Marketing, Processing, Training Tools; Industry and Lender Forbearance Trends
This morning analysts are talking about the 5 million people of Melbourne, Australia now under a new 6-week lockdown. Lockdown! In this country, we have four long months until the election, with plenty of mudslinging ahead. But here is a short piece on how to think about politics and mortgage origination: “Mortgage Outlook: What if it is Cloudy?” is focused on the current political climate. (Yes, 2020 estimates are in flux.) Focusing on residential lending, yesterday a CEO told me, “If you’re not making money now, go do something else for a living.” All evidence points to a superb 2nd quarter, and even with the economy contracting over the past few months and millions of borrowers going into forbearance, somehow U.S. mortgage companies are having one of their best years in history. The MBA reported margins averaged about 61 bps per loan made from January to March, making it the most profitable quarter since 2013 and nearly double the first-quarter average dating to 2008. Even with all the uncertainty from so many people being unemployed, there is still a lot of optimism in the market.
Lender and Broker Services and Products
The actionable Mortgage Risk & Fairness Score is a powerful & predictive, data-driven “intelligence” tool to better manage crisis-cycle credit risk & blind spots, latency, financial inclusion, pricing, capacity, regulation, and servicing. MRS enables lenders, servicers, investors, and MI’s to get to know borrowers better, holistically. Then, use that deep insight to make proactive, informed, and precise decisions to originate, segment, underwrite, fulfill, trade, and monitor more inclusively & efficiently. MRS is plug-n-play and enables quick deployment of advanced risk & behavioral/attitudinal analytics (propensity, segmentation, ability, resiliency, and “willingness” to pay) that are validated (top 10 bank) & vetted (CFPB, OCC, Fed). Bottom line, MRS is powerful incremental intelligence. Used up-front, and as an additional layer of insight for underwriting, secondary, and servicing, it will increase volume, inclusion, confidence, margins, efficiency, and capacity, while decreasing risk. Click for info.
As lenders across the country look to hiring rookie talent to meet capacity challenges, XINNIX has provided the bridge to help get new talent market-ready. XINNIX is experiencing record-breaking student enrollment month after month this year across its suite of Sales, Operations and Leadership Performance Programs. The XINNIX System of Training, Accountability and Coaching provides solutions to increase production of experienced loan officers and prepare new talent in sales and operations to be successful fast. Schedule a call with a XINNIX Account Executive today for more information on their suite of New Talent Training Programs. In the meantime, XINNIX is offering its readers a free copy of “Four Key Factors for Sourcing Rookies”, a resource designed to help hiring managers minimize recruiting mistakes and gain a competitive advantage to grow their business quickly. Download it here!
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Maxwell has released its third and final installment of the blog series, “Land of Unequal Opportunity.” After a history of redlining and governmental policies that contributed to inequality in housing and the racial wealth gap we see today, Part 3 covers the path forward, with the policies and changes needed to provide an equal and fair housing environment for all people. A must-read for all industry professionals, click here to read part 3. If you missed Part 1 or Part 2 you can start here.
Forbearance Developments
The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 1 bp from 8.48 percent of servicers’ portfolio volume in the prior week to 8.47 percent as of June 21. According to MBA’s estimate, 4.2 million homeowners are in forbearance plans. The share of Fannie Mae and Freddie Mac loans in forbearance dropped for the third week in a row to 6.26 percent, a 5-bps improvement. Black Knight echoed this, saying the number of borrowers in forbearance plans declined last week. The number of loans in forbearance dropped by 104k, and brings us back to levels last seen in early May. Many of the initial forbearance plans were for 90 days or so, and if a borrower received forbearance in mid-March, it was up by mid-June. In some areas and sectors the economy is improving as well.
Many state governments are weighing passing laws, mostly moratoriums on evictions and foreclosures. These tend to not help any servicer “paying up” for servicing on a loan originated in a state where their hands are tied. For example, in Oregon the governor is considering signing HB 4204 (a moratorium on residential and commercial foreclosures) and HB 4213 (a moratorium on residential and commercial evictions). Here’s a note on what they may mean for lenders and servicers if they pass.
FHA observes a significant increase in default and claim rates nationwide, which it attributes to the financial impacts of the COVID-19 National Emergency. This increase may be impacting the Compare Ratios displayed in the Neighborhood Watch Early Warning System (Neighborhood Watch). While FHA is unable to remove any loans in default or claim status from Neighborhood Watch Compare Ratio calculations, including loans in forbearance for borrowers affected by the COVID-19 National Emergency, FHA will consider the impact of the COVID-19 National Emergency as a relevant mitigating factor when a mortgagee’s Compare Ratio is above the designated threshold.
USDA updated its guidance concerning Electronic Status Reporting (ESR) for borrowers impacted by the COVID-19 national emergency. Effective September 1, when reporting loan statuses for August, please use the new Reason Code 055 – National Emergency for any COVID-19 impacted loan. For COVID-19 forbearances, the Status Code 06 - Formal Forbearance should continue to be used. The same default status date should be used as the date the borrower was approved for the forbearance if changing the Status Code. If the loan was not previously in default, the Status Code 42 – Delinquent must be reported first to open the default event and then Status Code 06 – Formal Forbearance should be reported in the following months.
U.S. Department of Agriculture Deputy Under Secretary for Rural Development Bette Brand announced USDA extended foreclosure and eviction moratorium for all Single-Family Housing Direct Home Loans through Aug. 31, 2020. The moratorium applies to Initiation of foreclosures or completion of foreclosures in process, excluding vacant and abandoned properties.
Evictions of borrowers from properties bought with a USDA direct home loan.
Freddie Mac Multifamily Announced New COVID-19 Forbearance Options and Tenant Protections. This announcement describes the creation of three supplemental forbearance relief options to assist borrowers who currently have a forbearance plan in place and who continue to be materially impacted by the effects of the COVID-19 pandemic and changes also extending several tenant protections.
Fannie Mae updated LL-2020-02, Impact of COVID-19 on Servicing, to modify the financial eligibility and reporting requirements for non-depository sellers/servicers. The temporary policy change relates to the calculation of the liquidity requirement for sellers/servicers who service mortgage loans that are in a forbearance due to COVID-19 hardships. Fannie Mae Form 1002, Mortgage Bankers Financial Reporting Form, is being updated to capture COVID-19 forbearance activity. This Lender Letter update also extended the suspension of foreclosure-related activities through June 30th.
Fannie Mae announced updated renter protections and forbearance extensions for borrowers. Fannie Mae’s Delegated Underwriting and Servicing (DUS) lenders have been delegated the decision to extend existing forbearances for multifamily property owners by three months, for a total forbearance of up to six months. If extended, once the forbearance period concludes the borrower may qualify for up to 24 months to repay the missed payments. While in forbearance, the landlord must suspend all evictions for renters unable to pay rent. For Fannie Mae-financed multifamily properties with a new or extended forbearance, the borrower is required to provide the following tenant protections during the repayment period: Allow the tenant flexibility to repay back rent over time and not in a lump sum; Not charge the tenant late fees or penalties for non-payment of rent; and give the tenant at least a 30-day notice to vacate.
An Essent Announcement declares its support of the additional temporary guidance recently announced by Fannie Mae and Freddie Mac regarding purchase and refinance eligibility requirements, renovation loans that were subject to forbearance, and underwriting borrowers with self-employed income.
Wells Fargo Funding retracted its post-purchase forbearance fee policy on conventional Conforming Loans. There will be no charges on an Agency loan-level price adjuster (LLPA) or administration fee on loans when a borrower goes into forbearance after Wells purchases the Loan. This change also applies to Loans affected while the fee policy was briefly in place. (Recall that WF revised its post-purchase forbearance policy applicable for all loans. It will assess the following fees if the borrower goes into forbearance on the subject Loan within 15 business days after Wells Fargo Funding’s purchase and prior to settlement*: Applicable Agency loan-level price adjuster (LLPA): 500 basis points (5.000%) for Loans to first-time homebuyers and 700 basis points (7.000%) for all other transactions. There will be a $1,000 administration fee applied to the transaction. Fees will not apply if forbearance occurs after Wells Fargo has sold and settled the Loan with the respective Agency, even if within 15 business days of our purchase.)
PennyMac announced it is aligning with the guidance given in Fannie Mae’s Updated Lender Letter 2020-03 dated May 19, 2020 and Freddie Mac’s Bulletin 2020-17 for borrowers who are currently in forbearance or other loss mitigation options looking to refinance their current mortgage or purchase.
As previously announced, Caliber has aligned with Fannie Mae Lender Letter LL-2020-06 and Freddie Mac Bulletin 2020-12 specific to selling loans in forbearance due to COVID-19. Due to these announcements, Caliber has updated our Borrower Attestation document to align with the new guidance. You may begin using the new Borrower Attestation Form, posted in AllRegs, immediately. Caliber amended Announcement CL20-26 regarding Loans in Early Forbearance. Any conventional purchase or rate and term refinance loan that enters forbearance, after purchase by Caliber, will not be assessed the standard agency Loan Level Price Adjustment (LLPA) of 5% (for first time homebuyers) or 7% (for all other loans). Correspondents will not be billed the $1,000 administrative fee for any loan that enters forbearance after purchase by Caliber. Caliber will not purchase loans that are currently in forbearance. As a reminder, the Correspondent represents and warrants the borrower’s ability to repay the mortgage; therefore, it is important to maintain diligent VVOE/VVOI procedures and obtain borrower attestations as outlined in Announcement CL20-19.
Capital Markets
Without much domestic news to start the week, let’s quickly revisit last week’s payrolls report, which showed that the economy added 4.8 million jobs in June. Sounds pretty good, especially since it’s the second month of gains after more than 20 million jobs were lost in April. But remember that the data were collected before coronavirus cases began to resurge at a record pace. Many states are now pausing their reopening plans and, in some cases, reversing them and forcing businesses to close again. Second, a lot of these newly added positions aren’t full-time. Over 9 million adults were working part-time hours in June, more than double the number in February. In just four months, the number of people who characterize their layoff as permanent has jumped by over 1.6 million. By contrast, after the official start of the recession during the 2008 crisis, it took 11 months to see more than 1.6 million permanent layoffs.
It seems to be a growing trend that the most recent economic figures actually paint a much less rosy picture upon further examination. The surprisingly rapid growth of the economy in May and early June initially seemed encouraging versus the depths of March and April, but it now appears to have been a sign that Americans were resuming normal activity in ways that spread the virus, the resurgence of which is now causing new shutdowns that will delay a true recovery. The depths of March and April make a range of economic indicators look as if they are soaring, but compared with a year earlier, those same numbers reveal a shattered economy, with millions of jobs destroyed and billions in sales lost, damage that may take a long time to repair.
As I alluded above, there weren’t any headlines that moved MBS and rates worthy of detailed mention yesterday. The ISM Non-Manufacturing Index for June increased into expansionary territory when it was expected to still contract, though less so than in May. June represented the first month of expanding activity since March, but isn’t a "strong" report so much as a report that showed stronger activity relative to the depressed activity in May.
Zzz… Don’t look for much market-moving data today: Redbook same store sales, JOLTS job openings for May, and several Fed speakers (Atlanta’s Bostic, Vice Chair Quarles, San Francisco’s Daly and Richmond’s Barkin). The NY Fed will conduct two FedTrade purchase operations totaling up to $4.406 billion starting with $1.509 billion UMBS15 2 percent and 2.5 percent followed by up to $2.897 billion UMBS30 2 percent through 3 percent. We begin the day with Agency MBS prices little changed and the 10-year yielding .67 after closing yesterday at 0.68 percent.
Employment
“While other mortgage lenders are hiring temporary operations staff to manage the recent surge in business, Citizens Bank Home Mortgage is adding permanent operations staff to support both our Retail and Wholesale divisions and will continue growing throughout 2020! Citizens is looking for talented processors, closers, and underwriters at our six regional operations sites in Irving, Texas, Marlton, New Jersey, Richmond, Virginia, Melville, New York, Franklin, Tennessee, and East Providence, Rhode Island. We know our Operations colleagues play a critical role in the home buying journey, and we value the important work they do. If you are looking to build your operations career at a company that is winning in the marketplace and recognizes your contributions, apply to Citizens Bank today! For questions, please email HomeMortgageRecruiting@citizensbank.com.”
“At ACC Mortgage, it is Christmas in July. With the most complete Non-QM products: DSCR, Super JUMBO, ITIN, P&L Lending, 85% Bank Statement. ACC is looking for more sales leadership, AEs, underwriters, and processors to support the increasing demand.Being the oldest and most stable Non-QM lender in the industry, we have the top comp plan and support. If interested in joining our family, please send your resume to the president, Robert Senko, for consideration.”
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