It
is Election Day (with a suitable joke below) and I am visiting Salt Lake City.
A recent report indicates that Utah ranked higher than the national average in
both housing recovery and real estate recovery, but it experienced the slowest
housing recovery of any post-World War II cycle, with residential construction
having only recovered 55 percent.
On
October 17th the commentary noted rumors: "If true it isn't the first, and won't be the last lender combo, but there
are plenty of jungle drums pounding out chatter about Mortgage Master Inc.
being purchased by loanDepot. Rumors of the buyout have been rampant for
past month or so and are becoming too loud to ignore - but it does seem to be a
rumor only at this point. Speaking of Mortgage Master, here is a byline by Paul
Anastos, President of Mortgage Master, on potential culture clashes in M&A:
a different view of M&A in the
mortgage space."
Certainly big companies are making moves. PHH
is making a big push in certain retail markets, especially trying to increase
Realtor-specific lending. And then news broke yesterday that privately-held Freedom
Mortgage Corporation had announced an agreement reached with Continental Home Loans
of Melville, New York to acquire the assets of the Long Island-based mortgage
lender. Management and staff formerly with Continental Home Loans join
CHL Mortgage, a division of Freedom Mortgage. Freedom Mortgage President
and CEO Stanley C. Middleman noted, "Continental Home Loans enjoys a
sterling reputation and takes pride in being the largest independent FHA lender
in New York State...As Freedom Mortgage's CHL Division, the organization will
continue to be led by its exceptional executive team, Mike McHugh, Eric Reeps
and Sam Barreta." The addition of the CHL Mortgage team brings Freedom
to over 2,000 employees and over $2 billion in monthly loan volume.
"CHL will continue to operate with the same staff and enhanced systems.
All loans will continue to be centrally processed and underwritten out of our
Melville, New York office," said Mike McHugh, president of CHL.
Fannie
Mae
Collateral Underwriter (CU) is a proprietary appraisal risk assessment
application developed by Fannie Mae to support proactive management of
appraisal quality. CU will provide additional transparency and certainty by
giving lenders access to the same appraisal analytics used in Fannie Mae's
quality control process. Perform an automated risk assessment of appraisals
submitted to the Uniform Collateral Data Portal® (UCDP®) and return a CU risk
score, flags, and messages to the submitting lender. Be available at no charge
so lenders can take full advantage of the application for quality control and
risk management purposes. The CU risk scores, flags, and messages will be
available to all UCDP users in real-time beginning on Jan. 26, 2015 through
UCDP. Find more information on the CU web page.
Have
you tried the consumer solicitation materials available on the website? These
resources (letters, postcards, statement inserts, FAQs, and more) highlight the
Home Affordable Refinance Program's (HARP's) many benefits and can be
customized to include your company's logo and contact information. There is
also an option to co-brand the materials with the Fannie Mae logo. Visit HARP Solicitation Materials page to access these
resources and refer to the Guide for Using HARP Consumer Materials for terms
and conditions.
"You
might want to comment on the fact that Fannie rolled out their new USDA product
(and the FHA Section 184 Native American). Why they stopped buying FHA and VA a
while back but now start buying USDA is a mystery to me. But like the previous
government programs, they won't be getting much volume since their pricing is
300-400 bps worse that the big aggregators who put them in Ginnies."
Fannie Mae Lender Letter announces that Fannie Mae has suspended the Maryland Housing Fund as an approved provider of mortgage insurance. With the exception of Refi Plus™ and DU Refi Plus™, mortgage loans covered by the Maryland Housing Fund must be delivered on or before Nov. 30, 2014. The lists of Approved Mortgage Insurers and Related Identifiers and Approved Mortgage Insurance Forms have also been updated.
Freddie
Mac
deployed servicing
technology tools regarding Default Fee Appeal System enabling
electronic submit appeal data, and supporting documentation, for foreclosure
timeline compensatory fees and late foreclosure sale reporting compensatory
fees. Beginning January 1, 2015, Servicers must use the Default Fee Appeal
System for all compensatory fee appeals but are encouraged to begin using the
appeal system today. Visit the new Default Fee Appeal System Web page for detailed
instructions on how to start using this new servicing technology tool.
Occasionally
I am asked to comment on securitization transactions, and much like MSR deals I
give color to, it's a huge conversation; here is what I have seen, starting
with...Kroll Bond Rating Agency has assigned preliminary ratings to six
classes of Invitation Homes' single-family rental pass-through
certificates. IH 2014-SFR3 is a single-family rental securitization that will
be collateralized by a $775.1 million loan secured by first priority mortgages
on 4,048 income-producing single-family homes. The floating rate loan will
require interest-only payments and have a two-year initial term with three
12-month extension options. This transaction is the fourth securitization
issued by Invitation Homes overall and the third securitization in 2014
...KBRA
has assigned preliminary ratings to thirty-seven classes of mortgage
pass-through certificates from Sequoia Mortgage Trust; this is a jumbo
prime RMBS transaction. The collateral pool backing SEMT 2014-4 consists of 479
first-lien, residential mortgage loans with an aggregate principal balance of
approximately $341.7MM as of the cut-off date. The pool is composed entirely of
30-year fixed-rate mortgages, all of which are fully amortizing. The pool is
characterized by substantial borrower equity in each mortgaged property, as
evidenced by the weighted average LTV (69.4%) and CLTV (70.4%). The CLTV ratio
incorporates 6.1% of the pool possessing known junior mortgages. The weighted
average credit score of the mortgage pool is 773, which is within the prime
mortgage range
....Kroll
recently announced JPMorgan's plans to sell a Prime Jumbo RMBS.
According to the release, the aggregate loan balance is $262MM, according to
Kroll presale. The security (for those with access, the ticker was said to be :
JPMMT 2014-5) is 373 loans, WaFICO 762, originators: First Republic 54.7%; JPM
36.4%; CMG 2.1%, top servicers: First Republic 54.7%; JPM 36.4%; Shellpoint
Mortgage Servicing 5.1%, with significant concentration in California with 48%;
followed by NY 11%, Texas 7.5%.
....Speaking
of JP Morgan, the bank may have been tapped by Fannie Mae for a new type
of risk sharing, or at least according to this Bloomberg article. "JP
Morgan is selling securities tied to almost $1 billion of mortgages that it
made and were guaranteed by Fannie Mae, in a new type of risk-sharing
transaction for the government-controlled home-loan giant. The deal, called J.P.
Morgan Madison Avenue Securities Trust, is similar to debt that Fannie Mae
began issuing last year to transfer some potential losses when homeowners
default to bond investors, according to a presale report by Fitch Ratings. The
credit grader is assigning a BBB- rating to a $19.8 million portion of the
transaction, which also has a more-junior ranked $27.2 million class."
....Kroll
recently announced that REDWOOD TRUST may sell a prime jumbo RMBS.
According to the report I read, RWT plans to sell its 4th RMBS of the year (for
anyone keeping score at home, the ticker may be SEMT 2014-4). The security (the
initial purchaser being Credit Suisse) is 479 first-lien mortgages, with an
aggregate principal acting as collateral, and a balance of $341.7MM. The pool
is comprised entirely of 30-yr fixed-rate mortgages, all of which are fully
amortizing, low LTV, WaFICO 773, and top 3 originators: First Republic (32.6%);
Prime Lending (5.9%), top servicers: Cenlar: (67.4%); First Republic Bank
(32.6%).
....In
a recent statement, RBC Global Asset Management announced an agreement
with Community Reinvestment Fund, USA to buy and service up to
$50m in loans. This agreement supports affordable rental housing as part of RBC
Access Capital Community Investment Strategy; the funds will support investment
in affordable housing by purchasing multi-family rental loans originated by
FHA, HFA under the FHA-HFAs Risk-Share loan program.
....according
to one report Two Harbors Investment Corp. may sell its third prime
jumbo RMBS. The presale report I read has the deal, backed by 519 loans with a
total principal balance of $356MM. The loans were acquired by TH TRS Corp from
originators Mortgage Master (13.6%), NYCB (13.2%), George Mason (12.7%), and
W.J. Bradley (9.1%). The loans will be serviced by Cenlar, with Wells Fargo as
master servicer.
While we're on the secondary markets, "Optimal Blue
announced an innovative new solution for market pricing intelligence.
Optimal Blue Insight, the industry's first real-time price benchmarking
service, provides retail pricing information for 470 lenders across 280
metropolitan areas nationwide. "Powered by the most accurate and
comprehensive product and pricing engine, Optimal Blue Insight enables lenders
to compare their retail pricing against the rest of the market for all loan
types and loan scenarios," commented James Rowe, Managing Director, Data
and Analytics. "It provides actual consumer facing prices -
not survey responses - which is an important competitive edge for optimizing
volume and profitability." For the first time, lenders have up to the
minute access to fully adjusted competitor pricing, including all loan level
pricing adjustments, margin and loan officer compensation. And the
pricing is segmented so users can see high, medium and low volume lenders in
each market."
Executive Rate Market Report:
A better
start this morning
after the 10 held its 40 day average yesterday. The 10 at 8:30 at 2.31% -3 bps
and MBS prices 14 bps better than yesterday’s close but just 5 bps better than
at 9:30 yesterday when most lenders priced. Yesterday the 10 and MBSs started
about unchanged then sold off about 11:00 am and set off re-pricing from most
lenders; opening better recently has been the best prices of the session. No
different today; by 9:30 treasuries and MBSs lost all the early gains. Early
trading in the key stock indexes had them slightly weaker this morning. Today
is election day but we don’t see that as any significance to the markets. At
9:30 the 10 yr note at 2.33% -1 bp, 30 yr MBS price +2 bps from yesterday’s
close and -6 bps from 9:30 yesterday. The DJIA opened -15, NASDAQ -16, S&P
-4.
Yesterday
crude prices ended below $80.00 ($78.78), this morning the price down another
$2.50 at 8:30 am. The
Saudis lowered prices for the US but increased prices for Asia; the ploy is to
pressure US producers to slow production. U.S. crude inventories climbed by 1.9
million barrels last week to a four-month high. OPEC members have decided not
to cut production even as prices hit 2 yr lows. There is a strong belief on
Wall Street that the lower oil thus lower gasoline prices will set up a big
increase in consumer discretionary spending; true enough, it will increase the
ability to spend more, we doubt however it won’t amount to as much additional
spending as markets believe. One stat out there is that the present level of
gasoline prices will add $1.29B to consumers; how much of it will be cycled into
more spending is the question.
The Sept
US trade deficit this morning increased to -$43.3B from -$40.1B in August;
expectations were for -$40.1B.
Evidence mounting that US companies that have large international sales are
going to suffer as Europe and China’s economies slow and exports will also
decline as the dollar continues to strengthen. Exports decreased by the most
since February, reflecting slowing demand from Europe, Latin America and Japan.
As the dollar becomes stronger against the yen and euro currency US exports are
set to decline, increasing the US trade deficit.
More
negative news from Europe; the
European Commission cut the growth forecast for the EU once again. Just about
every central bank, the IMF, the World Bank and leaders in China have been
cutting growth rates since the beginning of this year. The Fed’s quarterly data
has been lowered each quarter since Q3 2013. Gross domestic product in the
18-nation region will rise by 0.8% this year and 1.1% in 2015, down from
projections for 1.2% and 1.7% in May, the Brussels-based commission said today.
It lowered its projections for Germany, Europe’s largest economy, and said
inflation in the euro area will be even weaker than the European Central Bank
predicts. The Commission lowered its inflation outlook to 0.8% in 2015 lower
than the ECBs forecast of 1.1%. How long can US markets ignore the slowing of
global economies? The US is not an island any more, at some point the continued
weakness in Europe and China will filter to US markets. The ECB will have its
monthly meeting on Thursday; will the bank actually make a big monetary move as
Japan did last week? Based on past actions one would have to be suspect.
Economic
weakness in Europe, China and most of Latin America along with the increasing strength of
the dollar against other key currencies will be a drag on the US growth
outlook. That is the wider perspective, the narrower outlook however is that
investors and traders and analysts and economists and brokers will ignore the
underlying reality and will drive stock indexes higher using the cover that
there is no other place to invest, so jump right in the water is fine---at the
moment.
Sept
factory orders at 10:00,
expected -0.6%, hit right on it. Today’s trade deficit and now the weak factory
orders will cause the Q3 GDP to be reduced lower next month when markets get
the preliminary report. The advance report released last week at +3.5% from
+43.6% n Q2.
Squeezed; the 10 is trading between its 2 and
40 day averages as the two averages are beginning to move closer to each other.
2.31% and 2.35%. Most of the momentum
oscillators that were solidly bullish two
weeks ago are now I neutral territory, not bullish nor bearish. A waiting game
with the ECB meeting Thursday and US October employment on Friday. Traders
pondering the impact of lower oil process and the increasing strength of the
dollar and how each may affect the US economy, and what it means for interest
rates. Crude declines will keep the Fed’s inflation target from being any kind
of a problem. The problem though is that unless the US and global inflation
rates increase to those 2.0% targets the US and global economies will drag along
with less growth. Just no incentive to make those big purchases as prices
likely to fall than increase.
PRICES @
10:15 AM
- 10 yr note: +2/32 (6 bp) 2.34% unch (2.31% at 8:30)
- 5 yr note: unch 1.63% unch
- 2 Yr note: unch 0.51% unch
- 30 yr bond: +10/32 (31 bp) 3.05% -1 bp
- Libor Rates: 1 mo 0.155%; 3 mo 0.232%; 6 mo 0.327%; 1 yr 0.553%
- 30 yr FNMA 3.5 Nov: @9:30 103.27 +2 bp (-7 bp from 9:30 yesterday)
- 15 yr FNMA 3.0 Nov: @9:30 103.61 +2 bp (-4 bp from 9:30 yesterday)
- 30 yr GNMA 3.5 Nov: @9:30 104.35 +6 bp (-2 bp from 9:30 yesterday)
- Dollar/Yen: 113.65 -0.40 yen
- Dollar/Euro: $1.2511 +$0.0029
- Gold: $1167.30 -$2.50
- Crude Oil: $77.29 -$1.49
- DJIA: 17,379.93 +13.69
- NASDAQ: 4632.66 -6.25
- S&P 500: 2013.88 -3.93
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