Mortgage – HousingWire |
- MSR market picks up in Q3 where Q2 left off: Hot
- Wells Fargo: Our mortgage business will “naturally” decline
- Opinion: Trusting your data is key to taming origination costs
| MSR market picks up in Q3 where Q2 left off: Hot Posted: 15 Jul 2022 10:46 AM PDT Four new mortgage-servicing rights (MSR) offerings for agency loan portfolios valued at some $3.7 billion hit the market as the third quarter of the year kicked off. Alexandria, Virginia-based advisory and brokerage firm Prestwick Mortgage Group, along with its strategic partner, San Diego-based Mortgage Capital Trading (MCT), recently released bid documents for two separate MSR offerings involving loan portfolios valued at $1.85 billion in total. In addition to the MSR offerings being marketed by Prestwick and MCT, Denver-based Incenter Mortgage Advisors in July alone has come out with two large MSR offerings, which are tied to loan packages worth $1.84 billion. MSRs gain value as interest rates rise, in part because upward-bound rates cause mortgage refinancing to slow. That reduces mortgage-prepayment speeds — increasing the effective long-term yield of the servicing rights tied to those loans. Since the start of the year, rates have trended upward, quickly, with the 30-year conforming fixed rate rising nearly 2.3 percentage points since early January — from 3.22% as of the first week of 2022 to 5.51% as of mid-July, according to Freddie Mac's Primary Mortgage Market Survey (PMMS). One of Prestwick's packages on the auction block, offered by a party identified in bid documents as "an independent mortgage banker," involves MSRs for a pool of 2,826 Freddie Mac loans valued at $749 million. The other offering is for a package of MSRs on a combined portfolio of 4,853 Fannie Mae and Freddie Mac loans valued at $1.1 billion — also being offered by a party identified only as an "independent mortgage banker." The weighted average servicing fee for both packages is 0.25%. Bids on the $749 million Freddie Mac portfolio are due July 21. For the $1.1 billion Fannie/Freddie package, bids are due July 20. Incenter's offerings include MSRs for a pool of 3,212 Fannie Mae and Freddie Mac loans valued at $1.03 billion. The other MSR sale being marketed by Incenter involves a portfolio of 5,274 Ginnie Mae loans valued at $807.8 million. Bids for both of Incenter's MSR packages are due July 21. The servicing fee for the $1.03 billion package is 0.25%, bid documents show, while the servicing fee for the $807.8 million MSR package is a tad higher, at 0.284%. During the final week of June, Prestwick also put out for bid an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae MSRs, with bids due July 12. Prestwick's offering came on the heels of a separate bulk offering announced by Incenter last month, which involved a $915.8 billion package of Fannie Mae and Freddie Mac MSRs. Bids on that package were due June 23. At the time the $915.8 billion offering was being marketed, Tom Piercy, managing director of Incenter Mortgage Advisors, said his firm was working on multiple MSR deals totaling more than $60 billion, which "are not out for public auction." A recent report from mortgage-analytics firm Recursion, current as of the end of June, ranks Wells Fargo as the leading all-agency mortgage servicer, with a 7.6% market share and some $620.5 billion in loans serviced. Pennymac ranks second, with $507.1 million in agency loans serviced; followed by Rocket Mortgage, $490.7 billion; J.P. Morgan, $480.4 billion and Lakeview Loan Servicing, $389.3 billion. Following are the top five mortgage servicers broken down by agency and respective market shares, based on the volume of loans serviced as of the end of June, according to the Recursion report: Fannie Mae — total outstanding $3.31 trillion
Freddie Mac — total outstanding $2.84 trillion
Ginnie Mae — total outstanding $2.05 trillion
The post MSR market picks up in Q3 where Q2 left off: Hot appeared first on HousingWire. |
| Wells Fargo: Our mortgage business will “naturally” decline Posted: 15 Jul 2022 08:33 AM PDT Wells Fargo‘s second-quarter earnings reflect the broader challenges mortgage lenders face in such a turbulent market – in just six months, a rapid rise in mortgage rates has eroded consumer demand, shocked capital markets and forced mass industry layoffs. And those fundamental challenges are not going away anytime soon. The third-biggest U.S. mortgage lender by volume on Friday reported a decline in originations, a decrease in gain-on-sale margins and lower revenues from the re-securitization of loans purchased from securitization pools. The lone bright spot was higher mortgage servicing income. Wells Fargo originated $34.1 billion in mortgages between April and June, down 10% quarter-over-quarter and 36% year-over-year. Refinancing originations fell to just 28% of total production in the second quarter, down from 56% in the first quarter. Wells Fargo’s retail channel volume fell to $19.6 billion in Q2 2022, down 19% quarter-over-quarter and 47% year-over-year. Correspondent channel origination volume came in at $14.5 billion, up 5% compared to the previous quarter but down 36% compared to the same period in 2021. The bank’s home lending business revenues reached $972 million, declining 35% compared to the prior quarter and 53% compared to the same period of 2021. The higher rate environment and a more competitive landscape were responsible for the dip, executives at the bank said Friday. The mortgage banking noninterest income came in at $287 million in Q2 2022, a decrease from $693 million in the previous quarter and $1.3 billion in the same period of 2021. “Noninterest income declined as higher interest rates and weaker financial markets reduced our venture capital, mortgage banking, investment banking, and brokerage advisory results,” Charlie Scharf, the bank’s CEO, said in a news release. Wells Fargo’s mortgage servicing rights – carrying value (period-end)– increased 8%, from $8.5 billion in Q1 2022 to $9.2 billion in Q2 2022. Compared with Q2 2021, when it was $6.7 billion, it increased 36%. The net servicing income declined 34% quarter-over-quarter to $77 million but was up 201% year-over-year. According to Scharf, the bank is reassessing what makes sense in mortgage lending – in the servicing business, the primary focus should be on serving its customer base. On the origination side, he said Wells Fargo is not interested in being “extraordinarily large.” Instead, it is focused on products that will provide solid returns over the cycles, “given all the complexities and requirements that banks have that not necessarily everyone else has.” “If you just look at how much we originated historically versus you know what we’re originating today, it’ll naturally just come down over time,” Scharf told analysts. Wells Fargo is the second top-10 mortgage originator to report its second quarter earnings. JPMorgan Chase, the second-largest depository mortgage lender, reported double-digit declines in originations, margins compressions and revenue. “The mortgage market is expected to remain challenging in the near term,” Mike Santomassimo, Wells Fargo’s chief financial officer, said Friday. “We are making adjustments to reduce expenses in response to lower origination volumes, and we expect these adjustments will continue over the next couple of quarters.” Wells Fargo will lay off 125 employees in its home lending division in Iowa by the end of August, according to Worker Adjustment and Retraining Notification (WARN) notices submitted to the Iowa Workforce Development. The bank eliminated 72 mortgage jobs in Iowa across earlier layoffs. Mortgages and home lending divisions are now under Kleber Santos, chief executive officer of consumer lending. Santos will replace Mike Weinbach. Wells Fargo’s stock was trading at $41.33 as of 10:45 PM EST Friday, up 6.70% from the previous day. The post Wells Fargo: Our mortgage business will “naturally” decline appeared first on HousingWire. |
| Opinion: Trusting your data is key to taming origination costs Posted: 15 Jul 2022 07:28 AM PDT One statistic in the Mortgage Bankers Association's latest quarterly Mortgage Bankers Performance Report sticks out for all of the wrong reasons. In the first quarter of 2022, the average cost to originate a mortgage for an independent mortgage bank was more than $10,000 per loan, rising for the seventh consecutive quarter and breaking previous report records. So, why are production costs so high? A major factor driving non-sales costs is that we continue to re-enter, verify, and validate data at different checkpoints throughout the mortgage lifecycle. Even though this practice is highly inefficient, it happens because we have many parties involved in every transaction and each party has its own unique concerns and requirements. And nobody trusts the data they obtain from others. One path to bringing production costs down is through a transition to electronic records and the exchange of trusted data. While some lenders are offering, and many customers are availing themselves of, the ability to electronically sign certain documents, mortgage transactions, end to end, remain stubbornly reliant upon stacks of paper. It's clear that just being able to electronically sign documents is only part of the battle when it comes to digitizing mortgages. So, how can we eliminate the phenomenon of "checkers checking the checkers," and finally create an environment in which the mortgage industry can translate the promise of electronic records into tangible results, in the form of accelerated cycle times, reduced costs per loan, improved compliance, and enhanced customer experience? The answer is to restore trust in data among market participants. And a critical mechanism for restoring trust is the new MISMO SMART Doc Version 3 Verifiable Profile. Not only does this specification contain the expected SMART characteristics of being securable, management, archivable, retrievable, and transferable, but it also creates a truly electronic record with trusted data. This new resource is now available to the industry for input and comment, with a final version to be issued once input is incorporated. I'm not the only person who thinks this is a game-changer. According to Brett Bode, Analyst, Click n' Close, Inc., "a key benefit of the new SMART Doc standard is that it instills confidence and trust in data, as it ensures that all records kept by all parties agree with each other. The SMART Doc standard can be applied to a myriad of documents throughout the mortgage process and makes a ton of sense." Here are three key takeaways that the industry should understand about the new specifications:
The fact that the SMART Doc Version 3 Verifiable Profile specification creates a truly electronic record, rather than an electronic image of a document, resonates with Charles Epperson, chief technology officer at Evolve Mortgage Services. "With the Version 3 SMART Doc verifiable profile, you see the biggest lift when 'getting it right' at the beginning, doing everything electronically," says Epperson. "This delivers benefits throughout the process as all the documents can be read by users and technology. When we maintain continuity of the data collected during the process, there is now a link into the documents' data points that can be used to fact check and perform quality control. These documents can validate that all the information in the MISMO XML matches what was signed by the borrower and are visible down-stream to investors," Epperson said. Another crucial benefit of Version 3 is that you can view the SMART Doc, validate it, and transport it. It is the same physical document from vault to vault. These enhancements improve cycle times, lower production costs and allow the industry to achieve automated "lights out" processing. According to Christopher McEntee, vice president at ICE Mortgage Technology, "there are more than 1.7 million eNote registrations to date and industry interest in adopting [eNote] technology and business processes to enable a fully digital mortgage has never been higher." All eNotes are SMART Docs and the verifiable Version 3 addresses the expanded interest in and growing adoption of eNotes and provides a crucial solution. However, the potential for the Version 3 SMART Doc goes well beyond the realm of eNotes, since the packaging of trusted data and documents together could generate significant benefits when applied to just about any document currently used in the mortgage process. This new standard from MISMO may well provide lenders with some relief from the ever-increasing loan production costs observed in MBA's Performance Report. This SMART Doc Version 3 Verifiable Profile, which can be used across the real estate finance ecosystem, will help to accelerate our industry's digital transformation by restoring trust in data and enabling a needed transition to utilizing electronic records. Seth Appleton is president of MISMO. This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners. To contact the author of this story: To contact the editor responsible for this story: The post Opinion: Trusting your data is key to taming origination costs appeared first on HousingWire. |
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