LenderNews by Rob Chrisman
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May 4: Appraisal product, CFO job, seller wanted; Fannie & Freddie news in both the primary & secondary markets

May 4, 2017

May the 4th be with you! People wonder if anyone from Freddie Mac has ever actually visited Fannie’s location for an office visit. Yes! Here’s actual film footage to prove it. On a more serious note, 49 years ago today was the Kent State shooting where four students died and more than 500 colleges across the country were shut down.
 
Jobs, products, & opportunities
 
An investor is seeking to acquire a mortgage brokerage firm. “An experienced, ethical, and creative investor is seeking to acquire at least a controlling interest in a mortgage brokerage firm. Minimum $300 million in loan volume; over $500 million ideal. The principals would prefer a California-based operation. The investor does not wish to be involved in day-to day operations but instead, post-investment, would be an advisor and resource to assist in strategy. The principal has a mortgage banking background, holds a PhD in economics, and can act quickly. The ideal situation is for current shareholders to liquidate all or a portion of their equity and have access to additional capital for growth or for investments in technology or personnel. Interested parties should contact me.
 
Washington’s Evergreen Home Loans is seeking a Chief Financial Officer (CFO) to join its Senior Management team and “make significant contributions toward continuing to achieve dynamic growth and profitability. This individual will be actively involved in ensuring Evergreen continues to be the industry leader in customer service by delivering On Time and As Promised; and the very best place to work in the mortgage industry. Since 1987, our focus has been on providing a WOW full service home buying experience. We originate, fund, and service home loans and have approvals with Fannie Mae, Freddie Mac and Ginnie Mae. Evergreen was recognized as part of Washington’s 100 Best Companies to work for by Seattle Business Magazine in 2016, 2015 and 2014. Fortune Magazine ranked Evergreen no. 12 in their national survey of best workplaces in finance and insurance and Fortune named Evergreen a 2016 Great Place to Work for Women. Join our team today!” Please contact Arlene Evans -Talent Acquisition – or apply online.
“What’s new at PENDO? Two new tools, that’s what. Our new and proprietary, automated USPAP (Uniform Standards of Professional Appraisal Practice) Standard 3 compliance tool manages the appraisal review requirements set by each state, allowing the appraiser to look at the original appraisal—along with the review form and supporting market data—all in one view. The tool also tracks the number of appraisals Pendo has completed in each state and notifies us when it’s time to complete more reviews to meet the state AMC requirements. Launching one new tool just didn’t seem like enough, so we also developed an appraiser recruiting tool that helps our dedicated client success team find, track and engage appraisers for traditionally difficult assignments (unique properties, properties in high demand or sparsely populated areas). Want to learn more about either of them? Email us. We’d love to talk tools with you.”
 
Fannie & Freddie/conventional conforming news
 
During the conference, Fannie was certainly focused on its Day 1 Certainty program. Meanwhile, Freddie reminded everyone that it is working hard to harness the immense amount of data that it has in its computer servers to “re-imagine” the mortgage biz. Representatives from both groups discussed declining volumes, the lack of supply, and the continued examination of lowering defects and the cost to run a business.
 
Few parents will kick their kid out of the bedroom downstairs if they’re pulling their weight, financially, and then some. And cleaning the litter box. Given the plate of issues facing Congress (health care, taxes, immigration, housing, etc.), although it should be, booting Fannie Mae or Freddie Mac out of conservatorship is not a high priority. In Freddie’s case, the company announced first quarter results: The company’s 10-Q and press release are available, along with the first quarter 2017 financial results supplement. When it makes its June dividend payment to the government, it will have paid back over $108 billion compared to $71 billion the government “gave” it.
 
Freddie posted net income of $2.21 billion in the first quarter although it was a 54% sequential decline as refinancings declined during the period and non-cash hedging gains disappeared. The Agency took a $302 million charge on the value of its derivatives, which are used to hedge its financial positions. (Recall that in 4Q16, Freddie booked a huge gain of $6.38 billion.) The GSE took in $3.79 billion in noninterest income during the first quarter compared to $3.88 billion in 4Q16 and $3.40 billion in 1Q16. First-lien production fell to $385 billion from $580 billion in the fourth quarter, according to figures compiled by Inside Mortgage Finance.
 
MBA President and CEO David Stevens is confident that housing finance reform will move forward under the Trump administration, but criticized calls to simply let the government-sponsored enterprises recapitalize and be returned to shareholders without additional reforms. This “recap and release” proposal doesn’t have a lot of backing, aside from the current stakeholders in Freddie and Fannie.
 
All loans utilizing the employment/income guidelines in affect prior to the release of Freddie Mac Bulletin 2016-19 must be purchased by Franklin American Mortgage Company on or before June 1st. Additionally, per FAMC Bulletin 2016-26, Fannie Mae’s Collateral Underwriting service now indicates those loans that qualify for representation and warranty relief for the appraised value. Eligibility for Property Value rep and warrant relief from Fannie Mae is determined based solely on a CU Score of 2.5 or below, regardless of the DU recommendation.
 
Franklin American has made several improvements to its guidelines recently including expanding the Standard Conventional products (excluding High Balance) to permit cash-out refinance transactions on investment properties. The maximum LTV/CLTV/HCLTV will be the lesser of the program requirements per the FAMC Product Description or 70%. It has also expanded the Conventional Condominium parameters to permit investment condos on the Standard products (excluding High Balance). The maximum LTV/CLTV/HCLTV will be the lesser of the program requirements per the FAMC Product Description or 70%. Investment condos will continue to remain ineligible in the state of Florida. Refer to its correspondent lending manual for further details.
 
Effective April 28, Flagstar Bank announced its minimum FICO requirement on the Fannie Mae High Balance, and Freddie Mac Super Conforming products for one unit, primary residence properties, with a purpose of purchase or rate and term refinance is being decreased from 640 to 620.  
 
PennyMac is aligning with the numerous updates announced in Freddie Mac Bulletin 2017-2 and 2017-3. Additionally, PennyMac posted an announcement regarding the Rural Housing requirement that borrowers receive a Net Tangible Benefit on Streamlined-Assist transactions.
 
Pacific Union Financial, LLC will allow Fannie Mae revised guidelines as described in its Selling Guide Announcement SEL-2017-04 effective immediately for loans submitted to Desktop Underwriter (DU).   The Fannie Mae/DU Program Guide and Condo Approval Policy/Checklists will be updated as necessary on May 15.
 
U.S. Bank Home Mortgage announced it is offering Fannie Mae’s HomeReady program effective as of May 1, 2017. HomeReady loans must be run through DU only and loans must be underwritten utilizing your delegated underwriting authority with U.S. Bank.
 
As of April 28th, Mortgage Solutions Financial has rendered its conventional Student Loan cash-out refinance as an ineligible program.
 
Wells Fargo Funding is aligning with Fannie Mae’s multiple policy expansions apart from two changes that require system enhancements. Until all support is in place, the following new Fannie Mae offerings are not currently eligible for purchase: Student loan cash-out refinance feature. Project eligibility review waiver for Fannie Mae to Fannie Mae limited cash-out refinances.
 
PRMG has updated its product profiles.
 
PennyMac has declared certain transactions involving intra-family purchase transactions as non-bona fide purchases regardless of program. Criteria for non-eligible transactions are listed in a new announcement.
 
Capital markets
 
Some of the economic news yesterday was actually important. Probably the highlight was the Federal Reserve Open Market Committee saying that it expects the Q1 slowdown to be transitory, and labor is expected to continue strengthening. And, most important to mortgage bankers selling MBS, the statement gave no new additional perspective on its $4.5 trillion securities portfolio acquired during quantitative easing programs.
 
In other news, the MBA told us that residential applications were about flat last week, although refis were down 5% and purchase apps were up 4%. The ADP (private business payrolls) increased by 177k in April, a drop from March. The Markit Composite PMI, whatever that is, was “53.1” in April – a slight increase from last month. The ISM Non-Manufacturing PMI for April was “57.5.” Lastly, our U.S. Treasury will maintain, at $62 billion, the issuance of longer-term debt for the sixth straight quarter. The Treasury Borrowing Advisory Committee recommended that the U.S. issue more bonds with maturities between 10 and 30 years to lock in low rates rather than issuing ultra-long bonds.
 
The agencies transferring risk to those who want to own it continues. Freddie Mac spread the word that it settled the second seasoned credit risk transfer offering which is a rated securitization of approximately $1.12 billion. The Freddie Mac seasoned credit risk transfer trust, series 2017-1, will issue approximately $926 million in guaranteed senior certificates and about $190 million in unguaranteed mezzanine, subordinate certificates. The Freddie Mac Seasoned Credit Risk Transfer (SCRT) offering “builds on the company’s leadership in transferring mortgage credit and market risk to the private market on seasoned and distressed residential mortgage loans. The SCRT securitization program is a key part of Freddie Mac’s seasoned loan offerings to reduce less liquid assets in its mortgage-related investments portfolio and shed credit and market risk via economically reasonable transactions. Freddie Mac has sold $7 billion in nonperforming loans (NPLs), securitized $26 billion in re-performing loans (RPLs), and transacted $2 billion in structured offerings.
 
The loans will be serviced by Select Portfolio Servicing, Inc. The servicing of the loans will be in accordance with requirements similar to those applicable to the sale of non-performing loans (NPLs), which prioritize borrower retention options in the event of a default and promote neighborhood stability. Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated served as co-lead managers and joint bookrunners. Wells Fargo Securities, LLC and Citigroup Global Markets Inc. are co-managers, and The Williams Capital, L.P. is a selling group member.
 
Not wanting Freddie to receive all the publicity, not that they’re in competition, Fannie Mae priced its third credit risk sharing transaction of 2017 under its Connecticut Avenue Securities (CAS) program. “CAS Series 2017-C03, a $1.371 billion note offering, is scheduled to settle on May 10. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business…we expect to return to the market with our next CAS deal, 2017-C04, in mid-May. Our upcoming deal will reference loans that have loan-to-value ratios between 80 and 97 percent.” 
 
“The reference pool for CAS Series 2017-C03 consists of more than 167,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $41.2 billion. The loans in this reference pool have original loan-to-value ratios between 60 and 80 percent and were acquired from July 2016 through October 2016. 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.”
 
In terms of actual mortgage rates, the bond market hasn’t move much in a few weeks – fine by capital markets folks who don’t like volatility. U.S. Treasuries sold off a little (a few 32nds) yesterday in a “curve-flattening trade” after the FOMC kept monetary policy on hold but expressed confidence in the U.S. economic expansion in the accompanying statement. “Lower coupon MBS did not fare well, not surprisingly, with the flatter curve with some up-in-coupon flows out of FN30 3% only adding to their underperformance on the stack and vs. benchmark,” per ThomsonReuters.
 
Overnight Norges Bank (central bank of Norway) announced its latest rate decision (unchanged) and we’ve seen the latest jobs cuts data from Challenger, Gray & Christmas for April (a dip to 36.6k). We’ve had Initial Jobless Claims (-19k to 238k), productivity and unit labor costs (-.6% and +3%, respectively), and the trade balance figures (-$.1 billion to $43.7 billion). Coming up are March Factory Orders and the Agencies will begin releasing April prepayment data starting after 4:30pm beginning with FNMA. Yesterday the day finished with the 10-year yielding 2.31% – it has been around there for quite some time – and this morning we find it at 2.35%  with agency MBS prices worse .125-.250 versus last night’s close.
 
 
A man was sitting reading his papers when his wife hit him round the head with a frying pan.
“What was that for?” the man asked.
The wife replied, “That was for the piece of paper with the name Betty on it that I found in your trouser pocket."
The man shot back, “When I was at the races last week, Betty was the name of the horse I bet on.”
The wife apologized and went on with the housework.
Three days later the man is watching TV when his wife bashes him on the head with an even bigger frying pan, knocking him unconscious.
Upon re-gaining consciousness, the man asked why she had hit him again.
The wife replied, “Your horse called!”
 
 
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Does Everyone Want a Job?” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
Rob
 
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are over 300 mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2017 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)