Moody’s addresses what every LO knows – the next area of “opportunity” in the mortgage market: next area of “opportunity” in the mortgage market: cash-out refinances. As many CLTVs are approaching 75%, homeowners may choose to do a cash-out to either consolidate higher rate debt, do home improvements, or move out of an ARM. Or refinance an FHA loan that has accumulated enough equity to qualify for a conforming loan without MI. With rising home prices and rising interest rates, cash-outs will dominate the dwindling percentage of refis.


Random Fannie, Freddie, Conventional Conforming News

This morning Fannie Mae reported net income of $4.3 billion and comprehensive income of $3.9 billion for the first quarter of 2018. (This compares to a net loss of $6.5 billion and a comprehensive loss of $6.7 billion in the fourth quarter of 2017 due to tax law changes.) Fannie Mae’s pre-tax income was $5.4 billion for the first quarter of 2018 and $5.0 billion for the fourth quarter of 2017. “Fannie Mae provided approximately $113 billion in liquidity to the single-family mortgage market in the first quarter of 2018 while serving as the largest issuer of single-family mortgage-related securities in the secondary market. The company’s estimated market share of new single-family mortgage-related securities issuances was 42% for the first quarter of 2018.

Although being guilty of introducing yet another word combination into our vernacular, Freddie Mac is introducing the Freddie Mac HomeOneSM mortgage, available to qualified first-time homebuyers for a low-down payment of just three percent. This new conventional (non-FHA) 3% down payment option must be underwritten through Freddie Mac’s Loan Product Advisor®, which makes a complete risk assessment based on several factors as it relates to credit, capacity and collateral. The Freddie Mac HomeOneSM mortgage is offered only for conforming fixed-rate mortgages secured by a 1-unit primary residence.  At least one of the borrowers must be a first-time homebuyer. (The new program doesn't have any geographic or income restrictions. With an Affordable Second, the LTV can go as high as 105%.)

Freddie Mac is also updating income limits for Home Possible® mortgages to better focus the product on low- and moderate-income borrowers whom the products were intended to serve. Specifically, Home Possible income limits will be capped at 100% AMI, except for low-income census tracks which will continue to have no limits. HomeOneSM mortgage broadly serves borrowers without geographic or income restrictions and complements the company’s Home Possible® mortgage products for low-to-moderate income audiences. Both changes will be effective July 29, 2018.

United Wholesale Mortgage is allowing its mortgage broker partners to credit their borrowers up to $525 on both Freddie Mac Home Possible and Fannie Mae HomeReady loans. Both programs are great alternatives to FHA and, when coupled with UWM’s Elite BPMI and improved pricing, can save borrowers up to hundreds of dollars off their monthly payment, while still enjoying a great low rate. UWM is aligning the pricing on this program to match the regular conventional 30-year fixed pricing.

One can visit Fannie Mae’s Technology Support Center to reset your password and get answers to most frequently asked questions. In addition, you can get assistance with Fannie Mae's technology applications 24 hours a day, seven days a week via phone (800-2FANNIE) or web chat. Reference the updated Call Center Reference Guide for details as the call center menu options have been updated.

The May 2018 Fannie Mae Selling Guide expands its Community Seconds® provider options and clarifies our property inspection waiver (PIW) requirements. For a summary of key updates in this Selling Guide Announcement, view the executive perspectives video presented by Khristi Waters, Director, Credit Policy, and the executive overview from Carlos Perez, Chief Credit Officer for Single-Family.

What does "appraisal modernization" mean to you? The latest Fannie Mae Appraiser Update explores this hot topic, in addition to recent changes to the Appraiser Qualification Criteria and to Fannie Mae appraisal policies. Learn more about the Appraiser Quality Monitoring (AQM) process in the AQM Update and get tips on appraising properties with agricultural attributes in our Rural Round Up.

During the weekend of June 23, Fannie Mae will implement an update to Desktop Underwriter® (DU®). This release includes a change that allows lenders to instruct DU to disregard bankruptcy information in the eligibility assessment that is incorrect or due to extenuating circumstances. It will also allow lenders to disregard excessive mortgage delinquency information that is incorrect. Other changes with the release include updates to HomeStyle® Energy, DU validation service, HFA Preferred™ and HFA Preferred Risk Sharing, Potential Casefile Reuse, IPC Data Field retirement, and updates to align with the Selling Guide.

View the release notes for more details.

Mark those calendars! As a reminder, the Federal Housing Finance Agency has announced June 3, 2019, as the go-live date for the new Uniform Mortgage-Backed SecuritiesTM (UMBSTM). This is the date Freddie Mac and Fannie Mae will begin issuing these securities, creating the new GSE combined market of to-be-announced (TBA) eligible securities. More information is available here.

Effective April 13, Flagstar Bank began offering improvements to its Freddie Mac loan programs pursuant to Bulletin 2018-5. The Freddie Mac Fixed Rate, Doc. #5302 and Freddie Mac Super Conforming, Doc. #5347 will now allow the following updated eligibility: 2-unit primary residence revised max LTV/TLTV/HTLTV ratios up to 85% and second home revised max LTV/TLTV/HTLTV ratios up to 90%.

Flagstar Bank suspended the Freddie Mac A-Minus Program, Doc. #5303 as Loan Prospect Advisor is no longer offering the A-Minus eligibility messaging.

PennyMac changed the format and updating values on the Conventional LLPAs by Product Feature effective for all Best Effort and AOT-DT commitments taken on or after March 21, 2018. Read the PennyMac release for details.

Wells Fargo Funding has expanded its requirements for second homes subject to age restrictions. Conventional conforming and non-conforming loans on these properties no longer require deed restriction approval by Wells Fargo.

Per the Fannie Mae updated Selling Guide Announcement SEL-2018-03; AmeriHome has accepted this change in the timeline provided by Fannie Mae (with the additional bolded clarifications provided by AmeriHome). Specifically, regarding Lender-Sourced Contributions: Clarification that lender-sourced contributions to fund closing costs and prepaid fees that are normally the responsibility of the borrower are permitted provided the following: A lender-sourced contribution may not be used to fund any portion of the down payment {or reserves}; subject to repayment requirements, or require financial obligation apart from the subject mortgage; or passed to the lender from a third party. Limitations: The amount of the lender contribution should not exceed the amount of borrower-paid closing costs and prepaid fees. Excess Lender Credits: Any excess lender credit required to be returned to the borrower in accordance with applicable regulatory requirements is considered an overpayment of fees and charges and may be applied as a principal curtailment or returned in cash to the borrower.

FCM’s underwriting guidelines have been updated: Wholesale Product and Pricing Bulletin 2018-3 APRIL GUIDELINE UPDATES.

Effective April 17th, Wells Fargo Funding updated its living (inter vivos) trust requirements for conventional Conforming Loans to specify that a revocable trust rider must be used with the Security Instrument.

For all DU approved conventional loans, PennyMac is aligning with the updates announced in Fannie Mae SEL 2018-02, except for the HomeStyle Energy updates. Click here to view the announcement.

The Federal Housing Finance Agency announced June 3, 2019, as the go-live date for the new Uniform Mortgage-Backed Securities. Freddie Mac and Fannie Mae will begin issuing these securities on this date, creating the new GSE combined market of TBA eligible securities.

The Fannie Mae HomeSaver Solutions Network (HSSN) job aid, Requesting Approval for a Deed-in-Lieu (Mortgage Release™) Case in Workout Profiler, has been updated to include instructions related to the final interior property inspection and reporting a Mortgage Release to Fannie Mae. In addition, applicable HSSN job aids on the Servicing page have been updated to remove all campaign IDs and instructions related to recently retired Fannie Mae Modifications, including Fannie Mae Standard Modification, Fannie Mae Streamlined Modification, and Fannie Mae HAMP Modification.

Capital Markets

Rates didn’t do much yesterday but did show some volatility in the afternoon. Most notable for markets to digest (and analysts love to slice and dice Fed verbiage) was the Federal Open Market Committee removing the reference to a strengthening economic outlook from its directive but noting that inflation measures have moved close to 2.0% after the March statement described inflation as ‘continuing to run below 2.0%.' Additionally, the Committee described its inflation goal as ‘symmetric' over the medium term, suggesting the central bank will be comfortable with a period of inflation above 2.0% after an extended stretch below 2.0%. (Federal funds remain at 1.5% to 1.75%.)

Helping the demand side of the supply and demand curves, the NY Fed will return to its FedTrade schedule today when they conduct the largest operation on the current schedule when they will purchase up to $805mn 30-year conventional 4% ($460 million) and 4.5% ($345 million) at an earlier than usual closing time of 9:45am.

We’ve already had April job cuts from Challenger, Gray & Christmas (36k, -40% month over month), initial jobless claims for last week (expected to rise 15k to 224k, they were +2k to 211k), and the March trade deficit (seen improving to $49.3 billion from $57.6 billion, it narrowed to $49 billion) Preliminary Q1 productivity and unit labor costs are seen increasing 0.6% (actual 0.7%) and 1.8% (actual +2.7%).

Coming out after I send this commentary out are Markit Services PMI for April, March factory orders, ISM Nonmanufacturing PMI, and the NY Fed’s report MBS purchases for the week ending May 2 (expected to total $2.1 billion compared with $2.5 billion in the previous week). Thursday commences with the 10-year yielding 2.95% and agency MBS prices better by .125 versus last night’s close.

Employment and Lender Products

MAXEX reports accelerating trading volume on its residential mortgage exchange programs. To date, LoanExchange has traded over $1.4 billion in secondary market jumbo A and high balance loan volume and contributed loans into thirteen private securitizations. “Our clients appreciate the fact that, unlike other offerings, our exchange enables users to sign just one legal contract with one legal counterparty and then transact confidently and efficiently with our entire network of buyers and sellers,” said CEO Tom Pearce. “By standardizing and centralizing the loan sale process, MAXEX reduces operational costs and improves execution for all market participants.” If you wish to learn more about becoming a seller and/or a buyer on LoanExchange, please send an e-mail to Tom Pearce.

Angel Oak Home Loans is proud to announce a stellar first quarter for growth and originations. “Trent Reed has led our expansion efforts in NC/SC with 27 new hires since January 1st. Due to our significant expansion plans for the rest of 2018, we are seeking experienced loan officers and sales managers in Florida, Texas, North Carolina, South Carolina, Tennessee, Alabama, California and Illinois. With a full-suite of conventional lending options combined with our innovative non-QM portfolio products, loan officers are prepared for borrowers with unique sets of circumstances. Built for speed and driven by service, our Operations team is made up of some of the best in the industry. Angel Oak was voted a Top Workplace by the Atlanta Journal-Constitution and we bring the same dedication and commitment to all employees in all branches around the country. There is no better time to join a leading lender like Angel Oak Home Loans.” For more information on Angel Oak Home Loans, please reach out to Lee Williamson, Business Development Officer (678-641-6249).

Sierra Pacific Mortgage continues to provide financing solutions for the purchase and refinance markets in Retail, Wholesale and Correspondent lending. We have all heard the phrase, “This home has good bones.” It’s a common expression in the housing industry, one that means a home needs a little TLC. With that in mind, Sierra Pacific has a specialized Renovation Department, who concentrates in providing renovation home loan options, including the FHA 203(k) Limited and Standard products. Reach out to your Sierra Pacific contact to learn more.

In retail job news, “American Bancshares Mortgage is a reliable, time-tested retail Mortgage Banker. For more than 22 years, we have empowered our partners, assisted our communities and expanded our footprint across the nation. We are direct seller/servicers with a retail channel focus. Our superior centralized platform is a fully integrated solution that covers the entire loan lifecycle. Our corporate culture is based on an environment of creative and collaborative communication, always keeping our core values of commitment, integrity and transparency as the pillars of our organization. As we continue to reach our goals and expand our nationwide presence we are looking to add Regional retail managers to our team. Current openings are in the North East, South East United States and Texas. If you are ready to join our dynamic fast-growing organization that focuses on empowering and inspiring you, contact Sandy Garcia for a confidential conversation to discuss our many benefits and opportunities!”

GSF Mortgage Corporation continues to expand its Construction Lending Division by adding 12 loan originators in March. The FHA, VA and USDA Single Close Construction programs are hot products in this time of thin inventory. If you are interested in joining the GSF Mortgage Construction Lending Team and offer this product in your market, please contact Chad Jampedro.