May 18: CFO job; personnel movements; F&F and investor updates continue; what if Fed tweaked its balance sheet?

The last seven days has involved a little travel for me: Oregon, Incline Village in Nevada, and now Manhattan for the MBA’s Secondary Marketing Conference. Besides the news that toy store FAO Schwarz will shut its iconic Fifth Ave. flagship store (remember Tom Hanks’ “Big”?) – probably due to rents averaging $3,500 per square foot in the area – the chatter at the conference revolves around something good. The FHFA released its Progress Report on the development of the single GSE security. This update details the progress made since FHFA requested comment on the effort last year. As a reminder, the goal of the single security project is to increase secondary market liquidity by allowing the GSE securities to be fungible for purposes of TBA delivery. The WSJ told us that Fannie & Freddie are on track to issue a single bond. Hopefully a single mortgage-backed security (versus F&F issuing separate bonds as they have always done) by both firms could reduce homeowners’ borrowing costs.


Network Funding a nationwide mortgage company headquartered in Houston, Texas is looking for an experienced Chief Financial OfficerNetwork Funding is a 17 year old privately held company approved by Ginnie, Fannie, and Freddie, and is currently licensed to do business in 32 states. Network Funding is a 100% retail lender and last year originated approximately $1.5 billion with $1.1 billion in agency servicing business, “so our ideal candidate would have some experience with agency loan servicing. In addition to having a proven track record of professional success it is important for this candidate to have achieved this success with integrity and a spirit of teamwork.  If you have an interest in exploring this opportunity with one of the nation’s top privately held mortgage lenders please confidentially contact Gary Davis (281-832-0433).


Non-prime/non-QM investor Verus Mortgage Capital (backed by alternative investment manager Invictus Capital Partners) announced the addition of Jeff Schaefer as Executive Vice President, Head of National Sales, and Joel Veenstra & Andy Wideman each serving as Vice President of Correspondent Sales.


Congratulations to two mortgage veterans, Len Patton and Tricia Fox, who have joined the sales team of Capital Markets Cooperative. Len came over from PHH Correspondent and Tricia from Peoples Home Equity of the TPO division. CMC’s National Sales Manager, Richard Dybel, observed, “Tricia and Len are critical additions to support this rapid growth and will be responsible for managing and continuing to build the Patron network by promoting CMC’s services including our cooperative services, risk management solutions,  and the purchase of MSRs through our co-issue platform.”


Let’s jump into some conventional conforming news from across the biz.


The National Fair Housing Alliance is suing Fannie Mae for racial discrimination in lending. “Fannie Mae fails to perform basic maintenance and marketing tasks for foreclosed homes it owns in African American and Latino neighborhoods, while consistently maintaining its foreclosed properties in white neighborhoods.” Industry vets wonder how much of this is due to the fact that in some places like Toledo OH, Detroit MI, and Camden NJ, there simply isn’t a bid for these properties given their stripped state and unpaid back taxes.


Under the direction of the Federal Housing Finance Agency (FHFA), Fannie Mae has worked jointly with Freddie Mac to create an aligned set of Private Mortgage Insurer Eligibility Requirements (PMIERs) that were issued on April 17, 2015, and will be effective on Dec. 31, 2015. Refer to FHFA’s News Release and Fannie Mae’s Mortgage Insurers page for more information.


Sierra Pacific Mortgage has completed the transition to a direct agency platform for FNMA and FHLMC loan programs.  In addition, Sierra Pacific has released FNMA’s My Community product, the Illinois State Bond products, and added the MCM option to the National Home Buyers Fund and the Golden State Finance Agency conventional loan products.  Sierra Pacific Mortgage also offers Bond Loan Products in 32 states.


Fannie Mae’s Collateral Underwriter (CU) web-based user interface is now available to non-seller correspondent lenders. CU’s user interface allows lenders to perform in-depth analysis of an appraisal using CU’s dynamic web-based interface that includes comparable sales data, market trends, mapping, aerial photography, public records, and other functionality. Details are available in the CU Non-Seller Implementation Guide.


In response to the Federal Housing Finance Agency (FHFA) announcement on 4/17/2015 regarding FHFA’s comprehensive review of guarantee fees charged by Fannie Mae and Freddie Mac, Citi Correspondent Lending will now itemize the Adverse Market Delivery Fee by splitting out the fee as a separate price adjuster effective for Loans locked on and after May 1, 2015. Additional communications will follow as the FHFA policy effective date of 9/1/2015 ensues.


The latest updates from M&T Bank includes its FHA Underwriting & Eligibility Standards guide to include clarifications, additions, and corrections effective for loans registered with M&T on or after April 15, 2015.  Some of the changes have been previously announced through Bulletins, which are being incorporated into the parent guide. The new version will be posted to the appropriate Info Center for review.  This edit to the FHA UES guide does not take into consideration any of the forthcoming changes to FHA Underwriting that will go into effect on June 15, 2015.  Those changes will be announced separately at a later time. The FHLMC Super Conforming product pages have been updated to match FNMA High Balance.   Effective April 1, 2015, M&T has updated the following two forms in our MEME online library: Form 5002 “Correspondent Loan Submission Checklist,” and Form 8002 “Correspondent FHA Streamline Refinance Checklist.


Regarding the note above, for those who didn’t see it the first time around, per the direction of the Federal Housing Finance Agency, Fannie Mae is advising lenders that certain loan-level price adjustments (LLPAs) are being changed. In addition, the Adverse Market Delivery Charge is being discontinued. These pricing changes will be applied to whole loans purchased on or after Sep. 1, 2015, or loans delivered into MBS pools with issue dates on or after Sep. 1 (including DU Refi Plus™ and Refi Plus™ loans). The details of the pricing adjustments are available in the Loan-Level Price Adjustment (LLPA) Matrix and the Refi Plus™ Loan-Level Price Adjustment (LLPA) Matrix, both of which are posted on Fannie Mae’s website.


Fannie Mae has updated numerous miscellaneous servicing policy changes. These changes are related to processing additional principal payments for delinquent mortgage loans, accepting funds from Hardest-Hit Fund (HHF) Programs and Housing Finance Agencies (HFAs), and for accepting a partial reinstatement during foreclosure.


Due to The Federal Housing Finance Agency one-year extension of the Home Affordable Refinance Program (HARP), now set to expire on Dec. 31, 2016; Fannie Mae is notifying lenders that DU Refi Plus™ and Refi Plus™ have been extended until Dec. 31, 2016. This applies only to mortgage loans with application dates on or before Dec. 31, 2016, and whole loans that are purchased by Fannie Mae no later than Sep. 30, 2017, or in an MBS pool with an issue date no later than Sep. 1, 2017. Read all about it in the Announcement regarding extension of Fannie Mae’s DU Refi Plus and Refi Plus.


Federal Housing Finance Agency (FHFA) has directed Freddie Mac and Fannie Mae to make changes to its post settlement delivery fees. These changes are effective with Freddie Mac settlement dates on or after September 1, 2015. Review Guide Bulletin 2015-6 for complete details on all these changes, including copies of the impacted grids of Exhibit 19, Post settlement Deliver Fees, with the changes highlighted.


Effective immediately, NewLeaf Wholesale has updated the Conventional guidelines for NewLeaf 1 and NewLeaf 2 with policy changes and clarifications. These changes impact both Conforming and High Balance product guidelines. Updates include: information regarding future employment, restructured/modified mortgages, revolving accounts, student loans and condos in Florida.


A couple weeks ago Freddie Mac posted Bulletin 2015-5 updating servicing requirements and implementation of a new initiative that involves its purchasing mortgages from certain Seller/Servicers and transferring them to one or more Senior Subordinate Trusts.


From a 30,000 foot view, back in February Bloomberg had a good piece on Mel Watt and the issues surrounding principal mods for Fan and Fred loans. The biggest question remains: how can you help underwater homeowners without triggering a wave of strategic defaults? 85% – 90% of people whose mortgage is underwater are current on their payments. The last thing you want to do is encourage them to stop paying in order to get a principal mod. Luckily, time has been doing the heavy lifting here, as the number of homes with negative equity has fallen from 31% in 2012 to just about 17% today. Second, many of those homes are not Fan and Fred loans in the first place, and FHFA is only looking at cutting principal on Fan and Fred loans that it owns. The FHFA Home Price Index, which tracks the prices of homes with a conforming mortgage, is within 5% of the peak.


I’m in New York for much of this week, and some of the conversation is about the Federal Reserve working on plans to ease the market into their balance sheet reduction as $500 billion in bonds ($200 billion in Treasuries and $300 billion in MBS) are scheduled to expire next year and potentially disrupt the markets. While QE came to a close, the Fed is still buying mortgage and Treasury bonds to replenish their $4.5 trillion portfolio as call options (people prepay) are exercised. The Fed has been vocal about not rushing to shrink the portfolio and also want to continue reinvestments versus simply allowing a run off through maturity or prepayment. The general consensus amongst the Fed committee is give investors time to acclimate to a higher rate environment before making any meaningful reduction to the balance sheet. Wall Street traders expect the portfolio to begin shrinking in a controlled rate of decline about six months after the first rate hike. Policymakers could delay out of fear that the economy might stall. If you’ve made it this far, you’re probably wondering why this is as important as liftoff from ZLB. The Fed is a huge participant in the bond market with about a third of the market share and has helped make it cheap for Americans to take on mortgages. If the Fed were to quickly exit reinvestments and fall off the bond “cliff”, we’d see a serious spreads blowing out on MBS and mortgage rates would rise sharply.


Keeping on with the markets, think back to Friday…. The news did not lend itself to thinking that the economy is going gangbusters. Industrial Production fell for the 5th straight month. (Weak global demand, stronger dollar, lower oil prices continue to limit output.) The NY Fed’s Empire Manufacturing number showed that May’s business conditions were only slightly better over the month. The University of Michigan’s confidence number fell (consumers became increasingly convinced that there would be no quick and robust rebound following the dismal 1st quarter). And sure enough, bond prices have been improving and rates have been slinking back down.


Having a thousand or so folks who set rates and prices for every conceivably sized lender, and associated vendors and senior management, all gathered in once place always makes for interesting rate sheets back home. Certainly the economic news doesn’t stand still, and we have a bunch of it this week. Tomorrow is the Housing Starts and Building Permits duo. Wednesday is the Fed’s release of its minutes from the late April meeting. Thursday the 21st are the Chicago Fed Nat Activity Index, Initial Jobless Claims, Philadelphia Fed Business Outlook, Existing Home Sales, and Leading Economic Indicators. Friday, if anyone cares about inflation is the Consumer Price Index.


We closed the 10-yr at a yield of 2.14% on Friday and in the early going we’re at 2.17% with agency MBS prices worse about .125.



(Yes, an oldie but might be of interest.)

Once in a land far, far away there lived a group of people called Trids. The Trids were happy except for the huge ogre that lived on the mountain. The ogre would periodically terrorize the Trids.

The Trids tired of the ogre and sought to reason with him. They thought one of their religious leaders would be a good intermediary. So a group of Trids and their minister went up the mountain and before they could even say one word the ogre kicked them down the mountain. Not being dismayed the Trids thought that maybe the ogre was Catholic, so they sent another delegation, this time led by the local priest. But alas, as they approached the ogre he once again kicked them all down the mountain.

The Trids were upset until they thought that perhaps the ogre was Jewish. Unfortunately, no Trids were Jewish, so they wrote to the people of another land and asked them to send a Rabbi to help them with the ogre. The Rabbi arrived and led a delegation of Trids up the mountain. The ogre saw them coming and kicked all of them, except for the Rabbi, down the mountain. The Rabbi, having been told of the previous expeditions, wondered why he alone had not been kicked down the mountain, so he asked the ogre. The ogre laughed and replied:

“Silly Rabbi, kicks are for Trids!”





(Copyright 2015 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