Markets have taken the view that brief military conflicts have little long-term impact on economic trends. Gold, oil and the Japanese yen jumped after Iranian missiles hit US bases in Iraq, but capital left “safe haven” assets (like bonds) and returned to equities when it appeared the conflict would not escalate. It didn’t take long after the holidays for Freddie and Fannie to be in the news again. What may escalate, or at least continue with many opinions being thrown our way in 2020, is chatter about Freddie Mac and Fannie Mae. As a reminder, they are able to retain capital now, a step out of being in conservatorship. And now comes news that Federal Housing Finance Agency Director Mark Calabria has suggested F&F could operate under a Federal Housing Finance Agency Director Mark Calabria has suggested F&F could operate under a consent decree, usually thought of regarding legal settlements. A consent decree would technically relieve the companies of government control, albeit with regulatory safeguards, while they raise capital and work toward full independence. More analysis below.

Lender Products and Services

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New from Calyx! Path Express is now available for lenders looking for a cloud-based, enterprise-level LOS with a quick and efficient implementation process. Path Express is pre-configured with standard settings based on industry best practices. Path Express is a sister product to the popular Calyx LOS - Path Enterprise, the multi-channel, fully configurable cloud-based LOS designed from the ground up for financial institutions and Mortgage Bankers. Path is designed to truly simplify the loan process and provide the flexibility, visibility and controls lenders need to monitor and run their business their way. With guaranteed 99.95% consistent uptimes, Agile Compliance™ and the fastest implementation times in the industry, Path is dedicated to ensuring lenders’ long-term success. Contact Michele Warren to schedule a meeting and learn more!  

Freddie, Fannie, Conventional Conforming News 

In an election year, with impeachment proceedings being in whatever condition the impeachment proceedings are in, good luck having any substantive changes with F&F being driven from the halls of Congress. So the Agencies, companies, and regulators are taking things into their own hands, as they’ve done for quite some time.

How do the Agencies’ rates fit in to industry volume? According to Informa Financial Intelligence December 2019 Mortgage Originations Data, rate-lock volume has increased 44% YoY and fallen 18% MoM across all channels, while funded volume has increased 21% YoY and remained flat MoM. In the Retail channel, lock volume has increased 76% YoY and fallen 18% MoM, while funded volume has increased 83% YoY and remained flat MoM. Compared to 2018, YTD Purchase lock volume is up 5% and funded volume is flat, while YTD Refinance (R/T & C/O) lock volume is up 136% and funded volume is up 112% YoY. Average 30-year Conforming FRM funded loan note rates have fallen 53bps YTD from 2018, with refinance rates lower by 60bps and purchase rates lower by 50bps. Informa sources a statistically significant data set directly from lenders to produce these benchmark figures.

We are about a year away from the “QM patch” going away. I’ve heard, surprisingly, that many MLOs don’t know that losing the agency DTI exemptions is set for a year from now. Will all loans with a 44% DTI become non-QM? That would be a staggering move, although non-QM loans don’t see a gfee hit. Many conforming loans are approved as QM with DTIs above 43%. The industry is working with regulators on alternatives, like incorporating reserves, instead of using a line drawn in the sand at a 43% DTI.

People wonder, every once in a while, does Fannie Mae require its Seller/Servicers to perform an independent audit of the Post-Closing QC Process? Yes. In an August 7, 2019 announcement, FNMA added further guidance to its Lender Post-Closing QC Review requirements (Chapter D1-3-06 of the Selling Guide) by specifically calling for an independent audit of the Lender's QC processes and procedures. The lender must have an independent audit process to ensure the following: its post-closing QC process and procedures are followed by the QC staff; assessments and conclusions are recorded and consistently applied; and findings must be accurately recorded and consistent with the defects noted in the lender’s system of record. Results of the QC audit must be distributed to senior management and must include an affirmative statement that no influence from other business units or bias in the QC conclusions was apparent. Management must distribute the results to the appropriate areas within the organization and an action plan must be established for remediation or changes to policies or processes, if appropriate. The lender must provide a copy of the QC audits and the audit of the QC process to Fannie Mae upon request. Requirements related to QC independence must be incorporated into the lender’s QC plan and implemented by January 1, 2020.

Freddie Mac also issued a Quality Control Best Practices manual chockfull of useful information.

MWF updated Section 6.4.4 of its Conventional Guidelines regarding Co-Borrowers without Credit Scores. Updates include AUS approvals only and no manual underwriting allowed.

Refer to its Underwriting Guidelines for complete details.

Caliber Home Loans issued a reminder that pursuant to FNMA HomeStyle guidelines, an appropriate Renovation Loan Rider should be attached to the security instrument and a Renovation Loan Agreement is required. In addition, in compliance with the Taxpayer First Act, Caliber is requiring a consent form to be included in the file for all loans delivered for purchased by Caliber. The Mortgage Industry Standards Maintenance Organization (MISMO®) drafted a sample Taxpayer Consent Form designed to allow lenders to share tax return information with other loan participants. Lenders may prepare their own taxpayer consent form, however, providing it establishes express permission from the taxpayer to share tax return information in accordance with the law.

What would you think if your company hired a “financial advisor?” Well, FHFA (overseer of Fannie and Freddie) Director Mark Calabria told an audience that it is very close to announcing hiring one. That could be for a variety of reasons, but the odds are good that it has to do with an initial public offering at some point to raise more money. Analysts wonder if F&F, in their current state, have the ability to do an IPO while in conservatorship.

“Because we don’t have a financial advisor on board, we really have not done sufficient due diligence to figure out whether that’s an obstacle or not. One possibility is if there’s no way to raise sufficient equity in a conservatorship, once you’ve gotten to a certain point in retained earnings where you’re no longer critically undercapitalized, would you want to look at a potential consent order where they’re out of conservatorship but you’ve still got a lot of prudential safeguards because they’re not fully capitalized yet.”

Compass Point Research and Trading LLC’s Isaac Boltansky’s take is that, “First, hiring a financial advisor is an important step and stating that it was ‘very close’ is a noteworthy timing update. Second, the comment reinforced our long-standing belief that consent decrees could be used to bridge the gap between statutory and regulatory capital. Third, this is to the best of our recollection the first time that Director Calabria has specifically referenced the ‘critically undercapitalized’ threshold in the context of conservatorship and consent decrees.

What about Federal Home Loan Bank membership? Director Calabria restated that there will be a request for input (RFI) in the weeks ahead and said that there is a “high likelihood” that there will be a rule proposal this year broadly addressing membership issues. Director Calabria then stated that he will view the membership issue through (1) safety and soundness and (2) mission. Mr. Boltansky opined, “We firmly believe the ‘five-year captives’ will not have their grandfathered status expanded beyond the 1Q21 expiration. Beyond that, there will be a review of the FHLB membership framework that will begin with an RFI in 1Q20. That RFI and the subsequent comments will inform our view on the issue. We have been bearish on the prospects of a more expansive FHLB membership structure given failed legislative attempts and our assessment of the broader policy conversation, but the forthcoming RFI signals a renewed conceptual willingness to consider the matter.

Of course regulators have a lot of attention focused on nonbank lenders and servicers. Do they have enough cash to withstand buybacks or hard times? Director Calabria said, “We will be looking very closely at their activities to make sure the entities I regulate, but also the entities that are regulated by FSOC members, are able to withstand problems. One of the reasons I looked closely at the Ditech bankruptcy is that in a time of stress I expect to get four or five of those.”

Isaac believes, and few would disagree, “Prudent oversight of all market participants, including nonbank originators/servicers, is imperative. Furthermore, the uniqueness of the nonbank model and the growth of that market segment in recent years warrants a thoughtful dialogue. We note that Ginnie Mae is already in the process of enhancing its counterparty risk framework and the most recent FHFA scorecard included a goal to “mplement Servicer Eligibility Requirements 2.0” and “ssess readiness of servicers and servicing policies and processes for an economically-stressed environment.”

Capital Markets

U.S. Treasuries ended Thursday rallying due in large part to strong demand during the day's $16 billion 30-year Treasury bond reopening. It wasn’t much movement by the close, but the trade of the day was to pare down risk ahead of today’s payrolls report. Helping the rally were intelligence reports that the Ukrainian jet that crashed in Tehran was hit by anti-aircraft missiles. In other international news, China's December CPI and PPI both failed to meet expectations, World Bank lowered both its 2019 global GDP growth forecast and its 2020 GDP prediction, and the U.K.'s House of Commons voted in favor of the withdrawal bill. European Commission President von der Leyen is reportedly lobbying British Prime Minister Johnson to reconsider extending the transition period past the end of 2020. Finally, the most notable remark from a full slate of Fed speakers was Fed Vice Chair Clarida saying that some repurchase operations will be needed through the April tax season.

As the press continues to focus on stocks rallying as things in the Middle East simmer down, if anyone cares about jobs anymore, this morning we’ve had the U.S. employment data: Nonfarm Payrolls (145k, below forecasts), the Unemployment Rate (3.5%), and Hourly Earnings (+.1%). The weekly economic calendar concludes later this morning with November Wholesale Inventories. Additionally, the Desk of the NY Fed will conduct the last operation on the current FedTrade schedule when they purchase up to $802 million GNII 3 percent ($601 million) and 3.5 percent ($201 million). We begin the day with Agency MBS prices better .125 and the 10-year yielding 1.83 percent on the slightly weak payrolls number after closing yesterday at 1.86 percent.



Gateway First Bank achieved record growth in 2019, enabling the company to significantly expand its products and services. Following the merger of Gateway Mortgage Group with a 100-year old bank, Gateway emerged as a leading financial institution that provides digital banking and mortgage services for consumers and commercial customers. To support the company’s new developments, Gateway has created several new executive positions to expand the senior leadership team. New to the team are Peter Moenickheim (Chief Risk Officer), Steve Staid (Chief Servicing Officer), Tony Taveekanjana (EVP/Chief Production Officer), Deirdre Cherry (Chief Credit Officer), Charles Emley (SVP, Operations), Greg Hargis (SVP, Correspondent Banking), Greg Wagner (Retail Banking Executive), Joell Maddox (VP, Treasury Management Services), Nick Gulick (SVP, Marketing), and Melissa Bogle (VP, Corporate Communications). Join the Gateway team! Contact Sherry Gray or visit

Caliber Home Loans, Inc., the nation’s third largest nonbank mortgage lender and one of the fastest growing mortgage companies in the U.S., is pleased to announce David Schroeder as our Executive Vice President, Third Party Originations. He’ll focus on improving Caliber’s use of data and analytics to advance TPO production capabilities while partnering with Operations to enhance fulfilment. David joins us from ServiceMac where he was EVP of Marketing and Retention to create the foundation of their overall brand communication and retention capabilities. Prior to that he led TPO at Quicken Loans. Our CEO Sanjiv Das said, ‘We continue to grow aggressively in the Correspondent and Wholesale channels where we are among the top 10 and top 3 lenders, respectively. David’s experience and wealth of knowledge will be invaluable as we focus on our commitment to speed, the best price and best execution through leading edge technology and our delivery model’.”

It was a record-breaking year in so many respects for, Thrive Mortgage. In 2019, the top originators at Thrive saw a YoY increase of greater than 42% in their production volume. More impressive still is the fact that many within the next tier of production teams saw an even greater percentage increase in their total business. “When you combine the best coaching, the best support, and the best tech… and put it in the hands of highly motivated individuals, great things will happen,” stated Randell Gillespie, National Sales Director at Thrive. “Our people are our biggest differentiator. They are the secret to our success; therefore, it makes the most sense for us to strategically invest in their growth,” added Michael Jones, Thrive Mortgage’s Chief Financial Officer. “I’m extremely excited about our opportunities to continue expanding in 2020.” How will you Thrive in 2020? Visit to find out more.