 | | | | By John Bancroft jbancroft@imfpubs.com Commercial banks and thrifts continued to reduce the amount of mortgage servicing they do on behalf of other investors during the second quarter of 2014, according to a new Inside Mortgage Trends analysis of bank call-report data. With declining interest rates during the period and the prospect of faster prepayments, most banks also wrote down the fair market value they placed on their mortgage servicing rights, the data show. Banks and thrifts serviced a total of $4.458 trillion of single-family mortgages for other investors, typically through securitizations, as of the end of June. That was down 2.2 percent from the previous quarter and represented an 8.4 percent drop over the previous 12 months. A number of banks have been motivated to reduce their MSR holdings because of concentration limits imposed by the emerging Basel risk capital rules. Others have sought to unload servicing of distressed mortgages, both agency and non-agency. For further analysis and an exclusive ranking of the nation’s top 100 depositories by loans serviced for others, see Inside Mortgage Trends. Other areas of interest: Servicing, Secondary/MBS, Data/Rankings, Mergers & Acquisitions | | By Paul Muolo pmuolo@imfpubs.com The Federal Housing Finance Agency likely will keep guaranty fees charged by Fannie Mae and Freddie Mac flat or will install just a “token” increase, according to Compass Point Research & Trading. The firm also believes the regulator may “slightly” flatten the loan-level price adjustment grids of the two GSEs. Compass Point issued a research blurb on g-fees and LLPAs Monday morning, the deadline the FHFA set for taking public comments on the topic. Late Friday, the Mortgage Bankers Association issued its comment letter, saying it “strongly opposes” any hike in g-fees and LLPAs. The trade group argues that the guaranty businesses of Fannie and Freddie “have not only been preserved and conserved through the conservatorship, but have increased in value as a result of the increase in cash flows. There is certainly no need to further increase pricing.” The trade group adds: “It should also be clear that any further increases in credit prices will not ‘crowd in’ private capital.” MBA went so far as to ask Fannie and Freddie to eliminate the adverse market delivery fee altogether and to reduce LLPAs “in recognition of the reduced counterparty risk exposure faced by the GSEs.” Other areas of interest: Originations, Secondary/MBS, Regulatory, Fannie, Freddie | | By Brandon Ivey bivey@imfpubs.com Four of the seven largest servicers participating in the Home Affordable Modification Program need to make at least moderate improvements, according to a new report from the Treasury Department. Among this group, CitiMortgage performed the worst on the assessment of non-agency HAMP activity for the second quarter of 2014, with the Treasury claiming that the servicer needs to make substantial improvements on how it manages problem loans. The Treasury said Citi will have its HAMP incentive payments withheld until the servicer’s performance improves. That marks one of the few times the Treasury has actually withheld incentive payments to a HAMP servicer. Nationstar Mortgage, Select Portfolio Servicing and Wells Fargo were cited as needing moderate improvement and threatened with withheld incentive payments if their performance doesn’t improve. Citi performed particularly poorly calculating borrowers’ income. Freddie Mac, the Treasury’s compliance agent for HAMP, checks servicers’ income calculations under the parameters of the program. If Freddie finds a problem, it will cite instances where the servicer’s income calculation varies by more than 5 percent compared with how it should be calculated under HAMP. The benchmark for income calculation is an error rate of less than 2 percent. In the second quarter of 2014, Citi had an income calculation error rate of 6 percent. Nationstar and SPS also had poor metrics regarding income calculation. For more details, see this week’s upcoming issue of Inside Nonconforming Markets. Other areas of interest: Servicing, Regulatory, Nonconforming | | By Paul Muolo pmuolo@imfpubs.com Bank of America recently unloaded $3 billion of nonperforming mortgages, according to investment banking sources that ply their trade in the NPL market. A spokeswoman for the bank declined to comment on the sale. One source said the $3 billion “traded a few weeks back,” but could offer no more color on the transaction. BofA, of course, has been saddled with billions of dollars in NPLs and distressed servicing thanks to its 2008 disastrous purchase of Countrywide Financial Corp. In other NPL news, the Department of Housing and Urban Development will auction $2.3 billion (unpaid principal balance) of distressed product on Sept. 30. In total, 15,000 FHA mortgages will be offloaded. Investors will get a chance to bid on eight pools, ranging in size from $94.5 million to $804.5 million. The vendor on the sale is DebtX. Other areas of interest: Secondary/MBS, Mergers & Acquisitions, Nonconforming | | By Charles Wisniowski cwisniowski@imfpubs.com The Mortgage Bankers Association said it is pushing back against a proposed “costly and expensive” recommendation by the Inspector General of the Federal Housing Finance Agency that would limit the number of years an independent accounting firm can audit a seller/servicer’s financial statements. The recommendation was made in the IG’s recent post-mortem report on the 2009 collapse of Taylor, Bean & Whitaker, Ocala, FL. The IG concluded – among other things – that regulators, counterparties and investigators missed the swindle perpetrated by TBW management because they ignored various red flags. The IG study, however, focuses more on the red flags that were missed by regulators and not to audit failure, said Jim Gross, vice president of financial accounting and public policy at the MBA. In some instances, TBW “doubled pledged” the same mortgage collateral to different counterparties. Gross noted that the cost of changing external auditors is “significant,” both for large, publicly traded companies and for small, privately owned lenders. For further analysis, see Inside The GSEs. Other areas of interest: Originations, Servicing, Regulatory | | By Paul Muolo pmuolo@imfpubs.com The Congressional Budget Office finally got around to “scoring” the financial impact of the Johnson-Crapo GSE reform bill, concluding that over a decade it would save taxpayers roughly $60 billion. In its analysis, CBO notes the cost savings come about “largely because new fees that FMIC [Federal Mortgage Insurance Corp.] would charge the issuers of MBSs would exceed the costs of the guarantees as calculated under the Federal Credit Reform Act. In addition, under the bill, revenues would decline by $1.5 billion over the 2020-2024 period because the Federal Housing Finance Agency … would no longer assess fees on the GSEs (which are recorded in the budget as revenues) to cover the agency’s administrative costs.” Of course, the Johnson-Crapo bill is going nowhere fast this year… One question we occasionally hear is this one: If the GOP this fall gains control of the Senate as well, can’t they just push through a GSE reform bill and hope to override a presidential veto, if there is one? Keep in mind that if Republicans take the Senate, the margin may be just a seat or two. The other “factor” is the lobbying power of the National Association of Realtors, National Association of Home Builders and to a lesser degree the Mortgage Bankers Association. If eliminating Fannie and Freddie will result in higher mortgage costs – even if they are replaced by some other federal entity – they will fight tooth-and-nail against any bill… Radian reported Monday morning that it wrote $3.59 billion of primary new insurance during August compared to $3.9 billion in July. In June it wrote $3.53 billion. As part of its second quarter earnings, Radian said its MI unit has a risk-to-capital ratio of 18.7 to 1. Monday also marks the deadline for public comments on the Federal Housing Finance Agency’s mortgage insurance eligibility rules… Mortgage REIT Ellington Financial plans to issue 8 million additional shares of common at $23.92 a share. Ellington invests in a wide array of mortgage assets but also buys corporate debt and equity securities. MORTGAGE PEOPLE: The Mortgage Bankers Association promoted Marcia Davies to chief operating officer. Previously, she was the trade group’s chief of staff. Other job changes were announced as well – as part of what the trade group called an “organizational re-alignment.”
Volume of Purchase Mortgages with Private MI Coverage Jumps The volume of MI-insured purchase mortgages securitized by the GSEs was up 38.0 percent from the first quarter, and up 8.2 percent from the year before. One of the beneficiaries was Cherry Creek Mortgage, ranked 49th for volume of private MI-insured loans originated in the retail and broker channels in the second quarter, which sold $100.0 million in MI-covered purchase-money loans from these channels to the GSEs in 2Q14 and just $6.4 million in refinances. Find out more about Cherry Creek’s PMI-covered GSE business, as well as that of 1,534 other lenders in the latest edition of IMF’s quarterly GSE Private Mortgage Insurance Profile. Other areas of interest: Originations, Servicing, Secondary/MBS, Personnel, Regulatory, Nonconforming, Fannie, Freddie | | | |
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