Mortgage – HousingWire |
- The looming non-QM commoditization question
- HUD dings Movement Mortgage for alleged fair housing violations
- Tensions rise between CrossCountry and Guild
- Big non-agency players prepare for a blockchain future
- Mortgage rates steady at 5% as housing supply increases
| The looming non-QM commoditization question Posted: 02 Jun 2022 02:23 PM PDT  The question was on the minds of many at the Waldorf Astoria in Dana Point, California on Thursday – will non-qualified mortgage products become more commoditized as the rising rate environment wallops agency lending? "The way that we like to look at solving that problem is through a click of a button, distributing the loan at an even price to sell that to a cadre of investors," Al Qureshi, managing partner at Blue Water Financial Technologies, said on Thursday during IMN‘s third annual Non-QM Forum in California. Blue Water Financial Technologies is a provider of asset valuation, mortgage servicing rights (MSR) distribution, MSR hedging and electronic solutions to mortgage lenders. Qureshi added: "For an originator to do all these things right now there are a number of fixed costs. Investors will have to figure out what the pricing eligibility requirements are, you'll have to bend backwards to integrate that into your pipeline. That takes a lot of time. The way forward is streamlining the process all the way through." Non-QM loans, unlike subprime loans, are underwritten to a higher credit, income and asset standards and involve a range of buyers beyond individuals with low credit scores. The pool of non–QM loans today generally includes business owners, entrepreneurs, and self-employed people who don't have traditional documentation, such as payroll income. As a result, non-QM borrowers rely on alternative documentation such as bank statements and assets. "Leading up to today, you have a lot of different types of documentation," said Corina Gonzalez, senior vice president at DBRS Morningstar. "So we see which I think is a pretty commoditized space at this point. Assets need to get verified so it really comes down to reviewing underwriting guidelines." Industry players such as Angel Oak Mortgage Solutions believe the non-QM market could grow as much as four-fold this year, with origination volume ranging between $70 billion and $100 billion. In 2021, S&P Global estimated non-QM volume reached $28.6 billion, which was just 0.7% of the overall mortgage market. The non-QM industry is still a fraction of the entire mortgage market and the challenges of underwriting a non-QM loan is what makes it difficult for lenders to expand into non-QM lending. That was also one of the primary reasons why mortgage executives said the non-QM will unlikely be commoditized. "It [non-QM loans] is a manual underwrite," Robert Senko, president at ACC Mortgage, said. "Underwriters are trained as desktop underwriters (DUs). Scaling is hard." Taylor Stork, chief operating officer at Developer’s Mortgage Company, agrees. "It can't be commoditized from the origination." Stork said every origination deal in the non-QM market is unique, hence the reason for hiring qualified underwriters who can prove borrowers' ability to repay (ATR) is all the more important. "Under the Dodd-Frank Act, it says if you don't prove borrowers can pay back their non-QM loans, lenders have to pay three years worth of interest," Stork added. "That holds us accountable to hold our jobs." (Reforms created as part of the Dodd-Frank act include penalizing lenders that violate federal standards by prohibiting them from foreclosing on non-compliant mortgages or allowing the borrowers to recover damages as high as three years worth of interest payments.) What mortgage executives did agree on during the session was offering a broad product mix to maintain sustainability in a rate rising environment. "It’s been a challenge as an originator," said Dusty Lloyd, branch manager at New American Funding." "We’ll do non-QM loans and jumbo loans. We got into the CFI space to help people that don’t qualify any other way. Those really helped us replace a loss in mass volume.” "We've been through these cycles," said Senko. "It's not subprime lending. It's a nontraditional product to serve more clients. It shouldn't be your one tool in your belt to serve the market." The post The looming non-QM commoditization question appeared first on HousingWire. |
| HUD dings Movement Mortgage for alleged fair housing violations Posted: 02 Jun 2022 02:01 PM PDT Movement Mortgage will pay $75,000 to resolve allegations of racial discrimination, in violation of the Fair Housing Act, identified by undercover testers from the National Community Reinvestment Coalition. The agreement resolves a complaint the NCRC filed in October 2021 with the Department of Housing and Urban Development. NCRC alleged the Fort Mill, South Carolina-based retail lender discriminated against Black and Hispanic people seeking mortgages in the Seattle-Tacoma area. NCRC testers made inquiries about mortgage financing with a loan officer at Movement Mortgage, Dave Skow, on two occasions, four months apart, during 2021. The court filing alleges Skow attempted to steer a minority tester into Federal Housing Administration financing, and did not follow up with either of the two minority testers as he did with the white testers. In addition to the alleged discrimination testers identified, NCRC claimed public data show patterns of discrimination. NCRC alleged that Movement Mortgage had significantly higher application withdrawals and lower approvals in majority-minority census tracts compared with majority White census tracts, which it said amounted to redlining. "NCRC’s testing data showed that Movement Mortgage agents engage and facilitate an inviting application process for prospective White applicants but fail to extend those same services to prospective Black applicants," the complaint reads. "This behavior results in fewer prospective Black borrowers filing applications and further impacts the number of approvals in majority-minority census tracts.” NCRC had previously provided training to Movement Mortgage, at the lender's request, in 2019. The community group's findings, however, "reinforced the need not only for training but for continuing monitoring," said Brad Blower, NCRC general counsel. NCRC has sought to gum up bank merger approvals with accusations of redlining, extracting more than $100 billion in community benefits agreements with banks. But to resolve NCRC's allegations of racial discrimination, Movement Mortgage will pay $75,000. Of that sum, $65,000 will go to NCRC to defray its costs and $10,000 to Seattle-based nonprofit Washington Homeownership Resource Council, to provide financial literacy, housing education and counseling for persons in majority-minority census tracts in the Seattle area. Counsel for Movement Mortgage did not return a request seeking comment. Blower said that it was a credit to Movement Mortgage that the lender resolved the allegations so quickly. "Sometimes we have to wait years for resolution," Blower added. The nonprofit has a number of pending fair housing complaints before HUD. Demetria McCain, HUD's principal deputy assistant secretary for fair housing and equal opportunity, said it is "imperative" that lenders comply with fair housing laws. "HUD will continue working to ensure that all applicants are treated equally," McCain said. Movement mortgage employees will complete additional fair lending training as part of the agreement with HUD. As part of the agreement, Movement Mortgage will also organize an event in Seattle, dubbed "Grab the Key." The program is intended to improve homeownership rates of Black homebuyers, HUD said in a press release. Grab the Key started as an educational and awareness video for the mortgage industry, Movement Mortgage has said. Montell Watson, director of diversity lending at Movement Mortgage, has also said the lender had a goal of increasing its market share within diverse communities and "bringing more diverse loan officers into the industry." The post HUD dings Movement Mortgage for alleged fair housing violations appeared first on HousingWire. |
| Tensions rise between CrossCountry and Guild Posted: 02 Jun 2022 11:19 AM PDT  CrossCountry Mortgage is suing Guild Mortgage for poaching a former Las Vegas branch manager and allegedly convincing her to steal proprietary information, the latest escalation in a brewing legal battle between the retail mortgage lenders. CrossCountry alleges that San Diego-based Guild Mortgage offered Mirajoy Casimiro, former branch manager and loan originator at CrossCountry, a lucrative employment package and persuaded her to take "massive amounts" of confidential business and client information in the period spanning between mid- 2020 and January 2021. The lawsuit also claims that Guild convinced Casimiro to divert loans in process to be closed. The accusations are part of a lawsuit filed in late-May in the U.S. District Court of Nevada. CrossCountry Mortgage seeks an undisclosed amount as compensation for "the continuing loss of its competitive position, loss of market share, and lost profits." Guild Mortgage did not respond to a request for comment. Ohio-based CrossCountry Mortgage also did not respond to a request for comment. According to the lawsuit, Casimiro was "in active coordination" with Guild in exporting confidential information and data while she was still employed with CrossCountry. The lawsuit also said that CrossCountry did not receive a warning from Casimiro when she left to join Guild in January 2021. CrossCountry alleges that Guild intentionally made Casimiro breach her contractual obligations and duties of loyalty, and as a result, CrossCountry has suffered substantial harm, including loss of investment made in the former branch manager and a disruption to the company's Las Vegas operations. This is not the first spat between the two lenders. In October 2021, Guild Mortgage sued CrossCountry for allegedly engaging in similar practices. As of June 2022, litigation is ongoing. A lawsuit filed by Guild in the Western District of Washington U.S. District Court alleges that CrossCountry monetarily enticed three former Guild employees, who worked at the lenders' Kirkland branch, to convince other Guild employees to defect en masse to CrossCountry. The lawsuit said that the three former Guild employees, a former branch manager, a senior loan officer, and an operations manager, received “lucrative employment packages” from CrossCountry. In early July 2021, virtually the entire Kirkland Branch resigned from Guild and left to CrossCountry, the lawsuit said. Former employees took a "massive amount" of confidential business and client information, and loans were also diverted in the process at Guild to be closed at CrossCountry, the lawsuit alleges. Another lawsuit was filed by Caliber Home Loans in May 2022, which accused CrossCountry of executing an "illegal scheme of unfair competition" by targeting its employees, stealing trade secrets and diverting customers. The accusations are part of a lawsuit filed in May in the U.S. District Court for the Western District of Washington in Seattle. Caliber claims its rival hired more than 80 of its employees, among them 40 loan producers, beginning in February 2021. The staff worked across 18 different branch offices in six states: Washington, Oregon, Texas, Florida, Tennessee and California. At the time, neither lenders responded to requests for comment. The post Tensions rise between CrossCountry and Guild appeared first on HousingWire. |
| Big non-agency players prepare for a blockchain future Posted: 02 Jun 2022 09:30 AM PDT  Even though J.P. Morgan CEO Jamie Dimon is famously no fan of crypto, the bank dove into the enigmatic world of blockchain-based finance in 2020 with the launch of Onyx, a business unit devoted to exploring and expanding the use of blockchain technologies. Soon after Onyx was formed, the bank launched Onyx Digital Assets, a blockchain-based platform that makes possible transactions that involve tokenization — or creating digitized tokens linked to or backed by real-world assets. Recently, J.P. Morgan announced that it had settled its first tokenized transaction involving money-market fund shares as collateral — with plans to eventually pursue blockchain-based transactions for tokenized collateral involving equities and fixed-income securities, which include mortgage-backed securities (MBS). J.P. Morgan's interest in blockchain technology is echoed by Ginnie Mae, a major player in the agency MBS-guarantee market. Ginnie announced earlier this year that its Innovation Lab is exploring the use of blockchain and distributed-ledger technologies for potential future use in loan-pool issuance, servicing and bond management. The lab also unveiled a private- and public-sector exploratory initiative called the Federal Housing Blockchain Network. So, it should come as no surprise that two well-known mortgage finance companies in the non-agency space also are deep into exploring opportunities in the blockchain market. Blockchain technology links transaction records instantly in an encrypted data chain reproduced across a network of distributed computers, creating a transparent yet indelible and authenticated cyber record, or ledger, that can be accessed securely by authorized parties. "This structure is built on nodes, and it’s completely decentralized," explained Michael Carpentier, CEO and co-founder of Vesta Equity, which is working to create a marketplace for tokenized home-equity investments using blockchain. "It’s very hard to hack a blockchain." Carpentier added that blockchain represents a "fundamental shift in how we approach business transactions" because it allows users to instantly verify a transaction occurred via a permanent record kept on the blockchain. The technology not only addresses concerns about fraud, Carpentier said, "it [also] allows you to digitize real-world assets," such as a mortgage loan or loan pools. In other words, it flattens out the space between the primary and secondary markets, allowing mortgages to essentially be originated and securitized nearly instantaneously across a distributed computer network that is accessible to authorized investors. "It [promises to] completely remove, or disintermediate, the higher market," he added. "You don't need it." That full promise is still years away, some experts say at least five or more years in the future, in terms of broad market buy-in and use among the many parties now involved in originating and later trading or securitizing a mortgage via the traditional secondary market. “As you look at on the origination side, you have the call for efficiency and cost savings,” said John Toohig, managing director of whole-loan trading at Raymond James in Memphis. “And on the other side, you see, well, that just means I’m going to make less when making a loan. “There’s so many different pieces to it that I think present a long-term challenge. I do believe we will get there, but I don’t think it will be a snap-your-finger, overnight kind of evolution.” Marianne Bailey, a partner at cybersecurity firm Guidehouse and former deputy national manager for national security systems at the National Security Agency, stressed that when we see something new come along like blockchain technology, “that’s really cool, people expect miracles to happen.” The ‘early innings’Both real estate investment trust (REIT) Redwood Trust as well as non-QM lender Angel Oak Cos. also recognize the industry-changing potential of blockchain-enabled technology. It may still be a ways down the track, but the engine powering the blockchain train is already rattling the tracks. Consequently, both non-agency players have opted to be on front end of the technology-adoption bell curve through their partnerships and/or investments in blockchain-based platforms. Redwood and Angel Oak, of course, are not alone, in seeing blockchain’s potential, as the J.P. Morgan and Ginnie Mae examples illustrate. In addition, crypto-assets backed by mortgage loans are already being securitized via the blockchain by other lenders who have chosen to act now and seek permission from regulators later, if necessary — after formal rules are developed for so-called nonfungible tokens (NFTs) and other crypto-assets. Nonbank lender LoanSnap, for example, has launched a fledgling crypto-mortgage program that relies on artificial intelligence and blockchain technology along with a cryptocurrency called stable coin. The stable coin, pegged to the U.S. dollar on a one-to-one basis, is sold to investors via a blockchain platform and backed by real-world mortgage lien wrapped in or mirrored by a digital NFT — or a nonfungible token. To date, LoanSnap has locked in about $6.9 million in crypto-loan value across 35 homes that have a total market value of some $44 million. The annual percentage yield for holders of LoanSnap's stable coin used to fund the mortgage loans, called bHome, as of this week was 3.521% The crypto-mortgages originated by LoanSnap so far are essentially home-equity loans as opposed to home-purchase or rate-and-term refinance loans. The liens linked to NFTs represent a portion of a home's value as a result. Angel Oak Ventures is not far behind LoanSnap in capability, however. In April, the non-QM lender formed a partnership via its Angel Oak Ventures arm with Brightvine, a startup blockchain-based investment platform. Brightvine plans to allow Angel Oak "and other issuers to tokenize their real-world assets" and to "seamlessly raise funds on the blockchain," Brightvine said in the press statement announcing its "strategic venture" with Angel Oak. Sreeni Prabhu, co-founder and managing partner of Angel Oak Cos., said Angel Oak Ventures is focused on technology that creates a "more frictionless" business environment for investors and borrowers. He added that the company "believes in the potential for blockchain to bring about new and innovative investment solutions in the mortgage credit space." "Angel Oak intends to explore utilizing Brightvine's platform and could securitize non-QM loans via tokenization on the blockchain," Prabhu added. "Although still in the exploratory phase, Angel Oak Ventures believes that there is potential for blockchain to enable a better secondary market, reducing costs and improving efficiencies for all parties and improving the investor experience." Joe Vellanikaran, founder and CEO of Brightvine, said the company, launched about two years ago is, working to build an alternative to the existing secondary market that will increase liquidity for mortgages, MBS and other fixed-income vehicles. Brightvine estimates the size of the global fixed-income market at $123 trillion. "… Our goal is to eventually move the entire securitization process to the blockchain," Vellanikaran said. "Our focus right now is really to reach institutional investors and accredited investors for these types of products. And then further on down the line, open it up to other retail investors, but that depends on the regulations in place." Brightvine is working to comply with all applicable securities regulations in developing its platform. Currently, regulators such as the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency, the White House and industry groups such as the Financial Accounting Standards Board(FASB) are all focused on developing more targeted rules and regulations for blockchain-based crypto assets and related crypto-securities trading. Redwood Trust is on a seemingly even faster glide-path than Angel Oak with respect to employing blockchain technology and exploring its potential use in creating an additional liquidity channel for the company. Redwood Trust's venture arm, RWT Horizons, is an investor in Vesta Equity as well as three other companies with a strong blockchain focus — Oasis Pro Markets, Liquid Mortgage and Canopy Financial Technology Partners. Ryan McBride, chief investment officer of RWT Horizons, says the company's goal is to invest in firms that have a "direct nexus" to Redwood Trust's operating companies, which are largely focused on buying, selling and securitizing residential and investment-property mortgage loans. "We do not disclose the size of our investments in individual companies and would anticipate continuing to look for … investment opportunities that can help drive further innovation in housing finance," McBride added. Two of the companies McBride singled out as examples of its investments matching a commitment to technology innovation are Vesta Equities and Oasis Pro Markets, the latter a U.S.-regulated alternative trading system that allows subscribers to trade securities digitally, via secure blockchain technology, and make payments in digital cash (such as stable coin, a type of crypto-currency). Executives with Oasis Pro declined to comment for this story. "Specifically, we see opportunity for Oasis Pro to potentially distribute both residential and business-purpose [investment-property] loans and securities in tokenized form, adding an incremental distribution channel for both of Redwood's operating platforms [Sequoia and CoreVest]," McBride said. "Vesta Equity's vision of creating a marketplace for tokenized home-equity investments using blockchain fits well with our existing partnerships with Liquid Mortgage and Point. "As home equity currently sits at an all-time high, this remains an area of key strategic focus for us." Redwood Trust also is an investor in Point, a non-blockchain-based fractional home-equity lender that provides homeowners with cash upfront in exchange for a contract providing Point with a slice of the homeowner's equity. That share, via Point's home equity investment contracts (HEIs), is typically around 10 percent or so. Last year, Redwood and Point, the latter founded in 2014, completed a first-of-its- kind securitization backed by HEI contracts. The private-label securities (PLS) transaction, which closed in late September 2021, involved issuing $146 million in securities through a conduit dubbed Point Securitization Trust 2021-1. Also last fall, Redwood announced a separate $449 million residential mortgage-backed securities (RMBS) private-label offering backed by 497 jumbo residential loans that was securitized with the help of a fintech startup, Liquid Mortgage, in which the Redwood holds a minority stake. As part of the deal, Liquid Mortgage is leveraging blockchain technology to track loan-level payment and transaction-reporting data for borrowers and lenders. Liquid Mortgage is expected to report RMBS payment data to users of its proprietary platform on a daily basis, as opposed to monthly." Redwood President Dashiell Robinson said during the Q1 2022 earnings call that through the end of January of this year, a total of five Sequoia Mortgage Trust (SEMT) deals, including the initial SEMT 2021-6 offering last September, have made use of Liquid Mortgage's blockchain-based tracking technology. Those five securitizations involved prime jumbo loan pools valued at $2.5 billion with average loan balance of $902,582, according to private-label deals tracked by Kroll Bond Rating Agency. The latest SEMT deal closed on Jan. 26, 2022, according to Kroll's data. "We are working as well in parallel for CoreVest securitizations to leverage the same technology," Robinson said during a first-quarter 2022 earnings call. "We think that will be an exciting development for that part of the market." CoreVest is Redwood's business-purpose/investment-property lending and securitization affiliate. Liquid Mortgage also has an agreement with Canopy Financial Technology Partners through which Canopy will integrate its loan-level due-diligence product with Liquid Mortgage's platform, allowing due-diligence reporting and data to be tied directly to mortgage-backed digital assets on the blockchain. As mentioned, Redwood's RWT Horizons also is an investor in Canopy, which provides key third-party loan-review services for the RMBS market. “This partnership is a giant first step in the migration toward a true digitally native mortgage,” said John Levonick, CEO of Canopy, in announcing the deal with Liquid Mortgage. “This solution gives loan investors, and all subsequent assignees, access to verified and timely data, for the entire lifecycle of the asset … diligence by a third-party review firm conducted once, but accessible to all future parties [via the blockchain].” So, with its investments in Point, Oasis Pro Markets, Vesta Equity, Liquid Mortgage and Canopy, and other fintech plays, Redwood Trust has established a strong bench for employing blockchain-based technology in the not-so-distant future as a potential additional loan-trading and securitization channel for its mortgage assets. RWT Horizons completed five investment deals in the first quarter of this year. Since inception, RWT Horizons has made over $25 million in technology venture investment commitments, Redwood Trust CEO Christopher Abate said during the company’s earnings conference call in late April. Redwood's Robinson added during the same Q1 2022 earnings call that Liquid Mortgage is a "pioneering platform" but stressed it is only one part of a larger blockchain-based "ecosystem." "The intriguing thing is how transformational we can be to the securitization space, which is really exciting," Robinson added during the earnings call. "… As we have talked about before, having the remittance information [via Liquid Mortgage] on the blockchain really is just step one…. "We are still in the really early innings here. From our perspective, it is about the ecosystem, and the more we can help other people adopt in, we think the better things would be.” McBride told HousingWire that RWT Horizons will continue “to look for Web3 [blockchain-based] investment opportunities that can help drive further innovation in housing finance.” “We are excited about the possibilities created through our partners at Oasis Pro and Vesta Equity to apply new technologies as a way to reach new investors,” he said. The post Big non-agency players prepare for a blockchain future appeared first on HousingWire. |
| Mortgage rates steady at 5% as housing supply increases Posted: 02 Jun 2022 07:00 AM PDT Purchase mortgage rates this week averaged 5.09%, essentially flat from the prior week, according to the latest Freddie Mac PMMS. A year ago at this time, 30-year fixed rate purchase rates were at 2.99%. The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days. "Mortgage rates continued to inch downward this week but are still significantly higher than last year, affecting affordability and purchase demand," said Sam Khater, Freddie Mac's chief economist. "Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing. This is welcome news following unprecedented market tightness over the last couple years." The purchase index has now fallen for three consecutive weeks. Black Knight's Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming mortgage rate at 5.42% Wednesday, up from 5.32% the previous week. The 30-year fixed-rate jumbo was at 4.97% Wednesday, also up from 4.90% the week prior, according to the Black Knight index. This week, mortgage application volume dropped 2.3% from the past week to a four-year low: refi applications declined 5% and purchase apps decreased 1%, according to the MBA. The MBA found the adjustable-rate mortgage share dipped to 8.7% of total applications. Mortgage rates are following the Federal Reserve's (Fed) inflation-fighting monetary policy. Minutes from the Fed's meeting earlier this month released Wednesday showed policymakers emphasized the need to quickly raise interest rates to bring consumer prices closer to the Fed's 2% goal. The central bank raised the interest rate by a half percentage point on May 4 and unveiled a plan to reduce its $9 trillion asset portfolio. The Fed also has repeatedly signaled it will continue to raise rates in 2022 and into 2023. According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.32% with an average of 0.8 point, up from last week's 4.31%. The 15-year fixed-rate mortgage averaged TK% The 5-year ARM averaged 4.04%, with buyers on average paying for 0.3 point, up from 4.20% the week prior. The product averaged 2.64% a year ago. Economists forecast the tightening monetary policy will reduce origination volume significantly in 2022 and 2023. The MBA expects loan origination volume to drop more than 35% to about $2.5 trillion this year, from last year's $4 trillion. Meanwhile, the MBA expects 5.93 million home sales in 2022, compared to 6.12 million in 2021. The post Mortgage rates steady at 5% as housing supply increases appeared first on HousingWire. |
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