There are many ways to divvy up residential lenders: size, agency approvals, QM or non-QM, geography, broker and banker, take your choice. One very fundamental way to do so is whether or not a lender is a bank or an independent mortgage bank. Banks are often flush with cash, putting it to work in various lending activities, whereas independent mortgage banks - not so much. Kroll Bond Rating has released its research report that is worth a gander: Capital Requirements for Non-Bank Mortgage Companies. (Requires free registration.) In this era of counterparty risk, it is a must-read, especially for lenders selling loans and servicing to non-banks.

Bayview/Lakeview is seeking to hire a correspondent lending business development director for the Northeast. "Bayview companies are well established in the mortgage investment and servicing industry with experience in managing mortgage assets since 1995. Bayview/Lakeview offers a broad product line including: conventional, government and non-QM portfolio loans. If you are interested in joining a great company, please send your questions and resume to Jeff Lemieux at jeffreylemieux@bftg. com."(Bayview Asset Management is minority-owned by affiliates of The Blackstone Group, L.P (NYSE: BX).)

Let's try to get caught up with the sale of mortgage servicing rights (MSRs) during the last few weeks. Sometimes I wonder if there is more servicing hitting the market than there is new production! Rate sheet pricing that borrowers see is made up of the asset price (MBS), plus the servicing value, plus the margin. Everyone is looking at the same MBS prices - the question then comes down to the value of the servicing, which is generally close for most lenders, and their margins & overhead. It is not a complex model, and has been around for decades. But lately servicing has gained a lot of attention as companies sell it off to non-banks to cover overhead. Unlike aggregator pricing, where servicing was often incorporated into the total price, lenders are now exposed to the actual value of servicing. And when rates drop, the asset that you thought you'd have on your books for a long time may pay off, which in turns makes it less valuable. But don't worry; there are plenty of 3.50% 30-yr fixed rate mortgages out there that will stick around for a long time.

Mountain View Servicing Group had a $190M FHLMC/FNMA non-recourse servicing portfolio that was made available to the national market. The pool is 99% FRM of retails production, with a WaFICO of 748, WaLTV of 72%, with state originations in New Jersey (61.3 percent), Pennsylvania (18.6 percent), New York (8.8 percent), and California (5.4 percent). It also offered up a $3B Fannie Mae bulk MSR portfolio. Features of this portfolio included 100% FRM/1st Lien, with a 770 WaFICO, a 78% WaLTV, and a 3.73% WAC. Top states for the portfolio are Washington (86.3%), Hawaii (6.9%), Oregon (3.4%), and Idaho (2.2%). Bids were due on May 22nd.

Not to be outdone, Interactive Mortgage Advisors was offering a $500M servicing portfolio of slightly seasoned Fannie Mae with a WAC of 4.037%, AvLA of $209k, with a wide geographic dispersion with Texas as the lead state. And IMA brokered $3.5B Fannie Mae and Ginnie Mae bulk residential mortgage servicing rights from an independent mortgage company; the package carried a 3.822% WAC, broad geographical dispersion (Ca & East Coast States), 23 months of seasoning with total DEL of 5.98%, currently being sub serviced, with bids that were also due on May 22nd.

And Phoenix Capital has had two offerings; the first $193M Ginnie Mae MSR's of 100% Fixed 30yr term, WAC of 4.015%, WaFICO 684, 65% Retail/35% Wholesale with 100% CA originations; the second is $300M FNMA FRM 86/14% (30yr/15), WAC 3.82%, WaFICO 755, WaLTV 72%, with 73% California originations. Phoenix is also offering $2 billion bulk of Ginnie Mae and approximately $50 million/month GNMA flow mortgage servicing rights. Seller is an independent mortgage banker established in 1996, and the pool's breakdown is:  100% GNMA, Fixed Rate,  85% VA, 15% FHA (by Loan Ct), 3.99% 30yr WAC, 3.686% 15yr WAC, WaFICO 717, WaLTV 98%,  CA (12%), FL (8%), & TX(6%), 100% retail origination. Written bids for this portfolio are due on Tuesday, June 3rd.

Servicing loans is not a cakewalk, as this commentary has mentioned several times, especially when you are servicing loans in several states and/or time zones. And the larger servicers are under intense scrutiny, even after multi-billion dollar settlements - so is it the smaller player's turn? Seeking Alpha suggests that indeed it is! "The nation's largest lenders nearly sucked dry from mortgage settlements, housing regulators have turned their attention to a number of smaller players, with Fifth Third Bancorp (FITB), SunTrust (STI), and Regions Financial (RF) all recently disclosing investigations into the origination and servicing of home loans. U.S. Bancorp (USB) and Capital One (COF) have also disclosed probes into various mortgage practices. Any money recouped from the regional lenders would go a long way towards stabilizing the finances of the FHA which required a $1.7B taxpayer infusion last year. "Settling with the large guys gave [the government] a template," says Eric Wasserstrom from Robinson Humphrey. "The agencies involved in the national mortgage settlement had planned to focus on the largest mortgage servicers first," says the Iowa assistant AG. "Then you move on to other entities." 

Adam Quinones of Thomson Reuters has been sending out quotes from three of the servicing valuation and brokering firms. Steve Fleming from Phoenix Capital observes, "Bulk portfolio valuations have seen a slide (magnitude varies by WALA) over the past couple of months due to the commensurate interest rate drop, but we're also tracking how this plays out in the flow MSR arena. The flow (i.e. Agency concurrent or Ginnie PIIT) side has shown a degree of maturation in late-Q1/Q2-to-date, where the exponential flow SRP growth of Q4/early-Q1 has somewhat leveled off nicely into the mid-to-high 4x's for conventionals on average and mid 3x's to mid 4x's for Govies on average (by base servicing fee), with continued buy-side support. The FNCL's ~30+ bps yield dip since early April has had a more dramatic impact on bulk vs. flow values - it will be interesting to see how flow MSR pricing further matures if new production remains at these relatively lower pars for a substantial period of time."

And Matt Maurer from Mountain View states, "In April, the majority of our clients MSR portfolios went down in price 2 to 3 basis points and so far in May, majority of clients are seeing another 2 to 3 basis point drop in value. It will be interesting to track speeds on early 2014 production which are now in the money. With another 12.5 to 25 basis point drop in rates should start to see a larger pick up in prepayments given the large share of 4.125 to 4.375 note rate servicing held in seasoned MSR portfolios."

Dan Thomas from MIAC chimes in. "Although the rate environment has bounced around a bit and hurt some recent MSR values, we still expect the supply and demand dynamics to be robust for the remainder of the quarter and keep prices firm. GSE approvals and subservicer backlogs are becoming a significant disruption to the normal, tried and true servicing transaction marketplace.  Additionally, over-reaching regulation on high quality servicing transfers amongst well capitalized, quality servicers should be addressed in the near term before it significantly affects normal market liquidity for MSRs."

Often times it's difficult to provide content, disseminated from multiple sources, without violating email disclaimers...which I actually take seriously, as I also do with mattress tag warnings. But I can't ignore a number of emails, and reports, I have received over the last few weeks indicating that banks and REITs have started holding onto agency bonds. The total agency MBS holdings of mortgage REITs has increased by $7.3B in Q1; this is the first increase following three consecutive quarters of sharp declines in agency MBS holdings (which totaled $102.8B from April to December of 2013). Banks on the other hand have increased their agency MBS portfolios by $11.5B, after five consecutive quarters of decreases. Bank holdings of GNMA increased by $1.9B following a pickup of $9.7B increase the previous quarter. GNMA holdings have increased for three straight quarters, totaling $13.4B. Non-Agency holdings dropped by $8.9B, according to one report, which follows a $6.4B decrease the previous quarter. Non-agency holdings have decline for six consecutive quarters.

Let's see what some investors and FHA have been up to lately. As always, it is recommended that one reads the actual bulletin to see the full details.

Franklin American updated its USDA/RHD FICO Price Adjustments effective with locks beginning on May 1st. The changes are reflected on the rate sheet and the online pricing engine. Conventional products have also seen some updates with expanded guidelines to allow Financed MI for loans submitted through LP effective immediately.  The Conventional Conforming 10/1 ARM program and Conventional High Balance ARM program will no longer be eligible for loans submitted through Loan Prospector (LP) effective with locks on or after May 8, 2014. VA products received some updates as well regarding builder warranty requirements, repair inspections, new construction as cash-out refinance and occupancy requirements.

Affiliated Mortgage Company correspondent division provided clarification on FHA/VA products and credit requirements.  Cash-out transactions for properties located in CA, IL and MA require a 640 credit score. An acceptable credit score is required for all occupant borrowers on all full doc loans including loans with a non-occupant co-borrower and there can be no late payments on housing history in the past 12 months. Credit scores 620-639 requirements have been updated as well as VA ratio requirements.

FHA has posted its LEAP transition update. In anticipation of the May 27, 2014 deployment of LEAP, the LEAP User Manual is posted on the LEAP Information Page of Also, please note that although previous announcements indicated that Independent Public Accountants (IPAs) would access LEAP via HUD Secure Systems, these users will actually use their I-IDs to access LEAP via FHA Connection. Please reference Section 2 of the LEAP User Manual for additional information on lender and IPA access.

Are we heading for another multi-trillion dollar refi boom? Yes, rates are down, but the back-office and compliance cost of doing a loan is significantly higher than in the past - and no one is expecting those to come down soon. But Treasury prices surged Wednesday with the 10-year note improving by .75 and its yield back to its lowest in nearly a year at 2.44%. (Agency MBS prices did the same, and are also back to price levels from a year ago.) The catalyst for the rally was increased odds that the ECB will announce further accommodation as soon as next week following weak data in the euro zone. With the rally came more locks, and with the locks more selling of agency MBS to hedge them. Today we will have the 1st quarter GDP number (expected at -.5% versus the initial +.1%) along with Initial Jobless Claims (expected -11k) and Pending Home Sales. In the very early going the 10-yr is at 2.43%.