Representations and warranties Archives

Apache is functioning normally

February 9, 2024 by Brett Tams

AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

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AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

By:
Rob Chrisman

Thu, Feb 8 2024, 11:17 AM

Economists have their favorite indices to measure the health of the economy. GDP, if men are buying underwear, CPI, RV shipments, GDP, plastic surgery appointments, PCE, hemlines… tomorrow on The Mortgage Collaborative’s Rundown Skylar Olsen, the Chief Economist of Zillow, will discuss some of this, and more, for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”. Meanwhile, lenders are shifting the focus from things they can’t change to things they can: changing regional managers comp plans to incorporate profits instead of volume. Or honing marketing systems now, not when rates drop further and opening up refi opportunities. Or shifting to paying less for a refi and putting the difference into rate sheet pricing. And who’s buying the properties we’re lending on? Women. Okay, that was a bold generalization, but still… (Today’s Commentary podcast can be found here and this week’s is sponsored by Vesta, the new, modern Loan Origination System (LOS) which helps lenders reduce their costs to originate and improve their ability to integrate with new technologies in the ecosystem. Hear an interview with Ally Home’s Glenn Brunker on what’s happening in the housing market and what to expect going into spring homebuying season.)

Lender and Broker Software, Products, and Services

Matic, a digital home insurance platform built for the mortgage industry, recently announced an exclusive partnership with PRMG to extend their marketplace of over 40 A-Rated carriers into PRMG customer offerings. PRMG joins over 100 mortgage lenders, servicers and banks, representing 20 percent of home loans processed in the U.S., that partner with Matic to integrate the insurance shopping experience into the homeownership lifecycle. Now more than ever, mortgage leaders are turning to Matic to help them offer value to customers, generate revenue, and reduce costs in a tough housing market. Mortgage leaders, don’t miss out: book a demo with Matic to discover how to add an ancillary revenue stream that removes friction from the insurance process and keeps customers within your existing systems. And if you’re attending MBA’s Servicing Solutions Conference in two weeks, stop by booth 806 to learn more! Book a demo with Matic.

Only 60 days since launch and already 150+ mortgage originators have signed up to receive daily mandatory bids from MAXEX on bulk pools of Agency-eligible non-owner occupied (NOO) and second home loans. Moreover, we’re currently winning more than 10 percent of the loans bid! Why? Because our unique loan exchange model provides access to competitive pricing from five leading institutional buyers, allows you to underwrite to agency guidelines, and helps you avoid costly Agency LLPAs—all within a single contract and through a single, standardized clearinghouse. This seamlessly integrates with your existing bulk trading process. Visit here to learn more.

We live in a world of autopay, Apple Pay, Venmo, Uber Eats… the list goes on. If borrowers can pay for a pizza online, why are we still asking them to share their credit card info over the phone? Get with the times and collect upfront fees via text with Fee Chaser by LenderLogix.

TPO Products for Broker and Correspondent

“Button Finance is a leading home equity lender specializing in HELOCs and Closed-End Seconds, offering lucrative opportunities for our partners. Correspondent partners can earn 7.85 percent of the loan balance, while brokers can make 5 percent. Additionally, we offer an attractive 3.5 percent Lender Paid Compensation on Texas 50a6 loans. Our services extend to lending against investment properties for brokers, ensuring a broad spectrum of lending solutions. With competitive 8 percent note rates on Closed-End Seconds and no appraisals up to a $250k loan balance, Button Finance is your go-to partner for all home equity lending needs. Email us for more information.”

Eighty percent of homeowners have first mortgage rates less than 4 percent. However, they are sitting on over $10 trillion of tappable equity. HELOC originations provide an outstanding opportunity for lenders and their LOs. Every homeowner receives HELOC solicitations. If it’s not from YOU, then WHO? Depending on YOUR borrowers, this may be the ideal time for them to make home improvements or pay off credit card debt. Or it may be the right time for that dream vacation. NFTYDoor, a division of Homebridge, is a proprietary digital HELOC platform that provides on-demand access to YOUR borrower’s equity. Customers want an experience that is simple and fast, and through NFTYDoor, HELOCs can close in a few days, not weeks or months. Embrace the “Customer for Life” strategy with NFTYDoor’s platform that is 100 percent branded to you. Stay in front of your customers and recapture future business. Contact NFTYDoor today.

STRATMOR and Operations

Forecasters are predicting modest growth in new and existing home sales in 2024, which means we can all look ahead with cautious optimism. Now’s the time to review your operations and prepare for this modest shift back toward normalcy. Senior Operations Executives: STRATMOR Group is hosting its virtual Operations Workshop next week, February 14-16, to help you do just that. Interact with STRATMOR advisors and your peer lenders to discuss improving operational efficiency, overcoming recent challenges and pain points, and current trends in mortgage operations. Contact STRATMOR Group to learn more and sign up.

Conventional Conforming News

The Federal Housing Finance Agency’s 2024 scorecard for the government-sponsored enterprises included a new provision for representations and warranties. “Explore opportunities to harmonize the enterprises’ processes supporting the single-family selling representations and warranties framework, including defect identification, remedies and repurchase alternatives,” the scorecard states.

Fannie Mae’s (FNMA/OTCQB) December 2023 Monthly Summary is now available and contains information about Fannie Mae’s monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, and serious delinquency rates. There’s also Fannie’s Home Purchase Sentiment Index® (HPSI) which increased to its highest level since March 2022, due primarily to increased consumer confidence in job security and another significant jump in the share of consumers expecting mortgage rates to decrease. An all-time survey-high 36 percent of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28 percent expect them to go up, and 35 percent expect rates to remain the same. (Seems pretty even to me.)

Fannie Mae is updating the Uniform Loan Delivery Dataset (ULDD) to provide further guidance on implementation and mandate dates associated with the data enhancements included in the ULDD Phase 5 specification published on Sept. 12, 2023. Review the announcement for an overview on the implementation and mandate dates associated with business-critical and UAD 3.6 alignment data enhancements for the Phase 5 data requirements.

Pennymac is aligning with Freddie Mac Bulletin 2023-19, announcing updates to their rental income requirements. The updates are effective with loan deliveries on or after 03/15/2024. Details are available in Pennymac Correspondent Announcement 24-06.

National MI announced updates to the TrueGuide which include the following changes and clarifications: AUS Loans Automated Tools have been updated as follows: Fannie Mae Appraisal Waiver has been updated to reflect the name change to “Value Acceptance.” Fannie Mae Income Calculator for self-employment income has been added as an approved income and asset tool. Non-AUS Loans have been updated as follows: Jumbo and Medical Professional Program loan limit increases. Verbal Verification of Employment updated to align with the GSEs’ requirements. Underwriting Guidelines detailing these changes and clarifications will be posted to nationalmi.com in the near future.

AmeriHome Mortgage Announcement 20240111-CL summarizes previously published changes made during January, additional changes made with this announcement, and recent Agency and regulatory news.

Citizens Correspondent National Bulletin 2024-02 includes information on Value Acceptance + Property Data – DU (Delegated Transactions only). Effective February 1st, Conventional Conforming Updates and Disaster Tax Filing Relief. See the bulletin for additional information and all lock, delivery, and purchase by dates, if required.

Capital Markets

Need a crash course in Assignment of Trade (AOT) executions? In this blog post, Assignment of Trade Executions 101, MCT experts delve into the process of AOT executions, the impact of bid tape AOT on to-be-announced (TBA) positions, and how automation is moving the industry forward. The blog also reviews the cost savings associated with bid tape AOT executions and the MCT Marketplace technology used to complete these transactions. To learn more about MCT Marketplace, view the recent video with MCT’s CEO & President, Curtis Richins. In the video, Mr. Richins reviews key features of MCT Marketplace, opportunities within the platform for buyers and sellers, and a roadmap for the future.

Even with all the selling in the bond markets last Friday after January’s payrolls data came in much stronger than expected, yields have merely moved back to where they had been for most of the year so far. Most security prices are determined by supply and demand, and yesterday witnessed a strong sale of 10-year Treasuries at the record $42 billion 10-year Treasury auction.

But bonds barely budged! Sentiment was dominated by fears surrounding NY Community Bank. Do you remember when the spreads between Treasury securities and MBS “blew out” last March with the banks having to sell MBS? We may see that again with the NYCB possibly selling part or all of Flagstar’s billions in mortgage holdings. In news of interest to loan originators, FNMA’s Home Purchase Sentiment Index recorded another impressive gain for the second straight month to post the highest level since March 2022.

Today’s calendar kicked off with weekly jobless claims (218k, about as expected, 1.871 million continuing claims… the job market continues to be strong). Later are wholesale inventories and sales for December, several Treasury auctions that will be headlined by $25 billion 30-year bonds, Freddie Mac’s Primary Mortgage Market Survey, and remarks from Richmond Fed President Barkin. We begin the day with Agency MBS prices about .125-.250 worse, the 10-year yielding 4.13 after closing yesterday at 4.15 percent, and the 2-year is at 4.44.

Jobs and Transitions

“Direct nationwide lender Kwik Mortgage, based out of Parsippany NJ, is hiring Distributed Retail Sales. We have outstanding support, and our platform is built for you, featuring Blend, Encompass, HubSpot, Loan Vision and Optimal Blue! We offer a full suite of correspondent buyers inclusive of Fannie Mae and Freddie is on the table for 2024! From FHA and VA to Non-QM we have it all! We have a very flat leadership structure which means customers are not paying for more and getting less! We invest in our people and our process, and we have 27 years of company owned and operated success! We are always competitively priced. Don’t worry about fulfillment execution we owned and operated one of the best loan fulfillment for pay businesses in the country, Equilibrium Mortgage Solutions! Contact Paul Campbell, EVP of Lending, (760-774-7704), Paul Campbell, LinkedIn! We are connected: a Fannie Mae diverse minority advisory board lender, The Mortgage Collaborative lender board member, MBA Policy, Servicing and Compliance committee participant! A Depository DE&I advisory board member! Get Kwik come join us! NY, NJ, PA, CT, MA, RI originators welcome.”

Stronghill Capital, LLC, an Austin, TX-based Wholesale and Correspondent lender, is NOW HIRING across the country! If you’re a relationship-focused Account Executive with experience in Non-QM and Investor Financing, including multi-family and mixed-use properties, we’d love to speak with you! Stronghill’s Account Executives enjoy open territories, multi-channel opportunities to work with clients as correspondents or brokers, and consistent communication and collaboration with the Executive Leadership team. If you’re looking to join a rapidly-growing, dynamic organization with a focused commitment to growth and expansion in Non-QM, reach out to our SVP of Sales, Matt Brammer at 440.382.3183 to learn more.

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Source: mortgagenewsdaily.com

Apache is functioning normally

November 27, 2023 by Brett Tams

Mortgage lender Fremont Investment & Loan announced today that it received default notices from the purchasers of $3.15 billion in residential subprime mortgages that it sold last March.

At the time of those transactions, the mortgage lender agreed that for two years following the effective date of the loan transactions its “tangible net worth” would remain at no less than $250 million.

But Fremont said today that its net tangible worth would likely fall below that mark when it reports fourth quarter results, and warned that further write-downs could exacerbate matters.

As a result, the struggling bank will either need to pay those investors the difference between the $250 million and their actual net worth, or provide a letter of credit for that amount.

However, Fremont warned that it wouldn’t be able to provide either, and said its future was in jeopardy as a result.

“At this time, the Company’s new management cannot confirm that Fremont General is able to satisfy the tangible net worth covenant as of December 31, 2007 due to its ongoing efforts to complete its 2007 consolidated financial statements,” the company said in a statement on its website.

“To the extent that litigation is pursued and the Company was not successful in defending any such lawsuit, its ability to continue to conduct business as a going concern would be called into question.”

The company’s new management has initiated discussions to seek a waiver, but a resolution has yet to be reached.

The investors have also requested that Fremont repurchase approximately $11 million of the loans sold due to alleged breaches of representations and warranties.

Last week, the Brea, CA-based company said it hired Credit Suisse and Sandler O’Neill & Partners LP to explore strategic options, including a possible sale of the company.

A year ago, Fremont was slapped with a cease and desist notice from the FDIC, who said the bank was operating without proper risk management policies.

Shares of Fremont fell 22 cents, or 31.32%, to 48 cents in early afternoon trading on Wall Street.

(photo: drachmann)

Source: thetruthaboutmortgage.com

Apache is functioning normally

October 27, 2023 by Brett Tams

FHFA revises current single-family mortgages backed by Fannie Mae, Freddie Mac (iStock)

Apache is functioning normally

October 18, 2023 by Brett Tams

Verifications provider Argyle announced its integration with Fannie Mae’s Desktop Underwriter (DU) program on Monday, becoming the first DU-authorized report supplier to offer automated income and employment verification reports based on consumer-permissioned, direct-source data.

The integration enables mortgage lenders to use Argyle’s income and employment verification solution to get Day 1 Certainty and relief from representations and warranties on validated data.

The real-time nature of the verifications could help lenders limit loan repurchases, said John Hardesty, general manager of mortgage at Argyle. “As soon as a borrower puts in their credentials, we have live data. From a buyback perspective, the lender can have confidence in the data from the second they run the report.”

Argyle’s coverage includes 85% of the U.S. workforce, and the company says it offers up to 80% lower verification costs than other data providers.

“At Fannie Mae, we continue to focus on improving the digital mortgage experience,” said Peter Skarnulis, Fannie Mae’s vice president of single-family digital management solutions. “This is another opportunity for lenders to automate income and employment data verification, which can make the mortgage process more efficient for both lenders and borrowers.”

Income and employment verification are critical parts of the mortgage loan process, especially as fraud continues to plague the industry. Argyle’s ability to go to the source of income and employment documents from payroll providers and employer sources gives lenders a huge boost in the fight against fraud, Hardesty said.

“From a fraud perspective, it’s easy to make a fake pay stub or other documents online — it’s one Google click away — so relying on consumers to provide this information is risky,” Hardesty said. “We’re pulling data from the source, and we can give lenders another view into income and employment that they’ve never had before.”

Argyle’s integration with Fannie Mae’s DU will be complete and available by the end of this month.

Source: housingwire.com

Apache is functioning normally

September 29, 2023 by Brett Tams

DBRS, Inc. (DBRS Morningstar) finalized its provisional credit ratings on the following Mortgage-Backed Notes, Series 2023-SRM1 (the Notes) issued by Brean Asset Backed Securities Trust 2023-SRM1:

— $109.3 million Class A at AAA (sf)
— $11.5 million Class M1 at AA (sf)
— $11.5 million Class M2 at A (sf)
— $15.7 million Class M3 at BBB (sf)
— $15.8 million Class M4 at BB (sf)
— $15.7 million Class M5 at B (sf)

The AAA (sf) credit rating reflects credit enhancement of 46.3% for Class A, AA (sf) credit rating reflects credit enhancement of 40.7% for Class M1, A (sf) credit rating reflects credit enhancement of 35.1% for Class M2, BBB (sf) credit rating reflects credit enhancement of 27.3% for Class M3, BB (sf) credit rating reflects credit enhancement of 19.6% for Class M4, and B (sf) credit rating reflects credit enhancement of 11.9% for Class M5.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower’s primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowner’s association dues, if applicable. Reverse mortgages are typically nonrecourse; borrowers don’t have to provide additional assets in cases where the outstanding loan amount exceeds the property’s value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans.

As of the August 31, 2023, cut-off date, the collateral has approximately $203.70 million in current unpaid principal balance (UPB) from 189 active and 46 inactive reverse mortgage loans secured by first liens on single-family residential properties, condominiums, multifamily (two- to four-family) properties, and co-operatives. The loans were all originated in 2006 and 2007 and were originally securitized in the SASCO 2007-RM1 transaction. All loans in this pool are floating-rate assets with an 8.79% weighted-average coupon.

As of the cut-off date, the loans in this transaction are both performing and nonperforming (i.e., active and inactive). There are 189 performing loans, representing 79.85% of the total UPB. As for the 46 nonperforming loans, 19 loans are referred for foreclosure or in foreclosure (9.62% of the balance), eight are in default (2.50%), seven are liquidated/held for sale (3.21%), and 12 are called due following recent maturity (4.82%). None of the loans are insured by the United States Department of Housing and Urban Development (HUD); therefore, inactive loans (including the currently inactive loans) do not benefit from the typical insurance claim that HUD-insured loans experience.

The transaction uses a structure in which cash distributions are made sequentially to each rated note until the rated amounts with respect to such notes are paid off. No subordinate note shall receive any payments until the balance of senior notes has been reduced to zero.

DBRS Morningstar’s credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated Notes are the related Note Amount and Interest Accrual Amounts.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Rating and Monitoring U.S. Reverse Mortgage Securitizations (July 17, 2023; https://www.dbrsmorningstar.com/research/417277).

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

— Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023),
https://www.dbrsmorningstar.com/research/415687

— Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008

— Operational Risk Assessment for U.S. RMBS Originators (August 31, 2023),
https://www.dbrsmorningstar.com/research/420106

— Operational Risk Assessment for U.S. RMBS Servicers (August 31, 2023),
https://www.dbrsmorningstar.com/research/420107

— Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023),
https://www.dbrsmorningstar.com/research/414076

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

Source: dbrsmorningstar.com

Apache is functioning normally

September 4, 2023 by Brett Tams

DBRS, Inc. (DBRS Morningstar) finalized its following provisional ratings on the Mortgage Pass-Through Certificates, Series 2023-DSC2 (the Certificates) to be issued by J.P. Morgan Mortgage Trust 2023-DSC2 (JPMMT 2023-DSC2):

— $201.2 million Class A-1 at AAA (sf)
— $201.2 million Class A-1-A at AAA (sf)
— $201.2 million Class A-1-A-X at AAA (sf)
— $201.2 million Class A-1-B at AAA (sf)
— $201.2 million Class A-1-B-X at AAA (sf)
— $201.2 million Class A-1-C at AAA (sf)
— $201.2 million Class A-1-C-X at AAA (sf)
— $32.0 million Class A-2 at AA (high) (sf)
— $32.0 million Class A-2-A at AA (high) (sf)
— $32.0 million Class A-2-A-X at AA (high) (sf)
— $32.0 million Class A-2-B at AA (high) (sf)
— $32.0 million Class A-2-B-X at AA (high) (sf)
— $32.0 million Class A-2-C at AA (high) (sf)
— $32.0 million Class A-2-C-X at AA (high) (sf)
— $34.5 million Class A-3 at A (sf)
— $34.5 million Class A-3-A at A (sf)
— $34.5 million Class A-3-A-X at A (sf)
— $34.5 million Class A-3-B at A (sf)
— $34.5 million Class A-3-B-X at A (sf)
— $34.5 million Class A-3-C at A (sf)
— $34.5 million Class A-3-C-X at A (sf)
— $14.8 million Class M-1 at BBB (low) (sf)
— $10.8 million Class B-1 at BB (low) (sf)
— $7.9 million Class B-2 at B (low) (sf)

Classes A-1-A-X, A-1-B-X, A-1-C-X, A-2-A-X, A-2-B-X, A-2-C-X, A-3-A-X, A-3-B-X, and A-3-C-X are interest-only(IO) exchangeable certificates. The class balances represent notional amounts.

Classes A-1-A, A-1-B, A-1-C, A-2-A, A-2-B, A-2-C, A-3-A, A-3-B, and A-3-C are also exchangeable certificates.

The exchangeable classes can be exchanged for combinations of depositable certificates as specified in the offering documents.

The AAA (sf) ratings on the Certificates reflect 34.70% of credit enhancement provided by subordinated certificates. The AA (high) (sf), A (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 24.30%, 13.10%, 8.30%, 4.80%, and 2.25% of credit enhancement, respectively.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

This transaction is a securitization of a portfolio of fixed- and adjustable-rate, investor debt service coverage ratio (DSCR; 92.0%) and conventional (8%), first-lien residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 950 mortgage loans (representing 1,546 properties) with a total principal balance of $308,148,236 as of the Cut-Off Date (August 1, 2023).

JPMMT 2023-DSC2 represents the third securitization issued from the JPMMT-DSC shelf (the first of such rated by DBRS Morningstar), which is generally backed by business-purpose investment property loans primarily underwritten using DSCR. J.P. Morgan Mortgage Acquisition Corp. (JPMMAC) serves as the Sponsor of this transaction.

The mortgage loans were underwritten to program guidelines for business-purpose loans that are designed to rely on property value, the mortgagor’s credit profile, and predominantly the DSCR, where applicable. Since the loans were made to investors for business purposes, they are exempt from the Consumer Financial Protection Bureau’s Ability-to-Repay (ATR) rules and the TILA/RESPA Integrated Disclosure rule.

JPMMAC, acquired (or in advance of closing, will have acquired) the loans directly from originators, or in other cases certain third-party initial aggregators (B4 Residential Mortgage Trust, Series I, B4 Residential Mortgage Trust, Series IV, (together, B4), MAXEX Clearing LLC (MAXEX) ,and Oceanview Dispositions, LLC (Oceanview) that directly or indirectly acquired other mortgage loans. On the closing date, JPMMAC will sell all of its interest in the mortgage loans to the depositor. Various originators, each generally comprising less than 15% of the pool (except LendingOne LLC with 17.7%), originated the loans. As further detailed in this report, DBRS Morningstar did not perform individual originator reviews for the purpose of evaluating the mortgage pool.

The Sponsor, or a majority-owned affiliate, will retain an eligible vertical interest representing at least 5% of the aggregate fair value of the Certificates, other than the Class A-R Certificates, to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. Such retention aligns Sponsor and investor interest in the capital structure.

On any date following the date on which the aggregate unpaid principal balance (UPB) of the mortgage loans is less than or equal to 10% of the Cut-Off Date balance, the Optional Clean-Up Call Holder will have the option to terminate the transaction by directing the Master Servicer to purchase all of the mortgage loans and any real estate owned (REO) property from the Issuer at a price equal to the sum of the aggregate UPB of the mortgage loans (other than any REO property) plus accrued interest thereon, the lesser of the fair market value of any REO property and the stated principal balance of the related loan, and any outstanding and unreimbursed servicing advances, accrued and unpaid fees, any non-interest-bearing deferred amounts, and expenses that are payable or reimbursable to the transaction parties.

Of note, the representations and warranty (R&W) framework of this transaction, while still containing certain weaknesses, does utilize certain features more closely aligned with post-crisis prime transactions, such as automatic reviews at 120-day delinquency and the use of an independent third party R&W reviewer. For this, and other reasons as further detailed in Representations and Warranties section of the rating report, this framework is perceived as stronger than that of a typical Non-QM/DSCR transaction..

NewRez LLC d/b/a Shellpoint Mortgage Servicing will act as the Servicer for all of the loans following the servicing transfer date. Shellpoint currently services 44.9% of the pool. Prior to the servicing transfer date, Fay and Selene service 44.6% and 10.5% of the pool, respectively, as Interim Servicers. Computershare Trust Company, N.A. (rated BBB with a Stable trend by DBRS Morningstar) will act as the Paying Agent, Certificate Registrar, and Custodian.

For this transaction, the Servicer will fund advances of delinquent principal and interest (P&I) until loans become 120 days delinquent or are otherwise deemed unrecoverable. Additionally, the Servicer is obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties (servicing advances). If the Servicer fails in its obligation to advance, the Master Servicer is obligated to make such advance to the extent it deems the advance recoverable. If the Master Servicer fails in its obligation to advance, the Securities Administrator is obligated to make such advance to the extent it deems the advance recoverable.

The transaction employs a sequential-pay cash flow structure with a pro rata principal distribution among the senior classes (Classes A-1, A-2, and A-3) subject to certain performance triggers related to cumulative losses or delinquencies exceeding a specified threshold (Trigger Event). Prior to a Trigger Event, principal proceeds can be used to cover interest shortfalls on Classes A-1, A-2, and A-3 before being applied to amortize the balances of the Certificates. After a Trigger Event, principal proceeds can be used to cover interest shortfalls on Classes A-1 and A-2 sequentially (IIPP). For the more subordinate Certificates, principal proceeds can be used to cover interest shortfalls as the more senior Certificates are paid in full.

Excess spread, if available, can be used to cover (1) realized losses and (2) cumulative applied realized loss amounts preceding the allocation of funds to unpaid Cap Carryover Amounts due to Classes A-1 down to A-3. Interest and principal otherwise payable to Class B-3 interest and principal may be used to pay the Cap Carryover Amounts.

The rating reflects transactional strengths that include the following:
— Improved underwriting standards;
— Certain loan attributes;
— Robust pool composition;
— Satisfactory third-party due-diligence review; and
— 100% of the loans are current by MBA definition.

The transaction also includes the following challenges:
— 100% investor loans;
— Four-month servicer advances of delinquent P&I; and
— Representations and warranties framework.

The full description of the strengths, challenges, and mitigating factors are detailed in the related report.

DBRS Morningstar’s credit ratings on the Certificates address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the rated Certificates are the Interest Distribution Amount, Interest Carryforward Amount, and the Class Principal Amount.

DBRS Morningstar’s credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. For example, in this transaction, DBRS Morningstar’s ratings do not address the payment of any Cap Carryover Amount based on its position in the cash flow waterfall.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (August 9, 2023; https://www.dbrsmorningstar.com/research/418987).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

— Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules (April 28, 2023; https://www.dbrsmorningstar.com/research/413297)

— Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

— Third-Party Due-Diligence Criteria for U.S. RMBS Transactions (September 11, 2020; https://www.dbrsmorningstar.com/research/366613)

— Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023; https://www.dbrsmorningstar.com/research/414076)

— Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

— Operational Risk Assessment for U.S. RMBS Originators (July 17, 2023; https://www.dbrsmorningstar.com/research/417275)

— Operational Risk Assessment for U.S. RMBS Servicers (July 17, 2023; https://www.dbrsmorningstar.com/research/417276)

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

Source: dbrsmorningstar.com

Apache is functioning normally

July 9, 2023 by Brett Tams

The largest institutional single-family rental (SFR) operator in the country, Invitation Homes, is in the hot seat over its alleged failure to comply with building-permit requirements for rental properties it owns in California.

Another larger player in the space, Progress Residential, recently postponed a securitization transaction due to difficult market conditions. And yet another big force in the market, FirstKey Homes, is pulling collateral out of a 2021 securitization deal.

These developments—and more—can be seen as cracks in the armor of a housing-industry sector that rose out of the ashes of the Great Recession and grew to become a thriving alternative for individuals locked out the home-purchase market by rapidly rising prices.

The market stresses facing the SFR sector now include decelerating rents, a rising cost of capital and a shortage of homes available to purchase — which has slowed property acquisitions and related securitization deals that help market players regenerate capital.

David Petrosinelli, a New York-based senior trader with InspereX, a tech-driven underwriter and distributor of securities that operates multiple trading desks around the country, said he expects the securitization market for institutional SFR players to “approximate a more normal market by summertime.”

“But the caveat, of course, is that all bets are off if there’s a more meaningful contraction in lending [in the wake of recent bank failures and other economic factors] because then you’re in serious trouble,” Petrosinelli added.

Inviting an SFR lawsuit

Invitation Homes earlier this year failed to convince a judge to dismiss a pending whistleblower lawsuit filed against the company in federal court in San Diego that alleges it made improvements at scores of properties in California without first securing required building permits.

The lawsuit claims further that the company “ignored permitting laws to avoid fees and increased taxes as well as to get renovated homes on the rental market as soon as possible.” The whistleblower litigation, known as a qui tam action — which allows private parties to sue on behalf of the United States — was filed under seal in state court in California in 2020 and moved last year to federal court — where the judge’s ruling denying dismissal of the case was handed down in January of this year.

The lawsuit is filed as a false-claims action on behalf of some 18 California cities by an entity called Blackbird Special Projects LLC, which discovered the alleged violations based on its examination of public records using artificial intelligence software. If successful in the litigation, Blackbird stands to get a cut of any recoveries for the local governments.

“To support these assertions, [Blackbird] used proprietary software to scour different rental listing websites such as Zillow.com and [Invitation Home’s] website to identify homes owned by defendant,” pleadings in federal court state. “[Blackbird] then used its proprietary ‘lookback’ technology to access pre-renovation images of the homes from a multiple listing service and compare them with post-renovation images from the rental advertisements.”

Invitation Homes declined to comment on specific allegations raised in the lawsuit, but a company spokesman did say the “allegations are without merit, and we intend to vigorously defend the company.”

“Invitation Homes is currently the largest owner of single-family, rental homes in the United States, with most of its homes located in California, Florida, Georgia, Texas and other Sun Belt states,” the federal lawsuit states. “In California, as of December 31, 2019, defendant [Invitation Homes] owned 12,461 single-family homes in over 100 cities.

“… By its failure to pay or remit inspection, permit fees, penalties and interest, Invitation Homes has defrauded cities and counties in California millions of dollars.”

By “renovating thousands of homes” absent obtaining building permits, pleadings in the case allege, Invitation Homes was able to “avoid revaluations that would have happened if permits were obtained, thus evading increased property taxes on improved properties.”

The Invitation Homes’ case is being watched closely by some players in the secondary market, where large SFR operators like Invitation Homes raise funds through securitization deals backed by their rental properties.

“The reason this matters is they [Invitation Homes] make representations and warranties into their securitization trusts that all work improvements are permitted,” explained Ben Hunsaker, a portfolio manager focused on securitized credit for California-based Beach Point Capital Management. “So, there are points where they may have to refinance securitization debt if this [litigation] goes sideways for them with unsecured corporate debt, and they go from 1% or 2% cost of capital to 7% or 8% cost of capital, and they also have to worry about their ratings then.”

Invitation Homes (IH) spent about $25,000 on renovations per home for its California SFR portfolio, pleadings in the lawsuit state.

“The vast majority of IH’s renovations required permits — including for demolishing and constructing sections of single-family homes, installing and demolishing pools, and significantly altering the electrical work— but permits were not obtained,” court pleadings allege. “Once the single-family homes were renovated without the required permits, IH rented them to tenants who were unaware of the unpermitted and potentially unsafe renovations.”

The federal judge now overseeing the case earlier this year denied a motion lodged by Invitation Homes seeking to have the case dismissed. As part of that ruling, the judge made clear that he wasn’t going to entertain any arguments by the defendant seeking to shift blame to contractors for failing to secure the building permits.

The judge states in his ruling, essentially, that even if independent contractors are responsible for the alleged failure to obtain building permits, that fact alone doesn’t absolve Invitation Homes of the responsibility to “do the investigating itself” to ensure permits were issued.

Industrywide turbulence

The lawsuit against Invitation Homes is not the only dark cloud hanging over the institutional SFR sector.

The securitization market for institutional SFR companies, which collectively represent some 5% of an SFR market composed of some 17 million properties, is currently in the doldrums. That’s largely due to a lack of housing available to purchase, and consequently a lack of new assets to securitize, according to market expert L.D. Salmanson.

Salmanson is CEO of Cherre, a data-integration and insights platform that works with major players in the real estate market, including insurers, asset managers, lenders and SFR operators. The company serves as a data warehouse and deep analytics platform that integrates client data with other public and private data sources to create powerful market assessment and forecasting tools.

“First of all, there’s been a massive slowdown in the purchase rate for the large [SFR] players,” Salmanson said. “What’s been causing the slowdown is not the [flat to decelerating] rental prices, although that is affecting it.

“Rather, it’s that there are a lot less people selling because they’re not getting the [higher] prices that they’re looking for [as home prices decelerate]. But that’s temporary. That’s not going to last.”

Last year, there were a total of 15 securitization deals involving large institutional SFR players valued in total at $10.3 billion, according to data tracked by Kroll Bond Rating Agency (KBRA). This year, so far, there has been one offering, a $343 million securitization deal by Progress Residential (Progress 2023-SFR1) that closed in late February, KBRA data show.

Yet even Progress, which has a portfolio of some 83,000 SFR properties, appears to be caught up in the SFR securitization stagnation. Hunsaker said one major SFR player a few weeks ago postponed a securitization deal, pulling it off the market prior to pricing due to market conditions.

That player, according to industry sources, was Pretium Partners-backed Progress Residential, and the deal was Progress 2023-SFR2.

Hunsaker added that another potential drag on the institutional SFR market is the fact that some single-family rental (SFR) operators are backed by investment firms that also invest in the commercial real estate market, which he said also is facing stiff headwinds now — particularly in the office and multifamily sectors.

For example, Bridge Investment Group Holdings early last year acquired Gorelick Brothers Capital’s estimated 2,700 SFR-property portfolio spread across 14 markets concentrated in the Sunbelt and Midwest. Bridge’s portfolio also includes investments in office and multifamily properties.

Likewise, SFR operator FirstKey Homes, with a portfolio of some 45,000 SFR properties under management, is an affiliate of Cerberus Capital Management, a global investment firm with approximately $60 billion in assets across credit, private equity as well as residential and commercial real estate interests.

KBRA reported last month that FirstKey Homes exercised a so-called “excess collateral release” [ECR] feature for a securitization deal dubbed FirstKey Homes 2021-SFR1. It was the first such ECR exercised across the 12 KBRA-rated securitization deals to date that have included such a provision.

“In connection with the subject transaction … the issuer requested release [via the ECR] of 729 properties from the collateral pool of 9,218 properties,” KBRA’s report notes. “Post release, the remaining 8,489 properties will collateralize the same debt of $2.06 billion [due to increased home values].

“…The analysis indicated that the [exercise of the] ECR, in and of itself, would not result in a downgrade.”

Hunsaker said for many SFR operators facing uncertainty now, the solution is to stop buying new properties if they believe their cost of capital is rising too much — absent home prices dropping enough in the future to make the numbers work.

“I think most of these [SFR operators] are capitalized for longer-term [property] holding incentives [and] … I don’t think these structures are set up to be forced sellers,” Hunsaker said.

He added that healthy home-price appreciation to date made it possible for FirstKey Homes to release the excess collateral from the 2021 securitization deal.

“But they weren’t releasing that excess collateral to sell the houses,” he stressed. “They’re releasing that excess collateral to put it on their balance sheet and reduce the amount of encumbered debt they have.”

FirstKey Homes does not share financial details about its operations for competitive reasons, a company spokesman said when asked to comment on the ECR transaction.

“What’s vital to remember is that across the SFR sector, investors are still active, albeit a bit more selective, with the belief SFR provides durable cash flows and stable occupancies,” the FirstKey spokesman added. “Additionally, with household formations significantly outpacing the decades-long low housing supply, it bodes well for continued strong demand for the high-quality single-family rental homes we provide our family of residents.”

Source: housingwire.com

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Apache is functioning normally

Apache is functioning normally

Mortgage rates affecting affordability, buyers advised to build up down payments

Housing market showing lackluster activity

Apache is functioning normally

Apache is functioning normally

Inviting an SFR lawsuit

Industrywide turbulence

Small lenders face onslaught of agency loans returned to sender

AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

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Mortgage rates affecting affordability, buyers advised to build up down payments

Housing market showing lackluster activity

Inviting an SFR lawsuit

Industrywide turbulence