LenderNews by Rob Chrisman
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Nov. 7: Non-QM program, LO tools; training on MSAs, tax returns, CRA, etc.; earnings announcements continue – they’re pretty good

November 7, 2016

A loan officer walked up to me at a recent sales event and complained, “I’m spending more time promoting myself than I am being myself.” I replied, “I didn’t you know you were running for office!”
 
In terms of business opportunities for builders, “Are you a homebuilder looking to earn ongoing, reliable profits? Do you want more control over your customers’ purchase and refinance experience? Is regulatory red tape keeping you from offering your buyers a better mortgage solution? A well-known depository-owned lender wants to have a confidential conversation with you about forming a mutually beneficial joint venture. The company has a proven track record of delivering A+ customer experiences, while managing the risk and regulations of the mortgage business.” Interested parties, principals only, should send a note of interest to me to learn more and be put in touch with the institution.
 
Under the “non-QM” banner, “Greenbox Loans was founded based on the concept of ‘out of the box’ underwriting of residential loans. ‘Many originators & brokers come across borrowers that are fine credit risks but don’t fit many company’s guidelines,’ observed Raymond Eshaghian, President of Greenbox. Greenbox Loans is offering several programs as alternatives for private ‘hard money’ for investors whereby borrowers can purchase or refinance investment properties with no income, no employment, and no reserves of up to 75% LTV. These investor programs are available for borrowers with fico scores as low as 640 and can be used for purchase, rate and term refinance as well as cash-out loans. In addition, self-employed borrowers with FICO scores as low as 580 can obtain financing with NO Tax Returns by utilizing either personal or business bank statements and receive up to 80% LTV. Greenbox is hiring Underwriters, Funders, Account Managers and Wholesale Account Executives for Inside & Outside Sales. Send your resume to careers@greenboxloans.com or call directly to: 213-235-4204.”
 
And in terms of tools for originators, “Even if you weren’t at the MBA, you know that the digital mortgage is here to stay. Modern platforms like Maxwell enable loan officers to manage their active borrowers, deliver a modern experience to customers, and connect to source data like bank accounts and online tax returns. ‘Loan officers tell us we save them a day a week,’ says John Paasonen, Maxwell’s CEO. ‘We built Maxwell for originators and their teams to work seamlessly with borrowers and agents, from application to collecting conditions all the way to cleared to close.’ Maxwell has facilitated nearly a $1B in mortgages since it was launched publicly this summer. Chrisman Report readers benefit from a 25% discount on their first year. Sign up for a demo of Maxwell to see how it can transform your work.”
 
Events this week and all of November? You bet!
 
Register for Plaza’s complimentary webinar on November 8th to learn more about its Fannie Mae HomeReady program.
 
On Thursday, November 10th, join Essent for a 60-minute webcast in which Mark Fleming, Chief Economist, First American Financial Corporation, will dig into economic measures used to justify the “automation angst” narrative, uncover the truth behind the data, and gauge automation’s real impact on the housing market. Don’t miss this opportunity, register now.
 
Join CoAmp on November 10th for an informative one-hour webinar-based panel discussion about the implications of the Colorado Division of Insurance’s recent landmark decision to prohibit Market Service Agreements for title companies.
 
Are you looking for unique insights on consumer credit trends? Join Experian on November 17th for its quarterly webinar to hear highlights from the Q3 2016 Experian-Oliver Wyman Market Intelligence Report.
 
Genworth Mortgage Insurance is offering another round of courses on its Tax Return Review for the Self-Employed Borrower as well as its Income series in the month of November. Both series provide goal-oriented training with minimal time investment, leading to in-depth knowledge of the topic and the ability to provide quick-closing, higher-quality loan packages. With each course lasting less than one hour, Genworth is providing lenders the flexibility to brush up on single topics or register for all available modules in each series. Register here. To learn more about Genworth’s comprehensive set of self-paced eLearning courses, live webinars and classroom training offerings, visit Genworth Training.
 
SunWest has a full November calendar of webinars available. Topics include Mortgage Disclosure Improvement Act (MDIA) Regulations, Appraisal Ordering Process, Best Practices for Correspondent Delivery, Warehouse Lending Process, USDA Loan Programs and FHA’s 203(k) Rehabilitation Program, HUD’s primary tool for the rehabilitation and repair of single family properties.
 
Register today at www.siliconvalleycamp.com for the 2nd annual Casino Royale at the Glasshouse on December 8, presented by Silicon Valley CAMP and the Asian Real Estate Association of America (AREAA). Come to network, play games, and enjoy the food, drink, live music, silent auction, celebrities, magicians and Santa Claus!  Fabulous prizes include a Razor Hovertrax 2.0 Hoverboard, Sharp 50-inch Smart LED TV, and Warriors Tickets! ALL proceeds donated to Rebuilding Together, a 501(c)(3) helping repair homes and adding accessibility modifications for elderly and low-income homeowners in Silicon Valley.
 
The MBA is offering a one-day workshop on December 15th in Charlotte to consider CRA residential mortgage lending requirements. Regulatory developments, practical case studies and best practices will be covered. Legal experts will cover the interrelationship between CRA, fair lending and the new HMDA, as well as the new CRA Interagency Q&As from July 2016. 
 
Turning to news impacting lenders, how much do lawsuits, and the resulting fines, cost? Wells Fargo is talking to multiple regulators about investigations it mortgage lending, and has raised reserves for possible litigation losses related to its fake accounts scandal to as much as $1.7 billion, it said in a filing last week. In the filing, the bank said it has received “potential theories of liability” from the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, which is concerned about some of Wells Fargo’s mortgage practices.
 
On the flip side of paying fines, plenty of businesses in the residential lending sphere are making some coin. Last week Fannie Mae reported $3.2 billion in net income for the third quarter, up from $2 billion in Q3 of 2015. Losses on interest-rate derivatives totaled $491 million, down from $2.6 billion in Q3 of 2015. FNMA will pay a dividend to Treasury of $3 billion this quarter, which brings their total paid to the Treasury to $154.4 billion. FNMA drew $117.1 billion in support from the Treasury.
 
Based on third quarter results Freddie Mac will pay a dividend to the U.S. Treasury of $2.3 billion in December leaving a capital reserve of $1.2 billion. The reserve is reduced every year. The December dividend will bring the total paid to the Treasury since the company was put into conservatorship in September 2008 to $101.4 billion against funds provided to Freddie Mac in a series of draws totaling $71.3 billion. Freddie has not required a draw since the end of 2012.
 
Ocwen Financial finally posted a profit, earning $9.4 million for the third quarter. Operating EPS excludes a $5.7 million gain on the sale of MSRs, a $2.3 million positive MSR mark, and $17 million of regulatory reserving charges. The company also plans to make a request to the New York regulator that the company be allowed to acquire MSRs.
 
But Ocwen (a mega servicer at over $216 billion) is not out of regulatory hot water quite yet. In its SEC filing, Ocwen reiterated that it has “received several civil investigative demands, or investigative subpoenas, from the CFPB [Consumer Financial Protection Bureau] seeking information about our servicing practices followed by a Notice and Opportunity to Respond and Advise (NORA) letter from the CFPB under which the CFPB (1) notified us that the CFPB’s Office of Enforcement is considering recommending that the CFPB take legal action against us relating to compliance with federal laws pertaining to our servicing practices…”
 
Essent done good. The private MI company posted a strong quarter driven by the positive impact of single premium cancellations and higher insurance-in-force (IIF) growth. We could see a slower decline in the average premium rate due to the 4Q impact of refi activity and positive impact of post-PMIERs single premium price adjustments. Essent is not ceding premiums to reinsurers, which helps relative to NMI Holdings (NMIH). Anyone who owns stocks knows that its shares currently trade at 2x book value, above the peer range of 1-1.1x. Essent saw a stronger-than-expected premium margin. The premium margin increased to 59.1 bp from 57.6 bp Q/Q.
 
PennyMac Financial Services done good too. PFSI’s earnings beat many estimates due to higher gain on sale income driven by meaningfully stronger than expected mortgage volume. This was partially offset by lower servicing income. Those who dug into the numbers saw that “Penny” removed the negative MSR mark net of hedge gains. The negative MSR mark was driven by an increase in the discount rate that the company was using on its Ginnie Mae MSRs. This reflects the reduction in liquidity for Ginnie Mae MSRs in the market as many large banks have exited the FHA origination and servicing business.
 
PennyMac’s servicing portfolio increased to $186.7 billion UPB from $171.7 billion UPB in 2Q. You can figure a servicing fee margin of 27.4 bps, down from 28.7 bps in 2Q. On the production side Penny estimated that its market share for correspondent production rose to 10.5%, up from 9.2%. Total origination volume increased by 30% Q/Q and conventional rate locks increased 43% q/q to $9.7B from $6.8B in 2Q. These levels are significantly above industry production estimates. (PennyMac is releasing a new SRP Grid, updates to LLPA’s and Seller Guide updates.)
 
Nationstar reported 3Q16 figures that also beat expectations due to stronger-than-expected results from the origination segment. But strong mortgage banking was offset by weaker servicing. NSM reported adjusted pretax origination earnings of $83 million, up +54% from $54 million in 2Q. Funded volume rose +6% to $5.5B from $5.2B last quarter, with purchase volume accounting for 24% of total funded volume (down from 26% in 2Q). Gain on sale margin (based on funded volume) increased +15% to 3.84% in 3Q vs. 3.33% in 2Q. Based on total closings, the gain-on-sale (GOS) income increased to 3.84% from 3.33%.
 
In terms of servicing, during the quarter NSM boarded about $100B of loans, of which $91B were subserviced loans that carry lower margins. The prepayment speed (net of recapture) was 15% vs. 14% the prior quarter while the recapture rate dropped 27% from 25% in 2Q. Putting it a different way, NSM’s operating EPS (earnings per share) excludes a negative MSR mark of $8 million. Servicing came in below some expectations driven by higher amortization and a lower servicing fee. This is material given that the quarter-end servicing portfolio was $453 billion up from $369 billion (UPB).
 
Looking at rates, Friday fixed-income security prices traded higher, and thus rates went lower, despite a better-than-expected jobs report for October. Mortgages didn’t do much. All eyes now turn to tomorrow’s U.S. general election which the press has been talking about for years, which most pollsters now believe will be closer than they thought it would be two weeks ago. And at this point it would be a surprise if the Federal Open Market Committee did not hike short-term rates in December. If you’re a fan of numbers, on Friday the 10-year improved .250 in price to end the week yielding 1.78% but the 5-year T-note and agency MBS prices only improved marginally.
 
For scheduled news, there isn’t anything today. Tuesday we’ll have the September JOLTS (Job Openings) and a $24 billion 3-year Treasury auction. Wednesday we’ll probably learn who won the BIG election and the various elections around the nation; lost in all of that will be the MBA’s usual application numbers for last week and a $23 billion 10-year Treasury auction.
 
The excitement will continue Thursday with Initial Jobless Claims and a $15 billion 30-year Treasury auction. Friday we’ll have some set of November Michigan Sentiment numbers. To start the week we find rates slightly higher versus Friday with the 10-year at 1.81% and agency MBS prices worse a few ticks.
 
 
One day a florist went to a barber for a haircut. After the cut, he asked about his bill, and the barber replied, “I cannot accept money from you, I’m doing community service this week.”
The florist was pleased and left the shop.
When the barber went to open his shop the next morning, there was a “thank you” card and a dozen roses waiting for him at his door.
Later, a cop comes in for a haircut, and when he tries to pay his bill, the barber again replied, “I cannot accept money from you, I’m doing community service this week.”
The cop was happy and left the shop.
The next morning, when the barber went to open up, there was a “thank you” card and a dozen donuts waiting for him at his door.
Then a Congressman came in for a haircut, and when he went to pay his bill, the barber again replied, “I cannot accept money from you. I’m doing community service this week.”
The Congressman was very happy and left the shop.
The next morning, when the barber went to open, there were a dozen Congressmen lined up waiting for a free haircut.
 
 
If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “How Consumers Influence Interest Rates.” 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 2016 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.)