buyer buying the entire company, or a percentage of ownership… a minority ownership has very little value. It is not a simple process, and making assumptions about the future is problematic. A thorough examination of these factors is where the value of a competent advisor shows itself.

Capital Markets

Spoiler alert: our Federal Reserve doesn’t set mortgage rates, but the “hawkish” tone from Federal Reserve Chairman Jerome Powell was an indication that there won’t be much slack in the battle to bring down inflation. If they are any indication, futures trading is pricing in roughly a two-thirds probability that the central bank will boost its key interest rate by a quarter percentage point in November after a pause in September.

In an eagerly anticipated speech from Jackson Hole on Friday, Fed Chair Powell made no bones about the Fed’s unwavering pursuit of returning annualized inflation to 2 percent. As far as the Fed is concerned, the message is “stay the course” even if that means even higher interest rates. Powell reiterated that the Fed would not change its long-term inflation target of 2 percent as some market commentators may have hoped and reaffirmed the reliance on incoming economic data and the potential to further tighten monetary policy if the conditions warrant. His wholly expected remarks seem to have had a calming effect on markets. Other central bank chiefs echoed Powell in projecting a cautious stance, saying the inflation triggered by Covid-19 and its fallout has not been fully conquered.

While recent data has been trending in the Fed’s desired direction, Powell noted that the previous two months of data are not enough to instill confidence that inflation will continue to trend down towards the Fed’s goal. There are still supply and demand imbalances that put upwards pressure on inflation specifically as it pertains to shelter and non-housing services. Overall, goods prices have declined and residential lease rates are cooling, however home prices remain high due to lack of supply. Given the desire not to repeat the mistakes of the 1970s in declaring victory over inflation too soon, it is not surprising the tone of the Fed continues to be one of caution, which may continue even as more positive data is released.

The Federal Reserve is data-dependent, of course, and this week is packed with potential market moving events including front-loaded month-end supply, and economic data including several labor market indicators, culminating with monthly U.S. employment numbers that will be released on Friday, and Fed-favorite PCE on Thursday, which also happens to be month-end. Other economic data of interest include housing-related releases, consumer confidence, GDP, Chicago PMI, ISM, and construction spending. The start of the week is all about supply with the Treasury auctioning $45 billion 2-year notes and $46 billion 5-year notes. Today also brings Dallas Fed Texas manufacturing for August and comments from Fed Vice Chair for Supervision Barr. We begin the week with Agency MBS prices roughly unchanged from Friday’s close and the 10-year yielding 4.23 after closing Friday at 4.24 percent. The 2-year is at 5.10 after Fed Chair Powell’s Friday comments drove the yield higher.

Employment

“A seasoned executive is looking to explore the next growth and strategic opportunity. Over the course of a twenty-three-year career, I developed expertise in many aspects of the business, spanning retail, wholesale, and correspondent production. Background also includes a deep understanding of MSR and servicing operations. Proven ability to manage businesses at scale, with a strong focus on compliance, credit, and enterprise risk management. Passionate about process optimization and leveraging technology to drive efficiency, all while fostering a positive organizational culture. Track record includes driving maximized revenue through aggressive yet responsible growth strategies. Working for private equity-owned organizations, providing valuable experience in capital acquisition and broad investor relations. If you’re interested in learning more about my background and how I can contribute to your team’s success, please don’t hesitate to contact Anjelica Nixt to forward your note.”

The Maryland regional office of USA Mortgage has added leading Home Loan Officer Jamison Mullen to its team. Mullen, a 20-year industry veteran, joins a USA office headed by Bill Sohan who recently came on board as a regional vice president. “I wasn’t looking for a change. I was with a great company. But sometimes an opportunity arises that you can’t ignore,” said Mullen. “When Bill and Sam Rosenblatt approached me about joining forces, I had to listen. And as soon as I met the corporate leadership team at USA Mortgage, I knew they were the kind of people I wanted to work with for the remainder of my career.” Founded in St. Louis in 2001, 100 percent employee-owned USA Mortgage has offices in 34 states and is licensed in 49 states plus the District of Columbia. For a confidential conversation about joining USA, contact Bill Sohan at 410-963-2308.

Quality. Stability. Virtue. Traits that define a successful mortgage company, or any company, for that matter. But when we’re talking about mortgages, InterLinc Mortgage hits the mark on these three skills, and more. With an average of $32 million in annual production per Loan Originator, the mortgage team not only kept pace through a turbulent market, but they did also so with excellence. Scotsman Guide’s 2022 Top Overall Lender and Top Retail Lender awards prove the grit and sustainability displayed by the producers (which is an assembly of the elite) and its leaders. A company that proves fortitude and character…worth the look.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

August 28, 2023 by Brett Tams

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

Apache is functioning normally

August 22, 2023 by Brett Tams

Panuwat Dangsungnoen

During the initial wave of the banking crisis in March, I published “Truist: Immense Unrealized Bond Losses Threaten Core Equity Stability.” At the time, Trust Financial Corp. (NYSE:TFC) had suffered the most significant drawdown among the top-ten US banks. Roughly five months ago, I was among the few analysts with a definitively bearish outlook on the bank, while many had viewed it as a dip-buying opportunity. My perspective was that although TFC’s “bank run” risk was low, the vast extent of its off-balance sheet losses left it with little safety for a potential rise in loan losses. Further, I expected that growing net interest margin pressures would substantially lower the bank’s income over the coming year, potentially compounding its risks.

Since then, TFC has declined by an additional ~11% in value and recently retraced back near its May bottom, associated with the failure of the Federal Republic. I believe the most recent wave of downside in at-risk banks is a notable signal that the market continues to underestimate systemic US financial system risks. Of course, following TFC’s most recent bearish pattern, I expect many investors to increase their position, viewing the company as significantly discounted. Accordingly, I believe it is an excellent time to take a closer look at the firm to estimate better its discount potential or the probability of Truist facing much more significant strains.

Estimating Truist’s Price-to-NAV

On the surface, TFC appears to have considerable discount potential. The stock’s TTM “P/E” is 6.3X compared to a sector median of 8.7X. Its forward “P/E” of 7.7X is also below the banking sector’s median of 9.3X. TFC’s dividend yield is currently at 7.2%, nearly twice as much as the sector median of 3.7%. Finally, its price-to-book is 0.66X, considerably lower than the sector median of 1.05X. Based on these more surface-level valuation metrics, TFC appears to be around trading around a 25% to 35% discount to the banking sector as a whole. Of course, we must consider whether or not this apparent discount is pricing for the bank’s elevated risk compared to others.

Importantly, Truist is one of the most impacted banks by the increase in long-term securities interest rates, giving the bank huge unrealized securities losses. Based on its most recent balance sheet (pg. 12), we can see that Truist has about $56B in held-to-maturity “HTM” agency mortgage-backed-securities “MBS” at amortized cost, worth ~$46B at fair value, giving Truist a $10B loss that is not accounted for in its book value. That figure has remained virtually unchanged since its Q4 2022 earnings report through Q2 2023; however, it will rise with mortgage rates since higher rates lower the fair value of MBS assets. Truist’s Q2 report also notes that all of its HTM MBS securities are at due over ten years, meaning they’re likely ~20-30 year mortgage assets that carry the most significant duration risk (or negative valuation impact from higher mortgage rates).

Significantly, the long-term Treasury and mortgage rates have risen in recent weeks as the yield curve begins to steepen without the short-term rate outlook declining. See below:

From the late 2021 lows through the end of June, the long-term mortgage rate rose by around 4%, lowering Truist’s MBS HTM assets fair value by ~$10B, while its available-for-sale securities lost ~$11.9B in value (predominantly due to MBS assets as well). Accordingly, we can estimate that the duration of its securities portfolio (almost entirely agency MBS) is roughly $5.5B in estimated losses per 1% increase in mortgage rates. Since the end of June, mortgage rates have risen by approximately 35 bps, giving TFC an estimated Q3 securities loss of ~$1.9B. Around $1B should show up on TFC’s balance sheet and income, while ~$900M will remain unrealized based on its current AFS vs. HTM portioning.

For me, we must value TFC accounting for both. Total unrealized losses and estimated losses based on the most recent changes in long-term interest rates. That said, should mortgage rates reverse lower, Truist should not have that $1.9B estimated securities loss in Q3; however, should mortgage rates continue to rise, the bank should post an even more considerable securities loss. At the end of Q2, Truist had a tangible book value of $22.9B. After accounting for unrealized losses, that figure would be around $12.9B. After considering the losses associated with the recent mortgage rate spike, its “liquidation value” is likely closer to $11B. Of course, Truist has a massive ~$34B total intangibles position due to goodwill created in its acquisition spree over the past decade. Although relevant, I believe investors should be careful in accounting for goodwill due to the general decline of the financial sector in recent years.

While much focus has been placed on unrealized securities losses, the risk associated with those losses is vague. Truist can borrow money from the Federal Reserve at par against those assets, partially lowering the associated liquidity risk. However, the Fed’s financing program is at a much higher discount rate (compared to deposit rates) and only lasts one year, so it is not a permanent solution. Further, the unrealized securities losses are on held-to-maturity assets, meaning it will recoup the losses should the assets be held to maturity. Of course, that means it may take 20-30 years, and Truist may need that money before then.

Further, Truist has a substantial residential mortgage portfolio at a $56B cost value at the end of Q2 (data on pg. 48). Those loans had an annualized yield of 3.58% in 2022 and 3.77% in 2023; since the yield did not rise proportionally to mortgage rates, we know the vast majority of those loans are likely fixed-rate long-term. Since they’re not securities positions, Truist need not publish their changes in fair value; however, should Truist look to sell its residential mortgages, they would almost certainly sell at a similar total discount to its MBS assets, considering its yield level is akin to that of long-term fixed-rate mortgages before 2022. I believe the unrealized loss on those loans is likely around $10B.

The rest of Truist’s loan portfolio, worth $326B at cost, is predominantly commercial and industrial ($166B), “other” consumer ($28B), indirect auto ($26.5B), and CRE loans ($22.7B). Excluding residential mortgages, all of its loan portfolio segments have yields ranging from 6-8% (excluding credit cards at 11.5%), with those segments’ total yields rising by around 3-4% from June 2022 to 2023. Accordingly, it is virtually certain that most of its non-mortgage loans are either short-term or fixed-rate since their yields rose with Treasuries, meaning they do not likely face unrealized losses based on the increase in rates.

Overall, I believe that if Truist were to liquidate its assets, its net equity value for common stockholders would be roughly zero, technically $1B. That figure is based on its current tangible book value, subtracting known unrealized losses on securities (~$10B), estimated recent Q3 realized and unrealized losses (~$1.9B), and estimated unrealized mortgage residential loan losses (~$10B). While the bank does have some MSR assets, worth ~$3B, that are positively correlated to rates, I do not believe that segment will offset unrealized losses in any significant manner. Together, those figures equal its tangible book value and would lower the total book value to about $34B. However, in my view, intangibles are not appropriate to account for today because virtually all banks have lost value since its 2019 merger, making its goodwill an essentially meaningless figure.

From a NAV standpoint, TFC is not trading at a discount and is most likely trading at a significant premium. Further, based on these data, Truist is, in my view, seriously undercapitalized. Although TFC posts a CET1 ratio of 9.6%, which is also relatively low, its common tangible equity would be essentially zero if its loans and securities were all accounted for at fair value. To me, that is important because most of its losses are on ultra-long-term assets so it may need that lost solvency sometime before those assets’ maturity. Further, even its 9.6% CET1 ratio is close to its new regulatory minimum of 7.4%, so a slight increase in loan losses or a realization of its estimated ~$22B in unrealized losses would quickly push it below the regulatory minimum.

Truist Earnings Outlook Poor As Costs Rise

To me, Truist is not a value opportunity because it is not discounted to its tangible NAV value. Even its market capitalization is around 65% above its tangible book value, which does not account for its substantial unrealized losses. However, many investors are likely not particularly concerned with its solvency, as that could not be a significant issue if there are no increases in loan losses, declines in deposits, or sharp NIM compression. If Truist can maintain solid operating cash flows, that could compensate for its poor solvency profile.

Of course, TFC cannot continue to try to expand its EPS by increasing its leverage since it is objectively overleveraged, nearly failing its recent stress test. On that note, poor stress test results are essential, but “passing” is somewhat inconsequential, considering most of the recently failed banks would have passed with flying colors, as the test does not account for the substantial negative impacts of unrealized losses on fixed-income assets. That is likely because, when “stress testing” was designed, it was uncommon for long-term rates to spike with inflation as it had, and banks had much lower securities positions compared to loans. Thus, it is quite notable that TFC nearly failed a test that does not account for its substantial unrealized losses.

Looking forward, I believe it is very likely that Truist will face a notable decline in its net interest income over the coming year or more. Fundamentally, this is due to the decrease in Truist’s deposits, total bank deposits, and the money supply. As the Federal Reserve allows its assets to mature, money is effectively removed from the economy; thus, total commercial bank deposits are trending lower. Truist’s deposits are trending lower in line with total commercial banks. I expect Truist’s deposits to continue to slide as long as the Federal Reserve does not return to QE. As Truist competes for a smaller pool of deposits, its deposit costs should rise faster than its loan yields. Today, we’re starting to see the spread between prime loans and the 3-month CD contract, indicating that bank NIMs are declining. See below:

Truist’s core net interest margin has slid from 3.17% in Q4 2022 to 3.1% in Q1 2023 to 2.85% in Q2. Truist’s deposits (10-Q pg. 48) have generally fallen faster than its larger peers, so it needs to increase deposit costs more quickly. Over the past year, its total interest-bearing deposit rate rose from 14 bps to 2.19%, with the most significant rise in CDs to 3.73%.

Notably, Truist has increased its CD rate to the 4.5% to 5% range to try to attract depositors. However, the bank continues not to pay any yield on the bulk of its savings account products, causing a sharp increase in customers switching toward the many banks which pay closer to 5% today. Over the past year, the bank saw around $10B in outflows for interest-bearing deposits and about $25B from non-interest-bearing deposits, making up for those losses with new long-term debt and CDs. Problematically, that means Truist is rapidly losing more-secure liabilities to more fickle ones like CDs and the money market. While this effort may slow the inevitable decline of its NIMs, it will also increase Truist’s solvency risk because it’s becoming more dependent on less secure liquidity sources as people move money between CDs more frequently than opening and closing savings accounts at different banks.

Truist also faces increased expected loan losses due to a rise in late payments last quarter. That trend is correlated to the increase in consumer defaults and the sharp decline in manufacturing economic strength. See below:

Consumer defaults remain normal, but I believe they will rise as consumer savings levels continue to fall and should accelerate lower with student loan repayments. The low PMI figure shows many companies face negative business activity trends, increasing future loan loss risks on Truist’s vast commercial and industrial loan book. Of course, Truist also has a notable CRE loan portfolio, which faces critical risks associated with that sector’s colossal decline this year.

The Bottom Line

Overall, I believe Truist has become even more undercapitalized since I covered it last. I also think Truist faces an increased risk of recession-related loan losses and has a more sharp NIM outlook. Even more significant increases in mortgage rates recently exacerbated strains on its capitalization, while its low savings rates should cause continued deposit outflows. Further, its increased CD rates should create growing negative net interest income pressure.

If there was no recessionary potential, as indicated by the manufacturing PMI, then TFC may manage to get through this period without severe strains; however, its EPS should still decline significantly due to rising deposit costs. That said, if Truist’s loan losses continue to grow due to increasing consumer and business headwinds, its low tangible capitalization leaves it at high risk of significant downsides. If its loan losses grow or its deposits decline, it will need to realize more losses on its assets, quickly pushing its CET1 ratio below its new regulatory minimum. Personally, I strongly expect TFC’s CET1 ratio will fall below the 7.5% level over the next year and could fall even lower if a more severe recession occurs.

I am very bearish on TFC and do not believe there is any realistic discount potential in the stock besides that generated by speculators. Since there is a significant retail speculative activity in TFC and some potential for positive government intervention due to its larger size, I would not short TFC. Although TFC downside risk appears significant, many factors could create sufficient temporary upside that it is not worth short–selling. That said, I believe Truist may be the most important financial risk in the US banking system due to its solvency concerns combined with its size and scope. Accordingly, regardless of their position in TFC, investors may want to keep a particularly close eye on the company because it may create more extensive financial market turbulence than seen from First Republic Bank should it continue to face strains.

Source: seekingalpha.com

Apache is functioning normally

August 19, 2023 by Brett Tams

Independent mortgage banks (IMB) reported an average net loss of $534 on each loan originated from April to June, down from $1,972 per loan in the first quarter of 2023, according to the Mortgage Bankers Association (MBA). The average pre-tax production loss was 18 basis points in Q2.

Including both the production and servicing business lines, 58% of retail mortgage companies were profitable in Q2, up from 32% in the first quarter of 2023.

“There were signs of improvement in the second quarter of 2023. Production losses were less severe than the previous two quarters and net servicing financial income was strong,” Marina Walsh, the MBA’s vice president of industry analysis, said in a statement. “Additionally, the majority of mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

The average production volume was $502 million per IMB in the second quarter, up from $398 million per company in the first quarter of 2023. The volume by count per IMB averaged 1,553 loans in Q2, an increase from 1,264 loans in Q1.

However, production revenue was 328 bps in the second quarter, down from 358 bps in the previous quarter. It includes fee income, net secondary marketing income and warehouse spread.

Meanwhile, according to Walsh, after 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan during the second quarter of 2023.

“Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black,” Walsh said.

Loan production expenses averaged $11,044 per loan in the second quarter of 2023, down from a study-high of $13,171 per loan in Q1. The average number of production employees per company also declined to 366 between April and June from 372 in the previous quarter.

Servicing operating income — which excludes MSR amortization, gains or loss in the valuation of servicing rights net of hedging gains or losses, and gains or losses on the bulk sale of MSRs — was $105 per loan in the second quarter, up from the previous quarter’s $102.

The sale of MSRs does not directly impact earnings as a revenue stream, but the conversion of MSRs into cash via sales deals bolsters a lender’s cash flow and overall liquidity.

The MBA expects mortgage origination volume for one- to four-family homes to post $468 billion in Q3, a rise from $463 billion in Q2 2023, according to its latest forecast.

The MBA also projected the 30-year fixed mortgage rate to trend up to an average of 6.6% in the second quarter, ultimately declining to 5.9% by the fourth quarter of 2023.

Source: housingwire.com

Apache is functioning normally

August 19, 2023 by Brett Tams

Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats

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Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats

By:
Rob Chrisman

Fri, Aug 18 2023, 10:49 AM

As numbers approaching a thousand head to Orange County, CA, for the California MBA’s Western Secondary, keeping an eye on the remnants of a hurricane, it is not an easy lending environment with mortgage rates at 20-year highs, firmly in the 7’s. Thomas Edison believed, “Vision without execution is hallucination.” Many owners of lenders and vendors had very good vision and execution some years ago when creating their companies. But thinking that 2020 and 2021 would continue indefinitely would have been classified as a hallucination, and obviously things have become much more difficult with many wondering where things go from here. I don’t have a crystal ball, but a certain percentage of those owners who deferred being serious about exploring a sale, waiting, until after the cycle was obviously on the downside, they’ve perhaps undermined an opportunity for negotiating more favorable deal terms. It can be argued that the smarter entrepreneurs engaged in company sale negotiations while industry mindset is mostly driven by prosperity. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades.)

Lender and Broker Software and Services

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“Salesforce is committed to partnering with mortgage lenders to drive their technology transformation with modern solutions that are already in practice and serving many of the top mortgage lenders in the country. As part of its efforts to drive the industry forward through the adoption of a modern tech stack, Salesforce identified UMortgage to establish the precedent of utilizing its mortgage and lending software to its fullest potential to facilitate better client experiences. Using customized task management systems and automations within Salesforce, UMortgage has been able to achieve 300% year-over-year growth and near-perfect 95 net promoter score (NPS), an indicator of a best-in-class client experience. Check out the following link to learn more about the innovative technological systems that are helping UMortgage Loan Originators maximize their lead generation & conversion. With an investment in intuitive solutions, UMortgage is driving the mortgage industry towards a better future that enables brokers to thrive.”

We’re hearing that lenders are ramping up their tech stacks and (most importantly) focusing on the quality of the data powering that technology. If you’re considering taking your company’s tech stack to the next level, look for a property data provider that delivers the most comprehensive data through the best channels to meet your unique business needs. That’s why we’re highlighting First American Data & Analytics and its repository of more than 8+ billion recorded documents. First American is more than just a data provider. It offers end-to-end solutions for the mortgage lifecycle. From detecting fraud and risk to providing valuation solutions, First American powers lenders to make informed, data-driven decisions. If you’re ready to have access to the most accurate, complete, and current data, reach out to the team and get a data sample now.

“Lenders, the home insurance market is facing unprecedented volatility. We want to hear if it’s affecting your business and the closing process. Take our five-minute survey to share your thoughts. As a thank you, you can select to be entered to win a $100 Amazon gift card, compliments of Matic Insurance. Click here to begin the survey. Matic is a home insurance marketplace built for the mortgage industry. Learn how mortgage enterprises can implement a new revenue stream that helps borrowers navigate the insurance buying process. Book a demo today.

Wholesale lending is undergoing a transformation that will leave those who cling to outdated processes behind. Using bargain CRMs as electronic phone books or even worse, spreadsheets to track brokers, is a clear sign that your sales process is holding you back. Modern CRM technology like OptifiNow provides a comprehensive, out-of-the-box solution that helps wholesale lenders create a sales and marketing process that drives broker engagement and significantly increases loan volume. Download our guide to finding the right CRM for wholesale lenders to learn how to transform your wholesale business and stay ahead of the competition!

What’s an internal audit anyway and do you need one? An internal audit acts as a third line of defense for your mortgage operation. It provides comprehensive assurance based on the highest level of independence and objectivity to evaluate the effectiveness of management’s internal controls. This function should advise your mortgage operation on plans to achieve the company’s strategic, operational, financial and compliance goals. An effective internal audit should go far beyond just checking a compliance box; it should be an integral part of protecting your company. If you want to ensure you’re adhering to regulatory requirements and demonstrating good faith business practices, a Richey May internal audit is a good fit. If you’re looking to be Fannie Mae approved in the future or want to maintain your approved status, it’s required. If you’re unsure whether you need an internal audit, ask one of Richey May’s experts today or learn more here.

Pricing Products and Programs

“Lender Price introduces Composable Pricing UI, an innovative user interface that empowers lenders to effortlessly customize their pricing engine using No Code or Low Code options. With a variety of skinning options and increased flexibility, Lender Price users can now easily create a personalized pricing experience with an abundance of options to choose from. Surpassing the limitations of single UI platforms seen with competitors, the era of rigid, one-size-fits-all PPE’s is over. With a flexible pricing engine like Lender Price, users now have the ability to tailor their interface based on their individual needs and preferences. Composable UI represents a paradigm shift in digital lending technology UX, liberating both individuals and organizations from the constraints of single UI platforms,” said Dawar Alimi, Lender Price CEO. “With an abundance of options and unparalleled flexibility, users can personalize and take charge of their pricing experience.” Email us or request a demo today.”

In this market, hustle is everything. You can’t afford to waste a single deal or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check ReadyPrice out today.

STRATMOR Comp Information and Survey

Yesterday I published, “What do underwriters and processors and LOs make? STRATMOR has the information, spelled out in a recent Perspectives piece.” Several wrote to say that there is a wide disparity in pay based on experience, at every level, and that averages may not be telling the whole story. Point well taken, although the drop in volume/units has not been matched by the drop in personnel. Stay tuned…

Information is critical in making payroll decisions. STRATMOR Group’s Compensation Connection® Study provides valuable insight into compensation components, incentive plan structures, role specifics and more, aggregated by company type, annual volume, and region. Prior three-year trending is also included on most metrics. Get the compensation data you need: sign up for the Fall 2023 Compensation Connection® Study today!

Lenders can Relive the 2nd Quarter of 2023

Spoiler alert: Losses continue but at a slower pace. The MBA has crunched the numbers of those surveyed and calculated that independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $534 on each loan they originated in the second quarter of 2023, an improvement from the reported loss of $1,972 per loan in the first quarter of 2023.

Marina Walsh, CMB, MBA’s Vice President of Industry Analysis and overall good person, summed up the Quarterly Mortgage Bankers Performance Report. “After 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan. Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black… Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, most mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

Once again, servicing income helped big time. Think about that as companies sell it off. When the MBA looked at both production and servicing, 58 percent of companies were profitable last quarter, an improvement from 32 percent in the first quarter of 2023 and 25 percent in the fourth quarter of 2022. Still, the average pre-tax production loss was 18 basis points (bps) in the second quarter of 2023, compared to an average net production loss of 68 bps in the first quarter of 2023, and down from a loss of 5 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 47 basis points.

“Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 328 bps in the second quarter, down from 358 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,510 per loan in the second quarter, down from $11,199 per loan in the first quarter.

“The purchase share of total originations, by dollar volume, increased to a study high of 89 percent in the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 80 percent in the second quarter, with the average loan balance for first mortgages increasing to $343,386 in the second quarter, up from $329,159 in the first quarter.

It ain’t cheap to do a loan. “Total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) decreased to $11,044 per loan in the second quarter, down from a study-high $13,171 per loan in the first quarter of 2023. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,236 per loan.

“Servicing net financial income for the second quarter (without annualizing) was $94 per loan, up from $54 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $105 per loan in the second quarter, up from $102 per loan in the first quarter.”

For all the stats, there are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Contact Falen Taylor (202-557-2771). The reports can also be purchased on the MBA’s website.

Capital Markets

At this point it can be argued that the Fed doesn’t want to see higher long-term rates. But bond yields continue to rise across the board, impacting mortgage rates of course, continuing an upswing that began nearly three months ago at the beginning of the summer. In fact, the yield on the benchmark 10-year Treasury (US10Y) closed at 4.25% on Wednesday, the highest level since 2008. The upward march this week follows the release of the latest Federal Open Market Committee minutes, which stressed that additional interest rate hikes might be needed.

“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy… Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening... and emphasized the importance of communicating as clearly as possible about the Committee’s data-dependent approach to policy and its firm commitment to bring inflation down to its 2% objective.”

Stronger-than-expected economic data continues to pour in, helping stock market prices, especially if you think the Fed to end its hiking cycle soon. Others say 10-year yields above 4 percent still present a good buying opportunity, in contrast to the potential rewards from pricey stocks and multiples that might not be as appealing. But it seems that bond investors have shifted to a “higher-for-longer” narrative coming out of the Fed, causing nominal rates and real rates to keep moving higher. Not good for housing affordability.

Strong economic data continued yesterday with initial jobless claims -11k and Philly Fed beating expectations by 22 points. That helped to lift benchmark 10-year U.S. Treasury yields above 4.30 percent as MBS once again sold off across the coupon stack. The recent surge in U.S. mortgage rates to anywhere between 10-month and two-decade highs, depending on who you ask, has pushed housing affordability to the lowest level in nearly four decades. Yesterday also brought another troubling sign for the Chinese economy as Beijing authorities are said to have told state-owned banks to step up intervention in the currency market in a push to prevent a surge in yuan volatility.

With no major data releases or Fedspeak today, the market will be left to its own devices. We begin the day with Agency MBS prices better from Thursday afternoon by .250, the 10-year yielding 4.22 after closing yesterday at 4.31 percent, and the 2-year at 4.91: yield curve inversion is alive and well without a recession.

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Source: mortgagenewsdaily.com

Apache is functioning normally

August 14, 2023 by Brett Tams

A bank capital proposal issued by the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency has many in the housing policy community concerned that revised risk weights for bank-held mortgages could further erode banks’ market share in residential mortgages.

Bloomberg News

Many components of the capital rules that federal regulators proposed last month last month have elicited questions and concerns from in and around the banking sector, but none more than the treatment of single-family mortgages.

Trade groups representing banks and various parts of the mortgage industry have come out against the rules, as have housing affordability advocates. These groups say the impact of the proposed rule changes would be felt by the housing sector more so than the banks themselves.

“In the housing sector, which has just been in a sort of boxing ring getting punched, one after another, and getting exhausted from all that’s coming at them, this one is pretty incredible,” said David Stevens, a long-time mortgage executive who now heads Mountain Lake Consulting in Virginia. “We thought the current Basel rule made sense, but this one’s going to have downstream effects that are going to be very broad in the housing system.”

The change is expected to have at least a moderate impact on banks’ willingness to originate. While banks have been steadily ceding market share to independent mortgage banks and other nonbank lenders since the subprime mortgage crisis, they still play a key role in the so-called jumbo mortgage market, which consists of loans too large to be securitized and sold to the government sponsored enterprises Fannie Mae and Freddie Mac.

“The big, traditional mortgage lending banks have largely exited the field and that’s been going on for some time. This is the next nail in the coffin,” said Edward Pinto, director of the AEI Housing Center at the American Enterprise Institute. “This nail will make it harder for banks to compete with Fannie and Freddie, generally, and then take the one market they’ve had left to themselves, the jumbo market, and make it harder to originate because of the capital requirements.”

Some policy experts say the bigger impacts could come from the second-order effects of the regulation. In particular, they point to the treatment of mortgage servicing assets — the salable right to collect fees for providing day-to-day services to mortgages — as a change that could crimp the flow of credit throughout the housing finance sector and lead to higher costs being passed along to individual households.

“With potential borrowers already facing record high interest rates, steep home prices, and supply-chain issues, increased fees and scarcity of bank lenders could be another brick in the wall stopping Americans from obtaining meaningful homeownership and wealth creation,” said Andy Duane, a lawyer with mortgage-focused law firm Polunsky Beitel Green.

The proposal, put forth by the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller on the Currency, notes that the rule change could result in second-order effects on other banks, but it largely focuses on benefits that large banks could enjoy relative to smaller banks as a result of the new rules. It notes that such risks are offset by a requirement that banks adhere to both the new framework and the existing one, to ensure they do not see their regulatory capital levels dip below that of the standardized approach.

Still, the regulators are aware that the change could have unintended consequences on the mortgage industry and housing attainability. Because of this, their proposal includes several questions about the subject.

“We want to ensure that the proposal does not unduly affect mortgage lending, including mortgages to underserved borrowers,” Fed Vice Chair for Supervision Michael Barr said while introducing the proposal in an open meeting last month. He added that housing affordability was one of “several areas that I will pay close attention to and encourage thoughtful comments.”

However, the proposal dismissed the idea that the new risk weights on residential mortgages would have a material impact on bank lending in that space. Citing various policy papers, academic studies and regulatory reports, the agencies assert that the risk-weight changes would lead banks adjusting their portfolios “only by a few percentage points.”

Stevens — who served as an assistant secretary in the Department of Housing and Urban Development in the Obama administration, a commissioner for the Federal Housing Administration and president of the Mortgage Bankers Association — said he is not convinced regulators have done sufficient analysis to rule out the type of sweeping, negative implications that he and others fear. He noted that the 1,087-page proposal includes fewer than 20 pages of economic analysis.

“I just don’t think they’ve thought through the downstream effects and the lack of analysis, in terms of actual financial estimates of the implications, is really concerning,” He said. “This will be a really big change, and that’s why you see everybody up in arms and the trade groups aligned against this proposal.”

Like other components of the bank regulators’ Basel III endgame proposal, the components related to mortgages would create standardized capital rules for large banks and do away with the ability for large institutions to use internal models. It also extends these requirements to all banks with more than $100 billion of assets, rather than only the largest, global systemically important banks.

The key provision in the package of proposed rules is the use of loan-to-value, or LTV, ratios to determine risk-weights for residential mortgage exposure.

The change could allow banks to hold less capital against lower LTV mortgages, though there is some skepticism about much of a reduction in capital that change will ultimately entail, especially for GSIBs that previously relied on internal models, said Pete Mills, senior vice president of residential policy for the Mortgage Bankers Association.

“Those risk weights aren’t published, so we don’t know what they are, but they are probably lower than 50% for low-LTV products,” Mills said.

The Basel Committee’s latest regulatory accord, which was finalized in December 2017, envisions LTV ratios as a means of assigning risk weights. But Mills said many in the mortgage banking space were caught off guard by how much further U.S. regulators went beyond their global counterparts. The joint proposal from the Fed, FDIC and OCC calls for a 20 percentage point increase across all LTV bands, meaning while mortgages with LTVs below 50% are assigned a 20% risk-weight under the Basel rule, the U.S. proposal calls for a 40% risk-weight. Similarly, where the Basel framework maxes out at a 70% risk-weight for mortgages with LTVs of 100% or more, the U.S. version has a top weight of 90%.

Under the current rules, most mortgages in the U.S. are assigned a 50% risk weight, so loans with LTVs between 61% and 80% would see their capital treatment stay the same, and any mortgages with LTVs of 60% or lower would see a lower capital requirement. Loans with an LTV of 80% or higher, meanwhile, would likely see a higher capital requirement.

“For GSIBs, that’s probably an increase in capital throughout the LTV rank,” Mills said. “For the rest, it’s a higher risk weight for higher-LTV mortgages and maybe slightly lower in other bands, but, in aggregate, that’s not good for the mortgage market. It’s a higher risk weighting for most mortgages.”

Approximately 25% of first-lien mortgages held by large banks began with an LTV of 80% or higher, according to data compiled by the Federal Reserve Bank of Philadelphia. Roughly 10% have an LTV of 90% or higher, while half were 70% or lower.

Mark Calabria, former head of the Federal Housing Finance Agency, said he is not surprised by the proposed treatment of mortgages, calling it a “natural evolution” of where regulators have been moving. He added that some elements of the proposal resemble changes he oversaw at Fannie Mae and Freddie Mac in 2020.

Calabria said mortgage risk is an issue in the financial system in need of regulatory reform, but he questions the methods being considered by bank regulators.

“I worry that they’re making the problem in the system worse by driving this risk off the balance sheets of depositories, which is probably actually where it should be in the first place,” he said. “I’m not opposed to them tinkering in this space they just need to be more holistic about it.”

The proposal also notes that the new treatment of residential mortgages is aimed at preventing large banks from having an unfair advantage over smaller competitors.

“Without the adjustment relative to Basel III risk weights in this proposal, marginal funding costs on residential real estate and retail credit exposures for many large banking organizations could have been substantially lower than for smaller organizations not subject to the proposal,” the document notes. “Though the larger organizations would have still been subject to higher overall capital requirements, the lower marginal funding costs could have created a competitive disadvantage for smaller firms.”

Yet, while regulators say the proposed rules promote a level playing field, some see it giving an unfair advantage to government-backed lenders.

Pinto sees the proposal as a continuation of a decades-long trend of federal regulators putting private lenders at a disadvantage to the governmental and quasi-governmental entities. He noted that if securities from Fannie and Freddie and loans backed by the FHA and Department of Veterans Affairs, which tend to have very high LTVs, are not given the same capital treatment as private-label mortgages, the net result will be the government playing an even larger role in the mortgage market that it already plays.

Pinto said despite these government programs targeting improved affordability, their provision of easy credit only drives up the cost of housing even further. He added that he hopes regulators reverse course on their treatment of mortgages in their final rule.

“They should just back off on this entirely. It’s inappropriate,” Pinto said. “They need to look at the overall impact they’re having on the mortgage market, and the housing and the finance market, and the role of the federal government, and the fact that the federal government is getting larger and larger in its role, which is inappropriate.”

The other concern is a lower cap on mortgage servicing assets that can be reflected in a bank’s regulatory capital. The proposal would see the cap changed from 25% of Common Equity Tier 1 capital to 10%.

Mills said the capital charge for mortgage servicing rights is already “punitive” at a risk weight of 250%. By lowering the cap, he said, banks will be forced to hold an additional dollar of capital for every dollar of exposure beyond that cap. He noted that regulators had raised the cap to 25% five years ago for banks with between $100 billion and $250 billion of assets to provide some relief to large regional banks interested in that market.

If the cap is lowered, Mills said banks will be inclined to shed assets and shy away from mortgage servicing assets. Such moves would force pricing on servicing rights broadly, a trend that would ultimately lead to higher costs for borrowers.

“MSRs are going to be sold into a less liquid, less deep market, and there are consumer impacts here because MSR premiums are embedded in every mortgage note interest rate,” Mills said. “If MSR values are impacted by this significantly, that rolls downhill through the system. An opportunistic buyer might be able to buy rights at a depressed value, but that depressed value flows through to the consumer in the form of a higher interest rate.”

The proposal will be open to public comment through the end of November, after which regulators will review the input and incorporate elements of it into a final rule. Between the questions raised in the proposal, the acknowledgement by Fed and FDIC officials that the changes could hurt housing affordability, and the strong negative response to the proposal, there is optimism that the ultimate treatment of residential mortgages will be less impactful.

“Nobody seems to be pushing for this, and nobody other than the Fed seems to like it,” Calabria said. “If I was a betting man, it’s hard for me to believe that this is finalized the way it is now in terms of mortgages.”

Source: nationalmortgagenews.com

HELOC, Manufactured, Technology, Marketing, and Digital Tools; Central Banks and Inflation

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Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

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Hedging Webinar; Home Insurance Nightmare; GSE Changes; Interview with Henry Broeksmit on Youth in the Industry

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