What happens when forbearance ends?

What happens when forbearance ends?
This video is part of our HousingWire 2022 forecast series. After the series wraps in January, join us on February 8 for the HW+ Virtual 2022 Forecast Event. Bringing together some of the top economists and researchers in housing, the event will provide an in-depth look at the predictions for this year, along with a roundtable discussion on how these insights apply to your business. The event is exclusively for HW+ members, and you can go here to register.

In this video interview, HW+ Managing Editor Brena Nath sits down with Marina Walsh, vice president of Industry Analysis Research and Economics at the Mortgage Bankers Association, as she breaks down whether or not the industry is ready for the end of forbearance, along with some broad trends from the MBA’s weekly forbearance report.

Watch the full session below and here is a small preview of the interview, which has been lightly edited for length and clarity:

Brena Nath: What else do you think people need to know when it comes to the year ahead? Is there anything that you think they should keep in mind or be paying attention to?

Marina Walsh: I think it’s important to understand the options available to borrowers once they exit forbearance, and that’s an indicator of what could potentially come in 2022. For instance, we have loan deferrals, partial claims, which are basically an interest-free loan that gets tacked on to the end. When you pay off your loan, it becomes due. I think options, like modifications, provide a good sounding board, along with all the other options that are being made available, particularly for FHA borrowers who were hardest hit by this crisis. I think going forward it’s going to be a soft landing. We do not anticipate wide-scale foreclosures, for example. We just think with home price appreciation, with all the workout options available, with wage growth, with all of the great economic data coming out in regard to unemployment. There’s a lot of opportunities for borrowers to get back on their feet if they were in forbearance.

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Freedom Mortgage dominates the MSR market

Freedom Mortgage dominates the MSR market

Another large mortgage-servicing rights bulk offering is on the market this week on the heels of a $10 billion MSR package that went out to bid earlier this month. 

The latest deal is being marketed by New York-based Mortgage Industry Advisory Corp., or MIAC. It is a $6.23 billion bulk-sale offering of agency MSRs, with bids due by Jan. 20. The seller is not identified.

“MIAC, as exclusive representative for the seller, is pleased to offer for your review and consideration a $6.23 billion Fannie Mae, Freddie Mac, and Ginnie Mae mortgage servicing portfolio,” bid documents for the new MSR offering state. “The portfolio is being offered by a mortgage company that originates loans with a California concentration.”

In early January, Denver-based Incenter Mortgage Advisors also launched 2022 by unveiling a $10 billion bulk-sales package of mortgage-servicing rights tied to Fannie Mae and Freddie Mac loans. The seller is not identified in the offering, which indicates the deadline for final bids was Jan. 12. Incenter Managing Director Tom Piercy would only say that the seller is a “nonbank.”

These latest offerings come on the heels of an active year in 2021 on the MSR front, which new data shows was dominated by one lender that can be named: Freedom Mortgage.

The new MSR package being marketed by MAIC is composed of 17,609 loans, most of which are Fannie and Freddie mortgages, with Ginnie-backed loans composing less than 8% of the package by loan volume. The average loan size, according to the MSR-offering bid documents, is $353,763, and the average FICO credit score of the borrowers is 750. The servicing-fee cut is set at 0.258%, with the average interest rate on loans in the MSR package at 3.023%.

Slightly more than 56% of the loans in the servicing package were originated in California, based on principle balance. The other leading states for loan originations for the MSR bundle are Washington, 12.27%; Illinois, 5.34%; and Oregon, 4.27%.

Combined, the two MSR bulk offerings kicking off the start of the year, with loans valued in total at more than $16 billion, are a sign that the MSR market is on a roll right now.

“We’re approaching … a peak [in the market] again,” said Piercy. “We’ve been on the phone … advising our customers that this is happening. 

“We’re … seeing values trending up, and I’m pretty bullish on this for the foreseeable future.”

Rankings released recently by New York-based mortgage data-analytics firm Recursion offer some insight into the state of the MSR market and its major players as the new year begins to unfold. 

Leading the pack on multiple fronts is Freedom, which bills itself as the leading Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) lender in the country. That also explains, in part, Freedom’s role as a leading servicer in the Ginnie Mae market as of year-end 2021. 

Ginnie’s unique program

Ginnie serves as the government-backed securitization pipeline for loans insured by government agencies that provide loan-level mortgage-insurance coverage through their lending programs. Unlike Fannie and Freddie, however, Ginnie does not purchase loans. 

Rather, under the Ginnie program, lenders originate qualifying mortgages that they can then securitize through the agency. Ginnie guarantees only the principal and interest payments to purchasers of its bonds, which are sold worldwide. The underlying loans carry guarantees, or a mortgage insurance certification, from the housing agencies approving the loans — which include single-family mortgages guaranteed by the FHA, VA and U.S. Department of Agriculture.

The holders of Ginnie Mae MSRs, primarily nonbanks today, are the parties responsible for assuring timely payments are made to bondholders. And when loans go unpaid due to delinquency, those servicers still must cover the payments to the bondholders. 

“Ginnie Mae as an organization, their function is to a make sure that there’s a market for buying these Ginnie Mae bonds, and then they have to manage the servicers to ensure that the integrity of the bonds is maintained,” Piercy explained. “The servicer retains the obligation to pass through the principal and interest to the bondholder.”

Under Ginnie’s program, then, lenders can securitize through the agency qualifying loans they purchase or originate, and then they can choose to retain or sell the servicing rights to the loans backing the Ginnie Mae securities issued. 

That’s where Freedom Mortgage shines, based on information provided by Recursion. In terms of Ginnie Mae securitizations, including new issuance and net MSR purchases, Freedom is by far the largest Ginnie servicer.

As of the final month of last year, the lender controlled 13.2% of Ginnie Mae’s $1.95 trillion outstanding servicing book of business — with a $261 billion balance comprised of both new-issuance securitizations and net purchases, according to Recursion’s data.

The figures for the other Ginnie servicers among the top five — again, based on new issuance and net purchases — as of the same time frame are the following:

PennyMac Financial Services, $222 billion, 11.2%.Lakeview Loan Servicing, $203 billion, 10.3%.Wells Fargo, $125 billion, 6.4%.Quicken Loans, $101 billion, 5.1%.

Diving down into the numbers a bit, the total volume of newly issued Ginnie Mae securities year to date through Dec. 1 last year stood at $780 billion, including $102 billion for the leading issuer, Freedom. The other leaders in that category:

PennyMac Financial Services, $96 billionQuicken Loans, $56 billion.Lakeview Loan Servicing, $45 billionCaliber Home Loans, $26 billion.

Li Chang, founder and CEO of Recursion, points out that Wells Fargo “only delivered $19 billion in new issuance,” to the Ginnie market year to date through Dec. 1, 2021 — far less than Quicken Loans. But “Wells has a huge legacy book” of Ginnie MSR business, she added, so it ranks above Quicken in Ginnie-servicing market share based on the lenders’ outstanding loan balances.

Freedom also was the top buyer of Ginnie MSRs from other servicers over the 11-month period, based on loan volume, at $71.2. billion in net purchases, followed by Lakeview Loan Servicing, $50.4 billion; Mr. Cooper (formerly Nationstar Mortgage), $21.7 billion; and Carrington Mortgage Services, $7.3 billion.

Loan delinquency rates

The loan-delinquency rate for Ginnie loans in Freedom’s MSR portfolio as of Dec. 1 of last year was 9.7% — representing all loans 30 days or more past due. That’s down from 14.3% in 2020, the initial year of the pandemic. Freedom declined to comment for the story.

Freedom’s late loans accounted for 22.1% of all outstanding loans on Ginnie’s books that were 30 days or more late as of early December 2021, the Recursion data shows. In general, nonbanks reported higher delinquency rates for their Ginnie MSR portfolios than did banks. Trailing Freedom’s double-digit figure on that measure are Lakeview Loan Servicing, with an 11.4% share of the Ginnie late-loan pool; PennyMac, 8.2%; Mr. Cooper/Nationstar Mortgage, 6.4%; NewRez, 4%; and Quicken Loans, 3.1%. 

“Banks typically have lower delinquency rate than nonbanks,” Chang said, “as they have the access to capital to repurchase delinquent loans out of Ginnie Mae pools.”

Piercy explained that once a loan in a pool of Ginnie-securitized loans is 90 days past due, the servicer has the right to buy it out of the pool at par and modify it as needed because that lender now owns the loan. If the lender can then get the borrower to make six monthly payments in a row, it “can reissue that loan into a Ginnie Mae security” and earn a profit on the spread.

“The conventional-loan world is much different than the Ginnie world because of the inherent risks tied to the credit around Ginnie Mae servicing, versus conventional servicing,” Piercy said. “And why is that? 

“[With] first-time homebuyers, low down-payment programs, the demographics [of Ginnie loans] are such that you’ve got a greater propensity to fall into a default category.”

In the bigger picture, servicing rights for Fannie Mae and Freddie Mac loans also can be bought and sold, just as the MSRs for loans carrying Ginnie Mae’s stamp are bought and sold. So, Recursion also provided a ranking of all agency MSR transfers — which includes sales and purchases of Freddie, Fannie and Ginnie MSRs.

And, once again, the leading purchaser year to date through Dec. 1 of last year was Freedom Mortgage, with $143.4 billion in total agency MSR purchases, Recursion’s data shows. That includes $40 billion in Fannie Mae servicing rights, $32 billion in Freddie MSRs and $71 billion in Ginnie MSRs.

Freedom’s all-agency MSR purchases over the period are double its closest rival: PHH Mortgage, at $68 billion. Trailing PHH in the category are JP Morgan, $62 billion; Lakeview Loan Servicing, $51 billion; and Matrix Financial, $46 billion.

Piercy stresses that the MSR market is fluid in terms of sales and purchases, and for varied reasons. So, he cautions against drawing conclusions out of context from figures like delinquency rates, existing market share, or any lender’s ranking relative to another.

“You know, there’s a lot that can be involved, and different lenders are buying and selling MSRs for various reasons, even if they’re a net buyer,” he said. “They are buying or selling for portfolio management. Maybe they need to improve a [borrower-class] profile, or maybe they’re not having success in recapturing [refinancing] a certain profile. 

“So, they’ll strip that out and try to sell it [those MSRs] to someone who thinks they can do it better. I mean, that’s what the market really is all about.”

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What are the drivers of housing demand in 2022?

What are the drivers of housing demand in 2022?

This article is part of our Housing 2022 forecast series. After the series wraps, join us on February 8 for the HW+ Virtual 2022 Forecast Event. Bringing together some of the top economists and researchers in housing, the event will provide an in-depth look at the top predictions for this year, along with a roundtable discussion on how these insights apply to your business. The event is exclusively for HW+ members, and you can go here to register.

As the U.S. enters the third year of the pandemic, the 2022 housing market remains on stable ground. Existing-home sales for 2021 are expected to show the highest levels in 15 years. While interest rates are projected to rise in 2022 to 3.5% for the 30-year-fixed rate mortgage by year end, the rate increases may temper demand in 2022. With frenzied housing demand normalizing in 2022, homebuyers are likely to see home price gains in single digits rather than the rapid double-digit pace of 2021. Housing demand in 2022 is anticipated to remain steady given familiar demographic, workforce and familial dynamics spurred by the pandemic.

Demographics

The median age of a first-time buyer for the past three years has remained 33 years old. Between 1981 and 2018, the median age of first-time buyers ranged between 28 and 32. There are 23.4 million adults aged 28-32 in the U.S. right now, the largest number of adults by age category. There will soon be a wave of potential buyers aging into the first-time buyer age group. These young buyers are not without headwinds, such as low affordable housing inventory, rising home prices and student debt. 

NAR data shows that first-time buyers have overcome rising home prices to patch together a downpayment, through diversifying their downpayment source, using savings, downpayment help from family and friends and stock market/401k loans to assist in their path to ownership. Younger millennials may have also helped as they moved back home during the pandemic at record numbers, thus skipped paying market value rent to a landlord. The highest share of young adults since the Great Depression moved home, and will now be re-emptying the nest as they purchase homes. Additionally, 38% of student debt borrowers were able to use the pandemic to pay down their student debt by paying more to their principle of their debt or cutting spending on entertainment. 

Movement for more space

As of week 33 in the U.S. Census Pulse Survey, 23.5% of households had at least one family member who worked remotely due to the coronavirus. As the omicron variant spreads, if workplaces are able, many are maintaining fully remote or hybrid plans. This flexibility is likely to continue and become permanent as recruiting and retaining talent becomes increasingly difficult for CEOs. Workforce flexibility allowed consumers more freedom in their choice of location for home buying. In the latest Realtors Confidence Survey, 88% of buyers purchased in a suburban, small town or rural area. This is up from 85% one year ago. 

Buyers are moving to suburban areas not only for the square footage but for the affordability and inventory that are more likely to be found in these regions. Even before the pandemic, it was more likely for a young millennial buyer to purchase in a small town rather than an urban center. Housing affordability, space and inventory become top priorities in decision making when buying a home, in addition to proximity of family. Regardless of this movement, there will always be the attraction of city centers for some buyers who want the walkability and amenities. These buyers may be reinventing the suburbs with walkable town centers and gathering places for their children and pets. 

Familial dynamics

In the last year, a desire to be closer to friends and family ranked as the top reason for repeat buyers to purchase a home and for sellers to sell a home. The needs of buyers of all ages have evolved not only in what they need from their home — a home office, a bigger yard, and more room to cook — but also who lives near their home. Support systems are now a top priority for neighborhood choice, edging out both convenience to job and affordability of homes. The reason to remain close to family may differ for different homebuyers. For working parents, elderly relatives may be the extra set of hands needed as schools continue to grapple with hybrid, remote and in-person schedules. The growing share of single women homebuyers may desire family and friends to be close, but not within her own home. Young adult buyers may seek the comfort of families nearby after moving from family homes, and retirees may pursue the benefit of being close to grandchildren. 

Known unknowns

The next year is not without unknowns. Where will the pandemic go next? What is the next variant after omicron, and what impact will it have? Despite these unknowns,  purchasing a home continues to be an  investment buyers want to make for their financial future. Even with the expected increase in interest rates, homebuyers can lock in a historically low rate and know with certainty what their monthly cost will be for the next 30 years. The American Dream of homeownership is a constant, providing both financial and housing stability within a sea of societal uncertainty.

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Understanding Realogy’s stance on commissions

Understanding Realogy’s stance on commissions

When Missouri federal judge Stephen Bough unsealed a sworn declaration last week from Coldwell Banker CEO Ryan Gorman in a sprawling antitrust lawsuit about real estate commissions, it prompted disquiet among real estate agents, including those who work at Gorman’s company.

“My Coldwell Banker agent office policy insists that we do not cut commission under any circumstance,” said one agent who requested anonymity to speak candidly about her company, which is part of the Realogy brokerage conglomerate. “Gorman’s comments confuse me.”

Gorman’s two-page declaration has been interpreted as everything as the “dam that breaks” NAR’s 108-year-old stranglehold over real estate commissions, by one longtime observer, to “fairly irrelevant” by another.

Adding to the lack of clarity about whether Gorman’s statement is especially important for real estate, or even for the lawsuit it comes from, is that almost none of Realogy’s competitors either denounced Gorman or supported him.

That silence comes amid multiple lawsuits alleging an antitrust conspiracy between brokerages and the NAR, plus a U.S. Justice Department antitrust inquiry into NAR.

Filed with the court on Nov. 11, Gorman’s declaration comes in a proposed class action lawsuit filed by housing consumers against NAR, Realogy, HomeServices of America, RE/MAX, and Keller Williams Realty.

The lawsuit, in part, challenges a rule first put forth by the National Association of Real Estate Exchanges, NAR’s forerunner, in 1913, that a member agent representing a home seller, “Always be ready and willing to divide the regular commission equally with any member of the Association who can produce a buyer for any client.”

More than 100 years later, NAR’s cooperative compensation policy reads similarly, stating that the seller’s agent specifies what commission they shall provide the buyer’s agent.

The way it works is that a real estate agent belonging to NAR agrees with a seller that, for example, the agent will receive 6% of a home’s final sales price. The agent then, obligated to make an offer of compensation to the buyer’s agent — with the dueling incentives of both getting as much money as possible but attracting home-buying agents, decides to split their commission. So, on the local Multiple Listings Service, the seller’s agent posts that the buyer’s agent is due for a 3% commission.

Plaintiffs in the Missouri case and other pending lawsuits argue the policy artificially inflates commissions, discourages consumer’s right to negotiate on commission, and prompts buyer’s agents to steer clients toward homes where they can receive a higher commission.

Gorman’s declaration on behalf of Realogy Brokerage Group does not actually disagree with the cooperative compensation policy. But it argues, “The mandatory nature of the NAR cooperative compensation rule should be rescinded.”

Gorman goes somewhat further, stating Realogy agents are not required to abide by any NAR rule, except the code of ethics. Also, if there is a stated buyer’s agent commission, consumers should know about it, Gorman argued. That position has since become NAR law.  

Agents on well-frequented Facebook groups including Lab Coat Agents have reacted with trepidation and anger, suggesting that Gorman’s position undermines buyer’s agents. Meanwhile, Norman Miller, a professor at the University of California San Diego who has spent a generation covering real estate commissions and believes they are too high, said that the loosening of the cooperative compensation policy, “Gives agents more flexibility and more opportunities to compete on price more.”

“I have seen seller’s agents commissions go down in the last 10 years,” Miller said. “This could help trigger buyer’s agents fees to drop.”

But it’s not clear if Gorman’s views will gain traction. NAR affirmed it stands by its policy. And the other lawsuit defendants — Home Services of America, RE/MAX, and Keller Williams — declined to comment, each stating they have a company policy to not comment on pending litigation.

Another top national brokerage, eXp, also declined to comment, and multiple messages left this week with Compass and Zillow went unreturned.

Asked about whether Realogy’s position would gain industry support, a company spokesperson said, “We cannot speak for other brokerages,” noting, “There are rumors and speculation about our position that are generating misinformation and confusion across the industry.”

The one brokerage that did take a position is Redfin, whose agent compensation model includes employee salaries and also commission rebates for homebuyers.

“Redfin supports making offers of compensation optional rather than a mandatory,” said a spokesperson. “We supported NWMLS when it made this change in 2019. That market is a good example that mandating offers of compensation is not necessary for competition and cooperation to flourish in the real estate marketplace.” 

Redfin is referring to the Northwest Multiple Listings Services, the Seattle-based MLS that is also a pioneer in making buyer’s agent’s expected compensation known to consumers. But for some real estate observers, including Steve Murray of RealTrends, the NWMLS’s recent experiments serve as an example that industry reforms do not necessarily change consumer behavior or lower commissions.

Max Besbris, a professor at the University of Wisconsin-Madison, also wonders if what is being argued about is a bit tangential to the lawsuit plaintiffs’ aims to increase consumers’ bargaining power and choices.

The end of cooperative compensation seems instead, “An attempt to give listing agents even more power in determining commissions. What would make more sense are new laws requiring listing agents to more actively inform sellers that commissions are negotiable,” Besbris said.

Messages left with the lawyers for plaintiffs in the lawsuit went unreturned. The Missouri case remains in the fact-finding phase with no timetable yet for major court decisions.

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What will servicing look like in 2022?

What will servicing look like in 2022?
The number of homeowners still in forbearance plans has been declining as foreclosure moratoriums expire. HousingWire recently spoke with Joe Davila, president and CEO of Selene Finance, about how servicers can best help homeowners with next steps as they exit forbearance plans.

HousingWire: More than one million borrowers are exiting forbearance plans. How can servicers prepare to help them with next steps?

Joe Davila: Communication, borrower education and training of consumer-facing staff are all critical elements to ensure your servicing operation is properly prepared to help borrowers as they exit forbearance plans.

Embedding the loss mitigation rules into process workflow is needed to ensure consistency and proper flow of information and decisioning. The call center and loss mitigation teams must be properly trained on the options that are available to the borrower to properly guide the discussion.

In certain cases, with the proper technology, the borrower can self-service through a portal to select their exit plan with limited or no documentation requirements.

HW: What do servicers need to know about expiring foreclosure moratoriums?

JD: Servicers have foreclosures in process that are either stopped in a certain stage or progressing to the next stage that require appropriate reporting, tracking and documentation.

Once the moratoriums are lifted, the need to monitor state-by-state rules or potentially county-by-county in an automated fashion will be tricky and require technology enhancements and comprehensive training of the staff.

There are still many unknowns so the servicer will have to remain flexible and start to think about staffing the foreclosure teams because most of the foreclosure teams were reassigned due to moratoriums.

HW: How can servicers best help homeowners as those moratoriums lift?

JD: Servicers will utilize a structured waterfall to determine the optimal outcome for the borrower. These rules will assess the borrower’s ability to pay, property value and employment status.

The goal is always to keep the borrower in the home whenever possible. The servicer will provide outreach to borrowers in foreclosure as well and handle inbound calls where alternatives to foreclosure will be discussed.

HW: What will servicing look like in 2022, and how can servicers best prepare for what comes next?

JD: In 2022, the focus will be on the new CFPB and regulatory environment along with post-moratorium management of the borrowers and the foreclosure process. Compliance with regulatory changes will require technology adjustments, training and advanced reporting to identify real-time risk.

If post-moratorium foreclosure guidelines are set at the state or even county levels, the need to embed the new rules will also be a challenge to manage.

In addition to all of this will be managing the COVID-19 situation if the virus continues to impact day-to-day life. Hiring and retaining a work from home staff versus a hybrid model of in and out of the office will continue to be a challenge even though we have seen very good performance to date.
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HomeServices of America closes year with five acquisitions

HomeServices of America closes year with five acquisitions
HomeServices of America, a Berkshire Hathaway affiliate, closed 2021 with five acquisitions. The acquisitions add nearly $8 billion in closed sales volume to HomeServices’ 2021 portfolio, according to the company. Read on for more. 
Source: thetitlereport.com

Proper Title opens first office outside Illinois

Proper Title opens first office outside Illinois
Proper Title, LLC, opened a new office in Schererville, Ind., that will serve real estate agents in northwest Indiana. This new location marks Proper Title’s first office outside of Illinois. Read on for more.
Source: thetitlereport.com

Barristers of Ohio merges with Erie Title Agency

Barristers of Ohio merges with Erie Title Agency
Cleveland, Ohio-based Erie Title Agency, Inc. merged with Barristers of Ohio, part of the Hanna Family of Companies, to form a new company, Erie Title Barristers Group. The group will be led by the current Erie Title president, who will assume the role of president of Erie Title Barristers Group. Read on for more.
Source: thetitlereport.com

Stewart names VP of enterprise operations

Stewart names VP of enterprise operations
Stewart Information Services Corp. named a vice president of enterprise operations. In her new role, she will lead product innovation and development efforts for the company’s Direct Channel technology. Read on for more.
Source: thetitlereport.com