Strong Earnings from loanDepot; Time to Worry About Rates? - IMFnews

Share Register Advertise February 18, 2021 TPO Channels Post Gains at Expense of Retail jbancroft@imfpubs.com Correspondent and wholesale-broker operations posted impressive gains in the fourth quarter of 2020, but neither got back to pre-COVID levels, according to a new Inside Mortgage Finance analysis. Correspondent production was up 12.9% from the third to the fourth quarter, hitting an estimated $288 billion. For all of 2020, correspondent lending rose 33.4% from 2019 to $907 billion. While that was the highest total for the channel since 2006, total first-lien mortgage originations were up more than twice as fast, by 73.8% from 2019. The correspondent share of first-lien originations last year, 22.5%, was the lowest on record. Correspondent lending is most prominent in the agency market, and government-insured business in particular. And that’s where the biggest improvement came in the fourth quarter. For full details and exclusive rankings of all the channel market leaders, see the new edition of Inside Mortgage Finance. A Sequential Profit Drop for loanDepot but Shares Rally bivey@imfpubs.com After downsizing its initial public offering last week, loanDepot Thursday morning reported robust earnings of $547.17 million for the fourth quarter and a profit of $2.01 billion for the full year.  As IMFnews went to press, its shares were fetching $26.36 in early trading, up 7.79% on the day. On a sequential basis, earnings dropped 24.8%. The nonbank’s gain-on-sale margin slipped to 338 basis points in 4Q20 compared to 498 bps in 3Q20. According to Inside Mortgage Finance, the company ranks seventh among originators and 26th among servicers. In January, the California-based lender/servicer detailed plans to sell as many as 17.3 million shares at a price of up to $21 per unit, an offering that would have generated proceeds of $362.3 million. However, in the IPO completed last week, the firm sold 3.9 million shares at $14, raising just $53.90 million. At one point last week, its share price almost reached $40. JPM Preps Large Credit Risk Transfer with Non-QMs bivey@imfpubs.com A unit of JPMorgan Chase is preparing a credit risk transfer deal involving non-qualified mortgages, a transaction that looks to be the first of its kind involving non-agency product. The offering includes loans with an unpaid principal balance of $2.36 billion, according to Moody’s Investors Service. Principal payments to investors will be based on the performance of a reference pool of 2,471 jumbos originated by Chase’s wealth management division. The collateral consists of 30-year fixed loans. “This deal is unique in that the source of payments for the notes will be JPMorgan Chase Bank’s own funds, and not the collections on the loans or note proceeds held in a segregated trust account,” Moody’s said. While non-agency MBS issued by Chase and others typically receive AAA ratings, the risk transfer deal received a preliminary Aa3 grade from Moody’s. (The rating was capped at the rating for JPMorgan Chase Bank.) For more details, see the new edition of Inside MBS & ABS, available later today.   Unsettled Still: The Disparate-Impact Question mvolkova@imfpubs.com If the Biden administration doesn’t move to defend the 2020 disparate-impact rule, the National Association of Mutual Insurance Companies said it will revive its lawsuit challenging the 2013 version, according to the Ballard Spahr law firm. But first, some background. In 2015, NAMIC and the American Insurance Association successfully challenged the Department of Housing and Urban Development’s final rule on the use of disparate impact to prove allegations of unlawful discrimination with regards to homeowners’ insurance. However, the same year, the Supreme Court upheld the use of disparate impact under the Fair Housing Act in Texas Department of Housing and Community Affairs v. the Inclusive Communities Project. NAMIC then filed an amended complaint before the U.S. District Court for the District of Columbia to continue its challenge of the rule. That lawsuit was put on hold in anticipation of changes proposed by HUD in the 2020 final rule. For full details, see the new edition of Inside Mortgage Finance, now available online. Short Takes: The 10-Year, Time to Worry / The Challenge That Lies Ahead / Busy and Steady in SoCal / Applications / What’s Special About Ellington’s MBS pmuolo@imfpubs.com, bivey@imfpubs.com The big story this week – besides a surprising M&A deal and loanDepot’s earnings – is the continued march northward on the 10-year Treasury. As IMFnews went to press, the bond was offering a yield of 1.29%, the highest reading in a year. But are mortgage bankers worried? Not quite… Eddy Perez, president of Equity Prime Mortgage in Atlanta, reports yes, applications are slowing but he’s hardly worried “because we’ve been working on outsourcing and analyzing all our data for the eventual slowdown that will create a margin crunch.” In a nutshell, EPM is prepared. He noted the real challenge is mental. “The challenge will be cutting ops staff and salaries since the cost to manufacture has gone up,” he said… California loan broker Anne James of Reliance Mortgage says, “While 2021 has been busy, it’s been more even and a steadier flow than last year”… In case you missed it, the Mortgage Bankers Association found new applications decreased 5.1% for the week ending Feb. 12. The refi share dropped ever so slightly to 69.3% from 70.2%... SECONDARY MARKET WATCH: Ellington Financial is the first MBS issuer in the market with a deal primarily backed by non-QMs originated after March 2020. Loans in the planned $251.8 million MBS were originated by LendSure Mortgage. DATA POINT: Among the top ten wholesale funders in 2020 just one was a depository: Citizens Bank, ranked 10th. The complete tally appears in the new edition of Inside Mortgage Finance. You’re Invited: Participate in Inside Mortgage Finance’s Salary Survey Inside Mortgage Finance, the mortgage market’s leading source of detailed industry data, invites you to participate in our annual research effort, Salary Survey 2021. Please take just a few minutes to share — completely confidentially — some details about your job function, salary, benefits and career satisfaction. In return, you’ll receive a brief report on compensation levels in the industry after the survey closes. The survey will be open only for a few weeks, so click here to take it today … and share the link with your colleagues! - To ensure delivery to your inbox, add news@imfpubs.com to your address book or safe sender list. Home | Update Your Account | Mortgage Data | User Agreement | Unsubscribe © Copyright 2020 Inside Mortgage Finance Publications 7910 Woodmont Ave., Suite 1000, Bethesda, MD 20814 Tel: (301) 951-1240; Fax: (301) 656-1709

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