Mortgage – HousingWire |
- Morty CEO Nora Apsel discusses the online mortgage marketplace and its journey to open access to all
- Servicers endorse a permanent forbearance, but under different rules
- Neither rate volatility nor war has stymied the MSR market
- Opinion: The larger risk from a barely noticed CFPB lawsuit
- VA extends deadline for COVID-19 home retention options
- Finance of America asks investors to look beyond traditional mortgage
- Mortgage rates decline to 3.76% amid Ukraine conflict
- Fed’s Powell backs rate hike of 25 basis points
- Bye, bye refi: Purchase mortgage apps overtake refis
- 2022 HousingWire TECH100 Mortgage Honorees
| Morty CEO Nora Apsel discusses the online mortgage marketplace and its journey to open access to all Posted: 03 Mar 2022 01:39 PM PST Over the past few years, digital transformation has increasingly changed the way property and real estate transactions occur. A vertical which has seen a strong digital push is mortgages, with consumers, lenders and other agents increasingly using online tools and services to apply for and process home sales.  One company leading this charge is Morty, an online mortgage marketplace that matches customers with the right loan product for them, using technology to automate and manage the entire experience. The company has found success since its founding, doubling its size over the past year and processing over a billion dollars in loans to date. Morty also recently raised a $25 million Series B from leading investors March Capital, Rethink Impact, Thrive Capital, Prudence and Lerer Hippeau. FinLedger spoke with Morty co-founder Nora Apsel, who rose from engineer to COO and now CEO, about the company’s journey, overarching goals and plans moving forward. Q: First off, can you just describe Morty and the services you offer? A: Morty is an online mortgage marketplace, so we leverage great product and technology to first match customers with the right loan product for them. Then, we automate and manage the entire experience all the way through to closing, so we’re a full service platform. We take customers from the very beginning, figure out what they can afford, to the very end of closing on their loan. Q: What would you say are the biggest challenges when it comes to bringing those two pieces together? Matching customers and partnering with lenders? A: Taking a step back, my background historically is as an engineer. Part of the reason why Morty was so very interesting to me when we founded it was because it really presented this opportunity of overlap. How can we leverage technology to really do better for the consumer and promote their needs, as opposed to the traditional mortgage approach which is very much from the banks or the lender’s perspective. Getting to what your actual question was, which is, ‘What’s the challenge in matching these two things?’ It’s really about the technology and the data flow. The reason why Morty is unique and is able to offer this access to customers in a way that traditional mortgage providers can’t is because we’re taking in all of this data from both consumers and from lenders. It’s our pricing engine that’s really identifying, ‘What is the best thing for this person right now?’ Everything changes every single day, so being able to take in all of those things and say today, what is the best thing to match customers in a really transparent user friendly type of way? Q: Over the past couple years, what have you seen as far as technology demand growth along those lines? Are people still getting their feet in? A: I think the progress over the past year has been quite measurable, but I still think we’re just at the beginning. If we were having this conversation five years ago, I would say the big challenge is getting people online. How do we figure out how to make sure customers know that they can get their mortgage online, and that it’s better, more transparent and secure? That pendulum has swung a little bit more with the pandemic, and people are becoming more comfortable with real estate transactions online. You saw all that happen in 2020, and now mortgages is feeling that as well. We believe that’s a trend that doesn’t go backwards, so we’ll just continue. Customers will continue to make that migration online and it’s really the last financial transaction to be moved online. Q: You said you have an engineering background. What have been the biggest challenges for you when it comes to learning about the mortgage industry? What has been the most eye opening thing that you’ve learned through the whole process? A: I was an engineer for over a decade and then even before that, I worked in nonprofits for a while, so my interests are really around where technology and large scale social or financial impact intersect. I think the thing that continues to surprise me, even though I’ve been in this industry for so long, is the blackbox nature of mortgage. Customers give some information and they get out a number, or a bunch of documents that they need, and there’s no understanding of why or how to change that. That’s the reason why you hear from customers that their mortgage was really confusing, the communication was bad and their cost was too high. It’s because everything is super blackbox and confusing, and I think even when we founded the company, I vastly underestimated the ‘blackbox-ness,’ if that is a word, of the industry. Q: What do you think needs to be done to improve that transparency? Is it just on the technology, or is it in advocacy? Where do you see the biggest potential to educate people? A: There are a couple of things, and one is definitely education. The content that customers want is that which puts the customer first, and gives and leads with transparency and information. The third is really building a broader ecosystem of real estate and fintech companies that are looking to help the customer, putting the customer first and making sure all of the those players in that ecosystem are connected in a really transparent way, so that the customer always knows what’s going on and what their options are. Q: Looking at the ecosystem and your previous point about data, have you seen data driving this ecosystem forward? What have you seen data bring to the table as far as things coming together? A: I think mortgage is a pretty big industry and I would break it into two parts around the consumer side, and then the servicing and secondary market side. I think it’s been pretty impressive to see some of the data providers and new tech startups coming to support the second part, like the servicing in the secondary markets. I think it’s the first time that the area has really seen that, which is pretty cool. But in the consumer side, where Morty sits, it still operates largely in silos so the data share is not where it should be. We should be able to free flow, we should be able to share data when it’s beneficial for the customer, right? Whether it’s information about the transaction or the appraisal, or the homeowners insurance, numbers, that stuff should all be able to be gathered in one place so that the customer always knows what’s going on. What are their options, how much longer, what do they need to do? Q: Do you see that happening, or is that just something that will take longer to break down. Is it even possible with regulation and things of that nature? A: It’s possible. To be clear, I’m not looking to like share personal identifying information (PII). I think it’s possible, but I think it’s gonna take time because what you need is data forward, typically startups, to grow in these areas, and then begin to work together in tandem for the customer. Q: Can you talk about last year’s Series B, and how you’ve been using that funding? A: For us, the Series B was really about being able to expand out our marketplace. Our vision is to really be a single point of access into the home financing market, for anybody and everybody. But when we closed our Series B, we were focused on purchase and primary homes. We’ve used the money to hire and grow the team really with the notion of wanting to be able to expand out this marketplace, and to be able to be that single point of access for all consumers. Q: Can you just talk about secondary versus primary and what the biggest points of differentiation are when looking at how you deal with them? A: There’s different eligibility and pricing guidelines associated with every different home type. For us, we care a lot about making sure every product that we offer on our site is done in a transparent, accurate way and is very user friendly. So that the customer can self-operate, which is a big part of how our sight of our product works. The expansion was really about, “okay, we nailed primary homes, now let’s make sure we’re offering that same level of service and accuracy at secondary homes,” then jumbos and investment homes as we continue to expand out. Q: That leads to my next question. What are your big goals for 2022, and what are some things you’re excited to tackle? A: It’s largely the same answer in that it’s all about being this like single point of access. That’s the power of a marketplace, right? It’s this one-stop shop that anybody can go to, to really find the right thing. I think the stuff I’m especially excited about, in addition, is expanding to all sorts of loan types. I’m excited to expand out to other home financing solutions and partner with great companies that are doing that now. You know, a mortgage is not the right option for everybody. For some people it might be a rent-to-own solution. For some people, it might be all-cash first and then a mortgage. There are some really great startups and more established companies that are doing those types of things. We’re excited as a marketplace to partner with those people, so that we can direct customers to what is the best thing for them. Q: Looking around at these other startups, are there any that excite you or that you’d like to partner with? A: There are some very cool things happening in proptech and fintech. If we can talk about me personally as opposed to Morty, I think one of the cool things in proptech is the ability to build your home completely online, and really making it totally modular and universal. I think that’s super exciting and really reflects innovation in a couple of different areas, including things like construction, that I know nothing about. I think for us, again, we are continuously going back to this concept of access, and wanting to make sure that customers are getting all the different types of access to the right type of thing. One thing that we’re interested in is the intersection of mortgage and crypto. How do we make sure that people who have invested heavily in crypto are able to leverage those types of assets? We haven’t done anything on that, but I think it’s really interesting. It all goes back to the fact people should be able to know how to get the right mortgage for them, and should be able to go to one single point of access to find that. Q: Does it come back to, like you said with data silos, the fact a lot of people just aren’t applicable for certain things because their data isn’t shown in a typical FICO score? A: I would say the inability to underwrite a mortgage with crypto is not like the biggest problem, but it could be it. I believe it will increasingly become more challenging, because more people will continue to invest in it and it will be a more dominant asset type. For the questions that you’re talking about around FICO. We all know that FICO is not equitable. I think that there are a lot of interesting products out there for consumers in a variety of different situations, but very often, those customers have no idea that they can get a mortgage or how to get one. Similarly, many times the companies that are offering those types of products don’t know how to connect with the right customer. That really shows, and that’s really where the value of the marketplace comes in. It’s this matchmaking experience. Q: You went from co-founding the company as an engineer, then went on to act as COO and now CEO. What has that journey been like, and what have you learned along the way? A: The journey has consistently been challenging, and that’s startups, right? I think for me, I have approached every single challenge very much from an engineering mindset. So there is a problem. Let’s identify what the potential solutions are, let’s create a process around that solution, let’s implement it and then let’s test it. That paradigm has served me very well, because it allows you to create structure and a lot of transparency with your team. I think as you’re building a company, you know, we are really fortunate to have some people who have been with Morty for you know, three or four or five years. That comes from really being able to build transparency around, ‘Where are we going?’ and ‘How are we going to get there?’ and ‘How are we doing?’ Q: What do you look for when searching for talent? A: You’re hitting on engineering, because it’s definitely the talk of the startup world, but for us in general, when hiring people I think we do have a quite specific culture here. Everybody believes in what we’re building and is working towards that vision. I think being bought into the mission and the vision of the company is really important, because what we’re doing is very hard and it’s going to take a long time. It’s not get the startup up and just run it for a couple of years. There’s a lot of investment in that and that has been really important. Even getting back to engineering, we run a really tight engineering hiring process, and a big part of it is just finding the right people. For engineers the challenge that we have is really centered around data transparency and efficiency, and those are super interesting problems. It’s really about like finding the right people that are excited about solving those problems and being part of a mission-driven company. Q: Through this whole journey, what has been your biggest win or milestone you’ve been the most excited about? A: It’s a really challenging question, because startups are actually just a bunch of really small wins, but I have two. One was when we got our license in New York. New York is notoriously the hardest state to get your mortgage license in, and we spent a lot of time making sure what we submitted was perfect. We were really proud when we got that license, because it opened up a ton of opportunity for us and helped us take a big step further on our on our pursuit of 50-state coverage. That was a really big thing. And then I think the other thing that was like a pretty big milestone for us was when we were able to begin to see customers come through our product and go all the way to locking in their loans, or locking in their interest rate, without phone calls. Recognizing that this can be done in an automated, digital way and that customers do want to self-transact in this type of way … was real validation for us. Q: You brought up the 50-state coverage. How many are you in now, and what are your expansion plans? A: We are in 43 states right now, and our goal is to be in all 50 states by the end of the year. Q: That’s all I have for you, Nora. Is there anything I didn’t ask about you or Morty that you think I should know? A: The thing I always make sure to communicate is that the differentiator for Morty really comes from this combination of our marketplace bottle and our investment and focus in growing through product and tech and believing that it is the better way to transact. It’s more transparent, more cost effective, and it’s also what consumers want. 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| Servicers endorse a permanent forbearance, but under different rules Posted: 03 Mar 2022 12:44 PM PST  A growing chorus of mortgage servicers, consultants, and lobbyists support the idea of having forbearance programs as a permanent solution in the industry’s loss mitigation toolkit, rather than only a temporary relief for wide-scale events such as financial crises and pandemics. “Whether it is a natural disaster, a job loss, or an illness, forbearance is wildly effective,” John Lawrence, executive vice president of the Texas-based servicer Selene Finance, said last week during the Mortgage Bankers Association (MBA) Servicing Conference in Orlando. Susan Allen, head of product at Experian Information Solutions, agreed: “There are a number of situations where it works really well. I certainly hope it’s here to stay, along with other programs.” Forbearance allows homeowners to defer mortgage loan monthly payments due to financial hardships, remaining in their homes. The relief, not available under normal circumstances, was implemented through the Cares Act due to the Covid-19 pandemic. The programs were offered before the loss mitigation “waterfall,” which provides tiers of assistance to help borrowers pay their mortgage. Homeowners with mortgages from Fannie Mae, Freddie Mac, or government agencies such as the Federal Housing Administration (FHA) suffering a financial hardship could defer payments up to 18 months. The previous experience with forbearance programs, during the Great Recession, was not positive, according to executives. Borrowers had challenges accessing payment relief and the rules changed multiple times. This time, however, forbearance programs have been considered a success by avoiding a foreclosure crisis in the country. According to the MBA, these plans reached more than four million homeowners last year but declined to 650,000 as of January 31. “We still have a significant number of customers that are on forbearance. So, it may start to come down. But this is going to become infinitely more complex,” said David Sheeler, executive vice president of correspondent lending and servicing finance at Freedom Mortgage Lending. The industry believes that a permanent forbearance solution should come under different rules. During the Covid-19 crisis, forbearances were easily accessible to borrowers. Lenders and servicers did not require complete documentation to prove financial hardship to qualify their customers to the program. Homeowners’ assertion that they were suffering from such hardship was enough. Critically, during the pandemic, a share of borrowers in forbearance kept paying their mortgage loans monthly. MBA's data revealed that, during the last 19 months, 19.3% of forbearance exits represented borrowers who continued to make payments. However, executives in the industry defend that a permanent version should be implemented with some documentation, so forbearance plans can reach those who need the relief. Another aspect to consider is the impact of forbearance plans on servicers and lenders. Amid the urgency to help borrowers, the Cares Act brought risks to these companies. For example, the liquidity pressure placed as they have to pay investors, insurers, and taxing authorities on loans in forbearance, regardless of whether the borrower actually makes those payments. Rocket Companies, parent company of Rocket Mortgage, said that while Fannie Mae and Freddie Mac issued guidance limiting the number of payments a servicer must advance in the case of a forbearance, they expect that a borrower who has experienced a loss of employment or a reduction of income may not repay the forborne payments at the end of the forbearance period. "We have so far successfully utilized prepayments and mortgage payoffs from other clients to fund principal and interest advances relating to forborne loans. However, there is no assurance that we will be successful in doing so in the coming months and we will ultimately have to replace such funds with our cash, including borrowings under our debt agreements, to make the payments required under our servicing operation," the company said in its 10-K document filed in the U.S. Securities and Exchange Commission (SEC). Rocket reported that approximately 0.8% of its serviced loans were in forbearance as of Dec. 31. Rocket was the number three issuer of Ginnie Mae-insured mortgages in February, originating $3.5 billion in volume across 15,000 loans. California-based lender and servicer Pennymac also noted similar potential liquidity challenges in its 10K document. According to Pennymac's public statements, prepayment activity has thus far been sufficient, however, prepayment activity in the future may be insufficient to cover required principal and interest advances. "Servicing advances resulting from the COVID-19 pandemic could have a significant adverse impact on our cash flows and could also have a detrimental effect on our business and financial condition," the company said in its 10K. As of December 31, 1.3% of loans in Pennymac's predominantly government-insured or guaranteed MSR portfolio were in forbearance plans and delinquent. Servicers also support that forbearance programs should be shorter under a permanent version, with an efficient exit for borrowers who did not recover their income during the forbearance period. “Forbearance, traditionally, is a tool for short-term, but we are using it now for 18 months, or even more. It was never really designed for that,” a mortgage lobbyist told HousingWire. “We have to find an effective way also for borrowers to exit forbearance, hopefully not through foreclosure or short sale.” The FHA is working on expanding the COVID-19 loss mitigation program to include the option of a 40-year loan modification with a partial claim, an acknowledgment that some borrowers exiting forbearance are still facing financial challenges. The alternative, which can help borrowers during the pandemic, may become part of the FHA’s standard modification protocols. The post Servicers endorse a permanent forbearance, but under different rules appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Neither rate volatility nor war has stymied the MSR market Posted: 03 Mar 2022 09:52 AM PST  Despite the global turmoil sparked by Russia's recent invasion of Ukraine and the volatility in interest rates that has followed, the mortgage servicing rights (MSR) market remains on track to record one of its most dynamic runs in decades, according to multiple market experts. That's because even as mortgage rates have fluctuated in recent days, they remain well above mortgage rates in prior months — really years — when the bulk of the MSRs were booked. That means prepayment speeds will continue to favor sellers and buyers alike. In addition, MSR sales are a fast and sure way for sellers — originators and other holders of the assets — to raise cash to ride out the current volatile rate environment, as well as to address longer-term earnings pressures. In the year ahead, many lenders will need to adjust operations to cope with the still-anticipated long-term uptick in rates and the resulting move away from a refinancing-dominated market and toward a purchase market, MSR experts agree. The value of MSRs, which represent a small slice of the interest rate on a mortgage, tend to increase in a rising-rate environment because higher rates stifle prepayment speeds. "For a while now [the concern] was inflation, inflation, inflation and now you throw in [Vladimir] Putin and a war, it creates a flight to quality, which pushes the ball back the other direction, and rates go back down," said John Toohig, head of whole-loan trading at Raymond James. "So, there’s a lot of noise out there — talk about a whipsaw…. In my opinion, inflation is still the bigger issue, but for now you have these two conflicting forces." The conflicting pressures whipsawing the market currently are disconcerting on many fronts, but they also should be kept in perspective with respect to the MSR market and the dynamics that make it tick. "While the [rate] environment is scary, that's the environment we find ourselves in now," said Michael Carnes, managing director of the MSR valuation group at the New York-based Mortgage Industry Advisory Corp. (MIAC). "It’s kind of one of those things that if you don’t like it, wait five minutes, and it’ll change — like the weather. "In the case of mortgage servicing rights, you have to remember that a lot of these MSRS being transacted today were 100 basis points out of the money, and if they [fall to] 85 basis points out of the money [because of rate volatility], they are still out of the money and not at serious risk for repayment. … Also, you’re looking at multiple Fed rate hikes this year, and the general market consensus is that rates will continue to go higher." Carnes added that 2022 is shaping up to be a record year for MSR bulk transactions at prices that "are very, very competitive" — with some deals commanding a price, calculated as a percentage of the MSR loan pool involved, that is up to five times the net servicing fee. He said MIAC is looking at eight to 10 potential MSR sales deals over the next couple months, "and that's a lot of volume, considering we're not the only ones transacting MSRs." In fact, this week alone, Carnes said MIAC expects to close two MSR deals with a combined value exceeding $6 billion. "One of them is a smaller $500 million government [Ginnie Mae MSR] deal, and the other is a $5.7 billion agency [Fannie Mae/Freddie Mac] deal," he said. The Prestwick Mortgage Group, an Alexandra Virginia-based MSR advisory and brokerage firm, so far in March has put at least three MSR bulk packages on the market, according to bid documents. Two of those deals involve servicing rights on pools of Fannie Mae loans with a combined value of $610 million — a $242 million deal being brokered for an undisclosed Michigan bank and the other a $368 million offering by an undisclosed Pennsylvania bank. The third MSR deal, also being offered by an undisclosed seller — an independent mortgage banker — involves both Fannie Mae and Freddie Mac mortgages with a combined value of $640 million. Tom Piercy, managing director of Denver-based Incenter Mortgage Advisors, said his firm completed a dozen transactions in January involving agency MSR loan pools with a combined value of $113.2 billion, which is close to what Incenter historically has sold in an entire year. As of late February, Incenter had put out to bid at least two an additional two MSR deals with a combined value of $24 billion and had another $40 billion worth of MSR deals in the pipeline. Although the overall impact of the current volatile market conditions is not expected to derail the exuberant MSR market, it is having an impact around the edges, according to Piercy. "The war in Ukraine has created volatility across all global markets and specific sectors of each of those markets," he said. "Here in the U.S., we have seen the Treasury market impacted as many investors, both domestic and foreign, have invested in the safety of U.S. Treasuries, which drives those rates down. "As we've seen U.S. Treasury rates — and, more specifically, 10-year Treasuries —move down, so have MSR values, but not significantly. The reason is that we have not seen primary mortgage rates move [significantly] during this volatile period in Ukraine, so this props up optimism on forward-looking prepayment curves." Piercy adds, however, that the instruments used to hedge MSR assets "are more volatile, hence the slight impact to price." Freddie Mac reported on Thursday, March 3, that the 30-year fixed-rate mortgage averaged 3.76%, down from 3.89% a week prior. A year earlier, the average rate on a 30-year fixed-rate mortgage was 3.02%. "Geopolitical tensions caused U.S. Treasury yields to recede this week as investors moved to the safety of bonds, leading to a drop in mortgage rates," said Freddie Mac’s chief economist, Sam Khater. "While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. "Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months." It's difficult to forecast with a high degree of certainty the fate of the MSR market through the balance of the year, but one MSR expert who preferred to remain on background, predicted that it will continue remain healthy at least through the second quarter of this year. Carnes has another take, informed both by the extremely favorable pricing levels for MSRs currently and the eventual need for some lenders to bolster earnings in what promises to be a diminished yet still healthy mortgage-production environment in 2022, compared with the 2021. "Right now, people are taking advantage of being able to sell these MSRs at levels that we haven’t seen since prior to the financial crisis [some 15 years ago]," he said. "As we get later into the year, their reasons for selling might be for earnings purposes. "I don’t really want to make any predictions on the staying power of this type of [MSR deal] volume that we’re seeing today. But I do believe some combination of the eventual need for earnings [stability] and the ability to sell MSRs at substantial gains will continue to keep the market strong for the duration of this year." 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| Opinion: The larger risk from a barely noticed CFPB lawsuit Posted: 03 Mar 2022 09:10 AM PST As all participants in the mortgage industry know, securitization is a critical tool for making loans to homeowners at affordable rates. The process of bundling loans and separating risks makes available fixed-rate mortgages that are fully prepayable at borrowing costs well below other forms of debt. To say that securitization is critical to American homeownership is, to say the least, a massive understatement. There are many reasons why securitization works so well and why the ability to originate and finance a loan is as reliable as turning on your tap and knowing it will produce water. In both cases, it's because of plumbing. That is, a network of connectivity hidden behind the walls that we typically take for granted. In securitization, just like in your kitchen, if you mess with the plumbing, you mess with the whole system. Tinkering with that plumbing must be done on occasion, but it also must be done very carefully. (I learned this once trying to fix a dishwasher.) It’s not just about student loansTo wit, a barely noticed case in the world of student loan securitization is currently working its way through the court system. It involves the Consumer Financial Protection Bureau (CFPB) taking actions that would make fundamental adjustments to the plumbing of securitization. Make no mistake — this is not going to be just about student loans. If the case of the CFPB vs. the National Collegiate Student Loan Trust ("NCSLT") lands the wrong way… well, let's just say it will be harder to fix than my dishwasher. One of the critical mechanisms of securitization is the separation of the underlying assets from the bankruptcy risk of the mortgage bond issuer. This separation is important for the market. In essence, it means that the investor in a securitization deal is analyzing two things — one, the credit worthiness of the underlying assets and, two, the operational capacity of the deal structure to collect and remit according to the outlined requirements. It’s the credit of the underlying borrower that mattersThe end investor does not, for example, need to price the risk that the bond issuer itself becomes insolvent. It is the credit of the underlying borrower that matters. To achieve this, a trust is established that legally separates and protects the mortgage loans collateralizing the investors' bonds from any bankruptcy of the bond issuer or other participants. These trusts operate via a special purpose vehicle, which has no employees and makes no subjective decisions. They fulfill cash flows. This legal construct is critical. Absent this mechanism upon which investors rely, all securitizations would need to be evaluated for a myriad of additional credit risks, so many that investing in them could be altogether impossible. In the NCSLT case, the CFPB is challenging the very core of this structure. Specifically, in CFPB vs NCSLT, the CFPB is attempting to assert that a trust has liability for the mistakes of a servicer. In the facts of the case, the CFPB alleges that a student loan servicer made errors in collections and borrower communication and that the servicer was subject to CFPB oversight. Fine, that is something for which the market is built. But the CFPB is taking the case one step further to say that the trust itself is also liable. This is a sea change to the entire market. Should passive securitization trusts be accountable for servicing errors?Dating back to 2017, this case has been working its way through the court system, undergoing a variety of twists and turns. As recently as last year, a district court expressed skepticism at the bureau's attempt to hold passive securitization trusts accountable for servicing errors or that securitization trusts under the plain language of the statute are a "covered person." Late in 2021, however, a new judge in the case found that these passive trusts were "covered persons" under the Consumer Financial Protection Act and therefore under the bureau's enforcement authority. No one is or would argue against servicers having responsibility to comply with all consumer protection laws. In fact, market participants demand it. Without accountability for the servicers, investors would not be able to rely on the cash flows of their investments. But if the CFPB's suit is successful, the entire edifice of securitization is at risk because if every party is responsible for every other party's operations, the structure cannot function. Again, this is not just about student loans. The ruling will likely establish precedent for other consumer asset classes. Once established, the plumbing of securitization begins to crack across consumer sectors. Investors in everything from auto loan asset-backed securities to residential mortgage-backed securities will have to somehow assess these foundational changes to risk allocation from the party responsible to the innocent fixed income bondholders. Conceivably, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac — who also establish trusts as part of their securitization mechanism — would suddenly have securitization vehicles subject to substantial liability. The same would hold true for all fixed-income investments made in collateralized securitizations held across Americans' 401(k), pension, or other savings vehicles. None of this is contemplated in the markets, and as far as we can tell, none of this was contemplated in the creation of the CFPB's authority. Everyone involved in these markets — consumers, investors, and the whole architecture in between — should take notice of this situation. While we are hopeful the right outcomes will prevail, the risks to the economy are real. If a securitization participant makes mistakes, they are subject to liability. To return to my original metaphor, if your faucet leaks, you should get it tightened. But opening the wall and taking a sledgehammer to the plumbing usually creates a larger, more costly problem that will take much longer to fix. And it rarely works out the way you want. Michael Bright is the CEO of the Structured Finance Association. This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners. To contact the author of this story: To contact the editor responsible for this story: The post Opinion: The larger risk from a barely noticed CFPB lawsuit appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| VA extends deadline for COVID-19 home retention options Posted: 03 Mar 2022 08:06 AM PST The Department of Veterans Affairs is giving borrowers impacted by the pandemic an additional fifteen months to get loan payment relief. The new deadline for home retention options is now July 1, 2023, according to a circular published by the department on Monday. The options were initially set to expire April 1, 2022. The reason for the extension was not explained in the one-page circular. A VA spokesperson said in a statement that the department remains committed to assisting veterans who experience financial hardship. "VA's Loan Guaranty Service has taken multiple steps to assist veteran borrowers in retaining their homes and overcoming their individual financial situations due to the pandemic," the spokesperson said. VA's servicers handbook outlines numerous home retention options available to borrowers including repayment plans, special forbearances, and loan modifications. There are also alternatives to foreclosure such as compromise sales and deeds in lieu of foreclosure. During the onset of the pandemic, the department moved to make changes in its handbook, relaxing some of its requirements to qualify for numerous home retention options. Here’s how to proactively maintain fair lending As economic factors continue to affect borrowers and the risk of delinquency rises, mortgage servicers need to be proactive in helping borrowers navigate their situation and loss mitigation options. Presented by: ACESSome of the changes outlined in a June 2021 circular, which will be in effect until at least July 2023, include allowing servicers to enter a VA disaster modification with a borrower. The modification must be made no later than 18 months after the date in which the COVID-19 national emergency ends, without VA pre-approval. The VA also allows servicers to offer Disaster Extend Modifications, to prolong the loan’s original maturity date for up to 18 months. The loan must be modified no later than after the date on which the COVID-19 national emergency ends. The department said at the time that they do not normally allow for the modifications to lengthen the loan maturity date by more than a year past the original maturity date without VA preapproval. Borrowers now also have more time to defer their loan payments. To offer loan deferment, a servicer must defer payment of the total amount of missed payments, including principal, interest, taxes and insurance to the loan maturity date or until a borrower refinances the loan, transfers the property, or otherwise pays off the loan, the VA said. Servicers cannot charge any added costs, fees or interest to the borrower. In July 2021, the department also implemented a partial claim payment program. The option allows the VA to purchase a borrower’s forbearance indebtedness amount, up to 30% of the unpaid principal balance of the VA-guaranteed loan. The borrower, in exchange for the VA's partial claim payment, must enter into a second lien and interest-free promissory note to repay VA the partial claim amount. The program is available through Oct. 28, 2022. According to the Mortgage Bankers Association, in the fourth quarter of 2021 the VA delinquency rate declined 57 basis points to 5.24 percent. During 2021 overall, the share of VA loans that were delinquent decreased by 205 basis points, the MBA said. Meanwhile, as of Jan. 31, 2022, the share of Ginnie Mae loans in forbearance, which includes VA loans, inched downward. The share of forborne loans decreased to 1.60% from 1.63% the previous month, the trade group’s report found. The post VA extends deadline for COVID-19 home retention options appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Finance of America asks investors to look beyond traditional mortgage Posted: 03 Mar 2022 07:45 AM PST Finance of America Companies on Wednesday told investors that it managed to increase in originations in 2021, but a more competitive landscape reduced margins and, consequently, the company's net income. Amid a tough environment for forward mortgage lending, Finance of America is betting on specialty finance & services products – reverse mortgages, investor loans, commercial loans – which are expected to deliver most of the return this year. Finance of America funded $35.6 billion in 2021, up 9% compared to 2020, mainly due to reverse and commercial businesses. However, in the fourth quarter, the total volume was $8.79 billion, down 10% year-over-year and 2% quarter-over-quarter. On paper, the company posted a $1.17 billion loss in 2021, reverting a $498 million profit in the prior year, which was virtually an impairment of goodwill and intangible assets. The action was needed to align its book value with supportable control premium, due to a sustained decline in the stock price, FoA executives said. The adjusted net income, which excludes the impairment, was $308 million in 2021, down 28% year-over-year. In the fourth quarter, the company had a $1.33 billion loss on paper due to the impairment, compared to a $50 million profit in the prior quarter and a $152 million profit in the same quarter of 2020. The adjusted net income was $70 million, a 7% decline quarter-over-quarter and down 43% year-over-year. During a conference call with analysts, Patti Cook, the outgoing chief executive officer, said Finance of America delivered a "solid performance" in its first year as a public company, with the specialty finance and services business standing out while the mortgage industry is facing a tough environment. The originations landscape is shifting – is your business ready? HousingWire recently spoke with Jon Gerretsen, SitusAMC Managing Director of Residential New Originations and Fulfillment Services, about the home buying boom and how lenders can gain market share and drive profitability in a white-hot purchase mortgage market. Presented by: SitusAMCIn 2021, the company's best performance was in commercial originations, increasing from $855 million to $1.7 billion, up 107%. Reverse originations increased 57% year-over-year, to $4.26 billion. About $29.6 billion of the total funded last year came through its traditional forward mortgage lending arm, which increased 2% in comparison with the previous year – in total, 55% of the mortgage volume was in refinancing last year, filings show. In the fourth quarter, however, mortgage originations declined 22% compared to Q4 2020 and 7% in comparison to the Q3 2021, to $6.89 billion. Margins in the mortgage business declined from 3.88% in 2020 to 2.86% in 2021. Cook said margins are declining because the company is originating more through the wholesale channel than the retail division. Like many of its competitors, FoA has reduced headcount to account for reduced volumes. "We have taken steps to position our mortgage business for dramatically reduced refinance volume, while still maintaining our ability to benefit from expected growth in the purchase and nonagency markets," she said to analysts. "This quarter, our mortgage segment posted a loss, which can be primarily attributed to our nascent home improvement business." The company's strategy is to sell more specialty finance and services products through mortgage channels. It also has a home improvement business. The revenue of these products attributable to mortgage went from $46 million in 2019 to $96 million in 2021. The segments are expected to remain the major driver of profitability in 2022, Cook said. During the conference call, an analyst asked why the company's stocks performance is disconnected to executives' optimism with the business. Cook answered the company has been consistent in telling specialty finance and services products will drive the company earnings during mortgage cycles. "People have to believe that the trend continues. We should start to be distinguished from the peers." Finance of America shares were trading at $3.39 around 10 a.m. EST on Thursday, up 4.46% from the prior day. The company made its public debut in April by merging with the special purpose acquisition company Replay Acquisition Company valued at $1.9 billion. It began trading at $10 a share. On Wednesday, its market value was $191.5 million. In early February, the company announced that Cook will retire as soon as the company finds a successor. Cook will remain on the board of directors until the annual meeting of stockholders. The post Finance of America asks investors to look beyond traditional mortgage appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage rates decline to 3.76% amid Ukraine conflict Posted: 03 Mar 2022 06:54 AM PST The average 30-year-fixed rate mortgage declined to 3.76% for the week ending March 3, down from 3.89% in the previous week, amid the geopolitical tensions caused by Russia’s war in Ukraine, according to the latest Freddie Mac PMMS Mortgage Survey. A year ago, the 30-year fixed-rate mortgage averaged 3.02%. The PMMS report is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. The survey said buyers paid for 0.8 points on average. According to Sam Khater, Freddie Mac's chief economist, investors moved to the safety of bonds due to the geopolitical conflict, leading the U.S. Treasury yields to recede this week, which impacted mortgage rates. "While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months," Khater said. Mortgage rates usually move in concert with the 10-year Treasury yield, which reached 1.86% yesterday, compared to 1.94% on the previous Wednesday. The 15-year-fixed-rate mortgage averaged 3.01% last week, down from 3.14% the week prior. A year ago at this time, it averaged 2.34%. Economists have said that the war in Ukraine could bring a short-term reduction in mortgage rates, as investors flock to safe haven assets like mortgage-backed securities and bonds. Staying nimble in a fast-paced market with the right mortgage technology In the rapid-fire, volatile mortgage marketplace, lenders need technologies to help them remain nimble and successfully navigate constant change. Advanced product, pricing and eligibility technology creates efficiencies and helps lenders compete in a fast-paced market. Presented by: Black KnightHowever, longer term inflation brought on by the conflict, mainly via oil prices, will cause mortgage rates to rise. Federal Reserve Chair Pro Tempore Jerome Powell is expected to raise rates by 25 basis points this month. The first rate increase is expected in a little less than two weeks, coinciding with the March Federal Open Markets Committee meeting, scheduled for March 15 and 16. The expectation of higher rates are reducing borrowers' appetite for new loans. Mortgage applications decreased 0.7% for the week ending Feb. 25. Compared to the same week one year ago, applications dropped 41.7%. The mortgage industry has entered a purchase era, with refinance applications declining last week below 50% of the mix for the first time since June 2019, the Mortgage Bankers Association (MBA) reported on Wednesday. The post Mortgage rates decline to 3.76% amid Ukraine conflict appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fed’s Powell backs rate hike of 25 basis points Posted: 02 Mar 2022 11:52 AM PST Despite the ongoing conflict in Ukraine, Federal Reserve Chair Pro Tempore Jerome Powell plans to raise rates by 25 basis points this month. The first rate increase is expected in a little less than two weeks, coinciding with the March Federal Open Markets Committee meeting, scheduled for March 15 and 16. President Joe Biden also outlined a plan to reduce inflation including by reducing prescription drug and childcare costs, and creating affordable housing, at the State of the Union address. Biden said he would "go into more detail later.” In the short-term, however, the federal government's primary toolkit to reduce inflation is rate reductions by the Federal Reserve. That was the focus of a marathon House Financial Services Committee hearing Wednesday. At the three-plus hour hearing, Powell said he would “support a 25 basis point rate hike." He also said that it's possible the central bank would move even more aggressively, by raising rates more than 25 basis points, if inflation remains elevated. Analysts had previously predicted rate hikes of as much as 50 basis points in March. Here’s how to proactively maintain fair lending As economic factors continue to affect borrowers and the risk of delinquency rises, mortgage servicers need to be proactive in helping borrowers navigate their situation and loss mitigation options. Presented by: ACESLawmakers also questioned Powell on how the conflict in Ukraine would impact the Fed's policy. Economists have said that the conflict in Ukraine could bring a short-term reduction in mortgage rates, as investors flock to safe haven assets like mortgage-backed securities and bonds. But longer term inflation brought on by the conflict will cause mortgage rates to rise. Powell, in his testimony, said the "near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain." "Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways," Powell said. Powell also took questions from lawmakers about housing affordability. While housing policy is not the realm of the Fed, controlling inflation is part of its dual mandate. Since housing costs make up a large portion of indices measuring inflation, the Federal Reserve is concerned with rising home prices. Home prices, Powell said, will grow more slowly as the federal funds rate rises, pulling mortgage rates up with it. But he has no expectation that home prices would return to pre-pandemic levels, he said. "We won't get back to pre-pandemic levels," said Powell. "We're not trying to get prices back down, we're trying to limit future prices." Some members of Congress also commented on the future of Powell's re-nomination to the Federal Reserve, which hit a snag two weeks ago when Republican Senate Banking Committee members refused to show up for a vote. Republican members blamed the debacle on Democrats for refusing to split up the slate of nominees, to allow some of the nominees to be confirmed. Republican members have said they will not allow the vote to proceed until Sarah Bloom Raskin answers questions about business dealings. Biden, in his Tuesday evening address, urged lawmakers to go ahead with the nominations in light of concerns over rising prices. "And while you're at it, confirm my nominees for the Federal Reserve, which plays a critical role in fighting inflation," Biden said. Powell will also testify before the Senate Banking Committee on Thursday. The post Fed’s Powell backs rate hike of 25 basis points appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bye, bye refi: Purchase mortgage apps overtake refis Posted: 02 Mar 2022 04:00 AM PST It's official: the mortgage industry has entered a purchase era, with refinance applications declining below 50% of the mix for the first time since June 2019, the Mortgage Bankers Association (MBA) reported on Wednesday. The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased to 4.15% from 4.06% the week prior. For jumbo mortgage loans (greater than $647,200), rates rose to 3.88% from 3.84% the week prior. Why lenders should think about non-QM now, not later Agency rates are on the rise and refinance volume is down. Originators who had their best year in 2021 will have to utilize something else to make up for this loss in 2022 and non-QM can be the answer. Presented by: Angel Oak"Refinance share of applications dipped below 50%. Although there was an increase in government refinance applications, higher rates continue to push potential refinance borrowers out of the market," Kan said in a statement. But the Federal Reserve was already balancing efforts to slow inflation without cooling the economy too much by rising rates this year. Experts expect inflation will be exacerbated by the conflict, especially considering sanctions on Russia, an oil-producing nation. How the Fed 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 0.25%. The post Bye, bye refi: Purchase mortgage apps overtake refis appeared first on HousingWire. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 HousingWire TECH100 Mortgage Honorees Posted: 01 Mar 2022 10:00 AM PST  The 2022 TECH100 Mortgage list of honorees spotlights the innovators that are making the housing sector better and more sustainable by increasing efficiency, improving borrower experience and bringing elasticity to mortgage origination and servicing processes. These organizations were measured based on each company's key technology, quantifiable metrics and client impact. As you look through this year’s list of honorees, it becomes increasingly clear that the real winners in today's housing economy have latched onto the concept of sustaining innovation. These are the companies and solutions demonstrate a new era of innovators that understand the dynamics of the housing industry. The following table presents the full list of 2022 TECH100 recipients. Click through the list of honorees to see their accomplishments and how their driving innovation within housing.
The post 2022 HousingWire TECH100 Mortgage Honorees appeared first on HousingWire. |
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