Subservicing Contracts Bloom, However...; Non-Accruals Rise at Velocity - IMFnews

Share Register Advertise March 17, 2021 Subservicers Continue to Reap New Contracts. Outlook Appears Bright pmuolo@imfpubs.com The nation’s subservicing specialists cracked the 30% market share barrier in the fourth quarter, amassing contracts to handle $3.56 trillion worth of residential product, according to a new ranking and analysis from Inside Mortgage Finance. In 3Q20 and 4Q19, subservicers managed 29.0% and 27.4%, respectively, of all outstanding residential loans in the U.S. The 4Q20 tally, 30.5%, is the highest since we began tracking the data point last decade. Fun fact: Most consumers who receive their monthly statements from a subservicer don’t even know their debt is actually owned by someone else, whether it’s a small- to medium-sized nonbank, a private equity investor or a real estate investment trust (among other users). The market share gains over the past year have been driven, in part, by nonbanks that didn’t like the servicing-released premiums offered to them by a consolidator and decided to keep the servicing strip while using a vendor to handle the grunt processing work. The practice increased during the early quarters of the pandemic when mortgage rates began to head south rapidly thanks to liquidity measures undertaken by the Federal Reserve. For full details and exclusive rankings, see Inside Mortgage Finance, now available online. Originations and Nonperforming Loans Increase at Velocity Financial bivey@imfpubs.com Velocity Financial regained its financial footing during the fourth quarter of 2020, with sharp increases in originations and income, according to figures released Tuesday afternoon. The Westlake Village, CA-based nonbank originates non-agency investment-property loans through brokers. Velocity funded $179.3 million of product during 4Q20. The company (like many in its niche) suspended new lending in March 2020 due to volatility from the coronavirus and then restarted near the end of the third quarter. The nonbank managed to generate a profit each quarter in 2020, including $9.6 million of net income in 4Q20 compared to $3.5 million in the previous period. The jump in income was credited to strong whole-loan execution in the secondary market. Velocity historically issues MBS. At Dec. 31, the firm held $1.9 billion of loans in portfolio. The non-accrual status: 17.2% of loans held for investment, up from a 15.8% share at the end of the third quarter. The increase in nonperformers was due to borrowers who had received three-month forbearance plans earlier in the year while failing to resume making payments. Mark Szczepaniak, Velocity’s chief financial officer, said the nonperforming rate leveled off early in 2021 and the company has been generating income from resolution of the loans. “The uptick in nonperforming loans hasn’t been that troubling to us because historically we have always made money on these nonperforming loans and we continued to do that straight through 2020,” he said.     DBRS Builds RMBS Ratings Share, S&P Steady in ABS jbancroft@imfpubs.com DBRS Morningstar extended its top ranking in rating non-agency MBS in 2020 while S&P Global maintained its position as the top rating service in the non-mortgage ABS market, according to a new Inside MBS & ABS analysis. DBRS rated $36.85 billion of non-agency MBS last year. While that was down 11.2% from 2019, total rated non-agency MBS issuance dropped even more, by 17.4% in 2020. By dollar volume, DBRS graded 51.4% of rated issuance. The firm’s wheelhouse is the scratch-and-dent market, where DBRS was involved with 83.9% of rated issuance. A significant volume of S&D issuance is not rated. Fitch Ratings wasn’t far behind with $13.29 billion of S&D deals rated last year, or 69.4% of the market. Moody’s Investors Service saw a significant 76.1% drop in S&D ratings from 2019. For full details and exclusive league tables, see Inside MBS & ABS, now available online. New York Nonbank Fined for Cybersecurity Breach lburden@imfpubs.com   The New York Department of Financial Services has ordered independent mortgage lender Residential Mortgage Services to pay $1.5 million in penalties to settle allegations of a cybersecurity breach. In its complaint, the DFS said that in 2019 Residential Mortgage, based in South Portland, ME, suffered a data breach in which a hacker accessed the email account of an RMS employee who had access to a significant amount of sensitive personal data on mortgage loan applicants. The lender failed to notify the department’s superintendent of the incident, according to an examination conducted by the DFS in 2020. Under state laws, financial institutions have to report a cyberattack within 72 hours from a determination that such an event has occurred. The New York regulator said RMS failed to investigate the breach. For additional details, see the new edition of Inside the CFPB, now available online. Short Takes: Subservicing Revelations / Two Large Contracts / A Big Loss in Business Coming? / Non-agency MBS Deals Brewing pmuolo@imfpubs.com, bivey@imfpubs.com The nice thing (nice for journalists, at least) about so many mortgage bankers going public is the truckload of disclosures lender/servicers have to make under SEC rules. For instance, in recent public filings loanDepot and AmeriHome Mortgage both revealed that they don’t service their own mortgages but instead use subservicers... Why is that a big deal? Answer: Both have MSR balances north of $100 billion. In a new 10-K filing, loanDepot notes the maneuver “allows us to generate revenue in an operationally efficient manner while fulfilling our primary objective of maintaining ongoing relationships with our customers, and was advantageous in terms of managing start-up costs associated with the segment”... But the real juice lies with this sentence: “We are currently developing a proprietary mortgage servicing platform and we intend to transition all of our servicing to our own proprietary platform.” In other words, the subservicer with the loanDepot contract will eventually see $106 billion worth of work slide out the basement door... Who is that subservicer? Cenlar... Back in January, IMFnews reported that Cenlar was the main vendor on AmeriHome’s $101 billion portfolio. LoanCare had a small piece of the action as well. AmeriHome had hoped to go public this year but instead opted for a franchise sale to depository Western Alliance Bank... THIS JUST IN: loanDepot is set to issue a $383.0 million non-agency MBS stocked with newly originated conforming jumbo mortgages. Also, an affiliate of Annaly Capital Management is prepping a $257.1 million deal with non-qualified mortgages that have seasoned for an average of nine months. Uncover the Valuable Market Intelligence Within HMDA Data With 48 data points providing details on mortgage lending transactions at 5,508 U.S. financial institutions, HMDA data contains a wealth of information. But how do you mine all this data to get at just the answers you need? IMF’s HMDA Dashboard makes it easy. This interactive tool allows you to filter your inquiry by loan purpose, loan type, property type, secondary-market purchaser, type of lender, geography and much more … then use the results to figure out how your product mix or results compare to the market, where you can expand your efforts, or who might help you grow your business. 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