July 3: Notes and news about housing numbers, owning Agency stock, Agency deals, and vendor deals & products

Mortgage Loan Originators (MLOs) are always interested in housing news and thoughts about the direction of the market. Let’s start this holiday weekend commentary with a note from Sherri Calcut, President of Mortgage, BOK Financial. “In the current housing market environment, it is important to work with a mortgage consultant that understands supply and demand. Housing inventory levels are at an unprecedented low, and mortgage interest rates are still extremely attractive. At BOK Financial, we anticipate they will continue to stay that way with the average 30-year fixed rate currently in the low 3% range. Inventory levels are exceptionally short in the single-family lower price point range, essentially starter homes and homes less than $250,000. We continue to see a strong trend with multiple offers above list price, along with tighter closing timeframe requirements. Homebuyers also need to do the math as their borrowing power may be greater, allowing them to afford more or move into a price range that was previously unattainable, even with increased prices. Low housing inventory levels also require a buyer to be prequalified and ready to quickly engage.” Thank you, Sherri!

Do you own stock in Freddie or Fannie?

In June, the Supreme Court rejected the shareholder lawsuit regarding the net profit sweep. Fannie and Freddie stocks were down dramatically on the news. Some wonder why, if they’re run by the government, Freddie Mac and Fannie Mae still have stock that can be bought and sold. From the capital markets ranks Brent Nyitray reminds us, “It is critical to understand that the only reason why these stocks trade is because the government doesn’t want to consolidate Fannie and Freddie debt on its balance sheet. If that wasn’t an issue, then they would have been wiped out when Fannie and Freddie failed in 2008. These stocks always were a litigation lottery ticket, and it looks like it didn’t pay off.”

Vendor news

Lenders aren’t the only ones going public. Blend Labs filed for its initial public offering (IPO). According to the filing, Blend Labs cofounder Nima Ghamsari stands to make a potential $10.9 billion in incentive pay if all goes well. Blend’s board of directors has awarded Ghamsari 78.2 million stock options priced at $2.86 a share that vest over a 10-year period, dependent upon the company’s stock skyrocketing in the years after its IPO. Ghamsari’s “Founder and Head of Blend Long-Term Performance Award,” revealed in Blend’s S-1 filing will begin vesting 15-months after Blend’s IPO with no price hurdle. It will then be awarded in tranches based on increasingly demanding stock price hurdles, which could be worth billions for Ghamsari. The company and it will trade under the symbol BLND and stated in the S-1 that its software handles more than $5 billion of mortgage applications on an average day for its 300 clients including Wells Fargo, U.S. Bank, Lennar Mortgage, Opendoor, and other clients.

But there are those who wonder about Blend’s valuation. Chris Whalen, for example, wrote a piece questioning the validity of Blend being worth more than, say, Rocket or Black Knight. Time will tell.

Town Square Mortgage entered into a partnership agreement with Havenly, a mortgage technology company based in Newport Beach, was approved by Fannie Mae, Freddie Mac, HUD, and state regulators. According to Adam Welwood, President and COO of Town Square Mortgage. this partnership was created with the goal of fueling future growth empowering Town Square Mortgage to be at the forefront of mortgage technology. Lisa Thomas, CEO of Havenly and also serving as the new CEO of Town Square Mortgage stated, “We are excited to work with Adam and the entire team at Town Square Mortgage, our partnership will support Town Square Mortgage with technology, customer experience and marketing expertise needed to drive sustainable, profitable growth.”

Have you heard of Tomo? A new $70 million real estate startup led by former Zillow executives Greg Schwartz and Carey Armstrong officially launched in Seattle, Dallas, and Houston. Tomo offers a price match if homebuyers find better mortgage rates. It also discounts interest rates by 0.125% if customers use a Tomo Brokerage Partner Agent, which, in turn, was built out by real estate coach Tom Ferry.

Total Expert, the CRM and customer engagement platform purpose-built for modern financial institutions, today launched Total Expert for Consumer Direct: the first all-in-one sales and marketing platform built on a single data model for direct lending. The new offering ensures lenders can develop a complete understanding of each consumer based on their unique financial needs and deliver a personalized and valuable digital loan experience.

ACES Quality Management (ACES) released its Q4 2020 and 2020 calendar-year ACES Mortgage QC Trends Report. Notable findings from the Q4/CY 2020 report include: The overall critical defect rate improved to 2.09%, which was lower than the prior quarter but still higher than other quarters in 2020.­ Loan Documentation defects rose in 2020, which was most likely driven by pandemic-related issues and symptomatic of manufacturing-related defects overall. 2020 was dominated by refinances as a result of pandemic-driven historically/record low interest rates. Conventional loan share hit its highest point since ACES began publishing the QC Trends Report in 2016. Early Payment Defaults decreased in Q4 2020 and Q1 2021, providing some hope for the future, but lenders should be mindful of upcoming forbearance-related deadlines.

SimpleNexus has become the first mortgage POS to integrate with Finicity’s Mortgage Verification Service (MVS) allowing lenders to streamline the verification of applicants’ assets, income and employment using a single embedded service without ever leaving the SimpleNexus mobile app. Just a few simple steps that take just minutes to complete. Finicity’s Mortgage Verification Service delivers GSE-accepted verification of assets, income, and employment in one easy interaction.

NAN (Nationwide Appraisal Network) has introduced an innovative new appraiser incentive, “Next-Day Pay”, that rewards ON-TIME work, and offers a substantial competitive advantage for their lender and broker partners. Appraisers are wired their full appraisal fee within 24 hours for work completed on-time or early. This new initiative has truly raised the bar within the industry, as it adds both a valuable incentive and an added layer of accountability. With the industry standard being 30 days for an appraiser to get paid, the appraiser community has taken notice of this new “Next-Day Pay” initiative. The results speak for themselves, with NAN reporting a 90+% success rate for on-time appraisal delivery to the lender.

According to the recently released Experian’s eBook, Navigating a New Era of Credit Risk Decisioning, 1 out of 3 consumers remain concerned about their finances. However, the research also found that consumers are no longer reducing their discretionary spending as much as they were six months ago, with high-income houses starting to spend the most. The report identifies three things’ lenders need to do to navigate the complexity of the current lending and credit landscape: Leverage data and advanced analytics, Proactively engage customers and Prepare for a potential wave of delinquency.

People need a place to live… and wash their car?

For many Americans, their car, SUV, or pick-up truck is the second-most expensive item (after a house) that they will purchase. maintaining that investment and maintaining an image by keeping their cars clean also matters. While I enjoy pulling out a hose, wash mitt and soap to give my “whip” a customized shine, I also often opt for the more convenient ritual of a trip to the local car wash.

The Census Bureau tells us that there are roughly 16,976 car washes with paid employees in the United States, with over 160,000 workers who earned an average annual salary of $21,911. California, the state with the largest population, not surprisingly ranked first in the number of car washes and car wash employees (2,025 and 24,851, respectively). Still, New Hampshire may be among the best for car wash workers. The Granite State had one of the nation’s highest average annual payroll per car wash employee at $32,407. The District of Columbia had the lowest car wash-to-population ratio (one for every 54,288 people) which may make it a prime location for new car wash businesses.

A new report puts the United States housing shortage at 3.8 million units, up from 2.5 million housing units in 2018. That puts a small building boomlet in perspective: last year was one of the best ever years for new apartments since 1990, and only 389,000 apartment units began construction. This year, a projected 446,000 units will begin construction, and while that’s distinctly an improvement, there’s still a huge deficit to contend with.

With the pandemic winding down, the CDC has extended the eviction moratorium for another 30 days. The foreclosure moratorium was extended as well. What are the huge companies that have a stake in the U.S. single family home market up to?

Blackstone, the largest alternative investment firm in the world, and a huge owner of single family homes, is buying a majority stake in Certified Collectibles Group, an acquisition that will value the company at over $500 million. It’s a bumper time for the company, which serves as an intermediary evaluating the quality and value of collectibles like coins, sports trading cards, comic books and stamps. Business has exploded at such appraisers as the pandemic led many to scour closets for such nostalgic collectibles, and led others to scour eBay for more.

As the nation rebounds from the coronavirus pandemic, more than 2 million homeowners are behind on their mortgages and risk being forced out of their homes in a matter of weeks, a new Harvard University housing report warns. The U.S. has roughly 140 million housing units ranging from mansions, through tiny townhouses, to apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are already rental properties. And of those 15 million single-family rentals, institutional investors own about 300,000. Most of the rest are owned by individual landlords. Of that 300,000, BlackRock, largely through its investment in the real-estate rental company Invitation Homes, owns about 80,000.

Agency deals

With the exit of Mark Calabria from the helm of the FHFA, the conservator of Fannie Mae and Freddie Mac, there is hope that Credit Risk Transfer deals will return to the secondary markets. But the Agencies are still active in the capital markets, regularly issuing securities. Many of these deals are backed by the cash flow from multifamily loans, or “reperforming” loans. And the demand by investors for these securities directly impacts the rates offered by Fannie and Freddie to borrowers.

Fannie Mae announced the results of its twentieth reperforming loan sale transaction. The deal included the sale of approximately 24,600 loans totaling $4.25 billion in unpaid principal balance (UPB), divided into five pools. The winning bidders of the five pools for the transaction were Pacific Investment Management Company LLC (PIMCO) for Pools 1, 2 and 3; J.P. Morgan Mortgage Acquisition Corp. (Chase) for Pool 4; and Great Ajax Operating Partnership, LP (Aspen) for Pool 5. The loan pools awarded in this most recent transaction include Pool 1: 3,604 loans with an aggregate UPB of $773,103,188; average loan size of $214,513; weighted average note rate of 3.29 percent; and weighted average broker’s price opinion (BPO) loan-to-value ratio of 82 percent. Pool 2: 3,630 loans with an aggregate UPB of $770,449,422; average loan size of $212,245; weighted average note rate of 3.12 percent; and weighted BPO loan-to-value ratio of 60 percent. Pool 3: 7,888 loans with an aggregate UPB of $1,191,043,442; average loan size of $150,994; weighted average note rate of 4.04 percent; and weighted BPO loan-to-value ratio of 61 percent. Pool 4: 4,721 loans with an aggregate UPB of $721,912,807; average loan size of $152,915; weighted average note rate of 4.03 percent; and weighted BPO loan-to-value ratio of 63 percent. Pool 5: 4,739 loans with an aggregate UPB of $790,446,866; average loan size of $166,796; weighted average note rate of 3.99 percent; and weighted BPO loan-to-value ratio of 65 percent. The transaction is expected to close on June 18, 2021.

Moody’s also assigned provisional ratings to four classes of mortgage insurance credit risk transfer notes issued by Radnor Re 2021-1 Ltd, as follows: Class M-1A was assigned Baa3 (sf), Class M-1B received Baa3, Class M-1C Ba3 (sf), and Class M-2 B3 (sf). Transaction credit strengths include strong loan credit characteristics, and the fact that the MI policies are predominantly borrower-paid MI policies (98.4 percent by balance). Transaction credit weaknesses include the high LTVs of the loans, as well as a limited third-party review scope and lack of representations and warranties (R&Ws) to the noteholders.

(Thank you to Keith L. for this one. Warning: rated PG for language.)

The British Medical Association has weighed in on the new health care proposals.

The Allergists voted to scratch it, but the Dermatologists advised not to make any rash moves.

The Gastroenterologists had a sort of a gut feeling about it, but the neurologists thought the Administration had a lot of nerve.

The Obstetricians felt they were all laboring under a misconception. Ophthalmologists considered the idea short-sighted.

Pathologists yelled, “Over my dead body!” while the Pediatricians said, “Oh, Grow up!”

The Psychiatrists thought the whole idea was madness, while the Radiologists could see right through it.

Surgeons decided to wash their hands of the whole thing. The ENT specialists wouldn’t hear of it.

The Internists thought it was a bitter pill to swallow, and the Plastic Surgeons said, “This puts a whole new face on the matter….”

The Podiatrists thought it was a step forward, but the Urologists were pi$$ed off at the whole idea.

The Anesthesiologists thought the whole idea was a gas, and the Cardiologists didn’t have the heart to say no.

In the end, the Proctologists won out, leaving the entire decision up to the arseholes in London.

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, “The Secondary Market’s Presence in the Primary Markets”. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


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Rob Chrisman