After a long time in captivity with the same people, one may become, uh, less than enamored with their pals. “12th day of self-isolation and it’s like Vegas in my house. We’re losing money by the minute, cocktails are acceptable at any hour, and nobody knows that time it is.” How’d you like to have a huge investment in WeWork? Word has gone out to dedicate your computer’s unused computing capacity to discovering more about the virus. There are still shortages, perceived or real, and I received this note from Rich B. in Salt Lake City: “Our neighbor’s tract home got TP’ed last night and now it’s listed on Zillow for $12.1 million.” One wonders if the U.S. Government, and its related entities, will ever have a shortage of money. Fortunately for borrowers, Ginnie Mae issuers, small businesses, lenders, and nearly everyone, our government has stepped up and stepped in. Yet lack of liquidity is the fastest way to close down a business, or an industry, and warehouse lenders, broker-dealers, lenders, and investors are all still very spooked. The Treasury Department has formed a mortgage task force to help; more below on corona-driven rates in the capital markets section.
Lender Products and Services
“Computershare Loan Services (CLS) has built a dedicated A-team… or rather, an ‘E-Team’ to respond to recent market shifts and unprecedented business growth. The new Enterprise Sales team includes highly-skilled mortgage veterans: Dana Abernathy, Ralph Armenta, and Shelley Duffy. This group will focus on connecting mortgage professionals nationwide to CLS’ business solutions that span the mortgage lifecycle. I mean, who doesn’t want to increase profitability and lower costs? CLS snagged a fourth seasoned expert, Chris Karnes. As EVP of National Sales, Chris will focus on expanding the CLS fulfillment business. ‘Since success is always about the people on your team, I am confident these talented professionals will push CLS to new heights,’ said Randy Lightbody, Chief Revenue Officer.”
“If Fed rates are zero, then why aren’t your mortgage rates?” Odds are your staff is hearing this question more times a day than they can count. That’s why Top of Mind is giving away free access to a trio of timely digital flyers that answer all of your borrowers’ most pressing questions while simultaneously winning their affection. If you love what you see and want to learn more about how Surefire CRM’s timely, award-winning content helps you win customers for life, schedule a demo.
In this time of great uncertainty, borrowers are reaching out to their Servicers more than ever. Caliber Home Loans, Inc. team members have rallied to expand support capacity, and we’ve enhanced our capabilities to enable customers to self-serve and secure their homes. It’s also important to know that if a customer reaches out to Caliber about refinance options, we continue to refer them back to our broker partners through the Reconnect program. Referrals have jumped more than 150% over the last three weeks, and we’re proud to have helped support those ongoing relationships. To learn more about Reconnect and the Caliber advantage, contact your Caliber Account Executive or Tony Kottenbrock (214-632-6102).
Corona-Driven Changes Will Continue
About a quarter of the nation’s residential lending comes from California. So I asked the California MBA’s CEO Susan Milazzo how it was handling things. “While our members have acted swiftly to adapt to the unprecedented environment due to impact of COVID-19, the California MBA has been hard at work from a legislative and regulatory standpoint. Advocacy is the core of our mission and in times like this, we are reminded just how critical that role is to our industry. The California MBA has been active in dialogue with our regulator and the Governor’s Administration to share impacts of this pandemic on the independent mortgage banking community and to encourage relief efforts to ensure that we protect the flow of access to affordable mortgage credit. At a time when IMBs have had record level originations, we are hit with a global catastrophe that, among other things, limited their ability to move those loans through their pipeline.
“Our initial efforts were aimed at ensuring that independent mortgage bankers were included in the definition of essential services during the state shut down. We continue to advocate for emergency remote online notarization and county recorders’ offices to remain open. We also encouraged the California Congressional Delegation to support the federal relief act. We have to acknowledge the support provide to us by the national MBA as they have worked tirelessly not only to represent this industry in DC but have been a strong partner with us in California as policy makers need housing industry statistics for our state as they continue to develop further efforts to help Californians. We have also created a COVID-19 page that is updated as new information come in. Just as we did through the financial crisis in the late 2000’s, the California MBA will continue to be a strong force to represent the mortgage banking industry. While we had months to absorb the magnitude of the last financial crisis, this took days. Know that we are strong and poised to meet this challenge.”
While we’re on California, Governor Gavin Newsom issued an executive order banning the enforcement of eviction orders for renters affected by COVID-19 through May 31, 2020. The order prohibits landlords from evicting tenants for nonpayment of rent and prohibits enforcement of evictions by law enforcement or courts. It also requires tenants to declare in writing, no more than seven days after the rent comes due, that the tenant cannot pay all or part of their rent due to COVID-19. This builds on the Governor’s previous executive action authorizing local governments to halt evictions.
The Fed’s intervention into the MBS market will help with stability. But Lenders are grappling with margin calls, early pay off penalties, worried warehouse lenders, and renegotiations. What is motivating the pricing changes, FICO shifts, and servicing value fluctuations from the Agencies and leading correspondents like Wells Fargo, PennyMac, AmeriHome, and Chase, impacting every lender and program? And what is helping
“Forbearance” was the focus lately. Lenders report that borrowers are asking about not street rates will remain stubborn and margins elevated for a while. making their payments within days of their loan closing. Under the Ginnie Mae MBS program, the approved issuers who service mortgage-backed securities (MBS) are required to remit scheduled principal and interest (P&I) to investors, and make various other payments in connection with mortgage loans, even when monthly payments are not received from borrowers. What if the issuers who service them don’t receive the payments from borrowers? Ginnie to the rescue!? “Ginnie Mae has the authority to make changes to the requirements of our program, and we are using those powers to tailor the existing disaster pass-through assistance programs to more suitably scale to the needs of this National Emergency. Ginnie Mae fully anticipates implementing within the next two weeks, via an All Participants Memorandum (APM), a Pass-Through Assistance Program (PTAP) through which issuers with a P&I shortfall may request that Ginnie Mae advance the difference between available funds and the scheduled payment to investors. This PTAP will be effective immediately upon publication of the APM for Single Family program issuers, with corresponding changes made to Ginnie Mae’s MBS Guide in due course. We anticipate publishing PTAP terms for HMBS (reverse mortgage) and Multifamily issuers shortly thereafter.”
The memo continued. “I also want to relay that the implementation of the PTAP is not the only step Ginnie Mae is taking to alleviate the effects of the National Emergency. We have recently acted to facilitate electronic execution and transmission of certain pooling documents (APM 20-01), and delayed submission requirements for audited financial statements from issuers (APM 20-02). We are also expediting our digital collateral initiative, and in the near future Ginnie Mae expects to publish information about forbearance of sanctions for violation of liquidity and delinquency standards attributable to the COVID-19 crisis.
Lenders are pricing defensively, still continuing to manage to their capacity. The effects of the Covid-19 outbreak are beginning to show up in US economic data as unemployment claims skyrocketed to 3.28 million for the week ending March 21st. This was nearly 5 times higher than the previous weekly record of 695,000 set during the week ending October 2, 1982 as well as the peak during the last financial crisis of 665,000 for the week ending March 28, 2009. While weekly new unemployment claims peaked in March 2009, the number of unemployed in the Bureau of Labor's employment report did not peak until October 2009 when it hit 15.3 million people and a 10.0 percent unemployment rate. Mortgage applications fell 29.4 percent for the week ending March 20 with purchase apps falling by 14.6 percent and refinance apps fell 33.8 percent as mortgage rates moved higher. February's new home sales declined 4.4 percent to a 765,000-annual rate after a strong January. Even with the decline, February's annual rate still exceeded all months in 2019. Over the previous twelve months the median price for a new home increased 7.8 percent.
Federal Housing Finance Agency Director Calabria said that as the economic fallout from the coronavirus continues, the agency might have to seek help from Congress or the Federal Reserve to support the government-sponsored enterprises. Although Fannie Mae and Freddie Mac are currently equipped to handle an uptick in delinquencies, Calabria stated the mortgage giants are less prepared to do so over the long term. Speaking of the Federal Reserve, the Fed said it will conduct $1 trillion in repurchase operations every day for the rest of the month, while increasing the size of daily agency MBS purchases and indicating it will now be able to make loans available to eligible financial institutions secured by certain high-quality assets purchased from single state and other tax-exempt municipal money market mutual funds. U.S. banks accessed $28 billion last week at Fed's discount window.
In accordance with the most recent FOMC directive, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York updated the current bi-weekly schedule of agency MBS purchase operations. On Friday, the desk conducted an additional $15 billion in purchases across 2 operations for regular TBA settlement. In total, the Desk of the NY Fed purchased $35.815 billion in MBS Friday with 63.2 percent in UMBS30. Despite the buying, bid/ask price spreads remained quite wide. For the week, it bought $67.633 billion (70 percent in Class A) which averaged out to $13.5 billion per day compared to around $5.5 billion per day in originator supply. The Desk will target purchases of at least $100 billion for this week and will release a schedule each day for the next day’s operations. The schedule of operations for today includes purchases of $7 billion UMBS 30-year 2.5 securities, $9 billion UMBS 30-year 3.0 securities, $7 billion UMBS 30-year 3.5 securities, $10 billion UMBS 30-year 4.0 securities, $4 billion G2SF 30-year 2.5 securities, $4 billion G2SF 30-year 3.0 securities, $2 billion G2SF 30-year 3.5 securities and $2 billion G2SF 30-year 4.0 securities. These purchases are designed to support the smooth functioning of the agency MBS market amid the recent, highly unusual disruptions associated with the coronavirus outbreak. The Desk stands ready to conduct more purchase operations in the coming days should that be appropriate to promote smooth agency MBS market functioning, or adjust terms of future operations as needed to maintain efficient and effective policy implementation.
In addition to the Fed, the mortgage agencies also are doing their part to help people that are or will be impacted by the coronavirus with HUD and FHFA announcing suspension of foreclosures and evictions for at least the next 60 days and encouraging borrowers to reach out to their servicers ASAP if they are experiencing hardship.
REITs have been particularly hit hard by the lack of liquidity in the capital markets. Last week Two Harbors Investment Corp sold most of its non-agency mortgage-backed securities as some mortgage real estate funds struggled to meet margin calls last week and continuing into this week. Some lenders to mortgage REITs demanded to the funds they lent to that the funds post more cash on their loans, as the values of non-agency mortgage bonds they use as collateral have deteriorated due to market volatility stemming from the deadly coronavirus outbreak. The asset sales removed the potential risk of not being able to roll the funding on non-agency RMBS as they become due. Two Harbors said in a statement. Given the significant reduction in margin call risk, Two Harbors will continue to be in a position to meet margin calls in the ordinary course. The New York-based REIT did not disclose how much non-agency paper it sold. At the end of 2019, it held US$3.63 billion of non-agency securities, making up nearly 11 percent of its total investment portfolio, according to a SEC filing. Two Harbors said it reduced its repurchase agreement loans by about US$2 billion after the asset sales. Its portfolio now consists primarily of agency securities and mortgage servicing rights, totaling US$20 billion.
U.S. Treasuries rallied to close last week, despite the House of Representatives voting in favor of the $2 trillion stimulus bill, which should have added some certainty into the market. Personal income beat expectations in February, though inflation remains subdued and the report has been rendered obsolete due to the spread of the coronavirus. The final reading for the University of Michigan Index of Consumer Sentiment for March missed expectations, capturing the rapidly deteriorating economic conditions. The 10-year closed Friday -6 bps to 0.75 percent.
Today’s economic calendar contains two releases, February Pending Home Sales and the Dallas Fed Manufacturing Index, both due out later this morning. The Fed will purchase up to $40 billion across four FedTrade operations, as they will do each day this week. Tomorrow’s releases include just the January S&P Case-Shiller Home Price Index and March Consumer Confidence before Wednesday brings March ADP Employment Change, Chicago PMI, February Construction Spending and the March ISM Manufacturing Index. Thursday sees the usual jobless claims and the February Trade Balance. The week closes with March Payrolls and the March ISM Non-Manufacturing Index. We begin today with Agency MBS prices better by .250-.50 and the 10-year yielding .66 percent, not helping the margin call situation.
AnnieMac Home Mortgage, a Top 10 lender in the Renovation space, is looking for a sales leader with a proven track record to oversee all renovation sales activity. This individual will also be responsible for hiring, training and coaching existing and future loan officers in order to achieve the company’s goal of becoming a Top 5 Renovation lender in the next 24 months. If interested, please send your resume to Ryan Kube.
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“PrimeLending’s done it again: Adding powerhouse products and technologies that help our loan officers grow and succeed. This time, PrimeLending has launched eClose, a mostly digital closing experience that significantly streamlines and simplifies the closing process for our loan officers, borrowers and business partners. It’s been a productive Spring -- first, PrimeLending implements Blue Sage, a best-in-class, cloud-based LOS that offers a seamless origination process and unmatched efficiency. Next was the addition of Total Expert, a data-driven marketing platform that gives our team the ability to create, deploy and track powerful marketing materials that turn prospects into life-long clients. And now the launching of eClosing. These are just a few of the reasons why we’re the home of modern origination. If you’re ready to build your business with leading technology tools, contact Nic Hartke to talk about how PrimeLending’s tools can help you discover your best.”