GSE Forbearance Terms Extended; Earnings Projections - IMFnews

Share Register Advertise February 10, 2021 Borrowers with GSE Mortgages Allowed to Extend Forbearance bivey@imfpubs.com The Federal Housing Finance Agency announced a new policy on Tuesday, providing additional relief for certain borrowers in forbearance. Those with mortgages serviced by the government-sponsored enterprises will be able to request an additional three months of forbearance. Previously, relief plans tied to the coronavirus were limited to a maximum of 12 months, with the deadline quickly approaching for those who sought help in March and April 2020. The extra three months goes beyond the 12-month forbearance period required by the Coronavirus Aid, Relief and Economic Security Act for federally backed mortgages. FHA and VA have yet to offer a similar extension. As of Feb. 2, 913,000 mortgages serviced by the GSEs were in forbearance, representing a total unpaid principal balance of $190.0 billion, according to estimates by Black Knight. FHFA projects that the GSEs will ultimately incur total expenses of $1.5 billion to $2.0 billion due to forbearance and a moratorium on foreclosures. Profits Expected when GSEs Report 4Q Earnings This Week dhollier@imfpubs.com Freddie Mac plans to report its fourth quarter earnings this Thursday with Fannie Mae following a day later, leaving some time to make projections about just how much money the government-sponsored enterprises earned. Mortgage-backed security issuance by the GSEs offers one metric to feed into the crystal ball. Fannie closed out 2020 in record fashion, issuing $1.337 trillion of MBS for the year, an increase of 126.0%. Freddie didn’t do too bad either, with MBS issuance soaring 139.4% to $1.054 trillion. Based on MBS issuance in the first nine months of the year, Fannie could generate comprehensive income of about $4.60 billion for the fourth quarter, boosting net income for the full year to an estimated net income of $11.90 billion. Using similar projections for Freddie, the GSE could see $2.82 billion of income for the fourth quarter and $7.97 billion for the year. There are, of course, hazards to these kinds of back-of-the-envelope estimates. For more details, see the latest issue of Inside The GSEs. Ocwen Plans to Stem Losses with Investment from Oaktree dhollier@imfpubs.com Ocwen Financial lost $7.2 million in the fourth quarter of 2020, slightly less than the $9.4 million loss in the previous quarter, according to preliminary results released Tuesday. Most of those losses were due to adjustments to mortgage servicing right valuations, which cut servicing revenues. Ocwen also announced that funds managed by Oaktree Capital Management agreed to purchase $250 million of the nonbank's debt. About $100 million of the proceeds of this investment will go to pay down existing debt, with the remainder aimed at growth in servicing and diversifying the company’s origination channels. According to Ocwen, that may include additional acquisitions. In December, Ocwen and Oaktree entered into a strategic partnership to acquire MSRs. Ocwen added $30 billion of servicing and subservicing to its portfolio during the fourth quarter, ending the year handling an unpaid principal balance of $188 billion. Ocwen originated $10.0 billion of mortgages in the fourth quarter, up 49.3% from the previous quarter, with nearly all of the volume through correspondent and flow. However, margins continued to fall more sharply than expected. The company forecast an average margin of 77 basis points in the fourth quarter, but actual margins came in at 56 bps. Vaccine Rollout Could Help Boost Purchase Mortgage Market mvolkova@imfpubs.com Distribution of the vaccine for the coronavirus will be key to reinvigorating the economy and boosting the purchase mortgage market, according to Mike Fratantoni, chief economist at the Mortgage Bankers Association. “There will be a flood of spending by the time we get to the middle of 2021 that will support hiring in leisure and hospitality,” Fratantoni said. “And the unemployment rate will go to 4.8% and then continue falling from there.” The MBA economist recently spoke at a webinar hosted by SitusAMC. He said more housing inventory is expected to hit the market in the coming months and there’s expected to be strong demand for purchase mortgages for millennials. “Homeowners will be much more amenable to listing their houses this spring,” Fratantoni said. For more details, see the most recent issue of Inside Mortgage Trends. Short Takes: Applications Decline / GSE Foreclosure Moratorium Extended / Jumbo MBS from Goldman / A Seller’s Market bivey@imfpubs.com Mortgage applications declined by 4.1% on a weekly basis as of Feb. 5, according to the Mortgage Bankers Association. Requests were down for both refinances and purchase mortgages as interest rates ticked slightly higher... The Federal Housing Finance Agency extended the foreclosure moratorium on mortgages serviced for the government-sponsored enterprises by one month to March 31. The foreclosure moratorium differs from the FHFA's separate extension to forbearance terms... Goldman Sachs is preparing to issue a $427.61 million jumbo mortgage-backed security. The deal follows a similar $415.72 million MBS Goldman issued in January... The share of homeowners who think it’s a good time to sell their home increased from 50% in December to 57% in January, according to a survey by Fannie Mae. Those seeing it as a good time to sell cited favorable interest rates for mortgages and high home prices. Subservicers Handle More Than a Quarter of U.S. Home Mortgages With $3.30 trillion of contracts on their books at the end of 3Q20 — up 18.7% from a year prior — subservicing vendors handle 28.7% of all outstanding mortgages in the U.S. If you’re thinking of joining the growing group that outsources handling to a company that focuses on servicing, consult IMF’s Guide to Mortgage Subservicing. You’ll learn what types of companies would benefit from using a subservicer, how to select one and set up the relationship, and steps an MSR owner must take to maintain a successful and compliant subservicing situation. To ensure delivery to your inbox, add news@imfpubs.com to your address book or safe sender list. 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