Lenders everywhere are watching costs and volumes. Overtime pay has virtually vanished, and efficiency is the name of the game (versus throwing personnel and technology at production bottlenecks). Sure enough, recent MBA application data show declines, and margins are acting as margins always do when production drops. According to FBX | Informa Financial Intelligence, April 2021 mortgage rate-lock volume was up 5 percent year over year but down 9 percent MoM across all channels, while funded volume increased 34% YoY and decreased 15% MoM.) Of course mortgages aren’t the only thing seeing margin and price changes. Prices for wholesale chicken wings are up 26 percent. In January 2020, a pound of jumbo wings were wholesaling for $1.58 per pound, and as recently as last June they were going for $1.46 per pound; now a pound is $2.92! And for another “sign of the times, of the 3,597 store openings announced so far this year by large retail chains, 45 percent of those new locations were from either a Dollar General, a Dollar Tree or a Family Dollar. In general, dollar stores have been expanding rapidly, in part due to widening wealth disparity and a shrinking middle class. According to the Pew Research Center, the percentage of American households considered middle-income fell from 61 percent in 1971 to 51 percent in 2019. Dollar stores are also online shopping-proof, as the customer base they target often lacks access to affordable online retail at that price point.
Saturday Spotlight: ReadyPrice: Mortgage technology for the modern era for lenders and brokers.
In a short statement, describe your company.
Launched in 2020, ReadyPrice’s is a dynamic community, bringing together leading mortgage loan originators (MLOs) and lenders to facilitate a more efficient loan origination process. ReadyPrice enables MLOs to manage and choose pricing, run automated underwriting, and deliver loans to lenders at no cost. For lenders, ReadyPrice provides an efficient way to scale their businesses, ensuring wholesale lending rates are included in every pricing engine search while providing brokers with the easiest path to directly transfer loans in addition to a number of marketing opportunities. ReadyPrice technologies supports pricing for FNMA, FRE, FHA, VA, USDA, VA, and non-agency (non-QM, jumbo, etc.) loan originations.
The system is growing at an unprecedented rate, growing the platform, and investing in new tools to drive efficiency and transparency across the origination process.
In January of this year, ReadyPrice was acquired by SitusAMC, augmenting the system with a broad ecosystem of complimentary technology and services across the life cycle of real estate finance.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
We believe that our company and people have a responsibility to the communities where we work, live and play. Our offices regularly come together to support local charities and volunteer our time. This past year, SitusAMC and associated companies came together to partner with FeedingAmerica to provide 250,000 meals for the hungry.
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?
While our business is largely focused on technology, we believe our success is rooted in the quality of our people. To that end, we’ve established an in-house training department that provides support and training to ensure our people feel empowered to be their best. Additionally, we’ve launched the SitusAMC University, housing tools and resources that our employees can access in real time. We also leverage the many subject matter experts from across the enterprise to provide unique perspectives and insights in the form of webinars, articles, podcasts and more to our own employees, enabling them with the knowledge they need to be better partners for our customers and clients.
Tell us how your company maintains its culture in the office, or in a work-from-home environment if applicable.
While the pandemic has created unique challenges, we believe it’s made us more thoughtful on how we engage our employees and maintain our culture. Given the rapid growth of ReadyPrice and the many acquisitions led by SitusAMC much of the work we do around employee engagement is about bringing our people together and providing transparent views into the enterprise and where we are on our journey. We do this through all employee town halls, updates from leadership, and consistent communications.
Things you are most proud of that don’t have to do with sales.
What makes us most proud is the willingness of our teams to embrace change.
(For more information on having your firm, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
News from the non-lender, servicer, & vendor segment
Two Harbors reported disappointing results, as core EPS came in below estimates due to a 16 percent decline in the company’s investment portfolio and lower TBA dollar roll income relative to expectations. Book value declined 4.4 percent to $7.29. The company took several steps to optimize its balance sheet. The company paid a safe dividend of $0.17 dividend given its low leverage and ample liquidity. GAAP EPS, which included $270 million of net other income, came in at $0.81 driven primarily by a combination of MSR gains offset by derivative losses. As a reminder, the company has outstanding litigation with its former external manager (Pine River) that could result in a book value reduction due to a termination fee. Agency MBS totaled $11.5 billion compared to $14.6 billion in the prior quarter, likely due to elevated prepayment speeds. Mortgage servicing rights totaled $2.1 billion, up from $1.6 billion last quarter. Shares are expected to be weak primarily on the decline in book value.
MGIC reported slightly-better-than-expected earnings primarily driven by credit offset partially by lower net earned premium. New insurance written fell to $30.8 billion, above estimates. Insurance in-force (IIF) grew +9 percent quarter-over-quarter annualized. Book value per share increased to $13.95 as unrealized gains declined offsetting GAAP income. The first quarter loss ratio came in at 15.5 percent, which was down from 17 percent in the fourth, and below estimates. The company used a 7 percent default-to-claim rate on new notices in the first quarter, compared to 7.5 percent last quarter and 9 percent a year ago. While the quarter was largely in-line, the shares were weak today on the big market share movement at peers Radian and NMIH, which raised concerns about price competition.
Radian management noted that the big market share move in the 1st quarter was driven by pricing changes. The company believes that, given the strength in the economy, the mortgage insurance industry has started to give back price increases that were put in place last year. Radian had not yet done so, which likely drove the decline in the company’s share in the first quarter. They expect their share to normalize as industry prices converge. While historically share has shifted in the bulk market, the movement this quarter was in the traditional flow market. The company restarted its share repurchase activity this quarter. Management noted that given its significant holding company liquidity, the ongoing restriction from FHFA on dividends being paid out of the operating company is not a constraint on their share repurchase plans this year.
Essent earnings beat forecasts on a lower loss expense driven by favorable prior period development. KBW reports that New Insurance Written was up 42 percent year-over-year, but that market share declined to 13 percent from 16.7 percent last quarter. Essent announced a $250 million buyback authorization. Higher investment income and other income offset lower net earned premiums. On the expense side, the lower loss provision drove the beat. GAAP book value per share rose to $34.75. PMIERs excess capital dipped to $1.1 billion, a 61 percent cushion, driven by runoff of the ILNs, which reduce minimum required assets. Credit losses and LAE came in better than forecast, driven entirely by favorable prior period development. Essent’s insurance in force had been previously reported and was down 4 percent quarter-over-quarter annualized, but up 19 percent year-over-year.
Black Knight saw revenues ($349.7 million) above consensus $383.3mn, as well as a rosy adjusted EBITDA ($174.0 million). Management raised its 2021 guidance midpoint for adjusted revenues/EBITDA/EPS reflecting the first quarter beat. This is attributable to stronger revenue growth, including 2021 organic revenue growth. Software Solutions revenue (servicing and origination) of $295.8 million grew 20.9 percent year-over-year, which benefited from the recent Optimal Blue acquisition. Data & analytics revenues of $53.9 million grew 16.9 percent year-over-year. Black Knight cited organic revenue growth of 9 percent, the highest since 2016, which includes an estimated 4 percent drag from foreclosure revenues. During the first quarter, BKI repurchased 600,000 common shares for $46.7 million.
SimpleNexus has expanded its eClose solution to support remote online notarization (RON) and in effect, fully digital eClosings. With the addition of RON to SimpleNexus eClose.
In a RON eClosing, or full eClose, all documents are eSigned and electronically notarized by a commissioned remote online notary via webcam. SimpleNexus has partnered with market leading, MISMO RON standard certified remote online notarization provider Notarize to debut RON in its eClose environment. In the future, SimpleNexus will partner with additional RON vendors.
Sales Boomerang expanded its integration combining loan opportunity alerts from Sales Boomerang with the multi-channel marketing that spans phone, text, email, direct mail, social media and website retargeting of Insellerate, the technologies’ seamless API integration enhances every stage of the borrower journey to help lenders increase customer retention and convert more leads to loans.
The National Association of Minority Mortgage Bankers of America (NAMMBA) announced that First American Docutech joined the association as a Gold sponsor. Together, NAMMBA and First American Docutech are focused on affecting positive change in the mortgage industry to better serve minority communities and contribute to the development of a more diverse and knowledgeable mortgage workforce.
Secondary markets: determining primary market rates
Most lenders have moved their adjustable-rate mortgage offerings to CMT (Constant Maturity Treasury) programs. In the secondary markets, the Structured Overnight Financing Rate (SOFR) has come to dominate the deals being done. It is good to remember that investor’s demand, whether they are portfolio lenders or owner of securities backed by mortgages, is the primary driver of the rates borrowers see on rate sheets. No lender with a warehouse line would ever offer a product that it can’t sell at a rate that is unattractive to investors like insurance companies, pension funds, or money managers.
As 2020 wound down and 2021 continued strong, let’s take a snapshot of some of the SOFR deals Freddie Mac was issuing.
We had a new $898 million offering of Structured Pass-Through K Certificates (K-F109 Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The K-F109 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are SOFR-based. The one offered class, Class AS, has a weighted average life of 9.55 years, a coupon comprising the 30-day SOFR average + 24 bps, and a $100.00 price. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds.
Freddie priced a $877 million offering of Structured Pass-Through K Certificates (K-F88 Certificates), which includes a class of floating rate bonds indexed to the SOFR. The K-F88 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based and settled in late October. K-F88 includes one $624.970 million class (Class AL) of senior bonds indexed to LIBOR, which have a coupon of 1-month LIBOR + 33 bps and another $253.000 million class (Class AS) of senior bonds indexed to SOFR, which have a coupon of 30-day SOFR average + 35 bps. Both classes have weighted average lives of 9.46 years and $100.00 prices. Freddie Mac will provide a basis risk guarantee on Class AS that covers any floating interest rate basis risk if the value of SOFR exceeds the value of LIBOR.
In the autumn Freddie priced a new $986 million offering of Structured Pass-Through K Certificates (K-F89 Certificates), which includes a class of floating rate bonds indexed to the SOFR. The K-F89 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based. K-F89 includes one $536.295 million class (Class AL) of senior bonds indexed to LIBOR with a coupon of 1-month LIBOR + 32 bps, and another $450.000 million class (Class AS) of senior bonds indexed to SOFR with a coupon of 30-day SOFR average + 37 bps. Both classes have a weighted average life of 9.48 years and a $100.00 price. Freddie Mac will provide a basis risk guarantee on Class AS that covers any floating interest rate basis risk if the value of SOFR exceeds the value of LIBOR. The K-F89 Certificates are expected to settle on or about October 29, 2020.
And the market priced a new $973 million offering of Structured Pass-Through K Certificates (K-F87 Certificates), which includes a class of floating rate bonds indexed to SOFR. The K-F87 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based. K-F87 includes one $583.256 million class (Class AL) of senior bonds indexed to LIBOR, which have a coupon of 1-month LIBOR + 35 bps, and another $390.000 million class (Class AS) of senior bonds indexed to SOFR, which have a coupon of 30-day average SOFR + 35 bps. Both classes have a weighted average life of 9.48 years, and a $100.000 price. Freddie Mac will provide a basis risk guarantee on Class AS that covers any floating interest rate basis risk if the value of SOFR exceeds the value of LIBOR.
The Detroit Land Bank has been rehabbing long abandoned home in the City of Detroit.
Yesterday one of the crews discovered a four-foot skeleton below the sink while tearing out a kitchen.
The job was stopped, forensics was called in, and, after an exhaustive eight-hour records search, it was concluded the remains were that of little Tommy McKinney, 1958 hide-and-go-seek champion.”
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, “Hiring: New Tactics for a New Day.” 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 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 2021 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.)