Mortgage – HousingWire

CFPB lets mortgage servicers collect on social media, but will they?
Goldman Sachs plants its flag in the jumbo-loan gold rush
Mortgage rates move slowly despite tightening market
Better.com’s CEO apologizes, but the fallout continues
Pension fund withdraws insider trading lawsuit against Dan Gilbert
Mortgage applications are up, on the strength of FHA refis

CFPB lets mortgage servicers collect on social media, but will they?

Posted: 09 Dec 2021 01:35 PM PST

HW-Rohit-Chopra — CFPB Director Rohit Chopra

The new Consumer Financial Protection Bureau (CFPB) debt collection rule allows mortgage servicers to communicate with borrowers on social media, but the compliance risk may outweigh the potential reward.

The CFPB's rule went into effect Nov. 30. The watchdog agency said it would be looking very carefully at how debt collectors use the new means of contacting consumers, including through social media.

“We're not going to tolerate excessive emails, texts, or DMs, and we expect debt collectors to verify consumers' identities as well as the underlying debts,” a spokesperson for the CFPB said. "The debt collection industry is on notice: they must treat consumers with respect, and we are going to enforce the law when we see violations.”

But whether or not the CFPB's new rule applies to mortgage servicers is somewhat of a grey area, although an agency spokesperson said the rule does not specifically exempt the industry.

Its application to mortgage servicers hinges on how the Fair Debt Collection Practices Act defines a “debt collector.” Mortgage servicers are sometimes considered a debt collector under that statute, such as when they service loans on someone else's behalf, as mortgage subservicers do. Mortgage servicers are also typically considered debt collectors if they acquire the mortgage while it is in default.

The CFPB’s new debt rule comes with some major caveats, including limits on how often a debt collector can contact a borrower. Servicers must verify consumers' identities as well as the underlying debts, which poses a challenge on social media.

The communications must also be private, meaning mortgage servicers won't be able to send a public Venmo request for a mortgage payment, or post on the public wall of a borrower's LinkedIn profile page.

Given that social media platforms' privacy policies vary, and few have end-to-end encrypted messages, keeping debt-collection conversations private could also be daunting. Meta, the company formerly known as Facebook, has said end-to-end encryption for its Messenger and Instagram might be available in 2022, at the earliest.

Experts are divided on whether mortgage servicers will take advantage of the new capabilities, especially given the CFPB's increased scrutiny of mortgage servicing, the ambiguities in the new rule, and the limitations of documenting compliance on social media.

Matthew Tully, vice president of agency affairs and compliance at Sagent, which develops mortgage servicing software, said he sees the new rule as a step toward bringing the FDCPA, which dates to 1978, into the 21st century.

"This is the first step of a journey," said Tully. "The Bureau has opened the door."

The CFPB may have opened the door for mortgage servicers to negotiate a borrower's defaulted mortgage via Instagram, but only just barely.

Courtney Thompson, the founder of mortgage servicing advisory firm Consigliera, said that language like "excessive" or "reasonable" to administer the law with flexibility. But subjective language spells uncertainty for mortgage servicers, who are already keenly aware of the new administration's heightened regulatory leanings.

Thompson said she doubted servicers would do asset-level communication of any kind on social media, because "servicers are struggling to digital communicate with consumers at all," she said, "let alone on Facebook."

That's primarily because servicers need a unified audit trail for all communications with consumers, she said. The need to document everything has kept many servicers using traditional modes of communication — paper and telephone.

Still, others observed that if communicating via social media proves an effective way of reaching consumers, then mortgage servicers will take advantage.

John Toohig, managing director of whole loan trading at financial services firm Raymond James, said he could see mortgage servicers using social media to reach borrowers. That is, until regulators carry out enforcement actions against servicers who do so, with fines big enough to hurt.

"It comes down to whether [the rule] has teeth or not," Toohig said.

Whether mortgage servicers are ready to start direct messaging consumers, they are already incorporating aspects of the new debt collection rule into their record-keeping systems.

Tully, of Sagent, said the company's platform for loan servicers, LoanServ, already allows servicers to track contacts based on the CFPB's new seven-day rule, which limits debt collectors to one call during a seven-day period.

He said that servicers will, in time, use social media to contact borrowers. But there is a long way to go before reliable identity verification systems will allow servicers to contact borrowers with confidence. Until then, they will likely opt for traditional methods of phone, text and email.

"You have to be really sure it's the right person on Instagram, because otherwise you can get in a lot of trouble," Tully said. "Is it worth the risk of trying to collect on a debt, only to end up revealing info that shouldn't have been revealed?"

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Goldman Sachs plants its flag in the jumbo-loan gold rush

Posted: 09 Dec 2021 07:01 AM PST

Investment bank Goldman Sachs, through its affiliate Goldman Sachs Mortgage Co., has sponsored 18 private-label transactions so far in 2021 backed by more than 20,000 loans valued collectively at $9.9 billion, an analysis of bond-rating reports shows.

Goldman Sachs' string of residential mortgage-backed securities (RMBS) offerings this year were dominated by a dozen prime jumbo-loan deals backed by loan pools valued at $7.7 billion. Securitizations in the prime jumbo space have been on a tear so far in 2021.

MAXEX, which operates a major loan-aggregating platform that serves the RMBS market, indicates that through October, the loan-pool value of prime jumbo private-label offerings stood at nearly $44 billion –which dwarfs 2020's total — and executives with MAXEX expect the figure to easily exceed $50 billion by year's end.

Michael Franco, CEO of SitusAMC, which provides due-diligence services to RMBS issuers, said market dynamics have played a major role in the dominance of jumbo-loan securitizations in the private-label market this year.

"The [private-label] market started coming back this year [after dropping off in 2020 due to the pandemic], and deals started getting done," Franco said. "Home prices are rising, so there's additional collateralization, and that makes people feel comfortable with residential risk in the search for yields.

"So, you start seeing more appetite for private-label securities [this year, propelled by] factors in the market overall — higher securitization volumes aided by robust originations. … Also, home-price appreciation means more loans are falling into the jumbo loan category."

The balance of Goldman Sachs' private-label deals through November in 2021 involved primarily RMBS transactions backed by agency-eligible investment properties. Those deals were fueled, in large part, by changes in January to the preferred stock purchase agreements governing Fannie Mae and Freddie Mac. The key change was a cap placed on the agencies' acquisition of mortgages secured by second homes and investment properties.

The amendments to the PSPA, however, were suspended in September of this year and are now under review by FHFA. In the coming months, the effect of the rollback of that cap is expected to be felt in the private-label market.

"As we move forward in the coming months, we expect to see this volume fall off as originators sell the majority of agency-eligible NOO [mortgages on nonowner-occupied homes] to Fannie Mae and Freddie Mac," states a recent report by MAXEX, which operates a loan aggregation platform that serves lenders, including private-label issuers of jumbo-loan securitizations.

The explosive demand for and growth in the jumbo-loan market existing outside the agency space also has focused the attention of some bond-rating firms on the use of automated underwriting platforms in originating those loans — which are later packaged into RMBS deals. The move toward greater automation in the private market is being driven, in part, by record loan originations coupled with a shortage of underwriters in the industry available for loan-origination and private-label due-diligence reviews.

Bond-rating firm Moody's Investor Service highlights three of Goldman Sachs deals that involved the use of automated underwriting systems (AUS). Two of the prime jumbo RMBS deals singled out by Moody's involved loan originator United Wholesale Mortgage (UWM) and the third was a deal in which Movement Mortgage was the loan originator. In all three cases, Moody's indicated it was increasing expected loss assumptions due to the lack of track record of AUS-underwritten jumbo loans.

"We made an adjustment to our losses for loans originated by UWM primarily due to the fact that underwriting prime jumbo loans mainly through DU [Fannie Mae's AUS] is fairly new, and no performance history has been provided to Moody’s on these types of loans," Moody's states in an October presale report reviewing a Goldman Sachs' RMBS offering. "More time is needed to assess UWM’s ability to consistently produce high-quality prime jumbo residential mortgage loans under this program."

A November Moody's presale report reviewing a Goldman Sachs securitization involving Movement Mortgage as the loan originator states the following:

"We concluded that these loans were fully documented loans, and that the underwriting of the loans is acceptable. Therefore, we ran these loans as 'full documentation' loans in our MILAN model but increased our … expected loss assumptions due to the lack of performance, track record and substantial overlays of the AUS-underwritten loans."

Goldman Sachs did not reply to a request for comment.

Joseph Mayhew, chief credit officer at Evolve Mortgage Services, which provides due-diligence services for private-label RMBS deals, said both Fannie Mae's AUS platform (Desktop Underwriter) — which was used by UWM and Movement Mortgage — as well as Freddie Mac's AUS (Loan Prospector) are "good tools" with extensive data sets, however.

"Would you rather use a dataset [like Desktop Underwriter) that has… tens of millions of transactions every year, with up-to-date information in every possible market segment, or would you rather use a smaller data set that might be only for prime jumbo loans, but it's got one-thirtieth of the data available to it that DU has?" Mayhew asked. "Now, I do think you have to use your common sense.

"If you go up to $1.6 million to $1.7 million [for a jumbo mortgage], I think they [the agencies] have a pretty good data set for that. Now, if you're talking about a super-jumbos in the $2 million to $5 million range, I think you have to draw a line and say maybe it's not the best evaluation tool for those borrowers."

The average loan balance in the pools for the three private-label deals highlighted by Moody's was between $990,000 and $1 million, according to the bond-rating reports.

Time will tell whether using automated underwriting platforms developed by Fannie and Freddie to originate prime jumbo loans proves to be a great solution for the market or a future stumbling block. Regardless, the continuing imbalance between housing supply and demand, promises to keep upward pressure on home prices going forward, which is seen as a tailwind for the jumbo-loan market, according to executives at MAXEX.

"There is almost a three- or four-year lack of supply of new homes that exists out there, versus the demand from homeowners, and unless a new supply of homes comes online soon, these supply/demand dynamics could further drive housing prices up," said MAXEX CEO Tom Pearce.

Adds Greg Richardson, chief commercial officer at MAXEX: "As loan sizes go up, we have the ability to put more and more production into these [jumbo-loan] products."

As a headwind for the prime jumbo market, however, Keith Lind, executive chairman and president of non-QM player Acra Lending, points out that mortgage refinancing in 2022 is projected to be down by as much as 62% —according to an estimate from the Mortgage Bankers Association that assumes rates could reach 4% next year.

"The margins [for prime jumbo loans] are extremely thin after hedging and deal fees and everything else," Lind said. "This all depends on how fast they move rates, but with those refinancings, the majority of that is prime jumbo and agency [mortgages.]

"So, I think as rates rise, that market probably shrinks pretty fast."

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Mortgage rates move slowly despite tightening market

Posted: 09 Dec 2021 06:56 AM PST

Mortgage rates decreased one basis point to 3.10% in the week ending Dec. 9, remaining low and stable despite tighter housing supply and affordability, according to the latest Freddie Mac PMMS mortgage report.

A year ago at this time, the average 30-year fixed-rate loan averaged just 2.71%, according to the report published on Thursday.

Sam Khater, Freddie Mac's chief economist, said in a statement that rates have moved sideways over the last several weeks, fluctuating within a narrow range.

"Going forward, the path that rates take will be directly impacted by more information about the Omicron variant as it is revealed and the overall trajectory of the pandemic," Khater said. "In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory."

The survey focuses on conventional, conforming, and fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.

Lenders – Now is the time to prioritize lead generation

HousingWire Editor-in-Chief Sarah Wheeler and Deluxe Senior Business Development Executive Mark McGuinn discuss the challenges lenders are facing to optimize lead generation, even as mortgage rates continue to change.

Presented by: Deluxe

Economists at Freddie Mac said the 15-year fixed-rate mortgage averaged 2.38% last week, down from 2.39% the week prior. However, it's higher than it was a year ago, at 2.26%. Meanwhile, the five-year ARM decreased to 2.45%, down four basis points from last week. A year ago, 5-year ARMs averaged 2.79%.

Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 1.52% on Dec. 8, up from 1.43% a week before.

The year-over-year increase in rates is impacting mortgage applications. The latest Mortgage Bankers Association (MBA) survey published on Wednesday showed a 27.3% decline for the week ending Dec. 3, in comparison to a year ago. The decline is higher in refinance (36.5%) than in purchases (9.4%).

Compared to the previous week, the overall market composite index grew 2% on a seasonally adjusted basis.

"Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20% over the week," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a statement. "Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller."

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Better.com’s CEO apologizes, but the fallout continues

Posted: 08 Dec 2021 02:10 PM PST

HW+ vishal garg — Vishal Garg, CEO of Better.com

In the span of three minutes, 900 Better.com employees were fired via Zoom by the company's CEO Vishal Garg last week.

"If you're on this call, you are part of the unlucky group," Garg said nonchalantly in a video that was leaked to the internet. "Your employment is terminated effective immediately."

A day after the layoffs, the CEO publicly claimed that the company's former employees were "stealing" from the company and its customers by being unproductive. Garg alleged that the terminated employees worked an average of two hours per day.

The blowback from the industry has been immense, with many mortgage executives questioning the ethics of firing employees just weeks before the holidays. Some lenders have moved to publicly extend an olive branch to former Better employees, offering to bring them on board, while others have created a fund to provide financial aid to those laid off.

A leaked email shows that Garg issued a mea culpa on Tuesday to his team, apologizing for the way that he handled the layoffs.

"I failed to show the appropriate amount of respect and appreciation for the individuals who were affected and for their contributions to Better," Garg said. "I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you."

In response to the PR nightmare, members of Better's communications team, including head of public relations Tanya Hayre Gillogley, head of marketing Melanie Hahn, and vice president of communications Patrick Lenihan, all submitted resignations this week, according to a source familiar with the matter. All three employees declined to comment.

It also looks like Better's plans of going public via SPAC in the fourth quarter of 2021 will likely get pushed to next year.

The reason stems from a recent amendment to a financing agreement between Better's SPAC partner, blank-check firm Aurora Acquisition Corp. and venture capital company SoftBank.

Last Tuesday, Better said that the new agreement would inject $750 million of a total $1.5 billion in committed funding to Better immediately, while the remaining $750 million will be distributed to the company in the form of a convertible note at Better's option within 45 days after the closing of Better's merger with Aurora.

The amendments to the transaction do not change the implied equity value for Better of approximately $6.9 billion, the company said.

The original financing agreement stipulated that SoftBank would dole out up to $1.78 billion to the company, of which $950 million would have been used to purchase shares from existing Better stockholders.

An employee with knowledge of the matter said that since the deal terms were revised, this will delay Better's aspirations of going public until January 2022. They also noted that delaying going public will give Better time to extinguish blowback stemming from the layoffs.

As reported previously, another source with direct knowledge of Better's plans to go public said last week that it would be virtually impossible for Better to go public before the end of the year.

"The S-4 hasn't been declared effective and once it is, you're probably four weeks at least until the vote and closing," the source said.

Meanwhile, the 9% of employees terminated by Garg – who has a history of controversial behavior – are garnering support, with tech companies, lenders and headhunters advertising jobs and their desire to help on Linkedin.

Paul Hindman, managing director of Grid Origination Services, noted in an email that given the broad range of visibility that Garg created, the rally to support these folks is unlike anything that he’s ever seen.

"I'll leave you with this: I wouldn't be surprised if some of these folks formed a new company across the street…its happened before," Hindman said.

Furthermore, Amy Spurling, CEO of HR software company Compt, said in a statement that a company “can’t claim to be dedicated to building an inclusive and diverse workplace and then unceremoniously cut the entire DE&I team on a group call."

She added, “The Zoom call layoff wasn’t the worst part to me. When you’re fully distributed, you don’t have another choice really. I give him credit for being the one to have the conversation actually. What is inexcusable is the purported reason as to why he did the layoffs — that 900 people were lazy and only working 2 hours per day. “

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Pension fund withdraws insider trading lawsuit against Dan Gilbert

Posted: 08 Dec 2021 12:50 PM PST

A pension fund in Detroit has withdrawn a lawsuit filed only two weeks ago that accused Rocket Companies Chairman Dan Gilbert of insider trading.

On Wednesday, the Police and Fire Retirement System of the City of Detroit said that the lawsuit was filed due to a "miscommunication" with a third-party law firm.

"The firm was authorized to review the case and do fact-finding but not authorized to file a lawsuit," the pension fund said in a statement. "The PFRS General Counsel has taken steps to ensure that PFRS be removed as a party to this lawsuit immediately."

The lawsuit, filed in Delaware Chancery Court on Nov. 23, said that the pension fund bought $500 million of Rocket Companies’ stock from Gilbert on March 29 at $24.75 per share, according to Cleveland.com. The purchase was made just four days after the billionaire announced a $500 million philanthropic investment in Detroit neighborhoods.

The lawsuit says that Gilbert knew the company stock would be less valuable at the time of the sale to the pension fund, and that he avoided major financial losses – $160 million – doing so, Cleveland.com reported. Rock Holdings, which is controlled by Gilbert, was also named in the now-defunct suit.

Aaron Emerson, a spokesperson for Rock Holdings, said that the assertions in the complaint are "baseless and defy logic."

"We have either met or exceeded guidance ranges that were provided in our 2021 earnings releases while earning more than $10 billion in net revenue this year," Emerson said in a statement.

The Police and Fire Retirement System of the City of Detroit said it engages, from time to time, in derivative and securities lawsuits to protect its $3 billion portfolio.

"These lawsuits are typically filed by third party law firms – not PFRS general counsel – and are often done under limited time frames for court filings. It appears a full measure of the facts were not known at the time of the filing by an outside law firm," said the pension fund regarding the case.

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Mortgage applications are up, on the strength of FHA refis

Posted: 08 Dec 2021 04:00 AM PST

Mortgage applications increased 2% for the week ending Dec. 3, driven by a surge in government refinancings according to the Mortgage Bankers Association (MBA) survey published on Wednesday.

The increase was mainly driven by the refinance index up 9% from the previous week on a seasonally adjusted basis. Concurrently, the purchase index decreased 5% from the week prior.

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) decreased to 3.30%, one basis point down from the previous week. For jumbo mortgage loans (greater than $548,250), rates rose to 3.33% from 3.27% the week prior. Meanwhile, the rate for mortgages backed by the Federal Housing Administration (FHA) fell to 3.35% from 3.42%.

"Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller," Kan said.

Regarding the purchase market, Kan said mortgage applications fell after four consecutive increases, but activity is still close to the highest level since March, a positive sign. "Purchase activity continues to be constrained by a lack of inventory, combined with rapid rates of home-price appreciation and mortgage rates higher than in 2020."

Compared to a year ago, mortgage applications declined across the board. The overall market composite index dipped 27.3% on a seasonally adjusted basis. Refinance apps fell 36.5% year over year, and purchase apps decreased 9.4% in the same period.

Refinances represented 63.9% of total mortgage applications, down from 59.4% the previous week. VA loans comprised 10.7%, increasing seven basis points. Meanwhile, FHA loans went from 8.9% to 9.9% in the period. The USDA share was at 0.5% of the total.

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Loans And Mortgage

Friday, December 10, 2021