Aug. 28: Non-QM, recruiting, training products; servicing developments – who’s doing what

As the East Coast swelters and Hawaii floods, loan officers I’ve spoken to recently believe the high price end in some markets is starting to stall a little bit as markets correct toward normalcy. I’ve spent much of this week in Montana and, as a small random sample, inventory for sale in certain areas is ample. On a bigger scale, nationwide sales of existing, pre-owned homes fell for the fourth consecutive month, with single family home sales falling 0.2 percent for an annual rate of 4.75 million homes. As it stands, homes were on the market an average of 27 days, up from an average of 26 days in June. For a positive thought, want some good PR for your company and for the residential lending biz? Forget cookies – how about helping the local Girl Scout Troop build and sell a Tiny House?

Products and services for lenders & LOs

Attracting and retaining top originator talent is an increasing challenge in this market. Technology can play a big role; however, not all providers are created equal. The right platform enables your LOs to be more productive and efficient, delivering trust in your organization to invest in their future. Maxwell stands out from all other digital mortgage providers. They allow entire teams of LOs to incorporate technology as a natural extension of their work, allowing them to accomplish more every day, delight their referral partners, and attract new business. Maxwell was developed with input from thousands of LOs. The efficacy of their intuitive design is apparent in their high adoption rates across lending businesses. Request a demo to learn more about Maxwell today.

“Most originators want one of three things. They want to make more money. They want to work fewer hours. And they want to have less stress. Not surprisingly, the only way to have any of these is to commit to a high-performance game plan that involves a mandate, Keeping your Customers for Life! That game plan involves three key success strategies: acquiring new clients, optimizing the client experience and retaining and cultivating existing clients will take your business to the next level. Most people will do business with you once. The key is to make them want to do business with you forever. If you want your customers for life, you must talk with them during their life. Read the Total Expert guest blog by Todd Duncan, founder and CEO of High Trust: Three Bankable Strategies to Become a High-Performance Originator.”

Center Street Lending is excited to announce a newly designed website. The look has been updated and the site is easier to navigate. New features include as a new company video, profile pages on the Center Street Lending team, new resources, and before and after photos from recent deals. Center Street Lending is a private money, portfolio lender providing business-purpose loans through wholesale and retail channels for investment loans in: fix and flip, fix and rent, buy and rent, buy, tear down and build, new construction, and bridge loans. Center Street collaborates beyond the transaction, and provide stability, fast closing, expertise, and savings (interest fees are based only on draws, not total loan amount). For more information, contact management at


Not converting your leads? Let Cindy Ertman show you how! Check out Cindy’s Mortgage Mastermind Elite (MME) coaching group starting October 2018 at and receive her FREE Training Guide “10 Easy Steps to Secure Your Listing Agents.” As one of the industry’s Top 100 Mortgage Loan Originators in the U.S. for over a decade, Cindy brings together a vetted community of High-Performance Mortgage Professionals committed to sharing best practices, increasing their income, and expanding their referral partner network.

Are you looking for opportunities to grow volume and attract more loan officers? Galton Funding, a leading non-agency correspondent buyer specializing in prime QM and non-QM  1st and 2nd liens with expanded features is your answer. In addition to competitive pricing, product & program highlights include: high LTV no MI Jumbo to 95% LTV, FRM and ARM 40 year I/O, no cash-out restrictions to 95% LTV and aggressive NOO and alternative documentation options. Galton Funding has recently introduced a significant number of major enhancements to their offering, including a Streamlined 1st Lien program (SL1) that allows income documentation per FNMA DU up to Galton’s standard loan limit of $2.5MM and Galton’s max LTV of 95%. The SL1 program will significantly simplify your non-agency underwriting process. Other program enhancements include increased LTVs, additional eligible income sources such as RSUs and an I/O feature on 2nd liens to compete with HELOC offerings. More detail on Galton’s programs can be found on the Galton Funding website,  along with business development contact information.


Usherpa’s popular and informative Local Housing Snapshot video is now available in 43 markets across the United States! These quarterly short-form videos share essential, hyper-local real estate market data with professionals in each of the featured cities, keeping them up-to-date on the most important statistics about home sales in their city, and positioning Usherpa users as valuable partners and industry leaders to their real estate contacts. Visit Usherpa’s website to view the Local Housing Snapshot video in your hometown.

Every borrower’s situation is unique and features its own set of challenges. Verus Mortgage Capital offers interest-only options for virtually all programs – including borrowers with credit events, self-employed, real estate investors, foreign nationals – and for those who simply want to free up their cash flow. Loan amounts to $5 million, terms up to 40 years and LTV up to 85% are available. Verus, a non-QM investor who builds powerful partnerships with correspondent originators, has purchased over $2.6 billion in expanded, non-QM loans and completed six rated securitizations. Email Jeff Schaefer today to learn more.

Servicing trends & sales

Servicing values fluctuate all the time, and usually make up the lion’s share of price differences in rate sheets. Depository institutions still have a majority share of the agency servicing market, but nonbanks continued to gain ground during the second quarter, according to a new Inside Mortgage Finance analysis of agency mortgage-backed securities data. “As of the end of June, nonbanks serviced $2.887 trillion of single-family loans in MBS pools issued by Fannie Mae, Freddie Mac and Ginnie Mae. That was up 2.8 percent from March and represented a 14.5 percent increase from a year ago – more than triple the growth rate for the overall market. In the Ginnie MSR sector, non-banks controlled 60% of the market at June 30, compared to 55% a year ago. Agency servicing held by banks, thrifts and credit unions declined by 2.2 percent over the past year. The biggest drop for depositories was in Ginnie servicing, which fell 4.3 percent from June 2017.”

Two Harbors continues to benefit by its floating rate non-agency securities and positive credit performance along with slightly faster prepayment speeds in the non-agency portfolio. Analysts view the more favorable MSR acquisition environment and attractive MSR financing as positive for returns in the coming quarters. Recall that TWO on-boarded the $1.1 billion of capital from the CYS merger transaction at the end of July.

In servicing, there’s an active market out there. Banks are buyers, as well as non-banks, REITs, and private equity firms are buying conventional conforming servicing. And at a 5-multiple level in some bulk deal cases! On the Ginnie side, for FHA & VA loans, 3 multiples are out there from REITs and private equity funds – banks are on the sidelines. Why? Because of Basel III, additional capital is required by a bank to retain servicing making the MSR (mortgage servicing right) less attractive. Servicing experts are watching for Ginnie potentially changing capital requirements or implementing stress tests, MSR values to increase with rising rates, and continued cash flow problems for smaller lenders who had hoped to retain servicing. Phoenix said MSR values are up sharply in 2018 with good liquidity, many investors, and prices at their best levels since 2014. And in terms of execution, Tom LaMalfa’s survey this year at the conference asked, “When you sell servicing, is it usually on a bifurcated basis?” The majority answered, “No.”

The trend of a sequential decline in the total mortgage servicing portfolio for the five largest U.S. banks (Bank of America, Chase, Citi, US Bank, and Wells) continued in the first quarter of 2018, as a notable reduction in third-party mortgage servicing portfolio mitigated small gains from fresh mortgage originations for the period. The decline has been seen across most U.S. banks since 2012 and is a result of the increased capital requirements that banks’ mortgage servicing rights attract in the wake of the economic downturn of 2008.

U.S. Bancorp has bucked this trend over the years, though, as its traditional loans-and-deposits business model, its risk-averse growth strategy and its lower capital requirements compared to its larger peers have helped it build a sizable capital buffer. With the regional banking giant focusing its efforts on growing in its mortgage business since the recession, it has done well to make the most of the vacuum created by Bank of America and Citigroup’s de-emphasis of the industry.

The total mortgage servicing portfolios of many banks have changed over recent quarters. The overall change in industry dynamics over the years is evident from the fact that these five banks service 35% of all outstanding mortgages in the U.S. now – down from almost 60% in late 2012. (The total value of U.S. housing debt outstanding is taken from the quarterly data compiled by the New York Fed.)

Going back to earlier this year, subservicers increased their base of contracts to $2.19 trillion in the first quarter, a modest 3.3 percent sequential gain, according to survey figures compiled by Inside Mortgage Finance. Compared to the same period a year earlier, contracts increased by 15.3 percent. “Overall, these third-party processors managed 18.3 percent of home mortgage payments at the end of the first quarter, compared to 16.4 percent a year ago. It appears the sector is healthy, but some vendors have been engaging in steep price cuts to gain market share. (Sounds familiar to lenders, huh?) Also, two top-10 ranked subservicers – PHH Mortgage and Ditech Financial – have uncertain futures, which means their accounts could eventually wind up elsewhere.

Capital markets

Looking at the bond markets, rates were up slightly Monday, and the U.S. 10-year closed +2bps to 2.85% – all treasuries beginning the week in the same direction. The biggest news of the day came in the form of an announcement of a preliminary agreement to replace NAFTA in a new deal with Mexico, though Canada is yet to enter the agreement, which calls for auto worker minimum wage and regional auto content requirements. In other international news, a Chinese journal reported that China’s export growth may slow to about 2.0% year-over-year during the second half of 2018. And Japan’s Prime Minister Shinzo Abe declared his candidacy for their September election.

Today’s economic calendar kicked off with advance indicators for July (merchandise trade deficit widening to $72.2 billion) and retail and wholesale inventories (+.7%). The S&P CoreLogic Case-Shiller 20-City Home Price Index for June is expected to increase and consumer confidence in August to decline before the day rounds out with the Richmond Fed’s manufacturing and the Dallas Fed Texas Service Sector Outlook Survey for August. We start with the 10-year yielding 2.85% and agency MBS prices worse a smidge.

(Thanks to JJ for this one. Rated PG: don’t read if you’re offended by…golf.)


Ed and Linda met on a singles cruise and Ed fell head over heels for her. When they discovered they lived in the same city, only a few miles apart, Ed was ecstatic. He immediately started asking her out when they got home.

Within a couple of weeks, Ed had taken Linda to dance clubs, restaurants, concerts, movies, and museums. Ed became convinced that Linda was indeed his soul mate and true love.

Every date seemed better than the last. On the one-month anniversary of their first dinner on the cruise ship, Ed took Linda to a fine restaurant. While having cocktails and waiting for their salad, Ed said, “I guess you can tell I’m very much in love with you. I’d like a little serious talk before our relationship continues. So, before I get a box out of my jacket and ask you a life changing question, it’s only fair to warn you, I’m a total golf nut. I play golf, I read about golf, I watch golf on TV. In short, I eat, sleep, and breathe golf. If that’s going to be a problem for us, you’d better say so now!”

Linda paused, then responded, “Ed, that certainly won’t be a problem. I love you as you are, and I love golf too; but, since we’re being totally honest with each other, you need to know that for the last five years I’ve been a hooker.”

Ed said, “It’s probably because you’re not keeping your wrists straight when you hit the ball.”

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to Copyright 2018 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.)

Rob Chrisman