Young adults are stacking up, but not shacking up - according to a recent Zillow analysis. Most young adults are living with their parents or living with friends in order to defray housing costs rather than cohabitating with a significant other. Low wages, minimal employment opportunities and the high cost of rent has forced many young adults to pack into fewer households, increasing household size but negatively impacting the rate of household formation. Between 2000 and 2013, the percentage of 23 to 34 year olds living with family increased 46% whereas the share of 23 to 34 year olds living with a significant other fell 21%. Zillow also found that the rate of young adults living with two or more roommates has increased at a higher rate and that a greater share of working adults are living with family rather than their partners.

It happened a while back, but I recently received an email asking about Moody's downgrading of Ocwen, specifically   "Ocwen's primary and special servicer rating from SQ3 to SQ3-." First, all rating agencies have a proprietary system of rating companies, securities, and nations; Moody's is no different. Their Servicer Quality (note the SQ) ratings breakdown like this....SQ1 is a strong combined servicing ability and servicing stability; SQ2 is above average combined servicing ability and servicing stability; SQ3 is average combined servicing ability and servicing stability; SQ4 is below average combined servicing ability and servicing stability; and SQ5 is weak combined servicing ability and servicing stability. Moody's changed Ocwen's rating from an SQ3, to an SQ3-. Much like in high school PE class when you failed to hustle in dodge ball, your solid 'C', turned into a solid 'C-'. The +/- in each category represents the higher, or lower, end of the designated rating category. While this downgrade is a reflection of Ocwen as a whole, it might not yet be a catastrophic event as Keefe, Bruyette, and Woods write, "Moody's downgraded OCN's primary servicer rating and special servicer rating one notch from SQ3 to SQ3-. The rating agency cited legal and regulatory uncertainty as well as concerns regarding OCN's ability to manage the integration of acquired portfolios. The company's servicer rating remains on review for further downgrades. While we think this downgrade could trip termination event clauses in some of the Pooling and Servicing Agreements (PSAs), we think most PSAs require a rating downgrade to below average before a termination event is tripped."

However, Compass Point views the downgrade as a "termination event" between Ocwen and Home Loan Servicing Solutions, per the purchase agreement between the two companies. As any Secondary Marketing gal will tell you, "when in doubt, check the PA." The purchase agreement between OCN and HLSS reads: "Termination Event" means the occurrence of any one or more of the following events: (e) Seller fails to maintain residential primary servicer ratings for subprime loans of at least "Average" by Standard & Poor's Rating Services, a division of Standards & Poor's Financial Services LLC (or its successor in interest), "SQ3" by Moody's Investors Service, Inc. (or its successor in interest) and "RPS4+" and "RSS4+" by Fitch Ratings (or its successor in interest). As Compass notes, the servicer rating downgrade increases the risk of further "events of default" within the private label MBS pooling and servicing agreements (PSAs) and would likely lead to further servicer termination votes being conducted by trustees.

While the rest of the mortgage industry continues to fiddle, Ocwen continues to smolder. Home Loan Servicing Solutions received a letter from Mangrove Partners recently asking the company to terminate its servicing agreement with Ocwen.  Mangrove intends to nominate a slate of replacement directors for election to the board this year. According to the reports, Mangrove states that it believes there have been multiple termination events under the documents governing HLSS's Rights to MSRs. Among those is the recent downgrade of OCN's servicer rating by Moody's and Fitch. Upon a termination event, HLSS can direct Ocwen to transfer the servicing rights to another servicer. Mangrove wrote in its letter that it believes HLSS can transfer its servicing rights significantly above where it is currently valued on its balance sheet. The letter indicates that the fund has already been in contact with the Board and refers to an initial letter written February on 2nd. The potential board nominations represent a very diverse and extensive banking background including the mortgage industry's own Amy C. Schumacher who has extensive experience as a senior executive in the mortgage industry, including leading origination, servicing and capital markets organizations. She currently serves as the Chief Operating Officer of Prospect Mortgage.

Yes, Ocwen has been accused of "imprudent and improper servicing practices" by mortgage-securities investors in a letter to the trustees for the debt. The investors, who include a who's-who of funds (PIMCO, BlackRock, MetLife) own at least 25% of voting rights for 119 deals, with $82 billion in original balances, according to the statement. In retort, Ocwen replied by saying the claim was "groundless"....which I assume is the legal way one would say nu-uh. Bloomberg writes, "Ocwen denies that there is any basis for a default under the Trust agreements, and it will respond, at the appropriate time," according to a letter sent by Richard A. Jacobsen on behalf of Ocwen to the attorney representing the bondholders." As has been noted by many analysts, these allegations threaten Ocwen's present-day structure at the moment; Ocwen's stock price rose 9 percent to $6.91 in late January after the company avoided a California suspension of its license last week in a $2.5 million settlement of a dispute with the state, however, the stock has declined 58 percent to start the year.

Speaking of boards, The National Rental Home Council (NRHC) announced its inaugural Board of Directors and Officers:  President of the Board - John Bartling, President and CEO, Invitation Homes, Secretary - Tom Hallock, SVP, Director of Alternative Investments, American Homes 4 Rent, Treasurer - Fred Tuomi, COO, Colony American Homes, Board Members Ali Nazar (Chief Experience Officer, Starwood Waypoint Residential Trust), and Jeffrey Merigg (Associate General Counsel, Progress Residential). The National Rental Home Council is a non-partisan organization dedicated to advocating on behalf of the single-family rental industry. The NRHC seeks to educate the public, the media and policymakers about the economic value of the industry and the benefits of large-scale, well-managed single-family rental housing platforms.

I don't know how we find ourselves in the last week of February already, but plenty of lenders are reaping the fruits of their January locks, and should continue to do so into March. But we have a week's worth of schedules news ahead of us, along with the usual surprises overnight from Asia, Russia, and Europe, before we are swept into March.

Today we have the Chicago Fed numbers along with several Existing Home Sales figures. Tomorrow is a whole 'nother set from our friends at S&P/Case-Shiller (do you think Case got dibs on being named first after a coin toss?) along with some Consumer Confidence numbers. Wednesday the housing cavalcade rides on with mortgage applications and New Home Sales. Thursday is a heavy day with Jobless Claims, the Consumer Price Index, and Durable Goods, along with yet another housing index (this time from the FHFA). Friday is GDP, Personal Spending & Consumption, the Chicago Purchasing Manager's Survey, Pending Home Sales, and a bevy of figures from the University of Michigan about the current economy. Phew! Agency MBS prices and rates are roughly unchanged this morning: the 10-yr closed at 2.13% and we're at 2.12%.

 

Jobs and Announcements

On the jobs front, there is "a new kid on the block". "'What if Silicon Valley built a mortgage bank from the ground up, the right way?' We asked ourselves this question and founded LendingHome to do just that. We have revolutionized real estate investment lending, and we are about to do the same for owner-occupied mortgages. Come join our LendingHome team and be a part of our success!  We're a fast growing company with unlimited opportunities for you to grow, learn, and accelerate your career." LendingHome is currently looking for a VP/Director of Credit Risk Management, underwriters, and QC Auditors.  See job posting here: Director/VP of Credit Risk or Underwriters.

A large independent mortgage banker in the Mountain West region is currently looking for interested candidates for its Business Systems Administrator at its corporate office. The Business Systems Administrator, overseeing that function for a company with 1,800 employees and with over $400 million per month, has the primary responsibility to administer and configure systems to ensure operational effectiveness for an end to end loan origination system.  Qualified candidates need a minimum 3 years of mortgage experience with expertise in Encompass360 or other enterprise mortgage software.  Please send confidential resumes to me at rchrisman@robchrisman. com.

ALCOVA Mortgage continues to expand, and is searching for experienced and highly motivated Branch Partners and Senior Mortgage Loan Originators to join "our successful sales teams in the following markets that include Virginia, West Virginia, District of Columbia, Maryland, South Carolina, North Carolina, Tennessee and Georgia. ALCOVA Mortgage has been recognized by INC. 5000 as one of the fastest growing businesses 3 years in a row! Founded in 2003, ALCOVA is a privately owned company backed by strength and stability. We are a full service independent mortgage banker that is fully approved and delegated with VA, USDA and FHA. We have in-house underwriting, closing and funding. We offer a large product base, niche products such as 203K, Reverse, Manufactured and New Construction. The ALCOVA culture will allow you to thrive in the industry and our unparalleled support and customer service will help you build your book of business effortlessly. ALCOVA is also looking for Underwriters and Closers with 3 years or more of experience and they offer remote work from home opportunities for qualified applicants. Interested parties should send confidential inquiries to me at rchrisman@robchrisman. com; please specify the opportunity.

And the market for servicing continues unabated as companies who had hoped to retain servicing find out they'd rather have the cash now...

MountainView Servicing Group had a $177 million FNMA/Private non-recourse servicing portfolio out for bid. The package is 99% fixed rate 1st lien products, 72% WaLTV, 4.79% WAC, $110k Avg Loan Size, with top states: California (31.7%), Nebraska (27.3%), Wyoming (17.4%), and Colorado (9.3%). Bids for this package were due February 4th. For those with an appetite for GNMA product, Interactive Mortgage Advisors had a $272M deal currently out for bid. The 2,300 loan package has an Avg Loan Size of $119k, 5.09% WAC, 87.9% WaLTV, 669 WaFICO, with TX/OK accounting for half of the production. Bids were due February 5th. How 'bout a flow deal? Phoenix Capital's Project Newness is a $50M per month FNMA/GNMA flow agreement; conventional flow will be:  Avg Bal $270-288k, WaFICO 716-723, WaLTV 76%, 86% California geography, and approximately 97% Wholesale originations; government flow will be: Avg Bal $275-289k, 100% Owner Occupied, WaFICO 667-671, WaLTV 92-94%, 70-72% California geography, and approximately 97% Wholesale originations. Both conventional and government are sub serviced with DMI. Bids were due February 6th.

Interactive Mortgage Advisors is brokering a $110 million Fannie Mae bulk residential mortgage servicing rights package. The offering is 100% retail originations, 3.99% WAC, WaFICO of 745, WaLTV of 78.6%, with an average loan size of $185k. Bids are due February 18th. MountainView Servicing Group has two deals I've seen; the first, a $736 million package of FHLMC/FNMA/GNMA. The non-recourse servicing portfolio is 100% FRM, 3.94% WAC, WaFICO of 762, WaLTV of 66%, an Avg Loan Size of $332k, with top Top states: California (89.0 percent), Arizona (3.7 percent), Massachusetts (2.2 percent), and Texas (1.0 percent); the second is a $3B FNMA/FHLMC non-recourse servicing portfolio from a well-capitalized, strong counterparty. This portfolio is 100% fixed rate 1st lien product, with a WaFICO of 753, WaLTV of 73.3%, 4.16% WAC, 49% purchase loans, average loan size of $193k, with top state production in: California (20.0 percent), Utah (12.7 percent), Colorado (7.4 percent), and Arizona (7.0 percent). Bids were due last Tuesday. Phoenix Capital, never short of project names, is offering Project Mammoth. Mammoth is $25+ million per month flow of Fannie Mae mortgage servicing rights. The flow will be 100% FNMA A/A, Fixed Rate, 69-80% 30yr term; 20-31% 15yr term, Avg Loan Balance $258-$275k, WaFICO 724-751, WaLTV 68-75, with estimated state distribution of NJ (51%), NY (19%), & PA (6%). Written bids were due February 18.