The Ever-Changing World of Private Mortgage Insurance; Capital Markets

Residential lenders aren’t the only ones having a tough time out there. Builder Hovnanian reported a Q2 loss of $9.8 million. The Social Security program’s costs will exceed its income this year for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits. (It is estimated that the trust fund will be depleted in 2034 and Social Security will no longer be able to pay its full scheduled benefits unless Congress acts to shore up the program’s finances.) And while our stock market has rallied nicely, many large consumer food companies have seen their share prices drop by more than 30% in the last year as consumers move to fresh food and new brands.

Private Mortgage Insurance News

National MI announced the introduction of Rate GPS, a new risk-based pricing platform that assesses a variety of loan characteristics to more closely align National MI’s premium rates to the risk associated with individual loans. Rate GPS evaluates a variety of factors (including credit scores, loan-to-value ratios, debt-to-income ratios and other borrower, loan, and lender characteristics) to precisely calculate the appropriate mortgage insurance rates for individual loans. The new, granular risk-based pricing approach supports National MI’s goals for maintaining capital strength, generating strong risk-adjusted returns, and bolstering the credit quality of its loan portfolio. Based on the company’s current mix of business, Rate GPS represents an estimated overall rate reduction of less than 10%. “Rate GPS aligns with our lender customers’ desire for more targeted pricing and will ultimately enable lenders to structure their loans with more precision. We believe it will provide a more affordable option for borrowers,” said Brad Shuster, CEO of National MI. With Rate GPS, National MI leverages modern analytical and modelling tools to evaluate and assess historical loan data to produce rates that are closely calibrated to loan risks. The technology supporting Rate GPS is intended to deliver a smooth and seamless pricing process for lenders and their borrower customers.

LOs remind borrowers that, due to last year’s tax bill, several tax provisions were extended that expired at the end of 2016 and were retroactively reinstated for 1 year through 2017. Families with total adjusted gross income up to $100,000 may deduct 100% of the mortgage insurance premiums paid in 2017. The MI tax deduction gradually phases out until adjusted gross income reaches $110,000, at which point, the deduction reaches $0.

Fannie Mae and Freddie Mac have worked with the mortgage insurers (MIs), at the direction of the Federal Housing Finance Agency (FHFA), to revise the GSE Rescission Relief Principles. During 2018, the MIs will revise their master policies to reflect the new principles and obtain the required approvals from the GSEs, FHFA, and the state insurance commissioners. Once finalized, the GSEs and MIs will then coordinate an implementation date and notify lenders accordingly.

USMI (a group that includes 5 of the 6 major MI companies) released a new report on the private MI’s role in homeownership nationwide. The report found that nearly 30 million homeowners have been served by MI for more than 60 years, and breaks down low down payment mortgage lending with MI in all 50 states. The report also underscores the historic importance of MI, how MI has helped promote homebuying in the U.S. especially with first-time buyers, and the protections that MI provides to American taxpayers and the federal government. The complete report on MI in the U.S. is available here. All 50 states fact sheets, plus data for the District of Columbia, are available here.

USMI submitted a comment letter on FHFA Notice of Regulatory Review. The comment letter suggests that FHFA should reassess its “Prior Approval for Enterprise Products” interim final rule for the GSEs, because though the regulation establishes a process for the GSEs to obtain prior approval from the FHFA for new products—and provide prior notice to the FHFA for new activities—the regulation is “unused [since its implementation in 2009] and apparently not fit for purpose.”

A U.S. national security panel approved a Chinese conglomerate’s $2.7 billion takeover of Richmond, Va.-based insurer Genworth Financial Inc., after the companies convinced authorities they would take extraordinary steps to secure Americans’ personal data. The approval by the Committee on Foreign Investment in the U.S. for China Oceanwide Holdings Group Co.’s deal marks the largest publicly reported Chinese deal to win CFIUS’s blessing during the administration of President Donald Trump. (CFIUS is a secretive, interagency committee that reviews proposed foreign takeovers of U.S. businesses. Led by the Treasury Department, it can advise the president to block deals on national-security grounds.) This materially increases the likelihood of GNW's sale to China Oceanwide, as CFIUS was the most controversial review. The regulatory focus now moves to the Delaware Department of Insurance and Chinese regulators.

MGIC has turned heads with new rates for Borrower-Paid Monthly Premiums, Borrower-Paid Non-Refundable Single Premiums and Borrower-Paid Annual Premiums. MGIC is modifying its borrower-paid monthly and non-refundable single premium rates to include risk-based adjustments for DTI ratios greater than 45% and for 2 or more borrowers. These changes are effective with MI applications we receive on or after Monday, July 9, and subject to regulatory approval.

Its new BPMI monthly rate card modestly increases base premiums and aligns its rate card with those of peers (RDN, ESNT, and GNW). The card also introduces more granularity through adjustment factors, like those from peers. Is pricing stabilizing in the industry?

MGIC will insure loans with DTIs exceeding 45% only when the Representative Credit Score is 700 or greater, effective with mortgage insurance applications received on or after March 1, 2018. This change applies to loans with an Agency automated underwriting system (AUS) response. MGIC’s non-Agency Underwriting Requirements currently do not allow DTIs exceeding 45%.

And MGIC released its May data. Total new notices decreased -16.1% YOY, while total delinquent inventory fell by -10.5% YOY. IIF growth remained strong at +7.4% YOY, tracking above +7.0% forecasts for 2Q18.

Arch MI has announced its integration with Byte Software. Equipped with the newly designed integration, BytePro users now have direct access to RateStar, a risk-based pricing solution without leaving the BytePro LOS. Chris Hovey, Arch MI’s Executive Vice President and Chief Operating Officer stated, “We are committed to bringing technology solutions to the marketplace that improve lender efficiency and accuracy, and this new integration on the BytePro LOS will help lenders close more loans with RateStar – Arch MI’s most dynamic rate program.”

UWM has made improvements to its Single Premium Financed Mortgage Insurance rates for correspondent loans. Click this link to price a loan.

Wells Fargo Funding issued a reminder for loans with borrower-paid private mortgage insurance (PMI), Sellers must satisfy Homeowners Protection Act (HPA) requirements and accurately disclose to the borrower when/if PMI can be requested to be cancelled and when/if it will be automatically terminated.

Recall back earlier this year we had a “PMIERs 2.0 overhang.” Late last year Compass Point Research and Trading had refreshed its views on mortgage insurers, highlighting the potential trading risk of the pending PMIERs 2.0 capital rules.

Capital Markets

Tad Dahlke, Managing Director at Incenter, sent out, “Ginnie surprised the market and VA originators last week with a significant rule change that took effect without warning: Starting June 1, VA refi loans are banned from all Ginnie pools if the loans refinanced out of were less than 6 months' seasoned. What this means: Many originators were caught with loans that will never be securitizable in Ginnie pools - not even single-issuer custom pools. While these loans retain their VA guarantee, they will need to trade to investors as whole loans. The market will take a few days to settle on pricing; our initial estimate is somewhere between 2 and 5 points below TBA.”

Rates were flat to close last week ahead of this week’s busy calendar. The headline news will come Wednesday, when the Federal Reserve is expected to announce a 25-bps rate hike. A day later, the European Central Bank could provide some guidance about the end of its asset purchases, and Friday, we will have a decision from the Bank of Japan. Those come after several international central banks took the spotlight. Central Bank of Brazil President Goldfajn pledged to defend the real through currency swaps and other instruments, if needed. Earlier in the week, Reserve Bank of India unexpectedly hiked rates and Bank Indonesia Governor intervened verbally, as emerging market economies struggle to contain capital outflows.

Today is the calm before the storm, so to speak, with no economic releases. Things kick back into gear tomorrow with the May NFIB Small Business Optimism Index and May CPI figures. In addition, the U.S. North Korea summit is slated to begin on the island of Sentosa in Singapore while further headlines regarding tariffs are also expected. Wednesday sees the usual MBA Mortgage Applications, PPI readings, and the FOMC rate decision. Thursday, we have import/export prices, weekly claims, and Retail Sales. The week closes with some manufacturing and production numbers as well as the preliminary June Michigan Consumer Sentiment Index. Rates are a shade higher to start the week versus Friday’s close: the 10-year is yielding 2.96% and agency MBS prices are worse nearly .125.

LO Products

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Employment

Caliber Home Loans, Inc. is the #1 retail mortgage lender in Florida, according to housing market intelligence firm Metrostudy. Caliber’s 34 Florida branches closed over 11,000 loans in 2017, contributing to the lender’s overall volume of $43 billion. Caliber is a leading national mortgage originator and servicer – and has the numbers to prove it. It is unique in that Caliber has a large servicing portfolio that currently exceeds $140 billion. This strategy requires significant capital but yields customers for life for this lender and its Loan Consultants. Caliber is growing in Florida, and in competitive markets across the U.S. Contact Jeremy DeRosa or visit www.joincalibernow.com.

“Ally Home is expanding its Mortgage division in Charlotte, to handle our rapid growth! We want someone who is self-driven, detail-oriented, and consistently achieves their goals. We are looking for experienced, dedicated sales professionals to be a major contributor on our sales team. The DTC (Direct to Consumer) Mortgage Originations Loan Officer proactively solicits new and existing residential mortgage business primarily from Ally's customer base and leads provided by Ally's Marketing partners. Mortgage Loan Officers help effectively match Ally's mortgage product(s) to each customer's unique loan objectives / financial goals. We demand and compensate our sales professionals for producing high quality, compliant loans and providing superior customer care according to Ally's brand promise. Responsibilities include managing lead and loan application pipeline, prioritizing work, ensuring application quality, performance and loan quality standards are maintained and production goals achieved.”

Evergreen Home Loans continues to grow, both as a company and individual loan officer production. Average production per Loan Officer at Evergreen increased 42% over the past 3 years. More impressive, the top 25 loan officers grew their production on average by 90% from 2014 -2017. GROWTH is a core conviction at Evergreen and the company is committed to helping their loan officers grow – personally and professionally. Evergreen plans to continue this growth trend, including hiring loan officers seeking a great culture and place to work. Candidates can find a testament to the Evergreen culture on their awards and recognition page and the latest job openings on the Evergreen Home Loans Careers page.