Friday, February 25, 2022

Mortgage – HousingWire

Mortgage – HousingWire

Rocket Mortgage wants you to forget about the 2020 refi boom

Posted: 24 Feb 2022 05:47 PM PST

Jay-Farner-Quicken-Loans-HW
Rocket Companies CEO Jay Farner

No mortgage lender in America capitalized on the pandemic-driven refi boom better than Rocket Mortgage.

The Detroit-based company, with a ready-built infrastructure and top-notch brand recognition, was uniquely positioned to absorb historic mortgage demand as others struggled to get out of the gates. In 2020, Rocket’s parent company notched $9.4 billion in profit on the strength of $320 billion in mortgage originations. Few thought those records would ever be broken.

It’s fitting then that Rocket executives in Thursday’s earnings report opted not to compare the full-year 2021 financials with that of the prior year, which it treated as something of a freak occurrence. They quietly chose to compare 2021 financial results with 2019 results, a fairly normal year for the mortgage industry.

Overall, Rocket reported a $6 billion in profit in 2021, a 35.4% decline from the prior year, even though mortgage originations actually rose to $351 billion, up nearly 10% from 2020. Business also slowed considerably in the fourth quarter, as interest rates ticked up and refis waned. Rocket’s net income fell 69.5% year-over-year to $865 million, which was also a sequential decline of 37%.

Margins declined to 2.80% in the fourth quarter, a sequential decline of 25 basis points and a 161 bps decline from a year prior.

If Rocket executives, who no doubt noticed that the company’s stock had been trading at its lowest mark ever – were worried about a downturn, they didn’t show it.

Jay Farner, CEO of Rocket Companies, said on a conference call with analysts that as rates rapidly increase, the company's strategy has always been to protect margin and profitability. "In fact, we have grown our mortgage business substantially since the last market cycle by doing the right things," he said.

Farner told analysts that Rocket has invested heavily in a flexible, scalable multi-channel platform and is still generating significant mortgage volume growth from less rate-sensitive products, such as purchase business and cash-out refinances.

In the fourth quarter, the company reported $75.8 billion in loan originations, down 30% compared to the same period of 2020 and 13% compared to the third quarter of 2021.

Since Rocket brought employees back to the office on February 14, the non rate-sensitive products account for nearly 90% of the mortgage production, Farner said.

Purchase volume grew 76% year-over-year due to focus on a "technology-driven client experience," the company said.

Regarding the servicing book, the unpaid principal balance increased 35% year-over-year to $552 billion as of December 31. Rocket has 2.6 million clients in the servicing portfolio and generates an annual $1.4 billion in recurring servicing fee income. 

Rocket has invested heavily in diversifying beyond mortgage. Farner said the company will continue its strategy to leverage its platform to grow and scale across real estate, mortgage, and financial services. The acquisition of Truebill, a personal finance app, for $1.3 billion in December, was part of the strategy. 

"Our combined teams are currently working together to create a single sign-on solution that will bring the entire Rocket ecosystem together through one unified login. We expect this new experience to launch in the next 30 to 45 days," Farner told analysts.

The company expects closed loan volume of between $52 billion and $57 billion for the first quarter of 2022, with a rate lock volume between $50 billion and $57 billion. Executives are forecasting the gain-on-sale margin to be between 2.80% and 3.10%.

Despite the annual decrease in profits, the company board of directors declared a special dividend of $1.01 per share to Class A common stockholders. It will fund with cash distributions of around $2.0 billion. 

"Since our IPO, Rocket has returned $4.5 billion to shareholders through dividends and share repurchases while remaining well-capitalized and investing in a disciplined manner to generate long-term shareholder value," Farner said. 

Rocket Companies shares closed on Thursday at $11.56, up 4.33% from the prior day. The stocks were down 0.95% in the aftermarket following the earnings report. 

The post Rocket Mortgage wants you to forget about the 2020 refi boom appeared first on HousingWire.

Ukraine conflict could lead to lower mortgage rates in short-term

Posted: 24 Feb 2022 03:02 PM PST

Stocks fell Thursday as Russian troops launched a full-scale attack in Ukraine, and at least in the short-term, the turmoil could lower mortgage rates in the U.S.

During large-scale disruptions, investors often flee to safer options, such as U.S. Treasury notes, bonds and mortgage-backed securities. All things being equal, that dynamic tends to put downward pressure on mortgage rates.

"While mortgage rates trended upward in 2022, one unintended side effect of global uncertainty is that it often results in downward pressure on mortgage rates," said Odeta Kushi, deputy chief economist of title insurance firm First American. "The 10-year Treasury yield is down today, likely in response to the worsening Russia-Ukraine conflict, and mortgage rates may follow suit."

Kushi also drew a parallel to the weeks following the 'Brexit' vote in 2016, when a declining bond yield led to a decline in mortgage rates.

But the Federal Reserve was already balancing efforts to slow inflation, without cooling the economy too much. Experts expect inflation will be exacerbated by the conflict, especially in light of sanctions on Russia, an oil-producing nation.

"The two forces are at odds with each other at the moment," said Melissa Cohn, regional vice president at William Raveis Mortgage. "Inflation will be made worse by war, not better."

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Inflation is rising, but expectations that it will rise have not yet spun out of control, said Mark Zandi, chief economist at Moody's Analytics.

"Inflation expectations remain anchored, but that's the risk," said Zandi. "Because it's been high going on for a year, if you throw Russia into the mix, with higher oil prices and higher inflation, we could hit an inflection point where those expectations become unanchored."

How the Federal Reserve thinks about the conflict in Ukraine — how long it may last, the likelihood it will expand beyond the borders of Ukraine, and its impact on the economy — will determine how mortgage rates move in the long term. The Fed will meet again from March 15 to 16, and is expected to raise rates from 0 to .25%.

“If the Fed thinks the biggest impact of this disruption will be more upward inflationary pressure, then they will presumably stay the course they laid out, perhaps even accelerate it a bit," said Jim Parrott, a non-resident fellow at the Urban Institute who was a senior economic advisor in the Obama administration. "If instead they decide that the larger impact will be to cool the economy, they might decide to move more cautiously.”

Joel Kan, an economist at the Mortgage Bankers Association, said Thursday that the trade group expects the Federal Reserve to increase rates four times this year.

"With this morning’s news on Russia, don’t really think that that’s going to slow [The Fed] down for now,” he said. “They acknowledge that that’s a risk. But given the inflation picture, we’re going to see at least a couple of rate hikes.”

Rates fell slightly to 3.89% this week, down three basis points from the prior week, according to Freddie Mac's weekly survey of the primary mortgage market.

The Federal Open Markets Committee said in January they expected it would "soon" be appropriate to raise the target range for the federal funds rate. It decided to keep the target range for the federal funds rate at 0 to 0.25%, but is expected to raise rates in early March.

Starting in January Fed has also tapered its monthly asset purchases. That tapering is set to conclude in March, rather than mid-year, as initially planned.

The conflict in Ukraine may have other impacts on the housing market besides potential short-term downward pressure on mortgage rates and long term inflation. Homebuilders are affected by the uncertainties brought by higher oil prices.

And stock market declines could temper homebuyer appetite for more expensive or second homes, and reduce the amount they have to make purchases. 

"There are a lot more down days ahead, but it does feel like there's no good that comes out of this from the perspective of the economy," said Zandi. "It's all downside. It just remains to be seen how much."

Flavia Furlan Nunes contributed reporting.

The post Ukraine conflict could lead to lower mortgage rates in short-term appeared first on HousingWire.

RE/MAX banks on organic growth in 2022

Posted: 24 Feb 2022 10:43 AM PST

Despite a 1.6% drop in U.S.-based agent count and a net loss of $15.6 million in 2021, RE/MAX Holding Inc., executives were positive about the Denver-based franchisor's performance during the firm's fourth quarter earnings call with investors on Thursday, thanks to RE/MAX's organic revenue growth.

During 2021, RE/MAX generated $329.7 million in total revenue, up 23.9% from 2020. Revenue, excluding marketing funds, was up 22.7% to $247.3 million for all of 2021, with 11.8% of that revenue coming from organic growth, which RE/MAX defines as revenue growth coming from continuing operations. Organic growth comprised 5% of the $66.2 million in revenue during Q4, primarily due to fewer agent recruiting initiatives versus the prior year, a price increase in RE/MAX continuing franchise fees, increased events-related revenue, and growth in RE/MAX's mortgage brokerage franchise, Motto Mortgage.

"For the third quarter in a row we generated mid-single digit organic revenue," RE/MAX CFO Karri Callahan said during a call with investors. "We are witnessing a trend of organic growth developing and we believe it will continue throughout 2022."

Much of this increase in total revenue, however, came from the acquisition of RE/MAX Integra's North American regions in July 2021, which included more than 19,000 agents and 1,100 offices across Canada and the U.S.

“Over the past few years, we've been strategically investing to expand and diversify our revenue and growth opportunities," outgoing RE/MAX CEO Adam Contos said during the call with investors. "Our Q4 results affirm that these investments are beginning to pay off."

While RE/MAX's agent count in the U.S. dropped in 2021, the brokerage's Canadian agent count rose 10% and its agent count outside of the U.S. and Canada rose 5.6% for a total of 56,524 international agents. The brokerage's newest international office opens in Pakistan on March 1. At the end of 2021, RE/MAX's total agent count came in at 141,998, a new high for the firm.

"We are trying to get 25,000 agents in Canada sometime later this year, which would represent a 25% increase from just a few years ago," RE/MAX Real Estate CEO Nick Bailey said during the call.

Bailey also noted that 2021 was the best year ever for the number of closed transactions for RE/MAX, with over two million transaction sides completed in 2021.

During the call, Motto Mortgage president Ward Morrison highlighted the company's growth since entering into the mortgage space in October of 2016. In 2021, 64 Motto Mortgage franchises were sold, bringing the total number of franchises sold since the firm's inception to over 300. Of these franchises, Morrison said that a little over 55% of sales have been to RE/MAX brokers, while roughly 15% have been to independent real estate brokerages or professionals affiliated with a rival brand.

For all of RE/MAX Holding Inc., total operating expenses came in at $78.7 million during the fourth quarter, an increase of 20.1% over Q4 2020. The firm attributed this increase to higher selling, operating and administrative expenses, increased marketing funds expenses, and high depreciation and amortization expenses. Selling, operating and administrative expenses totaled $6.3 million during the fourth quarter, a 13.6 year-over-year increase and representing 69.9% of revenue, down from 74.6% a year prior.

In early January, RE/MAX announced that CEO Adam Contos will be stepping down at the end of March. Longtime board member Stephen Joyce has been appointed to interim CEO.

On the call Joyce thanked Contos for his work and highlighted further growth and improving U.S. agent count as his first areas of focus. The brokerage said it hopes to increase its agent count 2% to 4% and generate revenue in the range of $366.0 million to $376.0 million in 2022.

In November, RE/MAX announced its preliminary third quarter results after an outside audit on its independent regions revealed some possible reporting error.

The post RE/MAX banks on organic growth in 2022 appeared first on HousingWire.

FHA inches closer to offering a 40-year loan modification 

Posted: 24 Feb 2022 09:59 AM PST

The Federal Housing Administration (FHA) is working to expand the COVID-19 loss mitigation program to include the option of a 40-year loan modification with a partial claim, an acknowledgement that some borrowers exiting forbearance are still facing financial challenges.

Julienne Joseph, deputy assistant secretary in the Office of Single-Family Housing for FHA at the U.S. Department of Housing and Urban Development (HUD), said that the government agency is "almost there" and "getting warmer" in offering the option to borrowers.  

"As far as the 40-year-old partial claim, I would say probably in the next 60 days we’ll be hearing more about what we can do there," Joseph said Wednesday at the MBA's Servicing Solutions Conference & Expo 2022 in Orlando, Florida.

She added: "Of course, we feel time is of the essence, especially because the national emergency has been extended." On Feb. 18, President Biden extended the national emergency declaration for the COVID-19 pandemic beyond March 1.

HUD did not immediately return a request seeking additional information on its plans. 

In September, the FHA posted a draft mortgage letter proposing a 40-year loan modification combined with a partial claim. The goal is to help borrowers reach the targeted reduction of 25% of the monthly principal and interest portion of their mortgage payments.  

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The FHA's proposal came only after Ginnie Mae announced in June that it was set to introduce a new 40-year mortgage term for its issuers. Lenders and servicers had previously voiced concerns the government-owned enterprise would not be able to purchase the long-term loans, a mortgage lobbyist told Housingwire.

"We have begun the work to make this security product available because an extended term up to 40 years can be a powerful tool in reducing monthly payment obligations with the goal of home retention," Michael Drayne, Ginnie Mae acting executive vice president, said in a statement.

Industry stakeholders sought more time to adjust to the change. In an October letter, the Housing Policy Council (HPC) and Mortgage Bankers Association (MBA) asked the FHA to delay implementing the new option until the first quarter of 2022. They also asked the government agency for a 90-day window to start offering the loan modification.

"The demand on servicers to implement a wide array of policy changes over the last several months has been challenging and we expect this to continue well into the first quarter of 2022," they said in a letter to FHA. 

The FHA is studying the right place to offer the 40-year loan modification with partial claim in the loss mitigation "waterfall," which provides tiers of assistance to help borrowers pay their mortgage.

The new loan modification will likely be offered toward the end of that process, as the FHA does not want it to be too "intrusive," according to Joseph. The option, which can help borrowers during the pandemic, may become part of the FHA's standard modifications' protocols.

Other government entities, such as Fannie Mae and Freddie Mac, already provide a 40-year loan modification term. According to the HUD website, its loan modification option extends the term of the mortgage to 360 months at a fixed interest rate. 

The partial claim, however, allows arrearages to be placed in a zero-interest subordinate lien against the property to be paid after the last mortgage payment, if the loan is refinanced or the property is sold, whichever occurs first.

The 40-year loan modification with partial claim combines both options. "It is for those who are obviously struggling the most. They may have gone back to work, but their incomes are lower than pre-pandemic," a mortgage lobbyist who participated in the discussions with the FHA told HousingWire.

According to the latest MBA data, 650,000 homeowners were in forbearance plans as of January 31. Forborne loans in the Ginnie Mae portfolio decreased three basis points from December to January, to 1.60% of servicers' portfolio volume.

During the last 19 months, MBA's data revealed that 29.1% of the total forbearance exits resulted in a loan deferral or partial claim. About 19% of those borrowers continued to pay during the forbearance period. However, 17% were borrowers who did not make their monthly payments and did not have a loss mitigation plan. 

The post FHA inches closer to offering a 40-year loan modification  appeared first on HousingWire.

Big MSR sale keeps Homepoint in the black in Q4

Posted: 24 Feb 2022 08:10 AM PST

HW+ Willie Newman
Home Point Capital CEO Willie Newman

Home Point Capital, the parent company of wholesale lender Homepoint, turned a $19.3 million profit in the fourth quarter, a sequential decline from the $71 million it notched in the third quarter as margins dropped and revenues fell.

The lender told investors Thursday morning that the gain-on-sale margin fell to just 59 basis points, a decline from 84 bps in Q3 and 216 bps in Q4 2020.

Revenue fell to $181 million in Q4, a decline from $275 million in the prior quarter and $454 million in the fourth quarter of 2020. Origination volume decreased to $21 billion in Q4, a slight decline from $21 billion in the prior quarter. A year ago, Homepoint originated $24 billion in the fourth quarter.

In a statement before the opening bell rung, Home Point Capital CEO Willie Newman touted the company’s quick adaptation to a rapidly changing mortgage market.

"We expanded our broker partner network to over 8,000 brokerages and made meaningful progress on key initiatives to evolve our business, including rigorous expense management, expanded capital markets execution alternatives, and building more optionality in servicing,” Newman said. “These achievements, as well as our ongoing focus on the wholesale channel, have effectively positioned us to navigate through what we expect to be a challenging environment in 2022."

Indeed, the company’s big calls on key chunks of the business kept the balance sheet in the black in the first quarter. The sale of $13.1 billion in Ginnie Mae servicing rights generated nearly $175 million, saving Homepoint from what otherwise would have been a sizable loss. The company is exiting the Ginnie Mae servicing space.

The wholesaler also announced last week that it would move all of its mortgage servicing processing work to ServiceMac, a First American company, another cost-cutting move. By doing so, Homepoint will transfer about 300 employees to ServiceMac.

Homepoint registered $152 million in expenses in the fourth quarter of 2021, a 13% reduction from the third quarter, part of a reorganization plan put into place earlier in the year. Expense reductions came across the origination segment, corporate expenses and servicing.

For the full year, Homepoint recorded $166 million in net income, a dramatic decline from the $607 million in net income gained in 2020. Total origination volume, however, rose to $96 billion in 2021, up 55% from the 2020 mark of $62 billion. Total revenue was $962 million, compared to $1.4 billion in 2020. Total origination in the origination segment came to $751 million in 2021; the company recorded $1.5 billion in 2020.

Homepoint told investors it had $555 million in cash, MSR credit lines and other credit facilities at the end of the fourth quarter. It had a total warehouse capacity of $7.5 billion.

The company did not offer a forecast for upcoming quarters in its Q4 earnings statement.

The post Big MSR sale keeps Homepoint in the black in Q4 appeared first on HousingWire.
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Mortgage – HousingWire

Mortgage – HousingWi...