Apr. 17: Letters on Agency buybacks and appraisal waivers; Saturday Spotlight: Embrace Home Loans

I ordered a chicken and an egg from Amazon. (I’ll let you know.) You think the mortgage process is confusing and, at times, thorny? How ‘bout a totally non-mortgage related item for a Saturday morning to keep things in perspective when ethics, the government, and science collide. Sharon MacNeil lost her husband Eric to cancer, but before his death, Eric banked his sperm. Eleven years after his death, Sharon underwent in vitro fertilization using Eric’s donation and ended up with twins in 2008. When Sharon sought child’s survivors’ benefits from her deceased husband’s wage earnings, the Social Security Administration denied her request, as did an administrative judge, a district judge and then the U.S. Court of Appeals for the Second Circuit. A child conceived from the frozen sperm of a dead man can’t collect his social Security benefits. And you think you have problems. But onto residential mortgage lending!

Saturday Company Spotlight: Embrace Home Loans: Doing home loans exceptionally well.


In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).


Founded in 1983, Embrace Home Loans is one of the nation’s leading mortgage lenders, with over 700 team members across the country and licensed to do business in all 50 states and the District of Columbia. We’re a Fannie Mae, Freddie Mac, FHA and VA lender and we process, underwrite, fund, and close all loans inhouse. We have three distinct divisions: Retail, Direct-to-Consumer, and a Financial Institutions Group which supports mortgage originations for Ameriprise Financial and Eastern Bank. We had an estimated $6.4 billion in total loan production in 2020, representing an approximate 70% year-over-year increase from 2019. We plan to increase our sales and operations teams this year and are expanding our national footprint, opening new offices across the country.

Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.  


Giving back to people in need is a cornerstone of our company culture. Last year, we sponsored and participated in many philanthropic endeavors, from making masks, hosting food drives, and helping military veterans in need. We also match employee donations to the causes they care about, up to $2,500. Our team members can also volunteer at organizations of their choice for up to 100 hours and get paid during that time–plus the organizations receive a monetary gift from Embrace as well.

While COVID-19 posed a few obstacles to our charitable efforts, our team members still found ways give back. As just one example, one of our branch managers worked with local restaurants to organize food drives to benefit those on the front lines of the pandemic, including first responders and hospital staff, in addition to local schoolchildren, shelters for abused women, and support for Meals on Wheels.

What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop? 


We’ve developed our own certified coaching program, which 75 of our managers have gone through. We also know how important branch managers are to a loan officer’s career. That’s why we focus on recruiting and retaining branch managers who have a track record of creating and maintaining a positive sales atmosphere as well as coaching and mentoring new loan officers to be the best they can be.

Tell us how your company maintains its culture in the office, or in a work-from-home environment if applicable. 


Our culture is very important to us. Most of all, we try to make our people feel appreciated and valued, especially when working remotely. During COVID, for example, we gave every employee five days off if needed to care for someone who was sick, plus we gave $4,000 to every employee who needed a tutor or babysitter so they could work from home. We also set up a COVID testing site in the corporate office for anyone who wanted to get tested. During the past year, we held fun gatherings via Zoom and Microsoft Teams to keep people connected. We also held monthly award ceremonies, town hall discussions, virtual branch lunches with the CEO and sent special care packages to our teams to thank them for their support.

Things you are most proud of that don’t have to do with sales.  


Every year, we commit a percentage of our earnings to charity. Over the past decade, Embrace and its employees have donated over $25 million to many worthy causes.

Fun fact about Embrace. 

CEO and Founder Dennis Hardiman was once called the “Godfather of refinancing” in a trade article. Hardiman started the company in 1983 after watching mortgage interest rates fall “a whopping five points” and he realized how beneficial it would be for homeowners to be able to reduce their mortgage rates. In prior years, refinancing was pretty rare.

(For more information on having your firm, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)

Appraisal waivers

I received this note from an MLO near a major U.S. city. “Can someone answer the question why Fannie and Freddie do not allow for appraisal waivers when a value is over a million? I have people with houses worth $3 million getting a conforming no cash out loan with 12% DTI and 780 scores. The need for an appraisal is ridiculous. It is hurting purchases because people can’t close fast enough and they owe out to cash buyers because appraisers are too busy. It would make total sense to stop appraisals that are not necessary.”

Michael Simmons, co-president of AXIS AMC, responded with, “First let me start with Fannie’s description of what their mission is (I added the highlights):

‘Fannie Mae was chartered by U.S. Congress in 1938 to provide a reliable source of affordable mortgage financing across the country. Today, our mission continues to provide a stable source of liquidity to support low- and moderate-income mortgage borrowers and renters. One of the ways we do this by enabling greater access to affordable home and rental housing finance in all markets and at all times.’

“The GSEs are by charter and design here to serve as a stabilizing force for the mortgage market. At no time was it more apparent that the financial crisis in 2008 when, if not for both entities agreeing to continue to buy loans from lenders, the entire housing market would have totally seized up and likely collapsed our entire economy. This was repeated last year when Covid threatened to shut down the housing market, and why, in my opinion, the drive by some to take Fannie and Freddie out of conservatorship and make them private is completely misguided. Had that occurred, our housing markets would have collapsed completely because our private banking system would never have stepped into that breach to support our markets (nor do they have the collective wherewithal to do so).

“Another reason is data. Home values over $1 million are, on the whole, uncommon in most markets. And even when there is what might be called a ‘concentration’ of sales data in a market area (like some areas in CA), it pales before the amount of data that the GSEs have assembled in the rest of the markets nationally. Not only is the data limited, but in the high-end of the real estate market values are historically far more fragile in changing markets or shifting economic conditions. Price swings are more dramatic and affordability becomes an issue. Plus the base of buyers is far smaller… And all that translates to a different risk profile. That’s why the higher end tends to be one of the slowest segments to recover.

“In terms of ‘fixing’ things, navigating the ugly political cross-currents in today’s world, the fluid interpretations of monetary policy, pandemics, and the endless list of other critical issues that we all face, solutions will continue to prove challenging.

“One additional note on where this conversation started. Waivers were originally designed to serve a certain narrow niche for a limited customer base. In my opinion, waivers are over-used and presently distorted to our market data. They may have, at least so far in these markets, served as efficient risk predictors from a lending standpoint, but they provide little by way of identifying value, and that’s an element that they’ve effectively replaced. But that’s a different conversation for another time.” Thank you, Mike!

Agency repurchases: an increase ahead?

Fannie & Freddie are not only shrinking their footprint in the primary markets, but the jungle drums are saying that the GSEs (government sponsored enterprises) have turned their attention to buybacks. This is, of course, their prerogative, as is how much energy they direct at having Agency sellers buy back performing loans, but it is a topic that has industry insiders concerned.

Attorney Brian Levy had this to say. “The job losses of today and resulting loan losses are virus effects. There is no ‘blame’ to place on mortgage originators, servicers, or aggregators for problems they didn’t cause and can’t control. It’s unjust to make those parties bear recourse due to contractual terms never intended to be used for this risk. But remember the pivotal cave scene in The Fugitive. Harrison Ford, the fugitive, cries out to his pursuer, Tommy Lee Jones, ‘I didn’t kill my wife.’ Just like Jones, the GSEs today, simply reply, ‘I don’t care’. Even though the GSEs (Fannie, Freddie, and FHA) are wards of the state, presently they are saying it’s not their job to dispense justice. Just like the Jones character, the GSEs ‘don’t care’ and are saying they will pass virus-related recourse back to originators. They are saying you can talk to a judge later about justice.”

The secondary market and securitizations

The demand for mortgages in the secondary markets (whether held in portfolio, sold to someone else in a whole loan sale, or securitized) drive rates in the primary market for borrowers. It is good for MLOs to keep an eye on who is doing what, and what is being issued, to gain a sense of the market. This is especially of interest as capital markets staff look to “private label” investors and securitizations to soak up non-owner and 2nd home loans from the Agencies.

For example, Redwood Trust, which backed out of buying loans from lenders a year ago, has certainly come back. RT reported that in the last quarter it locked $4.6 billion of residential loans with over 110 discrete sellers (95% Select loans and 5% Choice loans). Redwood originated $384 million of business purpose loan (66% single-family rental loans and 34% bridge loans). It announced first investments under recently launched RWT Horizons venture investing strategy focused on early and mid-stage companies driving innovation in financial and real estate technology, and digital infrastructure.

In the securities market Redwood onboarded approximately 40 historical Sequoia securitizations (aggregate notional value at issuance of $17.3 billion) “onto the dv01 capital markets technology platform” to provide investors secure, real-time data and transparency on the underlying loan performance of these securitizations, and completed three securitizations across Residential and Business-Purpose Lending: SEMT 2021-1 and SEMT 2021-2, backed by $527 million and $348 million of jumbo residential loans, respectively, and the ramp-up on CAFL 2020-P1, providing $200 million in financing for single-family rental loans.

Fitch Ratings has assigned expected ratings to Angel Oak Mortgage Trust 2020-5 (AOMT 2020-5). The certificates are supported by 784 loans with a balance of $324.37 million as of the cutoff date. This will be the eleventh Fitch-rated transaction consisting of loans originated by several Angel Oak-affiliated entities. The certificates are secured mainly by non-qualified mortgages (Non-QM) as defined by the Ability to Repay (ATR) rule. The majority of the loans were originated by several Angel Oak entities, which include Angel Oak Mortgage Solutions LLC (77.9 percent), Angel Oak Home Loans LLC (6.8 percent) and Angel Oak Prime Bridge LLC (0.2 percent). The remaining 15.1 percent of loans were originated by third-party originators. Of the pool, 82.6 percent comprises loans designated as Non-QM, 17.2 percent are investment properties not subject to ATR and the remaining 0.2 percent were designated either SHQM or HPQM.

The governor from California is jogging with his dog along a nature trail. A coyote jumps out and attacks the governor’s dog, then bites the governor. The governor starts to intervene, but then reflects upon the movie “Bambi” and realizes he should stop because the coyote is only doing what is natural.
He calls animal control. Animal control captures the coyote and bills the state $200 for testing it for diseases and $500 for relocating it. He calls a veterinarian. The vet collects the dead dog and bills the state $200 for testing it for diseases. The governor goes to the hospital and spends $3,500 getting checked for diseases from the coyote and getting his bite wound bandaged.
The running trail gets shut down for six months while the California Fish and Game Department conducts a $100,000 survey to make sure the area is now free of dangerous animals. The governor spends $50,000 in state funds implementing a “Coyote Awareness Program” for residents of the area. The Legislature spends $2 million to study how to better treat rabies and how to permanently eradicate the disease throughout the world.
The governor’s security agent is fired for not stopping the attack. The state spends $150,000 to hire and train a new agent with additional special training, re: the nature of coyotes. People for the Ethical Treatment of Animals (PETA) protests the coyote’s relocation and files a $5 million suit against the state.

The governor of Texas is jogging with his dog along a nature trail. A coyote jumps out and tries to attack him and his dog. The governor shoots the coyote with his state-issued pistol and keeps jogging.
The governor spent 50 cents on a .380-caliber, hollow-point cartridge. Buzzards ate the dead coyote.
And that, my friends, is why California is broke and Texas is not.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Hiring: New Tactics for a New Day.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


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Rob Chrisman