Apr. 30: Secondary market securitizations; vendor updates; social security numbers as passwords; basis points further explained
Here in Hawai’i, over the last 30 years, rainfall in Hawaii has decreased by 18%. The population in the region has doubled since 1959, with visitors reaching record levels, a double whammy for water supplies. Whether you believe it is happening or not, climate change is not only impacting investor choices in buying mortgages, but it is not confined to mortgage pricing. It is making it more expensive to insure collections of fine art that is in places like Florida and California which have seen weather-related disasters pose increasing threats to property, some of which is priceless art. California, which has seen the annual cost of a homeowners insurance policy increase 40 percent, has also seen the premiums for fine art insurance increase between 5 percent and 12 percent. Florida, which has seen intense storms and flooding, also has the people who insure one-of-a-kind art increasingly skittish.
Technology: a double-edged sword
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All my passwords are totally protected by amnesia! “We’ve gotten used to passwords by now, but at least, in most cases, passwords can be changed when they are hacked. Your social security number? Not so much. If your SSN leaks just once, you’re hosed. It’s not possible to change it, and that brings up the true depth of idiocy in all of this: Relying on security that depends on keeping an unchangeable piece of information secret is really bloody stupid.”
Ever heard of smishing? Me neither. But if you’ve received a text from a strange number (maybe even your own) advertising CBD gummies, confirming a package delivery, or letting you know a bill has been paid, complete with a seemingly unsuspecting link, that’s it, and they are on the rise.
Thinking about putting your life savings into cryptocurrencies? Don’t. Diversification is very important. Just ask anyone who put their retirement savings into WAMU, PNC, Countrywide…
Basis points: deep dive
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David W Brooks II, Managing Partner with Value Partners, LLC, kindly took the time to further expand readers’ knowledge of how basis points work following up on a piece in my Commentary from earlier this week. “I’m currently working on a consulting project for a mortgage lender and it pains me to see basis points get in-appropriately calculated. All interest rates are stated on an annual basis 6.0% means six per cent per year.
“Basis points are only a shorthand way of talking about percentages. All too often, in the mortgage banking industry, we tend to calculate it like this: Production $1,000,000 for quarter one. Pretax income for quarter one $2,500. So $2,500/$1,000,000 equals .25% or 25 basis points. Except that is not what basis points is intended to mean. (Yes, I realize you obtain the same number if you annualize both production and pretax income but this is an example. If you have any volatility across periods then it’s even more important to understand the annualized representation.)
“If I obtain a loan at prime plus 300, it means I take the prime rate (an annual number), and add to it 300 basis points…. an annual number. On a $1,000,000 loan, Prime Rate 3.0%, plus 3.0%, the first quarter interest expense is 15,000 (equal months in each quarter). If I take $15,000/$1,000,000, I get 1.5%, or 150 basis points. Which in the world of interest rates means nothing until I annualize it! So $15,000 X 4 is $60,000. Now I get back to the 6% rate on the loan. To do our monthly and quarterly basis point calculations correctly, shouldn’t we be appropriately annualizing each period to get the true basis points?” Thank you!
Vendor chatter
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Third party providers do more than capitalize odd letters in their names, or make up odd names for their companies. Let’s take a random look at who’s doing what.
PrivoCorp announced its acquisition of Peoples Processing, Inc. Strongly differentiated by its technology & innovation focus, this acquisition helps consolidate the presence of an established brand. For existing customers of Peoples Processing, this means a significantly enhanced value in terms of access to pool of talent, global standards, and proven processes. With this acquisition, PrivoCorp is now able to offer significant value to its customers including Empowering You by delivering diverse and disruptive products and solutions across the breadth of your business with capabilities in Mortgage, Banking, Title, and Tax. Accelerating Your Growth with next-gen innovations in Risk & Compliance, Analytics, Digital Transformation, Mobility, and Intelligent Automation. Transforming Your Business with technology led Smart Solutions, industry insights, scalability, industry experience, cost savings, flexibility, and global capability.
Asteroom announced the release of a new nationwide solution for appraisal management companies to collect the data to complete desktop appraisals. Adopted and used by large AMC’s in its private pre-launch such as Appraisal Nation and Opteon, the news is out to showcase significant points. Lenders and appraisers are more comfortable using 3D tours in desktop appraisals because leads to more accuracy due to seeing 100% of the property. Appraisals are completed in as little as 3 days from the time a lender requests it from an AMC’s. Asteroom’s network of realtors capturing the data are the best individuals to collect data for appraisers due to their easy access to properties.
OptifiNow issued a press release announcing their new custom integration with LoanScorecard for Non-QM Wholesale Lenders. This integration enables wholesale lenders to provide fast and accurate scenario quotes to mortgage brokers in a high-volume call center sales process.
PunchListUSA, the first marketplace to digitize home inspection data for instant estimates
and online ordering of home repairs and renovations, announced expansion of its leadership team to scale repair and renovation services. PunchListUSA press release announced the appointment of Danielle Alexander as VP of Enterprise Operations and Dan Vercek as VP of Field Operations.
Vesta, a mortgage LOS and Software-as-a-Service company and Docutech, provider of document, eSign, eClose and digital-to-print fulfillment technology announced a new integration that helps lenders make significant progress toward the end to end digital mortgage automation. This integration empowers lenders using the Vesta LOS platform to accelerate their closing process, seamlessly generate document packages and support eSignitures via Docutech’s leading suite of digital mortgage and eClosing solutions.
The time it takes to process an appraisal is gaining attention in the industry for being a vital part of overall mortgage fulfillment. A recent STRATMOR Group study revealed that appraisal wait time is approximately 16 days, and even more in rural areas. Appraisal management platform Reggora, has partnered with Clear Capital® integrating Reggora’s appraisal management platform with the ClearCollateral Review® (CCR), a secure, interactive platform that allows users to document their review process flow and results. Lenders can take advantage of an improved appraisal review process that reduces risks and meets differing investor guidelines. Lenders using the Reggora and CCR platform have seen as much as a 35% reduction in appraisal turn times and a 50% reduction in appraisal revisions.
A new Licensed Underwriting offering was announced by SitusAMC. The New York-based company says the expanded service provides turn-key support for a variety of product types including agency, home equity, jumbo, non-QM and DSCR programs. The new services expand its Loan Fulfillment Support Services that were added by the 2021 acquisition of Assimilate Solutions.
CLOSED Title, with 20+ offices in the Southeast, has partnered with nationwide mortgage lending company, Hometown Lenders, to offer services at over 100 locations in 40 states.
The companies share similar core values rooted in the goal of streamlined, excellent customer experiences. They believe the integration of their services will take two central components of a real estate transaction – the securing of a mortgage and the closing – and seamlessly digitize them for consumers.
Facing historic inventory lows and unprecedented appreciation, multi-channel fintech Lower.com launched HomePass™ to help homebuyers, particularly first-time home buyers, win through cash offers. The program allows buyers to offer cash up front while financing behind the scenes, guaranteeing an on-time close for sellers and making the buyer’s offer more attractive, in an atmosphere where nearly half a quarter of homes are bought by institutional buyers.
Arch Global Mortgage Group, announced the expansion of Arch Mortgage Funding, Inc. (AMF) to include products for the Non-Qualified-Mortgage (NQM) market to support lenders seeking to partner for NQM loan sales. By purchasing Jumbo and now NQM closed loans, AMF brings the non-Agency market an alternative, stable liquidity source. Also, within AMF’s expanded underwriting program are alternative income-qualifying tools, including Bank Statement, Asset Depletion and Debt Service Coverage Ratio. As a division of Arch Global Mortgage Group, AMF draws upon unparalleled global mortgage expertise in underwriting, compliance, credit risk analysis, pricing, reinsurance and securitization to provide solutions for lenders’ specific risk management needs.
Guaranteed Rate launched the Second Phase of its robust Language Access Program. Enhancements include ability to access Digital Mortgage Application and rate.com in Spanish furthering its promise to better serve the Hispanic community. At launch, rate.com in Spanish will feature 160 pages of the site translated. Also at launch, the Spanish Digital Mortgage will be available for properties in 45 states and all mortgage disclosures, notes and mortgages will only be available in English until later this year. By the end of this year, Guaranteed Rate is working to expand customer-facing communications, offer Spanish-language disclosures and agreements, and will feature the industry’s first end-to-end customer mortgage origination experience in Spanish.
The List of Homeownership Counseling Organizations, First American Docutech Cx17874, is provided per 12 CFR § 1024.20, which requires the lender or mortgage broker supply the loan applicant a list of homeownership counseling organizations located closest to the applicant within three business days after receipt of application. Additional information, including links, is available from First American Docutech Compliance and Solution updates.
Freddie and Fannie aren’t the only game in town
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Fannie Mae and Freddie Mac are certainly active in the secondary markets. But other entities are as well, and let’s take a random look at who’s doing what.
Toorak Capital Partners, Inc. (“Toorak”), a leading capital provider to the residential real estate lending industry, announced the successful closing of TRK 2022-1, a $285 million securitization of residential bridge loans, following the closing of TRK 2022-INV1, a $363 million securitization of DSCR loans last month. Toorak’s securitizations received investor demand despite a volatile and oversupplied market. To date, the company has issued $2.7+ billion in securitizations across nine deals, including six revolving transactions backed by bridge loans and three rated transactions backed by long-term investor loans on rental properties. Read the press release for details on Toorak’s multimillion dollar Securitizations.
Caliber, which is part of New Residential Investment Corp., is pricing a $370.1 million note offering backed by Fannie Mae MSRs. The notes, which mature in March 2027, have been rated BBB- by KBRA.
Ginnie Mae reported its MBS January 2022 issuance volume was $62.98 billion, maintaining the strong liquidity of the program and its value in meeting the financing needs of homeowners and rental property owners. Approximately 230,000 homes and apartment units were financed by Ginnie Mae guaranteed MBS in January. A breakdown of January 2022 issuance of nearly $63 billion includes $60.19 billion of Ginnie Mae II MBS and $2.79 billion of Ginnie Mae I MBS, which in turn includes approximately $2.63 billion of loans for multifamily housing. Ginnie Mae’s total outstanding principal balance as of January 31 was $2.168 trillion, up from $2.149 trillion in the prior month, and up from $2.109 trillion in January 2021.
Ginnie Mae announced in All Participants Memorandum (APM 21-07) that it is expanding the use of certain features found in its digital collateral program to paper mortgages, a move expected to make it more efficient for Issuers to modify paper mortgages. Specifically, approved Ginnie Mae issuers are permitted to use electronic signatures to execute a loan modification provided that the original mortgage note bears a wet signature and the modification complies with the local jurisdiction’s recording requirements. The new policy also allows for the use of Remote Online Notarization (RON) for notarizations associated with Loan Modification Agreements subject to requirements outlined in the Ginnie Mae MBS Guide. These and other program details are further discussed in APM 21-07.
Ginnie Mae guaranteed mortgage-backed securities (MBS) help the company remain a consistent source of finance for affordable housing and to find innovative ways to expand access to credit. Ginnie Mae financed more than 189,000 homes and apartment units in March 2022 with the month’s issuance volume reaching $51.18 billion. The March issuance includes $48.71 billion of Ginnie Mae II MBS and $2.47 billion of Ginnie Mae I MBS, which includes approximately $2.31 billion of loans for multifamily housing. As of March 31, Ginnie Mae’s total outstanding principal balance was $2.186 trillion, up from $2.175 trillion in February 2022 and $2.095 trillion in March 2021. With rising interest rates, we expect volumes to decline as affordability is challenged.
Ginnie Mae announced that it passed through to investors a record $1 trillion in principal and interest payments in Fiscal Year 2021. The timely payment of scheduled principal and interest to investors who own Ginnie Mae MBS is a testament to the scalability and reliability of the mortgage-backed securities platform, no matter the market conditions. “The past fiscal year broke MBS issuance and investor payment records,” said Office of Securities Operations Senior Vice President John Daugherty. “Through continuous attention to maintaining and upgrading the operations infrastructure of the MBS program, Ginnie Mae and its business partners were able to keep money flowing between investors and homeowners and renters and help stabilize the economy during a national emergency.”
Ginnie Mae MBS issuance volume was a record $82.6 billion in January, slightly above the previous record high $81.7 billion issued in December 2020. Issuance was fueled by across-the-board demand for government-backed mortgages as consumers increase home refinance and home purchase volume during this period of record-low interest rates. Approximately 293,004 homes and apartment units were financed by Ginnie Mae guaranteed MBS in January. A breakdown of January issuance includes $77.95 billion of Ginnie Mae II MBS (registered holders receive an aggregate principal and interest payment from a central paying agent) and $4.65 billion of Ginnie Mae I MBS (registered holders receive separate principal and interest payments on each of their certificates), which includes $4.57 billion of loans for multifamily housing. Ginnie Mae’s total outstanding principal balance as of January 31 was $2.114 trillion, up from $2.10 trillion in December, and little changed with the January 2020 level of $2.13 trillion.
A man was walking along the beach in Oregon and found a bottle. He looked around and didn’t see anyone so he opened it.
A genie appeared, thanked the man for letting him out, and said, “For your kindness I will grant you one wish, but only one.”
The man thought for a minute and said, “I have always wanted to go to Hawaii but have never been able to because I’m afraid of flying and ships make me claustrophobic and ill. So I wish for a road to be built from here to Hawaii.”
The genie thought for a few minutes and said, “No, I don’t think I can do that. Just think of all the work involved with the pilings needed to hold up the highway and how deep they would have to be to reach the bottom of the ocean. Think of all the pavement that would be needed from Coos Bay. No, that is just too much to ask.”
The man thought for a minute and then told the genie, “There is one other thing that I have always wanted. I would like to be able to understand women. What makes them laugh and cry, why are they temperamental, why are they so difficult to get along with? Basically, what makes them tick.”
The genie considered for a few moments and sighed, “So, do you want two lanes or four?”
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