Feb. 14: LO jobs; digital white paper, customer service, pricing products; another False Claims action; risk transfer status

I like Baltimore. It has cool row houses, the Edgar Allan Poe House & Museum, Babe Ruth’s birthplace, Fort McHenry, the Ravens and the Orioles, but… bedbugs? Yes, for the third year in a row Baltimore is tops in the U.S. for bedbugs. (How’d you like to be in charge of that survey, and be volunteered by your child to explain to their class what you do for a living?) I know that this is a weak lead in, but Baltimore is certainly one of the major cities in the U.S., and LOs are always trying to add value to clients through educating real estate agents about home prices and trends. Here’s a useful table showing the median home prices in the Top 100 Metro Areas.

Jobs & personnel moves

“Are you looking for ‘the one’ this Valentine’s Day? Someone you feel you can count on? Who supports your dreams, encourages your growth and gives you the opportunities you need to turn leads into customers for life? Meet Motto Mortgage. We believe our network deserves the very best which is why we empower each and every Motto Mortgage loan originator with the right tools and training to stay ahead of the competition. In fact, the Motto Mortgage network is aggressively recruiting for loan originators in the following states: Colorado, Delaware, Florida, Michigan, New Jersey, Nevada and Texas. Still unsure? With over 100 franchises sold and 70 offices open in 30 states, our network’s growth makes it easy to cast those first-date jitters aside. Take a chance and swipe right on Motto Mortgage. Contact us (866.668.8649) to learn why we might just be a match made in heaven for your career.”

Caliber Home Loans, Inc. CEO Sanjiv Das has been named a “Top 25 Industry Leader & Influencer” by The MReport. He is a 30-year mortgage industry veteran, with executive management experience both domestically and internationally. He has been a featured speaker at renowned institutions such as Harvard Business School and Columbia Business School – and is a regular commentator on CNBC, Bloomberg and for The Wall Street Journal. Since joining Caliber as Chief Executive in 2016, Das has overseen several acquisitions, introduced innovative financing solutions and invested in technology. In 2018, Caliber was among the fastest growing mortgage lenders, increased its market share, grew to the #4 non-bank lender (as reported by IMF) and hired over 1,200 employees. Caliber Home Loans has strength in numbers – and leadership – and is proud of both!

Pavaso announced that Tim Anderson has been named SVP of business development, responsible for developing products, strategies and relationships that drive adoption of Pavaso’s suite of digital products and services.

Lender products and services

New technology and digital mortgage services have flooded the industry recently, and for good reason. For years, many mortgage lenders have procrastinated adopting digital technology to improve efficiency in their operations, making it harder to attract and satisfy new customers. Late-bloomers are finally coming around, though, as we are seeing more and more lending teams actively researching and purchasing technology solutions to help their business.

With this, it’s hard to know the right questions to ask to help you find the right technology vendor. A newly released eBook, “Digital Mortgage Buyer’s Guide”, shines light on this process, touching on questions to ask and areas to focus on for those considering adopting new digital mortgage technology in their business. An exclusive to Rob Chrisman subscribers today (and a must-read for all lending professionals), Download your complimentary copy here.

Stay tuned for an announcement from ISGN Solutions – a premier provider of productized solutions to the U.S. mortgage industry. ISGN Solutions works with 11 of the top 20 originators and servicers and numerous other great mortgage companies around the country, combining its best-of-breed technologies and 2,000+ employees to help clients move their business initiatives further, faster. A point of pride for ISGN Solutions is being the most licensed and compliant solutions provider in the industry. Visit its website to learn more about how it helps companies stay ahead, and watch for the announcement.

Less than 10% of homeowners return to their original lender. This has to be the lowest of any industry! As a point of reference, when the big three automotive companies were in bankruptcy, their customer retention sunk to 17%! That’s almost double our industry. Doesn’t say much about how we take care of customers. Isn’t it time we start thinking about the lifetime value of our customers beyond the closing table? They’re the revenue of the future. Read more in the TMS white paper.

LendingPad LOS, endorsed by the National Association of Mortgage Brokers (NAMB) is offering a free service to growing brokers via its NAMB Edition. It is working with a group of wholesalers to further enhance NAMB brokers’ experience with their lenders. In the past brokers had to deal with different lenders’ websites making transaction experience difficult. Now they have one platform to check scenarios, to originate/process a file, and to manage their pipelines. LendingPad’s Lender Services include instant product, pricing & eligibility checks, streamlined registration and submissions for brokers on the NAMB Edition. Interactive product discovery, eligibility advisory, D1C & pricing pushes/alerts are just a few innovations to guide brokers to originate more efficiently. Unlike the few alternatives on the market, the NAMB Edition includes full-featured LOS/POS components or the ability to connect to other providers.  Its versatility, intuitiveness, and extensive capabilities resulted in LendingPad’s rapid growth as brokers’ favorite system-of-record.

Looking for ways to grow your business? Freddie Mac is collaborating with clients to deliver automation and insights that provide a competitive edge. Cut back on documentation and reduce time to close with Loan Product Advisor® automated income and asset assessment capabilities. Save borrowers time and money with ACE appraisal waivers, now available for certain condo unit loans. Grow your condo business with Freddie Mac’s unit-level condo exception tool, Condo Project AdvisorSM. Get greater efficiency with simpler collateral QC and underwriting in Loan Collateral Advisor® Get The Freddie EdgeSM.

BCG has released its first industry white paper of 2019 on the next wave of digital transformation in mortgage. The paper analyzes mortgage market conditions, details how many lenders are using digital solutions to establish differentiated value propositions, and provides initial results observed from new solutions by review data from Blend, a leading lending platform that processes more than 100,000 applications per month and is used by more than 125 lenders nationwide. The next generation of homebuyers wants a digital-first experience from end-to-end. The paper takes a close look at how digital solutions are poised to help lenders fight their way through tough times ahead. View the white paper here.

False Claims News Continues

Yesterday the Department of Justice (DOJ) and the Department of Housing and Urban Development (HUD) issued a joint press release indicating that Sierra Pacific Mortgage has settled a claim brought by them under the False Claims Act by agreeing to pay the United States $3,670,000 to resolve allegations that it violated the False Claims Act by falsely certifying compliance with Federal Housing Administration (FHA) mortgage insurance requirements in connection with certain loans.

“During the time period covered by the settlement, SPM participated as a direct endorsement lender (DEL) in the U.S. Department of Housing and Urban Development’s FHA insurance program. A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the resulting losses. DELs are required to follow program rules designed to ensure they are properly underwriting and certifying mortgages for FHA insurance and to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices.

“The United States alleged that between April 2007 and June 2009, SPM knowingly submitted loans for FHA insurance that did not qualify. The United States further alleged that SPM failed to properly respond to internal warning signs that its loans were poorly underwritten and failed to properly implement a quality control program once it was aware of those warning signs. By improperly approving loans that did not qualify for FHA insurance, SPM caused the United States to pay insurance claims on those loans when they defaulted.

The release finally ended with, “The claims settled by this agreement are allegations only and there has been no determination of liability.”

Sierra Pacific reacted: “As you know, a number of larger lenders have also settled claims with the government under this act. The False Claims Act has been used as a tool by the DOJ to punish lenders for alleged abuse during the housing crisis of 2007 – 2008. HUD reviewed nearly 200 loan files originated between 2007 and 2012 and found alleged issues with 16 loans. We have aggressively, contested these claims, but rather then enter into a protracted legal dispute with the Federal Government, we decided to settle this claim admitting to NO wrong doing. Sierra Pacific Mortgage has always originated quality and compliant loans that serve our customers and meet the requirements of our secondary market investors. We will continue to do so.”

Capital markets

Freddie & Fannie continue to move forward with initiatives that aren’t directly reliant on political decisions. Good for us, right! Dan Fichtler, Director of Housing Finance Policy, for the Mortgage Bankers Association writes, “We continue to be encouraged by the progress the GSEs are making with respect to their CRT programs. For the STACR and CAS offerings in particular, it’s clear that they’ve turned the corner to become better-understood, more-liquid securities, which is increasing investor demand and contributing to tighter spreads. Another very positive development is the decision by both GSEs to issue their STACR and CAS securities as REMICs, which should allow greater investment by REITs. These programs have certainly benefited from the fact that they developed and grew in a period of strong economic growth and rising home prices. It will be interesting to watch how the programs evolve, the securities perform, and the investor base changes during a downturn. Moving forward, our hope is that CRT remains a permanent part of the GSEs’ business models, that the GSEs continue to pursue diverse structures (front-end and back-end; capital markets and institutional), and that offerings are designed in a way that maintains a level playing field.

For example, on January 28, Fannie Mae announced an 18-month $2.0 billion Secured Overnight Financing Rate (SOFR) transaction, its third transaction of this type, which is meant to encourage market participation. Each subsequent SOFR deal since the first has seen increased demand, and Fannie thought it a good time to come to market with their first SOFR security maturing at the end of January. This third transaction has seen significant interest from both issuers and investors, as the market is eager to adopt new rates as a result of more varied maturity points. Over $40 billion of SOFR-linked securities have been issued in the marketplace since Fannie Mae’s inaugural offering last July as the company demonstrates commitment to the Alternative Reference Rate Committee’s (ARRC) efforts to develop LIBOR-alternatives. The CUSIP is 3135G0V26 and the pricing is SOFR + 6 bps. 83.7% of the investor distribution will go to the 2a7 fund, 1.3% to commercial banks, 9.7% to the Fund Manager, 0.4% to insurance companies, and 5.6% to state and local coalitions.

On January 25, Freddie Mac priced a $1.1 billion offering of Structured Pass-Through K-Certificates (K-087), multifamily mortgage-backed securities that are expected to settle on or about January 31, 2019. The A-1 class has a principal amount of $70.9 million, weighted average life of 5.99 years, a coupon of 3.59%, and a dollar price of $101.99. The A-2 class has a principal amount of $988.9 million, weighted average life of 9.81 years, a coupon of 3.77%, and a dollar price of $102.99. Finally, the A-M class has a principal amount of $56.8 million, weighted average life of 9.90 years, a coupon of 3.83%, and a dollar price of $102.99.

Also on the 25th, Freddie priced a $697 million K-C (03) offering of structured pass through certificates expected to settle on or about January 31, 2019. The K-C03 Certificates are guaranteed by Freddie Mac and are backed by a majority of 7-year, fixed rate loans that feature longer than typical periods of reduced prepayment penalties before maturity. There will be three offered classes, as follows. Class A-1 will have a principal amount of $32.4 million, a weighted average life of 4.90 years, a coupon of 3.06% and a dollar price of $99.99. The A-2 class has a principal amount of $664.6 million, a weighted average life of 6.77 years, a coupon of 3.49% and a dollar price of $100.99. The final class, X1, is comprised of the full $697 million but has a coupon of 0.48% and a dollar price of $2.63.

On February 6, Freddie priced a $1 billion multifamily K-deal (K-F57), backed by floating-rate multifamily mortgages with 10-year terms expected to settle on or about February 20, 2019. There will only be one offered class (Class A), which has a weighted average life of 9.60 years, a coupon of 1-month LIBOR + 54, and a dollar price of 100.00. The K-F57 Certificates will not be rated, and will include one senior principal and interest class, one interest-only class, and one class entitled to static prepayment premiums.

K-Deals are part of the Freddie’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. The certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

The U.S. 10-year closed Wednesday yielding 2.71% as the yield curve flattened (does anyone care?) in a “risk-off trade” on no large news stories. International news of note revolved around South Korea’s unemployment rate surging to a 19-year high, and industrial production in the eurozone contracting at the sharpest rate since the financial crisis. In the U.S. Senator Marco Rubio said he will put forward a bill that would result in corporate buybacks being taxed in the same way as dividends, which should encourage productivity improvements and job creation. Lock desks know that yesterday saw the fourth straight weekly decline in mortgage applications.

Today’s calendar kicked off with December retail sales (expected +.1% but was -1.2%!), January Producer Price Index (expected +.1%, it was -.1%, core +.3%), and weekly initial jobless claims (expected -10k, it actually shot up 239k). Also of interest to lenders will be the hearing before the Senate Banking Committee of Mark Calabria who has been nominated for FHFA Director. The lone scheduled Fed speaker for the session is Philadelphia Fed President Harker who speaks in Delaware. After the weak retail sales number we begin today with Agency MBS prices +.250 versus last night’s close and the 10-year yielding 2.66%.

Instead of the never cutting-edge, rarely amusing humor that occupies this spot, let’s have some trivia about smooching, given that its Valentine’s Day in the United States. I mention the U.S. because, surprisingly, few societies have romantic kissing in their repertoire. In a study published in July 2015, less than half of the cultures (46% of the 168) sampled engage in the romantic kiss. Societies with distinct social classes are usually kissers. Societies with fewer or no social classes, like hunter-gatherer communities, are usually not. For some, kissing seems unpleasant, unclean, or just plain weird. Kissing is clearly a culturally variable display of affection.

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, “How are You Going to Compete.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of 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 www.robchrisman.com. Copyright 2019 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