eMortgage Status at Lenders and Agencies - Catch the Wave!

By rchrisman@robchrisman.com

 

(Thanks to Stephen S. for this one.)

An artist asked the gallery owner if there had been any interest in her paintings that were on display.

"Well, I have good news and bad news," the owner responded. "The good news is that a gentleman noticed your work and wondered if it would appreciate in value after your death. I told him it would and he bought all 10 of your paintings."

"That's wonderful," the artist exclaimed. "What's the bad news?"

"The gentleman was your doctor."

 

Plenty of celebrities lose all their money, and then some, in various schemes. But here's one Brady Bunch member that did pretty well in California residential real estate.

So you're thinking about starting a bank, huh? The Wall Street Journal reports that from 2000 to 2008 the FDIC received 1,637 applications for new banks and approved about 75% of them. Since 2009, however, the FDIC has received 50 applications and only approved 6%. My calculator says that is...3.

 A survey by the RMA of community banks finds 56% of respondents say they expect to participate in M&A in the next 2 years. Interestingly, of those expecting to do M&A, 86% said they plan to acquire another bank while only 14% expect to sell. S&P Global Market Intelligence reports that as of Aug 8 there had been about 6% fewer deal announcements in the banking sector compared to the same period last year (157 vs. 167). Of interest to lenders, West Virginia's United Bankshares, Inc. and Cardinal Financial Corporation announced a merger agreement in a $912 million deal. For those playing along at home, Cardinal Bank owns George Mason Mortgage, LLC. We'll see if they keep it and fold it in, or sell it off - as has been rumored.

 Banking has been quiet for a couple weeks on the M&A front. During that time, it has been announced that six-bank holding company Industry Bancshares ($3.5B, TX) will acquire First National Bank ($54mm, TX). Vintage Bank Kansas ($59mm, KS) will acquire The Peabody State Bank ($41mm, KS). Sandy Spring Bank ($4.7B, MD) will acquire insurance company The Advantage Group Inc. (MD), and in Delaware Wilmington Savings Fund Society, FSB ($5.8B) will acquire Powdermill Financial Solutions LLC - Powdermill specializes in providing estate and business succession solutions to high-net-worth individuals and families.

 And something else that has been very quiet is the FDIC shutting down banks. There haven't been many this year but in Georgia, on Friday, the Woodbury Banking Company and folded into United Bank, Zebulon, Georgia.

 Among other business lines, banks are in the business of extending credit - making loans. The Fed's latest Senior Loan Officer Opinion Survey showed that banks continued to tighten lending standards across a number of different types of loans. Banks have now tightened standards for commercial and industrial (C&I) loans for four straight quarters, although the tightening in the latest survey was more modest than in the previous one. A relaxation of standards for mortgages eligible for purchase by government-sponsored enterprises and a tightening of standards for subprime mortgages were exceptions to stable lending standards.

 The price of servicing can impact the rates borrowers see just as much as the bond market can. Certainly the fluctuations in servicing values, the lack of natural buyers for servicing, and the issues with FHA & VA servicing is a hot topic at conferences. Someone emailed me the other day asking why I haven't included mortgage servicing rights (MSRs) in the commentary recently, so here ya go!

 The trend towards large blocks of MSRs continue with MIAC's $1.5 Billion FNMA and FHLMC mortgage servicing portfolio with an optional co-issue opportunity totaling $50 to $100 million per month. The portfolio is being offered by a mortgage company that originates loans with a national geographic concentration. The total package looks like: $172,926 average loan size, 98.1% FRM, 77.3% FNMA MBS, 2.4% FNMA A/A and 20.3% FHLMC ARC, 4.22% WAC, 728 WaFICO, 17 mos WALA, 99% retail originations, with a national geographic spread. Bids on this package will be due August 28^th....

 MountainView Servicing Group's $3 Billion GNMA servicing portfolio is being made available to the national market. The package is 100% fixed 1^st lien, $220k average loan size, 3.94% WAC, 688 WaFICO, 94% WaLTV, top states: California (19.9 percent), New York (10.3 percent), Florida (7.4 percent), and Texas (4.9 percent). Bids are due Thursday August 18^th. MountainView's second deal I have seen is a light snack of a $139 Million GNMA servicing portfolio that is being made available to the national market. The package is 41% fixed rate and 100 percent 1^st lien product, with an average loan size of $213k, 2.50% WAC (3.49% 30 yr.), 644 WaFICO, 97% WaLTV, with top states: Texas (15.6 percent), California (14.5 percent), Florida (8.7 percent), and Georgia (7.5 percent). Bids on this package are due Tuesday August 23^rd.

 And if size matters for you, MountainView is out there with a portfolio of mortgage servicing rights on nearly $2 billion in first-lien GSE home loans. There are over 10,200 residential loans that are behind the MSR pool, with over 25% from California and Texas. Based on weighted-average calculations, the service fee is 0.251 percent, the interest rate is 3.96% and the remaining term is 295 months. The weighted-average FICO score is 738, and the weighted-average original loan-to-value ratio is 76 percent. Freddie ARC loans account for $1.116 billion of the offering, and $0.803 billion are FNMA A/A mortgages. Bids due Wednesday.

  Last week Phoenix Capital, Inc. clocked in offering up $150-$200 million per month Fannie Mae and $150-$200 million per month Ginnie Mae flow servicing, bids due later this week. "Seller is a well-capitalized mortgage bank founded in 2001, interested in entering into a forward commitment to sell a portion of their production." On the conventional side of things 91% of the volume is fixed, average balance around $270k, very little HARP refinance loans, mostly refinances & owner occupied, average LTV around 75%, 36% retail, 44% from California. Phoenix's government offering is 85% FHA, average loan amount $245k, 79% purchase, 46% retail, all owner-occupied, 37% from Florida, weighted average FICO at 679, LTV 93%.

 Servicing is a key touch point between borrowers and lenders/servicers. In theory, digital mortgages, aka "eMortgages," help set up the loan for servicing and make human error less likely. Is that the case? Fannie and Freddie contacted 130 "key industry stakeholders": lenders, technology solution providers, warehouse banks, servicers, and title/settlement providers, to discuss their perceived obstacles/barriers to broader industry adoption of eMortgages.

 Fannie Mae posted The Evaluation Notices exhibit and the solicitation letters for the Streamlined Modification and Streamlined Modification Post Disaster Forbearance have been updated to reflect policy changes from Servicing Guide Announcement SVC-2016-05 in connection with the termination of the Fannie Mae Home Affordable Modification Program (HAMP), including the exclusion of references to HAMP or HAMP-related programs from certain borrower communications beginning September 1.

 On September 12, Fannie Mae will implement enhancements to Technology Manager, its online registration and account management application. For more information review the Technology Manager Version 2.1 Release Notes. Visit the Technology Manager page for more information.

 (Connoisseurs differentiate between eMortgages, which is a mortgage loan where the critical loan documentation, like the promissory note - eNote, are created, executed, registered, transferred and ultimately stored electronically, and eClosing, which refers to electronic closings involving parties applying eSignatures to electronic closing documents. As reporter Ben Lane points out, this is often a hybrid process in which certain key documents (e.g., Note, Security Instrument) are printed to paper and traditionally wet-signed. Therefore, an "eClosing" produces an "eMortgage" only if an electronic promissory note was signed electronically.)

 Survey says!? Unfortunately, the industry still has a long way to go to reach full adoption of the digital mortgage, and although it is picking up some momentum eMortgage adoption has been slow for a variety of reasons. "The survey showed that lenders are willing to spearhead the process while warehouse banks, servicers, and title/settlement partners will adopt when requested by lender partners."

 Sun West accepts initial loan application and applicable disclosures executed prior to closing using electronic signature ("e-signature") if in compliance with the requirements of the Federal E-Sign Act. You must utilize an E-Signature Vendor from Sun West's list of Authorized E-Signature Vendors available in the HELP section of sunsoft.

 FAMC is updating its policy and removing the requirement for upfront authorization of E-Sign third-party service providers. Although FAMC will no longer maintain an approved vendor list, all other FAMC requirements regarding e-signatures remain in place and unchanged. FAMC also provided information regarding Reg. Z's two different model rescission notices that may be provided on owner occupied refinances. The H-8 model rescission notice is typically used for all refinance mortgage transactions. The H-9 model rescission notice is used in a lender to lender refinance.

 What's bothering potential adopters? Acceptance by a limited number of investors, warehouse line availability, lack of key stakeholder readiness (servicers, document providers, custodians, title/settlement agents, etc.), implementation complexity, inadequate return on investment based on industry volumes, lack of uniform adoption of eNotarization and eRecording, resource & financial constraints, and GSE policy alignment all pop up as hurdles.

 Come on, warehouse banks! Lenders told F&F that there is a lack of availability of warehouse funds for eNotes. "Only a few warehouse lenders allow eNotes resulting in an added hurdle...the warehouse lenders will delay as long as possible since this changes their revenue model."

 But Ben Lane with HousingWire reports on the other side of that coin. "Warehouse lenders state there is a lack of customer demand, lack of investor outlets, and technology requirements that are 'too difficult' as major pain points. 'The initial estimate to implement eNotes is a significant six-figure amount,' the warehouse lenders noted. 'No one on our staff is familiar with the concept or IT architecture,' another lender stated."

 Mid America Mortgage, Inc. announced the firm has completed its first eClosing and eNote through its retail origination channel. Mid America intends to expand eClosing to all of its retail business, executing eNotes and utilizing electronic documents where allowed by local jurisdiction. "Mid America's vision for its future is to conduct eClosings with eNotes for all loans across all origination channels," CEO Bode said. "Furthermore, this strategy aligns Mid America with the CFPB's initiatives & position that eClosing should be an option for all borrowers."

 For servicers, the servicing technology requirements of eNote servicing is a major pain point. "As a sub-servicer without a direct relationship with an eVault and MERS reporting vendor, a financial and audit investment needs to be made to facilitate a total eNote servicing solution," one servicer noted.

 

As for what's next, the GSEs state that they will do what they can to help.

 

Turning our gaze lazily upon the bond markets...Up a little, down a little, with some intra-day volatility and some price shifting between coupons and security types (Ginnie, Fannie, Freddie). One interesting note: on Friday the 10-year touched 1.59% but closed at 1.58%, worse in price about .375. The 5-year T-note at MBS prices worsened between .125-.250.

 It's a new week, with a pretty hefty collection of scheduled data. To sum it up we'll see updates on housing, durable goods, GDP, and trade while the economic heavyweights head to Jackson Hole, Wyoming to chat - but to the best of my knowledge no one there has a crystal ball.

 This morning we've already had the Chicago Fed's non-market moving National Activity Index for July (at .27 the highest in 12 months), whatever that is. Tuesday we have New Home Sales. Wednesday has the MBA's application data for last week, Existing Home Sales, and the FHFA's House Price Index. Thursday the 25^th is Durable Goods, Jobless Claims, and some other tertiary numbers that economists love to say they analyze. Friday closes out with GDP, Personal Consumption, some University of Michigan figures, and International Trade in Goods. To start the week we're at 1.56% on the 10-year and agency MBS prices are better nearly .125 versus Friday's close.