Latest posts by Rob Chrisman (see all)
- May 26: Bank M&A; example of title/lender fraud; Basel update for LOs; wages & inflation; the Fed & mortgage rates - May 26, 2017
- May 25: Sales & software & controller jobs; PHH v. CFPB – recording of the arguments, a webinar about yesterday’s action, what’s next? - May 25, 2017
- May 24: Bus. Dev. & LO jobs, title company cuts fees, bus. opportunity; Guild’s 1% down product; new home sales trends - May 24, 2017
Let’s hope this is not a “here we go again” situation. RealtyTrac reports home flipping (defined as a property that is bought and resold within 1-year period) has jumped 20% in Q1 of 2016 and is up 3% year over year. This time around, 71% of house flippers paid cash for the home, however, compared to just 27% pre-crisis – comforting.
In job news Motive Lending, one of the premiere and fastest growing wholesale lenders in the country, has a rare opening in Orange County, California for a Regional Sales Manager to take over an existing team that is already producing $15-25MM in monthly funded loan volume. “Since inception in late 2013, Motive Lending has funded over $4 billion in loans and still growing at a very fast pace. Even if you’re doing well, don’t pass on this rare opportunity to explore the possibility of doing better.” Please contact Alex Falas, Recruiting Manager, with resumes or to learn more.
eOriginal, a leading SaaS growth company with over 20 years of experience in enabling our customers to Digitally Transform their business, is looking for an Account Executive, Digital Mortgage Services in its Baltimore, Maryland headquarters. “The company is a recognized best practice leader in a variety of asset classes including auto finance, equipment leasing, consumer lending, and vacation ownership. We are one of only a handful of Fannie Mae certified eMortgage vendors and have recently launched our expanded Digital Mortgage Platform with leading ecosystem partners. The AE must be able to navigate multiple organizational levels and gain access to business, technology, financial and legal decision makers, resulting in revenue generation for the company’s digital mortgage offerings. If you are interested at being at the forefront of the Digital Transformation of the mortgage industry and joining a fun and entrepreneurial company, please visit eOriginal’s career page or contact the HR Manager Caryn Hild. Come grow with us!”
“Located in Southern California and primed for exponential growth, we are a Direct FNMA & FHLMC Seller/Servicer and approved GNMA Issuer with expanded guidelines and extremely competitive pricing. We are currently looking for Wholesale Account Executives in California and a National Sales Manager to expand business opportunities and increase our sales force. If you are looking for a lender where you want to grow together and you need internal supports who understands the needs of sales force,” please send your resume to me at firstname.lastname@example.org for forwarding and specify the opportunity.
First California Mortgage Company is continuing its nationwide expansion and is looking for a Corporate Trainer to join its team. The ideal candidate will have a minimum of three to five years’ mortgage experience as a trainer and be responsible for creating materials and procedures as well as training all sales staff. This position will need to work hand-in-hand with Product roll out and Product Development. The Company is a FNMA & FHLMC Seller/Servicer, GNMA I&II Issuer, and jumbo and non-QM lender operating across multiple platforms: retail, wholesale, consumer direct and Affinity. First California Mortgage Company has been voted as one of Mortgage Executive best places to work, Inc 5000 fastest growing, and Mortgage Executive Top 100 for 2 years in a row. Please send inquires & resumes to Director of HR Shannon Thompson or visit www.firstcal.net for more information.
Altavera Mortgage Services, a Denver-based employer, is expanding its Ops team in the Denver metro area and the Denver/Colorado Springs corridor. “Altavera started with a simple idea. As people who’ve run originations and securitization shops, we wanted to build the outsource company we always wished existed—one we could turn to and entrust with our business, and one where people loved to work! We are looking for talented, engaged people to expand this philosophy and build their careers. If you live in Denver (we have north and south offices), Colorado Springs, Castle Rock or Monument areas, or are interested in working remotely from home, we would like to talk to you about senior underwriter, processor and closer positions. Visit our website for more information on qualifications, our tremendous benefits package and how to apply: www.Altavera.com.
EverBank stockholders and employees had some uncertainty removed from their lives when TIAA put rumors to rest by announcing the $2.5 billion acquisition. Both companies offer residential mortgages, EverBank known to be more of an on-line lender. Is it a technology play? Perhaps. The bank has over $27 billion in deposits across the country, and this may be a move to capture more of Millennial deposits. TIAA-CREF does have retail mortgage offices. The agreement to acquire EverBank “significantly expands TIAA’s banking and lending products and complements the company’s full suite of retirement, investment and advisory services available to help customers achieve financial well-being.”
Anyone excited about servicing is “few and far between.” But news broke that New Residential Investment Corp. (NRZ) inked an agreement in which it will purchase a total of $72 billion of servicing from Walter Investment Management (owner of Ditech) for a purchase price of $514 million. In additional NRZ entered into a forward flow arrangement with Walter to acquire MSRs of newly originated mortgage loans.
The purchase price for the acquisition of seasoned MSRs equates to around 71 basis points of UPB (unpaid principal balance). So it seems that NRZ has the ability to keep growing its servicing portfolio as the servicing industry consolidates. As analyst Bose George points out, “The flow purchase of newly -originated servicing represents a new initiative for NRZ. The company has historically focused on seasoned servicing. However, on the last earnings call, management noted that, given the current rate environment, the company would look at newly originated servicing. We expect this agreement to include a recapture feature, which replaces the MSR on loans that are refinanced by Walter. This feature helps mitigate prepayment risk.”
The current servicing market has turned volatile, unfortunately for owners of servicing, and in turn borrowers, downward in price/value. Just like when MBS prices drop, if servicing values do the same or servicing costs continue increasing, the borrower sees it in their rates. Stephen Fleming with Phoenix Capital observes, “Well, so much for lazy summer days. Our MSR Desk has been running hot and that’s without the warm summer we’ve had in Denver. This year had already represented an incrementally more challenging MSR environment than 2015, but then overall interest rate volatility spiked with Brexit and subsequent market moves.
“In light of the implied premium now placed on liquidity vs execution, trading levels are back another 10-15% across the board over past months – across all buyers, investors, and structures – with the Ginnie Mae PIIT arena especially feeling thin. Many trades, however, continue to successfully close and flow relationships continue to function well. Headwinds are present, but the co-issue and bulk markets have remained upright and a source of funding for Phoenix clients. Timing and knowledge of buy-side demand has become all the more critical in 2016 to increase the odds of a successful transaction, and in that light, we continue to actively work with a number of potential new buyer entrants that have expressed serious MSR interest. Ever forward!”
Mike Carnes with MIAC also had some reflections. “Accelerated prepayments, rising Cost to Service, and in some instances higher net worth requirements and/or the sellers’ inability to sell in increments large enough to generate attractive economies of scale have combined to create the perfect storm for certain sellers in need of an outlet for their MSR’s. Further complicating matters, over a two-business day span following the British electorate vote to leave the European Union, the 10 YR Treasury rallied by 28 basis points and as measured by Bankrate, 30-year fixed mortgage rates declined by 21 basis points. While I’d argue that Brexit put the market into an oversold positon, it did create somewhat of a ‘Sky is Falling’ mentality among buyers, which at least temporarily forced the utilization of higher prepay estimates and higher yield requirements on recent bulk and co-issue offerings. The result was wider bid/ask spreads and thus fewer deals getting consummated.
“As co-issue contracts renew, despite new “At Market” note rates, values have been trending lower not only due to higher cost, but also due to the belief that many buyers overpaid over the last two years. For many, prepay speeds have been much faster than what their acquisition prices contemplated. For that reason, there is some cost dollar averaging taking place by effectively widening out margins on newly acquired assets. For many, MSR values are down by as much as 25 basis points from this time last year, 15 or more basis points YTD and as illustrated by the following caption, over 10 basis points (mostly due to Brexit) since 5/31/16.
“But the news isn’t all bad. Given the decline in value, a small but growing number of MSR buyers who mostly sat on the sidelines over the last two years are starting to show some renewed interest in possible MSR acquisitions. We may not have reached an inflection point (yet) where the industry at whole says it’s time to get back into the market, but there are a few trail blazers who certainly think so.”
And Matt Maurer with MountainView Capital Holdings reports, “We are hearing a lot of chatter about the MSR market coming to a complete halt. We are seeing, however, FNMA, FHLMC, and GNMA servicing continue to trade in the market. MountainView back-tests our fair value assumptions sets to trade execution for all of the deals that we market. Over the last three months, conventional deals are executing at or near fair value levels. This is a result of models being rather predictive on speeds and credit performance along with a deep pool of bank and non-bank conventional MSR buyers. And we have strong bidders for both high and low coupon conventional servicing. A 8.5% to 9.5% yield for an asset that has been effectively hedged for an extended period of time is still very attractive to bank and non-bank MSR investors. We expect execution levels on a yield basis to hold steady over the next quarter with stronger execution on newly in the money (3.75% to 4.125% F30) conventional servicing once July and August speeds are reported.
“The GNMA MSR market is not as pretty. Since March, we have seen faster than predicted speeds on FHA and VA servicing which appears to be driven by increased FHA streamline and VA IRRRL activity and home price appreciation (which is allowing borrowers to refinance into lower cost conventional loans). And low-rate FHA, and, especially, low-rate VA servicing is not immune to the faster realized speeds. Even GNMA servicing buyers that hedged have had subpar results given the higher than expected speeds. To protect themselves from further pain, GNMA servicing bidders have softened their pricing. In a stochastic modeling framework, the option adjusted spread (OAS), which is the equivalent to a static yield or required return, is influenced by many risk factors including prepayment error, regulator risks and compliance risks. And given realized speeds on GNMA servicing and the risk of HUD reducing the ongoing MIP again (which is an ‘un-hedgable’ event), it makes sense for bidders to increase their expected prepayment error and thus, their OAS, or required return.
“Based on our recalibrated GNMA modeled speeds, we are currently seeing GNMA servicing trade 6 to 10 bps back of prepay collaborated fair value levels which equates to around 150 bps to 250 bps in higher required return. For activity to increase in the GNMA MSR bulk market, a couple of the following probably need to happen: 1) sellers recalibrate their models to reflect increased realized speeds, 2) prepayment speeds migrate back to historical levels for several months and bidders get comfortable with the prepayment risk of the asset, and/or 3) new GNMA servicing buyers come to the market to take advantage of the double digit returns that can be made by buying GNMA servicing in today’s low yield/return environment.”
Our fixed-income markets have been pretty stable. Monday MBS ended mostly higher and directionally tighter, as the 10-year note closed lower, but well off morning lows with the curve slightly flatter. It wasn’t enough intra-day chop to cause any price changes on rate sheets, however, despite the 10-year hitting a high of 1.61%. At the close the 10-year was nearly unchanged from Friday’s close, as were agency MBS prices, on no news of substance.
This morning we’ve had some economic news: the preliminary 2nd quarter productivity (-.5%, worse than expected) and unit labor costs (+2.0%). Later are Wholesale Inventories and Sales for June, along with a $34 billion 3-year notes auction by the Treasury. After the numbers this morning the 10-year yield is 1.59%, pretty much unchanged from Monday night, as are agency MBS prices.
A young woman wasn’t feeling well and asked one her co-workers to recommend a physician.
“I know a great one in the city, but he is very expensive. Five hundred dollars for the first visit, and one hundred dollars for each one after that.”
The woman went to the doctor’s office and, trying to save a little money, cheerily announced. “I’m back!”
Not fooled for a second, the doctor quickly examined her and said, “Very good, just continue the treatment I prescribed on your last visit.”
(Copyright 2016 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.)