Mortgage – HousingWire |
- MSR market closes June on $5.2B high note, but has it peaked?
- Banks report rise in mortgage delinquencies
- FGMC owes Customers Bank $25M, bankruptcy filing shows
- Purchase mortgage rates drop, ending 2-week climb
| MSR market closes June on $5.2B high note, but has it peaked? Posted: 01 Jul 2022 11:06 AM PDT  The mortgage-servicing rights (MSR) market continued to defy gravity and remained upward bound as June came to a close. On the last day of the month, the New York-based Mortgage Industry Advisory Corp. (or MIAC Analytics) released bid documents for an MSR offering it is brokering that exceeds $5 billion in value. "MIAC Analytics, as exclusive representative for the seller, is pleased to offer for your review and consideration a $5.22 billion Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing portfolio," the offering documents state. "The portfolio is being offered by a mortgage company that originates loans with a concentration in California." In fact, by value, the bulk of the loans in the MSR package were originated in California — representing $2.9 billion, or about two-thirds of the total value of the MSR bulk offering. The percentage of Fannie- and Freddie-backed loans in the package is split evenly by value — at 39.3% and 39.5%, respectively. Ginnie-backed loans comprise 21.2% of the package by value. The offering includes a total of 17,088 mortgages with an average interest rate of 3.127% — well below current 30-year fixed rates now approaching 6%. The servicing-fee cut — a slice of the total interest rate — averages 0.268%. In addition to the current offering, MIAC came out with two large MSR offerings earlier 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. But how long can this MSR boom continue? Tom Piercy, managing director of Denver-based Incenter Mortgage Advisors, said as interest rates rise, the value of MSRs generally increases because the risk of early repayment of mortgages decreases. And fast-rising rates in 2022 have killed the refi boom, which is a major driver of mortgage prepayments. Piercy added, however, that at some point rates reach a level where each additional incremental increase doesn't appreciably decrease prepayment speeds. "The question around diminishing returns is valid," he said. "However, one must be aware of the nuances and economic variables that impact MSR valuations." Yes, we would see pricing begin to hit its ceiling when looking at just prepayment curves, Piercy explained. "For instance, most 2020 & 2021 conventional [mortgage] vintages have seen lifetime [prepayment] speeds drop to as low as 6% or 7%, and more typically 8%," he said. "The standard life of a mortgage asset without refinance pressure is typically 8% over the history of data — simply due to relocation, divorce, death, etc." A conditional prepayment rate, or CPR, is typically expressed as an annual percentage based on the likely prepayment rate for a pool of mortgages. "Given this history, one would believe we are hitting our ceiling with MSR values, but that's not the whole story," Piercy said. Piercy explained that another factor impacting the value of MSRs that could further fuel the run-up in value is the relationship between loan escrow balances and short-term rates. There is a short-term (monthly) float of around 13 days between the average on-time payment of principal and interest to the day of remittance to the investor. Long-term escrows, he added, are considered the taxes and insurance payments “that are received monthly but not paid to the counties or insurer for six to 12 months, depending on how often taxes are paid in the county or when the homeowners policy is due.” "Escrow balances play a big part of the valuation when rates are higher," Piercy added. MIAC explains the role of an escrow balance plays in loan income on its website with the following example: "What follows is a simplified monthly income statement for a $200,000 loan the month after it is sold. The servicing fee is 25 basis points, the ancillary income is $20.00 per year, the monthly value of the escrow float is estimated to be $1.33 (average escrow balance of $1,600 at 1% interest), and the servicing costs are $125 per loan." When the spread between short-term and longer-term rates narrows, as it has been since the start of the year, that helps to bolster the value of escrow balances and the related MSRs, Piercy said. As of March 1, the spread between the 2-year and 10-year Treasury was 41 basis points, according to Federal Reserve data. On June 20, it stood at 4 basis points. "This increase in short-term rates will impact the value of the escrow balances associated with the MSR asset, hence, generate even greater value in the short-term," Piercy said. "As rates rise, however, one will typically see the required yield on investment increase, but that is lagging parameter, which means we will see the value of MSRs increase in the short-term should these short-term rates continue to rise." Based on recent MSR offerings in June that are in addition to MIAC's recent offerings, it appears there is still plenty of fuel left in the MSR-value tank. Earlier this week, HousingWire reported that the Prestwick Mortgage Group, an Alexandria, Virginia-based advisory and brokerage firm, had put out for bid an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing rights. Bids are due July 12. Prestwick's offering comes on the heels of a separate bulk offering announced recently by Incenter Mortgage Advisors that involves a $915.8 billion package of Fannie Mae and Freddie Mac MSRs. Bids on that package were due on June 23. Piercy said Incenter also is working on multiple deals totaling more than $60 billion "that are not out for public auction." The post MSR market closes June on $5.2B high note, but has it peaked? appeared first on HousingWire. |
| Banks report rise in mortgage delinquencies Posted: 01 Jul 2022 10:12 AM PDT Banks reported an increase in foreclosures during the first quarter of 2022, according to a quarterly survey published by the Office of the Comptroller of Currency this week. The survey, which examined servicing metrics provided by seven undisclosed national banks, found that 19,542 new foreclosures were initiated in the first quarter of 2022. The OCC said this marks a jump from the previous quarter, but added the foreclosure volume in the first quarter is comparable to pre-COVID-19 pandemic foreclosure volumes. Most industry observers predicted that the national foreclosure rate would rise once foreclosure moratoriums ended on July 31, 2021. Home forfeiture actions, including completed foreclosure sales, short sales, and deed in-lieu-of- foreclosure actions also grew by 26.8% year-over-year to 2,410, the OCC found. The seven banks surveyed reported a total of 42,427 modifications completed, a 10.7% decrease from the previous quarter. An estimated 140,000 renovated properties purchased at foreclosure auction or bank-owned auction were resold to owner-occupant buyers between January 2020 and December 2021 Presented by: Auction.comOf the modifications completed, the OCC said 97.4% were "combination modifications," where interest rate reductions and term extensions are applied to a loan to help bring down a borrowers mortgage payment. Among the combination modification completed, 83% included the capitalization of delinquent interest and fees, 88.6% included an interest rate reduction, 84.2% included a term extension and 22.3% of the loans modified included a principal deferral, the OCC said. The report added that of the 42,427 modifications completed during the quarter, 34,278 reduced the loan's pre-modification monthly payment. The regulator said 3,721 loan modifications were completed during the third quarter of 2021 and six months later, 2,915, or 8.6 %, were 60 or more days past due, or in the process of foreclosure at the end of March 2021. Banks surveyed reported servicing approximately 12.2 million first-lien residential mortgages with $2.6 trillion in unpaid principal balance, the report said. This represents 22% of all residential mortgage debt outstanding in the nation. Year-over-year, the OCC found mortgage performance improved – the percentage of mortgage current and performing at the end of the first quarter increased to 96.9% compared to 94.2% last year. The post Banks report rise in mortgage delinquencies appeared first on HousingWire. |
| FGMC owes Customers Bank $25M, bankruptcy filing shows Posted: 30 Jun 2022 12:21 PM PDT  First Guaranty Mortgage Corp. (FGMC) and its holding company, Maverick II Holdings LLC, filed for Chapter 11 bankruptcy protection Thursday, June 30, leaving one of the country's major warehouse lenders as its largest unsecured creditor, according to court filings. Pennsylvania-based Customers Bank, which has warehouse lending operations located in Hamilton, New Jersey, is listed as the largest unsecured creditor in the FGMC Chapter 11 case — with a claim of $25 million, court pleadings show. A 2021 report by industry publication Inside Mortgage Finance ranked Customers Bank as the 10th largest warehouse lender nationally in terms of financing commitments as of Q3 2021 — at $5.4 billion. Scott Goodwin, senior vice president of warehouse lending at Customers Bank, said the debt exposure in the FMGC case "is guaranteed by a PIMCO entity, and we expect to be paid in full." Behemoth investment management firm PIMCO in 2015 purchased a stake in FMGC, according to a report by Inside Mortgage Finance at the time. HousingWire reported late last week that First Guaranty had laid off nearly 80% of its staff and stopped accepting new mortgages. The lender then filed for Chapter 11 bankruptcy on Thursday, June 30. “While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we ultimately must do what is best for our borrowers and consumers,” said Aaron Samples, chief executive officer of FGMC. “After careful review and consideration, the company determined that pursuing the protections of chapter 11 is the right and responsible path at this time. "As part of this process, the Company retained a portion of its workforce to manage the day-to-day business." The lender also has filed various motions to preserve company "value for the benefit of the company's stakeholders," FGMC's announcement of the bankruptcy states. The goal for a company in a Chapter 11 bankruptcy protection case is to emerge from bankruptcy after restructuring its operations and debt through a court-approved reorganization plan — with secured creditors having superior status over unsecured creditors. Among the motions now pending in the FGMC bankruptcy case is a request seeking court approval for debtor-in-possession (DIP) financing, which would be provided by Barclays Bank PLC, court pleadings show. DIP is a special kind of financing available to companies in Chapter 11 cases and normally has priority over existing creditors' claims or equity holdings. Other creditors in the FGMC bankruptcy with unsecured claims exceeding $500,000 include the following:
The nature of each of the company's claims is listed as a margin call in the court pleadings — except for Sourcepoint's claim, which is listed as a trade debt. FMGC is listed as the only equity security holder in Maverick II Holdings, court pleadings show. The bankruptcy filing so far does not include a list of secured creditors, only a creditors matrix — which does not include financial figures. PIMCO is not listed in the matrix, at least under that operating name. FGMC's Chapter 11 bankruptcy case is filed with the U.S. Bankruptcy Court for the District of Delaware. The post FGMC owes Customers Bank $25M, bankruptcy filing shows appeared first on HousingWire. |
| Purchase mortgage rates drop, ending 2-week climb Posted: 30 Jun 2022 07:03 AM PDT Purchase mortgage rates this week dropped 11 basis points to 5.70%, according to the latest Freddie Mac PMMS Index, ending a two-week climb following the Federal Reserve's rate hike earlier this month. A year ago at this time, 30-year fixed rate purchase rates were at 2.98%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days. "The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession," said Sam Khater, chief economist at Freddie Mac. Another index showed the 30-year conforming rates also slid from last week. 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 rate at 5.89% Wednesday, down slightly from last week's 5.9%. The 30-year fixed-rate jumbo was at 5.42% Wednesday, up from 5.33% from the previous week, according to the Black Knight index. Khater expects the dip in mortgage rates will also slow down home price growth. What lenders should know about today's economic climate Between continuing rate hikes from the Federal Reserve, the ongoing war in Ukraine and continued economic recovery following the pandemic, mortgage lenders across the country are managing a volatile housing market. Learn how updating your mortgage technology stack can help you get ahead in today's unpredictable lending environment. Presented by: Polly"This pause in rate activity should help the housing market rebalance from the bottleneck growth of a seller's market to a more normal pace of home appreciation," Khater said. Mortgage application volume rose 0.7% last week led by refinancing applications and a slight uptick in conventional loans, according to the Mortgage Bankers Association. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week, the MBA said. Refi application rose 1.9% from the previous week and purchase application marginally increased 0.1% from a week earlier. Mortgage rates tend to move in concert with the 10-year U.S. Treasury yield, which reached 3.10% Wednesday, down from 3.16% a week before. The federal funds rate doesn't directly dictate mortgage rates, but it does steer market activity to create higher rates and reduce demand. Following the Federal Reserve's interest rate hike of half a percentage point June 15, mortgage rates have been showing an upward trend for the past two weeks. According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.83% with an average of 0.9 point, down from last week's 4.92%. The 15-year fixed-rate mortgage averaged 2.26% a year ago. The 5-year ARM averaged 4.50% up from 4.41% the previous week. The product averaged 2.54% a year ago. Economists expect the tightening monetary policy will reduce originations in 2022 and 2023. The MBA expects loan origination volume to drop about 40% to about $2.4 trillion this year, from last year's $4 trillion. Meanwhile, the MBA expects 6.53 million existing and new home sales in 2022, compared to 6.9 million in 2021. The post Purchase mortgage rates drop, ending 2-week climb appeared first on HousingWire. |
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