In my travels around the States, I see that some lenders are nervous. Yes, margins appear to have, for the most part, stopped compressing dramatically. Many lenders have exited, as have low-producing production staff. Staff reductions will continue. But veterans of the biz know that summer is basically over, in terms of the locked pipeline. Many locked loans will fund in September and October. Autumn is around the corner, and winter is coming… neither of which are traditional high purchase volume seasons. And it is doubtful that lenders will have large number of refinances to cushion any seasonal volume blows. Survival of the fittest… and of those with the lowest cost to produce to outlast competitors.

Capital Markets

MCT is proud to announce new functionality that delivers real-time pricing and automates loan commitment for Freddie Mac clients. MCTlive! Rapid Commit speeds up the committing process, ensures data integrity, and optimizes best execution for all commitments.  MCT is the first vendor to have successfully completed the first commitment via Freddie Mac’s new API technology.“This integration is a significant step on our road map for increased technology collaboration with Freddie Mac for the benefit of our mutual lender clients.” stated Phil Rasori, COO at MCT. After completing Best Execution Analysis and determining loans to be sold to Freddie Mac, Rapid Commit intelligently completes product selection and delivers commitments for all loans with a single click. MCTlive! Rapid Commit interfaces bi-directionally with Freddie Mac’s Loan Selling Advisor system in real-time. Lenders interested in leveraging MCTlive! Rapid Commit to improve their loan sale process should schedule a consultation.

Fannie and Freddie continue to transfer risk to the private sector, and away from the taxpayer. Moody’s Investor Service reported that the placement of mortgages eligible for purchase by the government sponsored enterprises (GSEs) into recent private-label residential mortgage-backed securities (private-label RMBS, or PLS) is largely credit neutral for the securitizations. The GSE-eligible mortgages included in PLS to date have had strong credit characteristics, more in line with those of prime jumbo loans than with GSE-owned loans.

This trend that is expected to continue because of GSE pricing dynamics that make it more profitable for issuers to include some types of GSE-eligible loans with stronger credit characteristics in PLS rather than sell them to the GSEs, particularly high-balance loans, which have comprised a significant portion of recent PLS collateral. Although on average, GSE-eligible loans have weaker credit characteristics than prime jumbo loans, the credit characteristics of GSE-eligible loans in PLS are stronger than GSE-owned loans, and more akin to those of prime jumbo loans. GSE-eligible loans in PLS thus far have higher credit scores and lower LTVs, and include fewer cash-out refinances than the related population owned by the GSEs. The differences in pricing are making it more profitable for issuers to include some GSE-eligible loans with stronger credit characteristics in PLS.

On August 14, Fannie Mae began marketing its eighth sale of reperforming loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio. The sale consists of approximately 18,400 loans, having an unpaid principal balance of approximately $3.59 billion, and is available for purchase by qualified bidders. Bids are due on September 6, 2018. Reperforming loans are mortgages that were previously delinquent, but are performing again because payments on the mortgages have become current with or without the use of a loan modification. The terms of Fannie Mae's reperforming loan sale require the buyer to offer loss mitigation options designed to be sustainable to any borrower who may re-default within five years following the closing of the reperforming loan sale. In addition, buyers must report on loss mitigation outcomes.

Fannie Mae priced its fifth credit risk sharing transaction of 2018 under its Connecticut Avenue Securities (CAS) program. CAS Series 2018-C05, a $983 million note offering, which settled last week. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. The next CAS deal, CAS 2018-C06, is due at the end of September. The reference pool for CAS Series 2018-C05 consists of more than 116,000 single-family mortgage loans with an aggregate outstanding unpaid principal balance of approximately $28.7 billion. The loans in this reference pool have original loan-to-value ratios between 60.01 and 80 percent and were acquired from December 2017 through March 2018.  The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages, and were underwritten using rigorous credit standards and enhanced risk controls. Fannie Mae will retain a portion of the 1M-1, 1M-2, and 1B-1 tranches to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 1B-2 and 1A-H tranches. With the completion of this transaction, Fannie Mae will have brought 28 CAS deals to market since the program began, issued $34 billion in notes, and transferred a portion of the credit risk to private investors on over $1 trillion in single-family mortgage loans as part of the CAS program.

Looking at Friday’s bond market, once again it was another snoozer. There was the usual talk about what happened overseas, but not enough to make an impact on rate sheets that borrowers would see. The Conference Board's Leading Economic Index pointed to a sustained pace of economic expansion for the foreseeable future. The University of Michigan's preliminary Consumer Sentiment Survey for August declined, driven by concerns about the prices of large household durables.

Whether or not the yield curve can portend a recession remains to be seen, especially with the NY Fed keeping long-term rates low, but the yield curve ended the week at a slightly flatter level, as the 2s30s spread compressed to 41 bps from last Friday's 42 bps while the 2s10s spread tightened by a basis point to 25 bps.  The 10-year ended the week yielding 2.87%.

Anyone looking for rates to move much, based on scheduled news, may be disappointed. There is no news of substance scheduled for today or tomorrow. In Turkey the markets are closed from mid-Monday for the balance of the week. Wednesday things pick up with the MBA’s application data for last week, July Existing Homes, and the minutes from the July FOMC meeting. Thursday is weekly Initial Jobless Claims, June FHFA Housing Price Index, and July New Home Sales. Friday holds July Durable Orders. The week starts with rates little changed from last week’s ending levels: the 10-year is yielding 2.85% and 30-year agency MBS prices are up or down a smidge, depending on maturity, coupon, and type.

Lender Services and Products

Did you know? Maxwell and HousingWire recently teamed up to survey lenders across the country and found that 70% of lending institutions are either actively purchasing or already have a digital mortgage solution in place. Even in a challenging and constrained market, lenders understand the impact that a technology-fueled process can have on internal efficiencies, close times, borrower satisfaction, and referral volume. Don’t get left behind! Maxwell's lightweight and easy-to-implement technology empowers your team to amplify productivity, delight borrowers, and close more loans — faster. Today, lending teams on Maxwell are closing loans 45% faster than the national average, helping them achieve the ROI they deserve from a technology partner. Request your custom demo today!

3W Partners is leading client efforts to market a national title agency that is a custom-built centralized transaction platform, including purchase money transactions, and is completely digital, end-to-end. The agency is in growth mode, and because of the digitization and variable cost infrastructure, margins increase exponentially as volume grows. Has capability to scale services on-demand without making significant staffing changes, and is SOC2 Type II certified, the ultimate in information security. This is a great opportunity for the right buyer that will be deemed as a “good shepherd” of the business and its people, especially for a lender looking to control costs and the borrower experience. Serious inquiries only, to be vetted before sharing any information. No fishing expeditions here. To learn more, contact Scott Roller.

Corporate Moves and Deals

There are other things happening besides name changes out there. Recall that Georgetown Mortgage, LLC, is now Thrive Mortgage, LLC. And Alight Mortgage Solutions, the leading provider of cloud-based applications for budgeting, forecasting, financial reporting and scenario analysis for the mortgage industry, changed its name to Riivos, Inc.

On a small scale, every week unpublicized branches and small residential lenders are joining forces or are being acquired by larger firms. Makes sense – why should two $50/million-a-month lenders pay for two compliance, QC, shipping, accounting, etc. departments when one department can handle a $100 million workload? Bigger deals are occurring as well.

On the commercial side of things, MetLife (there’s a name from the past!) and State Street Bank struck a $2 billion mortgage partnership whereby the companies will co-lend each loan under the multiyear agreement.

Computershare Loan Services (CLS) announced its intent to acquire LenderLive Network, LLC, a leading fulfillment and secondary market service provider in the U.S. mortgage industry. “This acquisition, which is subject to regulatory approvals, will further strengthen Computershare’s growth in the U.S. mortgage services market, adding scale to our existing fulfillment and secondary market services provided by Capital Markets Cooperative and Credit Risk Solutions (formerly Altavera) and providing an additional source of new servicing volume. LLN’s private-label fulfillment team brings decades of experience to its clients, including financial institutions of all sizes. Their secondary market services will further enhance CLS’s ability to work with both government-sponsored and private market investors.

“LLN’s fulfillment and secondary market teams are made up of about 480 employees, all of whom are expected to join CLS’s U.S. staff of nearly 1,500 following the anticipated close of the acquisition in around four months. LenderLive Holdings, the parent company of LLN, LenderLive Services and reQuire will not be part of this transaction… LenderLive is a portfolio company of Aquiline Capital Partners, a New York-based private equity firm investing in financial services.”

RoundPoint Mortgage Servicing Corporation (RPMS), one of the nation's largest non-bank mortgage servicing companies, announced it has been selected as a subservicing partner for Bay Point Advisors, LLC. “Bay Point Advisors is an Atlanta-based private lender providing small and medium-sized businesses with secured, mezzanine, bridge and DIP financing. RPMS services loans for a variety of Investment Banks, PE firms, hedge funds, mortgage banks, credit unions/CUSO’s.”

Amazon, for several months now the source of mortgage origination rumors, announced a partnership with Marriott hotels. Amazon plans to drop an Alexa into every room to act as a personal assistant. (“Show me the power switch to turn you off.”)

Are we ready for counties and governments to own banks? Los Angeles may be heading that way – thanks to Karin for passing this story along. China has ordered its banks to boost lending to exporters and infrastructure projects as the government aims to bolster growth.

Facebook is working on partnerships with banks to receive credit card transaction and checking account balance information to be used for alerts and balance inquiries on its Messenger app. The company is also working on offering additional financial services through Messenger.

Bank M&A continues. In the last few days it was announced that Equitable Bank ($333mm, MA) will merge with Coastal Heritage Bank ($517mm, MA). And in the last few weeks we learned that United Business Bank ($1.3B, CA) will acquire MyBank ($157mm, NM) for $23.5mm in cash (100%) or 1.46x tangible book. WSFS Bank ($7.0B, DE) will acquire Beneficial Bank ($5.8B, PA) for about $1.5B in cash (15%) and stock (85%) or approximately 1.72x tangible book. In Oklahoma Blue Sky Bank ($209mm) will acquire Bank of Cushing ($102mm), and in Iowa Keystone Savings Bank ($105mm) will acquire Farmers Savings Bank ($38mm).

Things don’t always work out. Wells Fargo is looking to reduce its Pacific Northwest branches by 15%, including up to $2.5B in deposits. Virginia Community Bank ($251mm, VA) and Atlantic Bay Mortgage Group (VA) have announced they terminated a previously announced merger between the two entities after failing to obtain required regulatory approvals.

Employment

Evergreen Home Loans™ is strengthening its commitment to their core conviction GROWTH by increasing innovative digital marketing efforts that are driving leads for loan officers. From 2014-2017, the top 25 Evergreen loan officers grew their production on average by 90%. The company is continuing momentum through social media marketing and other digital strategies that increase purchase business. Evergreen defines its GROWTH conviction as empowering personal and professional growth within the Evergreen family and supports high-touch loan officers that thrive in a unique and award-winning culture. Interested candidates can learn about the Evergreen culture on the awards and recognition page and job openings on the Careers page.