Aug. 7: Letter on MLO customer service; Freddie, Fannie, Rocket, Zillow capital markets deals; Hooters’ refi

Rates are great, lender’s volumes are still solid, but how many of you out there are hearing this from veteran originators? “Mortgage life is busy, but it is ‘getting ready to get hard.’ There’s a lot of competition right now. What I love about that is a lot of new people to our industry are messing up loans, and those of us with experience receive the call to ‘fix it’, and then the real estate agents trust us even more!” Meanwhile, companies continue to grapple with WFH or WFO considerations. United Airlines, with so many field staff, will require 100 percent of its employees to be vaccinated. Wells Fargo and BlackRock, the world’s largest asset manager, delayed their return-to-office plans. Amazon postponed its return date until January as the Delta variant drives a rise in US Covid-19 cases. Want to read something sobering? Here’s a mainstream press report on the COVID variants, ranked by severity, that I imagine we’ll be hearing about for years. Do we forget office life forever, as this cartoon points out, with employees turning “feral?”

Customer service in IMBs versus banks

“I disagree with anyone who believes that banks have worse customer service and productivity than independent mortgage banks. Culturally very different? I don’t think so. Some will tell you that a bank is really run by financial executives who have grown up with more discipline and rigor, and an eye towards compliance. That it’s sort of a top-down management, command, and control hierarchical structure, and one can see why a loan officer is not going to want to be in a bank environment that is so buttoned up and more much more structured.

“I am a grizzled mortgage banker who has held senior positions in TPO and Retail… Big banks, IMBs, and my current ‘quasi-retirement’ thing with a ‘small’ (less than $2 billion in assets) community bank. My eyes were opened when I stepped back from the large banks and IMBs. Yes, there is structure at a bank, big or small, with a focus on regs, compliance, financials, etc. At the small Midwest bank I am now at there is also an exceptional nimbleness and culture. The fulfillment, marketing, general support, and most importantly communication, are simply not possible at larger organizations…notwithstanding desire, efforts, and testaments that such is obtained.

“To wit… Most of the MLOs here averaged over 23 closed loans per month in 2020. Yes, an unusual year, but during the pandemic-crazed refi boom, 52% were purchase transactions. The top MLO averaged 32/month for the year with a peak of 52 in May 2020. Even this year the MLO is averaging 29 closed loans/month with the entire team hovering around 12/month. I have been amazed at the productivity since during my big bank days we aspired for four or five per field retail MLO per month.

“For some of my career, I also managed the retention/consumer direct businesses for name-brand banks. The customer and loan retention rate where I am now is over 86%, shockingly high compared to the numbers I aspired to elsewhere. I do believe that a great customer experience does exist at banks… Especially the community bank.”

The capital markets

Not only are Fannie & Freddie active in the secondary markets, but non-Agency deals continue. And these help drive the rates that borrowers are shown in the primary markets. Originators can look at the details and see what matters from an investor’s perspective. Let’s look at a sample.

(Of course, mortgage cash flows aren’t the only thing securitized. Any asset can, and if you want Hooters to owe you money, step right up. This week restaurant franchiser Hooters, with 377 locations, returned to the whole business securitization market for the first time in six years, pricing a $315m deal. Refinitiv reports, “The two-part transaction came as franchisers have been busy tapping the ABS market this year to refinance debt at historic low costs, or raise cheap funds for acquisitions. WBS issuance shows no signs of slowing as fast-food chain Taco Bell plans to issue a US$2bn deal next week, BELL 2021-1.” HOA Funding LLC 2021-1 will refinance four securitized notes that were issued in 2014 and 2015. The US$275m “A-2” note with a weighted-average life of 4.9 years cleared at a 4.75%, while a US$40m “B” tranche that carried a 5.0-year WAL fetched a 7.50% yield. The yields on the new deal are moderately lower than ones on maturing notes, which ranged from 4.85% to 9.00%. Too bad the symbol couldn’t have been WHOA…)

Correspondent real estate loan investment platform Toorak Capital Partners announced the successful closing of a $224.3 million securitization backed by 30-year single-family rental property loans. This is the first Toorak securitization transaction to carry ratings from S&P and KBRA. The securitization consists of 1,092 first lien, fixed- and adjustable-rate, fully amortizing, and interest-only residential mortgage loans secured primarily by one to four-unit residences. The loans are underwritten based on rental income rather than wage income, in line with commercial real estate practice in the US and common practice in many international markets, such as the UK buy-to-let market. Toorak has funded over $6.0 billion in loans to renovate, stabilize, or rent out housing in the United States and United Kingdom.

Zillow priced the first-ever securitization backed by a portfolio of homes acquired by the company under its “instant buying” model, which uses algorithms to predict home values in the hope of acquiring and quickly flipping properties for a profit. The new two-part debut 144a transaction, ZH Trust 2021-1, was upsized to $450 million, expanding the company’s funding sources as it pushes into the home flipping business. Zillow has so far been financing its property purchases using credit lines extended from Goldman Sachs, Citigroup, and Credit Suisse, which are the lead joint bookrunners for the company’s RMBS debut.


Unlike traditional RMBS, where investors have the benefit of a direct or indirect security interest in the real estate backing the notes, the Zillow notes are backed by a loan secured by a special unit of beneficial interest in a revolving portfolio of loans, whose value could fluctuate depending on the timing and prices on the homes Zillow flips. The risks are offset by adequate credit enhancement, its short-maturity and expected continued strength in home prices. The securitization proceeds will be used to extend a loan facility and refinance the short-term loans on a portfolio of 1,416 single-family homes which Zillow has acquired since the third quarter of 2020,

There is a $247 million Class “A” note and a $53 million Class “B” note, each with a weighted-average life of 2.10 years. The “A” note priced at swaps plus 195 bps from initial price talk in the mid-200 bps area, while the “B” tranche cleared at 295 bps over swaps, which was inside its IPT in the mid-300 bps area. The Zillow deal offered wider spreads than other recent deals tied to single-family rental deals because of its untested collateral and being Zillow’s first-time issue with no credit ratings.

Fitch Ratings expects to rate the residential mortgage-backed certificates issued by RCKT Mortgage Trust 2021-3 (RCKT 2021-3) The certificates are supported by 597 loans with a total balance of approximately $557 million as of the cutoff date. Every loan in RCKT 2021-3 was originated by Quicken under the new qualified mortgage (QM) rule announced in December 2020. These loans were not deemed to be SH verify loans to Fitch. Fitch views QM loans that are non-SH verify loans as having a higher risk of challenges and so would typically apply a penalty to these loans. For this transaction, Fitch ran two additional analyses. One in which average prime offer rate (APOR) loans were designated as Higher Priced QM, and another in which an additional $5,000 in lawyer fees were applied to each APOR loan. The difference in expected losses was immaterial to the final levels. Expected ratings can be found here.

And Fannie?

Earlier this year Fannie Mae priced a $759 million Multifamily DUS REMIC (FNA 2021-M1) under its Fannie Mae Guaranteed Multifamily Structures (GeMS) program. FNA 2021-M1 marks the first Fannie Mae GeMS issuance of 2021. Despite high volumes and some Q1 dislocation, spreads have remained strong and Fannie Mae’s Multifamily business hopes to build on a record year of MBS issuance in 2020. Pricing for the available classes is as follows. Class A1 has an original face of $76.5 million, a weighted average life of 5.94 years, a 0.87 percent fixed coupon, a spread of S+19 bps, and a 100 offered price. Class A2 has an original face of $497.3 million, a weighted average life of 9.77 years, a 1.39 percent WAC coupon, a spread of S+26 bps, and a 100.57 offered price.  All classes of FNA 2021-M1 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal.

As last year wound down Fannie Mae priced a $783 million Multifamily DUS REMIC under its Fannie Mae Guaranteed Multifamily Structures program. FNA 2020-M52 marks the tenth Fannie Mae GeMS issuance of 2020, bringing total GeMS issuance for the year to $8.5 billion. The program allows investors and broker dealers to structure REMICs with their own DUS collateral – a flexibility that has been particularly helpful to liquidity given the year’s rate environment. All classes of FNA 2020-M52 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal. The structure details for the multi-tranche offering are as follows. Class A1 has $85.1 million of original face, a weighted average life of 5.77 years, a 0.878% fixed coupon, a spread of S+29 bps and a 100 offered price. Class A2 has $501.6 million of original face, a weighted average life of 9.76 years, a 1.319% WAC coupon, a spread of S+39 bps and a 100.07 price. Class A3 has $75.0 million of original face, a weighted average life of 9.83 years, a 1.20% fixed coupon, a spread of S+35 and a 99.11 price.


As 2020 wrapped up Freddie Mac announced pricing of the third Seasoned Loans Structured Transaction Trust (SLST) offering of 2020—a securitization of approximately $637 million including both guaranteed senior and non-guaranteed subordinate securities backed by a pool of seasoned re-performing loans (RPLs). Freddie Mac SLST Series 2020-3 includes approximately $504 million in guaranteed senior certificates and approximately $134 million in non-guaranteed subordinate certificates. The underlying collateral backing the certificates consists of 4,486 fixed-, adjustable-, and step-rate, seasoned RPLs, most of which were previously modified to assist borrowers. The SLST program is a fundamental part of Freddie Mac’s seasoned loan offerings which reduce less-liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. To date, Freddie Mac has sold over $8 billion of Non-Performing Loans and securitized approximately $69 billion of RPLs. Additional information about the company’s seasoned loan offerings can be found at:

And Freddie Mac priced a $1.2 billion offering of Structured Pass-Through K Certificates (K-120 Certificates), which are backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 10-year terms and are expected to settle on or about November 24, 2020. Pricing for the deal is as follows. Class A-1 has $179.146 million of principal, a weighted average life of 7.04 years, a spread of S+25 bps, a 0.892% coupon, a yield of 0.88588% and a $99.9933 price. Class A-2 has $914.511 million of principal, a weighted average life of 9.89 years, a spread of S+32 bps, a 1.500% coupon, a yield of 1.17129% and a $102.9943 price. Class A-M has $155.272 million of principal, a weighted average life of 9.92 years, a spread of S+37 bps, a 1.229% coupon, a yield of 1.22364% and a $99.9971 price. The K-120 Preliminary Offering Circular Supplement can be found at

And at the end of 2020 Freddie Mac closed its first Social Impact M-Deal backed by 27 mission-focused properties for low-income residents, many of whom are disabled, seniors with disabilities or homeless veterans. The transaction provided $359 million in liquidity to Arc70 to fund bonds backed by properties that address affordable housing challenges or properties serving underserved groups considered to be among the most vulnerable. This is the first M Certificate offering under the company’s Social Bonds Framework, which is part of the larger Impact Bonds series. Historically, more than 90% of the eligible rental units Freddie Mac has funded are affordable to families with low-to-moderate incomes earning up to 120% of area median income. Freddie Mac securitizes about 90% of the multifamily loans it purchases, thus transferring the majority of the expected credit risk from taxpayers to private investors.

(Warning: Rated PG for language. Don’t read if easily offended.)

A motorcycle police officer stops a driver for shooting through a red light. The driver is a real jerk, steps out of his car and comes striding toward the officer, demanding to know why he is being harassed by the Gestapo!

So the officer calmly tells him of the red-light violation. The motorist instantly goes on a tirade, questioning the officer’s ancestry, sexual orientation, etc., in rather explicit offensive terms.

The tirade goes on and on without the officer saying anything.

When the officer finishes writing the ticket, he puts an “AH” in the lower right corner of the narrative portion of the ticket. He then hands it to The ‘violator’ for his signature. The guy signs the ticket angrily, and when presented with his copy points to the “AH” and demands to know what it stands for.

The officer says, “That’s so when we go to court, I’ll remember that you’re an a$sho1e!”

Two months later they’re in court. The “violator” has a bad driving record with a high number of points and is in danger of losing his license, so he hired a lawyer to represent him.

On the stand the officer testifies to seeing the man run through the red light.

Under cross examination the defense attorney asks, “Officer, is this a reasonable facsimile of the ticket that you issued to my client?”

Officer responds, “Yes, sir, that is the defendant’s copy, his signature and mine, same number at the top.”

Lawyer: “Officer, is there any particular marking or notation on this ticket you don’t normally make?”

“Yes, sir, in the lower right corner of the narrative there is an ‘AH,’ underlined.”

“What does the “AH” stand for, officer?”

“Aggressive and hostile, Sir.”

“Aggressive and hostile?”

“Yes, Sir.

“Officer, are you sure it doesn’t stand for a$sho1e?”

“Well, Sir, you know your client better than I do.”

(How often can one get an attorney to convict his own client?)

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Rob Chrisman