Volume Rankings and Market Share Changing, Helping Smaller Lenders; Servicing Sales a Hot Topic
David Stevens, the president of the MBA, is on TV today talking about the undeniable housing recovery. But a lot of that is all-cash transactions. Mortgage applications have been down 5 of the last 6 weeks. Capital markets personnel report that pipelines are down 20-30% versus October levels. I am not convinced that, "Oh, our pipelines always drop at this time of year" applies this time around. Others say, "The refi market seems a little tired (refi's are down to 75% of new apps) and although we've known that increasing our purchase business is important we haven't done much about it." The good news for "smaller" lenders is that the market share of the big banks seems to dropping.
The latest figures from the 4th quarter of 2012 reflect this. Looking at total originations & market share, the ranking goes Wells Fargo (25%), Chase (11%), Quicken Loans (5%), US Bank (5%), Bank of America (4%), Citi (4%), Flagstar (3%), PHH (3%), PennyMac (2%), and Ally (2%). These figures from National Mortgage News show that a) Wells' market share no longer equals the other nine combined, and b) the total of the top 10 is roughly 64%, leaving plenty of the $1+ trillion market to be divvied up.
So if the supply coming onto the market is down, does that mean the value of servicing mortgages is going up? And if so, does that mean rate-sheet prices will improve because of it? Nationstar, Ocwen, and Walter Investment have certainly been buyers (non-depository buyers, by the way, not quite so directly worried about Basel III restrictions should they come to pass). There is certainly the argument to be made that servicing cash flows are much better than the value in the marketplace, especially if legacy issues are eliminated, and there has been some big moves lately. The latest is Ally, the lender that had its capital plan rejected last week by the Federal Reserve, agreed to sell its remaining agency mortgage servicing rights to Quicken Loans for about $280 million (if approved by Freddie & Fannie). The loans had an unpaid principal balance of about $34 billion. Earlier this month Ally agreed to sell agency mortgage servicing rights to West Palm Beach, Florida-based Ocwen Financial for about $585 million.
And thus pretty much ends Ally's, ex-GMAC, ex-RFC's, role in the home loan lending industry. Or as they put it, "non-strategic mortgage activities." "Going forward, the Bank's full focus and resources will be centered on its leading direct banking franchise and advancing its customer-centric deposit activities, as well as continuing to grow its key role in Ally's auto finance operation," said Ally Bank President and Chief Executive Officer Barbara Yastine. Ally Bank also completed the previously announced sale of its correspondent and wholesale broker mortgage operation on Feb. 28 to Walter Investment Management Corp.
And Ally was not on the recent list released by Fannie Mae, although GMAC was, announcing the results of its 2012 Servicer Total Achievement and Rewards (STAR) Program. The scorecard measures servicer performance. EverBank, GMAC Mortgage, Green Tree Servicing, Nationstar Mortgage, PHH Mortgage, Seterus and Wells Fargo received the highest results in 2012.
The sale of mortgage servicing rights (MSRs) could be the place to be, as many firms who think that servicing is a breeze run a little short of funds. It is good to look at servicing packages occasionally - one can see what is important for buyers. In the last week or two I have received several offers of servicing packages. (Not me personally - I still can't seem to even collect on the debts my kids owe me - but the entire market.) For example, "IMA, as exclusive broker for the Seller, is pleased to provide this $828 million Fannie Mae bulk residential mortgage servicing rights offering for your consideration. In addition to this bulk package, the Seller would like to establish a monthly flow relationship that will deliver $15 - $20 million per month of comparable product over the next twelve months. This portfolio offers a unique geographic profile that is not usually seen in the market. All recent production with 6 months of seasoning at 3.65% WAC. The Seller is an independent mortgage company with strong financials and solid reputation." (This from Tom Piercy with Interactive Mortgage Advisors in Denver.)
And a couple from MountainView Servicing Group. "MountainView Servicing Group, LLC ("MountainView"), as exclusive sale advisor, is pleased to enclose for your review and consideration this $201 million FNMA non-recourse servicing portfolio that is being made available to the national market. Quality features of this portfolio include: 100% fixed rate, California 1st lien product, weighted average interest rate of 3.65 percent, weighted average original FICO of 773 and weighted average original LTV of 58.4 percent, no delinquencies, average loan size of $370,394." And this one: MountainView is pleased to enclose for your review and consideration this $2.2 billion GNMA servicing portfolio that is being made available to the national market. Quality features of this portfolio include: the seller has representation and warranty protection for VA loss protection in its correspondent MLPAs and all reps and warrants are transferrable and assigned to successors or assignees, weighted average interest rate of 3.76 percent (3.91 percent on the 30 year fixed-rate product), low all-in delinquencies of 7.12 percent (1.25 percent in foreclosure), national portfolio with lead states of Texas (13%), California (10%), and Georgia (7%), average loan size of $189,507." (These from Matt Maurer with MountainView in Denver.)
Let's move to some relatively recent vendor, investor, and agency updates. As always, it is best to read the actual bulletin for full details, but these will give you a flavor for what is going on out there.
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First Guaranty Mortgage Corporation is a national Ginny Mae and Fannie Mae direct lender best known up to this point for its niche products, but has announced it will be pushing more mainstream products such as Streamlines, IRRLs, and HARP. And although it has earned a reputation for its extensive use of manual underwriting, it has bulked up its technology and production "so it will have the pricing and service for the growth." First Guaranty Mortgage Corp. is also adding a number of AEs in markets across the country, which is something brokers and correspondents may be interested to hear. With that in mind, FGMC has named Jeffrey Gibson to the position of Managing Director, TPO Flow, which will encompass both the wholesale and correspondent flow lending divisions of the company. Gibson will oversee wholesale and correspondent flow lending activities for the national lending company. He was previously AVP, Correspondent Division Manager. FGMC also offers bulk and mini-bulk whole loan trades through its capital markets division, which operates independently of the TPO flow division. For more information about First Guaranty Mortgage Corporation, visit: http://www.fgmc.com.
Mountain West Financial has clarified its FHA and VA guidelines on paying off outstanding debts disclosed on credit reports and now requires any aggregate amount over $5000 or outstanding judgment on a tax lien to be paid in full. For aggregate amounts up to $5000, MWF will follow the AUS decision. Borrowers on a payment plans for collection accounts that have made payments for at least six consecutive months are not required to pay in full; however, the monthly payment should be included in the debt ratio.
Effective for all correspondent loans registered on or after March 18th, M&T Bank will be increasing the DE government and renovation Funding Fee to $225 for loans where the Final 1003 is uploaded electronically and submitted via MEME. Loans for which this data is not submitted electronically will be subject to a fee of $325.
Homeward has rolled out its LP Open Access Limited Cash-out product, which allows for LTVs up to 150% and unlimited CLTVs for 1 and 2-unit properties with minimum FICO scores of 680 that aren't currently Homeward-serviced. For 1 and 2-unit property loans presently serviced by Homeward that comply with LP LTV/CLTV, credit, and escrow overlays, Homeward is offering the LP Refi Relief Limited Cash-out program, which allows second homes and investment properties as well as primary residences. Both products are available with 10-, 15-, 20-, 25-, and 30-year amortization periods for amounts up to $417,000 ($533,850 for 2-unit properties) and do not require FEMA-declared disaster area re-inspections. Eligible condos and rural properties are eligible in addition to 1 and 2-unit properties, borrowers may be added to the new loan, and there is no limit on the number of financed properties borrowers may have, regardless of occupancy type (second homes and investment properties are permitted so long as the loan is currently serviced by Homeward).
PennyMac has updated its delivering procedures and is now withholding net-out MI and MIP payments at funding and will remit any such payments associated with the loan after purchase. Any payments for loans purchased on or after the first day of the month will not be amortized, while payments for loans purchased on or after the twelfth of the month will be amortized.
As per Freddie guidance, PennyMac is now allowing non-owner-occupied transactions that close in the name of a living trust so long as the trust complies with all FHLMC and state requirements.
As a reminder, all loans being scored for the first time with the FHA TOTAL Scorecard whose case numbers were assigned after March 2nd will be scored using Version 3.1. Existing loans without a case number will be scored according to the version that is provided to TOTAL for the 90 days following the release; after the 90 days is complete loans without a case number will be scored using the new version by default.
The FHA will be revising HUD Form 92900-B ("Important Notice to Homebuyers") to reflect the guidance revisions that change the period for assessing the Annual Mortgage Insurance Premium, the updated version of which will be effective for case number assigned on or after June 3rd.
All FHA loans with case numbers assigned on or after April 1st will be subject to a 5-10bps increase to the Annual Mortgage Insurance Premium apart from those with 15-year terms and LTVs of 78% or less, which will remain at 0 until June 3rd. The FHA is also revising its MIP cancellation policy, the changes to which will go into effect for loans with case numbers assigned on or after June 3rd. As per the updated policy, the Annual MIP duration will either be 11 years or the term of the loan depending on the LTV. The Informed Consumer Choice Disclosure, Important Notice to Homebuyers, GFE, and Truth-in-Lending documents should all be updated to reflect the correct MIP cancellation policy.
Looking at the markets, there really isn't much going on with rates, especially after the pretty-much unexplained drop we saw in MBS prices on Wednesday. The good housing news, however, continues to chug along, with NAR telling us that February's existing-home sales and prices affirm a healthy recovery is underway in the housing sector. Housing sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year price increases. Lawrence Yun, NAR's chief economist, said conditions for continued housing improvement are at play, although he never misses an opportunity to take a jab at underwriting. "Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise. Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchases affordable," he said. "The only headwinds are limited housing inventory, which varies greatly around the country, and credit conditions that remain too restrictive."
Traders report that originator supply has topped $2.5 billion after two $3+ billion sessions, in addition to more selling from money managers and servicers. Some pretty smart minds have claimed that nothing has really changed, and in fact mortgage pricing is certainly better than where it was a week ago. And MBS levels, relative to Treasuries, could be attractive to buyers - as Thomson Reuters noted, "The current spread levels, along with near term monthly demand prospects, could encourage better buying to begin showing." But that didn't help yesterday as agency MBS prices ended the day worse by .125, and the 10-yr ended at 1.93%. With no news scheduled for today here, and things relatively quiet in Europe, we're opening with the 10-yr. down to 1.92% and MBS prices a shade better.
Okay, instead of the usual joke, this is really weird and takes about 20 seconds.