It hasn’t been a good few weeks for banks whose names begin with “Si” (Silvergate, Silicon Valley, and Signature, with Silicon Valley Bank declaring Chapter 11 bankruptcy this morning; today’s Rundown discusses how the bank crisis may impact lenders). Ah, those clever secondary marketing folks. Cornerstone’s Henry S. frets, “I can’t believe it’s bank collapse season already. I just finished taking down my train derailment decorations.” Certainly, time flies by, and I hope you’re wearing some green today. Originally a religious holiday to honor St. Patrick, who introduced Christianity to Ireland in the 5th century, St. Patrick’s Day has evolved into a celebration of all things Irish, with the first parade on March 17, 1762, in New York City, featuring Irish soldiers who served in the English military. It certainly is more fun to think about celebrating the Irish than the constant stream of headlines as people race to conjecture about the health of world banking, and people crying “shoulda woulda coulda.” The markets seem to be performing a stress test on the Fed. The Federal Reserve’s (Fed’s) tightening seems to be finally having an effect, and an early victim has been smaller banks that did a poor job of managing interest rate and deposit concentration risk. (Today’s podcast can be found here and this week is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking.)
Lender and Broker Services, Products, and Software
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Advancial Federal Credit Union (NMLS#469500 an Equal Housing Lender) can eliminate a departing residence’s liability from the DTI and reserves! If you can’t close on a new home due to a departing residence’s sale falling out, call Advancial today! Advancial may also offer a cash out refinance on the departing residence and eliminate this debt from the DTI while using the cash out proceeds to purchase a new home. HELOC or other short-term financing may also be eliminated if needed for down payment. Requirements: 30 percent or more equity in departing residence and must be actively listed prior to new home’s closing. No need for an executed contract or contingency removal. Loans up to $5mm with no pre-payment penalty. Available in all 50 states and DC. Advancial saves loans! Visit, email, or call today 888-876-2328. As an emerging leader in Portfolio and Warehouse non-prime wholesale lending, Advancial has gained a reputation built on stability, reliability, and dedicated customer service.
FHA, VA, USDA, Ginnie News
Sure, the lion’s share of residential head Freddie and Fannie’s direction. But Government programs shouldn’t be dismissed. If one looks at last week’s application data, the MBA’s number crunchers tell us that the FHA share of total applications is nearly 13 percent, the VA’s share of total applications is about 12 percent, and the USDA’s share hovers at 0.5 percent.
FHA published a final rule in the Federal Register, Increased Forty-Year Term for Loan Modifications which will allow mortgagees to increase the maximum term of a loan modification from 360 to 480 months for FHA-insured mortgages after a default episode. FHA will also simultaneously publish Mortgagee Letter (ML) 2023-06, Establishment of the 40-Year Loan Modification Loss Mitigation Option establishing the standalone 40-year loan modification policy. The regulations in this final rule are effective on May 8, 2023. The provisions of the ML may be implemented immediately but must be implemented no later than May 8, 2023.
The recent $1.7 trillion FY2023 appropriations package, as enacted, contained several MBA-supported provisions, such as increased funding for FHA technology upgrades, reauthorization of the National Flood Insurance Program (NFIP), increased funding for Ginnie Mae administrative expenses, language to encourage small-dollar FHA mortgage lending, and increased funding for housing counseling.
The rapid rise of interest rates and the current economic climate is creating liquidity pressure for HMBS Issuers obligated to fund borrower draws and make timely payments to HMBS investors under Ginnie Mae’s Guaranty Agreement. As announced in Ginnie Mae All-Participants Memorandum (APM), 23-04, the minimum HMBS pool size is being reduced to relieve this pressure and decrease the amount of time Issuers must carry balances between the HECM loan origination disbursement and HMBS securitization.
PRMG has aligned with USDA, non-permanent resident aliens are now eligible until May 2, 2025. Also noted in PRMG Product Update 23-1, Choice Stretched, Non-Prime, and DSCR Stretched and Non-Prime: Clarified that if the borrower was added to title and there was no purchase price, the borrower would need to be on title for 12 months before we could consider a cash out transaction using the appraised value.
AmeriHome Correspondent Product Announcement 20230303-CL announced, effective immediately, the USDA Program Guide is updated to align with recent changes to Chapters 9 and 15 of the USDA HB-1-3555, along with other guide updates.
Citizens Correspondent National Bulletin 2023-06 includes information on FHA Reduced Annual MIP Premium Rate.
Capital Markets: Bank Failure 101
Banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure and Chapter 11 filing this morning. Nearly a dozen of the nation’s largest banks have deposited $30 billion into First Republic Bank in an effort to stabilize the lender’s balance sheet after the firm’s share prices plunged in the aftermath of several bank failures, bank regulators announced Thursday.
The beginning of SVB's failure was when it invested heavily in long-term U.S. government bonds and mortgage-backed securities. To pay depositors near 0 percent but take the money and earn 4-6 is an attractive spread. Unfortunately, bond prices have an inverse connection with interest rates, and when rates rise, bond prices fall. As a result, SVB's bond portfolio began to lose considerable value when the Federal Reserve started raising interest rates rapidly to battle inflation.
When a large depositor tweeted that he was withdrawing his deposits, others envisioned bank lines from the 1930s and rushed to do the same. Since SVB did not have enough cash, it began selling some of its bonds at high losses. It took just 48 hours from the time when it declared that it had sold the assets to the time of its demise.
Almost all banks, and any individual who owns bonds, have unrealized losses in their bond portfolios… and people have to park their money somewhere. But SVB is likely not the only one dealing with price volatility.
Treasury Secretary Janet Yellen says she is keeping an eye on other institutions considering SVB developments. Looking ahead, if the Federal Reserve grows concerned that SVB's issues indicate a larger weakness in corporate balance sheets induced by increasing rates, their willingness to maintain raising rates will be tested. It is hard to deal with rampant inflation AND a banking confidence crisis simultaneously. The disintegration of the prominent SVB is a clear warning sign for the banking sector, which includes warehouse banks that mortgage bankers rely on, and it remains to be seen how it will affect other institutions.
We had a pullback in the bond market yesterday after the European Central Bank delivered a rate hike and First Republic’s rescue package was secured. The ECB’s 50 basis points hike added to bets the Federal Reserve will also raise rates next week, despite the banking crisis.
In terms of economic releases, the new residential construction report from the Census Bureau showed that single-family housing starts rose 1.1 percent in February to a seasonally adjusted annualized rate of 830k, though January’s figure was revised downward. Single-family permits, which are generally more indicative of the underlying trend, increased, but remain below the current pace of starts. Initial jobless claims decreased to move back below 200k, reflective of a tight labor market that features a reluctance on the part of most employers to let employees go. The Philadelphia Fed survey ticked up slightly, though "most future indicators weakened, suggesting that the firms continue to have tempered expectations for growth over the next six months."
Today’s St. Patrick’s Day calendar has industrial production and capacity utilization for February, leading indicators for February, and preliminary March Michigan sentiment, all old news compared to hourly bank news. We begin Friday with the 2-year back up to 4.13, Agency MBS prices better .125-.250, and the 10-year yielding 3.50 after closing yesterday at 3.59 percent.
Jobs; Lender Wanted
Acquisition opportunity. Are you looking to sell, are you tired of the current grind? A motivated mortgage group is looking to acquire an existing mortgage lender with clean corporate history & HUD Title II approval, location preferred is East Coast, but not a requirement. If you are interested, please send a confidential note to Chrisman LLC’s Anjelica Nixt for forwarding.
“Caliber Home Loans is proud to be named the #1 Military Friendly Brand designation in 2023, our seventh year to be ranked in the top 10 and our very first time to nab the number one spot, showcasing just how much our commitment to servicemembers and their families continues to grow. Our military lending division knows our veteran’s needs because it’s made up of an incredible roster of veterans, reservists, military spouses, and LOs who care. Join the ranks of our Retail team and change the lives of those who sacrificed for us by reaching out to Tina Jablonski.”
“Loan Officers recently ranked professional satisfaction as a mere 2.5 / 5-stars. The majority struggle to find any sort of meaning in their work, likely resulting in less satisfaction with the career overall. Churchill Mortgage is different. We have longer average tenure due to our unique and unrivaled family culture that values our people first and helps clients achieve the real American dream of debt-free homeownership. We want our originators to win business and deliver meaningful results for the families we serve. And that’s why we have a 4.9 / 5.0 client rating on Google, TrustPilot and Experience.com. Click here to learn more about how we setup our team for success with competitive products, service and top-notch marketing. If you want to be part of a company where your voice matters and you are more than just a number, we’re hiring. For confidential inquiries, please contact Jesse Vazquez or (214) 308-6177.”
“Are you seeking a career with a stable and financially secure Non-QM Wholesale and Non-Delegated Correspondent company? Take a look at Logan Finance. As a premier Non-QM company, we specialize in helping broker and banker partners committed to finding loan solutions for borrowers who do not meet traditional lending requirements. We pride ourselves on our stability and financial security. We provide our employees with the resources they need to thrive in their careers. With our comprehensive training programs, ongoing support, and competitive compensation packages, you can be confident that you are joining a company that values its employees and is committed to their success. You should consider joining the Logan Finance team if you are looking for a challenging and rewarding career in the wholesale Non-QM Mortgage industry. Email us or call 702-296-0831 today and find out why we've grown over 3,000 percent YoY.”
“AmWest Funding Corp, one of the nation's leaders in Non-QM lending, is looking for Delegated Correspondent Account Executives to join our team! AmWest Funding is thrilled to feature its array of Non-QM programs, including VOE/P&L, Asset Qualification, Bank Statement, One Year Tax Return, and DSCR programs to a broader clientele. Here at AmWest Funding, we have been setting the bar high in mortgage lending since 2016. Our team is passionate about providing our lenders (or business partners) with competitive pricing and an expansive array of products that allow them to excel. If you are looking for an experienced lender to help you expand your territory and further diversify your product offerings with excellent service and turn times, join us today! Contact us or visit our website for more career opportunities.”