July 6: Readers’ letters on technology being a given, veterans & 1003s; Agency risk transfer continues


Not a lot going on out there. Holiday week. I thought about making up some sensationalist headlines or clickbait (“You won’t believe what these mortgage bankers looked like in 1980!”), but I’ll save that for another edition. But there are a couple things that readers weighed in on.

Veterans and the 1003

My father, 96, was in the USN from 1942-1962, so catching my eye was a note from north of San Francisco. Kurt Weidner addressed VA lending. “I know how you feel about our Veterans, as you write about your dad’s service in the Navy. It’s a travesty that many Veterans never take advantage of the VA loan program. This occurs for 2 reasons: 1) The Veteran is not aware of the program, or 2) The LO taking the loan application doesn’t ask the borrower(s) if he/she is a Veteran.

“I can speak from personal experience (30 years as a Wholesale AE) that many deserving Veterans miss out on this incredible benefit simply because the question is not asked at the loan application interview. Since the FHFA has postponed the implementation of the new 1003, and is asking for input, how can we get this important question added to the 1003??? ‘Is any borrower a US Veteran?’ should be the first question on the 1003. The second question should be, “If YES, are you familiar with the VA loan program?’ This would ensure all Veterans get the opportunity to use their hard-earned and well-deserved benefit.

“As a side benefit, it would also make every LO learn the basics of the VA program. I’m hoping industry leaders you can spearhead this with ‘the decision makers’ to get this long overdue oversight corrected.” Thank you, Kurt.

Tech thoughts

It is good to step away from being “in the weeds” once in a while and take a broad look at things. In this case, I received a note on “Technology and the Mortgage Industry” from Steven Cooley with Art Vs. Math. “Mortgage companies continue to feel pressured to evolve and modernize while maintaining their roots of relationship building and partnerships. The new approach showcases how automation, and the newest technology will simplify or expedite the loan process. This message is stale and over sold. The reason this message is becoming white noise is because software and technology is equally as commoditized as the mortgage product.

Consumers expect to be able to check their loan progress. They expect to be able to upload documents. They expect to use forms to fill out their information. They expect technology to drive the process.

Technology cannot be your market differentiator, unless it really is. It must be leaps and bounds above the competition. There must be no other parallel. It must create a moment worth sharing, commenting, liking, and retweeting. Finding your market differentiator is imperative to standing out from the crowd. Be the obvious choice. Defining your distinct value, identifying your voice, and communicating it to the right audience are massive marketing challenges. Overcoming these challenges creates internal stability, consumer advocacy, and market viability that can be scaled. Relying on a technological silver bullet is risky. Relying on technology as part of your overall strategy is necessary.” Thank you, Mr. Cooley.

The biggest insurers have come together to provide a collaborative rating system for cybersecurity technology on the market for businesses, according to the Wall Street Journal. The results will be available to the public on the Marsh & McLennan’s US website. Global spending on information-security products and services will likely top $120B this year, according to Gartner Inc.

Agency risk transferring news

Freddie & Fannie continue to move forward with initiatives that aren’t directly reliant on political decisions, like billions of dollars of transferring credit risk. Dan Fichtler, Director of Housing Finance Policy, for the Mortgage Bankers Association observes, “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.”

Loan originators should know that transferring credit risk away from taxpayers to willing buyers help rates for their borrowersLet’s see what Fannie’s been up to in the capital markets.

On June 11, Fannie Mae priced its second Green Multifamily DUS REMIC in 2019 (FNA-2019-M9), totaling $805 million under its Fannie Mae Guaranteed Multifamily Structures program. This will be Fannie Mae’s 10th GeMS deal backed by Green MBS collateral, bringing total structured Green REMIC issuance to $8 billion. This is the first Green deal to include the more call-protected A3 tranche and is designed to offer investors multiple options along the yield curve. Fannie Mae’s Multifamily Green Financing Business provides financing through several different Green product offerings, encouraging apartment building owners to make energy and water savings improvements to their properties, and providing financing to properties holding a third-party, Fannie Mae-approved, Green Building Certification. Pricing for the deal is as follows. Class A1 has an original face of $57.7 million, a weighted average life of 6.59 years, a FIXED coupon of 2.61 percent, and an offered price of 101. Class A2 has an original face of $547.6 million, a weighted average life of 9.53 years, a FIXED coupon of 2.94 percent, and an offered price of 102. Class A3 has an original face of $200.0 million, a weighted average life of 9.88 years, a FIXED coupon of 2.90 percent, and an offered price of 102. Fannie Mae introduced the Green MBS product to the market in 2012 and has issued over $56 billion in Green MBS since the program’s inception. All classes of FNA 2019-M9 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal.

Also on June 11, Fannie Mae announced the winning bidder for its fifteenth non-performing loan sale of approximately 4,300 loans totaling $770 million in unpaid principal balance divided among four pools expected to close on July 23, 2019. The winning bidders of the four pools for the transaction were Igloo Series IV Trust for Pool 1, MFRA Trust 2015-1 for Pool 2, Elkhorn Depositor LLC for Pool 3, and VRMTG ACQ, LLC for Pool 4. The loan pools awarded in this most recent transaction include: Group 1 Pool: 896 loans with an aggregate unpaid principal balance of $153.7 million; average loan size $171k; weighted average note rate 4.33 percent; weighted average delinquency 19 months; and weighted average broker’s price opinion loan-to-value ratio of 82 percent. Group 2 Pool: 708 loans with an aggregate unpaid principal balance of $135.1 million; average loan size $191k; weighted average note rate 4.18 percent; weighted average delinquency 28 months; and weighted average BPO loan-to-value ratio of 108 percent. Group 3 Pool: 1,597 loans with an aggregate unpaid principal balance of $276.6 million; average loan size $173k; weighted average note rate 4.50 percent; weighted average delinquency 22 months; and weighted average BPO loan-to-value ratio of 90 percent. Group 4 Pool: 1,136 loans with an aggregate unpaid principal balance of $204.6 million; average loan size $180k; weighted average note rate 4.60 percent; weighted average delinquency 22 months; and weighted average BPO loan-to-value ratio of 77 percent. Bids are due on Fannie Mae’s fifteenth Community Impact Pools on June 18, 2019. Potential buyers can register for ongoing announcements or training, and find more information on Fannie Mae’s sales of non-performing loans and on the Federal Housing Finance Agency’s guidelines for these sales, at http://www.fanniemae.com/portal/funding-the-market/npl/index.html.

Fannie Mae priced its fourth credit risk transfer transaction of the year, Connecticut Avenue Securities (CAS) Series 2019-R04, a $1 billion note offering that represents Fannie Mae’s latest CAS REMIC transaction. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. Fannie will return to market this month with CAS 2019-R05, a low-LTV loan transaction. CAS Series 2019-R04 consisted of nearly 103,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $25 billion. Fannie Mae will retain a portion of the 2M-1, 2M-2, and 2B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 2B-2H first loss tranche. Class 2M-1 is offered at $234.3 million, priced at 1-month LIBOR plus 75 bps, and expected to be rated BBB-sf/BBB+. Class 2M-2 is offered at $538.8 million, priced at 1-month LIBOR plus 210 bps, and expected to be rated Bsf/BB. Class 2B-1 is offered at $257.7 million, priced at 1-month LIBOR plus 525 bps, and will not be rated. With the completion of this transaction, Fannie Mae will have brought 34 CAS deals to market, issued $40 billion in notes, and transferred a portion of the credit risk to private investors on more than $1.2 trillion in single-family mortgage loans, measured at the time of the transaction.

Fannie Mae priced its fourth credit risk transfer transaction of the year, Connecticut Avenue Securities (CAS) Series 2019-R04, a $1 billion note offering that represents Fannie Mae’s latest CAS REMIC transaction. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. Fannie will return to market this month with CAS 2019-R05, a low-LTV loan transaction. CAS Series 2019-R04 consisted of nearly 103,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $25 billion. Fannie Mae will retain a portion of the 2M-1, 2M-2, and 2B-1 tranches in order to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 2B-2H first loss tranche. Class 2M-1 is offered at $234.3 million, priced at 1-month LIBOR plus 75 bps, and expected to be rated BBB-sf/BBB+. Class 2M-2 is offered at $538.8 million, priced at 1-month LIBOR plus 210 bps, and expected to be rated Bsf/BB. Class 2B-1 is offered at $257.7 million, priced at 1-month LIBOR plus 525 bps, and will not be rated. With the completion of this transaction, Fannie Mae will have brought 34 CAS deals to market, issued $40 billion in notes, and transferred a portion of the credit risk to private investors on more than $1.2 trillion in single-family mortgage loans, measured at the time of the transaction.

On May 14, Fannie announced the results of its eleventh reperforming loan sale transaction, which included the sale of approximately 21,200 loans totaling $3.27 billion in unpaid principal balance, divided into four pools. The winning bidder of the four pools for the transaction, which is expected to close on June 21, 2019, was DLJ Mortgage Capital, Inc. The loan pools awarded in this most recent transaction include: Group 1 Pool: 2,808 loans with an aggregate unpaid principal balance of $562,968,352; average loan size $200,487; weighted average note rate 3.90%; weighted average broker’s price opinion (BPO) loan-to-value ratio of 71%. Group 2 Pool: 6,837 loans with an aggregate unpaid principal balance of $988,152,544; average loan size $144,530; weighted average note rate 4.86%; weighted BPO loan-to-value ratio of 77%. Group 3 Pool: 6,954 loans with an aggregate unpaid principal balance of $992,818,709; average loan size $142,769; weighted average note rate 4.85%; weighted average BPO loan-to-value ratio of 75%. Group 4 Pool: 4,620 loans with an aggregate unpaid principal balance of $730,740,732; average loan size $158,169; weighted average note rate 4.53%; weighted average BPO loan-to-value ratio of 82%. The cover bid, which is the second highest bid, was 92.80% of UPB (59.15% of BPO) for the total of the four pools which were purchased on an all-or-none basis. Bidders interested in future sales of Fannie Mae non-performing and reperforming loans can register for ongoing announcements, training, and other information at http://www.fanniemae.com/portal/funding-the-market/npl/index.html.

A woman who had been married three times walked into a bridal shop and told the salesclerk that she was looking for a wedding gown for her fourth wedding.

“Of course, madam, “replied the salesclerk, “exactly what type and color dress are you looking for?”

The bride-to-be said, “A long frilly white dress with a veil.”

“Please don’t take this the wrong way, madam, but such dresses are usually more fitting for the first-time bride who is more innocent in the ways of life, if you get my meaning.”

“WELL!” replied the customer, a little peeved at the clerk’s directness, “I can assure you that a white gown would be quite appropriate. Believe it or not, despite all my marriages, I remain as innocent as a first-time bride. You see, my first husband was so excited about our wedding, he had a heart attack due to an unknown congenital condition as we were checking into our honeymoon hotel.”

She continued. “My second husband and I got into such a terrible fight in the limo on our way to our honeymoon hotel that we had that wedding annulled immediately and never spoke to each other again.”

“What about your third husband?”

“That one was a Democrat”, said the woman, “and every night for four years, he just sat on the edge of the bed and told me how good it was going to be, but nothing ever happened.”

(Before anyone whines about political jokes, it is easy to sub out Republican for Democrat. Feel free to do that.)

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, “Residential Lending, Banks, and Market Share.” 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.

Rob

(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