We don’t know much so far about the election results besides the pollsters being, once again, wrong on a national scale, and (so far) yesterday being mostly gratifying for Republicans. I have one question: After this quarantine… Will the producers of My 600-Lb. Life just find me, or do I find them? My weight isn’t the only thing changing. According to the Emerging Trends in Real Estate 2021 report, COVID-19 has made lower-density areas for both residential and commercial real estate more appealing and is accelerating suburban growth, especially in Sun Belt markets. Growth in the suburbs has been a consistent trend in the report for the past five years, but new work-from-home policies and increased family formation among millennials are furthering this shift. Home buyers will look for suburban locales with low taxes, affordable housing, job opportunities, and auto-oriented transportation. The report also predicts cost-conscious companies will gravitate toward cities that also are affordable and business-friendly with growing workforces. And ask yourselves, “Will the youth of 15 years from this year be named, “the Coronnials’?”

Broker and Lender Products and Services

This week, Stearns Lending celebrates 31 years in the mortgage industry. During this time, it has helped countless customers become homeowners, developed groundbreaking technology solutions to drive growth and sales, and fostered a kinetic culture that empowers Stearns’ employees. Stearns has also provided lenders with guidance, partnership, and tools throughout a variety of volatile market conditions during their tenure, including the 2008 housing crisis, TRID and QM regulations, and most recently, the COVID-19 pandemic. It has successfully navigated the challenges this year has presented by accommodating working from home conditions, achieving growth during economic turbulence, and implementing innovative sales and marketing strategies for our new normal. All of these initiatives have validated Stearns’ stability, perseverance, and paves its path for a very bold future. Click here to follow the Stearns story.

“Do you need warehouse capacity? Do you see value in a diversified approach to fill your capacity needs? Josh Erskine, CEO of OneTrust Home Loans shares their experience: “Introducing Secondary Facilities into our business in 2020 has increased our lending capacity to 2.5X monthly funding volumes preparing our company very well for our next phase of growth while allowing us to not worry at all about capacity during a time of significantly increased productions. The facilities have also provided us with a diversified capital source that is purely based on Agency and Gov’t guidelines without overlays making navigating potential WH Lender guideline changes more manageable. The investment of time in deploying these facilities has been well worth it, making us more efficient as a company along the way by shifting collateral management under a single custodian for all WH lines, facilities, and Agency execution.” Based on market projections for 2021 and 2022, there is no better time to introduce this unique secondary facility structure to your business. Please send a message to Chrisman LLC’s Anjelica Nixt to setup a time to discuss.”

“Easily find your next vendor on Vendor Surf, showcasing the most innovative solutions and recognized brands, SEARCHERS can 'Find 'em Fast,' in real-time via specific filters: nothing else like it. Not another static ‘directory.’ A quarter million-page views, with over half of our traffic coming from Google. Even they recognize us as the ‘Vendor Authority.’ The premier destination for decision makers at lenders and credit unions, intelligently connecting to desired vendor partners. There's more! See the industry’s most complete Calendar of events, webinars, podcasts and training… usually over 400 items. We post yours for free. Send them to Scott@VendorSurf.com.”

Company-Sponsored Training

Today’s the day! Evergreen Home Loans™ and Barry Habib, CEO of MBS Highway, are live at 8:30 a.m. (PST) for Your Time is Now, a must-see webinar on how to maximize your business while planning for the future. Including insights on interest rates post-COVID, the next hot market segment, and creating engagement on social media. Register here before 8:30 a.m. (PST) to watch the webinar on Zoom. Or catch the livestream on the Evergreen Home Loans Facebook and YouTube pages. Can’t make it? Follow Evergreen on LinkedIn or YouTube for information on how to access the recording. However you watch, you don’t want to miss this one!

GO Mortgage and NAIBRS are sponsoring the "Housing Leadership Summit for Realtors" webinar on December 10th at 11:00 am Central. Guest speakers from Freddie Mac, Proposed Properties, and GO Mortgage will discuss how realtors can become the new construction real estate specialist in their market. Learn how to leverage new construction to win more listings and how to have commissions paid upfront for new construction builds by attending this free webinar. Additionally, NAIBRS is offering its New Construction Specialist certification class (valued at $59) free to anyone who registers for the webinar. Please register or learn more at https://bit.ly/decemberrealtorsummit.

Join Jeff Lavigne, Senior Wholesale AE, to learn how to bust persistent myths about getting a rental property loan, what a creditworthy "low income" borrower looks like, why DTI doesn't matter for a rental property loan and options you can offer your rental property investor clients.

Register for “Solving Challenges Real Estate Investors Face” webinar here.

Servicing Trends

While Ginnie Mae servicers have always had the right to repurchase delinquent loans, the recent opportunity is more meaningful since a large percentage of borrowers in forbearance are likely to be successfully modified through a COVID-19 partial claim (a modification where the missed payments are rolled into an interest free balloon subordinate mortgage). Mortgage banking activity remains strong, and volumes and gain-on-sale margins should remain robust for the back half of the year. Further, the recent decision by FHFA to delay implementation of the 50-bps fee on refinances has removed the risk that gain-on-sale margins could be negatively impacted in Q3.

MSR risk management results were released for Q3 2020, and shone some light on MSR values in the industry. Much of the change in MSR roll forward and risk results was driven by the value change due to payments/other. The MSR asset empirical duration showed an average increase of 1.0 based on FNCL change but a (2.4) decline based on the swap change. The OAS Valuation methodology showed the annual hedge benefit at 8.2%, while it was 26.5% for Static Valuation. The change in MSR fair value (MM) was -25. The MSR Fair Value % of Book Value was just under 4%, while the MSR Fair Value % of Tier 1 Capital was 4.8%. That makes for an implied MSR cap portfolio price of 0.75% on average and a servicing revenue multiple of roughly 2.60.

KBW Financial Services recently released a report showing that Agency 30-year fixed-rate MBS prepayment speeds moved higher in September to 35 CPR, up from 33 in August and 19 a year ago. Primary mortgage rates have continued to head lower (the Freddie 30-year fixed mortgage rate came in at 2.8% last week), but are still wide relative to MBS yields in the secondary market due to industry capacity constraints. That means prepayment speeds will likely remain fast versus historical levels, though lower interest rates will help by likely lengthening the refinance wave as opposed to increasing current prepayment speeds. The current environment of elevated mortgage originations and high gain-on-sale margins is favorable for mortgage banks and the elevated prepayment environment has become manageable for mortgage servicers despite the accelerated amortization rates.

Mayer Brown recently released a publication on the effects of climate change on servicing values. Mortgage servicers have been forced to deal with increased disaster-related damage to mortgaged properties and the related mortgagor defaults. The paper discusses whether the servicer bears the risk of loss resulting from borrower defaults arising out of natural disasters even though the servicer has no beneficial ownership interest in the loan. When a loan is pooled to back securities guaranteed by Ginnie Mae, the credit risk of loss following a mortgagor default resulting from a natural disaster rests in part with the servicer.

Additionally, the servicer morphs into the actual holder of the loan following an early pool buy-out. If the frequency and severity of natural disasters continue to increase, the appetite of servicers to service government insured or -guaranteed loans and acquire the related servicing rights could evaporate, lessening availability or increasing the costs of government-insured or -guaranteed residential mortgage loans. Hazard insurance, flood insurance, and other property-related insurance policies limit the amount a holder of an FHA-insured or VA- or RHS guaranteed loan can recover after a property has suffered damage from natural disasters, allocating that risk of loss to the servicer or holder. The eventual result of more natural disasters from climate change would be decreased access of consumers to such loan programs or increased costs to obtain insured or guaranteed loans.

For Encore, earnings improvement in August centered around its glut of cheap Non-Performing Loans coming to market over the near/medium term. Debt buyers and specialty servicers often rely on leverage in order to meet their cost of capital, and therefore prudent management of both sides of the balance sheet is tightly linked to the value that's ultimately transmitted to equity investors. PRAA's recent offering of 5-year unsecured debt can also provide a window for Encore to access the straight debt market at relatively attractive terms as soon as next March, when $161 million of 2.875 percent coupon converts roll over. They see that potentially enhancing the quality, and broadening the investor base, of the company's funding profile. As an important reference point, Encore is currently trading almost exactly where it was just prior to its acquisition of Cabot in spring of 2018, which engenders a pathway toward generating high cash-on-cash returns while stabilizing or reducing leverage.

Fannie Mae updated Selling Loans in Forbearance Due to COVID-19 in LL-2020-06 to extend eligible note dates to November 30th and delivery to January 31st.

Recall that the Federal Home Loan Bank of San Francisco (FHLBank) announced that it will extend its deadline for discontinuing its monthly cost of funds index (COFI) from early 2021 to early 2022. FHLBank will no longer calculate the index after the publication of the December 2021 COFI in January 2022. Read the Fannie Mae Servicing Notice for additional details.

Capital Markets

With votes still being counted all over the nation, we may be days, or even weeks, from certainty about the presidency. That didn’t stop investors from pouring money into equities yesterday in the incorrect anticipation of further fiscal stimulus from a blue (or at least a purple) wave. All the money flowing into equities forced Treasury bonds prices lower to attract interest, which drove yields up by yesterday’s close. The UMBS30 basis ended tighter, led by 1.5% and 2.5%, while the 10-year yield momentarily hit its highest level since early June. Factory orders for manufactured goods increased 1.1% month-over-month in September, as expected, the fifth straight monthly increase in factory orders as business spending continued to increase in September.

The 10-yr yield hit .94% before reversing course and dropping more than 16bps into this morning (.79%). Beside the potential reaction to yesterday’s election results, today’s economic calendar sees the beginning of the two-day FOMC meeting along with the Quarterly Refunding announcement. We’ve already seen that mortgage applications increased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 30, 2020. We’ve also received ADP employment for October (365k, roughly half of what was forecast), and the September trade deficit narrowing to $63.9 billion. Later this morning brings final October Markit Services PMI and October ISM non-manufacturing PMI. Today’s Desk support consists of three operations totaling up to $5.7 billion MBS ($975 million UMBS15 1.5% and 2%, $3.2 billion UMBS30 2% and 2.5% and $1.5 billion GNII 2% and 2.5%). We begin the day with Agency MBS prices better .250-.5 and the 10-year yielding .79 after closing yesterday at 0.88% with some of the uncertainty being removed from the market.


Jobs and Transitions

ACCMortgage.com: On the heels of a record shattering $183 million in closings and loan proposals for the month of October, is pleased to announce that mortgage industry veterans, Bryan Cross and Joel Hansen, have joined the company as Regional Sales Managers for its West Coast Wholesale Division. “Bryan and Joel are both highly seasoned, valued additions to our Sales Team. Each of these gentlemen bring a wealth of talent, industry knowledge, and product expertise to the company. These gentlemen will help to continue our growth,” said Robert Senko, President. ACC never stopped lending during COVID and is offering the most complete Non-QM Suite of Products with the sharpest pricing and fastest turn times in the industry. 90% Bank Statement, P&L Only, 90% Prime Jumbo, 85% ITIN, 2nd Chance programs. Interested in joining our growing team? E-mail your resume to Recruiting@accmortgage.com.

In the midst of a pandemic and historically low rates, non-QM is still in high demand. Borrowers want it. Originators want it. Wall Street wants it. And leading non-QM lender Angel Oak Mortgage Solutions is delivering it. Self-employed borrowers can take advantage of the bank statement program to qualify while real estate investors can use the cash flow of the property (DSCR) to qualify. In addition, Angel Oak is offering their Platinum Jumbo, Portfolio Select and Asset Qualifier programs. With improvement to rates and guidelines happening frequently (21 times since May), you can keep up-to-date on their program page. To continue its growth and help brokers and correspondents grow and prepare for the 2021 purchase market, Angel Oak is actively hiring Account Executives in markets across the country. See JoinAngelOak.com for more information on that role and other operational openings.

“R.J. Arnettt, SVP Finance of America Mortgage TPO National Sales Manager, is proud to introduce our new Regional Sales Managers: Mike McCarthy (West), Dave Weatherford (Central) and Todd Carte (East). If you are looking for a new challenge and to be part of a growing team, Finance of America Mortgage TPO is actively seeking Account Executives for roles nationwide. FAM TPO offers its brokers and NDCs a complete menu of product offerings: Conventional DU & LPA, FHA Plus, VA Plus, VA IRRRL, USDA, Jumbo, HELOC, Renovation Lending, Residential Investor Loan, Reverse and more. At Finance of America Mortgage, we can assist you help your customers make smart, informed decisions to buy the important things in their lives. To learn more, contact Finance of America Mortgage TPO today!  FAMTPO.com.”

New American Funding has a new Director of Legislative Policy and External Affairs: Charles R. Lowery, Jr., representing the company in “aligning with national organizations to advance the company’s mission of increasing Black homeownership.”