Upcoming Events; Continuing Agency Changes That Move the Markets
Don't ask me how we arrived at the last week of October already, but here we are barreling toward Halloween and changing the clocks Sunday morning and moving from abbreviations like EDT and PDT to EST and PST. Winter is on the way and WalletHub, yet another company with another letter capitalized in the middle of it, conducted an in-depth analysis of 2015's most and least energy efficient states, comparing the efficiency of car and home-energy consumptions. The top ten most energy-efficient states include New York, Vermont, and Minnesota, and the least energy-efficient states include Virginia, Georgia, West Virginia, North Dakota, Tennessee, Arkansas, and Kentucky. I mentioned these findings to my cat Myrtle who made a joke - in poor taste - about certain states still using coal to cook.
Secretary, U.S. Department of Housing and Urban Development Julián Castro will join Realtor.com Chief Economist Jonathan Smoke and Wall Street Journal Economics Correspondent Nick Timiraos to discuss the state of the housing market for millennials in an online town hall event on Monday, Oct. 26 from 6:00 p.m. ET - 7:00 p.m. ET. This conversation, hosted at The George Washington University in Washington, DC, will be streamed live at realtor.com/townhall. Following the discussion will be a Q&A session where questions submitted by viewers on Facebook and Twitter will be answered.
If you're in Washington, or will be on Tuesday the 27th, and an LO or Realtor, the Washington Mortgage Bankers are offering up a presentation by the fabled Steve Richman titled, "Navigating the Future". The cost is $25 ($20 for groups of 5 or more). Be there at 8:30 for topics such as, "The Face of Today's Homebuyer & How to Capitalize on This Demographic" and "Transactional Buyers vs. Relationship Buyers - How to Appeal to Both."
Join California MBA on October 28th for its free webinar to discuss how to capture the Millennial $1 trillion purchase market potential.
"Rob, what do you hear about Fannie & Freddie g-fees being used by the government for other purposes?" Good question, especially as borrowers pay for the g-fees which the lender includes on rate sheets. The ducats earned by Freddie & Fannie, a good chunk of which is related to g-fee income, goes to the U.S. Government - one reason Congress is in no hurry to cut the agencies loose. Industry groups sent a letter to Congressional leaders urging them to refrain from utilizing Fannie Mae and Freddie Mac's credit risk guarantee fees as a source of funding for any extension of highway programs. Before Congress returned to their districts for their August recess, the Senate passed a three year highway bill that was funded, in part, by a four year extension to the current 10 year, 10 basis point increase in g-fees for Fannie Mae and Freddie Mac. Last week, during a six-hour hearing where lawmakers offered over 150 amendments, the House of Representative's Transportation and Infrastructure Committee marked up and approved the Surface Transportation Reauthorization and Reform Act of 2015 (H.R. 3763), a six-year, $325 billion surface transportation reauthorization bill.
Karen Shaw Petrou recently scribed an opinion piece to her Federal Financial Analytics clients on why Fannie Mae and Freddie Mac "remain frightening." "Fannie Mae told mortgage bankers that it's now a 'holder and mover' - not a warehouse - of mortgage credit risk. Freddie has previously described itself as a 'buyer and seller,' also taking itself out of the GSEs' bread-and-butter guarantee business. With this transformation, the GSEs are complying with the Administration's demands and sharing what was once their wealth. However, it's not that easy. Fannie and Freddie can shed credit risk while the market is devouring high-yield deals with an 'effective' US Government guarantee. At any point at which the music stops, the GSEs may well find themselves stuck with a big pile of non-transferable credit risk and a portfolio they cannot fund unless Treasury bails them out again or the market absorbs a huge, sudden issue of GSE debt backed by an 'effective' USG guarantee. In short, we can pretend we're making Fannie Mae and Freddie Mac disappear, but we're actually turning the GSEs into still bigger simulacrums of their old, risky selves."
The article goes on to mention that the FHFA, portfolio restrictions, gfee moves, and risk sharing transactions have helped to establish who will take the risk, and how much it costs to execute this "complex risk shuffle."
"So far, the deals are moving well and FHFA and the GSEs have thus decided to do more - hence the new GSE mission statements. It seems like the perfect no-action sort-of solution - Washington's favorite kind. In it, Congress and the Administration do nothing, while seeming to do something because Fannie Mae and Freddie Mac's on- and off-balance sheet books dwindle without any decrease in originations of the thirty-year, fixed-rate mortgages so beloved of constituents and, thus, also of policy-makers regardless of party.
"The only problem is that this solution only works for as long as interest rates are low, macroeconomic growth is positive, and no one rattles the cage. Despite the good times, private investors now gobbling up GSE risk-shares could decide not to play. This decision could be made gradually as rates rise and deals better pair risk and reward, especially if risk perceptions discount the GSEs' federal backstop as any real reform demands. Or, far worse, the market could snap shut because hedge funds, insurance companies, pension funds, and the others bellying up to the risk-share bar come under acute market stress - the 2007-08 scenario that shut down bank mortgage securitization at terrific cost to their liquidity and, then, the financial market.
"The real road to GSE reform requires a comprehensive prudential framework that recognizes what sparks risk across an on- and off-balance sheet book of business, builds in protections at shareholder cost, backs them with federal facilities for public policy purposes, and ensures orderly resolution if all else fails. Covering up GSE solvency problems with risk transfers only makes Fannie Mae and Freddie Mac still more vulnerable to liquidity risk -in short, it's no way out."
Freddie Mac's new automated settlement functionality for liquidation transactions in Workout Prospector, will be available on November 16, and includes short sales, deeds-in-lieu of foreclosure, charge-offs, and third-party foreclosure sales. While you don't have to submit third-party sales for settlement through Workout Prospector until March 1, 2016, it is strongly encouraged to implement this new process, beginning on November 16. To get started use the following forms: Complete and submit the Workout Prospector Order Form. Complete and submit the Servicing Technology Tools Sign Up Form to gain access to Workout Manager®, which allows you to monitor your settlements after they're submitted. Familiarize yourself with Workout Prospector: Review the Workout Prospector Users' Guide. Sign up for available workout settlement training and view helpful reference materials to familiarize yourself with the tool.
Fannie Mae's announcement 2015-13 includes several updates to its servicing guide. To list a few, updates include short sale access, requirements, property inspection frequency, lender-placed insurance requirements, and changes to requirements for processing modification agreements.
In response to the Fannie Mae retirement of MyCommunityMortgage, Wells Fargo Funding is assessing these changes and has identified system and pricing constraints that will prevent it from accepting MyCommunityMortgage loans after December 11, 2015. MyCommunityMortgage loans must be purchased by Wells Fargo Funding on or prior to December 11, 2015. On the flip side, Fannie Mae is introducing the HomeReady Mortgage, designed to help serve creditworthy, low- to moderate-income customers with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. Wells Fargo's Home Opportunities program will be updated to more closely align with the HomeReady Mortgage. As a result, Wells' Home Opportunities loans meeting today's requirements must be purchased by Wells Fargo Funding on or prior to December 11, 2015.
Materials are now available to help you promote the HOME by Fannie Mae mobile app to buyers. The app launched in July and is designed to help buyers learn about the responsibilities of homeownership, estimate affordability, get tips on maintaining their home, and calculate potential savings on future mortgage payments.
As of October 13 Ditech removed its -0.050 LLPA for all Conforming Fannie Mae and Freddie Mac Fixed and Government Fixed products with loan terms greater than or equal to 20 years in California and Nevada. Regarding its Fannie Mae 5/1 ARM products with a 5/2/5 CAP, this product must be underwritten using Desktop Underwriter. 5/1 ARM loans with a 5/2/5 CAP run through Loan Prospector will not be eligible for purchase.
Fannie Mae is reminding Servicers of its existing policies to assist borrowers following a disaster. Disasters, such as the recent flooding in South Carolina, refer to Assistance in Disasters for information on where to find Fannie Mae's policies for providing assistance to borrowers impacted by a disaster.
Greystone, a real estate lending, investment and advisory company, announced it has provided a $6,230,000 Freddie Mac Forward Rate Lock Tax-Exempt Loan ("TEL") - the first in the industry for construction-to-permanent financing - for the significant rehabilitation of Mayberry Townhomes, a 70-unit affordable housing development in San Diego, CA. The Freddie Mac TEL for this transaction is a 24-month forward rate lock with an 18-year permanent loan term and 35-year amortization with an actual loan to value ratio of 82%. Mayberry Townhomes is an existing multifamily community being acquired by Community HousingWorks of San Diego, CA, which will see renovation and new construction utilizing 4% Low Income Housing Tax Credits and construction financing from Bank of America Merrill Lynch, with Greystone and Freddie Mac providing the permanent financing.
It seems that the markets have grown bored with the United States, so the focus last week was more overseas. More specifically European Central Bank (ECB) President Draghi hinted at the possibility the ECB will provide more policy accommodation before the end of the year. On Friday the People's Bank of China actually announced a 25 basis point cut in its one-year lending rate to 4.35%, a 25 basis point cut in its one-year deposit rate to 1.50%, and a 50 basis point cut in the required reserve ratio for banks and another 50 basis points for qualifying institutions.
The news in the US revolved around our government. Some of the weakness at the front of the curve could be attributed to budding angst over the still unresolved debt limit issue. Get used to it: Treasury Secretary Lew has already warned extraordinary funding measures are likely to run out on November 3.
The last week of October - time flies. And another week of scheduled news. Today is the September New Home Sales figures. Tomorrow is the September Durable Orders figures, August Case-Shiller 20-city Index, and October Consumer Confidence. Wednesday the 28th we'll have the FOMC Interest Rate Decision at 2PM EDT. Thursday includes Initial Jobless Claims, Q3 GDP, and September Pending Home Sales. Friday, while mortgage banking departments compete with each other for the best costumes, is another full day with September Personal Income & Spending, PCE Prices, Q3 Employment Cost Index, October Chicago PMI, and October Michigan Sentiment. We closed the 10-year Friday at 2.08%; it is currently at 2.07% and agency MBS prices are better by a smidge.
Jobs and Announcements
In job news United Guaranty Residential Insurance Company (United Guaranty), the number one mortgage insurer in terms of New Insurance Written for four consecutive years, is seeking a Senior Account Executive for Northern Illinois. "We're looking for a highly motivated individual to write and successfully execute a business plan to achieve United Guaranty's objectives. The ideal candidate will have experience in direct sales and extensive knowledge and experience in mortgage origination, particularly mortgage insurance. The candidate we select will deliver exceptional customer service, build strong relationships with clients at all levels, work closely with lenders to provide training on our industry-leading products, and provide expertise to help our clients in meeting their goals." For more information or to apply, please visit the United Guaranty Job Openings Web page.
And in free "up and coming products for lenders", as mortgage call centers and "lead-driven" LO's focus more on purchase's, converting pre-approvals and working with loyal Realtors is paramount for success. "Here's a novel twist: a service offered by LoanAgentMatch.com that 'Matches Pre-Approved Homebuyers with Realtors'. Tom Krug, president of LoanAgentMatch, wrote to me saying, 'We're looking out for our Lenders by promoting their loan products and services during the home shopping experience. We match borrowers with Realtors in our network, dramatically increasing loan conversions. We eliminate the steering that occurs when Realtors introduce borrowers to the 'local LO'. Call centers can focus on originating, we manage the Realtors. Realtors aren't only screened prior to joining; they're interviewed by us prior to each match. This is a FREE service and each borrower gets an iPad Mini upon closing with their assigned Realtor. What lender or borrower wouldn't want that?" (If you'd like to learn more contact Tom Krug.)