A Gain for FHA/VA Correspondents; KKR Cuts Stake in Mr. Cooper - IMFnews

Share Register Advertise March 29, 2021 FHA/VA Correspondent Lending Posts Nice Gain in 4Q20 jbancroft@imfpubs.com Correspondent production — long the mainstay of the government-insured market — regained some traction in the fourth quarter of 2020, but still has a long way to go. Correspondent production of FHA/VA loans increased 7.6% from the third to the fourth quarter, according to an Inside FHA/VA Lending analysis. That's compared with a 2.7% quarterly increase in total government-insured lending by a group of 40 lenders that provided detailed survey data to Inside Mortgage Finance. As a result, the correspondent share of new FHA/VA lending edged up to 32.5% in the fourth quarter — still a drop from 41.8% for all of 2019 and 57.8% back in 2015. The volume of government business in the correspondent channel was up just 6.0% last year, while the group’s total FHA/VA lending rose 38.4%. For more details and exclusive tables on the topic, see the new edition of Inside FHA/VA Lending, now available online. PHH Hires Former Mr. Cooper SVP to Lead Correspondent bivey@imfpubs.com Ocwen Financial's PHH Mortgage subsidiary has hired Andy Peach as senior vice president in charge of correspondent lending. Peach joins the nation's 17th largest servicer from Mr. Cooper where he served as senior vice president of correspondent sales. He will report directly to George Henley, Ocwen's chief growth officer. Among originators, Mr. Cooper ranks 14th, according to figures compiled by Inside Mortgage Finance. Ocwen doesn't even crack the top 50. When it comes to channels, Mr. Cooper’s correspondent business dwarfs Ocwen’s. In 2020, Ocwen originated $5.7 billion of mortgages through correspondents, Mr. Cooper $27.5 billion. Ocwen stopped originating mortgages through the correspondent channel in 2017 “due to higher liquidity and capital requirements versus the available liquidity at the time.” The nonbank reopened the spigot in the second quarter of 2019. It has a minuscule presence in retail. In Stock Buyback Deal, KKR Reduces its Stake Mr. Cooper pmuolo@imfpubs.com Mr. Cooper, whose share price has been on a tear the past year, revealed Monday in a new regulatory filing that it purchased 3.7 million units of its common from affiliates of Kohlberg Kravis Roberts & Co. for $119.3 million or $32.25 a share. In trading Monday, Mr. Cooper's shares were fetching $34.77 in the open market compared to a 52-week low of just $4.31 and a high of $37.91. The nation’s third largest servicer also disclosed in a new 8-K filing its board hiked a previously announced stock repurchase initiative to $210 million from $100 million. Research firm Keefe, Bruyette & Woods noted that prior to the purchase, KKR owned roughly 16.5% of the nonbank’s shares, making it the largest stakeholder. “After this transaction, we estimate that KKR's ownership stake will be around 13%,” KBW noted. Thanks to rising rates, mortgage stocks have been under pressure of late but most of the declines have affected lenders that recently went public as opposed to “older” firms such as Mr. Cooper and PennyMac Financial Services. Some Lenders Fall In Line, Embracing New QM Rule bivey@imfpubs.com A handful of prominent non-agency lenders have updated their underwriting standards for jumbos in line with the federal qualified-mortgage rule that went live this month. Sprout Mortgage, Quicken Loans and United Wholesale Mortgage are offering jumbos underwritten using guidelines established by the government-sponsored enterprises. Previously, non-agency jumbos had to meet standards contained in Appendix Q of the Consumer Financial Protection Bureau’s ability-to-repay rule to receive QM status. “This is a big step forward for mortgage professionals to provide home buyers with fast, streamlined access to increasingly popular jumbo loans,” said Shea Pallante, Sprout’s president and chief production officer. The privately held company is allowing loan originators to use Fannie Mae’s Desktop Underwriter to help determine whether the jumbos can be originated. For full details, see the new edition of Inside Nonconforming Markets, now available online. Short Takes: A Different View of GSE Common / Doing Well / A Prediction on the Collins Case / Forbearance Below 5% / Impac Feeds Non-QM MBS pmuolo@imfpubs.com, bivey@imfpubs.com Earlier this month, Keefe, Bruyette & Woods downgraded the common of government-controlled mortgage giants Fannie Mae and Freddie Mac to “underperform,” reducing its target price on the former to $1.00 (from $2.00) while trimming the latter to $1.00 from $2.50. But over at Odeon Capital, veteran stock analyst Richard Bove is a bit more optimistic. In a recent research note, he raised his ratings on both to “hold” from “sell’… Bove’s conclusion: “The companies are doing well. The refinance boom is expected to weaken but not be eliminated.” He also points out that regulator Mark Calabria failed to make good on his earlier promise to take the GSEs out of conservatorship. Then again, if Trump had won the election that plan likely would have moved forward… Odeon’s new price target on Fannie/Freddie common: $2.00, up from $0.50. The firm also predicts the Collins case before the Supreme Court will result in a victory for the plaintiffs, which means the position of the FHFA director will be declared unconstitutional. “This is likely to be a Pyrrhic Victory in that this finding is not expected to be coupled with a demand that the net worth sweep was illegal and should be eliminated,” Bove argues… On Friday, Black Knight reported that the mortgage forbearance rate fell to 4.9% of outstanding residential loans as of March 23. The decline for the week: 19,000 units or 135,000 over the past month… Credit Suisse is prepping a $282.7 million MBS stocked with non-qualified mortgages that have seasoned for an average of 19 months. The top contributor to the MBS is Impac Mortgage with a 36% share. Subservicing Sector Is Still Growing The nation’s subservicing vendors ended the fourth quarter with $3.56 trillion worth of contracts on their books, a 16.0% increase from a year prior. If you’re thinking of joining the growing group that outsources handling to a company that focuses on servicing, consult the 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. 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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