Originations Remain Lights Out at LD, but...; Cenlar Exec Bolts for CSS - IMFnews

Share Register Advertise March 24, 2021 In a Surprise Disclosure, loanDepot Unveils Originations for January and February, GOS pmuolo@imfpubs.com   loanDepot disclosed in a new filing with the Securities and Exchange Commission that it originated $25.1 billion worth of residential loans in January and February compared to the record $37.4 billion the company funded in 4Q20. It also reported that its gain-on-sale margin for the two-month period slipped to 321 basis points from 338 bps in 4Q20. It’s somewhat rare for a publicly traded lender to make such a disclosure before the quarter’s end but the filing also reveals information regarding a new $500 million securitization facility (upsized late last night to $600 million), its servicing-related forbearance readings and the fact it has already commenced servicing mortgages inhouse instead of using a subservicing vendor. Labeling the disclosures as preliminary, the California-based nonbank noted, “We believe that the level of gain-on-sale margin experienced during two months ended Feb. 28, 2021 was the result of continued favorable market conditions and the low interest rate environment … In recent weeks, the mortgage industry has experienced an increased interest rate environment, which has led to lower refinance mortgage demand and lower gain-on-sale margins that more closely approximate historical margins." The company added: “We cannot predict the continued impact of an increased interest rate environment on our originations or gain-on-sale margins. Further, there is no assurance that these preliminary results will be indicative of our final results for the three months ended March 31, 2021 or in any future period.” CSS Taps Cenlar Executive as New Chief Risk Officer dhollier@imfpubs.com Common Securitization Solutions on Tuesday tapped Cenlar FSB executive Louis Glinn to be the company’s next chief risk officer. That puts him in charge of identifying both current and emerging risks for an enterprise that processes $400 billion in uniform MBS a month. Cenlar, which has a thrift charter, is the nation's largest subservicer, according to figures compiled by Inside Mortgage Finance. CSS CEO Tony Renzi put the importance of the CRO position into perspective: “Our risk and control environment is paramount to a safe and sound U.S. housing finance system and requires an expert at the helm." Glinn, who held the same title at Cenlar, appears to have the bona fides, previously serving in senior risk positions at S&P Global, JPMorgan Chase, and Ally Financial. At CSS, he replaces Sara Avery, whose four-year tour as CRO included the launch of the UMBS in 2019. Avery left the company in February. CSS, a joint venture of Fannie Mae and Freddie Mac, has been on something of a hiring spree. In 2020, at the direction of the Federal Housing Finance Agency, the company increased the size of the board by three members, the last two of which were picked early this year. In December, CSS also picked a new chief technology officer. The Fed’s Appetite for MBS: Insatiable. But When It Comes to the Yearend Tally… jbancroft@imfpubs.com   The Federal Reserve added $77.6 billion of agency MBS to its ever-expanding balance sheet during the fourth quarter, obviously doing more than just replenishing runoff. So far in 2021, the central bank has added another $94.0 billion, raising its holdings to a stunning $2.133 trillion as of March 10. Still, when it comes to the yearend tally, the Fed was bested by commercial banks, which held $2.21 trillion worth of Fannie Mae, Freddie Mac and Ginnie Mae product. The Fed’s balance at Dec. 31: $2.07 trillion. Foreign investors represent the third-largest cohort, with an estimated $1.29 trillion of U.S. product, mostly agency securities. That was up slightly from the previous quarter. For full details and exclusive rankings, see Inside MBS & ABS, now available online. Fannie and Freddie Get a Downgrade: ’Underperform’ dhollier@imfpubs.com If you’re looking to speculate on the common shares of Fannie Mae and Freddie Mac, perhaps you should wait. Keefe, Bruyette & Woods, one of the few research firms actively monitoring the investment prospects of the GSEs, has downgraded the two mortgage giants to “underperform.” Specifically, KBW reduced its target price on Fannie to $1.00 from $2.00. Freddie’s was cut to $1.00 from $2.50.  But far more interesting than the revised valuation is the set of assumptions and predictions found in the report.  KBW Managing Director Bose George begins with the assertion that the GSE capital framework, finalized by the Federal Housing Finance Agency in November, has set the stage for a very long capital raise. Just how long? Try 15 years. For more details, see Inside The GSEs, now available online. Short Takes: loanDepot Says It’s Flush with Liquidity / A Slight Increase in the Share Price / Free (Overnight) Money / MBS Implications? / A Promotion at GR pmuolo@imfpubs.com The new 8-K filing from loanDepot is chock full of interesting disclosures. Besides revelations about January and February originations, the publicly traded nonbank states its forbearance rate as of month’s end: 1.91% of the servicing portfolio or loans with a UPB of $2.4 billion. “As a servicer, we are required to advance principal and interest to the investor for up to four months on GSE-backed mortgages and longer on other government agency-backed mortgages on behalf of clients who have entered a forbearance plan.” The company adds: “While these advance requirements may be significant at higher levels of forbearance, we believe we are very well-positioned in terms of our liquidity. We will continue evaluating the capital markets as well, which would further supplement our liquidity should the need arise”... Does the market see anything it doesn’t like in the new disclosures? Apparently not. At press time, its share price was up 1.26 % to $23.39. Its 52-week high is $43.00, its low, $17.50... How would you like to borrow money overnight in the repo market and not have it cost you a nickel? Bloomberg reported yesterday that the rate on overnight general collateral repo agreements opened below zero. The reason: increased GSE cash investments, the Federal Reserve’s asset purchases and a faster deceleration in the Treasury general account. Keefe, Bruyette & Woods had this to say about the situation: Channel checks indicate the phenomena has spilled over into agency MBS repo rates. Analyst Bose George believes the spread between Treasury and agency MBS repo rates is currently around 1 basis point, “below its historical range of 1-3 bps, implying that overnight agency MBS repo rates are close to zero”... George told IMFnews Wednesday, “There’s even negative repo rates in some cases. So far, it’s just overnight but even one-month is 5 basis points for agency MBS. There’s lots of cash looking for collateral.” MORTGAGE PEOPLE: Guaranteed Rate promoted veteran loan officer Dianne Crosby to area manager of its Oakland, CA, office. The privately held GR is based in Chicago. A Complete History of GSE Buybacks, Seller by Seller Since 2009, Fannie Mae and Freddie Mac have secured $81.1 billion in repurchases on loans sold into their mortgage-backed securities. Another $70.3 billion in repurchase demands was withdrawn or otherwise kicked to the curb in the same period. GSE Repurchase Activity: Cumulative to Fourth Quarter 2020 looks at the GSE buyback record lender by lender and year by year, providing details on every lender who has faced a buyback demand from either Fannie or Freddie since 2009. You’ll find out how much they paid, how much of it relates to each vintage of MBS, and how much they got Fannie and Freddie to back down on.   To ensure delivery to your inbox, add news@imfpubs.com to your address book or safe sender list. 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