Yes, every week it seems like the airwaves are filled with news from the government-sponsored enterprise landscape. This week was no exception. The FHFA announced that the GSEs (think Freddie and Fannie) would offer a one-time principal reduction to owner-occupied borrowers who are 90 days or more delinquent as of March 1, 2016, have an outstanding unpaid principal balance of $250k or less, and whose mark-to-market LTV ratio exceeds 115%.
Critics say that this is, once again, a slippery slope, but the FHFA thinks 33,000 borrowers will be eligible for the modification, and that servicers must solicit eligible borrowers no later than October 15, 2016. The plan has already upset consumer advocates who will think it's not enough to address the problem, as well as from some taxpayer advocates frustrated that the bailouts keep coming. Most think that the program's scale and scope will limit its ultimate impact on the broader market but operational specifics could impact mortgage REITs, private mortgage insurers, and servicers.
FHFA Director Melvin L. Watt said that, "The Principal Reduction Modification program...will allow an opportunity for delinquent, underwater borrowers in these areas to avoid foreclosure and save their homes."
One veteran broker wrote to me saying, "Here is another government program designed to fail from day one. This is the key condition: '...only a select group of troubled borrowers will be eligible - owner-occupant mortgagors who are 90 days or more delinquent as of March 1, with unpaid principal balances of $250,000 or less. Also, the mark to market loan-to-value ratio must exceed 115 percent.' Why didn't they just add, you have to be able to stand on the top of a chair, balancing on one leg and juggle 5 eggs for 3 minutes?
"First, they are in essence urging people to default rather than continue to pay the payment. Second is the restrictions: why the $250k balance if F&F go to $625k? Isn't that disparate impact under Fair Housing? Oops - federal regulators are exempt? That means if the house isn't abandoned, then they had better have a low loan amount to begin with, coupled with the back principal, interest and legal. Of the 33,000 eligible, what percentage are currently not abandoned? I have seen people who were modified, after being told to go delinquent, that wound up with higher payments even though the loan was now out to 50 years and then couple that with no interest reductions."
As most of these delinquent loans are likely already bought out of pools, very little market impact is expected on this news. But the companies must now instruct their debt buyers to evaluate borrowers for loan forgiveness or principal reduction options. Also, debt purchasers can no longer release and walk away from possessed, vacant properties.
In the wake of revelations from court proceedings that there were strong Fannie Mae and Freddie Mac profit projections at the time the GSE profit Sweep Agreement was put in place, Scott Olson, Executive Director of the Community Home Lenders Association (CHLA) issued the following statement: "Since last summer, the Community Home Lenders Association has been calling for a change to the GSE Dividend Sweep Agreement to allow them to retain profits to build up a capital buffer and avoid a Treasury advance. These new revelations of strong GSE profitability projections significantly strengthen the arguments for this approach and the need for prompt action to do this." Last summer, the CHLA sent a letter to Treasury Secretary Lew, asking for a modification to the GSE Senior Preferred Stock Agreement which sweeps all Fannie Mae and Freddie Mac profits on a quarterly basis. The same agreement artificially reduces net worth for each GSE down to zero by January 2018 - creating concerns about the impact of a Treasury advance when they run out of money.
Fannie Mae's HomeReady mortgage expands access to mortgage credit without adding incremental risk to the industry. Among its most innovative features, HomeReady's non-borrower household income flexibility has received a lot of interest. To answer any questions, you may have about this flexibility, Fannie has developed a new eLearning course to explain the research behind its decision to develop it. View the eLearning course or read the FM Commentary.
Citi reminded folks that Fannie & Freddie Mac recently implemented a new appraisal-sharing solution within the Uniform Collateral Data Portal (UCDP). The appraisal-sharing feature enables correspondent lenders to easily share appraisal information with Citi within the UCDP. The new appraisal-sharing solution provides benefits to both the Correspondent and to Citi, one being the ability for Aggregators to retrieve the Status, Findings and Submission Summary Report (SSR) for correspondent-shared appraisals. There will be no change to Citi's existing pre-purchase process. Correspondents will continue to be required to provide successful Submissions Summary Reports; however, this new solution will help to reduce post-purchase resolution time and expedite loan delivery to the agencies.
USBHM will continue to require 5% minimum contribution from borrowers own funds for manufactured homes regardless of LTV/TLTV/CLTV for FHLMC Manufactured Home Program and Home Possible Manufactured Home Program. In addition, FHA 4000.1 requires that the borrower(s) employment be re-verified within 10 calendar days prior to Note Date. Recent HUD audits have found that in some cases re-verifications do not comply with the guidelines as they were completed 10 business days prior to Note Date. All FHA loans must have the re-verification of employment completed within 10 calendar days prior to Note Date.
Radian announced that it has entered a quota share reinsurance agreement with third-party reinsurers for a portion of its single-premium business. The after-tax cost of capital is expected to be less than 2 percent and the impact to 1Q16 earnings is expected to be $2.4 million (or $0.01/share). Fannie Mae and Freddie Mac have approved the deal and allowed full PMIERs credit. The new agreement is expected to reduce the percentage of single-premium risk in force, net of reinsurance ceded, to 25% from 31% in 1Q. RDN also expects 1Q16 net premiums earned to decrease approximately $6 million, operating expenses to decrease $3 million, the loss provision to decrease by $0.6 million, and pretax income to decrease by $2.4 million.
The Ditech Mortgage Insurance Desk was established to order mortgage insurance for transactions where Borrower Paid Mortgage Insurance (BPMI), Lender Paid Single Premium (LPSP) (Correspondent Paid) or Lender Paid Mortgage Insurance (LPMI) (Ditech paid MI) coverage is required. The MI Desk will no longer order BPMI and LPSP for Clients.
Prior approval submissions (those submitted to Ditech for underwriting) require the correspondent to order the MI insurance certification on all BPMI and LPSP transactions, prior to closing, to be cleared by the Ditech underwriter. Delegated Correspondents will be responsible for ordering Mortgage Insurance on all BPMI and LPSP transactions. Evidence of mortgage insurance must be in the loan file prior to purchase by Ditech.
United Guaranty's SwiftClose underwriting requirements are being expanded. Loans for which Desktop Originator (DO) is used to access Desktop Underwriter (DU) are now eligible. In addition, United Guaranty is removing all references concerning DO from its Standard underwriting requirements. Effective immediately, all loans for which DO is used to access DU are treated the same as loans entered directly into DU.
Of course companies are still buying and selling conventional/conforming servicing rights. Time to play a little catch up with MSR's, here's what I've been seeing recently. Mountain View Servicing Group was the seller of a $3 billion FHLMC/FNMA non-recourse servicing portfolio. Quality features of this portfolio include: 99.5% fixed rate and 100% 1st lien product, WaFICO of 761, WaLTV of 74%, WAC of 3.77%, no delinquencies, top states: Illinois (49.5 percent), Colorado (6.1 percent), California (5.2 percent), and New Jersey (4.6 percent), with an average loan size of $246,559.... Prestwick Mortgage Group is the exclusive broker for a well-capitalized Massachusetts-based financial institution, with a monthly concurrent flow of approximately $30-40 million of FNMA loan servicing. The deal will be 100% FNMA, 75-85% 30 FRM, 15-25% 15 FRM, $300k Avg Loan Balance, 100% Massachusetts (go Socks), 100% retail origination, 85% O/O, 63% SFR 28% Condo 9% 2-4 Family.
Looking at the bond markets, it has been a very non-volatile week - which is fine for anyone trying to hedge a pipeline and focus on closing those locked loans! Today we wrap up with the Industrial Production & Capacity Utilization duo along with some University of Michigan numbers measuring consumer sentiment. And for anyone focused on rates, we began the week with the yield on the 10-year T-note at 1.74%, closed out yesterday at 1.79%, and this morning we're at 1.77% with agency MBS prices better by .125.
Jobs and Announcements
At the other end of the nation Virginia Credit Union is searching for a Secondary Marketing Manager to join its growing team in Richmond, VA. It's the largest Credit Union in the area and among the top 55 largest credit unions in the country. Virginia Credit Union was recognized as one of the 2016 Best Places to Work in Virginia. For more information on this position, and other opportunities at this credit union, please click here. Questions or confidential resumes can be sent to HR Generalist Allyson Wells (804.201.2946).
In warehouse news PlainsCapital Bank National Warehouse Lending Division is growing and wants to create lasting relationships with mortgage banking partners that are looking to grow. "Offering facility amounts from $10 million up to $50 million, a national footprint, low doc funding options, 30+ approved investors and an understanding of the regulatory environment mortgage bankers are facing today. All of this has helped PlainsCapital Bank National Warehouse Lending Division grow into a preferred warehouse facilitator for multiple mortgage bankers." If you are interested in learning more about PlainsCapital Bank National Warehouse Lending Division please contact Pamela Robinson, SVP National Sales, or Deric Barnett, EVP Mortgage Purchase.
A quick congrats to Toni Bright. CoesterVMS, a national appraisal management company, has hired former Iowa appraisal board regulator Toni as its Chief Compliance Officer. Bright has more than 10 years of experience in Real Estate and Compliance, she come to CoesterVMS with a wealth of knowledge about Compliance, having been in charge of multiple boards for the State of Iowa as a Regulator for the last 10 years.
And congratulations to United Wholesale Mortgage (UWM), voted the #1 wholesale mortgage lender in the nation for 2015 according to numbers published by Inside Mortgage Finance. UWM was one of only two wholesale lenders among the Top 25 to increase production volume in the fourth quarter of 2015 and the only lender to increase volume by double digits.
And a quick clarification on news that I posted yesterday. ("Assured Guaranty Ltd. announced the acquisition of CIFG for approximately $450 million in cash. The acquisition is expected to close in mid-2016. AGO will acquire CIFG through AGC, the same operating subsidiary that acquired Radian Guaranty...") AGO acquired Radian ASSET, the financial guaranty company, and not Radian Guaranty. Said another way, the paragraph references AGO's prior acquisition of Radian Guaranty which should have stated that the group formerly acquired Radian Asset Assurance. Same parent, different entity. My apologies for any confusion.
Next Thursday Mitch Kider is also joining the call to provide compliance insights post this week's MBA Advocacy conference on Capitol Hill. Sign up here to attend the webinar next Friday, on April 21st, at 10AM PDT, 1PM EDT.
Ginger Bell has joined with the attorneys and compliance specialists at Strategic Compliance Partners to create a monthly " Trends in Compliance" webinar series. Join Ginger on Thursday, April 21st to find out more about this series.
Fannie Mae's announcement to utilize trended consumer credit data in the assessment of mortgage applicants beginning in June 2016 is a major shift for the industry. Register for Data Fact's April 20th complimentary webinar to learn more about trended data and how it will affect your business.
The best efforts committing option available through Fannie Mae's intuitive web-based application, Pricing & Execution - Whole Loan helps manage your pipeline and interest rate risk to eliminate the fall out risk. Join account executives from Fannie Mae's Capital Markets Sales Desk for an overview on why best efforts may fit your business and a live demo on April 20 at 2PM EDT. Register today.