6.26.24 Freddie Mac Second Mortgage Pilot; Blue Sage's Carmine Cacciavillani on Enterprise Software; Cap Markets Doldrums

Today's podcast is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries.

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“Don’t waste a good crisis.” Continuing data breaches constitute a crisis, the latest example being LendingTree Inc., cloud-based data analytics firm Snowflake Inc., and MBS loan-level data. Headlines that talk about a “crisis” or something “plummeting” in price should be viewed skeptically, regardless of the topic. Here’s “Home Prices are Falling Fast.” Really? I say, much ado about nothing. Dropping 1-2 percent… really… plummeting? Are people jumping out of windows? How about looking at those markets like Austin over the last 10 years: Most were bound to take a breather after getting ahead of themselves. There is something that has garnered a lot of headlines in recent weeks, and that is the FHFA authorizing a pilot program for Freddie Mac to buy as much as $2.5 billion in second mortgages over 18 months, a shift that could ultimately make it cheaper for households to borrow against the equity in their homes. There are those, however, who say that this is much ado about nothing: more below. Today’s podcast is found here and this week’s  is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a warranty, eliminating repurchase worries. Hear an interview with Blue Sage’s Carmine Cacciavillani on his nearly four decades in the mortgage industry as a solutions provider creating complex software-based business solutions.

Jobs & transitions

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JMAC Lending is pleased to announce the addition of mortgage-industry leader Sabrina Lopez as Regional Vice President – TPO West. Sabrina brings more than 20 years of strategic leadership experience to JMAC. In her role, Sabrina will grow and scale a team of Sr. Account Executives throughout the company’s western region.  “We want to empower our AEs to grow their business in this market,” JMAC’s President Christina Pham said. “Sabrina has a demonstrated record of success helping Account Executives become top producers in their markets. Her seasoned mortgage background, industry knowledge and relationship-driven mindset will be an essential component to JMAC’s continued growth and strategy. With Eric Yang as EVP of TPO and Bob Bordenet as Regional Vice President – TPO East, we are stronger than ever and well-positioned to take our team and business to the next level.” Elevate your lending capabilities this summer with your single source for solutions. Visit here and follow JMAC on LinkedIn, and contact Sabrina Lopez direct for Account Executive opportunities.

“Highlands Residential Mortgage is proud to announce that we have been ranked #1 by Experience.com for 2023 in their annual Top Performers in the Mortgage Industry rankings! This accolade is especially meaningful to us as it reflects the outstanding experiences and overall satisfaction of our customers and business colleagues. Brian Bennett, President of Highlands, shared, "While every award is a source of pride for us, being recognized in the #1 spot for 2023 is an incredible achievement for the Highlands team. It underscores how deeply our customers trust us and is truly a testament to our outstanding people that go above and beyond every day to provide a world class home financing experience. We are genuinely grateful for the recognition and will continue to serve all of our communities across the country at the highest level." To learn more about the Highlands experience, reach out to Corey Caster, EVP-Chief Production Officer.”

Xactus announced today that Joseph Peterson has been named Chief Financial Officer.  

(Remember: employers can view posted resumes for several months for a nominal charge and job seekers can post their resumes for free on www.lendernews.com.)

Software, products, and services for lenders and brokers

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When generating non-QM loans, traditional marketing efforts simply don’t cut it anymore. A 3 percent click-through rate on your email campaigns might be the norm, but it won’t give your salespeople the necessary conversations. Privy offers something different, something better. A branded real estate search and investing platform. Privy lets lenders automate borrower acquisition and retention. You become present at every step of a borrower’s transaction, from when they are just browsing to when they are ready to close. You are just a button click away. Provide your existing borrowers with the technology to close more investment deals while you close more loans. Contact Brad Bieber to learn more about Privy’s Lender Enterprise Solutions.

Despite some positivity in the housing market, pressure persists among mortgage lenders. The Mortgage Bankers Association forecasts single-family mortgage originations to grow to $1.8T in 2024, driven by increased purchase demand and equity take-out products, while Goldman Sachs predicts a 16 percent increase in the non-agency market amidst a 1 percent decline in agency mortgage production. Given this, Verus Mortgage Capital, the leading non-agency investor, believes there is no better time for lenders to expand their footprints and offer non-QM mortgages. Check out the five key insights Verus shares about non-agency lending in its recent blog post here. And to learn more about the non-QM opportunity, contact Jeff Schaefer, EVP – National Sales (202-534-1821).

Ask yourself this question: when evaluating the current market value of a subject property, are you using the best AVM on the market? We understand that when making critical business decisions, accuracy and details matter. That’s why we’re highlighting First American Data& Analytics and its Procision AVM to have your back. Its Procision AVM updates and tests the subject property values daily to maintain performance on every residential property in the U.S. every day. And the best part? First American’s AVM is designed for your specific business need – so you get the best results and highest satisfaction. But don’t just take our word for it: The data speaks for itself. As a nationwide, single-source data provider, First American Data & Analytics will fuel your biggest ideas so you can focus on growing your bottom line. That’s big stuff. Learn more about the Procision AVM.

The “housing theory of everything” is a concept equating the housing shortage in the United States to a broad range of societal problems like substance abuse, unemployment, domestic violence and disease. The idea is that when people live in safe, affordable housing they are more secure, less stressed and more employable. Those steady incomes and stable minds would, in turn, positively impact families and communities. In the latest Spotlight podcast from Dark Matter Technologies, Kyla Scanlon, who coined the term vibecession (when people have a more negative perception of the economy than what economic data suggests) and author of “In This Economy? How Money and Markets Really Work” joins Wes Hortabuck for a wide-ranging discussion of consumer perceptions, the “missing middle” in housing stock, and how providing more affordable housing could positively impact people’s lives and the broader economy. Take a few minutes and listen to the episode today!

“Is a standing call with your servicer enough when it comes to proper oversight? Is there a specified cadence for how often a lender should be meeting with their servicer? Ultimately, it is your responsibility to oversee your subservicer, so you must understand what is expected of you and the key actions you need to take to maintain oversight and comply with regulations. Tune in to this video where the experts at Richey May answer the most frequently asked questions about subservicer oversight requirements. Whether you’re considering leveraging a subservicer or navigating the general complexities of oversight, Richey May’s mortgage compliance experts can help. Contact us today for more information.”

“In today's competitive purchase market, the lenders who stand out are providing excellent, personalized and consistent communication. This approach is key to attracting new business, keeping your current borrowers happy and retaining clients for life. In our new blog, we’re sharing how ICE Surefire can help you streamline and improve your borrower outreach even further, so you’re prepared to thrive in today’s competitive purchase market. And by leveraging both Surefire and Encompass®, you’re able to deliver targeted content to the right contacts at the right moment. Read the full blog to gain all the insights.”

Agency news: Freddie Mac’s new program much ado about nothing?

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The Federal Housing Finance Agency (FHFA) announced its conditional approval for Freddie Mac to engage in a limited pilot to purchase certain single-family closed-end second mortgages. This conditional approval follows FHFA’s first publication of a proposed new product by either Freddie Mac or Fannie Mae (the Enterprises) for public comment under the new process mandated by the Prior Approval for Enterprise Products regulation, which became effective in April 2023. In an accompanying statement, Director Sandra Thompson further discussed FHFA’s analysis of the statutorily required criteria of Charter Act compliance, public interest, and safety and soundness. Upon the pilot’s conclusion, FHFA will analyze the data on Freddie Mac’s purchases of second mortgages to determine whether the objectives of the pilot were met. FHFA has determined that any increase to the volume or extension of the duration of the pilot, or a conversion of the pilot to a programmatic activity, would be treated as a new product that is subject to public notice and comment and FHFA approval. Any subsequent approval would be informed by the preliminary results of the pilot.

Seth Appleton, President of U.S. Mortgage Insurers (USMI), issued a statement on the Federal Housing Finance Agency’s (FHFA) decision to conditionally approve the proposed “Freddie Mac Single-Family Closed-End Second Mortgages” product as a limited pilot, pursuant to the Prior Approval for Enterprise Products Final Rule. In its comment letter, USMI raised certain aspects in urging FHFA to disapprove this proposed product and have Freddie Mac focus its efforts and resources on helping borrowers achieve homeownership.

In a press statement, MBA President and CEO Bob Broeksmit, CMB, responded to FHFA’s conditional approval of new product proposal allowing Freddie Mac to purchase certain closed-end second mortgages.

Compass Research and Trading was quick to point out that, “The FHFA would not have published the new product proposal for FMCC’s HEL product if it was not predisposed to approve it. Over 85 percent of the comment letters opposed the proposal, which included over 250 form letters in opposition. However, it did receive support from the National Fair Housing Alliance, Urban Institute, Community Home Lenders of America, and three credit union associations. Bank trade associations largely opposed the product, as did market trade associations.

Ed Groshans wrote, “We estimated that the potential tappable equity in Freddie’s portfolio to be $700 billion to $1.2 trillion. The FHFA addressed crowding out concerns by authorizing a pilot program for Freddie and limiting its HEL purchases to $2.5 billion. Our assessment is that the pilot program will have a negligible impact on consumer lenders. In addition, the FHFA capped the duration of the pilot at 18 months.

“Notably, the FHFA stated that any extension of the pilot or a conversion of the pilot to a programmatic activity would subject to another new product approval review. These limitations place the fate of any GSE HEL products in the outcome of the November election. We expect a Trump administration to cease the product on safety and soundness concerns, while a Biden administration could approve a larger scale product.”

The FHFA Director’s statement noted that the product is authorized by Freddie’s charter, in the public interest, and consistent with the safety and soundness of Freddie Mac or the mortgage finance system. The public interest section addressed crowding out. Sandra Thompson said that limitation on purchases and duration were in response to comments received and “intended to mitigate any concerns about potential inflationary impacts, extending the mortgage “lock-in” effect, or the “crowding out” of private capital.”

Switching gears to other updates…

Uniform Loan Delivery Dataset (ULDD) Phase 4a is implemented and the Phase 5 transition (optional delivery) has begun. Freddie Mac continues to enhance Loan Selling Advisor®. Sharing information about the customer test environment (CTE) for ULDD, plus additional news to help clients: Freddie Mac’s website.

Freddie Mac posted information on the new and updated UAD Redesign Documentation. The Uniform Appraisal Dataset (UAD) and Forms Redesign team has announced the release of additional documentation and updated one existing document to support ongoing implementation efforts. Fannie Mae’s Uniform Appraisal Dataset (UAD) and Forms Redesign team has released additional documentation and updated one existing document to support ongoing implementation efforts. These resources supplement prior documentation originally published in 2023 and subsequent releases throughout 2023 and 2024.

The publication of VantageScore® 4.0 historical credit scores is coming on July 10. For more information and to register for the session, visit Fannie Mae’s credit score models and reports initiative page.

Fannie Mae has approved the acquisition of Republic Mortgage Insurance Company and Republic Mortgage Insurance Company of North Carolina and its affiliates (RMIC) by Arch U.S. MI Holdings, Inc., a subsidiary of Arch Capital Group Ltd. RMIC is now an affiliate of our approved mortgage insurers Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company.

In the July Loan Product Advisor® (LPASM) release, Freddie Mac describes implementation of revised feedback messages related to the annual transition of LPA specification versions. Also included are reminders about collateral representation and warranty relief feedback messages and trended data.

As explained in Fannie Mae Release Notes, The Desktop Underwriter® (DU®) validation service will be updated the weekend of August 17 with enhancements intended to improve asset validation. Updates include asset validation up to the total balance of liquid accounts, consideration of net equity, evaluating assets when reported assets are not sufficient to cover closing costs, and more. View the integration impact memo for additional information.

At the Mortgage Industry Standards Maintenance Organization® (MISMO®) Summit, Fannie Mae shared significant progress on developing the Loan Boarding Data component of the Industry Transfer of Servicing Dataset. Help finalize both datasets by participating in the MISMO Servicing Transfers Development Workgroup.

Beginning July 1, all servicers can access the Liquidation Reconciliation Third Party Sales (TPS) application within Property 360™, which provides a simplified process for managing TPS cases from initial case creation to sale reconciliation. Servicers must onboard the application by no later than August 31. Details are available in the Fannie Mae release notes.

FHFA issued a Request for Input (RFI) on opportunities to improve the Federal Home Loan Banks’ (FHLBanks) processes for members and project sponsors to apply for Affordable Housing Program (AHP) funding. During FHFA’s FHLBank System at 100: Focusing on the Future review, many stakeholders encouraged FHFA to improve the efficiency of the application process. FHFA is seeking input on potential opportunities to improve the application process for the AHP competitive application programs. Each FHLBank develops user or reference guides and resources to assist FHLBank members and project sponsors apply for AHP competitive application funding. FHFA is providing these resources to assist stakeholders in providing feedback on the FHLBanks’ AHP competitive applications.

FHFA released its first quarter 2024 Foreclosure Prevention and Refinance Report. Fannie Mae and Freddie Mac (the Enterprises) completed 52,154 foreclosure prevention actions during the quarter, raising the total number of homeowners who have been helped to nearly 7 million since the start of conservatorships in September 2008. FHFA’s quarterly foreclosure prevention and refinance reports include data on the Enterprises’ mortgage performance, delinquencies, and active forbearance plans, as well as forfeiture actions and refinances by state. The data included in these reports are also available on FHFA's website as an interactive Borrower Assistance Map.

Capital Markets: summer doldrums

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There were a few miscellaneous data points yesterday, none of which did much to change the overarching narrative that the U.S. economy is beginning to slow, and none of which had much effect on bond movement. Consumer Confidence edged modestly lower in June, demonstrating a hesitant, but not overly concerned, consumer. On the housing front, the FHFA Housing Price Index was up 0.2 percent month-over-month in April after increasing 0.1 percent in March, while the S&P Case-Shiller Home Price Index was up 7.2 percent year-over-year in April, slightly more than expected. Home prices continue to rise despite 30-year mortgage rates hovering around 7 percent as people are becoming used to rates at these levels.

Security pricing is largely a matter of supply and demand, and the U.S. Treasury kicked off this week's quarterly refunding note auction slate with a solid sale of $69 billion in 2-year notes.

Mortgage applications from MBA kicked off today’s calendar, increasing 0.8 percent from one week earlier. This week’s results include an adjustment for the Juneteenth holiday. We learned last week that the Mortgage Bankers Association's refinance index surged 28 percent in the latest release and is now at its highest level since the fall of 2022. This is a good sign that new mortgages are slowly replacing the record-low lending rates from the beginning of the pandemic. One year ago, 30-year conventional and Ginnie Mae mortgage bonds with 1.5 percent through 2.5 percent coupons made up 42 percent of the U.S. MBS index, but that figure has now dropped to 37.3 percent. Still, most mortgages remain out of the money, most by over 300 basis points.

Later today brings New Home Sales for May and several Treasury auctions that will be headlined by $28 billion reopened 2-year FRNs and $70 billion 5-year notes. We begin Hump Day with Agency MBS prices slightly worse than Tuesday’s close, the 10-year yielding 4.29 after closing yesterday at 4.24 percent, and the 2-year at 4.73.

Let’s hope that your company’s training program is a little better than this.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is titled, “Catastrophe and Climate Risk Is Only Increasing”. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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