MSR Buyers Are Asking, ‘Where’s the Product?’
MSR Buyers Are Asking, ‘Where’s the Product?’
The monthly volume of Fannie Mae and Freddie Mac mortgage servicing rights (MSRs) brought to market dropped slightly in April, as independent mortgage banks generally had healthy balance sheets and didn’t need to sell, according to market commentary that will be shared today in a webinar hosted by MountainView Financial Solutions, a Situs company.
On the demand side for this product, a lot of capital is available among banks and non-banks, and over the past six months warehouse lenders have increased non-banks’ buying power with 5-10% higher advance rates on offered MSR financing lines. With the market dynamics of demand outweighing supply, recent deal execution on portfolios greater than $500 million in unpaid principal balance has been at or above consensus fair-value levels. MountainView estimates monthly bulk volume of Fannie and Freddie servicing will be between $6 billion and $10 billion in the near term with volumes decreasing in the fall.
In the Ginnie Mae segment of the MSR market, a few new buyers are entering the market, which on top of the existing group of buyers is pushing execution levels closer to consensus fair value. With the move up in rates, a large share of Ginnie portfolios from MountainView’s clients have become discount-rate servicing, which has reduced the amount of potential recapture income, or available gain-on-sale income related to refinancing loans, for buyers. However, what is bad for refinance opportunities is good for investors in interest-only (IO) or MSR cash flows.
Matt Maurer, a managing director at MountainView, also says strength of execution can be raised by offering Ginnie portfolios with lower default rates, lower prepayment rates, lower loan-to-value ratios, higher credit scores and higher servicing fees to a new group of buyers looking to acquire “cheap IO.” Higher-quality Ginnie servicing is trading at unlevered discounted yields between 10.5% and 11%, while lower-quality Ginnie servicing is either unsalable or trading at much wider yields. MountainView estimates monthly bulk volume of Ginnie servicing will be between $3 billion and $6 billion in the near term with volumes decreasing in the fall.
“MountainView is getting more calls than ever before from bank and non-bank MSR buyers asking, ‘When is the next deal coming out?’,” said Maurer.
These Are the 5 Worst Housing Markets for Millennials
Millennials are on the move, reinvigorating urban centers, as tech companies spread their wings beyond Silicon Valley to more affordable markets, bringing young workers with them.
But not all housing markets are welcoming millennials with open arms — that is, when it comes to incomes and affordability.
Low supply and high demand are pushing prices higher everywhere, but the situation varies slightly city to city. No surprise, San Jose, California, and Seattle are the toughest housing markets for millennials, but some other surprising cities are high on a list compiled by Realtor.com. The real estate listing company ranked markets based on inventory availability and affordability.
The five worst housing markets for millennials are:
1. San Jose, CA
2. Seattle, WA
3. Salt Lake City, UT
4. Minneapolis, MN
5. Omaha, NE
Read more: CNBC
Treasury Unveils ‘Fix’ for Restoring Fannie Mae, Freddie Mac
Treasury Secretary Steven Mnuchin told FOX Business he is dedicated to removing mortgage giants Fannie Mae and Freddie Mac from the government’s control.
“I am determined that we have a fix to the GSEs (government sponsored enterprises) and that we don’t leave them in conservatorship for the rest of the time,” he told Maria Bartiromo during an exclusive interview on “Mornings with Maria” on Monday. While Mnuchin declined to be specific on potential “fixes” he did say, “I think that having a government guarantee on a 30-year mortgage is important for liquidity in the markets.”
Mnuchin also commented on leadership, including the option of replacing the Federal Housing Finance Agency (FHFA) director. “That’s something we are going to look at and make sure we have someone in that job that supports the agenda” he added. The current FHFA director is Melvin Watt.
Although it’s “highly unlikely” that Congress addresses it this year, Mnuchin said it will be a “big focus” post-midterm elections.
Read more: FOX
Tight Supply Still the Bad Guy as Home Prices Pass 2006 Levels
Tight housing inventory continues to be an enemy to homebuyers as supply constraints keep putting upward pressure on home prices, which are now above where they were 12 years ago.
House values grew 7% year-over-year in March, and 1.4% on a monthly basis from February, according to CoreLogic’s Home Price Index.
“Home prices grew briskly in the first quarter of 2018,” said Frank Nothaft, chief economist for CoreLogic, in a press release. “High demand and limited supply have pushed home prices above where they were in early 2006. New construction still lags historically normal levels, keeping upward pressure on prices.”
About 37% of the nation’s 100 largest metropolitan areas based on housing stock were overvalued as of March, with 28% being undervalued. Of the top 50 markets, 50% were overvalued and only 14% were undervalued.
Read more: National Mortgage News
Politico Highlights Vacancies at Key Housing Agencies
A recent article from Politico examines the dearth of political appointees across several government agencies and the challenges in confirming nominations. The article delves into vacant leadership positions at the Department of Housing and Urban Development and Ginnie Mae:
“…At the highest levels of the federal food chain, Senate confirmations have been granted to fill less than half of open positions. Some nominees have been waiting in the wings for nearly a year…
“Sen. Tammy Duckworth (D-Ill.), unhappy with the Department of Housing and Urban Development decision to close two housing projects in her state, put a blanket hold on its nominees while she awaits a response to her questions about the move.
“The hold leaves HUD’s three biggest divisions leaderless. The Federal Housing Administration has been without a confirmed commissioner since 2014. Public housing and policy shops are being run by career staffers.
“And Ginnie Mae, which backs a third of the U.S. mortgage market, is without a president after Trump’s pick for the job, David Kittle, dropped out in November. He had waited more than nine months just to get through background and ethics checks. “I just pulled my name. I wasn’t going to wait any longer,” Kittle said.
“Even Democrats are frustrated. David Stevens, head of the Mortgage Bankers Association and a former Obama official, has been working to get Senate approval for Brian Montgomery, Trump’s pick to lead FHA. In a rare show of unity, affordable housing advocates and Wall Street trade groups have aligned behind Montgomery, who cleared the Senate Banking Committee on an 18-5 vote in November. …”
Read more: Politico
Why Did the Avengers Partner with a Mortgage Lender?
“Avengers: Infinity War” isn’t just a showcase for more than 70 of Marvel’s popular characters, it’s also a big stage for advertisers—with more brand partnerships and product placement than any Marvel Studios movie to date. One of the brands you’ll see on the big screen is Rocket Mortgage, a service from Quicken Loans that lets you get mortgage approval in minutes using an app on your phone.
Rocket Mortgage’s partnership with what’s already expected to become one of the highest grossest movies ever began with a TV commercial during the NCAA’s March Madness. It shows a young woman wearing headphones traipsing through middle of an “Avengers” battle scene. She’s filling out a mortgage application on her phone, oblivious to the fact that Dr. Strange and Iron Man are using superpowers to save her from exploding debris.
“Rocket Mortgage by Quicken loans makes the complex simple,” a voiceover says, “giving you superhero levels of confidence. Understand the details and get approved in as few as eight minutes, so nothing stands in your way.”
Read more: Marketplace
Will Tax Reform Drive Migration in Years to Come?
While many are already examining the near-term effects of the tax reform passed a few months ago, could it have larger implications for where people choose to live in the long run? In a recent Wall Street Journal op-ed, a pair of economists posits that changes instituted by the tax reform bill will ultimately drive millions of people out of blue states such as California and New York and into low-tax red states.
As economists Arthur B. Laffer and Stephen Moore, authors of the annual “Rich States, Poor States” report published by the American Legislative Exchange Council, explain, this migration from high-tax states to low-tax states is nothing new, but they argue that the tax reform bill—and specifically its cap on SALT deductions—is likely to accelerate this trend. According to Laffer and Moore, “The losers will be most of the Northeast, along with California. The winners are likely to be states like Arizona, Nevada, Tennessee, Texas, and Utah.”
Read more: DSNews