Sep. 19: Out-of-the-ordinary secondary market deals; primer on help for borrowers from HFAs; Saturday Spotlight: Truework
This week the lack of volatility in the bond market, and thus Agency mortgage rates, was made up for in other news. Lee Farkas was released from prison. As a reminder for anyone who has been in the business less than nine years, Farkas was sentenced to 30 years in prison in 2011 and ordered to pay $38.5 million for his role in a $2.9 billion scam that led to the collapse of both Taylor Bean & Whitaker and Alabama’s Colonial bank. TBW was one of the largest privately held mortgage lenders in the U.S., and Colonial was one of the 25 largest banks in the country. Virginia’s U.S. District Court Judge Leonie Brinkema, who tried him in 2011, cited Farkas’ age, health, and an outbreak of COVID-19 at the prison where he was confined as reasons for his release. I want his lawyer if something ever happens to me! And we have the death of Supreme Court Justice Ruth Bader Ginsberg. She indeed had a life “well lived” as they say. What happens now will occupy the press and the nation. After the death of Justice Antonin Scalia in February 2016, 9 months before the election, Senator Mitch McConnell famously refused to hold confirmation proceedings for then-President Barack Obama’s Supreme Court nominee Merrick Garland. “The American people should have a voice in the selection of their next Supreme Court Justice. Therefore, this vacancy should not be filled until we have a new president,” McConnell said at the time. Meanwhile, lenders keep on doing what they’re doing: helping millions of borrowers!
Saturday Company Spotlight
This week we highlight Truework, which “Gives employees control over employment, income, and other identity data.”
In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth). Truework was founded in 2017 in San Francisco with the idea that there needed to be a faster and more way for lenders to verify income and employment. More than 40,000 lenders, background check companies, landlords and other verifiers, as well as 150 enterprise companies and 20,000 small businesses, trust Truework as their employee and income verification platform of choice. By the end of 2020, Truework’s employer network will include over 26 million employees ranging from small and medium businesses to enterprise companies.
Tell us how your company maintains its culture in the office, or in a work-from-home environment if applicable. At Truework, our people are the cornerstone of our company. We believe that only by prioritizing our team members and company culture can we truly create a great product. Since shelter-in-place orders took effect in March, we’ve maintained our incredible culture through virtual off-sites such as wine tastings and woodworking where teams can get together and bond. We’ve also been hosting company-wide lunch-and-learns that range from anything from virtual tours of a local farm, to magic shows.
We’ve also begun virtual “donut” meetups, where a generator randomly pairs two team members together from different parts of the organization to meet up virtually that week. This is done with the purpose that even as our entire company works from home, getting to know other members of the team is still high priority. Furthermore, as we rapidly scale—we want to ensure that all new employees at the company are able to experience camaraderie and the Truework culture.
Things you are most proud of that don’t have to do with sales. In the midst of truly unprecedented times, we’ve been able to see the impact that our technology has had in ensuring that healthcare workers are quickly staffed and deployed to the frontlines of battling COVID-19.
Earlier this year we partnered with Trusted, a nurse staffing platform to help them verify important information about each nurse, such as verified employment history, work credentials, and criminal history. We saw that with Truework’s technology, tens of thousands of nurses were able to be verified in an average time of 22 hours and subsequently staffed, providing a critical need in the hardest-hit areas throughout the US.
Trusted’s head of marketplace, Amanda Maxedon, had this to say: “Nurses are the backbone of our healthcare system and have played a key role in the fight against COVID-19. Being able to ensure the privacy of their data while also helping to speed up the hiring process is not only a win for the nurses involved, but also ensures that everyone is able to get the care they deserve.”
Fun fact about Truework. Our team has grown rapidly and continues to grow. Since May of 2020, we have nearly doubled our team from 50 employees to 91 as of September.
(For more information on having your firm and its charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
Down payment help
Many MLOs and organizations know about, and understand, state-level housing finance agencies (HFAs). And there’s the National Council of State Housing Agencies (NCSHA), which advocates on behalf of all HFAs. But I continue to receive questions about resources and programs. So I turned to Stockton Williams, NCSHA’s executive director.
“Even in the midst of COVID-19, state housing finance agencies’ homeownership programs are running strong. Many HFAs have told us that their production is up substantially over last year, and some have seen record levels of volume in recent months. A large majority of this business isn’t refinancings, but home purchase loans to help low- and moderate-income borrowers realize the dream of homeownership.
“HFAs’ competitive products, including down payment assistance that can be paired with FHA, USDA, Fannie, and Freddie loans, offer affordable and sustainable paths to homeownership for responsible borrowers who may not otherwise be able to afford a mortgage. They have traditionally outperformed the market in shares of loans that go to minority borrowers and are constantly exploring new ways to address the specific housing needs of other underserved populations and communities.
“In addition, those lenders and servicers who have borrowers struggling to keep up with their mortgage payments due to a COVID-19-related hardship should be advised that many HFAs have established mortgage assistance programs to help struggling homeowners avoid foreclosure during these trying times. Some HFAs have received state and/or federal funding to support these efforts. Other HFAs quickly reopened dormant mortgage assistance programs from a federal program, the Hardest Hit Fund, that they administered in response to the financial crisis. Your readers can learn more about these initiatives with NCSHA’s matrix of state HFA emergency rental and housing assistance programs. The matrix includes links with more detailed information on each program.”
Secondary market tidbits
The vast majority of mortgage deals in the secondary market involve either hedging with TBA (to be announced, generic, unspecified) securities, Agency mortgage backed securities filled with loans with defined characteristics, or CRTs (credit risk transfers). Let’s take a look at some other, less generic securities that may be of interest, as they too help determine demand and therefore supply.
In late July Fannie Mae announced that it issued a Single-Family Green Mortgage-Backed Security (MBS) transactions under its Green Bond Program as part of the company’s ongoing commitment to be a leader in green finance. Fannie Mae’s Single-Family Green MBS program recently received a Light Green Second Opinion from CICERO Shades of Green, an independent leading global provider of green ratings for bonds. Fannie Mae has issued over $40 million in Single-Family Green MBS since the first bond was issued on April 22, 2020 to commemorate the 50th anniversary of Earth Day. Fannie Mae Single-Family Green MBS transactions include only mortgage loans backed by newly constructed single-family residential homes with ENERGY STAR certifications that meet or exceed the national program requirements for ENERGY STAR Certified Homes. On average, these homes are 20% more efficient than single-family homes built to code. In addition to these transactions, Fannie Mae has issued $75 billion of Multifamily Green MBS since 2010 backed by either green-certified properties or properties targeting a reduction in energy or water consumption. For details regarding the Single-Family Green MBS program, visit www.fanniemae.com/GreenMBS.
That Green Bond Program announcement came after Fannie Mae published its second annual Multifamily Green Bond Impact Report at the end of June to provide metrics on the projected financial, social, and environmental benefits from Fannie Mae Green Bonds for U.S. housing. As the largest green bond issuer in the world, Fannie Mae issued $22.8 billion in multifamily green mortgage-backed securities in 2019, comprising 32 percent of the company’s total multifamily issuances. Fannie Mae’s Multifamily Green Bond Impact Report shows that in the first 10 years of the program, 770,000 units have been retrofitted or green-building certified. Each dollar invested is projected to generate $2.99 in economic output. Newly constructed or retrofitted green multifamily buildings are estimated to have contributed $7.6 billion in workers’ income and $15.6 billion to U.S. GDP and supported 180,000 jobs. As a result of Fannie Mae Green Bond-financing, properties are projected to reduce water use by 7.7 billion gallons, greenhouse gas emissions by 528,000 metric tons, and source energy by 7.8 billion kBTU. The Green Financing Business supports the multifamily housing market by incentivizing property owners to make energy- and water-saving improvements and by supporting properties with a Green Building Certification. Selling green bonds into the broader capital markets helps accelerate the transition to a low-carbon economy and a greener housing supply.
New York-based Hunt Real Estate Capital provided three Fannie Mae conventional loans totaling $24.2 million for manufactured housing communities (MHCs) in the greater Phoenix area. The three properties contain 519 units and are four-star parks made for single- and double-wide homes and RV rental spaces restricted to tenants 55 and older. The three loans were limited to Tier 4 underwriting standards (1.55 debt service coverage and 55 percent loan-to-value) and all carry 15-year, interest-only terms. This refinance lowered the rate significantly and provided cash out to the borrower while retaining reliable, long-term cash flow.
On September 8, Freddie Mac announced a $534 Million non-performing loan (NPL) sale, comprised of seasoned non-performing residential first lien loans held in Freddie Mac’s mortgage-related investments portfolio. The NPLs are being marketed via five pools: four Standard Pool Offerings (SPO) and one Extended Timeline Pool Offering (EXPO), which targets participation by smaller investors, including non-profits and Minority, Women, Disabled, LGBT, Veteran or Service-Disabled Veteran-Owned Businesses. Bids are due from qualified bidders by October 1, 2020 for the SPO pools, and October 15, 2020 for the EXPO pool. The SPO and EXPO pools are expected to settle in December 2020. All eligible bidders, including private investors, MWDOBs, nonprofits and neighborhood advocacy organizations are encouraged to bid. To participate, all potential bidders must be approved by Freddie Mac and successfully complete a qualification package to access the secure data room containing information about the NPLs and to bid on the NPL pool(s). The bids are to be made on an all-or-none basis for any pool separately or for any combination of SPO pools together. The winning bidder will be determined on the basis of the economics of the bids, subject to meeting Freddie Mac’s internal reserve levels, at Freddie Mac’s sole discretion. The NPLs are currently serviced by Specialized Loan Servicing LLC.
Earlier this year Freddie Mac announced pricing on the $376 million multifamily mortgage-backed SB74 offering, a securitization backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust. The SB74 Certificates are expected to settle on or about May 29. Freddie Mac Small Balance Loans generally range from $1 million to $7.5 million and are generally backed by properties with five or more units. This is the fifth SB Certificate transaction in 2020. Pricing for the deal is as follows. Class A-5F has principal of $71.417 million, a weighted average life of 4.05 years, a 1.00 percent coupon, a 0.8668 percent yield, and a $100.4682 price. Class A-5H has principal of $116.777 million, a weighted average life of 4.15 years, a 1.17 percent coupon, a 1.0334 percent yield, and a $100.4850 price. Class A-7H has principal of $75.277 million, a weighted average life of 5.47 years, a 1.32 percent coupon, a 1.2162 percent yield, and a $100.4752 price. Class A-10F has principal of $113.436 million, a weighted average life of 7.26 years, a 1.38 percent coupon, a 1.2995 percent yield, and a $100.4845 price. This securitization is intended to aid Freddie Mac in continuing to provide liquidity to smaller apartment properties.
(Instead of the usual joke, trivia, or animal video, here is a test that KW sent along.)
Both the office and, more broadly, life entail lots of interactions with people you’re not quite sure about. Maybe they’re fun in some settings but not in others; maybe they have moments of brilliant talent mixed with astounding incompetence.
If you want to really evaluate how you feel about someone, give them the “Two Beers and a Puppy” test. The test is: In order to find out how you actually feel about someone, ask yourself, “Would I have two beers with this person?” And “Would I allow this person to look after my puppy over a weekend?”
There’s the “no and no” people. Those are to be avoided at all costs.
Some people are “yes and no,” or “no and yes.” These people are to cautiously trusted, or time spent. These people are no fun but they make the word a better place – for puppies, especially. Yes-beer, no-puppy people “are to be cautiously trusted. No-beer, yes-puppy people “are no fun but they make the world a better place. For puppies, especially.”
Some people are yes and yes, and those are the best people in your life. Hopefully, you were raised by people like that, or are your friends. Your life and work are better for having them in your life. Seek them out. Collaborate with them. Enjoy their company.
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 Agency Finance Fee: Delayed but not Forgotten.”
(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.)