Aug. 25: Retail jobs & sales tool for lenders; FHA/PACE update; volatility-hedge costs-refinancing-servicing connection

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. Read more...

There is nothing like some bond market volatility to drive up hedge costs and push down secondary marketing results, right? Capital markets departments for residential lenders have had some great months, but that may very well change in August and September. Monday saw a continuation of the “global economies are slowing, which means stock markets are going down while at the same time leading to lower rates since the demand for capital is less” trade. Treasuries soared (the 10-yr. note went as low as 1.90%) as investors scrambled to find safe havens from the rout in global equity markets – more the implications for lenders and servicers below.

 

In job news, CMG Financial continues to expand rapidly throughout the Southeast and seeking experienced Branch Managers and Loan Officers in Georgia, Tennessee, N. Carolina and Florida. CMG is a national mortgage banker licensed in 49 states and holds federal agency lending approvals with HUD, VA, GNMA, FNMA, FHLMC and RHS. “CMG has established itself as an expert in the industry and continues to grow its reach and reputation by expanding its footprint with high-caliber talent acquisition.  Since our inception in 1993, CMG Financial has increased loan funding every year!  CMG offers a white-glove onboarding experience, dedicated support, integrated marketing CRM, competitive pricing and products and industry leading service levels.  Schedule a confidential conversation with Mark Shay, Eastern Division Sales Manager (404.920.5930) or Catherine Nelson, Corporate Recruiter (925.884.2756) and find out why CMG has become a leading lender and how we’ve attracted several of the nation’s top originators.”

 

“Research has shown that 32% of consumers expect a company to respond to an online inquiry within 30 minutes. Another 42% expect contact within one hour. Speed to contact is critical to optimize sales opportunity. To see if companies are meeting these expectations, for the second consecutive year InSellerate sent digital inquiries, either through an online form or by email, to 778 companies attending LeadsCon NY. The research found, as a whole, the companies in the study did not meet consumers’ expectations when it comes to inquiry response time and more than half (56.34%) did not respond to the online or email inquiry at all. Of those companies that did respond, the average response time exceeded 24 hours and the primary response vehicle was email, which is a passive, non-engaging, relatively non-effective method of contact. To see the research entire research results click here, or if you are attending LeadsCon NY and want to see your company’s response time visit booth #315.”

 

And Greg Frost is looking for a few more Branch Partners. “Yes, it’s the same Greg Frost who was the mortgage industry’s first billion dollar Loan Originator. Greg’s Division, of Primary Residential Mortgage, currently has Branch Partners in New Mexico, Arizona, California, Colorado, Texas, South Dakota, Illinois, Iowa and Mississippi. If you’re operating in one of these states, and would like to investigate his very profitable Branch Partner business model, just click here to schedule a confidential conversation with Greg. Imagine working with and being mentored by one of the industry’s’ most prolific mortgage professionals. Click Here now.”

 

FHA announced anticipated guidelines for two new initiatives that will support borrowers seeking to make energy efficient improvements to their homes, including guidance that will allow borrowers to use Single Family FHA financing for properties with existing Property Assessed Clean Energy (PACE) loans that meet certain conditions. FHA also announced its new partnership with the Department of Energy helping borrowers using Single Family FHA’s Energy Efficient Home program to take advantage of energy cost savings when measured by DOE’s Home Energy Score.”

 

Speaking of products & programs, Open Door Partners is making it safer for real estate agents to show homes and create more collaboration with industry affiliates. Agents will use the Open Door Partners map of offices to meet new clients for the first time in the entry/front desk area and verify the clients’ ID then they will show the property. An online map that is mobile friendly allows realtors to search for nearby and convenient locations for their initial client meeting. The open door policy is a way for lenders and other industry partners to connect with realtors and create referral partnerships.

 

How ‘bout we peruse recent MSR packages my cat Myrtle has seen out for bid? MIAC, as exclusive representative, offered a $50 Million per month FNMA/FHLMC concurrent flow MSR offering. The flow servicing is being offered by a well-capitalized mortgage company that originates loans with national geographic concentration. The package had a $200k Average Loan Size, is 100% FRM, FNMA A/A (70.57%), FHLMC ARC (29.43%), 53.45% correspondent, 28.12% retail originations, with a 749 WaFICO. MountainView Servicing Group had two packages out for bid. The first was a $1.3 billion FHLMC/FNMA servicing portfolio, which was 100% fixed rate 1st lien product, 762 WaFICO, 72% WaLTV, 3.59% WAC, low delinquencies, $192k average loan amount, with top states: California (23.0 percent), Colorado (7.5 percent), Arizona (7.1 percent), and Washington (6.3 percent); the second package was $137 million GNMA servicing portfolio. It was 99.6% fixed rate and 100 percent 1st lien product, 766 WaFICO, 91% WaLTV, 3.97% WAC, $178k average loan size, with top states: New Jersey (40.6 percent), Pennsylvania (20.7 percent), Maryland (11.6 percent), and Connecticut (5.4 percent).

 

In the past I’ve touched upon the importance of prepayment speeds, and the influence this number has on pricing and hedging. Recently I read a July ’15 prepayment report and according to this paper Fannie prepayments fell 12% month-over-month, to $21.8 billion, as “seasonal factors” and 17bp higher driving rates reduced speeds. July continued the trend in a volatile rate market, with the 10y rallying sharply to 2.2% in the first week of the month (Greece being the biggest concern at the time), before selling off to 2.45% by mid-July. The 10-yr. then mostly rallied throughout the rest of the month, ending July around 2.18%. If anyone pays attention to the refi index, they’ll notice it’s still near its lowest levels of the year. If rates stay within a similar range, expect refi activity to remain sluggish.

 

The MBA’s president, David Stevens, reported that the new GSE servicing rules may hurt smaller nonbank firms. The new marginal capital requirements will likely be a burden among smaller nonbank servicers, which become effective December 31st. The new rule imposes that all GSE seller/servicers, including banks, meet a minimum net worth requirement of $2.5 million, including 25 basis points of the unpaid principal balance on one-to-four family loans serviced. Nonbank GSE servicers will also be required to meet new minimum capital and liquidity requirements as well as have a tangible net worth to total assets of at least 6 percent to meet the minimum capital requirement. Another encumbrance is that nonbank servicers will have to hold 2 percent against nonperforming loans that are greater than 6 percent of their portfolio but servicers will have a six month grace period to meet the capital and liquidity standards.

 

Speaking of servicing, Wells Fargo’s policy expansion in late July removed LTV/CLTV restrictions for Non-Conforming Loans when the total Loan amount exceeds 10 times the median home price on a primary residence or second home. In addition, regarding loans Guaranteed Rural Housing, in order to more accurately reflect the market, risks, and associated costs for GRH Loans, Wells Fargo Funding eliminated the Servicing Released Premium (SRP) adjuster and update Loan FICO adjusters specific to GRH Loans.

 

With this rally capital markets staffs are busy. Loans that are deep in the money need to be prioritized and processed quickly to get them closed and sold. By now the September Fed rate move is pretty much off the table. But what about all these investors that have been paying up for servicing over the last year – are they watching their investment go out the window due to refinancing? Many say of course they are – unless they have aggressive origination arms that are working on their own portfolios. Paying above market rates for the right to service a loan that pays off in three months is not generally a long-term recipe for success.

 

But Sally Ann Runyon with Thomson Reuters wrote, “…mortgage rates overall need to drop notably further to significantly stimulate refinancing activity. MBS analysts at Bank of America Merrill Lynch noted that from the end of June through the week ending August 14, the Refi Index increased 26% as mortgage rates declined 25 basis points. ‘From this point, every 10bp decrease in rates will increase the index by just over 200 points, or 1.3%,’ they said. Wells Fargo believes that a level of 1.75% on the 10-year would be needed where call risk could materialize and represent a convexity ‘inflection point.’ At this level, mortgage rates would be expected to be around 3.50% to 3.75%, they said.”

 

I know that this commentary is focused on mortgages, but we should note that heading into yesterday morning the Shanghai Composite (stock market) declined -8.49% to 3,210, putting its losses from the June high at 38%. Both the euro and yen spiked against the dollar as markets pushed through stop orders. That was the largest range for USD/JPY in at least one year. My guess is that most individual investors are sitting on their hands, and that computers are driving the selling. But it is still a concern when that much wealth is wiped off of balance sheets – especially if people were going to sell stocks to raise cash for a down payment.

 

It is nice and early here in Kansas, but the markets are open and different that Monday. (Was that pithy?) Today we’ll have some news, primarily housing related – the kind of stuff that indicates where the economy is rather than news that will move rates. The June Case-Shiller news comes out, as well as the June FHFA Housing Price Index, July New Home Sales (10:00 EDT), and August Consumer Confidence (10:00 ET). Throw in a $26 billion 2-year note auction and we could see some movement. For numbers we closed the 10-yr risk-free T-note at the-easy-to-remember 2.00% level and this morning we’re at 2.07% with agency MBS prices worse .250-.375.

 

 

I decide to water my garden.

As I turn on the hose, I look over at my car and decide it needs washing.

As I start toward the garage, I notice mail on the table that I collected from the mailbox earlier. I decide to go through the mail before I wash the car.

I lay my car keys on the table, put the junk mail in the trash can under the table, and notice that it is full.

So, I decide to put the bills back on the table and take out the rubbish first.

But then I think, since I’m going to be near the mailbox when I take out the rubbish anyway, I may as well pay the bills first.

I take my check book off the table, and see that there is only 1 check left.

My extra checks are in my desk in the study, so I go inside the house to my desk where I find the can of Coke I’d been drinking.

I’m going to look for my checks, but first I need to push the Coke aside so that I don’t accidentally knock it over.

The Coke is getting warm, and I decide to put it in the fridge to keep it cold.

As I head toward the kitchen with the Coke, a vase of flowers on the worktop catches my eye – they need water.

I put the Coke on the worktop and discover my reading glasses that I’ve been searching for all morning.

I decide I better put them back on my desk, but first I’m going to water the flowers. I set the glasses back down on the worktop, fill a container with water and suddenly spot the TV remote control.

Someone left it on the kitchen table. I realize that tonight when we watch TV, I’ll be looking for the remote control, but I won’t remember that it’s on the kitchen table, so I decide to put it back in the front room where it belongs, but first I’ll water the flowers.

I pour some water in the flowers, but quite a bit of it spills on the floor.

So, I set the remote control back on the table, get some towels and wipe up the spill.

Then, I head down the hall trying to remember what I was planning to do.

At the end of the day:

– the car isn’t washed

– the bills aren’t paid

– there is a warm can of Coke sitting on the worktop

– the flowers don’t have enough water

– there is still only 1 check in my check book

– I can’t find the remote control

– I can’t find my glasses

– and I don’t remember what I did with the car keys.

Then, when I try to figure out why nothing got done today, I’m really baffled because I know I was busy all day, and I’m really tired.

I realize this is a serious problem, and I’ll try to get some help for it, but first I’ll check my e-mail.

 

 

Rob

 

(Copyright 2015 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)