Mortgage – HousingWire

Freddie Mac unveils offer for up to $2.2B in CRT notes
Freddie Mac: Equifax glitch may have impacted 12% of credit reports in three week period
Almost 80% believe it’s a bad time to buy property
Ginnie Mae to open eNote program to more participants
Are these factors creating chaos in your mortgage lending ops?
FHFA report on GSE fair lending reveals “persistent” racial divide
CRT is ‘responsible’ hedge against taxpayer risk: FHFA’s Thompson
Frank Nothaft, economist with “inimitable style,” has died
Figure and Homebridge cancel planned merger
These mortgage lenders have cut jobs in 2022

Freddie Mac unveils offer for up to $2.2B in CRT notes

Posted: 07 Jun 2022 02:49 PM PDT

Freddie Mac has announced a cash tender offer for some $2.2 billion in outstanding notes across eight vintage credit-risk transfer (CRT) transactions conducted through the agency's Structured Agency Credit Risk, or STACR, program.

The offering price for the notes outstanding in the current offering, STACR 2022-TO2, ranges from $1,000.63 to $1,017.81 per thousand dollars of outstanding principal amount, depending on the series vintage. The notes are linked to five credit-risk transfer (CRT) securitization deals completed in 2019 and three from 2018.

Freddie Mac has conducted two prior tender offers for STACR series notes. The first, STACR 2021-TO1, was announced in September 2021 and resulted in the $1.6 billion worth of notes being validly tendered and accepted by the agency. The second tender offer, STACR 2022-TO1, took place in February of this year, with $2.1 billion worth of notes being properly tendered and accepted.

Through the STACR note offerings, private investors participate with Freddie Mac in sharing a portion of the mortgage credit risk in the reference loan pools retained by the agency. Investors receive principal and interest payments on the CRT notes they purchase, but if credit losses exceed a predefined threshold per the security issued, then investors are responsible for absorbing the losses exceeding that mark.

"The purpose of a STACR tender offer is to manage Freddie Mac's costs related to credit risk transfer by repurchasing STACR notes that have substantially deleveraged (due to decreases in credit risk of related reference pools and increases in credit enhancements to STACR securities) and that no longer provide Freddie Mac with an economically sensible means of transferring credit risk," states a Freddie Mac explanation of its tender transactions. "Following a tender offer transaction, any notes that are tendered and accepted in the tender offer will be retired and cancelled.

"… STACR notes included in a tender offer generally do not provide any meaningful capital relief to Freddie Mac. Freddie Mac considers, among other things, the macroeconomic environment, overall CRT market condition and Freddie Mac risk management objectives."

The offer period for Freddie Mac's most recent tender offer starts Tuesday, June 7, and will expire at 5 p.m. Eastern Standard Time on Monday, June 13. The settlement date is slated for Wednesday, June 15.

"Freddie Mac has engaged BofA Securities Inc. and Citigroup Global Markets Inc. as lead dealer managers and CastleOak Securities L.P. as co-dealer manager for the offer," the agency's announcement of the tender offer states.

Freddie Mac, year to date through early June 2022, ha s transferred a total of $10.9 billion in risk from reference pools valued at $300.9 billion via five STACR and three Agency Credit Insurance Structure (ACIS) CRT deals. For all last year, Freddie transferred $19.3 billion in risk on loan pools valued in total at $845.6 billion via 10 STACR securities offerings and 8 ACIS insurance-coverage CRT deals, da ta from Freddie shows.

Freddie earlier this year announced that it expects issuance volume of at least $25 billion in 2022 for its CRT program, including STACR and ACIS transactions. Since inception in 2013 to date, Freddie has transferred risk from reference loan pools valued at $3 trillion via its CRT program, with $98 billion in risk coverage active, according to an accounting on the agency's we bsite.

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Freddie Mac: Equifax glitch may have impacted 12% of credit reports in three week period

Posted: 07 Jun 2022 01:58 PM PDT

Equifax informed Fannie Mae and Freddie Mac last week that a "coding issue" may have resulted in erroneous consumer credit scores and credit data the company reported for about three weeks.

It is not clear how many of Fannie Mae's acquired mortgage loans were potentially impacted, but the problem could have affected credit data from March 17 to April 6. Freddie Mac said in a letter to lenders that the error "may have impacted" 12% of credit reports issued during this period.

"Any lender that received credit report data directly from Equifax online or via a third-party consumer reporting agency/reseller over this period may be affected by this incident," wrote Danny Gardner, Freddie Mac senior vice president, client and community engagement, in a letter to lenders.

Fannie Mae and Freddie Mac provided financing for nearly $450 billion in single-family purchase and refinance loans in the first quarter of 2022, according to their most recent financial statements.

In a statement, an Equifax spokesman said that per a company analysis, there was “no shift in the vast majority of scores,” and the problem has already been corrected. Equifax said it had found a coding issue in a legacy, on-premise server environment that was slated to move to a new Equifax cloud infrastructure.

“We have proactively notified our customers and resellers and are working closely with individual organizations on analysis,” the spokesman said. He added that moving that server to the Equifax Cloud would “provide additional controls and monitoring that will help to detect and prevent similar issues in the future.”

When it announced the coding error, Fannie Mae also reminded lenders that it is the lender’s responsibility, not Fannie Mae's, to correct erroneous credit data, and make sure that credit data they submit to Fannie Mae's automated underwriting platform, Desktop Underwriter, is correct at the time of the loan sale.

Gardner also told lenders they should "consult with their counsel" to update credit reports, and said that lenders should work with their consumer credit report provider and Equifax to identify the potential impacts on their originations.

Gardner also pointed out that Freddie Mac's automated underwriting software relies heavily on information from other sources. Both of the government-sponsored enterprises use automated underwriting platforms, which depend on the integrity of the underlying data.

"Consequently, accurate data is critical," Gardner said. As a result, for in-process applications, lenders must update and re-submit loan files to Loan Product Advisor, Freddie Mac's automated underwriting platform. Otherwise, those mortgages may need to be manually underwritten.

A Freddie Mac spokesperson said the enterprise is working with the Federal Housing Finance Agency to identify any impacts, and referred additional questions to Equifax.

Fannie Mae and Equifax did not immediately respond to requests to comment.

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Almost 80% believe it’s a bad time to buy property

Posted: 07 Jun 2022 12:00 PM PDT

Consumers’ concerns about housing affordability are squeezing would-be homebuyers out of the market, according to Fannie Mae‘s Home Purchasing Sentiment Index, which tracks the housing market and consumer confidence to sell or buy a home. The index score dropped by 0.3 points to 68.2 in May, inching toward its 10-year and pandemic-low of 63, recorded in April 2020.

All six of the index’s components — which ask consumers to weigh in on whether it’s a good time to buy, sell, and in what direction mortgage rates will move — dropped 11.8 points from the same time last year. A survey-high of 79% of consumers believe it’s a bad time to buy a home. About 70% of survey respondents expect mortgage rates will continue climbing during the next 12 months.

"Respondents' pessimism regarding home buying conditions carried forward into May, with the percentage of respondents reporting ‘it's a bad time to buy a home,’ hitting a new survey high," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The share reporting that it's 'easy to get a mortgage' also decreased across almost all segments."

Purchase mortgage rates, after hitting a 13-year high of 5.27% in May, fell for three consecutive weeks. Rates last week averaged 5.09%, essentially flat from the prior week, but significantly higher than the 2.99% rate during the same period last year, according to Freddie Mac PMMS.

The Federal Reserve raised the interest rate by a half percentage point on May 4 and repeatedly has signaled it will continue to raise rates this year and into 2023. The Fed’s interest rate does not directly affect mortgage rates, but higher interest rates steer market activity to create higher mortgage rates and reduce demand.

While fewer respondents than in previous surveys were worried about losing their jobs, more households expected their income to drop. About 81% of those surveyed in May said they weren’t concerned about job loss, fewer than the 84% the previous month. About 16% of respondents said their income was significantly lower in May than a year before, which was an increase from 14% of respondents in April.

"These results suggest to us that increased mortgage rates, high home prices and inflation will likely continue to squeeze would-be homebuyers — as well as those potential sellers with lower, locked-in mortgage rates — out of the market, supporting our forecast that home sales will slow meaningfully through the rest of this year and into next."

Fannie Mae’s Economic and Strategic Research (ESR) Group had forecast a slowdown in home sales for the second and third quarters of 2022, followed by a softening in construction activity and a noticeable deceleration in home price growth.

While it expects the economy to have a modest recession in the second half of 2023, the agency said the constrained consumer spending power amid elevated inflation and a rapidly rising rate environment carries the risk of a contraction happening sooner.

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Ginnie Mae to open eNote program to more participants

Posted: 07 Jun 2022 11:54 AM PDT

Ginnie Mae, a guarantor for federally backed loans, announced in late May that it would make enhancements to its digital collateral program. One of the most notable changes is that the agency will reopen its program to new participants starting June 21.

The agency said that the program has been successful and that it wants to expand the amount of eIssuers that can participate. The program has been in a pilot phase for close to two years with a limited number of approved participants.

Ginnie Mae also made some updates to its digital collateral guide, including allowing participants to perform eModifications to eNotes and said that eNotes will be accepting using a power of attorney. These updates have been in effect since June 1 and apply to all existing eIssuers, Ginnie said.

The digital collalteral guide also provides eligibility and technological requirements for aspiring applicants, the agency said.

Alanna McCargo, president of Ginnie Mae, said in a statement that these enhancements are a result of experience gained from running a pilot of the program.

"The lessons learned during the initial pilot of the digital collateral program are now incorporated into the eGuide and resulting enhancements," McCargo said. "We are excited to expand access to this program.

Ginnie Mae launched its pilot program in 2020, paving the way for the agency to accept eNotes as satisfactory collateral for its mortgage-backed securities.

At the time, industry stakeholders celebrated Ginnie’s decision to accept eNotes, noting that it's a significant step forward on the path to total digital mortgage adoption. Fannie Mae and Freddie Mac also accept eNotes.

By early 2021, the agency announced the issuance of the first mortgage-backed security (MBS) backed by digital pools. The MBS were loans closed by Rocket Mortgage in December 2020.

Since the launch of the program, over $8 billion have been securitized in eNotes, according to the agency. All current participants in the Ginnie Mae program are existing Ginnie Mae Issuers, a requirement under the program.

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Are these factors creating chaos in your mortgage lending ops?

Posted: 07 Jun 2022 11:50 AM PDT

Few other industries must deal with the level of complexity of home finance. From mortgage origination to servicing, companies are constantly grappling with high volume and stringent regulatory oversight while managing a large cohort of vendor partners. Add to those challenges increased competition in a rising interest rate environment that is choking off refinance business, driving overall mortgage volume down significantly.

When the squeeze is on, lenders must offer higher levels of customer satisfaction, lower costs or both to remain competitive. That requires elevated efficiency to counter the growing complexities, which likely include a more aggressive Consumer Financial Protection Bureau (CFPB). Technology will be the most popular solution, but choosing to implement multi-million-dollar platforms to streamline operations introduces even more complexity before savings are realized.

Two data degrees of separation

All too often though, it's not the lender's operation that is the problem. For both mortgage originators and servicers, the aforementioned large cohort of vendors must rely on third-party partners that introduce friction and uncertainty into their process. And automation is only as good as the information flowing through, much of it coming from two data degrees of separation.

For example, a loan processor may use a modern LOS to order a flood certification, title report, AUS decision or data verifications, but once the order has been placed, what if the data doesn't arrive? On the servicing side, a default servicer will work with a number of third-party vendors to gather collateral valuation, title information, property inspections and field services reports. The servicing platform can place the orders easily enough, but then what?

Lenders and servicers have focused a lot of attention on making their internal process as efficient as possible. Current LOS and servicing software can place orders and receive reports quite well, but they do a very poor job of managing the process in between those events. It's where their internal process intersects with that of their third-party partners — and the lack of visibility there — that they encounter the failure points that waste time, increase costs and destroy borrower satisfaction.

The result is that they will be less competitive than their peers and run higher non-compliance risk in the current regulatory environment.

The companies that run the highest risk

No company is immune from this challenge, but the pain — and the benefits of solving this problem — are disproportionately higher for a certain class of lender/servicer.

Smaller mortgage originators often deal with this problem by throwing more people at it. If a manager inside the lender's shop can ride herd on the vendors in process at any given time, the risk of lost or incorrect orders goes down. But as the lender grows, this becomes unmanageable.

Once the lender is operating in several states with multiple branches and a large cadre of vendors, the institution must either open and staff a number of separate centralized processing centers or find a better technology solution. Even then, they are often still operating in a binary environment: either the report they ordered was received on time or it was not.

Servicers of any size could benefit from a better solution, as even the smallest sub-servicers are holding tens of thousands of loans in their portfolio. We don't have enough people in the industry today to throw at the problems that will result if defaults continue to trend upward in the wake of the end of forbearance.

Why institutions are having trouble solving this problem

You can't solve a problem until you know exactly what the problem is. In our experience, these are the challenges that both lenders and servicers are facing today. They are hiding in the vendor management function.

Over the past few years, more financial institutions have staffed up their vendor management departments in response to the CFPB's vendor risk management guidelines. It is reasonable to see these companies, after going to this expense, trying to manage this problem with their internal staff by managing the Service Level Agreements (SLAs) they have in place with their vendors. Unfortunately, there are three significant challenges that stand in their way:

Challenge 1: The time crunch

Both lenders and servicers are under constant time pressure to complete their work. Originators will lose out to quicker competitors, especially in a purchase money market. Servicers, especially those who service government-insured loan products, are under statutory time constraints that give them very little wiggle room.

Finding a problem may be possible for the vendor management staff, but getting it corrected quickly will be difficult. The more often it happens, the less likely the institution will have a favorable outcome as problems tend to multiply.

Challenge 2: Shrinking margins

Margins were tight prior to the COVID-19 crisis and long before the Fed decided to start raising interest rates. In a highly competitive market, margins are the first to be sacrificed, making the problem even worse. This will make it more difficult to afford vendor management staff and make manpower a solution with diminishing returns.

Cost savings aren't possible when the solution involves throwing more people at a problem. Only increased automation can bring costs down and increase profit margins.

Challenge 3: The industry brain drain

Ask anyone in the HR department of a loan origination or servicing shop and they'll tell you that a storm is coming. The industry's workforce is made up primarily of professionals who are now in the later stages of their careers. We're seeing mortgage executives and workers retiring at record rates.

On the other side, recruiting is a challenge after years of negative publicity that has painted our industry in a poor light. Automation continues to be the solution of choice for growing companies who cannot attract enough manpower to build out their teams.

But unless the automation is specifically designed to solve these problems, it stands little chance of being effective. Going into the lender's next discussion with a prospective vendor with these challenges in mind will help them better evaluate any solutions that are offered.

Shamit Vohra is Vice-President of Strategic Accounts for Visionet Systems Inc., a New Jersey-based technology and mortgage-services organization.

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

To contact the author of this story:
Shamit Vohra at at Shamit.vohra@visionet.com

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

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FHFA report on GSE fair lending reveals “persistent” racial divide

Posted: 07 Jun 2022 09:12 AM PDT

The Federal Housing Finance Agency‘s (FHFA) inaugural mission report, released Monday, offers a glimpse into the fair lending performance of Fannie Mae and Freddie Mac, showing the agencies continue to back fewer loans to Black and Latino applicants, despite an uptick in applications submitted by those minorities.

The regulator, which supervises Fannie Mae and Freddie Mac's fair lending activities, said Black and Latino borrowers respectively represented 6.3% and 14.2% of all mortgages the government-sponsored enterprises purchased in the fourth quarter of 2021. But the gap between mortgage acceptance rates for minority and white borrowers "remains persistent," FHFA wrote.

In the fourth quarter of 2021, the acceptance rate for Black borrowers was 68%, nearly 20% below the acceptance rate for white borrowers. However, during the same period, the share of Black and Latino borrowers in the enterprises' mortgage loan portfolio have slightly increased, with about 0.5 and 2 percentage points more Black and Latino applications, respectively.

Acceptance rates for refinances for all borrowers rose in 2019, cresting in 2020, and have since declined. The refinance acceptance rate for Black borrowers reached more than 85% by the second quarter of 2020. But successful refinance applications have since dwindled to 77.6% in the fourth quarter, far below that of white borrowers.

While refinance acceptance rates among borrowers rose and fell in unison over the past two years, and the share of refinance acquisitions for Black and Latino borrowers grew, acquisitions of refinances for Asian borrowers decreased sharply during the same period.

The share of refinances by Asian borrowers rose during 2020 to more than 12%, but in 2021 fell to less than 10%. The share of refinances for Black and Latino borrowers was 6.6% and 13.1%, respectively.

The new report also revealed geographic trends in Fannie Mae and Freddie Mac's fair lending activities. Mortgage acquisitions for Black and Latino borrowers primarily were clustered in California and the south, with especially large concentrations around metro areas in Florida and Texas.

Among large metro areas, Florida’s Miami-Fort Lauderdale-Pompano had the largest share of acquisitions of mortgages for Black and Latino borrowers.

The number of loans purchased under Fannie Mae and Freddie Mac's duty to serve obligations — requirements imposed by Congress to meet the needs of specific underserved communities — more than doubled from 2018 to 2021. The majority of duty to serve single-family loan acquisitions in 2021 were in rural markets, where Fannie Mae and Freddie Mac acquired more than 77,000 loans.

Meanwhile, purchases of manufactured home loans more than doubled to 35,543 in 2021 from 16,205 in 2018.

Fair lending oversight and duty to serve are just two of the mechanisms at FHFA's disposal to ensure Fannie Mae and Freddie Mac meet their statutory obligation to support affordable housing throughout the nation, particularly in underserved communities.

The FHFA could also employ equitable housing finance plans to identify and address barriers to sustainable housing opportunities, and to find ways to advance equity in housing finance for the next three years.

So far, the FHFA has not used that particular tool. Last year the agency indicated the plans would be in place by January 2022, but they have not yet been released.

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CRT is ‘responsible’ hedge against taxpayer risk: FHFA’s Thompson

Posted: 07 Jun 2022 04:30 AM PDT

Fannie Mae is unveiling its sixth Connecticut Avenue Series (CAS) credit-risk transfer deal of 2022, a $754.4 million note offering backed by a reference pool of single-family mortgages valued at $25 billion.

The offering is slated to close June 10, according to a presale review by the Kroll Bond Rating Agency (KBRA). The latest transaction, CAS 2022-R06, involves a reference pool of 83,420 single-family mortgage loans.

The states with the largest concentrations of mortgages in the reference loan pool for the credit-risk transfer (CRT) offering are California, 18.4%; Florida, 7.1%; Texas, 6.6%; Washington, 4.7%; and New York, 4.1%, according to KBRA. The leading originators for the loans in the offering and the percentage of loans originated in the reference pool are Rocket Mortgage, 10%; United Wholesale Mortgage, 8.8%; Pennymac, 5.7%; and Wells Fargo, 4.3%.

This latest credit-risk transfer deal comes on the heels of new capital rules recently taking effect for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. One part of the change impacting CRT deals reversed rules adopted by the Federal Housing Finance Administration (FHFA) during the Trump administration. The Trump-era regulations made capital treatment for CRT deals unattractive, which contributed to Fannie’s decision to pause its CRT offerings for a year and a half.

In comments made at a recent Mortgage Bankers Association (MBA) convention in New York, Sandra Thompson, the newly confirmed director of the FHFA, made clear that CRT deals will be deemed a critically important part of the GSEs strategy under her oversight.

"I wanted to make sure that we got our capital treatment for CRT right, so we issued, or we re-proposed … aspects of the [overall] capital rule," Thompson said at the MBA event. "We made a change, and now the capital rule for the enterprises has favorable treatment of CRT, which we think is the right way to go because Fannie Mae and Freddie Mac are the largest owners of credit risk."

Thompson added that CRT will continue to be effective credit-risk management tool "that will exist outside of conservatorship" for Fannie and Freddie as well.

FHFA oversees Fannie Mae and Freddie Mac, which have been in conservatorship since 2008 in the wake of the global financial crisis of that era. The two GSEs, or agencies, buy loans from lenders, pool them and issue mortgage-backed securities that are sold to investors and guaranteed for a fee by Fannie and Freddie.

The recently finalized capital-rule change for CRT deals — which Thompson referred to during her MBA talk — cuts in half the risk-weighting formula for CRT deals, from 10% to 5% for retained CRT exposure. The rule became effective 60 days after it was published in the Federal Register in mid-March.

That modification of the capital-retention risk weight for CRT exposure, along with other adjustments to the capital-reserve requirements, "would make CRT transactions somewhat more economic" and "expand the risk-reducing and competitive benefits of CRT transactions," Ed DeMarco, president of the Housing Policy Council, an industry group, wrote i n a letter late last year to FHFA's general counsel in support of the then-proposed change to the CRT risk-weighting measure.

"CRT transactions lessen the systemic risk posed by the enterprises (GSEs) by reducing the concentration of that risk on the enterprises' balance sheets and the volatility inherent in the credit performance of the enterprises' guarantee business," DeMarco wrote in the letter.

The agencies' major credit-risk transfer programs include Freddie Mac's Structured Agency Credit Risk, or STACR, note offerings; and its Agency Credit Insurance Structure, or ACIS, transactions. Fannie Mae has similar CRT programs, which include its Connecticut Avenue Series, or CAS, note offerings; and its Credit Insurance Risk Transfer, or CIRT, transactions.

"When they do a credit-risk transfer transaction, it's taking risk from that huge bucket [the reference loan pool] and selling off most of the credit-risk pieces," Roelof Slump, managing director of U.S. RMBS at Fitch Ratings, explained in a prior interview.

Through the STACR and CAS note offerings, private investors participate with Fannie and Freddie in sharing a portion of the mortgage credit risk in the reference loan pools retained by the GSEs. Investors receive principal and interest payments on the CRT notes they purchase, but if credit losses exceed a predefined threshold per the security issued, then investors are responsible for absorbing the losses exceeding that mark.

Through the CIRT and ACIS transaction, a portion of the credit risk on mortgages backed by Fannie and Freddie is shifted to insurers in the private sector. The agencies pay monthly premiums in exchange for insurance coverage on a portion of the designated reference loan pools.

Year to date through early June of this year, based on an analysis of information released by Fannie Mae, the agency has transferred some $10.8 billion in risk (referred to “as risk in force”) from reference loan pools valued at $362 billion via five CIRT insurance deals and six CAS securities offerings — which includes the latest CAS offering.

That compares to all of 2021, when Fannie transferred $5.4 billion in risk from reference loan pools valued in total at $206 billion via 2 CIRT insurance deals and 3 CAS securities offerings.

Fannie paused its CRT program in March 2020, in part over concerns about the draconian capital rules for agency CRT deals adopted during the Trump era. Fannie Mae did not resume its CRT offerings until October 2021, after the new capital rules were initially proposed last year, as noted by Thompson at the MBA convention. Freddie resumed its CRT issuance in July 2020.

"In 2022, we look forward to bringing [to market] ap proximately $15 billion in our on-the-run CAS … transactions, subject to market conditions and other factors," said Devang Doshi, senior vice president of single-family capital markets at Fannie Mae, in a statement about the CAS program. Doshi did not comment on the goals for the CIRT program.

Since inception in 2013 to date, Fannie Mae has transferred risk from reference loan pools valued at nearly $2.8 trillion via its CRT program, with some $85 billion in risk coverage active, the ag ency's data shows.

Fannie's competitor, Freddie Mac, year to date through early June 2022 ha s transferred a total of $10.9 billion in risk from reference pools valued at $300.9 billion via five STACR and three ACIS deals. For all last year, Freddie transferred $19.3 billion in risk on loan pools valued in total at $845.6 billion via 10 STACR securities offerings and 8 ACIS insurance deals, da ta from Freddie shows.

Combined, then, Fannie and Freddie's CRT programs from 2013 to date have transferred to the private sector a portion of the risk from reference mortgage pools valued collectively at $5.8 trillion. The agencies have more than $180 billion in risk coverage active on those mortgage pools — representing about 3.1% of the total unpaid loan balance.

"To the extent that something catastrophic or really bad happens … we think that it’s really important … to make sure that the taxpayers are covered, and that Fannie and Freddie are covered as well, and that the credit risk is transferred to private investors, which we think is really responsible," Thompson said at the MBA convention. "It's a really good credit-risk management tool."

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Frank Nothaft, economist with “inimitable style,” has died

Posted: 06 Jun 2022 03:46 PM PDT

Frank Nothaft, chief economist at CoreLogic and before that, the top economist at Freddie Mac, has died. He was 66.

At CoreLogic, Nothaft headed the office of the economist, providing analysis, commentary and forecasting trends in global real estate, insurance and mortgage markets. Prior to joining CoreLogic in 2015, Nothaft had a nearly 30-year career at Freddie Mac, where he was most recently the chief economist.

“When I arrived at Freddie Mac in 2012 he was a long-established major name in mortgage research,” said Donald Layton, who was CEO of Freddie Mac from 2012 to 2018. “It was always a pleasure to work with him because he was truly a nice individual.”

Before joining Freddie Mac, Nothaft was an economist with the Board of Governors of the Federal Reserve System, where he served in the mortgage and consumer finance section and assisted Gov. Henry Wallich.

During his career, Nothaft often was called upon to provide expert commentary on national television and at industry trade conferences, explaining the workings of the housing market for both industry-focused and general audiences.

"Most people knew Frank as one of the nation's premier housing economists," said Robin Wachner, a CoreLogic spokesperson. "He was also an outstanding leader and one of those extraordinary people who was loved and admired by everyone who was lucky enough to know him."

From 2010 to 2015, he was on the faculty at Georgetown University School of Continuing Studies, where he taught urban real estate economics. He was a past president of the American Real Estate and Urban Economics Association and served on the board of directors of the Financial Management Association.

Nothaft was well-liked by fellow economists studying the housing market, as well as his colleagues, who described him as straightforward and prizing accuracy. But he was also known for his quirky sense of style.

"He was the best housing market analyst in the business, able to clearly and concisely convey information that helped our industry understand the current market and make decisions to prepare for the future," said Mike Fratantoni, chief economist at the Mortgage Bankers Association. "And Frank had an inimitable style, both in terms of his presentations and his ever-present bow tie."

Richard Koss, a former Fannie Mae official, said Nothaft “was devoted to accuracy and saying what he saw, not sugar-coating or making things look worse than they appear.

“You always knew that when you heard or saw what he wrote that you got his best view on something, you never had to think of it in the context of where he was working," Koss said.

In 2021, more than a decade after observing the Great Recession from his perch at Freddie Mac, Nothaft spoke of lessons learned in that time, during an interview with an undergraduate student at Duke University.

"You want to have good, responsible underwriting conditions at play," Nothaft said. "That’s one problem that occurred in 2005 and 2006 with the deterioration of underwriting standards.

"I think also important is having, whether it’s with external groups or internally, more of a healthy dialogue and culture to voice different opinions," Nothaft said. "Not everyone’s going to agree, but you need to be, with staff internally, and in dialogue with external groups, to [be able to] feel like you can express what you see and what you believe in."

James Kleimann contributed reporting.

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Figure and Homebridge cancel planned merger

Posted: 06 Jun 2022 02:08 PM PDT

Mike Cagney - HW+ — Figure Technologies co-founder and CEO Mike Cagney

Fintech lender Figure Technologies and multichannel originator Homebridge Financial Services last August announced a merger that they claimed would usher in monumental change to the mortgage industry.

Figure, founded in 2018 by SoFi co-founder Mike Cagney, would bring a blockchain tech platform to the merged company, which would double the lender's capacity to fulfill loans. Meanwhile, old school New-Jersey-based Homebridge, founded more than 30 years ago and led by Peter Norden, would add 150,000 customers, the companies announced.

"We are bringing together the most robust, powerful and efficient technology ever seen in lending and pairing that with a $25 billion a year loan originator," Cagney, co-founder and CEO of Figure, said in a statement during the announcement.

But things did not happen as expected. The companies are canceling their proposed merger just 10 months after the announcement, as regulatory approval on the deal hasn't occurred, and the demand for new technologies and products is too strong to wait.

"Due to the delays in closing coupled with continued momentum in other parts of our lending, payments, and marketplace businesses, we have concluded with the Homebridge team that the merger will not go forward," Cagney said in a message sent late Friday to Figure's team.

A spokesperson for Figure said the company had no additional comments beyond those posted on its website. Homebridge did not return a request for comment.

The companies will keep an ongoing strategic partnership, collaborating to drive the advancement of the Figure's proprietary platform, called Provenance Blockchain, Cagney said in the message.

They will also work together to develop new products, such as a home equity line of credit (HELOC) and piggyback products. "We will work closely with Homebridge to identify and deploy new applications, including a version of the whitelabel HELOC product for the wholesale market," Cagney said. "Homebridge will continue the integration plans with DART, our blockchain-based mortgage and eNote registry."

HousingWire reported in March that the delay in the deal's approval was changing Figure's strategy. In early April, the company launched a cryptocurrency-backed 30-year fixed-rate mortgage product for borrowers to use bitcoin and/or ether as collateral.

The plan was to launch such a product only after completing the merger with Homebridge, but circumstances changed because of delays in completing the deal.

Also, two other companies have announced the product since December, including Miami-based digital lender Milo and Toronto-based cryptocurrency lending platform Ledn.

Cagney has said it is realistic to think Figure will reach between $500 million to $1 billion in origination volume in 2022. Figure will use its own cash to originate up to $100 million in loans. And while Figure has no plans to raise capital for the product, it can tap other sources of funding if needed.

Per Crunchbase, Figure has raised $1.6 billion in venture capital, including a $200 million Series D round in May with 10T Holdings and Morgan Creek Digital, as well as a $100 million funding facility from JPMorgan Chase in January 2021.

In merging with Homebridge, Figure planned to partner with a lender that competes in multiple channels. According to Inside Mortgage Finance, Homebridge was the 36th-largest mortgage originator in 2021, originating about $23.5 billion in mortgages, a decrease of 11% compared to 2020.

The post Figure and Homebridge cancel planned merger appeared first on HousingWire.

These mortgage lenders have cut jobs in 2022

Posted: 06 Jun 2022 12:34 PM PDT

It’s a tough time for mortgage lenders. A rapid rise in mortgage rates and a big drop in origination volume has led to thousands of industry job losses over the last six months. And it’s likely to continue – executives are calling this one of the most challenging periods in memory. By some estimates, origination volume will fall in 2022 to about $2 trillion, about half the volume from the record-breaking years of 2021 and 2020.

Few originators have been left unscathed by the industry-wide reduction in capacity.

Wells Fargo, one of the nation’s largest banks, had at least 114 layoffs in its home lending business following a drop in revenue in that division in the first quarter of 2022. Sources told HousingWire the number was substantially higher, though the lender declined to provide figures.

Nonbank lenders such as Pennymac, Mr. Cooper, loanDepot, Guaranteed Rate, Fairway Independent Mortgage, Interfirst Mortgage Co., Movement Mortgage and Better.com all conducted at least one round of workforce reductions this year as mortgage rates surged past the 5% mark.

Below is a roundup of some of the notable lenders that have issued pink slips this year. We have undoubtedly missed some job cuts; you can share news of layoffs anonymously by emailing Connie Kim at connie@hwmedia.com. This list will be updated throughout the year.

Wells Fargo: at least 114 employees in home lending

Wells Fargo, the third-biggest lender by volume in 2021, laid off at least 114 employees in its home lending division this year. As of May 27, Iowa Workforce Development lists 49 layoffs at the Wells Fargo campuses in Des Moines and 34 employee reductions in West Des Moine. Impacted employees, all in the home lending division, will receive pink slips in June and July, according to Iowa's WARN notification list.

According to Worker Adjustment and Retraining Notification (WARN) notices submitted to the California Employment Development Department (EDD) earlier this month, the company plans to cut 31 jobs in the home lending business, in letters to the EDD reviewed by HousingWire. Layoffs included 17 associate loan servicing representatives and eight loan servicing representatives as well as senior operations processors and senior loan servicing representatives.

“The home lending displacements are the result of cyclical changes in the broader home lending environment," Lylah Holmes, a spokesperson at Wells Fargo, told HousingWire. Wells Fargo will be providing severance and career counseling, and helping affected employees identify other positions within the bank.

The bank's revenues in the home lending business totaled $1.5 billion in the first quarter this year, a 19% drop compared to the previous quarter and 33% lower than the same period in 2021.

Wells Fargo executives in early June said the bank was considering pulling back on its mortgage business, where, beyond the challenges related to a decline in originations, it has also struggled with scandals related to minority lending.

loanDepot: Unknown

loanDepot, the fourth-largest lender, per mortgage data firm Polygon Research, conducted an unspecified number of layoffs in late May. Multiple sources told HousingWire that “hundreds” were let go.

Jonathan Fine, loanDepot’s vice president of public relations, declined to say how many positions were cut and suggested that a review of the earnings call transcript from the first quarter would provide needed information.

In April, loanDepot announced plans for potential layoffs in the company's first quarter earnings call after reporting a net loss of $91.3 million.

Company chief financial officer Patrick Flangagan said loanDepot doesn't expect to be profitable this year and shared plans to reduce marketing personnel expenses.

Loan origination volume dropped 26% to $21.6 billion from the previous quarter, according to the firm, bringing the company's market share down to 3.1%. The lender expects loan origination volume to post between $13 billion and $18 billion in the second quarter of this year.

Company executives said loanDepot is not expected to be profitable in 2022.

NewRez LLC: 386 employees

New Residential Investment Corp., the sixth-largest lender per Polygon Research, eliminated 386 positions, accounting for about 3% of the mortgage division’s workforce, in February.

The layoff decision followed New Residential Investment Corp.’s acquisition of multichannel lender Caliber Home Loans last year.

"As we continue to create synergies between companies, we are creating a structure to streamline business channels and create long-term growth," the NewRez spokesperson wrote in an email to HousingWire in February.

Caliber was a heavy-hitter across multiple origination channels, generating $80 billion in originations and $153 billion in servicing in 2020. Best known for its distributed retail footprint and its fair amount of business in correspondent and wholesale channels, NewRez/Caliber had 3.7% of market share in 2021, according to data from Inside Mortgage Finance.

Owning Group: 189 employees

California-based Owning Corp., a direct-to-consumer lender acquired by Guaranteed Rate in February 2021, cut 189 jobs across three rounds from February to April.

The layoffs included 51 mortgage specialists, the most heavily affected position, and 42 mortgage consultants.

Employees that were let go also included underwriters, closers, and top executives such as lending directors and vice presidents for credit and underwriting.

Owning is the second company acquired by Guaranteed Rate in 2021 to face layoffs in the challenging mortgage market this year.

Early in January, Texas-based Stearns Lending, acquired in January 2021 from the financial giant Blackstone Group for an undisclosed sum, laid off 348 workers following the decision by Guaranteed Rate to discontinue operations of its third-party wholesale channel.

Better.com: more than 4,000 workers

Digital lender Better.com has already conducted three rounds of layoffs since late last year, and it’s unclear where the bottom is. The firm's CEO infamously laid off 900 employees in a Zoom meeting in December where he then criticized the departing employees to remaining workers, 3,000 workers in March, some of which work in India, and an undisclosed number of people in April.

The firm has been seeking to go public via a special purpose acquisition company (SPAC), known as Aurora Acquisition Corp. But without reliable access to purchase business, conditions look bleak for Better.

An S-4 filing from Aurora, dated April 24 2022, showed that Better.com posted a loss of more than $300 million last year. The "deterioration" in Better’s financial performance was attributed to multiple factors including increasing interest rates and the effects of "negative media coverage" following a series of layoffs that began in December 2021, according to the filing.

Pennymac Financial Services: 474 positions

California-based nonbank mortgage lender and servicer Pennymac submitted WARN notices to cut 474 jobs by July this year.

Following workforce reduction filings of 236 employees in March, the firm submitted WARN notices to lay off 238 positions by June and July, according to letters to the EDD reviewed by HousingWire on May 27. Pink slips will arrive for California employees at six offices in Thousand Oaks, Pasadena, Roseville, Westlake Village, Agoura Hills, and Moorpark.

The latest round of WARN notices will impact 59 loan officers in the Thousand Oaks, Pasadena, and Roseville offices.

The office at Thousand Oaks accounted for the largest layoff notifications — of 97 employees, including 25 loan officers. Most of the other positions to be eliminated were analysts and managers in back office operations.

Top management jobs, such as vice presidents for underwriting and partial credit guarantee (PCG) transaction management, will also be reduced, according to Stacy Diaz, executive vice president of human resources at PennyMac, in letters to the EDD.

Pennymac posted a profitable first quarter but its net income dropped more than 50% driven by lower profits from its production segment.

Interfirst Mortgage Co.: 491 workers

Rosemont, Illinois-based Interfirst Mortgage Co. eliminated more than 490 positions this year in two rounds of layoffs.

Pink slips were delivered to a total of 351 non-commissioned loan officers in January: 77 in North Carolina and 274 in Illinois.

Interfirst felt the consequences of mortgage rates hovering at around 5% in May and announced an additional round of 140 layoffs at the lender's facility in Rosemont. Starting May 17, or within two weeks of that date, the company cut jobs in the mortgage loan production. Employees that were let go included 26 processors, 20 originators, and 15 mortgage accountant executives in junior and specialist positions.

Administrative positions including human resources, talent acquisition, and executive assistants were also part of the workforce reductions, according to a WARN filed by the company in early March.

Mr. Cooper: about 670 positions

Residential lender and servicer Mr. Cooper slashed 670 jobs this year so far in two rounds of layoffs.

Earlier this month, Mr. Cooper said the elimination 420 positions, 5% of its employee base, will hit the originations side of the business. A total of 120 employees, or about 16% of the staff in California will be affected by the announcement, Mr. Cooper said.

Mr. Cooper laid off about 250 positions in the first quarter, the company said in a response sent following its earnings call in late April. While Mr. Cooper reported a profitable quarter with a net income of $658 million in 2022, the firm didn’t expect that to continue.

“Given lower volumes, rationalizing capacity is an unavoidable theme for everyone in origination and we’ve been very disciplined in managing capacity,” Chris Marshall, vice chairman and president of Mr. Cooper said.

The company forecasts quarterly origination volume earnings to be between $65 million to $85 million for the rest of 2022, compared to $157 million in the first quarter.

Union Home Mortgage: unspecified number of LOs

Union Home Mortgage laid off loan officers in junior and senior positions in April. The firm, like many other companies in the industry, said it's "temporarily adjusting staffing levels" and declined to provide details on the size of the reduction.

The 49th-largest mortgage lender, according to Inside Mortgage Finance, wasn’t immune to the shrinking mortgage market despite reporting an origination volume of $4.2 billion in the fourth quarter of 2021, up 65.5% from the prior quarter. The lender's origination volume rose nearly 26% to $13 billion in 2021 from 2020.

Fairway: cuts in wholesale and retail channels

Employees in the wholesale and retail channels, including analysts and senior positions in underwriting, training and information technology, were let go in May.

While Fairway didn't provide any comment, a dozen employees affected by the layoff told HousingWire the company laid off professionals who were with the company for more than two years as well as those who started less than four months ago.

The firm was in a better position than its rivals six months ago but Fairway felt the pinch of mortgage rates in the 5% range and surging housing prices.

Fairway's loans accounted for about 62% of the company's total origination in 2021, the highest share among the top 12 lenders in the U.S., according to Inside Mortgage Finance.

The lender offered a two-week severance payment for some employees but no career transition support, former employees said.

Stearns Lending: 348 employees

Stearns Lending laid off nearly 348 employees in March following Guaranteed Rate’s decision to discontinue operations of its third-party wholesale channel.

In January 2021, Guaranteed Rate acquired Stearns Holding from Blackstone Group for an undisclosed sum. The acquisition will enable Guaranteed Rate “to bolster retail loan origination and further its joint venture platform while developing new multichannel capabilities, the company said at the time of the acquisition.

Guaranteed Rate’s CEO Victor Ciaradelli, in a letter to brokers about shutting down Stearns wholesale channel, said the company will focus on leveraging its “industry-leading purchase platform augmented by the best loan officers in the business.”

Redfin mortgage: 121 employees

Redfin issued pink slips to 121 employees in January following the real estate giant’s announcement of an acquisition of mortgage lender Bay Equity Home Loans for $135 million.

The impacted employees, less than 2% of the total staff, were mainly in sales support, capital markets, and operations.

“Reorganizing our mortgage operations unfortunately means some colleagues and friends will be leaving Redfin," Adam Wiener, Redfin's president of real estate operations, said in a statement in January. "Many of these people are the pioneers who helped build Redfin Mortgage from scratch and we owe them a debt of gratitude."

The workforce reduction was expected to bring $6 million to $7 million in costs and transaction advisory fees of approximately $3.5 million, according to Redfin. The firm also forecasted to incur a non-cash impairment charge of $2 million to $3 million on mortgage-specific, internally developed software.

Interactive Mortgage: 51 employees

Mortgage lender WinnPointe Corporation, doing business as Interactive Mortgage, laid off 51 employees in 2022 following a workforce reduction of 128 people last year.

The permanent layoffs, according to the WARN notices sent to the California Employment Development Department, was in part due to the more than $1 million dollars in losses from rises in increase rates and the “economic collapse triggered by the Covid-19 pandemic.”

Of the 51 employees who were laid off in April, three are underwriters, 15 are LOs, 11 are processors, 19 are admins, and three are funders. The 128 employees who were let go last year, included six underwriters, 20 loan officers, 26 processors, 51 admins, and 25 funders.

USAA Bank: more than 90 employees

Texas-based USAA Bank reduced its mortgage sales team by more than 90 employees, the San Antonio Express News reported in April.

The publication said the layoffs came amid USAA Bank’s projections of a 34% drop to about 25,000 real estate loans despite having adequate staff in place to facilitate 38,000 loans, citing internal emails.

The company confirmed the cuts but categorized the workforce reduction as business as usual for a company of its size.

USAA Bank was founded in 1922 by a group of 25 U.S. Army officers to insure each other’s vehicles because of the perception that military officers were a high-risk group. Headquartered in San Antonio, Texas, the bank has five financial centers across the country including New York and Colorado.

Tomo Mortgage: almost a third of its workforce

Tomo issued pink slips to 44 employees, almost a third of its employees in late May.

Greg Schwartz, CEO at Tomo, said in a LinkedIn post said the firm was “impacted by the rapid rise in interest rates that has reduced purchase mortgage margins.”

With venture capital pulling back, Schwartz said the firm “must map out a stable budget that will rely on less capital for longer.”

Tomo will dial back market expansion plans and focus on building tech that will deliver a faster and less costly home buying process, Schwartz added.

The firm, which now has 110 employees, raised $40 million in a Series A funding round in March and touted a valuation of $640 million.

Founded in 2020 by former Zillow executives Carey Armstrong and Shwartz, Tomo claims to close 98% of its loans on time.

No layoffs here*

Lenders that haven't laid off employees yet this year include United Wholesale Mortgage (UWM) and Rocket Mortgage.

UWM, the nation’s second-largest lender by volume, hasn't instituted layoffs like many of its competitors, though executives are mindful of expenses.

Total expenses dropped to $316.9 million in the first quarter of 2022 from $364.4 million during the same period in 2021. In Q1 2022, salaries, commissions and benefits reached $160.6 million, which CEO Mat Ishbia considered a "solid" number.

"It's very important that we continue to manage our expenses. We have complete control of this, and we feel great about where we're at," Ishbia said to analysts during UWM’s earnings call.

Rocket Companies, the parent of Rocket Mortgage and Amrock Title, has not eliminated any positions but has offered a voluntary buyout to 8% of its staff in April.

In its most recent earnings call in May, executives said Rocket took "significant cost reduction measures" that includes implementing a voluntary career transition program to certain team members, reducing production costs, and shifting its market spending for the second quarter.

The firm in April said the buyout would save $40 million per quarter, after a one-time charge between $50 million and $60 million.

The post These mortgage lenders have cut jobs in 2022 appeared first on HousingWire.

Loans And Mortgage

Tuesday, June 7, 2022