 | | | | By Paul Muolo pmuolo@imfpubs.com This past week when we wrote about Ocwen executive Arthur Walker selling 821 shares of stock, the next day we received an email from another executive at the company wondering if IMFnews has a “headline quota to fill” concerning the company. The answer is no and we reminded the complaining executive that the reason we cover Ocwen so closely is because, quite frankly, the company presents a fascinating story. Why is it so fascinating? Take your pick. A former GE executive named Bill Erbey takes a once-small company that had a thrift charter and grows it into a nonbank behemoth that successfully capitalized on the nation’s mortgage crisis by purchasing legacy servicing rights from a bunch of megabanks that failed miserably at processing “high touch” loans. To make the story even more intriguing, along the way Ocwen spins off a handful of companies, all of which see their share prices soar before coming back to earth. And to make the story even more enticing, one of its biggest MSR acquisitions of the year gets torpedoed by a New York regulator who supposedly has political ambitions. Oh, and then there’s this angle: Ocwen has successfully maneuvered U.S. tax laws by incorporating offshore and employing most of its rank-and-file workforce in India. Arthur Walker isn’t just any Ocwen executive. He carries the title of senior vice president of international tax planning for the entire company. We could’ve ignored the stock sale if it weren’t for the title – and the fact that Ocwen’s shares have been clobbered this year. Is Ocwen an interesting company? You bet it is... Oh, by the way, this broke last night: Ongoing scrutiny by the New York Department of Financial Services and the Securities and Exchange Commission prompted Moody’s Investors Service to downgrade its ratings of Ocwen Financial. “Based on their findings, these agencies could restrict Ocwen’s activities, levy monetary fines, or take additional actions that could negatively affect the company’s financial strength and servicing stability,” the rating service said. Moody’s noted that Ocwen is also working to improve its servicing. Reporting by Brandon Ivey / bivey@imfpubs.com... A PERSONAL NOTE TO OCWEN’S SERVICING DEPARTMENT: I noticed that the escrow balance in my account is growing quite large. Please make sure you make my real estate tax payment on time so I don’t have to blog about it like I did with that little force-placed insurance problem we had earlier in the year. - Paul Fannie Mae made big news this week when the GSE told employees that it will sell its Wisconsin Avenue headquarters in Northwest Washington, DC, and move elsewhere. One of our readers who works at the FHFA sent us regulatory language reminding us that Fannie must be located in DC. Freddie Mac, on the other hand, does not, which is why it’s based in Virginia. A Freddie official told us that to the best of his knowledge the company is staying put in McLean, VA… Where will Fannie ultimately wind up? The early betting is the Washington waterfront near Nationals Park… One GSE watcher reminded us that back in the 1980s then-Fannie Mae Chief Executive David Maxwell was having a major business disagreement with a Wall Street executive well known for his knowledge of the MBS market. The feud got so bad that the Wall Street executive bought a “for sale” sign and placed it on Fannie’s front lawn and then took a picture of it. David Maxwell was not pleased. Back then Fannie was losing $1 million a day… One last note on the Fannie HQ story: The Consumer Financial Protection Bureau incurred a public relations black eye recently when its Inspector General issued a report finding that renovation costs for the bureau’s headquarters in Washington now stand at $215.8 million – $160.8 million more than the original estimate. Maybe CFPB should buy the Fannie property? The consumer watchdog could probably get it for under $100 million… What’s the difference between a mortgage “lending” REIT and one that invests in mortgage-backed securities? Yield, for one. Redwood Trust, a pioneer in the new era of jumbo MBS issuance, pays a nice dividend and yield of 5.8 percent. Annaly Capital Management, which invests mostly in MBS, pays a mouthwatering 10.7 percent. Of course, Redwood does more than just buy loans and issue MBS. And some MBS investing REITs are starting to buy servicing rights… WASHINGTON NEWS: The FHFA late this week proposed increasing some of the benchmark affordable housing goals for Fannie and Freddie through 2017, while also establishing new housing “sub” goals for low-income multifamily properties. The proposed rule – which requests public comment – presents three alternatives for determining whether a GSE has met the congressionally mandated single-family housing goals for 2015 to 2017. At press time, an alert on the matter was being emailed to subscribers of Inside The GSEs and Inside Mortgage Finance. Reporting by Charles Wisniowski / cwisniowski@imfnews.com. FOLLOW US ON TWITTER: Inside Mortgage Finance and some of our staffers post daily on Twitter, providing updates to readers. Our Twitter crew includes: Guy Cecala, Paul Muolo, and Thomas Ressler. And of course, Inside Mortgage Finance.
One Way to Boost Originations: Dip Your Toe in Non-QM Waters So-called non-QM lending is quickly shaping up to be one of the hottest new areas for mortgage lending growth. But before venturing into non-QM lending, mortgage lenders need to weigh the risks (including litigation) against the potentials: veins of profitable new business that have few alternative lending sources. Join Inside Mortgage Finance for “Unlocking the Potential of Non-QM Lending” at 2:30 pm ET on Wednesday, Sept. 24, and hear from lenders that are already part of the non-QM market. Learn the calculations they use to determine the market’s viability and how they’re meeting the challenges presented with non-QM lending. Other areas of interest: Originations, Servicing, Secondary/MBS, Personnel, Regulatory, Fannie, Freddie | | By Brandon Ivey bivey@imfpubs.com Lowering the government-sponsored enterprises’ loan limits is one of the main goals for firms involved in the non-agency market, but the effort lacks broad support in the mortgage industry, let alone Congress. Among those submitting comments to the Treasury Department this month regarding how to increase non-agency activity, the American Bankers Association was one of the biggest supporters of decreased loan limits for the GSEs. The conforming loan limit is at $417,000 and in high-cost areas the loan limit for the GSEs and FHA is as high as $625,500. The conforming loan limit and high-cost limit are “dramatically higher than necessary for the purchase of a moderately priced home, especially in light of housing price declines nationwide,” according to Robert Davis, an executive vice president of mortgage markets, financial management and public policy at the ABA. He said loan limits in much of the nation could be reduced. “This will assist the development of a private market for loans outside of the conforming loan limits as a step to a more fully private market for all loans,” Davis said. Officials at Redwood Trust said structural reforms should be implemented to attract more investors to non-agency mortgage-backed securities. The next step would be to reduce conforming loan limits. For further analysis, see the new edition of Inside Nonconforming Markets. Other areas of interest: Originations, Secondary/MBS, Regulatory, Nonconforming, Fannie, Freddie | | By Paul Muolo pmuolo@imfpubs.com Investment banking firms appear to be quite busy with buy- and sell-side clients these days. Many advisors believe smaller transactions could be plentiful in the second half of the year for the simple fact that they cost less and aren’t as risky. So far this year, most of the M&A transactions that have been publicly disclosed involve the sale of bulk and flow mortgage servicing rights, along with some branch acquisitions. Franchise deals are getting done, but in general have been tiny. Rick Roque, vice president for corporate business development for Menlo Company, Boston, said he has been an advisor of sorts on 14 deals over the past 12 months. “The last four months, I’ve been very, very busy,” he said. Roque said he is working on several transactions currently, but like most M&A professionals he’s not at liberty to provide company names until after the sale agreements are signed and cleared by the owners. Chuck Klein, managing partner of Mortgage Banking Solutions, said he is engaged in roughly 12 transactions. “I think at least six of those will close,” he said. Most involve originators whose annual production is $1 billion or less, he said. For further analysis, see Inside Mortgage Trends. Other areas of interest: Originations, Servicing, Mergers & Acquisitions, Trends & Profitability | | By Thomas Ressler tressler@imfpubs.com The Attorney General of New York late this week filed suit against four inter-related companies and their principals, accusing them of operating a loan modification scam. The companies targeted include Home Affordable Direct, Home Affordable Solutions and JR Holding Group Corp., all of which are based in Long Island. The fourth company, Clear Solutions and Settlements, is based in Tampa, FL. The principals sued include Javier Gutierrez and Shadi Soumekh. According to the AG, the companies and their owners took advantage of financially vulnerable consumers by claiming they could provide substantial relief from unaffordable mortgage payments through loan modifications and other forms of foreclosure prevention. The firms are accused of collecting illegal advance fees and routinely failing to deliver on their promises. The lawsuit seeks to stop the illegal practices, provide restitution and damages to consumers, and obtain disgorgement of profits, as well as penalties and costs. Among other things, the AG has secured a temporary restraining order barring the companies from collecting advance fees from homeowners before they accept and execute a loan modification agreement. Also, the court also placed a freeze on company bank accounts. The case is part of an ongoing joint federal-state sweep by 15 states, the Consumer Financial Protection Bureau and the Federal Trade Commission targeting scam operators that prey on financially struggling homeowners and those facing foreclosure. Other areas of interest: Servicing, Regulatory, Nonconforming, Trends & Profitability | | By Charles Wisniowski cwisniowski@imfpubs.com Freddie Mac could save millions of dollars a year in faulty reimbursement payouts to its servicers by investing additional resources in a wider selection of reviews, according to a new audit from the Inspector General of the Federal Housing Finance Agency. In 2013, Freddie reimbursed its servicers $1.4 billion but identified and denied $126 million in what the IG calls “erroneous” claims. The reimbursement payments by Freddie to its servicers cover expenses tied to delinquent loans. When a borrower stops paying his/her mortgage, cash is needed to pay property taxes and insurance and to maintain the residence. Also, money is needed to liquidate the loan. Still, the watchdog agency found Freddie’s review process to be “generally effective.” The IG noted: “We acknowledge that Freddie Mac would incur additional expenses, such as personnel costs, if it expanded the size of the prepayment review sample beyond the current percentage of claims reviewed. However, we estimate that doubling the percentage of claims reviewed would result in additional savings of nearly $7 million at a cost of only about $1 million in higher enterprise personnel expenses.” Other areas of interest: Servicing, Secondary/MBS, Regulatory, Freddie | | | |
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