Feb. 26: Primer on Credit Risk Transfers; vendor updates from coast to coast; Saturday Spotlight: New American Funding

There is nothing funny about Russia’s invasion of Ukraine. The Onion, however, does have a satirical take on the event. As was discussed in yesterday’s podcast, what happens with the uncertainty in Ukraine has little effect on the desire Mr. & Mrs. Renter who are paying $2,000 a month in rent and can buy an existing home that helps build wealth and have a mortgage payment of $1,800. What if they want a new home? Any group touched by lumber prices (like builders, remodelers, lenders, real estate agents) watch wood’s price, and its volatility. Lumber, like oil, gold, and pork bellies, is a commodity, and in lumber’s case if its price on the commodity exchange moves too much one way or another, it triggers a shutdown of the trading market, an event that has happened in 25 of this year’s 35 trading sessions. The shutdown is designed to prevent a disorderly market, but it’s actually created a pretty nonfunctional one. In order to keep the wood flowing, the Chicago Mercantile Exchange will increase the daily trading band by another 90 percent, meaning that starting on March 7 the maximum amount the price of a thousand board feet can move in either direction in a given day is capped at $57. (For perspective, before the pandemic a thousand board feet went for $350.) At least that will help liquidity, always a good thing.

Saturday Spotlight: New American Funding 



In 3-5 sentences, describe your company (when was it founded and why, what it does, where recent growth and plans for near-term future growth). 


Headquartered in Orange County, California, New American Funding is dedicated to helping families and individuals improve their quality of living through homeownership. Rick and Patty Arvielo founded New American Funding in 2003, and New American Funding has grown into a top-20 mortgage lender, one with more than 4,500 employees and a servicing portfolio of more than 221,000 loans for $58.1 billion. Going forward, New American Funding will transform the mortgage industry by providing world-class service to our clients while maintaining its commitment to its award-winning company culture.


Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why. 


New American Funding’s employees engage in countless community activities. From working with Habitat for Humanity, Big Brothers Big Sisters, St. Jude Children’s Research Hospital, Volunteers of America, Toys for Tots, and many more, the company’s employees are generous with their time. The company’s employees also engage in numerous homeownership events throughout the year that are designed to create sustainable homeownership.


What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop? 


New American Funding Co-Founder and President Patty Arvielo is an advocate for mentorship and has instilled that spirit in her company. The company’s career-development program, “If You Want to Grow, We Want to Know,” encourages employees to openly share their goals with leaders to further their growth.

Arvielo also hosts a quarterly mentorship program called “Thrive and Lead,” which includes New American Funding employees and external mortgage professionals who are mentored for three months. The company also offers the “360 Mentorship Program,” which matches an internal leader with an employee who is pursuing career advancement. The company’s training and compliance education platform, Specialized Training Empowering People, prepares individuals for a successful career in mortgage banking.

Diversity, equity, and inclusion are at the very core of New American Funding. Through the company’s Diversity and Inclusion initiative, New American Funding embraces and values our differences and recognizes that they make the company stronger.


Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable. 


The company works hard to replicate its on-site experience, which features a fun, family-style environment, to its employees working remotely. Departments engage in virtual contests, team-building exercises, and group activities, like a white elephant gift exchange, holiday bingo and trivia, and more, to ensure that everyone feels connected throughout the year. The company also shifted its mortgage and operations training programs and mentorship to virtual. This expanded the company’s inclusive work environment and created opportunities for trainees to work safely from home.


Things you are most proud of that don’t have to do with sales. 


New American Funding is a community. That spirit is embodied through NAF360, the company’s culture initiative in support of the goal of having happy employees who enjoy their jobs. NAF360 was designed to ensure employees feel balanced and valued in their work life and know they are being treated with 360 degrees of respect, which has led to New American Funding consistently being recognized as a top nationwide employer.


Fun fact about New American Funding.  


Thanks to a specific focus on lending to underserved communities, New American Funding is an industry leader in lending to minority borrowers. In fact, 36% of New American Funding’s purchase mortgage originations were for minority borrowers in 2020, compared to 25.5% for all other lenders combined, per 2020 HMDA data. (NMLS #6606)

(For more information on having the charitable, employee improvement-centric side of your firm featured, contact Chrisman LLC’s Anjelica Nixt.)

Vendor tidbits


Third party vendors to residential lenders do much more than make up names that bog down spellcheck and capitalize letters in the middle of their names. Let’s take a random look at who’s doing what.

New real estate investment platform, LEX Markets, is offering Millennials the chance to fractionally invest in commercial real estate. With an entry price of just $250, LEX aims to democratize real estate investing, especially for younger generations by removing the exorbitant cost of entry that limited the market to high-net-worth individuals. Today, any U.S. investor is able to sign up for a new brokerage account on LEX and start investing in real estate. Thousands of investors have already signed up to LEX’s first property listing in NYC, a Harlem office building and the first publicly traded commercial real estate asset in New York City, with many more properties in the pipeline.

OptiFunderSM is now integrated with the Fannie Mae Connect™ Whole Loan Purchase Advice Seller API, expediting the processing and reconciliation of purchased loan data for Mortgage Bankers. OptiFunder syncs data from Fannie Mae automatically, eliminating the manual process of obtaining purchased loan data and performs the computational logic required to process and reconcile purchase advices with the client’s LOS. This allows originators to simplify and streamline workflow and lower discrepancies. Mortgage bankers see faster accounting for investor loans with detailed pricing attributes and improved accuracy.

Carrington Mortgage Services has introduced ProcessIQ to assist brokers in moving complicated and time-sensitive loans through their pipelines more easily. This new service is unique to the industry, and approved CMS wholesale brokers have the option of having Carrington process the loan as part of its underwriting. When an enrolled broker submits a non-QM or full-doc FHA, VA or USDA loan, wholesale brokers can request that the Carrington ProcessIQ team handle all of the logistics and work directly with the borrower. The broker’s loan officer still manages all licensable activities but the ProcessIQ team takes care of everything else which makes it easy for our broker partners to expand their loan processing capabilities for more nuanced loans such as those with low FICO scores, high debt ratio or alternative income documentation requirements.

Sales Boomerang launched Reverse Mortgage Alert, a new addition to its pantheon of automated borrower intelligence products, as well as significant enhancements to the company’s existing Rate Alert product. The all-new Reverse Mortgage Alert notifies lenders when a past borrower or prospect would be a good candidate for a home-equity conversion mortgage (HECM). Sales Boomerang’s Reverse Mortgage Alerts helps lenders identify contacts who could benefit from a reverse mortgage based on their current age and accumulated home equity.

MISMO®the real estate finance industry’s standards organization, announced that it is seeking public comment on a new guide and sample credit response designed to help industry professionals using MISMO Reference Models v3.4 and v3.5 better report on loans that have been in or are in forbearance. This guide and sample response facilitates standardized visibility into accounts, not limited to mortgages, which have been in, or are currently in, forbearance pursuant to the CARES Act of 2020. The comment period also allows those who participated on the proposals at least 30 days’ notice prior to final release to review and disclose any applicable Patent Rights (as defined by MISMO’s 2018 Intellectual Property Rights Policy). The 30-day comment period will run through March 15. Interested participants should visit this link for more information.

AccountChek®, digital asset verification service from FormFree®, will support first-of-its-kind solution from Freddie Mac that allows mortgage lenders to assess a prospective homebuyer’s income using direct deposit data. Available to mortgage lenders nationwide, Freddie Mac’s Loan Product Advisor® (LPASM) asset and income modeler (AIM) solution fulfills mortgage verification of assets (VOA) and verification of income (VOI) requirements. FormFree’s® AccountChek leverages tens of thousands of data connections with more than 16,000 financial institutions to instantly deliver consumer-permissioned asset and income verification all in one report.

A March Freddie Mac Single-Family Seller/Servicer Guide Bulletin will provide lenders additional requirements and information about when the solution will be available.

Rate Reset, provider of KNOCK KNOCK, digital solutions platform, announced Granite Federal Credit Union, serving Salt Lake County in Utah, with over 30,000 members and $680 million in assets; will offer Rate Reset’s The Button™ later this year. The Button™, a consumer-initiated instant prequalification solution, positions credit unions and banks to compete against agile FinTechs by offering members and non-members the ability to prequalify themselves for a loan. The Button can be implemented in less than 60 days and is easier, faster, and more member-friendly than anything on the market today.

Renew Financial, a provider of the residential Property Assessed Clean Energy (PACE) financing program, announced it has teamed up with the nonprofit Federal Alliance for Safe Homes (FLASH®), to work toward their shared goal of helping homeowners to affordably strengthen their homes and safeguard their families from natural and manmade disasters. “It is an honor to join forces with FLASH in our effort to strengthen homes and communities by helping homeowners obtain affordable financing to improve the safety, resiliency, and energy-efficiency of their properties,” said Mark Floyd, CEO of Renew Financial. Renew Financial sponsored the 2021 National Disaster Resilience Conference (NDRC21), which brought together the nation’s top experts to discuss topics focused in areas of science, policy, and practice to create more resilient buildings and disaster-resilient communities in the face of earthquakes, hurricanes, wildfires, etc., as well as human-caused disasters.

Candor Technology signed its 60th client, Churchill Mortgage. Since its Loan Engineering System went into production in September 2020, Candor Technology has conducted more than 1.5M hands free underwrites for noteworthy banks, credit unions, and IMBs. Candor’s is the only solution that automates tasks, intelligence, and expert judgment to autonomously conduct the credit & information risk assessment just like a seasoned underwriter. In addition, The Loan Engineering System conducts detailed, nuanced crosschecks across a vast and complex set of dynamic data.

CoreLogic just released its quarterly mortgage fraud brief for Q4 2021, which showed that the Mortgage Fraud Risk Index increased 10.4% from Q3 2021, and 26.7% from Q4 2020. Factors such as a significant decrease in loan application volumes for Q4 versus Q3 and more changes to the GSE financing policies for investment properties translated to increased risk in Q4.

More than half of the metros with the highest fraud risk were in Florida and California, and 12 out of the 15 riskiest metros saw fraud risk increase over the past quarter.

CoreLogic’s full report is available to view.

Secondary market Agency deals


Before you go farther, you should know that Ginnie Mae has published a LIBOR Index Transition Reference Guide (Guide) to assist stakeholders in preparing for the transition from the London Interbank Offered Rate (“LIBOR”) on the LIBOR index cessation date of June 30, 2023. The Guide will serve as an information resource for affected parties. More details regarding Ginnie Mae’s transition from LIBOR can be found in the recently published 2021 Annual Report​.

Why should an MLO care about secondary marketing? If someone wants to own risk, why not sell it to them? Along those lines, billions of dollars of conforming conventional loans have been bundled into CRT (Credit Risk Transfer) bond deals, nonperforming, or multifamily deals, which help reduce taxpayer exposure to the large book of mortgages guaranteed by the two housing giants and help the Agencies manage their capital. In general, GSE reform needs to ensure stability in the MBS market, but also preserve price signaling from the private sector. Ensuring the smooth functioning of the conventional TBA market is paramount, and most believe that this requires a government backstop behind private capital.

These deals involve sharing, for a price, part of the credit risk with third party investors like insurance companies or pension funds. In the deals, the investors pay cash up front and purchase debt securities that are designed to absorb the credit losses on GSE (government sponsored enterprises) loan pools. The goal is to attract private capital into the mortgage market and shift some risk away from taxpayers since we are currently on the hook for Freddie & Fannie. Fannie Mae and Freddie Mac have still been pricing transactions to aid liquidity in the mortgage space, providing support for its borrowers and up-to-date disclosures for our investor base. And that helps rate sheet pricing for borrowers!

To give you some historical perspective of the program’s magnitude, Freddie Mac’s Single-Family business announced that its Credit Risk Transfer (CRT) program transferred credit risk via $4.8 billion of issuance on $167.2 billion of single-family mortgages from U.S. taxpayers to the private sector in the fourth quarter 2020. In 2020, the company transferred risk via $16.9 billion of issuances on more than $475.8 billion of mortgages. Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred $67.6 billion in credit risk on $1.9 trillion in mortgages through STACR, ACIS, certain senior subordination securitization structures and certain lender risk sharing transactions. As of December 31, 2020, 51 percent of the Single-Family credit guarantee portfolio was covered by credit enhancement.

Freddie Mac’s Single-Family business announced that its Credit Risk Transfer (CRT) program reported record first half CRT issuance last year of $9.9 billion, protecting $418.9 billion unpaid principal balance of mortgages. Second quarter CRT issuance of $3.5 billion, credit protecting $173.6 of single-family mortgages and record first quarter issuance of $6.4 billion, credit protecting $245.4 billion of single-family mortgages boosted the half. The issuances of the strongest half to date included STACR, ACIS, subordination and certain lender risk sharing transactions.

For more stats, Freddie Mac announced that its CRT program transfers credit risk away from U.S. taxpayers to global private capital via securities and (re)insurance policies) program transferred credit risk via $6.4 billion of issuance on $167.3 billion of single-family mortgages from U.S. taxpayers to the private sector in the third quarter 2020. Since the beginning of the year, the company has transferred $12.1 billion on $308.6 billion of mortgages. Among the notable transactions was the STACR REMIC 2020-HQA4 offering, the last scheduled STACR deal tied to LIBOR before the company moved to an alternative reference rate for later issuances. In Q3, Freddie Mac transferred between 79 percent (high LTV HQA series) and 85 percent (low LTV DNA series) of the credit risk on the underlying reference pools, helping to reduce capital required under the Conservatorship Capital Framework (CCF). Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred $64 billion in credit risk on $1.7 trillion in mortgages through STACR, ACIS, certain senior subordination securitization structures and certain lender risk sharing transactions.

A hole has been found in the nudist camp wall.

The police are looking into it.

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, “What’s Next” about how lenders and MLOs are shifting to a purchase-centric focus. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2022 Chrisman LLC. All rights reserved. Occasional paid job & product 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