Feb. 10: AFR deal done; Unacceptable Zoom behaviors; Compliance news for lenders; Social Bonds; Saturday Spotlight: CU Servnet
People, buildings, or art, chronologically, no one is growing any younger. What does a rich, vain 82-year-old do with her money? Well, if you’re Martha Stewart, you buy plastic surgery so you can look 32. And arguably unrecognizable… if that is really her looking in the mirror (scroll down). In another story on aging, what do Milwaukee, San Diego, and Santa Fe have in common? They have places in which to bunk down that made this Top 10 historic hotel list. (I’ve taken matchboxes from a few of them!) The history buffs out there know what the New Deal was during the Roosevelt Administration, and here’s a cool site with maps and descriptions of the art and architecture that is still around from 90 years ago. Now, on to residential mortgage lending, which, by the way was in the press this week with Janet Yellen talking about risk in the independent mortgage banker world.
Saturday Spotlight: CU Servnet
“Loan Subservicing That Improves the Member Experience”
In 3-5 sentences, describe your company (when was it founded and why, what it does).
CU Servnet is a Credit Union Service Organization (CUSO). There are many CUSOs across the country owned by credit unions in whole or in part that provide financial services and/or operational services, primarily to credit unions or their members. CU Servnet, established almost 25 years ago, is led by executives from some of the nation’s top credit unions, and is dedicated exclusively to mortgage loan servicing. Cenlar, the nation’s leading mortgage subservicer, is the exclusive partner to and one of several owners of CU Servnet. Through this relationship, CU Servnet generates ideas and initiatives to enhance the credit union member experience. Cenlar then develops, builds, and delivers member-focused solutions that benefit credit unions.
What are some of the benefits of being part of the CU Servnet CUSO?
CU Servnet has engaged Cenlar to be the exclusive provider to subservice for credit unions. Through this relationship, credit unions get a dedicated team of exceptional representatives trained in the culture and values of the credit union service model. The team cares for members with credit union-centric values: empathy, belonging and diligence. There is always a personalized member interaction with promotion of the same “valued feeling” the member receives when they visit a credit union branch. Our member experience specialists are able to handle multiple products in a loan portfolio at the first point of contact. And, if an issue should arise, they are also trained to respond with urgency, escalate when needed and close the loop. It’s always our goal to address and resolve a member inquiry on the first call.
In addition, credit unions receive free access to Net Promoter Score Surveys that measure member satisfaction and identifies areas for improvement of service to members, as well as trending and resolution analysis of member feedback to drive process refinement.
What else does Cenlar provide through CU Servnet?
CU Servnet’s mortgage subservicer, Cenlar, understands the credit union mission of caring for both members and the community. Cenlar’s goal is to empower credit unions of all sizes, enabling them to compete in a secondary market where banks and mortgage bankers have held the majority of loans. Cenlar delivers flexible, customizable solutions to meet and exceed the unique service expectations of credit unions, regardless of their size or portfolio mix.
What’s the benefit to credit unions’ members?
A member’s experience that aligns with their credit union’s own business model. Members are always cared for with warmth, welcome, active listening, empathy, and responsiveness, and they gain the experience of Cenlar’s regulatory servicing environment when handling difficult topics.
Fun fact about you.
Our team at Cenlar is always giving back to the community. Last spring, our team joined forced with Habitat for Humanity South Central New Jersey on International Women’s Day to build homes for women as part of Habitat’s Women Build program. For International Credit Union Day, our team volunteers at local food banks in the NJ area.
Is there anything else you’d like to share along these lines?
Our CUSO invests in new products and services based on the needs of the credit unions. The CUSO leadership listens for opportunities to improve the member experience and is consistently investing in ways to make that better. Backed by Cenlar, CU Servnet is able to provide credit unions with a variety of initiatives to help their organization – whether that’s onboarding videos, web enhancements or campaigns to drive business back to them. We create a partnership that is a win-win for the credit union and their members.
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
A new survey identified behaviors that have become socially unacceptable in virtual work meetings. Paramount among the faux pas is having television playing in the background (which 77 percent consider not acceptable in any meeting), vaping (76 percent), smoking (75 percent) or drinking alcohol (74 percent). Other behaviors that aggravate many include wearing sunglasses in a meeting (64 percent), which I can only assume is a strategy employed to obscure what substance one was smoking or vaping in that same meeting, or turning your camera off (38 percent), which appears to be a more amenable way to solve the “people don’t like it when you vape on cam” problem. Working on something unrelated to the meeting is also considered not acceptable 67 percent of the time, which, let’s be real here, usually says more about the necessity of the meeting than the necessity of the unrelated work.
AFR deal closes
American Financial Resources, Inc. (AFR) announced that it completed the sale of 100 percent of the Company to an investment group led by Proprietary Capital, LLC (Proprietary Capital). This was previously announced in August 2023, and the transaction was completed on February 8, 2024.
Founded in 1997, Proprietary Capital is a fund manager based in Denver Colorado. The firm provides an institutional platform for investors to gain exposure to the U.S. residential-mortgage market and housing-related assets. Headquartered in Parsippany NJ, AFR was founded in 1997 by Corey Dubnoff, the current Chief Administrative Officer whose role will continue going forward. Tim Yanoti will stay on as the Chief Financial Officer. The team at Proprietary Capital has tapped Rob Pieklo, a former AFR executive and partner, to return to the organization as the Chief Operating Officer. He spent 14 years at AFR (until 2018) and worked as an advisor to Proprietary Capital during the acquisition.
AFR is a full-service mortgage banking company with Direct, Wholesale, and Correspondent lending divisions that offer products ranging from Agency, Non-Agency, and Government lending with a niche in construction and manufactured home mortgage programs. The capabilities of Proprietary Capital are expected to drive additional product development and growth in market share across all channels. STRATMOR Group served as the transaction advisor to AFR.
Compliance and quality control: ignore at your own risk
MQMR recently published a compliance hot topic on why a mortgage lender needs to monitor their employees to ensure accurate HMDA data collection and reporting of demographic information (race, ethnicity, and sex). The regulatory requirement for lenders to collect demographic information dates back to 1977 and is used by regulators to help detect mortgage lending discrimination. The Consumer Financial Protection Bureau (CFPB) and other federal regulators stress the importance of collecting accurate data for this reason.
In a recent Consent Order with Bank of America, the CFPB imposed a fine of $12 million, finding that hundreds of Bank of America loan officers failed to ask mortgage applicants certain demographic questions as required under federal law, and then falsely reported that the applicants had chosen not to respond. The CFPB indicated Bank of America failed to adequately oversee its mortgage loan officers in regard to collection of this data, which resulted in inaccurate and false reports. Unfortunately, this is a common theme in the mortgage industry. Mortgage lenders must train their mortgage loan originators regarding the responsibility to request and collect demographic information from applicants.
For online applications, mortgage lenders must ensure their systems properly request and record this information as well. Mortgage lenders must also review and audit the data collected to make sure it is accurate. Appendix B to Part 1003 – Form and Instructions for Data Collection on Ethnicity, Race, and Sex is a useful tool for lenders. It provides a sample data collection form and explains how to report demographic information based on the applicant’s responses and method of application.
Lenders Compliance Group recently wrote about how to determine if a loan I’m doing is for a person or a business. Regulation Z includes a general definition of “consumer” for most sections of the regulation and a special definition that applies to the right of rescission. (The general rule includes only natural persons or cardholders to whom consumer credit is offered or extended.)
This means that persons such as endorsers, guarantors, or sureties generally are not “consumers” for purposes of the general rule. The special rule for rescission, however, broadens the definition to include any natural person, including a guarantor, surety, or person who is not even liable on the credit transaction, when that person’s home is subject to the security interest. That person has the right to receive the “material disclosures” required by Regulation Z, including the notices of the right to cancel, and, subject to Regulation Z’s specific requirements, may rescind the transaction. As you might expect, determining whether or not a person is a “consumer” can become more complicated than the foregoing black letter law might suggest, as often is the case with regulatory definitions. Read on for more.
MQMR recently wrote about the significant risks to a mortgage lender for offering pricing exceptions to an applicant in an effort to retain the customer. In December 2023, the CFPB issued a Matter Requiring Attention (MRA) notice to Wells Fargo regarding pricing exceptions (referenced by the CFPB as “loan discounts”).
The CFPB has previously explained that examiners use MRAs “to communicate specific goals to accomplish to address violations of law, risk of such violations, or compliance management deficiencies.” It is not entirely clear whether the CFPB is investigating Wells Fargo for actual discrimination or found sloppy records, lack of written guidelines, poor oversight, or a combination of the foregoing. Given the repeated warnings by the CFPB, mortgage lenders need to ensure their policies and procedures surrounding pricing exceptions are well-developed and equally applied. Staff must be properly trained, and a lender must monitor its process and procedures to ensure fair treatment of applicants. Fair lending and anti-discrimination are key areas of concern for the CFPB and other regulators. In 2022, the CFPB carried out 32 fair lending investigations, more than doubling the number of probes it commenced in 2020. Lenders should expect this number to continue to rise.
Lenders Compliance Group recently released some short compliance FAQs, including: Can lenders complete a statistically valid sample instead of meeting the 10 percent requirement? No. Lenders may not replace the 10 percent requirement with a statistically valid sample. However, lenders can complete a statistically valid sample within their loan population as long as they meet the 10 percent requirement. Separately, when does the post-closing QC cycle need to be completed? Lenders must complete a full post-closing QC cycle in 90 or fewer days. (Reporting to senior management is considered the final step in a cycle.) For example, loans that closed between March 1 and March 31 must be selected, reviewed, and reported on by June 30.
Secondary deals drive the primary market
Would a car maker manufacture a vehicle that no one will buy? Will a cosmetics company produce mascara that doesn’t appeal to anyone? Nope. What happens in the secondary markets is critical in determining the products and pricing offered to borrowers.
In light of continued liquidity constraints in the reverse mortgage sector, Ginnie Mae announced that it is exploring development of a new securitization product as part of its efforts to enhance and expand its existing Home Equity Conversion Mortgage (HECM) mortgage-backed securities (HMBS) program. Ginnie Mae is exploring the viability of a new securitization product that would accept HECM loans with balances above 98 percent of FHA’s Maximum Claim Amount. This new product will not change the requirements for the existing HMBS program, where HECM loans with balances at or above 98 percent Maximum Claim Amount are required to be bought out of HMBS. “Ginnie Mae remains committed to the HMBS program, which supports an important tool that enables seniors to tap into their home equity,” said Ginnie Mae President Alanna McCargo. “This potential product exploration reflects our focus on current liquidity issues affecting the secondary mortgage market. Given the growing population of older Americans that may need to rely on home equity for financial support, continued efforts to provide stability in the secondary market are crucial to the ongoing health and access to the FHA HECM product.”
Figure Technologies issued an oversubscribed, asset-backed securitization transaction (FIGRE 2023-HE3), with notes backed by over 2,600 fixed-rate open HELOCs. The $195 million transaction with collective credit limits of over $204 million consisted of notes rated AAA, AA, A-, and BBB- by KBRA. It was the first time KBRA rated a FIGRE 144A transaction and it was also the first co-contributed FIGRE deal and the tightest prints for the FIGRE shelf, with AAA notes priced at +240 basis points and A- notes at +330 basis points. The deal includes 20 unique class A-D investors, including notable alternative asset managers, insurance companies, private equity funds, and hedge funds.
Approximately 75 percent of loans in the securitization transaction had a 30-year term, and the weighted-average original term was 306 months. There was an 11.42 percent gross weighted average coupon, approximately 90 percent of the loans were owner-occupied, and around 94 percent of the loans were junior lien. The securitization consisted of loans with a weighted average FICO score of 744, a combined loan-to-value (CLTV) of 65 percent, and a debt-to-income ratio of 38 percent. Class A was 5.25x oversubscribed, Class B was 2.95x oversubscribed, Class C was 4x oversubscribed, and Class D was 4.25x oversubscribed. The deal, which closed in December, marked the fourth and final home-equity transaction in 2023 for Figure.
Fannie Mae began marketing its most recent sale of reperforming loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio. The sale consists of approximately 4,874 loans, having an unpaid principal balance of approximately $859.2 million, and is available for purchase by qualified bidders. Interested bidders can register here. Reperforming loans are loans that have been or are currently delinquent but have reperformed for a period of time. The terms of Fannie Mae’s reperforming loan sale require the buyer to offer loss mitigation options to any borrower who may re-default within five years following the closing of the reperforming loan sale. All purchasers are required to honor any approved or in-process loss mitigation efforts at the time of sale, including forbearance arrangements and loan modifications. In addition, purchasers must offer delinquent borrowers a waterfall of loss mitigation options, including loan modifications, which may include principal forgiveness, prior to initiating foreclosure on any loan. Interested bidders can register for ongoing announcements, training, and other information here. Fannie Mae will also post information about specific pools available for purchase on that page.
Fannie Mae announced the launch of its Single-Family Social Bond Framework and updates to disclosures for the company’s Single-Family mortgage-backed securities (MBS), aimed to further support access to credit and affordable housing as part of its mission and goals. The updated Social Bond Framework describes the Fannie Mae mortgage collateral eligible to be pooled, issued, and labeled as Single-Family “Social MBS.” The MBS that receive the Social label will be based on certain scores using an updated version of the current Social Index disclosure used by Fannie Mae and Freddie Mac (the Enterprises). The Enterprises will rebrand the Social Index as the “Mission Index” and update its formulation as further described in the Framework.
The Mission Index will begin to apply to pools issued by Fannie Mae beginning in March 2024 and for Freddie Mac beginning in June 2024. The Enterprises expect to assign the Social label to Single-Family MBS meeting the Social Bond criteria beginning in June 2024. The Fannie Mae Single-Family Social Bond Framework is being rolled out in alignment with Freddie Mac and in cooperation with the Federal Housing Finance Agency (FHFA).
Although the game should be a solid contest tomorrow, some people watch the Super Bowl just for the ads. Budweiser’s had some great ones over the years. Here’s one that is very well cast.
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