With the dramatic increase of COVID-19 cases in the United States and the world, and returning to captivity at home, it is never too early to start working on that bathing suit body for… 2021. Sure you’ve proved you can work from home. Productivity has gone way up, arguably because there isn’t much else to do besides work. LOs and AEs and other salespeople have been doing that for decades. But what about office culture, or encouraging innovation? How does management make it different working from home as an underwriter for Quicken Loans, United Wholesale, Freedom, Fairway Independent, Bay Equity, U.S. Bank, Caliber, or whoever? Companies are trying online plank-holding contests, daily chats from senior management, virtual co-worker happy hours, walk and talk Zoom meetings, guided meditation, and other things in an effort to build brand loyalty. And where do ideas come from, when in the past they came from chatting informally at lunch, passing by a co-worker’s desk, or on the way to the car at the end of the day? It is easy to argue that innovation is impossible to schedule for a WebEx call. But companies are trying. And executive coaching services are focused on boosting remote morale.
Saturday Company Spotlight
This week we highlight Mortgage Sentinel’s focus on the founding, growth, employee mentoring in a work from home environment, entrepreneurship and charity work, and spoke to Jim Paolino (CEO of LodeStar Software Solutions, a partner in Mortgage Sentinel).
In 3-5 sentences, describe Mortgage Sentinel (when was it founded and why, what it does, where, recent growth, and plans for near-term future growth). The company was founded in Philadelphia in 2020, and provides QA services to the mortgage industry that feature “secret shopping” techniques. This is a first of its kind service for mortgage lenders and helps originators gain insight into the interactions their team has with borrowers. We can help improve the overall sales performance while helping to ensure lenders are compliant with consumer-focused guidelines and regulations.
Mortgage Sentinel is a partnership between two industry leaders: LodeStar Software Solutions specializes in web-based compliance tools for the mortgage and title insurance industries, and RDAssociates, Inc. a competitive intelligence, market research and business development firm. They are experts in quality assurance and regulatory compliance research techniques.
Tell us about company culture and what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why. Because we are a newer brand, we are still building our corporate culture, which includes the charities we will support most. But both the founding companies have a history of helping various not-for-profit organizations in Philadelphia, including Philabundance, the area’s largest hunger relief organization.
What things you are most proud of that don’t have to do with sales? Mortgage Sentinel is founded on the ideals of bringing equality and transparency in the mortgage industry. By the nature of its service, Mortgage Sentinel helps mortgage originators ensure that all borrowers are being treated fairly regardless of their demographic or overall circumstances. Given the biases that exist in society at large, it is imperative that all organizations take a look at how they treat their customers. Mortgage Sentinel is in a unique position to assist with this process.
What does Mortgage Sentinel hope to achieve in the next five years? We founded Mortgage Sentinel on the concept that we, as an industry, can do even better in playing our part to ensure fairness and equality in the greater economy. We are also disappointed when we see companies being notified of violations at the point of borrower/originator contact (e.g. loan officers, account executives) for the first time by way of violation and penalty. We feel it’s nearly impossible to truly track or monitor what a company’s borrower-focused employees are doing at all times, and that there needs to be a proactive way to catch violations, many of which may be unintentional or the result of inadequate training (or even inadequate guidance by the regulating agency), and correct them before that firm needs to be penalized. Mortgage Sentinel is our vision for providing just that.
(For more information on having your firm featured, contact Chrisman LLC’s Anjelica Nixt.)
Borrower’s rates helped by the capital markets
The Agencies (aka Freddie and Fannie) continue to help that process in both the primary and secondary markets, hoping to achieve competitive pricing in the secondary market while limiting risks borne by taxpayers. 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.
These deals involve sharing part of the credit risk with third party investors – for a price. 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! Let’s see what Fannie has been up to lately.
First a walk down Memory Lane. Fannie Mae’s Capital Markets team provided a very well-written recap of recent MBS liquidity in the market. Daily origination volumes, which averaged $3.9 billion in the first two months of the year, doubled to $7.8 billion in the first two weeks of March. Volumes peaked to 2.36 times the yearly average a week ago (Tuesday), when the market was forced to digest $13.1 billion in mortgage supply. With the 10-year Treasury rallying to an all-time low of .36 percent last Wednesday, lenders have been challenged by capacity constraints. Limited demand for TBAs caused mortgage spreads to widen to levels not witnessed since the 2008 financial crisis, and large pickups in production over this month have caused specified pool pay-ups to fall dramatically since the March Class A settlement. Volatility has been the main hamper on MBS liquidity, with no end in sight. Bid-Ask spreads on TBA prices remain significantly wider than screens currently reflect, making it extremely difficult for the desk to execute TBA trades as pockets of liquidity have been rapidly disappear. Fannie experienced regular covers that were several ticks behind the winning levels, and liquidity became scarce enough that subsequent trades were met with even wider cover levels. Going forward, finding liquidity will continue to be challenging and Bid/Offers will likely continue to trade in a volatile range as dollar prices reflect the current state of the market’s depth.
On June 10, Fannie Mae priced FNA 2020-M29, its sixth Multifamily DUS REMIC in 2020 totaling $719.5 million under its Fannie Mae Guaranteed Multifamily Structures program. All classes of FNA 2020-M29 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal. The structure details for the multi-tranche offering are as follows. Class A1 has an original face of $90,800,000, a weighted average life of 5.79 years, a fixed coupon of 0.946 percent, and an offered price of 100 with a S+46 spread. Class A2 has an original face of $513,729,819, a weighted average life of 9.86 years, a fixed/AFC coupon of1.492 percent, and an offered price of 102 with a S+51 spread. Class 2A3 (I think that is Elon Musk’s baby’s nickname) has an original face of $115,000,000, a weighted average life of 9.79 years, a fixed coupon of 1.449 percent, and an offered price of 102 with an S+47 spread.
Earlier in the year Fannie Mae priced its second Multifamily DUS REMIC in 2020 totaling $1.03 billion under its Fannie Mae Guaranteed Multifamily Structures (GeMS) program. In addition to the traditional 10-year fixed-rate collateral, the February M5 deal offered a floating-rate execution off of an ARM with a LIBOR-based floater and an embedded 6 percent cap on the pass-through rate. Fannie will now work to develop a SOFR-based variable-rate product. All classes of FNA 2020-M5 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal. The $219.4 million Group 1 is comprised of 35 Fannie Mae DUS MBS based primarily in Texas (41.8 percent), Illinois (10.5 percent) and Indiana (9.6 percent) with a weighted average debt service coverage ratio of 1.47x and a weighted average LTV of 69.1 percent. Group 2 is comprised of $817.7 million in UPB across 69 Fannie Mae DUS MBS, primarily in Texas (14.6 percent), Virginia (13.5 percent) and Georgia (9.6 percent), with a weighted average DSCR of 1.50x and a weighted average LTV of 67.4 percent. For additional information, please refer to the Fannie Mae GeMS REMIC Term Sheet (FNA 2020-M5) available on the Fannie Mae GeMS Archive page.
And Fannie Mae priced its fourth Multifamily DUS REMIC in 2020 totaling $1.07 billion under its Fannie Mae Guaranteed Multifamily Structures (GeMS). Per Fannie Mae, the M14 deal captures the appeal of conservatively underwritten, Fannie Mae multifamily collateral in the face of recent volatility. Fannie Mae remains committed to transparent disclosure for investors in navigating the challenges of the current commercial real estate market. Group 1 collateral consists of $624.528 million in UPB across 43 Fannie Mae DUS MBS, primary geographic distribution in CA (34.07 percent), NC (13.86 percent), and WA (10.54 percent), with a weighted average debt service coverage ratio (DSCR) of 1.87x and a 64.5 percent LTV. Group 2 collateral consists of $448.329 million in UPB across 70 DUS MBS with primary geographic distribution in VA (12.00 percent), NY (11.39 percent), and FL (11.03 percent), with a weighted average DSCR of 1.33x and a weighted average 73.1 percent LTV. All classes of FNA 2020-M14 are guaranteed by Fannie Mae with respect to the full and timely payment of interest and principal.
Fannie Mae announced the completion of its first multi-tranche Multifamily Credit Insurance Risk Transfer (MCIRT 2020-01) transaction of 2020 covering a pool of approximately $8.7 billion of existing multifamily loans in the company’s portfolio. The covered loan pool for the transaction consists of 1,017 loans acquired by Fannie Mae from July 2019 through September 2019. These loans are secured by 1,019 properties. Each loan has an unpaid principal balance of less than $30 million. With MCIRT 2020-01, which became effective February 1, 2020, Fannie Mae will retain risk on the first 75 bps of losses on the reference pool. The C tranche will transfer risk to reinsurers covering losses between 75 bps and 150 bps. The B tranche will transfer risk to reinsurers covering losses between 150 and 275 bps. The A tranche will transfer risk to reinsurers covering losses between 275 and 400 bps. Once the pool has experienced 400 bps of losses, the credit protection will be exhausted and Fannie Mae will be responsible for any further losses. This new transaction is the eighth Multifamily CIRT transaction, and transfers approximately $283 million of risk to reinsurers and insurers as part of Fannie Mae’s ongoing efforts to increase the role of private capital in the multifamily mortgage market. Fannie now expects regular programmatic issuance in the market with one transaction in each quarter. Since 2016, in addition to the risk retained by Fannie’s DUS lender partners, Fannie Mae has transferred a portion of its credit risk on multifamily mortgages with an aggregate unpaid principal balance of more than $80.6 billion through the MCIRT program.
And Fannie Mae announced that it priced its second Multifamily Connecticut Avenue Securities (MCAS 2020-01) transaction as part of the company’s ongoing efforts to expand the types of loans covered and promote the continued growth of the credit risk transfer market. MCAS Series 2020-01 is a $425.6 million note offering that complements Fannie Mae’s Delegated Underwriting and Servicing (DUS) and Multifamily Credit Insurance Risk Transfer (MCIRT) programs. The reference pool for MCAS Series 2020-01 consists of approximately 218 multifamily mortgage loans with an outstanding unpaid principal balance of approximately $12 billion. The reference pool includes first-lien multifamily loans underwritten according to Fannie Mae’s standards and acquired by Fannie Mae from January 1, 2019, through June 30, 2019. The loans included in this transaction are a combination of fixed-rate and adjustable-rate multifamily mortgages with unpaid principal balances equal to or greater than $30 million and that have terms less than or equal to 12 years, in addition to other select eligibility requirements. Pricing for the three offered classes is as follows. Class M-7 has an offered amount of $43.2 million, expected initial credit support of 4.793 percent, and is priced at 1-month LIBOR plus 195 bps. Class M-10 has an offered amount of $339.8 million, expected initial credit support of 1.200 percent, and a pricing level of 1-month LIBOR plus 375 bps. Finally, Class C-E has an offered amount of $42.5 million, expected initial credit support of 0.750 percent, and a pricing level of 1-month LIBOR plus 750 bps.
(Thank you to Rhonda M. for this one.)
“I’m from the Gumamint and I’m gonna help you!” Here is an amusing story, as well as a reply to an over-reaching bureaucracy that seldom sees itself on the other end of its ridiculous regulations.
The State of Oregon Department of Fish and Wildlife sent a letter to a home/landowner asking for permission to access a creek on his property to document the decline in a certain species of unheard-of frogs. The property owners’ response in the second letter is worth the read.
Original Letter from Oregon Dept. of Fish & Wildlife:
ODFW Staff will be conducting surveys for foothill yellow-legged frogs & other amphibians over the next few months. As part of this research we would like to survey the creek on your property. I am writing this letter to request your permission to access your property.
Recent research indicates that foothill yellow-legged frogs have declined significantly in recent years and are no longer found at half their historic sites. Your cooperation will be greatly appreciated and will help contribute to the conservation of this important species.
Please fill out the attached postage-paid postcard and let us know if you are willing to let us cross your property or not. If you have any concerns about this project please give us a call. We would love to talk with you about our research.
Conservation Strategy Implementation Biologist
RESPONSE FROM LANDOWNER:
Dear Mr. Niemela:
Thank you for your inquiry regarding accessing our property to survey for the yellow-legged frog. We may be able to help you out with this matter.
We have divided our 2.26 acres into 75 equal survey units with a draw tag for each unit. Application fees are only $8.00 per unit after you purchase the “Frog Survey License” ($120.00 resident / $180.00 Non-Resident). You will also need to obtain a “Frog Habitat” parking permit ($10.00 per vehicle).
You will also need an “Invasive Species” stamp ($15.00 for the first vehicle and $5.00 for each additional vehicle) You will also want to register at the Check Station to have your vehicle inspected for non-native plant life prior to entering our property. There is also a Day Use fee, $5.00 per vehicle.
If you are successful in the Draw you will be notified two weeks in advance so you can make necessary plans and purchase your “Creek Habitat” stamp. ($18.00 Resident / $140.00 Non-Resident).
Survey units open between 8 am and 3 pm. but you cannot commence survey until 9 am. and must cease all survey activity by 1 pm. Survey Gear can only include a net with a 2″ diameter made of 100% organic cotton netting with no longer than an 18-ft handle, non-weighted and no deeper than 6′ from net frame to bottom of net. Handles can only be made of BPA-free plastics or wood.
After 1 pm. you can use a net with a 3″ diameter if you purchase the “Frog Net Endorsement” ($75.00 Resident / $250 Non-Resident). Any frogs captured that are released will need to be released with an approved release device back into the environment unharmed.
As of June 1, we are offering draw tags for our “Premium Survey” units and application is again only $8.00 per application. However, all fees can be waived if you can verify “Native Indian Tribal rights and status”.
You will also need to provide evidence of successful completion of “Frog Surveys and You” comprehensive course on frog identification, safe handling practices, and self-defense strategies for frog attacks. This course is offered on-line through an accredited program for a nominal fee of $750.00.
Please let us know if we can be of assistance to you. Otherwise, we decline your access to our property but appreciate your inquiry.
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, “Knowing a Borrower’s Mind”, focused on operations changes. If you have the 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. This newsletter is designed 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 2020 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.)