Whether bond loans (we all know how management loves those), non-QM, reverse mortgages, or high loan to values, originators everywhere are working hard for their borrowers and being creative in a compliant manner. For example, from Minnesota Eric Otterness writes, “Recently my team and I closed on a loan for a first-time buyer in Minneapolis where we had eight down payment assistance programs layered on top. I’m pretty sure that $86,000 on a $190,000 house is a new world record! It was fun and I doubt it has ever been matched or will ever be beaten. If anyone knows of a transaction where there were more, let them come forward and we will stop claiming the new world record!”
Lender Products and Services
Mr. Cooper Correspondent is excited regarding the pending acquisition of Pacific Union Financial (“PUF”) and looks forward to welcoming the PUF Correspondent team to the Mr. Cooper family in early 2019. “Blending two powerful Correspondent investors is a tremendous opportunity to leverage the complementary capabilities and offerings of both firms. Until the deal closes, it is business as usual for each firm, but afterwards, it’ll be a different story. Our combined client base can expect a world class Correspondent offering, to include a comprehensive menu of products and programs, expanded delivery options, and access to unrivaled Capital Markets expertise. One thing which remains constant is the dedication to delivering the best client experience and service in the Industry. Mr. Cooper is committed to Correspondent; our investments and developments continue with the recently-introduced Hybrid AOT execution and upcoming launch of eNotes. Mr. Cooper, the nation’s largest Non-Bank Servicer, is a premier Correspondent and Co-Issue investor.”
There are four key ways to make vendor management less complicated. When it comes to vendor oversight, most companies are stuck in the pre-SaaS era, relying on excel spreadsheets and SharePoint. A recent shift to self-service due diligence networks, where vendors can access oversight systems directly to comply with various requirements creates increased efficiency. Learn four key ways to make vendor management less complicated in Vendorly’s infographic: http://bit.ly/2Qsl4Pl. To learn more about Vendorly, head to Vendorly.com or reach out directly to Mike Ehms for a demo.
We are in the final stretches of 2018 and goodness knows it’s been a memorable one for the industry. Between changing market demands, margin compression, and many more challenges, 2018 will be one for the history books. In the complimentary Industry eBook, “2018 Mortgage Executive Year in Review,” Maxwell sat down with prominent industry executives to discuss their lessons learned in 2018 and how to apply those insights in your preparation for 2019. A must-read for all lending professionals and an exclusive to Rob Chrisman subscribers today, Download your copy here!
Vendor Surf, the only search engine across the mortgage and credit union ecosystems, from pre-origination through servicing and secondary markets, helps to quickly and efficiently match buyers with vendors that best meet their needs. With 80+ vendor categories and over 3,000 search filters, it guides searchers in their quest to choose wisely. It is free to search and affordable for vendors. Vendor Surf recently added the following great vendor partners: Actionable Science, BankUnited, Commonwealth USA Settlements, Custodio Settlement Services, FinLocker, Gooi Mortgage, HomeBuyer Connections, ISGN Solutions, Organizational Compass, Sheldon May & Assoc. P.C. (3-yr deal), and Spruce. Lastly, Vendor Surf is the single most comprehensive and robust online calendar of events, conferences, webinars and education opportunities. Find, or list, your events - free! Visit us HERE today – Catch the wave.
Fannie and Freddie
On October 1 Freddie Mac promoted Steve Lansbury to the position of SVP, Multifamily Underwriting & Credit to oversee all aspects of Multifamily underwriting, including under its Conventional, Targeted Affordable Housing and Small Balance Loan offerings, as well as Risk Distribution and Credit Governance. He will also be the principal manager of the division’s underwriting and credit approvals for all Multifamily debt investments. Lansbury replaced Deborah Jenkins who was promoted to EVP and head of the Multifamily business effective January 1, 2019.
Freddie Mac promoted Timothy Kitt to SVP, Head of Pricing and Execution in its Single-Family business. “Kitt, who has led the Pricing and Analytics team in Single-Family Portfolio Management for nearly four years, recently added costing analytics and all seller-facing Credit Risk Transfer (CRT) efforts to his responsibilities.” Tim joined Freddie Mac in 2015 after spending some time in portfolio management, asset sales/securitization and structured finance at Wells Fargo, GMAC/Ally and Sallie Mae.
Fannie Mae and Freddie Mac recently reported 3Q18 earnings. Fannie Mae reported $4.0 billion of operating profit before the payment of preferred stock dividends, while Freddie Mac reported an operating profit of $2.7 billion. The YOY earnings comparison benefited from a lower corporate tax rate (from 35% to 21%) for both companies, though Freddie recognized a $2.9 billion after-tax benefit from a favorable litigation settlement in 3Q17, so its YOY earnings actually decreased. The GSEs are expected to pay about $6.5 billion of dividends in 4Q ($4.0 billion from Fannie and $2.6 billion from Freddie) as comprehensive incomes resulted in each GSE's net worth exceeding the $3 billion capital buffer.
The government's senior preferred stock investment in the GSEs remained unchanged at $191.4b at the end of 3Q18. Including the expected 4Q18 distribution for Fannie and Freddie, the GSEs will have paid $292.4b of dividends back to the Treasury.
LOs should not forget that the Agencies (both Fannie and Freddie) continue to throw off plenty of ducats to the U.S. Government. The Government, in turn, is in no great hurry to get rid of the geese laying the golden eggs. For example, at the last earnings cycle, Freddie Mac reports income of $2.4 billion in Q2 and is set to return another $1.6 billion to Treasury. This income is up slightly from the first quarter this year, when the company reported comprehensive income of $2.2 billion, and up even more from the second quarter of 2017 when it saw a comprehensive income of $2 billion.
Its new origination volumes grew by 29% from last year to $84 billion. Unsurprisingly, refinance activity dropped about 7%. Through its credit risk transfer program, the government-sponsored enterprise announced it transferred risk on a total of $1 trillion in single-family mortgages outstanding.
The company’s net income came in at $2.5 billion for the quarter, down from $2.9 billion in the first quarter this year. Net income in the fourth quarter of 2017 was driven down by a write-down in net deferred tax asset due to tax reform. Because of this reform, both GSEs were even allowed to regain their capital reserves and withhold $3 billion from the Department of the Treasury.
Because of this, the company paid $1.6 billion dividend to the Treasury in September, based on its net worth as of June 30, 2018 of $4.6 billion. This will bring the total cash dividends paid to the Treasury to about $40.8 billion more than the cumulative cash draws received from the Treasury of $140.2 billion.
The U.S. government bailed out mortgage giants Fannie Mae and Freddie Mac during the housing crisis and placed them under conservatorship. For years the government is making serious bank off of that “investment.” While Fannie Mae and Freddie Mac withdrew $119.8 billion and $71.6 billion from the Treasury during the dark times, they’ve since paid Uncle Sam $167.3 billion and $112.4 billion in dividends, respectively, meaning the Treasury is $88.3 billion in the black thanks to the bailouts.
(F&F are busy in the primary markets - lots more Monday on policy and process changes that are typically implemented by lenders!)
Beth Hammack, Goldman Sachs' global treasurer, and Jason Granet, who leads the firm's initiative to shift away from the Libor benchmark, have recorded a podcast discussing the progress and challenges of the transition, as well as its potential effect on the industry. "First and foremost I think the impact is going to be hopefully an improvement in safety and soundness," Hammack says. A committee backed by the Federal Reserve will request public comment early next year on language for contracts that reference Libor. The Alternative Reference Rates Committee wants "fallback provisions" in contracts to ensure they remain valid if Libor becomes unusable.
The U.S. 10-year closed Thursday at 3.23% as we saw a “yield curve flattening” with the 2-year +4bps and 30-year unchanged. The release of the November FOMC Statement did not bring any surprises, as the FOMC voted to leave the fed funds target rate range at 2.00-2.25% and indicated that gradual rate hikes will continue. The FOMC did acknowledge that the tight labor market evidenced in the jobless claims figures from yesterday are supportive of a Federal Reserve potential rate-hike in December. All eyes are now on the December meeting where another rate hike is largely expected as the Fed attempts to maintain their 2% inflation target. Internationally, the European Commission expects that Italy's budget deficit will reach 2.9% in 2019, instead of the 2.4% deficit forecast by the Italian government. The EUCO expects that growth in Italy will only reach 1.2% in 2019 while the Italian government expects growth of 1.5%.
Overnight world stock markets are down. Here in the U.S. the economic calendar is slightly busy ahead of the long weekend (for bond traders), starting with October’s Producer Price Index (surprisingly inflationary at +.6%, +.5% core). The University of Michigan Sentiment Index and September wholesale inventories are also due out. And following the Fed’s blackout period, Fedspeak resumes today with three speakers scheduled: NY Fed President Williams, Philadelphia’s Harker, and Fed Governor Quarles all taking the stage. Friday starts with rates versus last night: the 10-year is yielding 3.22% and agency MBS prices are better by a tad.
Evergreen Home Loans THREE-PEATS! For the third consecutive year, Evergreen was named a Best Medium Sized Workplace by Fortune and consulting firm Great Place to Work®. Evergreen was has placed in the top 20 each year since 2016 and was also named a Best Place to Work for Millennials in 2018. “At Evergreen, we’re proud to be consistently recognized as one of the best places to work nationally. We understand how this positively impacts the experience our customers receive,” said Don Burton, president, Evergreen Home Loans. “We’re proud to have a diverse workforce who are passionate about changing the world one relationship at a time. We’re hiring loan officers who have the same high-touch approach and desire a great workplace culture.” Loan Officers looking for a great place to work where 95% of employees surveyed say Evergreen is a great place work can find information on its Careers page.
Paramount Residential Mortgage Group, Inc. (PRMG), promotes Brent Williams to Enterprise Architect. As the new EA, Williams will advise management on the execution of business strategy by effectively designing and aligning information and technology to drive digital transformation within PRMG. With Williams focus on Enterprise Architecture and strategy, PRMG is confident of continued innovations to support customers and better serve the expanding divisions; Retail, Wholesale and Correspondent - making PRMG synonymous with innovation in lending technology.
As most of you are aware, mortgage rates are on the rise and many lenders are experiencing a margin compression. If your compensation plan has been reduced or your volume has decreased, you need to contact Residential Bancorp immediately. It’s time to start taking advantage of the many benefits of running your own branch. Residential Bancorp has the experience, professionalism and service-oriented culture required for your success. Make the money that you’ve become accustomed to, with half the volume. Learn more and apply online here or call 888.329.8518 x215. #YourMortgageTeam
Parkside Lending LLC’s – New Broker portal, ePark 2.0, with Automated LE and State & Federal Disclosures in minutes, “continues to receive great feedback from our customers.
Automating the creation of the Loan Estimate with loan specific fees and delivering State and Federal Disclosures to the borrowers for e-signature has made the process of uploading and submitting a loan to Parkside Lending incredibly fast. In addition to our great new system, on November 1st, Parkside enhanced our already popular Jumbo I program, increasing both loan amounts as well as LTV/CLTV limits while at the same time lowering reserve requirements. We also rolled out FHA’s Simple refinance program and FHLMC’s Doctor program. Coming soon, we will launch USDA, another new Jumbo program as well as several Non-QM Options for our customers. If you are an Account Executive looking to join a great team or are a mortgage broker who is not currently working with Parkside Lending, please contact us at Sales@Parksidelending.com.”