A man was sitting reading his papers when
his wife hit him round the head with a frying pan.
"What was that for?" the man
asked.
The wife replied, "That was for the
piece of paper with the name Betty on it that I found in your trouser
pocket."
The man shot back, "When I was at the
races last week, Betty was the name of the horse I bet on."
The wife apologized and went on with the
housework.
Three days later the man is watching TV
when his wife bashes him on the head with an even bigger frying pan, knocking
him unconscious.
Upon re-gaining consciousness, the man
asked why she had hit him again.
The wife replied, "Your horse
called!"
May the 4th be with you! People wonder if anyone from
Freddie Mac has ever actually visited Fannie's location for an office visit.
Yes! Here's actual film footage to prove it. On a more serious note, 49
years ago today was the Kent State shooting where four students died and more
than 500 colleges across the country were shut down.
Fannie & Freddie/conventional conforming news
During the conference, Fannie was certainly focused on its
Day 1 Certainty program. Meanwhile, Freddie reminded everyone that it is
working hard to harness the immense amount of data that it has in its computer
servers to "re-imagine" the mortgage biz. Representatives from both
groups discussed declining volumes, the lack of supply, and the continued
examination of lowering defects and the cost to run a business.
Few parents will kick their kid out of the bedroom
downstairs if they're pulling their weight, financially, and then some. And
cleaning the litter box. Given the plate of issues facing Congress (health
care, taxes, immigration, housing, etc.), although it should be, booting Fannie
Mae or Freddie Mac out of conservatorship is not a high priority. In Freddie's
case, the company announced first quarter results: The company's 10-Q and press
release are available, along with the first quarter 2017 financial
results supplement. When it makes its June dividend payment to the government,
it will have paid back over $108 billion compared to $71 billion the government
"gave" it.
Freddie posted net income of $2.21 billion in the first quarter
although it was a 54% sequential decline as refinancings declined during the
period and non-cash hedging gains disappeared. The Agency took a $302 million
charge on the value of its derivatives, which are used to hedge its financial
positions. (Recall that in 4Q16, Freddie booked a huge gain of $6.38 billion.)
The GSE took in $3.79 billion in noninterest income during the first quarter
compared to $3.88 billion in 4Q16 and $3.40 billion in 1Q16. First-lien
production fell to $385 billion from $580 billion in the fourth quarter,
according to figures compiled by Inside Mortgage Finance.
MBA President and CEO David Stevens is confident that housing
finance reform will move forward under the Trump administration, but criticized
calls to simply let the government-sponsored enterprises recapitalize and be
returned to shareholders without additional reforms. This "recap and
release" proposal doesn't have a lot of backing, aside from the current
stakeholders in Freddie and Fannie.
All loans utilizing the employment/income guidelines in
affect prior to the release of Freddie Mac Bulletin 2016-19 must be purchased by Franklin
American Mortgage Company on or before June 1st. Additionally, per FAMC
Bulletin 2016-26, Fannie Mae's Collateral Underwriting service now indicates
those loans that qualify for representation and warranty relief for the
appraised value. Eligibility for Property Value rep and warrant relief from
Fannie Mae is determined based solely on a CU Score of 2.5 or below, regardless
of the DU recommendation.
Franklin American has made several improvements to
its guidelines recently including expanding the Standard Conventional products
(excluding High Balance) to permit cash-out refinance transactions on
investment properties. The maximum LTV/CLTV/HCLTV will be the lesser of the
program requirements per the FAMC Product Description or 70%. It has also
expanded the Conventional Condominium parameters to permit investment condos on
the Standard products (excluding High Balance). The maximum LTV/CLTV/HCLTV will
be the lesser of the program requirements per the FAMC Product Description or
70%. Investment condos will continue to remain ineligible in the state of
Florida. Refer to its correspondent lending manual for further details.
Effective April 28, Flagstar Bank announced its
minimum FICO requirement on the Fannie Mae High Balance, and Freddie Mac Super
Conforming products for one unit, primary residence properties, with a purpose
of purchase or rate and term refinance is being decreased from 640 to
620.
PennyMac is
aligning with the numerous updates announced in Freddie Mac Bulletin 2017-2 and 2017-3. Additionally,
PennyMac posted an announcement regarding the Rural Housing
requirement that borrowers receive a Net Tangible
Benefit on Streamlined-Assist transactions.
Pacific Union Financial, LLC will allow Fannie Mae
revised guidelines as described in its Selling Guide Announcement SEL-2017-04
effective immediately for loans submitted to Desktop Underwriter
(DU). The Fannie Mae/DU Program Guide and Condo Approval
Policy/Checklists will be updated as necessary on May 15.
U.S. Bank Home Mortgage announced it is offering
Fannie Mae's HomeReady program effective as of May 1, 2017. HomeReady loans
must be run through DU only and loans must be underwritten utilizing
your delegated underwriting authority with U.S. Bank.
As of April 28th, Mortgage Solutions
Financial has rendered its conventional Student Loan cash-out refinance as
an ineligible program.
Wells Fargo Funding is aligning with Fannie Mae's
multiple policy expansions apart from two changes that require system
enhancements. Until all support is in place, the following new Fannie Mae
offerings are not currently eligible for purchase: Student loan cash-out
refinance feature. Project eligibility review waiver for Fannie Mae to Fannie
Mae limited cash-out refinances.
PRMG has updated its product profiles.
PennyMac has declared certain transactions
involving intra-family purchase transactions as non-bona fide purchases
regardless of program. Criteria for non-eligible transactions are listed in a new
announcement.
Capital markets
Some of the economic news yesterday was actually
important. Probably the highlight was the Federal Reserve Open Market Committee
saying that it expects the Q1 slowdown to be transitory, and labor is expected
to continue strengthening. And, most important to mortgage bankers selling MBS,
the statement gave no new additional perspective on its $4.5 trillion
securities portfolio acquired during quantitative easing programs.
In other news, the MBA told us that residential
applications were about flat last week, although refis were down 5% and
purchase apps were up 4%. The ADP (private business payrolls) increased by 177k
in April, a drop from March. The Markit Composite PMI, whatever that is, was
"53.1" in April - a slight increase from last month. The ISM
Non-Manufacturing PMI for April was "57.5." Lastly, our U.S. Treasury
will maintain, at $62 billion, the issuance of longer-term debt for the sixth
straight quarter. The Treasury Borrowing Advisory Committee recommended that
the U.S. issue more bonds with maturities between 10 and 30 years to lock in
low rates rather than issuing ultra-long bonds.
The agencies transferring risk to those who want to own it
continues. Freddie Mac spread the word that it settled the second seasoned
credit risk transfer offering which is a rated securitization of
approximately $1.12 billion. The Freddie Mac seasoned credit risk transfer
trust, series 2017-1, will issue approximately $926 million in guaranteed
senior certificates and about $190 million in unguaranteed mezzanine,
subordinate certificates. The Freddie Mac Seasoned Credit Risk Transfer (SCRT)
offering "builds on the company's leadership in transferring mortgage
credit and market risk to the private market on seasoned and distressed
residential mortgage loans. The SCRT securitization program is a key part of Freddie Mac's seasoned loan offerings to reduce less liquid
assets in its mortgage-related investments portfolio and shed credit and market
risk via economically reasonable transactions. Freddie Mac has sold $7 billion
in nonperforming loans (NPLs), securitized $26 billion in re-performing loans
(RPLs), and transacted $2 billion in structured offerings.
The loans will be serviced by Select Portfolio Servicing,
Inc. The servicing of the loans will be in accordance with requirements similar to those applicable to the sale of
non-performing loans (NPLs), which prioritize borrower retention options in the
event of a default and promote neighborhood stability. Credit Suisse Securities
(USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated served as
co-lead managers and joint bookrunners. Wells Fargo Securities, LLC and
Citigroup Global Markets Inc. are co-managers, and The Williams Capital, L.P.
is a selling group member.
Not wanting Freddie to receive all the publicity, not that
they're in competition, Fannie Mae priced its third credit risk sharing
transaction of 2017 under its Connecticut Avenue Securities (CAS) program.
"CAS Series 2017-C03, a $1.371 billion note offering, is scheduled to
settle on May 10. CAS is Fannie Mae's benchmark issuance program designed to
share credit risk on its single-family conventional guaranty book of
business...we expect to return to the market with our next CAS deal, 2017-C04,
in mid-May. Our upcoming deal will reference loans that have loan-to-value
ratios between 80 and 97 percent."
"The reference pool for CAS Series 2017-C03 consists
of more than 167,000 single-family mortgage loans with an outstanding unpaid
principal balance of approximately $41.2 billion. The loans in this reference
pool have original loan-to-value ratios between 60 and 80 percent and were
acquired from July 2016 through October 2016. The loans included in this
transaction are fixed-rate, generally 30-year term, fully amortizing mortgages
and were underwritten using rigorous credit standards and enhanced risk
controls."
In terms of actual mortgage rates, the bond market hasn't
move much in a few weeks - fine by capital markets folks who don't like
volatility. U.S. Treasuries sold off a little (a few 32nds) yesterday in a
"curve-flattening trade" after the FOMC kept monetary policy on hold
but expressed confidence in the U.S. economic expansion in the accompanying
statement. "Lower coupon MBS did not fare well, not surprisingly, with the
flatter curve with some up-in-coupon flows out of FN30 3% only adding to their
underperformance on the stack and vs. benchmark," per ThomsonReuters.
Overnight Norges Bank (central bank of Norway) announced
its latest rate decision (unchanged) and we've seen the latest jobs cuts data
from Challenger, Gray & Christmas for April (a dip to 36.6k). We've had
Initial Jobless Claims (-19k to 238k), productivity and unit labor costs (-.6%
and +3%, respectively), and the trade balance figures (-$.1 billion to $43.7
billion). Coming up are March Factory Orders and the Agencies will begin
releasing April prepayment data starting after 4:30pm beginning with FNMA.
Yesterday the day finished with the 10-year yielding 2.31% - it has been around
there for quite some time - and this morning we find it at 2.35% with
agency MBS prices worse .125-.250 versus last night's close.
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