Sunday, June 19, 2022

Mortgage – HousingWire

Mortgage – HousingWire

Bank groups: CFPB should keep nose out of bank mergers

Posted: 17 Jun 2022 01:43 PM PDT

A banking regulatory agency asked whether the Consumer Financial Protection Bureau should be involved in deciding whether to green light bank mergers.

The industry’s answer? A resounding “No.”

Trade groups such as the American Bankers Association and the Independent Community Bankers of America, say that doing so would be beyond the scope of the CFPB, which has authority over certain industries, including mortgage, as well as lenders with more than $10 billion in assets.

The pushback from banks came after the Federal Deposit Insurance Corporation (FDIC) announced it is mulling changes to regulations that govern bank merger transactions and asked the industry for input. The Biden administration last year asked federal agencies — which have not denied a bank merger in the last 15 years — to update their bank merger policies.

The FDIC asked for feedback on whether it should consult with the CFPB when it is considering the “convenience and needs,” or the community impact, of a potential merger. The comment period ended in May.

Fair housing advocates have argued that the assessment of mergers’ community impact, required in the Bank Merger Act, element has been largely ignored in the evaluation of bank mergers.

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The ABA, in its response to the FDIC request for input, said that there are already regulations that govern how mergers are evaluated and that "specific agency responsibilities are well defined, with appropriate consideration of [Community Reinvestment Act] performance among them."

Banking regulatory agencies factor in a bank’s past CRA performance, which shows how well banks serve low- and moderate-income borrowers. But while there is no example of a bank merger failing due to poor CRA performance, multiple banks have failed their CRA exams and subsequently completed successful mergers.

"A separate role for the CFPB would therefore be superfluous to existing considerations, inconsistent with the Bank Merger Act, and beyond the scope of the CFPB's own authorizing legislation," the ABA said.

The Bank Policy Institute (BPI), the Consumer Bankers Association and the MidSize Bank Coalition of America in a joint letter to the banking regulator echoed that message.

The trade groups said that there may be "special situations" where the FDIC should consult the CFPB, such as in matters pertaining to enforcement actions against potential applicants.

However, the trade groups say that there is "no statutory basis" for federal bank regulators to consult with the CFPB on whether any merger satisfies the convenience and needs standard.

In the trade group’s view, participation by the CFPB in the application process "would extend beyond the role that Congress delineated for the CFPB."

"When Congress established the CFPB in the Dodd-Frank Act, there was no suggestion in the statute or legislative history that the CFPB should have any sort of concurrent role respecting mergers, or even be accorded a special right of comment," the trade groups said in their letter.

However, some outside of the banking industry, like the liberal think tank Center for American Progress, argue that the CFPB should have a more prominent seat at the table for bank merger reviews.

The CAP said that federal banking agencies have "placed insufficient emphasis on [the convenience and needs factor] despite significant evidence that bank mergers have negative effects on consumers and communities."

"We believe the CFPB should weigh in on every bank merger involving institutions it examines or mergers that would create a CFPB-examined bank (i.e., banks with more than $10 billion in assets)," the advocacy group said.

The group said that consumer compliance in recent years has "evaporated as a constraint on bank mergers" and that the CFPB has "the expertise and examination data to evaluate whether merging banks have properly complied with consumer financial protection laws.”

The FDIC's request for comment coincides with renewed attention to bank mergers and redlining.

In his July 2021 order, President Biden asked banking regulatory agencies and the Department of Justice to make a plan for the "revitalization of merger oversight."

The order said that over 10,000 banks have been shuttered in the past four decades in minority communities, partly due to mergers and acquisitions. The closing of these banks has impacted low-income communities, the administration said.

Concurrently, senior officials from the DOJ, CFPB and the OCC have said rooting out "modern-day redlining" is a top priority for the administration. In December 2021, a disagreement between the CFPB and the FDIC over the FDIC’s bank merger bylaws resulted in the ouster of its chair, Jelena McWilliams.

In a sign that there may be changes ahead, Lisa Cook, the first Black woman to serve on the Board of Governors of the Federal Reserve System, recently abstained from voting on a bank branch opening application. Community groups have said that the bank failed to provide small business and consumer lending services to African American communities in Southern Dallas.

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Industry uproar over 50 bps fee on GSE securities

Posted: 17 Jun 2022 01:19 PM PDT

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Mortgage industry stakeholders say a new 50 basis point fee on some Fannie Mae and Freddie Mac securities runs counter to the premise of a uniform mortgage backed security.

It's a "money grab," said one industry analyst, who requested anonymity to stay on good terms with the government sponsored enterprises, who together back the majority of the single-family mortgage market.

Stakeholders argue this policy will damage the uniform mortgage backed security process, which allows two companies, Fannie Mae and Freddie Mac, to issue a common security composed of separate single securities. Multiple analysts, former FHFA and GSE officials contacted for this story requested anonymity to speak candidly and avoid damaging relations with the GSEs.

Fannie Mae did not return a request to comment. Freddie Mac declined to comment.

Since 2019, the GSEs, while entirely separate companies, have issued uniform securities. This is accomplished by repackaging existing single securities to issue Supers, or level 2, securities. Those can include securities backed by either Fannie Mae or Freddie Mac loans. Starting July 1, each enterprise will charge a 50 bps fee on the portion of the security made up of the other enterprise's collateral.

Freddie Mac, in its press release, explained how the new policy would work. Starting July 1, if Freddie Mac were to create a $500 million Freddie Mac security from a combination of $200 million of Fannie Mae-issued commingled securities and $300 million of Freddie Mac-issued commingled securities, Freddie Mac would charge a 50 bps fee on the $200 million of Fannie Mae-issued collateral.

The move aligns with a portion of the new capital rule that assigns a 20% risk weight to securities issued by one GSE and included in securities created by the other. That policy is a holdover from the previous FHFA director, Mark Calabria.

An FHFA spokesperson said that the new fee is part of a "broad, comprehensive review of the Enterprises' pricing framework," which has so far focused on loan-level pricing. In light of the Enterprise Regulatory Capital Framework and associated capital planning rule issued earlier this month, the spokesperson said, the GSEs are "evaluating their long-term capital allocation strategies."

The agency spokesperson also said the new fee will "not impact borrowers," and will have "no anticipated impacts on UMBS liquidity, pricing, or execution."

The Structured Finance Association, which represents stakeholders in the securitization industry, sharply disagreed with that assessment.

In a press release, the trade group said that the fee "appears to undermine the purposes of the UMBS, which risks impairing the fungibility of that security and the liquidity of the broader TBA market, thereby negatively impacting borrowers."

The trade group urged Fannie Mae and Freddie Mac to "delay and reconsider" the impact of the fee on borrowing costs before implementing it.

Jaret Seiberg, a housing finance researcher at Cowen Washington Research, drew a connection between the new fee and the GSEs' new emphasis on mission borrowers, in a research note he disseminated on Thursday.

“We have long known that FHFA Director Sandra Thompson is an affordable housing advocate," Seiberg wrote. "Until today, we didn’t think her agency would push this part of the mission at the expense of market confidence.”

Other industry stakeholders, however, see no connection to the subsidization of mission borrowers. Seiberg did not return requests to comment.

Industry stakeholders had previously warned of this outcome, when the idea of a 20% risk-weight was first proposed, in 2020.

Ed DeMarco, president of the Housing Policy Council, wrote in an August 2020 comment letter on the Enterprise Regulatory Capital Framework that the 20% risk weight would "result in higher capital costs for the Enterprises, which would incentivize higher guarantee fees and lower returns on UMBS, both of which will lead to higher costs for homebuyers."

"Despite these higher costs for market participants, there does not appear to be a corresponding risk reduction to the overall housing finance system," DeMarco wrote.

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5 “back to basics” business actions loan officers should take today

Posted: 17 Jun 2022 12:16 PM PDT

It's a tough time to be a loan officer. Refinance activity is gone, housing inventory continues to be at record lows and interest rates remain on the rise. It is the type of perfect storm that will show the industry who the true survivors are and who has been riding the refi wave for the last two years.

Amid all the chaos, loan officers may be pressed to get creative when it comes to generating new business. Some have pivoted to become a niche loan officers, focusing on specific product offerings, such as reverse mortgages or non-QM loans. Some have taken to TikTok to make funny videos about why they are the best loan officer in the land. Others have decided to just pack it up and switch careers.

For those who want to stay the course and remain top of mind, it is time to get back to basics.

Stop Selling!

The best loan officers are those who aren't loan officers. Why? Because they aren't selling a single thing. They are offering a service and they unequivocally believe in that service. There is a saying that "when you believe in what you are selling, you aren't selling at all."  If you feel you must sell anything, focus on selling yourself. There are thousands of loan officers out there. What makes you the best loan officer? Is it your knowledge of different products? Is it your passion for helping first-time home buyers? Are you involved in your community? Whatever it is that makes you special, make that known! If you do not believe in what you are doing, and don't feel good about it at the end of the day, then you just might be in the wrong business.

Build Relationships

Your client is more than just another unit or commission. They are probably your friend, your neighbor, your pastor, your mom, or even your kids. Some of the best loan officers do not have to spend any money on marketing because they have focused their business on building relationships with their clients. They spend the time to get to know them, understand their needs, their desires, their hopes and dreams. Through this process, the client develops a relationship with you, and sees you as more than just a loan officer. You are part financial advisor and part dream maker. You helped them realize their dream, and you will be who they refer to their friends and family. You will be the first person they call when it is time to upgrade, downsize or relocate. All because you took the time to build the relationship.

Keep Learning

This industry is in a perpetual state of change, and if you don't keep up, you will get left behind. Stay apprised to changes in guidelines, the hottest products, the hottest markets, and the overall financial landscape. Spend some time with an underwriter and really dig into how they look at a loan file or appraisal. Open your mind to loans that may not fit into the agency guideline box.

Know Your Pipeline

As the saying goes, "garbage in, garbage out!" If you are flying by the seat of your pants and have no idea what is going on with your prospects, you will quickly learn that you have lost all control of the narrative. Keep your CRM up to date, cultivate your pipeline, and lay the groundwork for loans that will come to fruition over the next several months, or even years. Remove the chum and feed the shark!

Embrace Social Media

Let's face it – if you haven't jumped on the social media train yet, you are fighting a losing battle. Even if you learned early on that social media is the wave of the future, you must stay on top of the newest trends. Some of those trends are here for the long haul, while some may just be a flash in the pan (think "Clubhouse"), but at the end of the day, you must know how to connect with your prospects. Social media should be a permanent fixture in your marketing strategies, and above all, know your audience. What works on Facebook may not work on YouTube!

Conclusion

Being a successful loan officer will never be a "set it and forget it" endeavor- it requires constant nurturing and evaluation. While you may have to shift your position every now and then to move with the market, the core of your process should remain constant. Stick to the basics and you will be able to ride any market wave that comes your way!

Leora Ruzin, CMB, AMP is the Senior Vice President of Lending at Coloramo Federal Credit Union.

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HW+ Member Spotlight: Amanda Hill

Posted: 17 Jun 2022 12:11 PM PDT

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This week's HW+ member spotlight features Amanda Hill, head of mortgage solutions at Reggora. Prior to her role at Reggora, Hill held senior management positions at Blue Sage Solutions and Ellie Mae.

Below, Hill answers questions about the housing industry:

HousingWire: What is your current favorite HW+ article and why?

Amanda Hill: Lenders see appraisal modernization as a top priority by Maria Volkova. This was fascinating to me since I recently joined Reggora and I see so many opportunities for us to help lenders with this. It truly is time for lenders to consider how technology can improve this part of the mortgage process and reduce turn time.

HousingWire: What is your most useful tech tool?

Amanda Hill: My cell phone! I wish I could offer something more exciting, but it is just the most versatile, handy tool in my arsenal!

HousingWire: What has been your biggest learning opportunity?

Amanda Hill: My first job for a small but innovative bank when I was still in college…I started as a teller, but when I was bored, they taught me to assist in other areas and lending captured my interest! They had a young executive team who valued fresh ideas and were not afraid to train inexperienced novices like me.

I changed positions every 6-9 months, learning more at each level, and I eventually ran the entire mortgage lending department. They had a unique approach to hedging and though I never imagined I would work in finance as a kid, it was an amazing journey. I learned the value of taking risks, not fearing change and learning from a collaborative team.

HousingWire: What is the best piece of advice you’ve ever received?

Amanda Hill: "Life begins out of your comfort zone so go ahead and jump!"

HousingWire: What do you think will be the big themes for the housing market in 2022?

Amanda Hill: There will be a lot of eyes on rising mortgage rates and inventory of available homes for sale.  Homeowners who bought or refinanced when rates were much lower may reconsider planned moves or financing changes due to higher rates and limited inventory.

Similarly, first-time buyers may decide to delay their searches until the market provides more options, both in terms of inventory as well as home prices, and rates decrease. This creates a tough environment for lenders who will need to pivot to be as efficient and attract as many borrowers as possible.

With this increased competition in the market coupled with a slow-down in mortgage activity, we'll also see savvy lenders take the opportunity to reevaluate and modernize their tech stacks. Now is the time for lenders to create the fully digital mortgage experience that the market is craving.

HousingWire: What keeps you up at night and why?

Amanda Hill: The soaring price tags on homes for sale and rent. The challenges this creates financially for many families while excluding them from the goal of homeownership, or simply having a decent place to call home, is real. Add inflation to the mix and you realize that the impact on our family, friends and neighbors is daunting.

HousingWire: What's one thing that people aren't paying attention to that you think they should be paying attention to?

Amanda Hill: Obviously I'm biased on this one, but I think people should be paying more attention to the shifts happening around appraisal. The GSEs are implementing big changes this year that will allow for modernization to kick into high gear. If lenders don't prepare now by adopting the right workflows and technology, they're likely to be left behind. 

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For more information on HW+ benefits, click here.

To view past issues of our HW+ exclusive HousingWire Magazine, go here.

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Opinion: Do loan officers need more tech than they have now?

Posted: 17 Jun 2022 11:59 AM PDT

I am about to say something in 2022 that no one in software design and process management would say. Do loan officers need more technology than they currently have? Will new technology change anything?

Let that sit a second. After all, my friends probably assume I hit my head and need to reconsider my job choices. However, I am going somewhere with this. 

Most loan officers do not believe they need more tech than they have now. The absolute truth is they don't use much now at all and not because business is slow. Right now, they have 99.99% of what they need to do their jobs. Some loan officers can take a paper application, hand type it into a system, like Encompass, upload docs manually, and the file is ready.

They can access pricing and credit via a portal or website, and they are done. That process is one that has been the same for 25 years. They sell our product, build trust, offer rates and terms, get "buy in" and commitment from a borrower and pass to operations. That process doesn't need more than what they have.

All mortgage companies have some software package that does the above, and it all worked during the the refi boom. Everyone has been getting paid, so why change it? It isn't broke.

Nothing we have is broken

They do not need more technology. Nothing we have is broken. The tech we have that isn't used isn't about training or talent but the parts that are optional are not used.

An example is that, although there are self-checkouts in every store, the line to have the employee check you out is still the longest. Self-checkout is faster, easier, and there are 10 open registers instead of two. In the end, you’ll have the same bags in your trunk and pay the same amount for the same items as the self-checkout guy.

I called a friend over at Bank of America to talk about this. We discussed the GPS or Global Processing System they used to have at the bank. Function keys in a DOS-based green world was how all loans were done in 2010. 

Billions of dollars in closed loans went through this system. It worked, in theory. If your cash out was off by $10, you had to click through every field in about 25 screens to get to the loan balance to change it, then another 10 screens to get to the submit button. Then, you could see if it was right. It worked like a charm. I am pretty sure I worked one afternoon for three hours doing this to get a $1.02 overage to be $0. I also wrote a script that clicked through the first 25 screens, then a second to handle the last 10.

Being a loan office hasn’t changed

Being a loan officer (LO) hasn't changed. We’ve added some things in recent years that make the customer experience better, such as online applications, smartphone alerts, fast and easy document uploads, access to bank statements without uploads and digital disclosures. Loan officers have had applications pop up in their system complete with credit and docs before they say one word to a borrower. This makes it easier and faster for everyone.

I think there is a fear that if we cut any more of the process, we won't need the LO at all. But, remember this: People still stand in the grocery line to have their items scanned rather than use the self-checkout. There is a place for the personal touch.

Don’t fear the process

The LO is first inch in a yardstick. The process of mortgage loans requires technology that helps processors, underwriters, closers, funders, insurers, secondary, and more. Tech increases on the LO side may have huge time lifts for the other parties and increase the customer experience, but have no impact on how the loan is booked at all.

The flip of this is that we come up with amazing technology to close a loan but the title company refuses to use it. Does that impact the LO? Does it impact the loan? No. Is it something we'd like more people to use? Yes. Would it enhance a borrower's experience? Definitely.

So, my question was, does the LO need more technology than they have now? I am not and have not been a loan officer for many years. I know we will not get everyone to change, and I know there are borrowers out there who we win by staying the same. The next question is not do we ‘need’ the change but do we ‘want’ the change and, then, will change help?

BJ Witkopf is a mortgage specialist with Assurance Financial.

This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners.

To contact the author of this story:
BJ Witkopf at bj@witkopf.net

To contact the editor responsible for this story:
Sarah Wheeler at sarah@hwmedia.com

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Wells Fargo’s rapidly shrinking mortgage business

Posted: 17 Jun 2022 09:22 AM PDT

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Wells Fargo this week warned investors the bank’s mortgage business could drop by almost 50% in the second quarter from the prior quarter.

Wells Fargo Chief Financial Officer Mike Santomassimo said higher interest rates have greatly reduced the refinancing market – currently down about 82% from the prior year – and home affordability remains a challenge in the purchase market.

“As you would expect, you’re seeing the refinance volume fall significantly — no surprise,” he said at the Morgan Stanley U.S. Financials, Payments & CRE Conference Tuesday. “You’re still seeing some activity in the purchase market, which is good, but affordability does start to become an issue as rates continue to increase.”

The San Francisco-headquartered bank, the 4th-largest U.S. mortgage lender by volume and largest depository, originated $37.9 billion in the first quarter of 2022, down 21% quarter-over-quarter and 27% year-over-year. The share of refinancings declined from 64% in the first quarter of 2021 to 56% in the same period of this year.

Mortgage banking noninterest income in the first quarter totaled $693 billion, down from $1.3 billion year-over-year. Revenue from home lending fell to $1.5 billion last quarter, down 33% from the prior year.

Those figures will look even worse in the second quarter, Santomassimo told Morgan Stanley conference attendees. Rates on conventional mortgages are now in the 6% range, which will further dampen demand.

Executives at Wells Fargo this year repeatedly have said the home lending division would shrink.

The company recently laid off several hundred workers from its home lending division, citing a need to reduce capacity amid lower origination volumes.

Wells Fargo also has been battling a series of controversies related to minority borrowing and hiring practices. In March, Bloomberg reported Wells Fargo in 2020 rejected more than half of Black homeowners’ refinancing applications. The bank’s 47% approval rate for Black customers was the lowest among major lenders, according to Home Mortgage Disclosure Act (HMDA) data. Its approval rate of white applicants for refis was 72% in 2020.

Wells Fargo denied any wrongdoing and said its underwriting practices are consistently applied regardless of the customer’s race or ethnicity.

At another conference hosted by Bernstein Research in June, CEO Charlie Scharf said Wells Fargo is “in the process of changing, strategically, where mortgage fits in.”

Scharf cited lending standards for conforming loans set by Fannie Mae and Freddie Mac as one of the reasons for a smaller footprint.

“We basically process the applications according to guidelines that the GSEs tell us we should,” Scharf said. “When those produce results, the people like them, we get the kudos for it. If they don’t like them, we get the blame for it, even though we’re just following other people’s underwriting guidelines.”

Scharf also argued depository banks are held to higher standards than nonbank mortgage lenders.

“It’s very different today running a mortgage business inside the bank than it was 15 years ago, and I think appropriately so,” he said. “That does force you to sit back and say, ‘What does that mean? How big do you want to be? Where does it fit in?'”

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Fannie Mae, Freddie Mac impose new fee for some securities transactions

Posted: 16 Jun 2022 02:30 PM PDT

Fannie Mae and Freddie Mac plan to charge a new 50 basis-point fee for certain structured-finance offerings that use co-mingled agency securities as the underlying collateral. 

The fee will apply to securities issued through structured-finance offerings known as Supers, and separately, real estate investment conduits (REMICs). Through these vehicles, the uniform mortgage-backed securities (UMBS) of one government-sponsored enterprise (GSE), such as Fannie Mae, are co-mingled with UMBS from the other, such as Freddie Mac, and serve as collateral for securities issued through the Supers or REMICs.  

Supers are a type of structured finance transaction that include UMBS securities from both GSEs that have the same payment pass-through rate. REMICs are a type of multiclass-securities vehicle in which interest and principal payments from the underlying mortgage collateral are structured into several classes, with each class of securities having differing pass-through rates, average life, prepayment tendencies and final maturity dates. That structure allows investors to choose the class of security that best meets their investment and portfolio needs.

"The [new 50-basis point] fee is structured to apply only to the portion of the Supers or REMIC backed by the other GSE's collateral," Fannie Mae states in its announcement of the new policy, which becomes effective July 1. "This fee is designed to align with the cost of required capital for Fannie Mae guarantees of Freddie Mac UMBS collateral under the [new] enterprise regulatory capital framework.

"The [one-time] fee is intended to be charged at the time of settlement of the security," Fannie Mae's statement continues, "though we reserve the right to charge this fee post-settlement if our final view of the collateral demonstrates commingled securities are present."

The new capital rules assign a 20% risk weight to securities issued by one GSE and included in Supers or REMICs created by the other GSE. "The charge to create Fannie Mae Supers and REMIC securities that include solely Fannie Mae collateral remains unchanged, as no additional capital charge applies to such collateral," according to Fannie Mae's announcement.

The Mortgage Bankers Association (MBA) in comments submitted in 2020, recommended no risk weight for such securities transactions should be put in place under the new capital framework. Adam DeSanctis, a spokesman for the MBA, explained: "Any difference between the required capital for a [GSE's] own securities relative to those issued by another [GSE] could lead to different treatment and actions that weaken the aggregate UMBS market.”

The MBA will continue gathering information about the policy change, “and will engage in advocacy to ensure the continued smooth functioning of the UMBS market," he said.

Freddie Mac's announcement of the new 50 basis-point fee states that it "will be effective for applicable commingled securities issued on or after July 1, 2022," with the commingled securities defined as a "Supers or REMIC issued by Freddie Mac or Fannie Mae (each, an enterprise) that is backed, in whole or in part, by collateral (i.e., securities) issued by the other enterprise."

"This fee is designed to align with the cost of required capital for Fannie Mae guarantees of Freddie Mac UMBS collateral under the enterprise regulatory capital framework," according to the Freddie Mac fee announcement.

HousingWire Senior Reporter Georgia Kromrei contributed.

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GAO presses HUD on longstanding IT issues, Ginnie staffing

Posted: 16 Jun 2022 02:13 PM PDT

The Government Accountability Office this week reminded the Department of Housing and Urban Development (HUD) of some ways it could improve its operations.

Among the recommendations, the congressional watchdog said HUD needs to improve internet technology management and that Ginnie Mae, a guarantor for federally backed loans, needs to address “staffing-related challenges.”

Both points are reiterations of what the GAO previously flagged in 2014 and 2019, respectively. In the report, HUD said that it was making an effort to address the GAO’s recommendations.

Although some of the GAO’s recommendations have been outstanding for nearly a decade, HUD recently said in its strategic plan that it intends to close “outstanding audit findings, strengthen governance, and improve processes.”

It has a long list of recommendations to address before it can accomplish that. Among the most acute of challenges, from the GAO’s perspective, is the Department’s IT systems. GAO said in its report that HUD has “long experienced shortcomings in its IT management capability."

The GAO complained that the department still hasn't implemented an efficient way of tracking data on cost savings and efficiencies resulting from IT investments. Doing so would allow HUD to track whether IT investments are delivering expected benefits, the GAO argued.

Why now is the time for lenders to 'retool' their IT environment

After record-breaking volumes in 2020 and 2021, mortgage professionals are now feeling a pinch once again. HousingWire Content Solutions Managing Editor Maleesa Smith had the chance to talk with Bob Jennings, executive of underwriting solutions for CoreLogic, who shared what lenders should prioritize in this environment. 

Presented by: CoreLogic

HUD has before had difficulties accurately reporting its cost savings, according to the GAO. In the past, the department reported governance-related cost savings that was "not always accurate, consistent, or substantiated," the GAO said. Without having a mechanism to identify and track this information, HUD can't effectively monitor outcomes of its activities, it said.

HUD has taken some steps toward addressing this issue. In February, HUD told the GAO it had plans to collect quarterly data on IT-related cost savings.

HUD also said that improving its information technology infrastructure is a "key objective" to strengthen its efficiency in its strategic plan for the next four years.

But despite the stated plans, the GAO said HUD has not yet produced any internal policies to accomplish the tracking of IT-related cost savings.

The GAO also said that Ginnie Mae, a corporation inside of HUD, relies heavily on contractors for many functions, yet does not analyze the cost of using contractors. The GAO said that analysis would help it decide whether to use in-house staff instead of contractors for certain functions.

In March, in response to GAO's recommendation to get a handle on its contractor costs, Ginnie hired a contractor, the report said. The GAO said results of that contractor’s analysis are expected sometime this summer.

One of the reasons for Ginnie’s reliance on contractors is budgeting constraints. Ginnie Mae can use certain fee revenue to fund contractors but not its own in-house staff. Changing that would require approval from both HUD and Congress.

For now, GAO said Ginnie Mae is moving to adopt an alternative pay option and is working with HUD on a plan to implement it. This option would allow Ginnie to pay higher salaries for certain in-house positions.

The GAO also recommended HUD hash out an agreement with the Federal Emergency Management Agency and the Small Business Administration to identify barriers to disaster recovery access and disparate outcomes in disaster-affected areas. HUD told the GAO that such an interagency agreement existed, but it had expired.

The GAO also recommended HUD establish a plan to mitigate and address risks within HUD’s lead paint compliance monitoring process. That specific recommendation has been open since 2018.

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Fannie Mae cuts 2022 industry forecast (again)

Posted: 16 Jun 2022 12:15 PM PDT

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Fannie Mae lowered its projections of mortgage originations and home sales for 2022 as mortgage rates continue to climb.

Fannie Mae's Economic and Strategic Research (ESR) Group revised its projected mortgage origination volume to $2.6 trillion in 2022 and $2.2 trillion in 2023. In May, Fannie Mae dropped its mortgage origination volume projection for 2022 to $2.7 trillion and $2.25 trillion for 2023, down from the respective $2.8 trillion and $2.41 trillion projected the previous month. 

The GSE's projections for refinance originations this year remain at $797 billion, unchanged from last month. Fannie Mae estimates that with rates at 5.23%, per the agency's 30-year fixed rate survey reading, less than 2% of all outstanding loan balances have a refinance rate incentive of at least 50 basis points. Since that reading, rates have climbed on conventional mortgages north of 6%.

In 2023, Fannie expects refinance originations to go up by $24 billion or 4.8% of the entire originations volume as mortgage rates are predicted to stabilize that year.

Higher mortgage rates are the housing market's "primary constraint," the agency said in a statement Thursday. Total home sales are expected to fall 13.5% to 5.96 million units in 2022, sliding down even further from its 11.1% projected decline in May. About 5.29 million homes are expected to sell in 2023, down from the prior forecast of 5.42 million. 

Consumers are feeling the sudden rise in interest rates as employment growth slows and stock market valuations fall, said Doug Duncan, Fannie Mae's senior vice president and chief economist. "Nowhere is this more evident than in housing affordability measures, with the prospective monthly payment on a typical new mortgage climbing dramatically."

Existing home sales dropped 2.4% in April from March to 5.61 million, according to Realtor.com. A total of 591,000 new homes were sold in April, falling 16.6% from the previous month, the lowest level in two years. 

Regarding the overall economy, Fannie Mae marginally downgraded the GDP forecast for 2022 to 1.2%, from the 1.3% projected in May. While the agency raised the second quarter GDP to 2.5%, the GDP for 2022 is offset by a slower growth forecast in the latter half of the year as inflation continues to eat into real incomes and effects of higher interest rates. 

"Our view continues to be that the magnitude of response required of monetary and fiscal tightening to return inflation to the Federal Reserve's target will likely result in a recession, which we currently expect will be modest and occur next year," Duncan said. 

The post Fannie Mae cuts 2022 industry forecast (again) appeared first on HousingWire.

Nation’s interest-rate pain is MSR market’s gain

Posted: 16 Jun 2022 11:44 AM PDT

The pain in the housing industry caused by spiking interest rates isn't shared by all sectors — specifically the mortgage-servicing rights (MSR) market.

The MSR market has made a strong showing during the first half of the year, despite the market tumult. Recently, two MSR sales offerings were announced by two separate advisory firms, which together are valued at more than $1.4 billion. 

In addition, a third MSR advisory firm says it now has a number of deals in the works, which together are valued in excess of $60 billion.

The Prestwick Mortgage Group, an Alexandria, Virginia-based MSR advisory and brokerage firm, served as the exclusive broker for a $618 million package of Fannie Mae and Freddie MAC MSRs that was put out to bid earlier this month. The package included MSRs for nearly 1,600 Fannie Mae mortgages, valued in total at $376.6 million and for slightly more than 1,000 Freddie Mac loans valued at $241.9 million.

The entire package of MSRs offers a 0.2504% average servicing fee on loans with an average note rate of 3.75%, according to the bid documents for the deal. No information was provided on the seller other than it is an "independent mortgage banker."

The bulk of the underlying mortgages by count for the Prestwick MSR package, 1,171 loans, were made in Connecticut; followed by Massachusetts, 577; Wisconsin, 150; and Rhode Island, 143. The average loan balance for the entire MSR package is $275,146, with an average FICO credit score of 723 for the borrowers.

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New York-based Mortgage Industry Advisory Corp. (MIAC) also is out with two large MSR offerings this month involving a $4.8 billion loan pool and a separate $816.7 million package, both composed of Fannie Mae and Freddie Mac loans.

Nearly 62% of the loans by unpaid principal balance in the latter $816.7 million MSR package are Freddie Mac mortgages. The servicing fee for the entire package averages 0.25% with the average interest rate for the mortgages in the package at 3.059%, according to the bid documents. The average loan balance for the 3,644 mortgages in the MSR package stands at $224,112, with the average FICO credit score for the borrowers of 757.

"The portfolio is being offered by a mortgage company that originates loans with a concentration in Illinois and Minnesota," according to the MSR package bid documents.

The bulk of the loans by count are in Illinois, 1,785; Minnesota, 1,229; and Arizona, 456. The sale date for the package "is negotiable," according to the bid documents, with bids due by mid-June. 

For the $4.8 billion MSR offering, MIAC bid documents show 63% of the underlying loans are Fannie Mae mortgages. The average servicing fee for the package is 0.254% and 3.225% is the average interest rate for mortgages in the package.

The average balance for the 18,510 loans in the servicing pool is $259,248, with an average 762 FICO score for the borrowers. The largest geographic concentration of the loans to be serviced is in Texas, with 5,526 loans; followed by California, 3,294 loans; Georgia, 1,492; and New York, 1,415.

Information about the seller was not provided in the offering documents. Bids on the MSR package are due June 28.

Denver-based Incenter Mortgage Advisors also is staying extremely busy with MSR offerings, even if those deals are not in the public eye. Tom Piercy, managing director of Incenter, said the firm "is currently working on multiple deals totaling in excess of $60 billion that are not out for public auction." 

As interest rates rise — with the Federal Reserve adding a 75 basis-point accelerant to the mix Wednesday — loan-prepayment speeds drop, due to diminished refinancing activity. That, in turn, amplifies the value of MSRs because they pay out over a longer period. 

Those dynamics sparked some major MSR bulk offerings during the first quarter of the year, as HousingWire has reported. The new deals surfacing in the second quarter, including the two recent offerings, continue the pattern of a strong showing in the MSR market, which is not only fostering deals but also helping to shore up the balance sheets of lenders holding the assets.

In addition to the new June MSR offering, Prestwick previously brought to market in the second quarter at least three offerings with bid due dates in April: a $1.6 billion Fannie and Ginnie Mae offering; a $520 million Fannie offering; and a $1.8 billion Fannie and Freddie package, which is being offered in conjunction with San Diego-based advisory firm Mortgage Capital Trading (MCT), offering circulars show.

In May, also in conjunction with MCT, Prestwick unveiled a "Texas/Southeast" offering of Fannie Mae MSRs valued at $1 billion.

MAIC also has been on a roll in the MSR space during the quarter. In addition to the most recent MSR package set for auction in June, MAIC unveiled five MSR offerings featuring Fannie Mae, Freddie Mac and/or Ginnie Mae servicing rights with bid due dates in April or early May. The MSRs being auctioned in those bulk deals are tied to loan portfolios with a total value of $12.8 billion — ranging in value per bulk offering from $1.83 billion to $4 billion.

Finally, beyond the $60 billion in MSR deals it is currently pursuing, Incenter earlier in the second quarter unveiled seven bulk MSR offerings involving Fannie Mae, Freddie Mac and/or Ginnie Mae servicing rights. The value of the loan portfolios tied to those servicing rights — which were auctioned off in either April or May — ranges from $1.96 billion to an eye-popping $12.94 billion across the seven deals — with the overall value of the MSR offerings totaling $35.3 billion.

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