“Rob, are you hearing about investors taking more of a hard line on every issue right now? In recent years they would give an extra day, or waive something, but they are not doing this right now.” Yes, I am hearing that, and that “hard line” approach impacts the primary markets as well, and LOs should set borrower expectations. The “big guys” are testing the security market right now. (See the capital markets section for an interesting review of Wells’ deal.) Remember that in recent years plenty of securitizers have lost billions in fees and settlements due to loans in securities not being what they represented and want to avoid that at all costs. You can’t blame them dotting the i’s and crossing the t’s. Hopefully minor issues, unlike Sears and Kmart. Trepp reports that their locations have more than $10.6 billion in retail debt which features Sears as a top-five tenant at the underlying property.
Lender Products ans Services
Lenders One is pleased to welcome Jason Wright to the new role of Director of eMortgage Services to drive implementation and support of the L1 eClosing by DocMagic solution. Previously, Wright worked at PeirsonPatterson, LLP, guiding deployment of their eClosing platform since its release in 2008. He’s facilitated thousands of eClosings, working extensively with investors, warehouse banks, attorneys, settlement agents and real estate professionals in educating and onboarding them to eSign technology. Wright will be available to meet with Lenders One members and prospective members next week on the topic of eClosing at MBA Annual. Reach out to Jason directly if you’re interested in setting up a meeting.
Responsible consumers unable to obtain traditional mortgages can still get what they want using the innovative Real Estate Acquisition-Lease (“REAL”) Program, offered by Seashine Real Property Services. REAL provides solutions for consumers facing qualification challenges such as income documentation, divorce, sourcing of funds, isolated credit blemishes, citizenship, etc. REAL can be used on almost any property letting consumers choose their home, lock in current-market prices and keep 100% of any net-appreciation (no equity-sharing). With a simple qualification process, REAL can accommodate customers with as low as a 580-credit score and eliminates the difficulties of income and asset documentation and verification. Seashine is currently looking for real estate and mortgage company partners in the Southern CA and UT areas that are interested in looking for ways to close more deals while building lasting customer relationships. For more information, call 888-401-0285, email contact@realhomeownership.com or visit www.realhomeownership.com.
With 2018 the year of transition, lenders across the U.S. are struggling to find ways to produce more revenue and are searching for innovative products to support or recruit for their origination platforms. CFSI Loan Management is a full-service construction risk mitigation company, helping lenders manage the construction process from beginning to end. “We help our lending partners to ensure that the contractor and project feasibility phase is set prior to loan approval and after loan funding we provide full service fund control (including lien releases) and a national inspection platform that allows our clients to ensure that the project is progressing on time and the percent complete is accurate for funding each draw. Lenders manage credit risk, CFSI manages construction risk. Let CFSI Loan Management help you with your renovation or ground up construction loan programs.” Please contact President Brian Mingham for information.
Capital Markets
This week Wells Fargo began the marketing for its first private label securitization that pools $441 million of residential mortgages since the financial crisis. The pool is comprised of mostly 30-year fixed-rate mortgages to borrowers with strong credit profiles and high credit scores, While other big mortgage lenders have already gotten back into the business of securitizing home loans without government guarantees, including JP Morgan and Redwood Trust, this marks a seminal moment for Wells Fargo. The new Wells deal will include mostly Triple A rated notes of 2.78 to 9.25 years and a mezzanine tranche of Aa1/AAA rated 4.93-year notes, with weighted average credit scores of 779. Wells is expected to price the deal next week. Most recently, Wells paid $2.09 billion to regulators in August to settle claims that it mis-sold mortgage bonds to investors.
Moody's Investors Service looked at the 24 classes of residential mortgage-backed securities (RMBS) issued by Wells Fargo Mortgage Backed Securities 2018-1 Trust ("WFMBS 2018-1"). The ratings range from (P)Aaa (sf) to (P)Ba1 (sf). The mortgage loans are originated by Wells “generally in accordance with the non-conforming underwriting guidelines. All of the loans are designated as qualified mortgages (QM) under the QM safe harbor rules.” Wells will service all the loans and will also be the master servicer for this transaction.
Moody’s’ thought the following factors were the strongest features of this transaction. All loans came from Wells’ retail division. All the loans are QM, the borrowers have high FICO scores, significant liquid cash reserves and sizeable equity in their properties. The weighted average original FICO score of the underlying borrowers is 774 and the weighted-average combined loan-to-value ratio (CLTV) is 73.1%. 87.2% of the borrowers have more than 24 months’ liquid reserves. The pool is seasoned for approximately 17 months and has perfectly clean pay history.
The transaction structure “benefits from a senior subordination floor: WFMBS 2018-1 has a standard shifting interest structure, with a subordination floor to protect against losses that occur late in the life of the pool when relatively few loans remain (tail risk). When the total senior subordination is less than 1.25% of the original pool balance, the subordinate bonds do not receive any principal and all principal is then paid to the senior bonds. In addition, if the subordinate percentage drops below 5.00% of current pool balance, the senior distribution amount will include all principal collections and the subordinate principal distribution amount will be zero.”
“The loan-level Reps & Warranties meet or exceed the baseline set of credit-neutral R&Ws we have identified for US RMBS. R&W breaches are evaluated by an independent third party using a set of objective criteria. Like JPMMT transactions, the transaction contains a ‘prescriptive’ R&W framework. The originator makes comprehensive loan-level R&Ws and an independent reviewer will perform detailed reviews to determine whether any R&Ws were breached when loans become 120 days delinquent or the loan is modified due to mortgagor hardship or the property is liquidated at a loss above a certain threshold. These reviews are prescriptive in that the transaction documents set forth detailed tests for each R&W that the independent reviewer will perform.
“WFHL is one of the largest residential mortgage originators in the U.S. WFHL’s guidelines are well written and unambiguous. In addition, WFHL leverages technology and has solid processes and procedures in place to ensure the quality of loan production. Wells Fargo has the necessary processes, staff, technology and overall infrastructure in place to effectively service the transaction.”
Moody’s also noted risks led by credit challenges. “Due diligence results show credit underwriting exceptions. The due diligence results showed a number of loans with a final B grade where the exception remains. Many of the grade B loans were underwritten using the underwriters' discretion. Areas of discretion included missing verbal verification of employment, verification of closing funds and assets and explanation for multiple credit exceptions. The due diligence firm noted that some of these exceptions are minor and/or provided an explanation of compensating factors…the responses provided by the issuer were adequate and outweighed the limited compensating factors in some cases.
“Borrowers with multiple finance properties: Borrowers with two or more mortgages represent 30.8% (by loan balance) of the pool. Borrowers with more than one mortgaged property could be more likely to default than borrowers with one property especially in a distressed housing market. However, high income borrowers with stable employment may support debt payments on vacation properties. Borrowers with two to three mortgages represented 28.8% (by loan balance) of the pool. Borrowers with more than three mortgages represented 2.0% (by loan balance) of the pool.”
Large loans are an issue. “The pool contains a number of loans with high principal balances, which exposes the transaction to the risk of losses at the tail of the transaction, when few loans remain. At that time, a default of a large loan would significantly reduce enhancement and result in losses to the bonds.”
In terms of newer companies, Angel Oak just set its fourth straight record for quarterly production and continue to churn out larger and larger securitizations. Here are AO’s third quarter numbers for non-QM.
Rates continued their recent drastic volatility yesterday, the U.S. 10-year yield dropping to 3.13% in the wake of President Trump criticizing the Federal Reserve's tightening policy, saying the Fed is "out of control." That statement is ludicrous. Headlines surrounding economic releases revolved around both headline and core CPI registering below estimates, though it should ease concerns about rising inflation. President Trump is certainly frustrated both readings are above the Fed's 2% inflation target, making a rate hike in December likely a formality. The CPI readings showed labor is tight, but prices are calm as trade tariffs are adding price pressure to specific products that don’t necessarily show up in the headline reading.
Today’s calendar kicked off with September import / export prices (+.5% and flat, respectively). Next up will be the University of Michigan Sentiment Index, out at 10:00am, expected to rise. There are also three scheduled Fed speakers starting with Chicago’s Evans, continuing with Atlanta’s Bostic, and closing with Governor Quarles. We have already had Q2 bank earnings from JP Morgan, Citigroup, Wells Fargo and PNC – solid! Friday begins with the 10-year yielding 3.16% and agency MBS prices roughly unchanged versus last night’s close.
Jobs and Promotions
A lot of expansion is going on over at Thrive Mortgage with the addition of Randell Gillespie as National Sales Director. The legendary past of this company has perfectly prepared it for the growth they are experiencing. When asked about joining Thrive, Randell said, “They got my attention with their complete Construction Lending platform, ‘Lock & Shop’ program, competitive pricing, and quick processing. Once I visited corporate and witnessed the leading technology, resources, and passion; it was clear this platform was unmatched when considering the things I wanted as a former top-producing loan officer.” Randell’s extensive background ensures that Thrive will continue with their streak of success and growth in a compressed marketplace. The first lender in Texas to complete a 100% digital mortgage, Thrive is continually at the forefront of innovation seeking to enhance the client experience. Reach out to Thrive’s talent acquisition team today via Kim Rea (512-843-0225).
“Are you tired of managing a corporate P&L? Then maybe it’s time to start managing your own instead. Introducing Motto Franchising, LLC, the very first national franchised mortgage brokerage network in the U.S. When you join the Motto Mortgage network, you have the freedom and flexibility to run your own business while taking advantage of an out-of-the-box mortgage company solution. We even streamline the process of starting a new business by providing a strong wholesale lender mix, franchisee setup support, LOS training, licensing, marketing tools and more. It’s time to manage your future, on your terms. To learn more on how this innovative model is breaking the mold, contact our team at mottomortgage.com/franchises or 866.668.8649.”
Plaza Home Mortgage, Inc. is currently looking to grow its Sales Team. Plaza has a rare opportunity for an Account Executive role to handle the WA, ID & MT, with having access to existing clients and prospects, and is looking for a knowledgeable and motivated individual that can add to their book of business with Plaza. Join a growing team with a very competitive compensation plan, some of the best training in the industry, real-time marketing support and a regional operations center, along with a diverse product menu including Renovation Loans, soon to have Construction Loans with a team to support along with FHA, VA, FNMA, FHLMC, Jumbo and Non-QM! For more information on this opportunity, please contact Diane Saenz, (HRBP). Plaza is an EEOC employer and follows all laws relating to fair employment.
National MI continues to add Sales Advisor across the country. “We are excited to announce that Linda Boyle will be joining National MI and will work with Ernie Grue as an Account Representative in Maryland, DC and Northern VA. Linda brings extensive knowledge and strong relationships that will help National MI continue to grow in the region. Annie Chae will be taking on the role of Account Representative in Illinois. She has 25 years of industry experience, mostly as a loan originator, but also has background as a Wholesale Account Representative. She was previously with Pinnacle Mortgage Funding, PNC Mortgage and BMO Harris Bank. Joey Shoemaker will be joining us as an Account Representative in Illinois. Joey comes to National MI from Guaranteed Rate where he was the Director of Online Lending. In this role, he supervised a team of loan officers and originated on his own as well. Joey also has back office experience at Wells Fargo.”
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