As oil prices plummet this morning, while in captivity, uninterrupted sleep is a good thing. I know for a fact that the staff of the Mortgage Bankers Association, including President Bob Broeksmit, is not getting much of it. It is important to be united in the industry’s discussions with politicians and regulators. The MBA has a site with the latest Covid-19 information, including forbearance updates and information you can give consumers, and this week there’s a webinar on forbearance questions. And anyone who doesn’t belong to the Mortgage Action Alliance should. Heck, it’s free and has over 30,000 members (out of an industry of over 250,000 employees.) Remember the “pick-a-pay” programs? Now we have “skip-a-pay” and it is rumored that real estate agents of dubious quality are marketing homes and telling clients they can skip six months of P&I. Great.

Lender Services and Products

Here is a free webinar: “Use Digital Closings to Keep Your Loans Moving.” Register for a complimentary webinar on Wednesday, April 22 to learn how digital closings can keep your loans on track during the COVID-19 crisis. Hear from John Ralston, Black Knight’s Director of eLending Strategy, as he provides an update on digital closings in light of the GSEs' guidance and the availability of remote online notarizations. John will also demo Expedite Close, Black Knight's proven, easy-to-use digital closing solution that can be implemented in a few weeks. 

LoanStream Wholesale Lending Division has reduced credit score requirements for FHA, VA and USDA loans. Now FHA and USDA loans have a minimum 600 FICO, VA minimum - 620 FICO. Purchase, Refinance, Streamline and IRRRL available, (does not apply to cash out programs). Plus, LoanStream continues as one of the few lenders with NanQ, Non-QM lending programs, and exceptional service / pricing on their Conventional loan programs. Working with the ONE Lender, makes you the ONE to Call. Visit LoanStream today or call 800.760.1833 to talk with one our knowledgeable Account Executives. Thomas Shaw, Chief Marketing Officer offers the following, “We hope everyone remains safe during this time. LoanStream is committed to hiring Account Executives who want to offer expanded programs and help their broker partners grow with easy to use, consistent, predictable service.” Interested AEs should email Thomas Shaw for more information.

Looking for new ways to effectively manage high mortgage volumes and market volatility? Consider joining top industry executives from Optimal Blue, SimpleNexus, Total Expert and Mortgage Coach as they host a highly informative webinar, Effectively Manage High Volumes with Cross-Platform Automation, on Tuesday, April 28th at 2:00 PM CT. During this webinar, attendees will learn: (1) How a well-designed technology stack can deliver scalability; (2) The significance of workflow efficiencies during unprecedented market volatility; and (3) About intuitive new tools to more effectively manage high volumes during these unique times. Most importantly, attendees will discover how robust cross-platform integrations can incite automation and help an organization thrive in any market.

Forbearance Primer

For many borrowers currently struggling to make mortgage payments due to COVID-19, a popular option floating on the tips of tongues is mortgage forbearance. It allows homeowners to “pause” mortgage payments for anywhere from six to 12 months while their income (in theory) is reduced or completely nonexistent.

Remember that FHFA or HUD do not have ability to offer forbearance rules in the non-QM, portfolio, or jumbo world (they can make suggestions, but do not give directives) as it is up to the bank or investor to determine what they want to do and the investor owns the credit risk. Anyone using a subservicer should check the contract for forbearance costs and procedures. And lenders offering Agency products will follow Agency guidelines, so if F&F will not purchase loans in forbearance, lenders will do their utmost not to tie up their warehouse lines with unsaleable loans.

Black Knight, which knows a thing or two about research, estimates that about 5 percent of GSE (Freddie and Fannie) mortgages and 7.6 percent of FHA/VA loans are in forbearance as of April 16! According to Black Knight, approximately 5.5% of all mortgages were in some form of forbearance as of April 16. Isaac Boltansky of Compass Research writes that they believe that “the policy choice regarding a 13(3) servicing liquidity facility will be driven by the forbearance uptake rate and the potential for market disruptions.”

What is less discussed by those considering this option is that the homeowner must repay the missed payments, either by making a lump sum payment or getting on some kind of repayment plan. CEOs are often asking LOs to tell borrowers this. Additionally, once a borrower receives forbearance, they’re no longer eligible for a mortgage refinance. Instead of forbearance, what if the borrower undertook a cash-out refinance and used the proceeds to cover expenses until they got back on track?

While taking on more debt doesn’t sound like the most sensible plan when one already can’t make ends meet, homeowners are currently sitting on a mountain of home equity, perhaps hundreds of thousands of dollars of it. Collectively, there is $19.7 trillion in home equity and $11.1 trillion in mortgages. Some $6.88 trillion of that is agency debt, backed by Fannie Mae, Freddie Mac, or Ginnie Mae, which covers FHA loans, VA loans, and USDA loans. If homeowners could tap into it and obtain a near record low mortgage rate at the same time, it could be viewed as a win-win. Cash-out refinances could also help to reduce forbearance requests, which will help banks and nonbanks survive the crisis without needing some sort of liquidity backstop.

Who will pay real estate taxes if there are insufficient funds in the escrow accounts? After all, some counties are not going to waive late fees. The servicer will have to advance the T&I payments if funds are not available, and those will be repaid along with the advanced principal and interest payments that were made to the investor at the end or when either the borrower re-performs or when the loan goes to foreclosure should they ultimately default. Of course this can be very costly in places like New Jersey where tax rates exceed the mortgage rate. During the last crisis fines were also assessed to servicers if they did not meet foreclosure timelines. And we all know that judicial foreclosure states can takes years to complete the foreclosure process.

Experian put out a note on how forbearance impacts credit. The general thinking is that a loan in forbearance is reported to credit bureaus as late and past due. A borrower’s credit runs the risk of being crushed and there is no consistency, despite the CARE Act stating that this won’t harm credit. Servicers are reacting. For example, Wells Fargo is making it as easy as a borrower’s click of a button to institute forbearance.

FHA published Mortgagee Letter (ML) 2020-06, FHA’s Loss Mitigation Options for Single Family Borrowers Affected by the Presidentially-Declared COVID-19 National Emergency in Accordance with the CARES Act. This ML implements the mortgage forbearance provisions provided in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that President Trump signed into law on March 27, 2020. Read today’s Press Release.

Fannie Mae updated its Lender Letter LL-2020-02 in response to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In addition to a reminder to comply with the law, the update addresses: attempting to establish quality right party contact; forbearance plan terms; credit bureau reporting; and suspension of foreclosure activities and certain bankruptcy requirements.

Plaza Home Mortgage sent out a “Mortgage Payment Forbearance Message” to brokers. “If you have clients with Plaza Home Mortgage who have been financially impacted by the COVID-19 emergency, they may be eligible for payment or other forbearance. The fastest way to determine their eligibility for this assistance is to contact our subservicers directly. They can find the name of their subservicer on their monthly mortgage statement. Plaza Home Mortgage loans are serviced by: Dovenmuehle Mortgage (DMI, 877.801.2445) and PHH Mortgage (877.744.2514). If your borrower doesn’t know which subservicer to call, please have them contact Plaza Home Mortgage (888.807.2620) and we’ll track down that information for them.”

First Community Mortgage issued Bulletin 2020-16 to its Non-Delegated Correspondents regarding loans in forbearance or that have requested forbearance and Bulletin 2020-14 to its Delegated Correspondents regarding loans in forbearance or that have requested forbearance.

The Cares Act has a provision in the bill that provides forbearance allowing any homeowner to skip six months of mortgage payments and six more if needed. It is far longer than any forbearance plan ever used. And the homeowner does not have to even prove that they lost their job or cannot make their mortgage payment. (Forget job loss or other unforeseen medical or other circumstances, called “proof of hardship”.)

LOs are telling their clients that when the homeowner does not make their payment, the payments still have to be made to the mortgage investor who bought that loan. Principal and interest payments must be paid to the mortgage backed security (MBS) owner of that mortgage and property taxes still need to be paid to counties, and property insurance payments still must be paid. Forbearance simply shifts the burden of making these payments from the homeowner to the mortgage lender.

The impact is enormous. For example, the Mortgage Bankers Association has determined that if just 25% of all borrowers opt in for this program it will cost between $70 - $100 billion in the first 6 months, double that if it extends another 6 months. Dave Stevens with Mountain Lake Consulting writes, “All of these forbearance advances are backed by Freddie Mac or Fannie Mae. So if the borrower gets his/her job back, they will pay back the advances. If the borrower ultimately defaults after the 6 months, Freddie or Fannie will reimburse the mortgage servicer for all of these advances. There is no long-term risk to the mortgage lender or servicer. This is a short-term burden that risks taking down the entire mortgage banking industry. The mortgage lenders, more specifically the mortgage servicing companies, do not have this kind of money to make these advances… Freddie Mac and Fannie Mae actually own this servicing. The banks and other servicers simply manage the servicing on behalf of them. If the loans go bad these GSE’s reimburse them - that is their guaranty, it is the reason they exist. This is all about the time gap between the onset of forbearance until the borrower begins to re-perform. A liquidity facility would solve this. They can set this up almost immediately.”

Capital Markets

If you aren’t already, get used to hearing the words “unprecedented” and “worst on record” as the effects of Covid-19 begin to emerge in economic statistical releases. Retail sales dropped 8.7 percent in March (worst on record) as declines in furniture (-27%), autos (-26%), clothing (-50%), and restaurants (-27%) more than outweighed a 26 percent spike in grocery store sales. It is important to note that retail do not include other personal expenditures such as hotels, airlines, or movies. First quarter GPD will be released at the end of April and even though Covid-19 only began to significantly negatively impact the economy from the middle of March, analysts expect a slight negative reading. Needless to say the expected decline for the second quarter is expected to be the “worst on record.”

While it is likely that unemployment has peaked is those businesses directly affected by the shutdown, it is likely picking up in other areas that are seeing a slowdown in demand.  Those who have been able to file for unemployment are receiving an additional $600 per week due to the CARES Act; however the Paycheck Protection Program has been completely drained of its $349 billion.  As talk about re-opening the economy picks up and data on new cases and deaths begins to show signs of promise, the economy won’t fully get back to normal until consumers once again feel secure both financially and healthily to go out and spend again.

It was a mixed bag for Treasuries to close out last week. Despite a weak Q1 GDP print out of China and a continued slide in oil prices, the Fed announced near Friday’s close that it will be cutting the amount of its Treasury purchases this week to roughly $75 billion from around $150 billion last week. That announcement, along with diminished liquidity and economic reopening hope, helped Treasuries to pull back on the day. The 10-year yield closed the day +4 bps to 0.65 percent, though it was down -8 bps for the week. As far as economic releases went, the Conference Board's Leading Economic Index for March posted the worst monthly decline ever seen in the 60-year history of the index. Yikes!

This week’s economic calendar gets off to a quiet start with only the Chicago Fed National Activity Index for March (-4.19) out today. Today’s MBS FedTrade operations kick off with up to a maximum of several billion of current coupon Agency MBS. The calendar rolls on tomorrow with March Existing Home Sales before Wednesday sees April FHFA Housing Price Index. March New Home Sales are due out Thursday before the week closes with March Durable Orders and the final April Michigan Consumer Sentiment Survey. We begin today with Agency MBS prices unchanged and the 10-year yielding .62 percent.

Employment

“While it’s a challenging environment for everyone, it’s important to stay focused on your personal career trajectory as a mortgage loan officer. Consider the companies who will remain strong and well positioned for success, like Citizens. Before the crisis hit and stay-at-home orders were announced, we were already hiring many additional Operations full time colleagues, who are now all successfully working remotely, so as a loan officer, you can be assured that you’re joining a winning team. While the industry is determining what the ‘new normal’ will look like, our business continues to move forward. If you’re looking to make a change, considering joining the Citizens team where we’re #MadeReadyTogether and still winning in the marketplace. Apply now to Citizens Bank! For questions, please email HomeMortgageRecruiting@citizensbank.com.”

Because of their hyper focus on speed, efficiency and the customer experience, Envoy Mortgage’s newly advanced digital technology platform is positioned to overcome the current demands imposed by the COVID-19 pandemic. With its completely digital POS system, EnGen, paired with Day 1 Certainty and an eClosing hybrid option, Envoy is able to close transactions efficiently, putting borrowers into their new homes up to 12 days faster than the industry average. EnGen enables borrowers to self-serve throughout the process, supporting social distancing measures and eliminating the need for personal contact. Envoy’s warehouse line capacity remains strong and expansions have even been made without challenge. This strategic, tech-forward and financial position enables Envoy to continue supporting the needs of their new and existing loan originators and borrowers, even during uncertain times. If you are interested in joining Envoy Mortgage, register for a confidential live tour, also available on-demand.

Henry Ford said, “When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.” We’re living in insanely windy times but thanks to the amazing and incredibly dedicated people we have at Castle & Cooke Mortgage, we’re not only standing strong for our employees and customers, we’re taking off. Our servicing team is helping our clients find solutions to individual challenges while our underwriters and processors are keeping dreams of homeownership moving forward each day. We couldn’t be prouder of how our people have stepped up to keep providing phenomenal experiences, not just for customers but fellow team members too. Do you want to learn more about becoming part of a company that inspires clients and colleagues alike whether winds are wild or still? Contact Christi Fullerton today.