Daylight Savings commences for many parts of the U.S. dark and early Sunday morning. For many this means spring is around the corner, with improved weather and the nearing of the "home buying season" which kind of coincides with "kitten season", per my cat Myrtle. We need to get through March first, and I am hearing continued anecdotal murmurings of lender's February volume successes continuing into March. But is too much of a good thing bad? More specifically, fundings from those great January lock days should wrap up this month, and for some non-depository lenders the focus is on avoiding the expected warehouse strain and fluctuations in staffing needs. Personnel are working on clearing up suspended loans, and the usual investor culprits are being sworn at for dragging their feet on buying loans. Some things never change...
There was plenty yesterday regarding news on the Countrywide/Bank of America settlement being upheld and some chatter about HARP being extended (or not), but let's play some catch up on what lenders, investors, and securitizers are doing and seeing in the jumbo market - it is long overdue.
First, consumers are feeling a little better about the housing market, according to the Fannie Mae National Housing Survey. Expectations of home price appreciation rose to 2.5% from 2.3% a month ago, and almost half of respondents thing prices will go up in the next year. Americans are still negative on the economy, but less so, with 49% believing we are on the wrong track and 44% believing we are on the right track.
Wells Fargo is the biggest jumbo lender, originating $42.3 billion in these mortgages last year, or 18 percent of the market. "What jumbo lending does for us is attract really high quality customers with high quality assets we can put on our balance sheet," Wells Fargo's Blackwell said. Yep, it doesn't take a team of rocket scientists figuring out the cross-selling opportunities.
JMAC Lending has introduced a new product, Venice Non QM. Some highlights of this product include: Minimum FICO score starts at 650, Full doc up to 80% with minimum FICO 720 or 75% with FICO score 700 up to $1MM, 2 years foreclosure, short-sale, bankruptcy and loan modification - 1 year seasoning allowed max up to 50% LTV/CLTV, and Alternative documents for self-employed borrowers. For details visit JMAC Lending.
NewLeaf Wholesale announced two new Jumbo Products, NewLeaf High Ratio and NewLeaf Jumbo Access. These products are designed for Borrowers who do not meet the traditional requirements for Jumbo or Agency guidelines. The NewLeaf High Ratio product allows up to 55% DTI and is considered a Non-QM product due to exceeding the allowable QM DTI maximum. The Jumbo Access product is a QM product that qualifies borrowers with lower credit scores and shorter seasoning requirements on major derogatory credit. Both products must comply with the Ability to Repay (ATR) requirements.
NYCB Mortgage Company, LLC updated its Jumbo fixed 30 year product: Income Documentation for Commissioned Borrowers and Self-Employed Borrower Definition. For complete information, view its eligibility guide.
Flagstar spread the word of updates to its Jumbo 5/1, 7/1 and 10/1 Jumbo ARMs affect the following: Non-arm's length transactions, tradeline requirements, and closing in Trust. (Flagstar also told lenders they must submit case number cancellation requests to their account executive no later than February 20 in order to meet FHA's February 25 deadline.)
Mountain West Financial announced enhancements to the MWF Jumbo 2 Products with the following program codes: JF302, JF152, JA5L2, JA7L2, JA10L2, effective immediately. Enhancements include: Maximum LTV Increases across the Board, Combined Loan Amount to $3,000,000, Cash-Out Now Available for Second Homes and Investment Properties, and 2-4 Unit Available for Primary residence. MF Product Matrix has been updated with the details, and is located under Product Guidelines/Jumbo, or by clicking here.
PennyMac issued a reminder regarding a power of attorney on Conventional loans using Desktop Underwriting or on Jumbo loans. These products must reference the subject property address or legal description. Additionally, a general power of attorney is acceptable on VA loans as long as the veteran has given written consent to the specifics of the transaction by signing the loan application and sales contract. Please refer to the Power of Attorney section of the PennyMac Seller Guide, which outlines additional details on using a power of attorney.
And it doesn't take rocket science to figure out banks of all shapes and sizes are perfectly happy to hold on to those jumbo loans and not put them out into securities. So although the jumbo primary markets are alive and well, the secondary markets don't have much going on.
That being said, recently Kroll Bond Rating Agency (KBRA) assigned preliminary ratings to thirty-three classes of mortgage pass-through certificates from WinWater Mortgage Loan Trust 2015-2 (WIN 2015-2), a prime jumbo RMBS transaction. The underlying WIN 2015-2 mortgage pool comprises 516 first-lien, residential loans with an aggregate principal balance of $372,361,891 as of the cut-off date. WIN 2015-2 is the fifth transaction for WinWater Home Mortgage, LLC, a new mortgage conduit formed in 2013. The mortgage pool consists entirely of fully amortizing fixed rate loans, all of which have 30-year maturities. The pool is characterized by substantial borrower equity in each mortgaged property, as evidenced by the weighted average LTV (71.4%) and CLTV (71.7%). The weighted average original credit score of the mortgage pool is 766, which is within the prime mortgage range. "KBRA's rating approach incorporated loan-level analysis of the mortgage pool through its Residential Mortgage Default and Loss Model, an examination of the results from loan file reviews performed by independent third-party firms, cash flow modeling analysis of the transaction's payment structure, reviews of key transaction parties and an assessment of the transaction's legal structure and documentation."
While we're on securitization, I harken back to Eileen O'Grady's last missive from the ABS conference. "And as we pass the Ivanpah solar panel farm that generate 173,500 heliostats, (sorry, birds) on our way back to CA from Las Vegas we bid a fond farewell to ABS West, and to the 6,500 attendees who shared thoughts, read their attorneys' prepared remarks flawlessly, and worked as a team even as their employers were still negotiating legal settlements. Most importantly, the attendees, especially the leadership, took very seriously their responsibilities to put the mortgage crisis and The Great Recession in the rear view mirror, and bring "RMBS 3.0" to market. Let's all give them our full support.
"The final half-day of SFIG's ABS West Conference today was made up of no less than 14 content-rich sessions, most of which were focused on international structured finance. 'Overview of the US Online Lending Industry (P2P Lending)' went head-to-head with, 'China: Fostering Foreign Investment and Reducing Bank Dependency'. On the first topic, my Irish intuition tells me that P2P and how it evolves will demonstrate how Millennials will reinvent lending in the US, the UK, and Australia. On the second topic, Jeff Chen, a Partner at Dentons, stunned the crowd with a brilliant, nimble, comprehensive, seamless summation of the Chinese economy and banking system from a strategic to a molecular level. Remarkable. Bottom line: China and its middle class are too busy reforming its banking system and facilitating the growth of its middle class and its government-engineered consumer-based economy to concern themselves with Structured Finance. Structured Finance finding external capital for debt issuances from within China is way down the list of things for them to think through at this time. Check back in a few years.
"As for mortgages, Jody Shenn of Bloomberg wrote his version of events with ' Why Mortgage Bond Investors Won't Buy...."'. I respectfully take issue with Jody, but understand why he said what he said. I was delighted to be at the forefront of the mortgage industry at SFIG, on behalf of two of my clients, LoanScoreCard and Andrew Davidson & Co. If all goes well, my clients and I will have something to crow about at ABS East in Miami this September. Drop the serious dollars to register, and come to see the future before it sees you. Final tidbits from the ABS West Conference, thanks to Richard Johns, SFIG's shy, retiring Executive Director. Question: What asset classes will see the most securitization activity in 2015? Survey Says: 1) P2P Lending, 2) Solar/Renewable, 3) Private Label Mortgage-backed Securities, 4) Transportation, 5) REO/Rental, and 6) China. Question: Which Exhibitor had the best tchotchkes in the Exhibit area? Answer: Global Securitization Services, LLC." Thanks again Eileen!
Looking at the entire MBS market, 2014 saw a lack of supply and high demand, and thus mortgage rates benefitted. We start 2015 with the opposite occurring, and mortgage prices have suffered relative to Treasury securities although some traders believe that investors' interest is picking up - remember the Fed should continue to buy $1-1.5 billion a day into the summer. Certainly the specified pool sector (pools filled with loans grouped by LTV, geography, loan amount, etc.) has done very well.
We had a slew of news yesterday, some of it delayed due to the weather. Initial Jobless Claims unexpectedly increased by 7k to 320k, the highest level since May. The 4-week moving average was 304,750, an increase of 10,250 from the previous week's unrevised average of 294,500. Factory Orders were -0.2% to $470 billion in January, down six consecutive months. And Non-Farm Productivity fell 2.2% in the 4th quarter of 2014 and unit labor costs rise 4.1%. Wow - that was a bunch of lousy news.
But today we had arguably the most important monthly news: the employment data. Nonfarm Payrolls in February were +295k, with a back-month revision down in January, a 5.5% unemployment rate, Hourly Earnings were +.1%. After these numbers the yield on the 10-yr is sitting at 2.18% (versus Thursday's 2.11% close) and agency MBS prices are worse .250-.375.
Jobs and Announcements
On the flip side of that coin, PHH Mortgage continues to grow its Regional Financial Institutions group with the recent hiring of two new Regional Business Development Directors, Jef Stehman and John Tuttle. "With the CFPB's TILA-RESPA Integrated Mortgage Disclosures Rule going into effect on August 1, they will be very busy spreading the word about PHH Mortgage's turnkey solution for clients looking to offer residential lending services to their clients while mitigating the related risks and cost. PHH's outsourced solution allows its clients to reduce the burden of navigating an evolving and complex regulatory environment and provides clients with the benefits of retaining their customer relationships, managing variable costs and delivering enhanced service to its customers."
Homeward Residential, Inc. is pleased to announce five additions to its growing Correspondent Sales team. Barbara Burton and Rob Finter have joined as Account Executives covering California with Wendy Mack Dumas joining to cover the NJ, PA, and DE area. Rick Longmore has joined to cover Community Banks and Credit Unions in the Eastern US. In addition, Homeward has hired Stephen Fastuca as Vice President of Operations who will oversee the Correspondent Operations and Underwriting. With over 80 years of combined experience, they add a lot of value to Homeward's team and look forward to doing so for their customers. "We are excited to have these strong team members join us as we continue to build our business and help our customers with better products and execution options," said Jim Cotton, the 20 year Freddie Mac veteran that leads Homeward's Correspondent channel. Homeward is an authorized FNMA and Freddie Mac seller/servicer; has access to a GNMA approved Issuer; and is approved to purchase correspondent loans in all 50 states.
And congratulations are in order as Impac Mortgage Corp. Correspondent has announced that industry veteran Jim Janczy has been hired as the Regional Director of Sales leading all east coast sales efforts. "Jim brings to Impac 20 years of experience, along with a proven track record of success in the mortgage industry, which will be invaluable in meeting the regions goals and objectives in 2015" said Greg Austin, SVP and National Sales Director of the Correspondent Division. In fact, Impac Mortgage Corp. is looking to hire experienced correspondent AEs to join Jim on the East Coast. If you are interested, email your resume directly to Jim. He will also be attending the Regional Conference of MBA's in Atlantic City March 8-12 if you are interested in scheduling a meeting. Impac Mortgage Corp. launched in 2014 their answer to QM for underserved borrowers with a series of products: AltQM Income, AltQM Investor, AltQM Jumbo and AltQM Agency and AltQM Asset Qualifier. Check out their newly released AltQM Instructional video, "Slaying the QM Monster."
An overdue "hats off" to Rohit Gupta, president and CEO of Genworth Mortgage Insurance, who will be taking over as Chairman of USMI. And last but not least, KeyBank selected Mark R. Danahy to expand its mortgage operations.