Non-QM, Tech, Sales Products; M&A Continues; U.S. Bank Correspondent Reorganization

Lenders, investors, and servicers don’t like bankruptcy, and for good reason. Thank you to Brian B. up in New Jersey who sent along this note about how courts are beginning to try to stem the tide of serial debtors who file multiple petitions for bankruptcy protection. “Recently, the U.S. Court of Appeals for the Seventh Circuit issued an opinion that serves as both a warning to serial filers and a potential remedy for lenders."

M&A & investor shifts

There are plenty of deals going on out there, large and small. Some public, some private, some merely hinted at. (For example, why would Maryland's Corridor be taking applications under the SWBC name, but without a formal announcement?).  One seasoned vet likened the lender M&A environment to, "Owning a mortgage company, for some, will be like owning a farm - you do it until you run out of money."

On the banking side of thing, in the last week or two there have been plenty of announcements. (With bank stocks pummeled recently, it will be interesting to see if the steady stream of deals shifts: banks will be cheaper to buy, but the value of existing bank's capital is also lower.) Investar Bank ($1.7B, LA) will acquire Mainland Bank ($131mm, TX) for about $19.9mm in stock (100%). First Merchants Bank ($9.7B, IN) will acquire Monroe Bank & Trust ($1.3B, MI) for about $290.9mm in stock (100%) or about 2.4x tangible book. In California Exchange Bank ($2.6B) will acquire the trust department of First Northern Bank ($1.2B). First Interstate Bank ($12.2B, MT) will acquire Idaho Independent Bank ($725mm, ID) and Community 1st Bank ($130mm, ID) in separate transactions. First Interstate will pay about $181.3mm in cash (3%) and stock (97%) for Idaho Independent or about 2.49x tangible book. First Interstate will pay about $21.5mm in cash (3%) and stock (97%) for Community 1st or about 1.55x tangible book.

(As a quick aside, the STRATMOR Group is interested in speaking with lenders doing as little as $20-$50 million a month, below what some M&A firms are interested in pursuing - shoot Senior Partner Garth Graham an email if you just want to hear what your options are.)

U.S. Bank Mortgage Correspondent's customers learned that U.S. Bank is reorganizing its Correspondent sales team into three regions: West, Central and East. "It's important to note while our organizational structure will no longer include a National Accounts Region, the realigned team under West, Central and East Regions, provides for strong national coverage via Account Executives aligned with defined territories in all 50 states... With the realignment, some of you may have new U.S. Bank Account Executives. If so, you will hear from us immediately."

The bond markets

On October 5, Freddie Mac priced a new $1.1 billion offering of Structured Pass-Through multifamily mortgage-backed security certificates (K Certificates), which are expected to settle on or about October 12, 2018. There are five offered classes, with yields ranging from 3.51% to 5.49%, and Freddie Mac retaining 50% of Class X3. The K-081 Certificates are backed by corresponding classes issued by the FREMF 2018-K81 Mortgage Trust (K-81 Trust), which will also issue certificates consisting of the Class X2-A, Class X2-B, Class B, Class C, Class D, and Class R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-081 Certificates. K-Deals are part of the company's business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

On October 2, Freddie announced the sale of 3,247 delinquent non-performing loans (NPLs) from its mortgage investments portfolio, totaling $569 million. The loans are currently serviced by Specialized Loan Servicing LLC. and the transaction is expected to settle in December 2018. Bids are due from qualified bidders by October 16, 2018 and are offered as three separate pools of mortgage loans, consisting of mortgage loans secured by geographically diverse properties. The loans have been delinquent for over two years, on average and the borrowers have likely been evaluated previously for or are already in various stages of loss mitigation, including modification or other alternatives to foreclosure, or are in foreclosure. Mortgages that were previously modified and subsequently became delinquent comprise approximately 55 percent of the aggregate pool balance. The aggregate pool has a loan-to-value ratio of approximately 78 percent, based on Broker Price Opinions (BPO). To date, Freddie Mac has sold $7 billion of NPLs and transacted $43 billion of RPLs consisting of $27 billion via fully guaranteed PCs, $14 billion via Seasoned Credit Risk Transfer (SCRT) senior/sub securitizations, and $2 billion via Seasoned Loans Structured Transaction (SLST) offerings.

On October 2, Fannie Mae priced a $918 million Connecticut Avenue securities risk sharing deal, its sixth credit risk sharing transaction of 2018 under the CAS program. CAS Series 2018-C06 is scheduled to settle on October 10, 2018 and is designed to share credit risk on its single-family conventional guaranty book of business. The reference pool for CAS Series 2018-C06 consists of more than 105,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $25.7 billion. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls. Fannie Mae will retain a portion of the 1M-1, 1M-2, 1B-1, 2M-1, 2M-2, and 2B-1 tranches to align its interests with investors throughout the life of the deal. Fannie Mae will retain the full 1B-2, 2B-2, 1A-H, and 2A-H tranches. With the completion of this transaction, Fannie Mae will have brought 29 CAS deals to market since the program began, issued $35 billion in notes, and transferred a portion of the credit risk to private investors on over $1 trillion in single-family mortgage loans as part of the CAS program. Since 2013, Fannie Mae has transferred a portion of the credit risk on approximately $1.5 trillion in single-family mortgages through all its risk transfer programs.

The same factors are pushing stocks and bonds these days. Looking at rates, the U.S. 10-year closed yielding 3.17% at the end of yesterday's trading, which also saw weakness in equities listed in China and Hong Kong. It was a light economic day with a lot of Fed speak, notably Atlanta Fed President Raphael Bostic describing the economy as strong, noting it does not need support from monetary policy currently. The school of thought from many FOMC voters seems to be the Fed is still "a few" rate hikes away from a neutral stance.

Mortgage applications from the MBA for the week ending October 19 hit this morning: higher by nearly 5% but, when adjusted for the Columbus Day holiday, they aren't as rosy. Next up is the FHFA Home Price Index for August at 9AM ET. Preliminary October Markit Manufacturing and Services PMIs will be released at 9:45am, with both components expected to decline. September new home sales at 10AM ET are seen declining. Today also sees three scheduled Fed speakers: Minneapolis President Kashkari, Cleveland's Mester, and Fed Governor Quarles. We also receive monetary policy decisions from Sweden's Riksbank and the Bank of Canada, which is expected to hike rates by 25bp to 1.75%. Finally, the September Beige Book is due out at 14:00 ET. With that as a backdrop we begin Hump Day with rates lower versus Tuesday night: agency MBS prices are better by .125 and the 10-year is yielding 3.14%.

Lender products & services

Lending solutions provider Data Facts recently announced its webinar "How to Increase Your Business by 30% in 2019" to help mortgage lenders expand their business. This presentation offers several take-aways; embracing alternate credit products, strengthening opportunities created from mobile devices, creating a delightful customer experience, implementing ways to let the customer "drive", and offering borrower education. The free webinar is today at 10AM CT. Register here! Keep Data Facts in mind as a trusted partner you can rely on for credit reports, fraud products, tax return and social security verifications, flood certs, lead gen products, and more. Talk with a live person and take advantage of their personalized support. By offering a variety of seamless LOS integrations (Encompass, Calyx, Byte, etc.) and a 100% US based customer support team, they help their lending clients close more loans, faster and easier.

The term "mortgage point-of-sale" has been making headlines a lot lately - and for good reason! Mortgage lenders of all shapes and sizes have been flocking to next-generation point-of-sale solutions like Floify to streamline and secure their origination process and stay on the leading edge of this increasingly competitive space. In fact, a recent Fannie Mae survey found that 40% of lenders have already deployed some form of mortgage technology to automate the application process, prevent fraud, predict a borrower's creditworthiness, and more. Additionally, by automating common loan origination tasks with a versatile solution like Floify, lenders have reduced loan processing time by up to 15 hours/loan and nearly doubled their profitability - all without hiring additional staff. If you've been considering incorporating a leading point-of-sale solution like Floify into your lending operation, now is the perfect time to take advantage of this comprehensive system. Request a demo to learn more!

Deephaven Mortgage recently announced the launch of IDENTI-FI AUS, a first of its kind technology aimed at helping the originator pre-qualify loans at the point of sale. The IDENTI-FI AUS is powered by LoanScorecard and utilizes LoanScorecard's Portfolio Underwriter technology. This new technology analyzes the 1003, fully evaluates the credit report and runs against Deephaven's underwriting guidelines, exception logic, & matrices to provide originators with an instant-read on potential options across Deephaven's non-agency loan programs. This, in turn, enables originators to place loans that might otherwise not qualify. This new technology is free, available 24-7, and is at the originator's fingertips. To find out more about Deephaven's new technology or their suite of Non-QM products, contact Wholesale, Correspondent, or visit https://deephavenmortgage.com/.

Looking to break through the clutter of Non-QM options? Work with SG Capital Partners, who offers simplified loan solutions across the entire Non-Agency spectrum! SG recently announced new Expanded Access guideline updates launching Nov 1st. These changes include increased bank statement LTVs up to 90%, increased loan amounts up to $3M, and simplified review options for business bank statements. Partnering with SG also provides clients access to a collaborative product development team, specialized training for UW's/Loan Officers and direct access to a senior credit team for loan structuring and help with scenarios. Contact SGCP today to learn more!

Here's a hi-tech breakthrough in lending to self-employed borrowers. Amidst rising interest rates and declining origination volume, lenders must cast a wider net for customers, a growing number of which are self-employed. To capitalize on this trend, lenders need a simpler, faster way to underwrite mortgages for Americans who are their own bosses. To this end, Freddie Mac has integrated fintech vendor LoanBeam's technology with Loan Product Advisor®, our  automated underwriting system, to introduce the first and only integrated self-employment income solution for the market. LoanBeam's software uses optical character recognition technology to extract and digest a borrower's tax returns and other financials, and then calculate a total income figure that aligns with Freddie Mac's guidelines. This integration offers lenders several advantages, including an automated review of the accuracy of qualifying income, eliminating the need to chase down unnecessary documents that support residual/excess income and certainty that the income calculation is eligible for representation and warranty relief. Learn more.

Jobs, promotions, business opportunities

Fiserv/PCLender is looking for a senior position to manage business strategies and execution of technology integrations to the industry's leading providers. Manager will supervise relationships with third party suppliers to understand and implement new/additional services that can be offered to LOS Clients. Send inquiries to Resumes@PCLender.com or apply online for R-10097873

It's possible for LOs to grow volume and gain market share, despite this challenging environment. Movement Mortgage reports year-over-year growth of 30% to 60% in markets such as Houston, Philadelphia, Kansas City and Northern California. How? Movement credits its market leadership combined with a unique use of technology, industry-leading process, marketing tools and coaching support. When those resources are matched with smart, innovate loan officers, rapid growth is happening. Learn more about building a career on purpose at Movement by visiting https://movementlo.com/ or emailing Director of Talent Acquisition Matt Hill.

A national title company is looking for lenders that are interested in partnering to open a title and settlement company. Lenders must be closing over 50 units a month. Please email titlejv@gmail.com with information on your company. 

NotaryCam announced that the company has hired digital mortgage specialist Kelly Purcell as Executive Vice President of Marketing and Business Development.