May 25: Note about banks & credit unions; vendor news; Freddie & Fannie deals; a clever joke

There is often more to life than mortgages. (I know… once in a while.) As has been mentioned in this Commentary, everyone with a pet should know that private equity firms have been buying up vets and jacking up the prices. (My cat Myrtle, apex predator who enjoys line-caught seafood and is not above using cunning tactics, suggests, “Ask your vet who owns the practice!”) Speaking of seafood, does Red Lobster have aficionados? Maybe “fans” is more appropriate… When a private-equity firm bought the iconic seafood chain in 2014, it sold the real estate under the restaurants for $1.5 billion. Then the restaurants struggled to pay the rents on its locations. It is truly rough out there, and not only in mortgage banking. I haven’t seen a lot of interest lately by private equity firms in residential lenders, but, of course, that changes day by day and is determined by values.

Banks and credit unions

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Last Saturday I published a note regarding issues from a credit union buying a bank. The piece prompted Jarod T. to send, “I always love your daily email, but feel that the ‘Banks & Credit Unions: Dogs & cats? Oil and Water’ piece was a little one sided.

“I have worked for a correspondent lender, a bank, a mortgage insurance company, and now a credit union, so I have experience from several sides I believe. For context, I helped perpetuate the ‘credit unions are evil’ narrative for a good chunk of my career. I now know that I was being naïve and uneducated on the issue. You sell what you got, I guess, and it is easy to perpetuate this narrative when everyone around you is saying it and believes it!

“Here is a little perspective from the credit union side. In Missouri, anyway, almost half of the banks in the state are S corps. So, guess what? They don’t pay federal taxes either. In the same way, CommunityAmerica credit union doesn’t pay federal taxes, our profits are given to our members each year. How is that different? If you are going to make a play to change the tax code, don’t we need to add in S corps, otherwise they have an ‘unfair’ advantage.

“Also, credit unions are not for profit, so even if they were to tax us, there is nothing to tax. This seems like a silly argument to me. I kind of laugh when I hear mortgage banks say, ‘There is this huge advantage that credit unions have.’ The reality is that there is an advantage, but the advantage is benefiting the consumer, not corporate profits. If they want to make the argument, at least make it factual. I don’t think helping out the consumer is a bad thing. In this market, they need all the help they can get. Also, I can’t speak for other Credit Unions, but I know at CommunityAmerica, we are not required to comply with CRA rules, but we are, and we are making sure that we serve our community, often times in spaces banks and IMB’s won’t.” Thank you, Jarod!

Vendor morsels

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Truv, a provider of automated employment and income verification technology for mortgage lenders, banks, and credit unions, announced it is now an authorized report supplier for mortgage lenders using Fannie Mae’s Desktop Underwriter® (DU®) validation service. A recent recipient of the 2024 HousingWire Tech100 Mortgage Award, the all-in-one Truv platform, currently used by more than 100 mortgage lenders, enables lenders to replace costly, third-party borrower verification service providers and manual, error-prone methods of verifying borrower data, with cost savings and faster times to close by two days or more. Truv is currently integrated with leading point-of-sale and loan origination systems, including Encompass, nCino, Floify, BeSmartee and mpower, and has demonstrated savings of up to $350 or more per closed loan.

Introducing the Mortgage Industry’s First Total Flood Solution OSC Insurance Services OSC, in partnership with Newmark Valuation & Advisory (V&A) and powered by CoreLogic Flood Services data, is pleased to announce the launch of the mortgage industry’s first Total Flood™ solution, designed for the needs of banks, credit unions and mortgage services.

docutech Compliance posted information on CA Hazard Insurance Disclosure.

The Community Home Lenders of America (CHLA) issued positive comments to Freddie Mac on their allowance of attorney opinion letters (AOLs), in lieu of title insurance, within the condominium space. Last December, CHLA sent a letter to FHFA expressing support of the use of Attorney Opinion Letters (AOLs) in conjunction with Enterprise loans as an alternative to title insurance.

Clear Capital’s VP of Product, Dan McAlister, has been instrumental in his work with the GSEs on modernizing the appraisal process. Check out the Solutions Spotlight for Home Equity video from Clear Capital to learn about ClearAVM™ + Property Condition Inspection and how it can be used as a compliant evaluation in home equity lending.

FINOFR (formerly Rate Reset) launched its patented Reset technology with LGE Community Credit Union). LGE offers the Reset feature built into their loan to differentiate themselves from the competition and protect their portfolio when rates drop. What is a Reset? A “Reset” eliminates the process of a refinance and can be completed by the homeowner in 90 seconds. FINOFR has forever changed Mortgage Banking (for the better) solving mortgage retention. FINOFR has a 90 percent retention rate and has completed over 22,000 Resets with over $22 billion in volume. Contact Foster Kelly to schedule a demo of Reset Technology.

Lender Price, the industry-leading provider of innovative pricing, product and eligibility (PPE) technology and advanced capital markets solutions to the mortgage industry, is proud to announce its strategic API integration with the Byte LOS platform, an enterprise-class loan origination system, aimed at streamlining and enhancing the mortgage lending process for lenders and borrowers alike. This integration marks a significant milestone in the mortgage industry, bringing together the advanced capabilities of Lender Price’s innovative technology with Byte’s robust loan origination platform. By seamlessly integrating their systems, Lender Price and Byte are empowering lenders to operate more efficiently, reduce operational costs, and deliver an unparalleled experience to borrowers. Read the official press release for more information.

Snapdocs announced a partnership with SitusAMC to integrate the Snapdocs eVault to SitusAMC’s ProMerit platform. The partnership allows warehouse lenders to manage eNote transactions seamlessly and securely from within their warehouse lending system of record, enabling them to scale eNote adoption with confidence and ease. The integration between SitusAMC and Snapdocs securely allows eNote transactions to pass to and from ProMerit and the Snapdocs eVault. As a result, warehouse lenders centralize their eNote management process within ProMerit and eliminate the need for manual workarounds. Warehouse banks can now accept eNote transfers, initiate outgoing eNote transfers, reconcile eNote data, and view eNote statuses, processes that typically require manual action within an eVault all within ProMerit.

LoanLogics, a recognized leader in loan quality technology for mortgage manufacturing and loan acquisition announced significant enhancements to its LoanBeam income calculation technologies. The enhancements will enable lenders to efficiently process income documents related to wage earners in the same service they use to process self-employed borrowers.

By gaining access to all income calculations from within a single platform, LoanLogics clients can simplify and accelerate the income verification process for a wider number of borrower scenarios faster and more conveniently than ever. For additional information, read the post.

A recent study conducted by DPR and the Urban Institute found almost half of purchase mortgages in major U.S. cities could have qualified for DPA, and access to these programs could have helped save 30.7 percent of denied applications. Down Payment Resource (DPR), the housing industry’s leading technology for connecting homebuyers with homebuyer assistance programs announced a new integration using the latest API framework from Intercontinental Exchange (ICE) for mortgage technology. Available via the Encompass Partner Connect™ API Platform, the integration embeds support for DPA programs directly into core loan production systems, arming lending staff with the information they need to confidently deliver DPA. Borrowers are automatically matched with eligible company approved DPA programs based on declarations and loan application data making it easier for lenders to support homebuyers with the nation’s 2,300-plus down payment assistance (DPA) programs.

The Community Home Lenders of America (CHLA) released a plan for the modernization of Ginnie Mae. Arguing that Congress has shortchanged Ginnie Mae in funding and flexibility – in spite of the $15.744 billion in net profits Ginnie has produced over the last decade – CHLA proposed action items for Congress.

OSC, in partnership with Newmark Valuation & Advisory (V&A) and powered by CoreLogic Flood Services data, announced the launch of the mortgage industry’s first Total Flood™ solution, designed for the needs of banks, credit unions and mortgage services. Increased regulatory focus on climate change and ongoing supervisory scrutiny means that banks, credit unions, mortgage lenders, commercial banks, and servicers must accurately implement and enforce the mandatory purchase of flood insurance. This requirement under the Flood Disaster Protection Act serves to protect collateral, reduce risk within a portfolio, and ensure strong, long-term relationships with your customers.

Secondary market activity drives borrower rates

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What Freddie and Fannie are doing in the capital markets helps determine the interest rates that borrowers see. These deals dive into the weeds, somewhat, but it is helpful to see what investors consider.

Fannie Mae announced its latest sale of non-performing loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio, including the company’s twenty-third Community Impact Pool (CIP). CIPs are typically smaller pools of loans that are geographically focused and marketed to encourage participation by non-profit organizations, minority- and women-owned businesses, and smaller investors. The one large pool includes approximately 1,689 loans totaling $247.3 million in unpaid principal balance (UPB), and the CIP includes approximately 38 loans totaling $10.5 million in UPB. The CIP consists of loans geographically located in the New York/New Jersey area. All pools are available for purchase by qualified bidders. Bids are due on the one large pool by March 5, 2024, and on the CIP by March 19, 2024. Interested bidders are invited to register for future announcements, training and other information here. Fannie Mae will also post information about specific pools available for purchase on that page.

Fannie Mae priced a $518.3 million Multifamily DUS REMIC under its Fannie Mae Guaranteed Multifamily Structures (GeMS) program on January 31. FNA 2024-M2 marks the first Fannie Mae GeMS issuance of 2024. “Last week, we announced and priced our first deal of 2024, the M2. Due to ongoing market volatility, we prioritized a swift execution,” said Dan Dresser, Senior Vice President, Multifamily Capital Markets, Pricing and Analytics. “This deal kicks off 2024, and we are encouraged with the pricing and rapid deal execution, especially amid challenging market conditions. We will continue to seek avenues for investors to own Agency CMBS across the yield curve, and we appreciate investors’ participation in this transaction.” All classes of FNA 2024-M2 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal. For additional information, please refer to the Fannie Mae GeMS REMIC Term Sheet (FNA 2024-M2) available on the Fannie Mae GeMS Archive page.

Back in October, FHFA released the latest report on the sale of non-performing loans (NPLs) by Fannie Mae and Freddie Mac (the Enterprises). The sale of NPLs reduces the number of delinquent loans in the Enterprises’ portfolios and transfers credit risk to the private sector. FHFA and the Enterprises impose requirements on NPL buyers designed to achieve more favorable outcomes for borrowers than foreclosure. This report reflects activity reported prior to FHFA’s decision in February 2023 to pause Enterprise NPL and RPL Sales during a review of the sales programs. The pause was lifted in June 2023. The Enterprise Non-Performing Loan Sales Report includes sales information about NPLs sold through December 31, 2022, and shows that the Enterprises sold 163,297 NPLs with a total unpaid principal balance (UPB) of $30.0 billion from program inception in 2014 through December 31, 2022. The loans included in the NPL sales had an average delinquency of 2.8 years and an average current mark-to-market loan-to-value (LTV) ratio of 84 percent (not including capitalized arrearages). The average delinquency for pools sold ranged from 1.1 years to 6.2 years. Freddie Mac has sold 50,567 loans with an aggregate UPB of $9.7 billion, an average delinquency of 2.7 years, and an average LTV of 90 percent. Fannie Mae has sold 112,730 loans with an aggregate UPB of $20.3 billion, an average delinquency of 2.8 years, and an average LTV of 81 percent. NPLs in New Jersey, New York, and Florida represent 40 percent of the NPLs sold.

Freddie Mac announced the pricing of its first Seasoned Credit Risk Transfer Trust (SCRT) offering of 2024, a securitization of approximately $618 million including both guaranteed senior and non-guaranteed subordinate securities backed by a pool of seasoned re-performing loans (RPLs). The SCRT 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. Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2024-1 includes approximately $585 million in guaranteed senior certificates and $32 million in non-guaranteed mezzanine and subordinate certificates. The transaction is expected to settle on March 14, 2024. The underlying collateral consists of 3,635 seasoned fixed-, step-, and adjustable-rate RPLs, and includes both loans that were modified to assist borrowers at risk of foreclosure and loans that were never modified. On the Closing Date, the assets of the Trust will consist of seasoned, re-performing mortgage loans that, as of the Cut-Off Date, are either current or no more than 30 days delinquent under the MBA Method. To date, Freddie Mac has sold over $10.2 billion of Non-Performing Loans (NPLs) and securitized approximately $78 billion of RPLs consisting of over $30 billion of fully guaranteed PCs, $35 billion of SCRT senior/sub securities, and $12 billion of Seasoned Loans Structured Transaction (SLST) securities.

Thank you to Ray White for this tale of, “And to Whom does the Land of Israel Belong?”

It took an Israeli sense of humor at United Nations to set the record straight. An ingenious example of speech and politics occurred recently in the United Nations Assembly and made the world community smile.

A representative from Israel began: “Before beginning my talk I want to tell you something about Moses. When he struck the rock and it brought forth water, he thought, ‘What a good opportunity to have a bath!’

“Moses removed his clothes, put them aside on the rock and entered the water.”

“When he got out and wanted to dress, his clothes had vanished. A Palestinian had stolen them!”

The Palestinian representative at the UN jumped up furiously and shouted, “What are you talking about? The Palestinians weren’t even there then!”

The Israeli representative smiled and said, “And now that we have made that clear, I will begin my speech.”

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 titled, “Down Payment Assistance Programs Helpful But Not a Universal Remedy.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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Rob Chrisman