Sunday morning I was trying to explain to my cat Myrtle how the total cost of rescuing a stranded Matt Damon in all of his films (think Saving Private Ryan, Interstellar, The Martian) was an estimated $900 billion. She was not impressed, seeing as a) the scent of turkey in the refrigerator that is more captivating, and b) she overhears billions continually being talked about in this business. For example, in September of 2008 the agreement the Treasury made with both GSEs (Government Sponsored Enterprises, namely Freddie and Fannie) specified that in exchange for future support and capital investments of up to US$100 billion in each GSE, at the inception of the conservatorship, each GSE shall issue to the Treasury US$1 billion of senior preferred stock, with a 10% coupon, without cost to the Treasury. There were also stock warrants involved. Wanna buy stock in the GSEs? Read this first. Why should LOs care about Freddie Mac and Fannie Mae? About 70 percent of applications are for conventional conforming loans, so it makes sense to pay attention to their future. And everyone, and their uncle, has an opinion about the “Frannie.” More below!
Lender Products and Services
Are you ready for VA IRRRL opportunities in this market? Learn how to efficiently submit your files once for a final approval! Join Freedom Mortgage Wholesale for a live webinar training session on VA IRRRL mortgage products and origination processes. Ideal for new or experienced government originators. Sign up for a VA IRRRL webinar on 11/24.
What if you could get 10 hours of undivided attention from over 2 million real estate agents and financial advisors in 2021? You may have missed the news, but a whopping 73% of agents are re-evaluating their current relationships or looking for new ones. Through its work with Inman, Momentifi is signing up many of the top agents in the country for its new solution that helps mortgage companies and LOs protect their current relationships and find new ones. “The challenge we’ve found is that LOs are too busy to get in front of referral sources, and COVID is also making live events impossible,” says Momentifi CEO, Gibran Nicholas. “Meanwhile, agents and advisors still need mandatory continuing education (CE) credits each year. We’ve created a solution that imbeds you and your message into our mandatory CE classes.” Join Momentifi's demo at the Finovate digital conference today or click here to schedule a private demo with Gibran.
“Sales Boomerang is our highest and best ROI - hands down. We get instant feedback, and we usually get borrowers on the phone within minutes. Our Loan Officers have pure joy when they see that my company has my back. They literally say, thank you for putting food on my family’s plate. Loan Officers expect to have Sales Boomerang. When they walk in the door, they ask if we have Sales Boomerang. It’s expected, like a mandatory part of our toolkit. It's the gold standard. You must have it if you want to be in the mortgage industry.” (Kevin Peranio, Chief Lending Officer, Robin Clayton, Senior Digital Strategist, PRMG) Learn more about Sales Boomerang.
Are you ready to solve your appraisal logistics problems? Reggora is a leading all-in-one appraisal technology for both lenders and appraisers. By automating manual processes like order allocation, payment processing, appraisal review, and more, Reggora makes the appraisal process easier for everyone involved. Learn more at www.reggora.com
Freddie Mac and Fannie Mae Caught in a Crossfire
Scores of thousands of originators just want to help their clients with financing. While they’re doing that, however, the upper echelons of residential lending are focused on some potentially big changes – or not – which could impact pricing or the availability of credit for large swaths of borrowers.
American Banker’s Hannah Lang writes, “The Trump administration has moved forward on a plan to privatize Fannie Mae and Freddie Mac, but Joe Biden appointees could take steps to slow or stop their release from conservatorship.”
The Federal Housing Finance Agency (the federal regulator who oversees Fannie Mae and Freddie Mac) is pushing to speed up F&F’s exit from 12 years of government control through conservatorship. But Mark Calabria, who runs the FHFA, has yet to reach an agreement he needs with Treasury Secretary Steven Mnuchin. Both of them have made it a priority to return Fannie and Freddie to private hands, but how that is done will impact the cost and availability of conventional conforming home loans.
Recall that the CEO of Freddie Mac and senior management at Fannie Mae announced departures (after the results of the election were determined). Most expect little to change regarding housing finance reform, but stranger things have happened. We won't know which party will control the Senate until the Georgia runoff election, chances are that Republicans will hold the chamber and we will be looking at divided government. As Brent Nyitray observed, “True housing reform will have to be accomplished legislatively, and with COVID front and center it probably won't have the urgency to get considered, at least in the near future. Given the new administration's focus on perceived systemic racism in lending, the government will want to keep F&F on a short leash in order to push affordable housing goals.”
Last week the FHFA announced a final rule which establishes a new regulatory capital framework for F&F to ensure safety and soundness. It is similar to the proposed rule published earlier this year but made some modifications in response to comments. Namely, it increases the dollar amount of capital relief for the GSEs’ credit risk transfers, reduces the credit risk capital requirements for single-family mortgage exposure subject to Covid-19 related forbearance, and increases the exposure level risk-weight floor for single-family and multifamily mortgage exposures to 20 percent. The final rule takes effect 60 days after publication in the Federal Register (which is printed every day).
According to a fact sheet released in conjunction with the announcement, the final rule preserves key enhancements contained within the proposed rule. For example, ensuring each GSE “maintains high-quality regulatory capital by including a set of supplemental capital requirements, strengthening the quality of regulatory capital, including backstop leverage requirements, and addressing pro-cyclicality through measures such as capital buffers and single-family mortgage exposure countercyclical adjustments.
But the MBA President and CEO, Bob Broeksmit, CMB, released a statement expressing MBA’s disappointment that FHFA did not adequately address several concerns identified by MBA when the framework was re-proposed. The framework features a high level of required capital that likely will raise borrowing costs for consumers and adversely affect the availability of credit. Further, the harsh treatment of credit risk transfer mechanisms is unlikely to provide sufficient incentives for the GSEs to engage in significant levels of this activity, concentrating more risk at the GSEs.
Isaac Boltansky with Compass Point Research and Trading has some well-written thoughts from the FHFA’s Capital Rule, released last week. “At the highest level, the final rule is structurally and substantively similar to the original proposal with only a handful of consequential changes. Using data as of 2Q20, the GSEs would need to hold an aggregate $283.4B in capital compared to $262.7B under the re-proposal released earlier this year.
“On the positive front, this rule envisions an abundance of capital that should buoy the GSEs through seemingly any economic cycle and there was a modest softening of the capital treatment for CRT. Furthermore, with this in the rearview mirror, the FHFA will now focus on the PSPA amendment, which is the next mile marker on the road to ending the conservatorships.
“On the negative front, this rule envisions an overabundance of capital that could negatively impact the GSE return profiles, any future effort to raise equity capital, and mortgage credit availability if G-Fees are forced to move higher. Furthermore, it appears that the risk-based requirements were increased at least in part to counter criticisms stemming from the leverage requirement being binding under the proposal. Finally, our sense is that the CRT shifts will not reverse the uneconomical construct introduced in the proposal, which leads us to believe that new issuance may remain subdued.”
What moved rates toward the end of last week? A letter late Thursday from Treasury Secretary Mnuchin to Fed Chair Powell saying that certain emergency lending programs (including backstops for the municipal- and corporate bond markets) would expire at the end of the year as scheduled did not help investor sentiment. Chair Powell had expressed support early last week for extending several key lending facilities (e.g. Municipal Liquidity Facility, Term Asset-Backed Securities Loan Facility) that are due to expire at the end of the year. The Treasury Department also sent the central bank a list of unused funds meant to backstop five emergency lending facilities to be repaid, and the central bank said it would comply with that request.
The Treasury Secretary believes his agency and the Fed have plenty of firepower to support the economy, while the Fed is believed to strongly oppose the move, saying it is too soon to put down its emergency tool kit. It may force the Fed’s hand at its December 16-17 meeting to shift its purchases to longer-dated Treasuries, release a more-detailed bond-buying plan, or potentially change its pace of QE as an imperfect substitute for the expiring credit market backstops.
Black Knight reported Mortgage delinquencies improved for the fifth consecutive month in October (-105k), falling another 3.3% from September to reach the lowest level since March (6.44%). Still, the 3.4 million homeowners past due on their mortgages represents nearly twice as many delinquencies as there were at the start of the year. In better news, it reported the number of high-quality refinance candidates to approximately 19.4 million, for an aggregate potential monthly savings of $5.98 billion, both the highest on record. This comes as Freddie Mac announced 13th record low this year on the 30-year fixed rate mortgage average at 2.72% last week.
This holiday-shortened week is busy with data and month-end supply (usual T-bills as well as the 2-, 5- and 7-year notes). Economic highlights include Markit PMIs, consumer confidence, personal income/spending, durable goods, GDP, new home sales and the FOMC minutes from the November 4-5 meeting. In addition, FHFA HPI for September will be released tomorrow with the FHFA likely announcing the new conforming loan limit (currently $510,400) shortly thereafter.
The Chicago Fed National Activity Index for October (+.51 to .83) led off today’s calendar. Later this morning brings preliminary November Markit manufacturing and services PMIs and remarks from San Francisco Fed President Daly and Chicago Fed President Evans. The NY Fed Desk will purchase up to $20.8 billion over the first three days of this week. Today’s schedule totals $6.9 billion maximum over all three classes: $1.2 billion UMBS15 1.5% and 2.0%, $3.7 billion UMBS30 1.5% and 2.0%, and $2 billion GNII 2.0% and 2.5%. We begin the week with Agency MBS prices down/worse a few ticks and the 10-year yielding .85 after closing last week at 0.83%.
Employment and Transitions
On Nov. 19, President Bill Clinton was joined by Caliber Home Loans CEO Sanjiv Das for the Clinton Foundation’s virtual conference “Building an Inclusive Recovery.” The three-part series addresses racial and economic disparities in the wake of COVID-19. Part II, titled Affordable Housing and (Re)Building the American Dream, focused on affordable housing and how homeownership is an effective solution to building financial stability in America. President Clinton and Das were joined by a panel of experts knowledgeable in strengthening communities at the local, state, and national levels. Watch the replay on the Clinton Foundation website. “Caliber is a company with smart, strategic leaders who are enthusiastic about sharing knowledge. Come work for a company that will help you grow professionally. Visit our website today to view open opportunities. To be immediately considered for Operations or Sales positions, email Jonathan Stanley or Brian Miller respectively.”
Newfi Wholesale is looking for experienced Account Executives with an established account base in select geographic areas. As rates are starting to rise it’s critical to be part of a company that offers a diverse product selection with multiple solutions for your broker partners. Newfi’s proprietary non-QM products offer bank statement, 1099, asset depletion,1-year tax return and DSCR qualification options with all loan decisions made in-house and the ability to make exceptions. Newfi also offers six Jumbo programs, including one with an AUS option that allows true blended ratios and Cash Out up to $1M, as well as traditional Agency and Government programs. “Our proprietary technology delivers a smooth and effortless experience for our clients. Don’t get trapped with only vanilla products and have to compete with everyone on price – Newfi excels in all markets and rate environments. To learn more about joining the Newfi team please email Travis Butler.”
If you’re ready to begin the new year with a new career opportunity, Franklin American Mortgage Wholesale Lending is looking for a talented and experienced Operations Manager to oversee its Irving, TX operations center. As a part of one of the strongest bank-owned wholesale lenders in the nation, this senior management role will be part of the leadership team that sets the direction for Franklin American Mortgage Wholesale Lending nationally. “If you’re interested in the opportunity to lead a great team and help shape the future of a thriving business channel, contact our SVP of Wholesale Lending, Bobby Frank today!”
PHH Mortgage is looking to capitalize on the success of its Delegated Correspondent and Reverse Mortgage channels and is seeking experienced Account Executives and Relationship Managers who have a proven track record of success and a commitment to culture, collaboration, and customer experience. “Our story this year has been defined by rapid growth, superior service, industry-leading turn times and exceptional partner loyalty. If you are interested in joining a growing company and a winning team, please contact Bob Marseilles, VP of Correspondent Lending for additional details.”
“Control Freaks Wanted. Primary Residential Mortgage, Inc. (PRMI) is looking for control freaks. That’s right: if you like being in control of your own destiny and doing things your own way, we want you. At PRMI, we respect your creativity and entrepreneurial instinct. You’ll have the support, resources and, most importantly, freedom you need to do what you know is best for your market, your customers, your team, and your future. We’re always here to back you up, but you succeed on your own terms, and you realize the benefits of your success. Join PRMI today and take control of your future. Visit our website or contact Amy Gallow, VP of Business Development to learn more.”
“A comp plan that sounds too good to be true! Imagine a compensation plan where you get paid for the work you do regardless of whether the loan funds, well imagine no more. Our Mortgage Advisors are compensated on “New Loans Sent to Processing “giving them control over the speed of service and their monthly compensation. PCMA Private Client Lending is recruiting for top tier talent and our compensation plan proves it. To learn more about our rock star compensation plan click here: ARE YOU A ROCKSTAR. For consideration we suggest a visit to our client site www.pcma.mortgage and www.pcma.us.com to learn more about our firm, our principles, and our culture. Email us at firstname.lastname@example.org.”
FundingShield announced Kurt Kluth has joined as VP of Technology - Sr. Data Administrator where he will lead the data management and modeling team to deliver optimal process models, fraud prevention, and ensure transactional data integrity. Prior to joining Fundingshield Kurt was a Data Architect for CloudVirga and was a Sr. Database Administrator for First American Title Corporation.