Nature always bats last. Just ask singer Paul Simon who is moving his New York cottage away from the eroding ocean. Thinking about things like "oceans" and "cottages" reminds me...The National Association of Realtors reports sales of vacation homes dropped 22% last year to the lowest level in 3 years: higher prices and a shift in consumer behavior toward renting vs. buying led to the decline.
CFPB news
New Residential Investment Corp. investors are watching its share price sink due to Ocwen Concerns. NRZ shares fell as much as 13.4% intraday and ended the day down 7.7% on concerns related to Ocwen. Remember that last week the N.C. banking commissioner, along with 20 state regulators, filed a cease-and-desist order against Ocwen. The CFPB also filed a lawsuit. While these actions will likely prevent Ocwen from growing and keep operating expenses high, most do not think there is a near term risk of Ocwen filing for bankruptcy.
On April 19, House Financial Services Committee Chairman Jeb Hensarling (R-TX) announced that the Committee will hold a hearing to discuss the Financial CHOICE Act Wednesday, April 26. Touted as a potential replacement for the Dodd-Frank Act, the proposed new law ("Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs") was unveiled last June and eventually approved by the Committee last September. If enacted, among many other things, it would repeal the Volcker Rule, strip the CFPB of its examination powers and "UDAAP" enforcement authority, and discontinue small business loan data collection. And, finally, the Act would bring the CFPB, FDIC, OCC, FHFA, NCUA, and the Fed's supervisory functions under the congressional appropriations process, thereby mandating a cost-benefit analysis and, in some cases, congressional approval prior to the release of any new regulations.
Although not exactly mortgage-related, the CFPB's unlucky streak continues: A Washington federal appeals court on Friday rejected the agency's attempt to investigate an embattled accreditor of for-profit colleges, upholding a trial judge's ruling that faulted the Obama-era agency for straying outside its jurisdiction. In a unanimous ruling, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit said the CFPB's subpoena (targeting the Accrediting Council of Independent Colleges and Schools) was overly vague. The appeals court did not take a position on whether a more narrowly tailored subpoena would be enforced.
The CFPB had asked the accrediting council to identify the schools it had accredited since January 2010 and name a representative to testify on the accreditations of seven specific colleges. The CFPB said it wanted "to determine whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges." Writing for the D.C. Circuit panel, Judge David Sentelle said the CFPB's subpoena "never explains what the broad and non-specific term 'unlawful acts and practices' means in this investigation. Tellingly, in attempting to explain the scope of its investigation, the bureau merely repeats the broad language used in the notification of purpose."
Capital Markets
Despite the lack of the purchase market taking off, BofA Merrill Lynch Global Research announced it has revised its 2017 net supply higher by $118 billion. The group has revise its 2017 MBS net supply estimate to $331 billion net from $213 billion based on strong housing and low bank loan retention.
The securitization mechanism is still working, the latest of which involves Kroll Bond Rating Agency (KBRA) assigning preliminary ratings to six classes of mortgage pass-through certificates from LSRMF Acquisitions I, LLC's first non-prime securitization of 2017, COLT Mortgage Loan Trust 2017-1 (COLT 2017-1).
Caliber Home Loans, Inc. is the originator and servicer for 78.3% of the portfolio. COLT 2017-1 is the sixth non-prime securitization from LSRMF Acquisitions I, LLC since its first post-crisis non-prime securitization in 2015. "COLT 2017-1 is also the largest securitization of non-prime assets to-date; with over $400 million in collateral, it is nearly double the size of the next largest issuance, COLT 2016-3."
"The COLT 2017-1 mortgage pool comprises 853 first-lien mortgage loans with an aggregate scheduled principal balance of $402.6 million...KBRA considers the underlying mortgage loans to have certain non-prime characteristics including borrowers with prior credit events (23.4%), loans using alternative income documentation sources such as bank statements (21.7%), investor/business-purpose loans (1.1%), and/or loans to foreign nationals (0.4%). A large portion of the pool is designated as either Non-QM (69.3%) or QM-Rebuttable Presumption (26.1%).
"The underlying collateral consists of 74.1% hybrid adjustable-rate mortgages (ARMs), with initial fixed-rate payment periods of one (9.9%), three (7.8%), five (54.7%), seven (1.5%) or ten (0.2%) years, of which 2.8% of these loans possess a 10-year interest-only (IO) period. The remainder of the collateral pool consists of 25.9% fully-amortizing 30-year fixed rate mortgages (FRMs). Loans in the pool exhibit substantial borrower equity in each mortgaged property, as evidenced by the WA original LTV of 76.1% and WA original CLTV of 76.1%, which are comparable to CLTVs in KBRA-rated prime jumbo deals in 2016. The weighted average non-zero original credit score is 713."
Interest rates are all relative, right? Experienced LOs will tell you that they started when home loans were in the teens. And that business was fine. Bloomberg's Matt Scully reports from Colorado is taking two internet lenders to court over high interest rates, the latest legal battle in a growing national debate over online banking. "Consumer loans arranged by Marlette Funding LLC, an online lender registered in Delaware, and Chicago-based Avant Inc. exceed maximum finance charges under state law, Colorado said in two lawsuits scheduled for hearings in May. The issue boils down to whether the companies can arrange loans online between Colorado residents and non-state banks while charging interest rates as high as 36 percent, exceeding the state's 12 percent cap. The cases are part of a larger debate over regulation of so-called marketplace lenders...
Looking at the good ol' generic bond market, on Friday fixed-income securities made some small gains on some securities and was unchanged on others - depending on security, coupon, maturity, etc. MBS volumes, interestingly, were 50% of recent averages, per Tradeweb. (Tradeweb doesn't see every MBS traded, but bases its numbers on its activity.) Friday MBS prices were about unchanged from Thursday night, and the 10-year's closing yield was 2.24%.
We start the week with the first-round results of Sunday's presidential elections in France which have driven U.S. rates higher. With the future of Europe in French hands, the continent's leaders have cast aside their tradition of staying out of each other's elections and weighed in by basically saying they'll root for the candidate who wants to make the European Union stronger, not the one who wants to blow it up. They mostly endorsed independent centrist Emmanuel Macron, and are not fans of the far-right rival, Marine Le Pen, as France heads toward the actual election. The European Central Bank may accelerate its timetable for easing bond-buying efforts as concerns over French election results appear to be easing. Several market participants say an announcement might be made as soon as June.
The French election outcome was largely consistent with expectations as Macron and Le Pen made it to the second round. Macron making it to the run-off removes a downside risk from the table, and that is moving stocks and bonds this morning - especially stocks. If Macron wins on May 7th, continental leaders are cautiously optimistic that he can steer France back into an historically central role in European affairs. If Le Pen wins on 5/7, modern Europe - defined by integration and growing cooperation across national boundaries - could fall apart after already being jolted by Britain's planned E.U. exit. Knowing what happens overseas impacts our bond markets, this week we'll hear rate decision news from the Riksbank on Wednesday, and the European Central and Bank of Japan on Thursday.
This morning we've had the only U.S. news for the day with the Chicago Fed NAI for March (dropping to +.08 from +.27, whatever that means). Tomorrow, if you care about news from two months ago, we'll hear the February Case-Shiller 20-city Home Price Index and February FHFA Housing Price Index, along with March New Home Sales and April Consumer Confidence. Wednesday the only thing out is the non-market moving MBA Mortgage Index. Thursday are March Durable Goods, Initial Jobless Claims, March Advance International Trade in Goods, and March Pending Home Sales. Friday, we can look forward to Q1 GDP, Q1 Employment Cost Index, April Chicago Purchasing Managers Index, and April University of Michigan Sentiment figures - something for those grad school students to do. After the French election, we begin the week with U.S. rates higher versus late last week, and this morning the 10-year is hovering around 2.30% and agency MBS prices are worse about .250.
Job and Announcements
Angel Oak Mortgage Solutions, the leader in Non-Agency/Non-QM space, is pleased to announce the recent hiring of Sean M. Marr as Director of Correspondent Lending. Marr's role will be to build on Angel Oak's record growth and further expand their Correspondent channel. He has spent his entire 25-year career in mortgage banking including BancBoston Mortgage/HomeSide Lending and Principal Residential/Citimortgage. If you are a Correspondent looking for a way to diversify and expand your product offering in today's dynamic market place, now is the time to act. Please contact Sean Marr, or view its website for more information on how to partner with the nation's top Non-QM lender.
Nationstar Correspondent recently announced expanded credit offerings, including overlay removals. "Sellers can now take advantage of unlimited cash-out, no letter of explanation for cash-out transactions required, delayed financing for owner occupied properties, mortgage credit certificate allowances (MCCs), and FHA streamline eligibility for investment properties; just another example of our continued focus on enhancing the ease of doing business with us. Sellers also benefit from expedited delivery experiences with initial doc bulk uploads via SFTP, as well as the regional alignment of our sales and operations teams. Looking to partner with Nationstar Correspondent? Contact your region's AE by clicking on the 'Contact Us' tab of our website, or come say hi to our team at the National Secondary Market Conference & Expo in New York this month! We always value an opportunity to speak with you directly about how to better serve your business needs. Contact your region's Account Executive to set up a meeting."
For those companies utilizing a subservicer, Richey May & Co. has completed its oversight review over Dovenmuehle and will now be going on-site to Cenlar on May 11th and 12th to conduct an annual review. Based on requests from clients, Richey May has expanded its loan-level testing options in numerous servicing areas to assist clients in fulfilling their oversight responsibilities. Richey May & Co., an accounting and advisory firm heavily specialized in the mortgage industry, has developed an oversight review program that includes testing of subservicers' policies and procedures and internal controls on behalf of multiple clients at the same time, thereby sharing expenses and creating cost savings that are passed on to participating clients. If you are interested in learning more about Richey May's subservicer oversight review program, the expanded loan-level testing available, or how to participate in the Dovenmuehle or upcoming Cenlar reviews, please contact Kurt Blohm.
Optimal Blue announced today that the company has partnered with Total Expert Inc. to further increase productivity and drive revenue with robust contact and database management tools through integrating Optimal Blue via advanced API technology into Total Expert's enterprise sales and marketing platform. This integration provides enterprise lenders that utilize Total Expert's CRM and Co-Marketing platforms to increase efficiency and time savings by eliminating the need to navigate between multiple systems. In addition, users can further enhance marketing campaigns with dynamic, real-time product eligibility and pricing data down to the loan officer level. Loan officers will also have access to their specific pricing across the country and be able to run various unique scenarios. The seamless connection between Total Expert and Optimal Blue's new API also empowers lenders to deliver dynamic marketing content that is easily created, deployed, and tracked within Total Expert's central system of record. Click here for more information on Total Expert.
Today, SocialSurvey released its annual Top 25 U.S. Loan Officers for Customer Satisfaction. Congratulations to the winners. The list includes results from over 10,000 loan officers and nearly 50,000 verified customers. To qualify for the list, the loan officer must be in the top 1% in customer satisfaction, have a minimum average rating of 4.8 stars out of 5, and have received a minimum of 25 verified customer reviews in 2016. To say the least, making this list was nearly impossible.
Get Rob Chrisman Daily by Email
