Nonbanks Best Banks in Mortgage Earnings; A Change for the GSE AMF? - IMFnews

Share Register Advertise March 22, 2021 Nonbank Mortgage Income Slips a Bit in 4Q20, but Tops Banks jbancroft@imfpubs.com Most publicly traded nonbanks reported declining earnings from mortgage banking operations in the fourth quarter – but aggregate income for the growing sector exceeded that of the much larger banking industry. A group of nine mortgage banking companies reported a combined $4.58 billion in net income for the fourth quarter, according to an exclusive Inside Mortgage Trends analysis of earnings reports. While that was down 9.1% from the third quarter, the mortgage banking income of nine nonbanks topped the total $3.64 billion generated by 20 commercial banks and thrifts for the same period. The sudden dominance of nonbanks in mortgage banking profits was due to Rocket Companies, parent of Quicken Loans and one of two new nonbanks included in the ranking. For more details and exclusive tables, see the new edition of Inside Mortgage Trends, now available online. Redwood’s First Venture Investments Focus on Rental Services bivey@imfpubs.com The first investments by RWT Horizons, Redwood Trust’s venture financing unit, are focused on rental services. The mortgage investing REIT on Monday also announced that Ryan McBride, the chief operating officer of its CoreVest single-family rental unit, is also now chief investment officer of RWT Horizons. RWT Horizons made investments in Rent Butter, a firm developing a tenant screening tool as well as Rent Room, which offers technology-based property management tools for small landlords. The amount of the investments was not disclosed. Christopher Abate, Redwood’s CEO, noted that CoreVest’s borrowers drew Redwood’s attention to the two rental services that received investments from RWT Horizons. He said future investments by the unit will focus on residential mortgages in addition to business-purpose lending. “New partnerships forged through RWT Horizons will enhance our technology roadmap and drive innovation that supports continued best-in-class customer service, revenue growth, and increased market share,” Abate said. Profits Increase at Only Three FHLBs dhollier@imfpubs.com While mortgage bankers were earning money hand-over-fist last year, the Federal Home Loan Bank system was seeing profits head south, at least a little bit. The 11 regional FHLBs closed out 2020 with combined annual profits of $2.79 billion, off 12.5% from the year prior. The biggest chunk of that decline was in interest income, which fell 5.1% on an annual basis to $4.44 billion. Noninterest income fell a more precipitous 8.1%. Several key depository players in mortgage lending – Bank of America, Chase and Wells Fargo, to name a few – are FHLB members and have the ability to tap the advance window. Overall, the FHLB profit picture was somewhat worse in the fourth quarter. Their combined net income fell to $657 million, down 20.4% from the third quarter and 26.3% from the same period in 2019. For more details and exclusive earnings tables, see the new edition of Inside The GSEs, now available online. MBS Trading Volume Remains Strong pmuolo@imfpubs.com Mortgage traders in February continued to churn the pot, with $342.3 billion worth of agency MBS changing hands on a daily basis, according to newly issued figures from the Securities Industry and Financial Markets Association. Although the average daily trading tally fell slightly from a busy January, February registered one of the best readings of the past 18 months. Even non-agency MBS had a strong month, with daily trades averaging $3.5 billion, a sequential monthly improvement of 20.6%. The big question: Where do rates go from here? At press time, the 10-year Treasury was offering a yield of 1.70% compared to a 52-week low of 0.50%. For more details, see the new edition of Inside MBS & ABS, now available online. Short Takes: The Future of the Adverse Market Fee / Movement Afoot? / Three Mortgage Stocks to Short / But Not Rocket / UWM Steps Up pmuolo@imfpubs.com Now that rates are rising and applications are slowing (at least a little bit), we’re starting to hear more grumbling from lenders regarding the 50 basis point adverse market fee imposed on lenders trying to refi loans through Fannie Mae and Freddie Mac… With the GSE loan forbearance ratio continuing to shrink, and with many states starting to open up economically as COVID-19 vaccinations increase, lenders liken the fee to a tax on housing. But is a change in the wind? More to come... We interviewed one speculator last week who said he’s on the verge of shorting at least three mortgage stocks, all of which have gone public over the past few months. Not on his short list: Rocket Companies, parent of number-one ranked lender Quicken Loans. He believes Rocket has earned so much money the past year it can weather the storm. Plus, he likes their technology and marketing. This former mortgage company CEO did not want to be quoted by name… One fintech lender looking to buy a depository is SoFi, which is tiny when it comes to home lending. However, SoFi recently launched a new ad campaign featuring its home-improvement lending prowess. It also hopes to go public one of these days… COVID NOTE: United Wholesale Mortgage, the nation’s largest table-funder, said it will host an Oakland County Health Division COVID-19 vaccination site at its UWM Sports Complex, located in Pontiac, MI, beginning April 2. Not All Lenders Rode the Refi Wave in 4Q20 Like much of the industry these days, most of DFCU Financial’s fourth quarter loan sales ($76.78 million of $92.97 million total) were refinances. First Equity Mortgage also sold $92.97 million in loans to the agencies in the quarter, but it was one of the few lenders not riding the refi wave. Almost all of its sales ($87.23 million) were purchase loans. Dig into company-specific details — and more data on loan purpose, volume, channel usage and loan characteristics — for the more than 1,700 institutions that sold to Fannie Mae, Freddie Mac or Ginnie Mae during the quarter, in IMF’s Agency Seller-Issuer Profile: 4Q20.   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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