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Through its flagship offerings alone, Freddie Mac issued approximately $14.6 billion across 6 STACR and 8 ACIS transactions in the first half of 2022. Among the notable transactions in the first half was STACR 2022-DNA2. It was Freddie Mac’s largest-ever CRT securities transaction, at $1.9 billion.
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Terms of Fannie Mae’s non-performing loan transactions require the buyer of the non-performing loans to offer loss mitigation options designed to be sustainable for borrowers. All buyers of non-performing loans are required to honor any approved or in-process loss mitigation efforts at the time of closing, including forbearance arrangements and loan modifications. In addition, non-performing loan buyers must offer delinquent borrowers a waterfall of loss mitigation options, including loan modifications, which may include principal forgiveness, prior to initiating foreclosure on any loan. In the event a foreclosure cannot be prevented, the owner of the loan must market the property to owner-occupants and non-profits before offering it to investors, similar to Fannie Mae’s FirstLook program.
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Fannie Mae announced its latest sale of non-performing loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio, including the company’s twentieth Community Impact Pool (CIP). CIPs are typically smaller pools of loans that are geographically focused and marketed to encourage participation by non-profit organizations, minority- and women-owned businesses (MWOBs), and smaller investors.
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The four larger pools include approximately 5,780 loans totaling $959.1 million in unpaid principal balance (UPB), and the CIP includes approximately 70 loans totaling $16.3 million in UPB. The CIP consists of loans geographically located in the Miami-Dade area. All pools are available for purchase by qualified bidders. This sale of non-performing loans is being marketed in collaboration with BofA Securities, Inc. and First Financial Network, Inc. as advisors.
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“Freddie Mac’s Single-Family CRT program delivered record performance, introduced a new ACIS structure and reduced our costs via two STACR tender offers in the first half,” said Freddie Mac’s Mike Reynolds, vice president of single-family CRT. “We added 17 new investors/(re)insurers in the second quarter, demonstrating continued market demand for our offerings and establishing the largest average investor base in program history.”
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Additionally, record first half 2022 issuances totaled nearly $15 billion, protecting $358 billion UPB of single-family mortgages. The issuances included flagship Structured Agency Credit Risk (STACR), and Agency Credit Insurance Structure (ACIS) transactions, as well as other risk sharing transactions.
Additionally, in the first half, the company executed two tender offers for certain STACR Notes. More than $4.5 billion original principal balance of Notes were tendered and accepted. The tendered notes had substantially deleveraged and therefore no longer provided Freddie Mac with capital relief.
Freddie Mac’s Single-Family business today announced that its Credit Risk Transfer (CRT) program reported Second Quarter 2022 CRT issuance of approximately $6.5 billion, protecting approximately $151 billion in unpaid principal balance (UPB) of single-family mortgages. The total was a record for a second quarter.
FREDDIE MAC CREDIT RISK TRANSFER
Since the first CRT transaction in 2013, Freddie Mac’s Single-Family CRT program has cumulatively transferred approximately $99.9 billion in credit risk on more than $3.0 trillion in mortgages through STACR and ACIS. As of June 30, 2022, approximately 59 percent of the Single-Family mortgage portfolio was covered by credit enhancement.
The first half of 2022 was the largest in program history for ACIS transactions, and included a new ACIS structure. ACIS 2022-COR1, the first structure with collateral comprised solely of cash-out refinance loans. The program also launched the ACIS 2022-AFH1 in the second quarter, a structure that reduces Freddie Mac’s credit risk by protecting loans as they are purchased. Executed in June, ACIS 2022-AFH1 accelerated the placement of loans into an ACIS transaction by enabling underwriters to evaluate deal collateral via a proxy pool of previously securitized loans.
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small originators, by way of faster fundings. Also, borrower retention is maintained as well.
4 MORTGAGE BANKER | SEPTEMBER 2022
It’s critical to look at the collateral
cash-window fluctuates monthly and yearly, depending on the appetite of Freddie and Fannie.
ROB CHRISMAN
When originators sell loans via the cash window, the GSEs aggregate the loans from a large pool of lenders and securitized them as an MBS; the cash window option allows both Fannie and Freddie to make shortterm use of their balance sheet without interfering with their current mandate of continued reduction in their retained mortgage investment portfolio. Why would a secondary marketing department choose to sell in this fashion? Simple: speed and efficiency. The agency cash window typically alleviates warehouse line concerns, a problem which plagues many
Typically, smaller lenders selling their loans to larger lender aggregators sell servicing rights as well. The cash window allows smaller lenders to retain their customer base, while allowing them to continue to originate new loans. And finally, an added benefit to the cash window lies in the small arbitrage (implied or otherwise) between “best efforts” and “mandatory.”Asnotedabove, a lot of the benefits of selling cash window are really comparative advantages for the smaller lender; maybe this is why I hear so often the phrase “we utilize the cash window” from Capital Markets veterans. Historically, smaller lenders had two options: sell your loans to FNMA/FHLMC, or sell to a large aggregator. As large aggregators have been closing the correspondent channel, small originators have become central contributors in the cash window securitization model.
The Correspondent Channel vs. The Agencies
many years Fannie & Freddie have competed against aggregator pricing, and vice versa. Through co-issue execution, Freddie and Fannie’s end-run around the large aggregators and marketing directly to the small and mid-sized lenders is well known in the industry. But smaller lenders may not have the expertise or experience in analyzing some basic decisions between selling loans directly to F&F (through the cash window) or securitizing loans themselves. It is helpful to have a primer on what that means, and knowing what might be going on behind the scenes influencing your decisions.
To cash, or to swap, that is the question. If you work in secondary marketing, you no doubt have been asked, at some point, whether it is more profitable to trade agency product for securities, or for cash. As many know, approved lenders have the business luxury of either swapping closed loans they originate for mortgage-backed securities or selling these loans directly to FNMA/ FHLMC in exchange for cash (known as “cash window” sales). The share of Fannie and Freddie loans securitized through the
IMPORTANT TO WEIGH YOUR DECISION BEFORE PICKING YOUR BUYER.
By ROB CHRISMAN, COLUMNIST, MORTGAGE BANKER MAGAZINE
MARKETS
IT’S CRITICAL TO LOOK AT THE COLLATERAL CHARACTERISTICS OF CASH VS. SWAP CHANNELS IN ORDER TO UNDERSTAND THE MORE IMPORTANT CONCEPT OF PREPAYMENT.
For
There are some common misconceptions about cash window transactions, and the collateral and prepay differences, if any, between pools securitized through the cash window and the MBS swap programs. It’s important to understand who uses the cash window option, why, and whether or not there are differences in pool characteristics.
between the two channels, there isn’t much of a difference in prepayments.
In addition, it is possible that additional measures taken by the GSEs ensure that prepays are comparable as well. Fannie Mae specifically monitors prepayments of pools created from the cash window and compares the performance to similar pools created through the MBS swap program.
To the extent that prepays on cash window pools are significantly faster than similar pools created through the MBS swap program, a conversation with the lender may occur to understand possible reasons for the differences. As an added incentive, if necessary, Fannie Mae may limit or discontinue a lender’s activity through the cash
MORTGAGE BANKER | SEPTEMBER 2022 5
role as aggregators. Or sell directly to the aggregators, depending on the price.
characteristics of cash vs. swap channels in order to understand the more important concept of prepayment. There are similar collateral characteristics between the two, although throughout the years the weighted average coupon (WAC) for loans being securitized through the cash window has been lower than loans being securitized through the MBS swap program.
With all of that said, the secondary marketing staff of practically every lender weighs the decision, assuming the company is approved, of selling to the agencies or to the correspondent aggregators. And while “cash is king,” there are often case-by-case reasons that a particular agency loan will be destined for a particular investor. And it is important to know why.
Aswindow.wemove through 2022, one would expect smaller lenders to continue to sell to FNMA/FHLMC cash-window desks given that larger lenders have scaled back on their
Consequently, it is likely that the percentage of pools securitized through the cash window continues to increase if not stay at current elevated levels. Given the comparable collateral characteristics and increased oversight by the GSEs on participating lenders, prepays on pools securitized through the cash window are likely to be comparable to pools securitized through the MBS swap program.
Loan size for purchase loans securitized through the cash window have been lower than purchase loans securitized through the MBS swap program (loan size of refinance loans securitized through the cash window are higher than refinance loans securitized through the MBS swap program), the TPO percentage for purchase and refinance (non-HARP) loans securitized through the cash window is noticeably lower than similar loans securitized through the MBS swapWithprogram.similar collateral characteristics
In the latter scenario, when issuers buy a loan out of the pool, they lose the funding from the MBS and must fund the mortgage at their cost of funds—which in today’s market is probably substantially greater than the original note rate. After the modification, the mortgage can be repooled into a new MBS at a higher interest rate, which takes it off the issuer’s balance sheet. But the borrower will receive a modification in which they are paying a higher interest rate, and the higher mortgage payment will probably lead to the borrower losing their home.The approximate doubling of interest rates in the MBS market has created a
guaranteed MBS.
6 MORTGAGE BANKER | SEPTEMBER 2022
WHAT HIGHER RATES MEAN FOR THE MBS MARKET
MARKETS LOW MORTGAGE INTEREST RATES HELPED PREVENT FORECLOSURE AND EXPANDED THE MORTGAGEBACKED SECURITIES MARKET.
As
But rising interest rates can affect foreclosures, too. An unsung benefit of low interest rates over the past several years has been that many borrowers have avoided foreclosure. Now that rates are rising, the industry must figure out new ways to prevent losses to borrowers and lenders. A three-step waterfall method that offers payment relief without deferring substantial principal amounts could be an effective solution.
The borrower is modified into a loan with the original interest rate (the rate on the modified loan is the lower of the original rate or the new rate). The original rate on the mortgage may be lower than the rate on the debt, but the GSEs can easily bear this cost.
Mortgage Interest Rate Increase Requires A Reevaluation Of Loss Mitigation Techniques
Pool issuers, not servicers, buy loans out of an MBS pool. When they do, issuers must finance the purchase of the mortgages with their corporate assets. The bought-out loans are then held on the issuer’s balance sheet.
foreclosure through loan modifications. During the past 40 years of falling rates, mortgagebacked securities (MBS) issuers bought loans out of MBS pools and modified them to lower borrowers’ monthly payments and capitalize delinquent mortgage payments. These issuers included the approximateandenterprisesgovernment-sponsored(GSEs)FannieMaeFreddieMac,aswellasthe430issuersofGinnie
If the organization is an issuer of Ginnie Mae–guaranteed MBS, a lower mortgage rate than debt rate is a problem for them and the borrower. When an issuer cannot afford to buy the loan, it doesn’t have an effective loss mitigation strategy to offer the borrower, and the borrower is faced with either foreclosure or sale of their home to meet their mortgage obligation.
By TED TOZER, CONTRIBUTING WRITER, MORTGAGE BANKER MAGAZINE
If the issuer is Fannie Mae or Freddie Mac, the GSEs hold the securities on their balance sheet and fund them with their debt.
Low interest rates have helped two types of borrowers avoid foreclosure: borrowers at risk of delinquency, who could refinance to lower their monthly mortgage costs and extended their term, and borrowers who became delinquent, who could modify the terms of their mortgage to create an affordable payment.
Low interest rates also helped prevent
Mae
The interest rate an issuer can offer is directly tied to its funding costs. If an issuer has to buy the loan out of an MBS to modify its loan, the interest rate offered to the borrower will increase by the same amount the issuer’s funding costs increased.
THE FIRST RISING-INTEREST-RATE ENVIRONMENT IN 40 YEARS REQUIRES CREATIVE SOLUTIONS.
inflation hits a 40year high and mortgage rates rise, many people are focused on housing affordability. Indeed, increased interest rates over the past year have increased monthly mortgage payments by approximately 40 percent.
TED TOZER
situation in which Ginnie Mae issuers cannot afford to buy loans out of MBS pools and lose their low-cost funding, and struggling borrowers cannot afford a proportionally higher interest rate.
The following table shows that by maintaining the original mortgage note rate, the servicer can offer substantial payment relief without having to defer prohibitively high amounts of principal. If a loan remains in the pool, a $28,162 deferral of principal is required to reduce the borrower’s monthly payment by $103, or 9.9 percent. If the loan is bought out of the pool, a $90,662 deferral of principal is required to obtain the same relief for borrowers. A principal deferral of $90,662 is not possible because loan guarantors limit the size of deferral to 30 percent of the loan amount, or, in my example,Implementing$75,000. step 3 of the waterfall would require Ginnie Mae to allow a loan to be amortized within a pool. If it wants to do this, Ginnie Mae should quickly change
A THREE-STEP LOSS MITIGATION WATERFALL
MORTGAGE BANKER | SEPTEMBER 2022 7
its policy. Doing so could create a tool servicers could use to help borrowers stay in their homes.
1. Determine whether the borrower can afford a payment that would repay the servicer, in 12 monthly payments, the delinquent payments plus their monthly mortgage payments. Creating balloon payments at the end of the loan should be minimized because loan guarantors have limits on how much can be added to the end of the loan over the life of the loan. The capacity to create balloon payments for future borrower hardships needs to be conserved.2.Ifthe borrower can’t afford the additional payment to reimburse the servicer for delinquent payments, the loan guarantor should allow for the delinquent payments to be added as a balloon payment to the end of the loan. The borrower should only be required to make their original mortgage payment.
Typically, the solution to help a borrower stay in their home and avoid foreclosure was to add the delinquent payments to the loan amount, extend the term, and move the interest rate on the mortgage to the current market. But because today’s rates are rising, moving interest rates to the current market likely wouldn’t help maintain borrower stability.Instead, loan guarantors should consider adopting the following waterfall for loans that would not require the buyout of the mortgage from the MBS pool or the loan’s note rate to be increased.
3. If the borrower can’t afford their original mortgage payment, the guarantor should allow the servicer to add the delinquent payments to the end of the loan and defer enough principal to allow an affordable mortgage payment to be created
The challenge the industry faces now is determining how a mortgage can be modified to a payment the borrower can afford without requiring the issuer to buy the loan out of the MBS and lose its attractive funding costs.
(This column was originally posted on The Urban Institute website. https://www.urban.org/urban-wire/mortgage-interest-rate-increase-requires-reevaluation-lossmitigation-techniques Theodore (Ted) Tozer is a non-resident fellow at the Urban Institute’s Housing Finance Policy Center (HFPC). Immediately prior to joining HFPC, he was a senior fellow at the Milken Institute’s Center for Financial Markets.)
MORTGAGE CALCULATIONS SHOWING DIFFERENCES BETWEEN VARIOUS LOAN MODIFICATION OPTIONS
by reamortization of the loan over the remaining term of the mortgage.
The first rising-interest-rate environment in 40 years requires creative solutions. The mortgage industry cannot expect falling interest rates to help borrowers avoid losing their homes. The Federal Reserve dropped interest rates to essentially zero during the pandemic. A zero-interest-rate environment creates a situation where interest rates can only go up, and they have increased substantially. The industry must develop tools that will allow borrowers who have taken on mortgage debt since the Great Recession to be successful homeowners through tough economic times. The waterfall that has been proposed will be key to helping borrowers be successful homeowners through all economic cycles.
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This solution comes at a critical time for U.S. Hispanic homeownership, which is set to represent 56% of all new homeowners in 2030, according to data by Freddie Mac. However, Maxwell reports that existing POS solutions, which are the primary means for
PLATFORM MAKES MORTGAGE PROCESS AUTOMATICALLY BILINGUAL.
It’s a simple question in Spanish that may leave English speakers scratching their heads. That’s why Maxwell launched its Spanish-language Point of Sale (POS) platform targeted at lenders currently serving and expanding into America’s Hispanic communities.
lenders to engage with borrowers, are often haphazard and require significant effort to use from both the loan officer and the borrower.RutulDave, Maxwell’s chief technology officer, says that the new platform will allow loan officers using Maxwell POS to enable a Spanish-language loan application and personalize their landing page with a welcome message in Spanish. Dave also said that this is done by the automation’s detection of a user’s browser language settings on their desktop or mobile devices. Brian McCarthy, senior project manager and point of sales at Maxwell, said that this language setting is an instantaneous
MORTGAGE BANKER | SEPTEMBER 2022 9
By the way, the question translates to “What is happening with my mortgage?”
¿Qué está pasando con mi hipoteca?
BASIC SPANISH
By SARAH WOLAK, STAFF WRITER, MORTGAGE BANKER MAGAZINE
situation and that settings can be changed especially if an english lender is speaking to a spanish customer.
Dave said that so far, Maxwell is testing Spanish as its first language launch, then they will move on to other languages if there is success with this program. The application is primarily binary questions, according to Dave, but other questions will translate automatically. “We’re using basic Spanish currently,” Dave said. “[This system was] built with input from Maxwell’s in-house group of Hispanic American staff. By 2030, more than 50% of mortgage POINT OF SALES
NEW
TECHNOLOGY CONTINUED ON NEXT PAGE
Maxwell Aims To Extend An Arm To Hispanic Buyers
“MANY UNITED STATES-BORN HISPANICS HAVE LEARNED THEIR OWN VARIATIONS OF THEIR LANGUAGE VIA SOCIAL MATTERS AND SOCIAL MEDIA, BOTH WHICH HAVE AN EFFECT ON DIALECT AND LANGUAGE INFLUENCE.”
RALPH ROSYNEK
Dave and his team define “basic Spanish” as the form commonly used for legal documents like the Uniform Residential Loan Application (URLA). However, Dave said that Maxwell’s Hispanic staff “designed the layer of translation, and were also able to capture and incorporate industry-specific nuances and context into the language.”
10 MORTGAGE BANKER | SEPTEMBER 2022
different individual dialects. Of course, every customer will prefer their own native dialect.“Many United States-born Hispanics have learned their own variations of their language via social matters and social media, both which have an effect on dialect and language influence,” Rosynek said.
‘GAME OF TELEPHONE’ Rosynek compared multi-language mortgage processes to a game of telephone: concepts that are loaded with unfamiliar dialects and acronyms can cause confusion between lenders and customers. “In order for this to work, concepts need to be fully understood in languages by both the customer and loan officer in order for this approach to work,” Rosynek said. “At Moneyhouse, we give our customers one copy of their forms in English and one in Spanish.”Davesaid the platform will help Maxwell users adjust to the times of diversified lending. “The second biggest challenge for mortgage applicants is no Spanish support, second to credit score,” Dave said. “We’re likely the first to give support.” (Dave added that Maxwell does not offer a dedicated credit score McCarthyprogram.)saidMaxwell has made universal applications more borrower friendly in terms of the language used, such as changing the word “dependents” to “children.” Additionally, McCarthy said that using synonymous, more understood language is also easier to translate. “We have a spreadsheet with all translations we needed for our beta test,” McCarthy said.
The spreadsheet translations were generated by four Hispanic loan officers and underwriters on Maxwell’s team. McCarthy said that they started to translate applications last year to be internationalized and translated to Spanish. In April 2022, they began beta testing.
“They should be lauded for this, but I think if they want to have a sustainable global product, they have to commit to language interfaces and realize not everyone is going to be happy,” Rosynek said. “Automatic interfaces are great if there’s no compliance factors. In our litigious society, you have to be sure that what you commit to financially
applicants will be Spanish-speaking. We decided that we needed to get a head start.”
is fully complied to and understood. For this reason, AI can be dangerous.”
Ralph Rosynek, senior vice president at Moneyhouse, said Maxwell taking the first step in Spanish POS systems was a good move. However, Rosynek also said that there are multiple Spanish, Mexican and Hispanic languages that are all subject to
Following a successful beta trial, McCarthy says that Maxwell is advertising this new feature with their current customers, organizations and lending teams. In order for Maxwell clients to access this new feature, McCarthy says that there will be a spanish speaking prompt available to Maxwell lenders under the apply now section. “So far the banks [we’ve worked with] are excited to support their borrowers, this is a huge need we have in this industry.”
MORTGAGE BANKER | SEPTEMBER 2022 11
BUY A HOME.
As
IT
Relative to last year, the reduction in demand and home purchases stems from tighter credit and homeowners staying put. Mark Fleming, chief economist at First American, says that credit tightening
12 MORTGAGE BANKER | SEPTEMBER 2022
Is Still BuyingIn Today’s Market?
BUYERS
A GOOD
reduced the housing market potential by 458,000 potential home sales compared to one year ago.
sellers must also contend with a rising interest rate environment.”
Aside from buyers’ equity and credit concerns, the buying pool is shrinking and buyers are showing signs of reluctance to the housing market. The Mortgage Bankers Association reported an all-time low of mortgage application activity for the week ending July 22, and said that this low was last reached during February 2000. The percentage of first-time homebuyers looms around 30%. In May of this year, only 30% of survey respondents said that it was a “good time” to purchase a home. In June, however, Fannie Mae said that only 20% of buyers reported back that it was a good time to buy. 20% OF SURVEY RESPONDENTS IN JUNE FELT THAT WAS TIME TO
“Compared with one year ago, house price appreciation increased housing market potential by nearly 193,000 potential home sales. This may be particularly important in an environment where house price growth is beginning to moderate, as sellers may be tempted to jump into the market to capture the higher sale price, yet these potential
By SARAH WOLAK, STAFF WRITER, MORTGAGE BANKER MAGAZINE
the rate of home sales slows, there are nearly 509,000 single family homes available unsold on the market across the US. That’s the most we’ve had in almost 2 years, and 31% more than last year at this time. The market is moody, unpredictable and expensive, which leaves a small pool of buyers willing to take a leap of faith and buy.
Who
“As a homeowner gains equity in their home, they are more likely to consider using the equity to purchase a larger or more attractive home. However, if equity is low, homeowners are likely to remain ‘equity locked-in’ to their home,” said Fleming.
ONLY
Evangelou also said that according to NAR’s June 2022 data, homeowners who bought their houses three years ago prepandemic would be unable to afford the
With the housing market increasingly becoming competitive and selective, Zillow economist Nicole Bachaud says that buyers shouldn’t try to “time the housing market.” Bachaud says that the best time to buy a home ranges on a case-by-case basis that is dependent on what the buyer feels comfortable paying for.
IN
Daryl Fairweather, chief economist at Redfin, said that right now the market is attracting buyers that had trouble at the beginning of the year. “These buyers are now stepping into the market after they faced competition from all-cash buyers or buyers that offered large down payments at the start of the year,” Fairweather said. “That’s not necessary anymore since the volume of offers is down.”
same houses they purchased if they bought them today. “Although there were 526K sales in June 2022, that was still 2,000 down from June 2019’s data,” Evangelou said. “For homes in the price range $100-$250K, home sales dropped by 31%, which is the biggest drop we’ve tracked.”
“Millennials are the largest generation in U.S. history, and right now many of them are in their early- to mid-30s, typically prime time for buying a first house. They are competing with baby boomers for houses as well, who have been more active in the market than in the past. While many buyers A
CURRENTWITHINEXACTLYARELUCTANTHOMEOWNERSWHEREMARKETPOTENTIALARETORISKPURCHASE,WHOREMAINSTHEMARKET’SBUYERS?
MORTGAGE BANKER | SEPTEMBER 2022 13
Nadia Evangelou, the National Association of Realtors (NAR) senior economist and director of forecasting, reiterated that the current buyer pool is shrinking exponentially due to unaffordability, with 20% of households being unable to afford available homes. “20% of first time homebuyers currently spend 50% of their income on rent,” Evangelou said. “Even though more homes are becoming available,buyers now need to earn at least $125K to buy comfortably. With that being said, we’re encouraging younger homebuyers to rent instead.”
TO BUY OR NOT TO BUY
Mortgage professionals are feeling the strain of a limited buyer pool. Conversely, potential homebuyers are feeling squashed by looming interest rates and mortgage rates. Evangelou recommends that first time home buyers opt for 5-year adjustedrate mortgages (ARMs) due to rates offered below 4.5%. Additionally, Evangelou encourages mortgage professionals to cater to first time buyers by offering smaller options in affordable areas, granted that inventory is still limited. Evangelou also reminded that prior homeowners and boomers have an advantage over first time buyers, so showing them smaller, affordable homes as quickly as possible helps to increase first time buyers’ leverage.
Bachaud also recommends that sellers are meticulous about their online photos and curb appeal. “Most buyers begin their home search online, especially now. Talk to your agent about using professional highres photography, drone photography, or video footage to show off your home’s best features.”Fairweather says that mortgage professionals also should help their buyers understand different options for affording a mortgage and also educate them on the risks. “Most buyers hear about high interest rates and assume buying a house is just out of the question,” Fairweather said. “However, there’s other options such as adjustable rate mortgages (ARMs) that can help buyers find success.”
Fairweather also reassured buyers that now is a better time to buy than compared to the beginning of 2022.
Post-pandemic, less companies are expecting employees to show up daily to the office, which sparked a migration trend in 2021 that has only grown. Many are moving to small cities and suburbs now that there’s freedom to work from multiple locations. Bachaud said that rent growth peaked at record highs in February but has since decelerated. “This influx of demand was likely a one-time scenario, driven by a combination of the gradual reopening of the economy, people moving into their own place from shared accommodations, and a slow return to work in city offices,” Bachaud said. “The cost of buying a home may see rent growth pick back up in the coming months as renters opt to renew their leases or look for another rental rather than wade into the expensive for-sale market.”
are exiting the market right now due to rising costs and affordability challenges, demand is not going anywhere and will pick back up if and when homes become affordable.”Bachaud also said that the combination of price appreciation and high mortgage rates is pushing many potential buyers to the sidelines. “Those able to weather the storm are seeing a faint silver lining in the clouds, as shopping conditions have relaxed slightly from the ultra-competitive market seen through most of the pandemic,” she said. “Buyers currently priced out of the for sale market are likely faced with rising costs in the rental market, making it that harder to save up and later transition into home buying. But if prices do come down, these potential buyers will be waiting anxiously to jump on the opportunity to find their dream
their property. Strategic improvements, such as painting bathrooms pale blue, can cause listings to sell for upwards of $5,000 more, according to Zillow research.
Bachaud, on the other hand, recommends highlighting key features of a home that will draw in first time buyers, such as updated or state-of-the-art appliances. Bachaud and her team recommend that sellers make at least two home improvements, such as painting or landscaping, prior to selling
HOW TO MARKET WHEN THE POOL KEEPS SHRINKING
Fairweather also said that Redfin is noticing that the share of relocations is increasing as working from home becomes more available. She said that more buyers are shopping outside of their expensive metros and, in turn, are looking for longterm housing options rather than flipping or selling quickly.
Overhome.”thenext six months, Bachaud and her team at Zillow anticipate price growth to continue to moderate, which means easing up from the record high 20.9% annual growth seen in April but still higher than long-term averages. However, Bachaud says that if buyers are going to reenter the market, interest rates will need to drop.
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FANNIE’S PLAN
istorically, the housing industry has not been color blind, as evidenced by the sharp difference between Black homeownership, which stands at 42% and white homeownership, which far outpaces it at 72%.
For renters, they include: multifamily rental payment reporting; options to defray or decrease upfront security deposits; expanding eligibility and access to credit for credit-invisible borrowers; and enhancing eligibility and underwriting via rental reporting to credit bureaus.
By STEVE GOODE, STAFF WRITER, MORTGAGE BANKER MAGAZINE
The basis for choices are grounded in what Jones called the “Black housing journey,” a research-based roadmap of the barriers to equitable housing faced by Black consumers.
A sizable portion of their recently-announced Equitable Housing Finance Plan focuses on getting that money into the hands of potential Black homebuyers to help start evening things up..
not surprisingly, credit eligibility innovations and housing stability programs are a big part of the equation.Theplan features more than a dozen pilot programs and expansions of existing programs.
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But all the laws that have been put on the books over the last half century can’t seem to cancel out redlining, discrimination in access to housing subsidies and exclusionary zoning. So the folks at Fannie Mae and Freddie Mac are introducing another color to the equation: green. As in money.
For potential buyers, they include: building and launching the Fannie Mae Homeownership Education Curriculum program; piloting special purpose credit programs providing down payment assistance and reducing closing costs for homebuyers; launching the closing calculator tool; expanding the appraiser diversity initiative; expanding counseling services for borrowers and renters facing hardship; and providing ongoing oversight of servicer forbearance/home retention efforts.“Acentral element of our plan is the deployment of Special Purpose Credit Programs aimed at enabling access to credit and encouraging sustainable homeownership. SPCPs will be focused on people residing in formerly redlined and other underserved areas with majority Black populations,” Jones said. “In 2022, we will launch three to five SPCPs pilots for first-time homebuyers with key stakeholders in specific geographic markets to test eligibility enhancements, down payment assistance, and closing cost reductions.”
16 MORTGAGE BANKER | SEPTEMBER 2022 COVER STORY
he nation’s largest government-sponsored mortgage financier started in January with a three-year plan geared toward financially educating Black consumers, preparing them for homeownership and access to decent rental housing, and knocking down the barriers that they face. Many of those barriers are money-related, so
FANNIE AND FREDDIE SEE DIRECT ASSISTANCE AS A PATH TO DECREASING DISPARITIES.
“The housing inequities in our nation are deep and long-standing with a Black homeownership gap that has remained relatively unchanged for 50 years and persistent across all income levels for Black households,” said Katrina Jones, Fannie Mae’s vice president of racial equity, strategy and impact. “Given this history, it will require years - if not decades -of sustained attention and effort to narrow this gap.”
Equitable Housing Plan Focuses On Green For Black Homeowners
MORTGAGE BANKER | SEPTEMBER 2022 17 FREDDIE
Freddie Mac, which estimates that there are nearly 3.4 million Blacks who qualify for a mortgage but have not bought a home, also plans to leverage private, global investments to create and preserve affordable housing with an eye towards preserving — instead of displac — the communities intended to benefit from new investments.
he secondary market financier’s plan also introduces educational components, special purpose credit and down payment assistance programs, improve fairness in credit scoring and underwriting, financial empowerment for renters, support for underserved renters and
NOTMORTGAGEWHO3.4THEREESTIMATESMACTHATARENEARLYMILLIONBLACKSQUALIFYFORABUTHAVEBOUGHTAHOME.
emerging diverse multifamily developers in order to increase wealth-building opportunities and enhance the ability for people to invest in and grow their communities, and continue to set standards in both renter support and renter protections.
multifamily borrowers, expanded financing for affordable housing developers, improved access to community development financial institutions funds, minority depository institutions and smaller banks and reduced mortgage and title insurance costs.
Freddie Mac’s plan also calls for carrying out 21 research projects over the next three years. They include: homeownership gaps and academic achievement; the mortgage market experience for Black and Latino borrowers; a first-time buyer affordability index; Black indigenous homeownership; homeownership sustainability; trends in student loan debt among future borrowers from communities of color; the impact of
“We’re taking a problem-solving approach to identify root causes of the obstacles that prevent renters from becoming homeowners,” she said, adding that for each of the focus areas, the company will document obstacles and the actions needed to overcome them.
FREDDIE’S PLAN
T
Lastly, officials said they will create opportunities and access to capital for
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“As the plan matures and evolves, we will build additional consumer housing journeys and expand our focus on new or enhanced actions that address the unique challenges faced by other consumers who have been historically underserved by the housing finance system,” she said.
OUTSIDE HELP
KNOWING YOUR CUSTOMER
annie Mae based the approach to the plan on the words and experiences of the people they hope to help. In the third quarter of 2021 officials conducted a quantitative research study of 2,550 renters,including 714 Black renters, in an effort to develop a deeper understanding of the renter’s experience, pain points, and needs, particularly those who were low to moderate-income and other historically marginalized groups. They also conducted 10 qualitative in-depth interviews among lowto-moderate -income and disadvantaged renters to learn about the difficulties they faced.Then
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annie Mae officials also talked to the people that can help them, including nearly three dozen non-profits, government agencies, industry participants and outside consultants, including the Urban Institute, which has been championing the use of rent payments to help underserved communities build credit and qualify for homeownership opportunities.
“Freddie Mac’s Equitable Housing Finance Plan lays out meaningful actions designed to help make home possible and sustainable for more renters, buyers and homeowners, particularly in traditionally underserved communities,” said Michael DeVito, CEO of Freddie Mac. “Our multi-pronged approach reinforces Freddie Mac’s commitment to working across the housing industry to support opportunities for more Black and Latino families to access the American Dream. We are pleased to report that this work is already underway.”
“This plan serves as just one piece of a much larger and evolving strategy to address inequities in the housing finance system and extend the wealth building benefits of homeownership for families today and their future generations,” Jones said.
doors to homeownership for many buyers who were previously locked out and inspire more innovations in mortgage lending, eventually unlocking the doors to tens of thousands of otherwise qualified borrowers.
Jones said the plan has been in effect since January and that over the next three years Fannie Mae will be focused on the areas “where we can have the greatest impact.”
Freddie Mac officials conducted two homebuying journey consumer surveys with 1,600 Black and Latinos and asked them a series of questions, including primary residence area, family composition, homeownership status, living situation, credit score and reason for exiting the homeownership process.
They also conducted dozens of interviews with consumers, counselors and experts about housing related issues in the plan.
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In the 4th quarter of 2021, Fannie Mae officials met with 30 prospective firsttime homebuyers on multiple occasions to solicit feedback about the content and user experience of HomeView, its homeownership education course.
“Our focus is on removing barriers, not just for the loans Freddie Mac may ultimately buy, but also for the broader housing system,”
in late 2021, Fannie Mae surveyed more than 650 Blacks who were eligible or close to being eligible for desktop underwriting approval, and conducted 26 in-depth interviews, to better understand
the barriers to homeownership faced by the Black community.
Researchers from the Urban Institute were excited when Fannie Mae began incorporating rent payments into the mortgage application process last year and now plan to expand it, saying it will open
the mortgage market experiences on loan choice of Black and Latino borrowers; credit and debt profile of future Black and Latino borrowers; understanding the financial well-being of middle income Blacks and Latinos since the 2008 financial crisis; youth financial education; identify and implement enhanced baseline tenant protections; analyze housing choice voucher affordability efficacy and acceptance; ; housing choice vouchers for homeownership; analyze credit building data to assess impact and potential improvements; analyze LIHTC properties at risk of loss affordability; analyze and identify affordable rental housing needs; sizing affordable and aging housing supply in diverse rich and low income housing; analyze and address potential appraisal disparities in multi-family housing; appraisal gap analysis; racial segregation and the mortgage market outcome; and historic redlining analysis.
“They have the capacity to build robust data collection,” she said, adding that she thought tracking SPCPs would yield tangible results. “You should see those that are getting into mortgages fairly quickly,” Ratcliffe said.
Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, applauded both plans and called them “historic” because, unlike previous GSE efforts to increase homeownership, these specifically target communities of color while also addressing the rental Ratcliffemarket.saidshe sees plenty of good elements in the plan, from its inclusion of the lending community and efforts to reduce the costs and friction that come with mortgage applications, to rent reform and the robust research agenda.
HOUSEHOLDS70,000 IN >800 RENTALENROLLEDPROPERTIES THE INITIAL INITIATIVE HELPS RENTERS BUILD >15,000CREDIT CREDITNEWSCORES + 67% CREDITRENTERSSCOREINCREASE
MORTGAGE BANKER | SEPTEMBER 2022 19
ones reiterated that reversing the United States’ legacy of discriminatory practices in housing will take many years, but added that Fannie Mae is committed to a range of specific and meaningful actions in the next three years that are designed to knock down housing barriers and access to mortgage credit for individuals who by virtue of their race, ethnicity, or other characteristic have been historically underserved by the housing and mortgage finance system. “We believe the actions outlined in the plan are essential to advancing quality, affordable rental housing and equitable and sustainable access to homeownership across America, that in the long-term, will benefit all people on their housing journeys,” she said.
J
CHALLENGES AHEAD
of tangible metrics.
said Pamela Perry, Freddie Mac’s singlefamily vice president of equitable housing. “Our plan involves using data and our role in the market - and an intense commitment - to tackle issues around three main topics: access to credit, property valuation gaps and financial education.”
Freddie Mac officials are of the same mind, noting that the inequities facing Black and Latino communities are longstanding, and addressing this crisis demands longterm commitment and focus.
“How can they tell if it’s working?” she said.The answer for Ratcliffe lies in Fannie Mae and Freddie Mac’s ongoing investment in and attention to data.
“We are tracking our progress against the actions outlined in the plan and will measure success by how many barriers we knock down and by who benefits when they are removed,” she said, adding that Fannie Mae will create and publicly share an annual progress report of its efforts.
The initial initiative helps renters build credit by encouraging operators of Freddie Mac-financed multifamily properties to report on-time rental payments to the three major credit bureaus. Since the program began, officials said, 70,000 households in more than 800 rental properties have enrolled, resulting in more than 15,000 new credit scores being established and 67% of renters seeing their existing credit score
n order to help Fannie Mae implement the plan and for it to succeed, officials said they will need to commit to working collaboratively and transparently with industry participants, and that the plan’s progress will rely on partnership with mortgage lenders, local and state housing officials, and many others across the mortgage industry.
Freddie Mac officials pointed to an already successful initiative it began last year and a sister plan it unveiled in June.
“Millions of Americans lack a credit history. By factoring in a borrower’s responsible rent payment history into our automated underwriting system, we can make home possible for more qualified renters, particularly in underserved communities.”
In June the Mortgage Bankers Association and the National Fair Housing Alliance announced a new online toolkit for lenders interested in developing special purpose credit programs in order to offer mortgage credit to economically and socially disadvantaged borrowers in order to meet theirBobneeds.Broeksmit, MBA’s president and CEO, said the goal is to bring the mortgage industry together to develop effective policies and resources that will help close the racial homeownership gap.
“This extremely important decision will help many renters move closer to achieving the dream of home ownership,” DeVito said.
I
increase.Thenew initiative aims to increase home ownership opportunities for first time buyers by considering on time rent payments as part of the company’s loan purchase decisions.
“The online toolkit is designed to provide useful guidance and data analysis for mortgage lenders that are interested in using SPCPs to serve economically disadvantaged communities, as well as minority borrowers, most of whom lack the generational wealth to fund a down payment,” Broeksmit said.
And while she feels it’s important to recognize the difficulty of the task ahead for both companies Ratcliffe believes there is room for improvement, especially in the area
A GOOD ‘HISTORIC’ START
“The road ahead is challenging, but not insurmountable,” said Freddie Mac President Michael Hutchins. “With the partnership of lenders, investors, policymakers and other industry participants, we intend to make meaningful progress towards an equitable housing finance system that provides access to wealth, opportunity and a sense of home to people and communities across the United States.”
HOW TO KNOW IT’S WORKING
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been in business my whole life.
I started working when I was 9 years old, going door to door offering car wash services in Los Angeles during the 80s. It was rough to say the least. I got stiffed a few times, got paid in a handful of quarters once and got plenty of doors shut in my face. Yet I never forgot one of the most important things I have ever learned in those formative years:
It’s simply a staggering fact: Most businesses today spend far more time on things that do not directly bring in revenue than on things that do. Isn’t that amazing? Most companies spend far more time on internal issues, payroll, managing vendors and all the other things that do not directly amount to making more money. Sure, these things are important. But business that know how to spend more time on the things that matter tend to be the businesses and careers that are the most successful.
And the worst part? They are costly. Because they cut into time that is better spent chasing potential revenue. The three tools above will help you focus and spend more time making money and less time on things that don’t matter as much. Again, we are in business to continually generate revenue, which we then pull with all our might out as much profit humanly possible. And that is a worthwhile and noble goal that takes time.
When was the last time you picked up the phone and called a former client? Just because you don’t have current business with them doesn’t mean that you can’t reach out and say hello from time to time. You will be amazed at how this generates not only warm and fuzzy feelings, but best of all it just may generate a new lead.
Nir Bashan is an all-time Top 100 nonfiction book author and speaker. He helps folks become more creative at work.
It’s amazing to me how many people in sales (spoiler alert: we are all in sales) tell me that they cannot generate enough quality leads. If your LinkedIn is like mine, you probably get daily annoyances from people promising to get you 100 qualified leads by the end of the day! But you know that is all rubbish. Instead of wasting precious time with those snake oil salesman on LinkedIn, instead extract revenue potential from your existing clients.
2. EXTRACT, THEN EXTRACT SOME MORE
3. LOOK AT THE DETAILS
NIR BASHAN
If you know you are the kind of person who gets distracted, like me, then stop allowing someone else or something else to dictate your time. You cannot get distracted unless you allow yourself to do so. So don’t
1. TAKE BACK YOUR TIME
When we get creative and innovative, spending time on what matters becomes far easier. Here are three things that you can do today to quit spending so much time on stuff that doesn’t matter, and more time on stuff that brings in money:
Perhaps you are like me. You start your day with plenty of good intentions. You open your computer, get your cup of coffee, and then check your emails. While you wonder why most emails are sent in the first place, and how much better the world was before email, you check your stock portfolio and then read the news and then check on your Walmart order and then text a friend. Over 20 or 40 or 60 minutes later you have accomplished nothing.
So instead, plan out 10 minutes max for emails in the morning. Then spend an hour following up with clients so that you can maximize your revenue time. Your schedule may be different than mine, but that’s just it: make your own schedule before someone or something else does it for you.
MAKE YOUR OWN SCHEDULE BEFORE SOMEONE DOES IT FOR YOU.
By NIR BASHAN, COLUMNIST, MORTGAGE BANKER
Pay some attention to the details. Is there a client that you lost for some reason? Now is the time to look and try and figure out why. Is it a particular case that you had that took forever to close or to move forward? Now is the time to look and see why that was.
I hope that the three above tools give you a wealth of new revenue opportunities. It’s so easy to get distracted these days. There are plenty of things battling for our attention. From staff with perpetual problems and lack of self-starting all the way to social media and our insatiable appetite for 24 hours news, the distractions are out there.
CAREERS
How To Spend More Time On What Matters For Your Business
For instance, my legal team reaches out every half year or so, no matter if I have recently done work with them or not. And I may not need their services at the time, but inevitably I have a friend who has some legal needs and so on. Bingo: they create a new revenue stream making opportunity. It’s a simple yet very effective way to spend more time on revenue generating activities and less time on junk.
MORTGAGE BANKER | SEPTEMBER 2022 21
Biblical scholars have spent millennia looking at the same thing over and over again. Yet in every generation, they have found new
meaning, interpretations, and sources of life within our sacred texts. It turns out that you can do the same thing with your business or career, no matter what it is that you do. Take a look at the details even if you think you already intimately know them.
allow yourself to get distracted and you wont. Remember, you must schedule your own time or someone else will do it for you.
Ihave
When we spend time looking at the details, we open up opportunities to generate new revenue. It is almost as if there is a roadmap to success that appears in the errors of our past ways. Taking time to look at our errors and learning from them is one of the most effective ways we can spend generating new sources of revenue instead of wasting time.
How much of your day to day actually goes into making money, and how much is spent wasting time?
TECHNOLOGY ROUNDUP
Mortgage Cadence Launches
MCP is designed to provide an exceptional user experience across all products and channels and is the industry’s only platform to support both forward and reverse products. Delivered in the Microsoft Azure Public Cloud, MCP provides a secure, scalable system, accessible from anywhere and on any device. Inclusive of a leading point-of-sale through closing collaboration tools, MCP is both complete and easily configurable, offering rulesbased workflow, leading UI designer tools and an open-architecture designed to meet the needs of today’s lenders.
price, yield, WAL, dv01, OAS, discount margin, modified duration, weighted average CRR and CDR, severity and projected losses. The ability to view these and other model outputs across multiple scenarios in a single table eliminates the tedious and time-consuming process of running scenarios individually and having to manually juxtapose the resulting analytics.
“We are delighted to partner with Mortgage Cadence,” said Norm Fitzgerald, chief sales officer with National MI. “This integration shows our commitment to making the process of ordering mortgage insurance as easy as possible for lenders. MCP users will now be able to view our competitive rates within seconds, which significantly streamlines the process.”
REITs and other mortgage loan and MSR investors leverage the Multi-Scenario Yield Table to instantaneously run and compare multiple scenario analyses on any individual asset in their portfolio.
RiskSpan Introduces Multi-Scenario Yield Table RiskSpan, a provider of residential mortgage and structured product data and analytics, has announced a new Multi-Scenario Yield Table feature within its award-winning Edge Platform.
“We’ve always admired Fannie Mae’s commitment to providing equitable access to homeownership in America. We couldn’t be more excited to help them achieve that mission by providing transparency between investors and lenders and to reduce the back and forth that can be required in this ecosystem,” said Mike Yu, CEO.
Vesta’ssystem.
National MI Integrates With Mortgage Cadence National Mortgage Insurance Corporation (National MI) is now integrated with the Mortgage Cadence Platform (MCP), the newly-released, cloud-based digital lending platform from Mortgage Cadence. The integration enables mutual lender customers to obtain price quotes and order National MI’s realtime, risk-based mortgage insurance through its Rate GPS® tool instantly, without having to leave the MCP platform.
Analysts who determine that one of the scenarios is producing more reasonable results than the defined base case can overwrite and replace the base case with the preferred scenario in just two clicks.
Accurate Group Partners With Freddie Mac As Verified ACE+ PDR Software Provider Accurate Group, a provider of technology-driven real estate appraisal, title data, analytics and e-closing solutions, announced they have received verification from Freddie Mac for their ACE+ PDR (automated collateral evaluation plus property data report) offering.
22 MORTGAGE BANKER | SEPTEMBER 2022
An interactive, self-guided demo of this new functionality can be viewed here. Comprehensive details of this and other new capabilities are available by requesting a no-obligation live demo at Withriskspan.com.asingleclick
“Integrating with technology service providers like Vesta can help advance a faster and more seamless loan origination process, one that creates a better experience for consumers and lenders alike. We are delighted to deliver Vesta lenders efficient underwriting recommendations with our integration in order to better serve today’s borrowers in their journey to homeownership,” said Steve Pawlowski, Senior Vice President of Single-Family Products and Solutions Management, Fannie Mae.
MCP 2.0 LOS Platform
Vesta Announces Integration With Fannie Mae Desktop Underwriter Vesta, a loan origination system (LOS) and software-as-a-service company has announced an integration with Fannie Mae Desktop Underwriter (DU), the company’s automated underwriting
Accurate Group will deliver data collection for ACE+ PDR orders through its property inspection division, GroundWorks. Real estate lenders who leverage Accurate Group for Freddie Mac’s new ACE+ PDR offering, may benefit from the innovation of appraisal modernization resulting in significant cost savings, quicker turn times, mitigation of risk, and the advantage of a robust panel ready to fulfill orders.
modern LOS is enabling lenders of all sizes to build no-code custom workflows that enable an expedient lending process and power substantial automation that reduces costly fulfillment operations. Fannie Mae DU is a leading underwriting system that helps lenders efficiently assess loan eligibility for sale and delivery to Fannie Mae. Through this integration experience, Vesta lenders can seamlessly evaluate against Fannie Mae’s guidelines directly within the Vesta platform, and ultimately help lenders generate more loans with increased profitability.
from the portfolio screen, Edge users can now simultaneously view the impact of as many as 20 different scenarios on outputs including
The 2.0 release includes over 50 new features with key areas of focus in product & pricing enhancements, UI designer improvements, new vendor integrations and services related features. The release takes the platform even further by expanding key functionality accelerating the company’s ability to bring solutions to production with speed and efficiency and marks a critical step in the company’s innovative services strategy journey.
Entering scenarios is easy. Users can make changes to scenarios right on the screen to facilitate quick, ad hoc analyses. Once these scenarios are loaded and assumptions are set, the impacts of each scenario on price and other risk metrics are lined up in a single, easily analyzed data table.
Accurate Group has helped hundreds of lenders achieve strategic advantage by digitizing the entire mortgage process.
“GroundWorks provides the real estate sector with over 30,000 inspections per month, nationwide,” stated Paul Doman, president and CEO of Accurate Group. “Our best-in-class proprietary desktop and mobile technology disrupted the industry when first introduced in 2018 and continues to raise the bar as we continue to innovate without sacrificing quality, accuracy or compliance.”
Mortgage Cadence, an Accenture company, has announced the release of version 2.0 of its new Mortgage Cadence Platform (MCP) loan origination system, which represents a significant milestone in loan origination technology evolution.
While MCP has been available for new customers since its launch late last year, with the release of 2.0, the company has retired their legacy enterprise lending platform and migrated all existing enterprise customers to the new platform. “It’s exciting to be able to focus on the future and free our team to build out our next generation technology to meet our lender partner’s needs,” said Seth Hooper, chief product officer at Mortgage Cadence. “It’s very empowering and we’ve already had a tremendous response to the new platform.”
MCP is a modern, flexible and intuitive cloudbased LOS designed with an open architecture to meet the needs of a wide range of lenders, across all products and channels. Featuring advanced automation, high-quality analytics and open services strategy, MCP delivers a seamless experience from application to closing.
National MI’s API platform allows lenders and loan origination system (LOS) providers to quickly retrieve accurate mortgage insurance quotes through Rate GPS.
enables lenders to easily switch between credit providers to get the best pricing every time and to securely share a borrower’s credit data throughout their other systems. The new API also lets lenders toggle between soft and hard credit pulls so they are able to better control expenses while protecting their leads from trigger credit pull alerts at other lenders.
The partnership will initiate the launch of Tinman Marketplace, the next evolution of Better’s proprietary loan platform, which automates 70% of the mortgage process. Tinman Marketplace will be powered by Palantir’s Foundry operating system.
Creditmarket.Waterfall
First to Integrate with Freddie Mac’s Cash Settlement Purchase Statement API MCT’s capital markets platform, MCTlive!, is the first to integrate with Freddie Mac’s Cash Settlement Purchase Statement API. This API connection allows MCT Mark-to-Market and Hedge Accounting Reports to be updated with Freddie Mac purchase data directly, instead of waiting to run reports through a loan origination system (LOS).
As a top purchaser of whole loans from the MCT lender client base, integrating with the Freddie Mac Whole Loan Purchase Advice Seller API completes a large step in MCT’s roadmap for automating and independently verifying performance reporting.
Currently, most lenders order a borrower’s credit through hard-wired connections between a single credit provider and their point-of-sale (POS) system or loan origination system (LOS). This strategy fails to provide lenders with the best credit option for a particular scenario and prevents them from sharing a borrower’s credit data with their other systems which drive up costs.
First American Title Unveils Digital Platform For Title Agents
The PRISM platform automates the personalized quote delivery and title ordering process, eliminating the need for lenders or real estate agents to call their title agent for a quote for title and settlement fees or to order title, which helps accelerate the transaction and strengthen relationships with the parties
Theprocess.”partnership
ICE Mortgage Technology
“Truv is excited to provide ICE Mortgage Technology and Encompass customers with direct access to our one-stop verification solution,” said Kirill Klokov, CEO of Truv. “By using Truv with ICE Mortgage Technology, our mutual customers can experience much greater efficiency and cost-effectiveness with income and employment verification during the loan
provides ICE Mortgage Technology and Encompass customers with accelerated income and employment verification that is automated, accurate, and cost-effective directly in the leading loan origination platform. Consumers also benefit from quicker loan approvals and a better overall experience.
In a transitioning market, title agents are looking for easy-to-implement, cost-effective digital platforms and tools that increase efficiency, strengthen customer engagement and enhance the real estate transaction experience, First American said in a press release.
time-consuming and expensive parts of the mortgage process. Truv is a one-stop solution for income and employment verifications that empowers financial institutions to make confident decisions, faster. Truv’s consumerpermissioned instant verification infrastructure connects financial institutions to 120M+ US employees. Combined with its upcoming document upload capabilities and partnerships, Truv verifies 90+% of the U.S. workforce.
Staircase Launches Landmark Credit Waterfall Technology Staircase, the company building an integrated, digital infrastructure to accelerate tech-enabled mortgages, has launched Credit Waterfall, a new application program interface (API) that empowers lenders to streamline originations by providing access to all credit providers serving the mortgage
“Our PRISM platform is another example of First American’s leadership of the digital transformation of title and settlement,” said Kevin Wall, president of First American Title’s Agent and Lender Group. “By leveraging innovative digital technology and the company’s industry-leading public records data, the PRISM platform delivers a more efficient, more convenient real estate transaction experience for our title agents and the lenders, real estate agents, buyers and sellers they serve.”
Truv—a one-stop income and employment solution—announces an integration built on the latest Encompass Partner Connect API Platform and available through Encompass by ICE Mortgage Technology, part of Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology, and market infrastructure to automate consumer income and employment verification for the U.S.
“Pulling a borrower’s credit to determine their eligibility for a loan is an essential part of the mortgage process, but also one of the largest sources of lender costs,” said Soofi Safavi, Staircase co-founder and chief technology officer. “With Credit Waterfall, lenders now have the full breadth of choices when it comes to pulling a borrower’s credit, with the best possible option chosen every single time, automatically. There’s nothing else on the market like it.”
platform, real estate agents can access co-branded or white-labeled seller net sheets, buyer estimates, refinance quotes, marketing materials, and property reports, where permitted, that highlight the title agent’s role, helping both the real estate agent and title agent establish relationships with home buyers and sellers earlier in the real estate transaction and, ultimately, helping the title agent secure more title orders.
Throughinvolved.thePRISM
Verificationsworkforce.areoften
First American Title Insurance Company, a provider of title insurance and settlement services and the largest subsidiary of First American Financial Corporation (NYSE: FAF), announced the launch of its Prism digital platform, which combines automation and marketing tools, allowing First American policy-issuing title agents to offer products and services directly to their customers via any computer or mobile device at any time.
Better Joins Forces With Palantir Better, one of the fastest-growing digital homeownership companies, announced that it is teaming up with Palantir, a builder of operating systems for the modern enterprise, in support of its mission to fix the home financing process and make homeownership more attainable for all Americans.
MORTGAGE BANKER | SEPTEMBER 2022 23
At launch, Tinman Marketplace will move the mortgage industry from archaic rate sheets and 200+ eligibility PDF files to a rich interface on top of Better’s existing investor/pricing matching engine. This will make it easier for government-sponsored enterprises (GSEs) and mortgage industry investors
“We really appreciate Freddie Mac on their continued drive to improve the efficiency in which data is communicated back to lenders,” said Paul Yarbrough, senior director of MCT’s Client Success Group. “With Freddie’s new Cash Settlement Purchase Statement API, MCT clients are now able to automatically pull in any purchase advice statements posted by Freddie Mac. Subsequently, MCT clients can utilize our state-of-the-art data writeback to update the LOS quicker and more accurately saving the valuable time of critical staff at the lender.”
to make richer and deeper data driven mortgage capital allocation decisions. For the first time, simultaneous changes to pricing and eligibility criteria will allow capital to flow into underwriting attributes that are more than the traditional GSE Loan Level Pricing Adjustment grid.
MCTlive! Capital Markets Platform Becomes
Truv Announces Integration With The Leading Digital Lending Software
By removing manual data entry into the LOS the connection to this API will provide more accurate and timelier “Held For Sale” reporting. The integration also allows MCTlive’s Loan Commitment Tracker to automatically draw down outstanding commitments as loans are purchased by Freddie Mac.
• The average pull-through rate (loan closings to applications) increased to 75% in the second quarter, up from 73% in the first quarter.
• Personnel expenses averaged $7,371 per loan in the second quarter, up from $7,113 per loan in the first quarter.
• Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a studyhigh of $10,937 per loan in the second quarter, up from $10,637 per loan in
MBA’s Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Eightyfour percent of the 334 companies that reported production data for the second quarter of 2022 were independent mortgage companies, and the remaining 16 percent were subsidiaries and other non-depository institutions.
Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $82 on each loan they originated in the second quarter of 2022, down from a reported gain of $223 per loan in the first quarter of 2022, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.“The second quarter of 2022 did not yield the usual Spring seasonal pick-up in purchase activity, in an environment of higher mortgage rates, low housing inventory, and affordability challenges,” said Marina Walsh, CMB, MBA’s vice president of industry analysis. “With lower volume, lower revenues, and higher costs relative to the first quarter, the average pre-tax net production income per loan reached its lowest level since the fourth quarter of 2018.”
• Productivity decreased to 1.7 loans originated per production employee per month in the second quarter from 1.8 loans per production employee per month in the first quarter. Production employees include sales, fulfillment, and production support functions.
MARKET
Added Walsh, “Combining both production and servicing operations, only 57 percent of the companies in our report were profitable. Pulling out a profit in these difficult conditions is no easy feat.”
ONLY 57% OF MORTGAGE BANKERS WERE PROFITABLE, MBA SURVEY FINDS.
IMBs Report Losses In The Second Quarter of 2022
the first quarter of 2022. From the third quarter of 2008 to last quarter, loan production expenses have averaged $6,902 per loan.
• The average pre-tax production loss was 5 bps in the second quarter of 2022, down from an average net production profit of 5 bps in the first quarter of 2022, and down from 73 basis points in the second quarter of 2021. The only other quarters in the survey’s history to record net production losses were: first quarter of 2014 (8 basis points); first quarter of 2018 (8 basis points), and the fourth quarter of 2018 (11 basis points). The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 54 basis points.
• The average loan balance for first mortgages increased to a new study high of $337,130 in the second quarter, up from $324,368 in the second quarter.
• Including all business lines (both production and servicing), 57% of the firms in the study posted pre-tax net financial profits in the second quarter, down from 72% in the first quarter.
• Servicing net financial income for the second quarter (without annualizing) was at $133 per loan, down from $242 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, was $97 per loan in the second quarter, up from $94 per loan in the first quarter.
24 MORTGAGE BANKER | SEPTEMBER 2022
Key findings of Second-QuarterMBA’s2022 Quarterly Mortgage Bankers Performance Report include:
• Net secondary marketing income decreased to 243 bps in the second quarter, down from 270 bps in the first quarter. On a per-loan basis, net secondary marketing income decreased to $7,939 per loan in the second quarter from $8,429 per loan in the first quarter.
• Average production volume was $705 million per company in the second quarter, down from $808 million per company in the first quarter. The volume by count per company averaged 2,139 loans in the second quarter, down from 2,587 loans in the first quarter.
• Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 335 bps in the second quarter, down from 350 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,855 per loan in the second quarter, down from $10,861 per loan in the first quarter.
• The purchase share of total originations, by dollar volume, increased to 81% in the second quarter from 63% in the first quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 70% in the second quarter of 2022.
MORTGAGE BANKER | SEPTEMBER 2022 25
EFFECT ON MINORITY COMMUNITIES BETTER THAN TRADITIONAL BANKS, TOO.
study by the Federal Reserve Board found the growth of nonbanks has improved customer satisfaction with mortgage services. The research determined that as nonbanks increase their market share in a county, the complaint ratio of the county decreases.
26 MORTGAGE BANKER | SEPTEMBER 2022
Another factor in nonbanks providing better heightenednonbanksTheisregardlesstechnology,ofmarket,theirlargersize.studyfoundthatmayhaveincentives to invest in technology if they have a large nationwide market share because they can take advantage of the economies of scale and the marginal costs of technology investment are decreasing.
Study Finds Nonbanks Better At Happy Mortgage Customers
ANALYSIS
Anew
“With different specifications, we consistently observe a positive and significant association between nonbanks’ market share and their demand for technology-related skills,” the co-authors explained.
asincomegrows,inincreaseservicingincreaseconsistentimprovementthethequalitywehighermoreefficiencythesimilarmarketregulationsfintechexistingmortgages,welfare.consequencestheofWang,anfeds/files/2022059pap.pdfhttps://www.federalreserve.gov/econres/waswrittenbyAhmetDegerli,economistwiththeFederalReserveBoard,andJinganassistantbusinessprofessorattheUniversityMissouri.Theduobelievetheirstudyisthefirsttofocusonservicequalityofmortgagestounderstandtheofnonbanks’expansiononconsumerFocusingonfinancialproductsotherthansuchascryptocurrenciesandcreditcards,studiesshowthatnonbankfinancialcompanies,companiesinparticular,mayharmconsumers.“Ourfindingssuggestthatfuturepoliciesandofnonbanksshouldconsidertheeffectofsharesonservicequality.Ourfindingsecho[a2016study]inthatthenon-traditionalpartoffinancialsectorhasthepotentialtoimprovetheofthefinancialsystem,”theco-authorssaid.Thatcomesinspiteofnonbankstypicallygeneratingcomplaints.“Despitethefactthatnonbankshaveacomplaintratiothantraditionalbanksonaverage,findthatnonbankssignificantlyimprovetheirserviceastheirmarketshareincreases,contributingtoreductioninthecomplaintratioatthecountylevel,”authorssaid.Initsconclusion,theco-authorsexplained,“Forthisinservicequality,weprovideevidencewithtwoexplanations.First,asnonbankstheirmarketshare,theydevelopaspecialtyinlower-incomeborrowers.Second,asnonbankstheirmarketshare,theymakemoreinvestmentstechnology.Moreover,asnonbanks’marketsharetraditionalbanksincreasinglyfocusonhigher-borrowers,andtheircomplaintratiodecreaseswell.”Theco-authorsadded.“Wealsofindthatthe
Nonbanks are more likely to serve riskier, less creditworthy, and lower-income borrowers. Considering that such borrowers are more likely to have difficulties in making mortgage payments, and therefore, more likely to file a complaint, previous studies have shown, the co-authors noted.
improvements in service quality are more likely to benefit marginalized borrowers, such as minorities, who are more likely to receive low-quality financial services.”
“It is not surprising that nonbanks have higher complaint ratios than traditional banks on average. These findings are also consistent with the differences in business models between nonbanks and traditional banks. It is typical for nonbanks to finance their entire originations through securitization and the originateto-distribute model; whereas traditional banks still hold between 30% and 50% of their originations on their balance sheets. As a result, traditional banks may be more concerned with loan performance, and consequently, more incentivized to provide good services,” the researchers found.
The research also finds that nonbanks are better for minority communities. It said nonbanks are better poised to alleviate discrimination in the quality of services minorities receive from their mortgage providers.Thestudy, The Rise of Nonbanks and the Quality of Financial Services: Evidence from Consumer Complaints,
WHILE THE OWNISAPPROACHANDOUTCOMESPOTENTIALAREMANYVARIED,THEBESTONECANTAKETOUNDERSTANDONE’SRISKPOSITION. 28 MORTGAGE BANKER | SEPTEMBER 2022
MORTGAGE BANKER | SEPTEMBER 2022 29
The use of pay fixed interest rate swaps and interest rate caps can be useful tools in the effort to minimize risk associated with continued rising rates and its corresponding impact on longer fixed rate assets such as residential mortgages.
AN EXAMINATION OF THE USEFUL TOOLS FOR MINIMIZING RISK
In early/mid 2020, the combination of fiscal and monetary stimulus provided in unprecedented magnitude resulted in the banking system becoming flush with liquidity. This can be seen most clearly in the rate of growth experienced in the M2 money supply during that time. However, in the front half of 2022, the combination of the Federal Reserve’s monetary tightening, the record tax payments made to the federal government in April and the emergence of meaningful loan growth has certainly diminished this previously ample liquidity.
Q. Your presentation mentioned that several balance sheets now have overall asset liability profiles exposed to inflation induced rising rates. What does this mean for the future of the depository industry?
Mortgage Banker staff writer Sarah Wolak compiled this interview.
Q. What are some of the hedging strategies discussed in your presentation that can mitigate the risks associated with inflation and residential mortgage exposure?
Understanding Inflation And Residential Mortgage Exposure
Mortgage
Q. What effects do the anticipated recession have on these shifts in liquidity if any?
Q. Your presentation mentioned FASB’s “Portfolio Layer” hedging method. Can you expand on this and its benefits? For most, hedge accounting and hedge relationships when using a derivative are critical in order to achieve desired accounting outcomes. FASB introduced in March of 2022 a new hedging model within ASU 2022-01, the Portfolio Layer Method. This accounting model allows for an easier and more flexible approach to pooling together fixed rate assets in order to apply one or multiple derivatives, which would assist in mitigating interest rate risk.
Certain pockets of the industry have found themselves to be fairly liability sensitive at this point in the cycle, which with the Fed continuing to raise rates, has reduced margins and earnings. This dynamic has to be managed carefully, understanding the risks within each unique institution and using tools (whether derivatives or otherwise) to mitigate these risks.
This is the most critical question facing the industry today, how would a potential recession affect inflation, Fed policy, liquidity and finally interest risk within the system. While the potential outcomes are many and varied, the best approach one can take is to understand one’s own risk position. Modeling the balance sheet across a range of possible outcomes to truly understand where risks to earnings and capital reside, will then inform the practitioner with enough information to make an educated decision regarding if risk mitigation efforts (using derivatives or otherwise) should be pursued or not.
Q. What trends have you observed in the past two years that caused you to notice meaningful shifts in liquidity?
Q. Can you talk about how inflation impacts residential mortgage pipelines?
The consequences of not protecting the balance sheet against adverse outcomes in advance can be quite serious. Many have said, it’s difficult to buy insurance once the house is on fire. Instead, one should use the current moment to analyze and prepare for risks before they present themselves if possible.
Rising rates can increase payment requirements of a borrower, which could lead to credit issues. Also, coupled with this, housing values may decline.
softening mortgage pipelines.
MARKETS
If inflation were to continue at an elevated rate beyond the Federal Reserve’s target, this will compel the Fed to continue raising the federal funds target rate and quantitative tightening, both of which would likely cause benchmark rates to rise. As benchmark rates rise, oftentimes mortgage rates rise as well. This would have the effect of slowing housing demand, and therefore
Banker interviewed Daniel F. Morrill, CPA, principal, Wolf & Company, P.C., after a recent seminar before The Financial Managers Society he participated in on the topic of Inflation and Residential Mortgage Exposure – Mitigating the Risks.
Q. What are the potential risks of not adapting these strategies?
Q. What are some of the risks that residential mortgage holders face in today’s market? How can mortgage professionals help?
OCT 18 2022 Colorado’s top gathering for mortgage professionals returns to Denver on October 18, 2022. Don’t miss this exciting, informative event. NMP readers like you can attend for free by using the code NMPOCN. Complimentary registration available to NMLS-licensed active LOs and their support staff. Show producers reserve the right to determine final eligibility. www.comortgagesummit.com Produced ByTitle Sponsor ORIGINATORCONNECTNETWORK.COM NMLS RENEWAL CLASS OCT. 19
Mitchel H. Kider Managing Partner
Mr. Graham’s affiliations include the Dallas MBA, where he previously served as a Director & Chairperson of the Legislative Committee; DFW Mortgage Brokers Association, where he previously served as Legal Counsel; MBA; NAMB; Texas AMB prior to its closure; and Texas MBA.
Gregory S. Graham Co-Managing ggraham@bmandg.comPartner
International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California. In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.
Affairs, Federal Trade Commission, Fannie Mae, Freddie Mac, Ginnie Mae, and various state and local regulatory authorities and Attorneys General offices. In addition, Mitch acts as outside general counsel to smaller companies and special regulatory and litigation counsel to Fortune 500 companies.
James W. Brody, Esq. Mortgage Banking Practice Group jbrody@johnstonthomas.comChair 415-246-3995
MORTGAGE BANKER | SEPTEMBER 2022 31
providers. Mitch represents banks, mortgage companies, homebuilders, credit card issuers, and other financial service companies in a broad range of litigation and regulatory and compliance matters. He defends clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban DepartmentDepartmentDevelopment,ofJustice,ofVeterans
Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.
kider@thewbkfirm.com202-557-3511
Mitch Kider is the Chairman and Managing Partner of Weiner Brodsky Kider PC, a national law firm specializing in the representation of financial institutions, estatehomebuilders,residentialandrealsettlementservice
Marty Green 214-691-4488 ext 203
Black, Mann & Graham CoManaging Partner Gregory S. Graham has practiced in the areas of real estate, litigation, and bankruptcy law since 1989, and is currently licensed in Texas and admitted to practice before the United States District Courts for the Northern and Eastern Districts of Texas. Mr. Graham is also currently licensed to practice law in Georgia and has been since 2017. He received his Juris Doctor degree from Southern Methodist University School of Law in 1989 after receiving a Bachelor of Arts cum laude from UT Dallas.
MORTGAGE BANKING LAWYERS
mortgagelaw.commarty.green@Attorney
972-353-4174
LEGAL
These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields — knowledge, analytical ability, judgment, communication, and ethics.
James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan claims.repurchaseforeclosures,securitizations,bankruptcy,and&indemnificationHereceivedhisB.A.in
Scott L. Luna Partner sluna@ravdocs.com 469-730-4607
Scott Luna’s practice is focused on real estate law with an emphasis on mortgage document preparation and land title issues. Scott managed a successful multistate highvolume title and document preparation business for over 20 years before joining RAV and is recognized throughout the real estate legal community for his expertise. As a past President of the Oklahoma Land Title Association, Scott’s ongoing involvement in the industry adds to his wealth of title-related knowledge. Scott received his Juris Doctor degree from the University of Tulsa College of Law in 1991 after receiving his Bachelor of Science degree from Texas A&M University. Scott is currently licensed in Texas, Oklahoma, Missouri, Minnesota, Nebraska, and Kentucky.
32 MORTGAGE BANKER | SEPTEMBER 2022 MortgageBanker MAGAZINE
MORTGAGE BANKER | SEPTEMBER 2022 33 DATABANK
NOV 8 2022 Texas’s top gathering for mortgage professionals returns to Houston on November 8, 2022. Don’t miss this exciting, informative event. NMP readers like you can attend for free by using the code NMPOCN. Complimentary registration available to NMLS-licensed active LOs and their support staff. Show producers reserve the right to determine final eligibility. www.txmortgageroundup.com Produced ByTitle Sponsor NMLS RENEWAL CLASS NOV. 9 ORIGINATORCONNECTNETWORK.COMTE XA S MORTGAGE ROUNDUP
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38 MORTGAGE BANKER | SEPTEMBER 2022©2022 First Horizon Bank. Member FDIC.