More PSPA/GSE Cash Window Angst; A Warehouse CRT From TexasCap - IMFnews

Share Register Advertise March 12, 2021 Surprise: PSPA Limits on Investment Loans Go Into Effect in April dhollier@imfpubs.com Fannie Mae midweek released a lender letter intended to clarify new rules for the purchase of mortgages backed by second home or investment properties. The guidelines stem from amendments to the preferred stock purchase agreements between Treasury and Fannie Mae and Freddie Mac. Among the changes to the PSPA were several new restrictions on the GSEs’ acquisition of certain types of loans. (The alterations were requested by Treasury as a way to limit its exposure to what it perceived to be risky behavior.) For example, the updated PSPA specifically limits the amount of risk-layering allowed in a GSE’s acquisitions. No more than 3% of the single-family refinance loans purchased by Fannie or Freddie can have any two of the following criteria: loan-to-value ratios exceeding 90%, debt-to-income ratios over 45%, or a FICO score below 680. Likewise, only 6% of purchase loans can exceed these limits. But the rule change that has generated the most confusion is one that limits acquisitions of loans secured by investment properties or second homes. One bugaboo: the start date. For more details, see the new edition of Inside MBS & ABS, now available online. A New Wrinkle in the CRT Market: Warehouse Credit pmuolo@imfpubs.com   Texas Capital Bank, one of the largest warehouse financiers in the nation, this week closed on a credit-risk transfer deal tied to a reference pool of warehouse loans sized at $2.2 billion. In an interview with Inside MBS & ABS, TCB executives portrayed the CRT as a near-first that will provide capital relief while alleviating counterparty risk at the publicly traded bank. The notes issued to institutional investors carry a maturity of three years. The institutions were not identified by name but include insurance companies, hedge funds and private investors, the bank’s warehouse president, Jack Nunnery, noted. Nunnery and Executive Vice President Madison Simm said they expect the bank to enter into similar transactions going forward, adding the model likely will be emulated by other warehouse providers, including regional banks. For more details, see the new edition of Inside MBS & ABS, now available online. A Loss for Impac in 4Q, but Originations Jump. CEO Hopeful bivey@imfpubs.com  While many publicly traded nonbank lenders booked millions (if not billions) of dollars in profits during the fourth quarter of 2020, Impac Mortgage Holdings took home a $2.2 million net loss.  The previous quarter, the Irvine,CA-based lender generated $1.6 million of net income. Some of the earnings volatility in 4Q20 was due to losses on mortgage servicing rights. The company released results after the closing bell Thursday. Core earnings totaled $3.3 million. Impac paused production in April 2020 due to market volatility sparked by the pandemic and resumed originating GSE and federally-insured mortgages in June. The lender originated $810 million of mortgages in the fourth quarter, nearly double the firm’s production from the previous quarter.  However, profitability took a hit during the period as margins compressed due to higher interest rates plus increased competition among lenders. Impac re-launched jumbo and non-qualified mortgages late in the fourth quarter.   George Mangiaracina, Impac’s chairman and CEO, suggested non-agency lending will help boost its fortunes going forward. “With that amount of margin compression in the GSE product offset by what we believe will be a shift in production to non-QM and jumbo where the margins are healthier, we’re fairly confident that we’ll be able to continue to run the platform at a positive rate,” he said. A Stunner: Nonbank Share of Top-100 Nears 72% jbancroft@imfpubs.com Nonbank mortgage lenders drove the rapid expansion of the single-family mortgage market in 2020, according to a new Inside Mortgage Finance analysis of trends among the top 100 lenders. The top 100 lenders in the market – including production through third-party channels — generated a whopping $3.150 trillion in first-lien mortgages last year — up 59.3% from 2019. Of that total, nonbank lenders funded $2.146 trillion, or 68.1% of production for the top 100. The nonbank share of top-100 lending rose to 71.7% in the fourth quarter as IMBs increased production by a handsome 15.2% from the previous three-month period. Depository institutions among the top 100 lenders recorded a 4.4% decline in mortgage production from the third to the fourth quarter. For full details and exclusive production tables, see the new edition of Inside Mortgage Finance, now available online. Short Takes: Bankers and Brokers Keep Hiring / A Little Industry History / A Notable M&A Anniversary / Megabank Executive About to Depart? pmuolo@imfpubs.com, mvolkova@imfpubs.com Another mortgage-related record? Not quite. The latest job figures from Uncle Sam show that mortgage bankers employed 254,800 full-timers at Jan. 31 while brokerage firms had 117,100 for a combined total of 371,900. The last time the readings were this good? Back in August 2007… But wait. Why is the date so notable? Answer: It was around that time that subprime lenders were reeling, getting slapped with margin calls from their warehouse and MBS patrons on Wall Street. It’s no secret but the general underwriting mantra of the B&C industry amounted to, “If you have a pulse, you have a mortgage.” Then Bear Stearns and Lehman Brothers collapsed and the rest, as the saying goes, is history… Of course, today there is no subprime industry but instead a non-QM (qualified-mortgage) sector that is much smaller and where you have (more or less) a dedicated regulator (and real regulations) in the form of the Consumer Financial Protection Bureau… A few weeks ago marked the one-year anniversary of nonprime industry veteran Dan Perl selling his non-QM shop, Citadel Servicing Corp., Irvine, for something north of $250 million. We understand that Perl is looking at real estate investments and splitting his time between homes in California, Florida and Montana… It’s safe to say Citadel (and a few others) helped revive the non-agency sector, while many stayed on the sidelines… IN CASE YOU MISSED IT: Former Ohio Congresswoman Marcia Fudge was sworn in Wednesday afternoon as the 18th Secretary of the Department of Housing and Urban Development, the second African-American woman to hold the post. From her perch as HUD secretary, she will oversee the nation’s housing policies, with purview over FHA and Ginnie Mae. Earlier on Wednesday, the Senate confirmed Fudge by a 66 to 43 margin. During her nomination hearing before the Senate Banking Committee last month, Fudge expressed her intent to focus on fair lending issues and expand access to credit for first-time home buyers. MORTGAGE PEOPLE: At press time, we got wind that another top mortgage executive was about to depart from a megabank. Stay tuned. Renaissance Home Loans hired Jeff Mack as chief operating officer. He joins the Delray Beach, FL-based lender from due diligence provider Clayton Holdings. Average Retail Loan Size Lower Than Other Channels The average size of retail loans sold to the agencies in 4Q20 was $272,155, while loans from brokers and correspondents averaged higher ($329,097 and $288,799, respectively). Inside Mortgage Finance’s Agency Channel Analysis data report delves into the channel usage of more than 1,600 lenders, breaking down by channel the volume of originations they delivered to Fannie Mae, Freddie Mac and Ginnie Mae — and providing averages by channel on loan characteristics, including FICO score, DTI ratio, LTV ratio and loan size. To ensure delivery to your inbox, add news@imfpubs.com to your address book or safe sender list. 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