Meet the HousingWire Annual Welcome Committee: Haley Parker

Meet the HousingWire Annual Welcome Committee: Haley Parker
Haley Parker is the area business development manager at Fairway Independent Mortgage Corporation. She sat down with HousingWire to share her excitement for the upcoming HousingWire Annual conference and her role on the welcome committee. 

HousingWire:  What are you most looking forward to at HW Annual 2022?  

Haley Parker: Networking and connecting with Industry friends!

HW: As a local, what do you think are the features that set Scottsdale apart and make it the perfect setting for HW Annual 2022?

Haley Parker: Scottsdale is the perfect setting for HW Annual. Real Estate is the hottest topic out here and, in my opinion, Scottsdale is home to some of the best lenders and agents in the country! 

HW: The housing market is undergoing a serious change, what do you think mortgage professionals should do to stay on top of the changing market?   

Haley Parker: The key right now is two things: 

Social marketing and developing a personal brand is key. Industry professionals need to sell themselves in this market to build trust with existing agents.  Get out.  People need to be getting out in front of agents, existing and new, as much as possible. Agents are eager for information and speaking with them in person is becoming more and more common these days. It is a total purchase-driven market so you have to build your purchase agent sphere. Refinances are slow going to nonexistent right now but the thought is every purchase we are doing right now with these higher rates is a potential refi in a year or two.   

HW: Why are you excited to be a member of the welcome committee at HW Annual 2022?

Haley Parker: Besides being a native of Arizona and beyond proud to rep #StateFortyEight – I am the biggest fan of HousingWire. The culture and community they have created is incredible. Being a part of the Welcome Committee is the best of both worlds for me!

HW:  What advice would you give to top talent working in the industry today?

Haley Parker: Be Consistent, do not make drastic changes in what you were doing prior. Implement the social aspect that was essential during the COVID-19 pandemic, but remember what made us successful in 2015-2019. Go back to your 2018 day planner to see what you were doing during that time, add in some of the tactics from 2020-2021 and mingle the two. We knew how to generate and drive business prior to the COVID-19 pandemic. Get back in those habits while using the additional knowledge you’ve gained.

HW:  Why do you think meeting with teams in person, at conferences like HW Annual, is important after years of virtual work? 

Haley Parker: You are networking and garnering ideas and getting back in front of people. We should be taking any chance we can get to get back in front of people for building agent and client relationships as well as for recruiting. The day of sitting behind the computer at home is dead. You also need to be active and going to events like this should be a must if you are truly looking to build your business. HW Annual is a good opportunity to see what others are doing in the market to succeed and what new ideas are available.

HousingWire Annual

Why you should attend HW Annual Oct. 3-5 in Scottsdale

Meet the HousingWire Annual Welcome Committee: Lisa Lund

Meet the HousingWire Annual Welcome Committee: Erin Halbert

There’s only a few days left to register for HW Annual this year. Hear from today’s top leaders and enjoy networking events with like-minded professionals. Plus, get a warm welcome from Haley Parker and our other welcome committee members. Join us at HW Annual for the content, connections and technology you need to win in this environment. Register for HW Annual here! And remember, HW+ members get 50% off registration.
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Ginnie Mae: Vast majority will be able to comply with new capital rule

Ginnie Mae: Vast majority will be able to comply with new capital rule
Following grumblings from some servicers and industry trade groups, Ginnie Mae on Tuesday issued a statement that most nonbank mortgage companies it does business with will be able to comply with its upcoming — and controversial — capital rule requirements.

“While the overwhelming majority of Ginnie Mae issuers are compliant with these requirements today, we will continue engaging with our issuers throughout the implementation period,” Ginnie President Alanna McCargo said in a statement.

In the form of an FAQ, Ginnie Mae published answers related to a 250% risk weight for mortgage servicing rights, as well as liquidity requirements that critics say unfairly treat nonbanks like depositories, not finance companies.

Ocwen, one of the country’s largest Ginnie Mae servicers, has already expressed concern that it will not be able to meet the requirements. Similarly, the Community Home Lenders Association has expressed worry that the new requirements will cause harm to nonbanks, which account for more than 91% of all Ginnie Mae forward originations.

“Just as the previous regime drove banks away, the Biden administration is on the verge of driving nonbank mortgage servicers away from Ginnie Mae altogether,” Dave Stevens, the former FHA commissioner under Obama, wrote in an opinion piece for HousingWire. “At minimum, the changes put forth in the new rule are so punitive that either costs will rise, and thus interest rates for borrowers will, or some/many current Ginnie Mae servicers will opt to leave the program altogether.”

In its FAQ, Ginnie answered a question about using “Basel-type capital tools” to address nonbank liquidity risk. “We are attempting to ensure that balance sheets containing large concentrations of Mortgage Servicing Rights (“MSRs”) are adequately capitalized, and that the widely varying risk characteristics of different balance sheet items are incorporated into capital standards that until now have not considered them,” Ginnie said, noting that the MSR market is “opaque” and MSR values are highly volatile.

“In a rapidly declining market, precisely when funding needs are at their highest, these terms could lead to margin spirals and significant MSR write downs,” the government bond insurer said. “Because of the inherent importance of leverage in non-bank balance sheets, this constitutes a direct threat to liquidity and stability.”

Ginnie reduced the minimum risk-based capital ratio from 10% to 6%, but put a 250% risk weight on the MSR asset and the dollar-for-dollar deduction from capital for excess MSRs. This has caused significant consternation, with critics saying the policy doesn’t match the risk.

Government loans and conforming loans held for sale would have a 20% risk weight. Other loans held for sale would have a 50% risk weight. The compliance date for the requirement is December 2023.

In defending the policy, Ginnie Mae said it believes that a “risk-based approach without a deduction of ‘Excess MSRs’ is inadequate. With only a 6% capital requirement and a 250% risk weight, Independent Mortgage Banks (IMBs) could theoretically borrow 85 cents on the dollar [(100% – (250% x 6%)) = 85%] against MSRs without limit. Through the addition of a risk-based capital requirement, Ginnie Mae seeks to limit that exposure to ensure long-term viability for all of our Issuers.” In its FAQ, Ginnie asks one to “consider an IMB with MSRs that are valued at 3x their net worth. In the event the MSRs are marked down by 25% in a single quarter, all other things being equal, the mortgage bank’s total equity capital would decline by 75% (ignoring the impact of taxes). In this example, the Issuer would likely experience a margin spiral or other demands on their liquidity, resulting in further write downs of assets that could render them insolvent in a very short period.”

Ginnie said that if the new capital rule were in effect today, “95% of our Issuers (by count)would be compliant. Of those Issuers already compliant with RBCR, many have ample equitycapital to support the acquisition of MSRs that may come on the market.”
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Fannie Mae prices ninth CAS note offering of 2022

Fannie Mae prices ninth CAS note offering of 2022
Fannie Mae has launched its ninth Connecticut Avenue Series (CAS) credit-risk transfer deal of 2022, a $$591 million note offering backed by a reference pool of single-family mortgages. 

The transaction, CAS 2022-RO9, involves a reference pool of 96,000 single-family mortgages with an outstanding principal balance of $29.3 billion. The loans in the reference pool have loan-to-value ratios ranging from 80.01 percent to 97.00 percent and were acquired between September 2021 and December 2021. 

“The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls,” Fannie Mae states in announcing the deal.

Through CAS note offerings, private investors participate with Fannie in sharing a portion of the mortgage credit risk in the reference loan pools retained by the agency. Investors receive principal and interest payments on the CAS notes they purchase, but if credit losses exceed a predefined threshold per the security issued, then investors are responsible for absorbing the losses exceeding that mark.

Citigroup Global Markets Inc. is acting as the lead structuring manager and joint bookrunner. Wells Fargo Securities LLC will serve as co-lead manager and joint bookrunner. 

Co-managers for the offering include Amherst Pierpont Securities LLC, Barclays Capital Inc., BofA Securities Inc. and Performance Trust Capital Partners LLC. Selling group members include service-disabled veteran-owned firm Mischler Financial Group Inc. and Hispanic-owned Great Pacific Securities, according to the Fannie Mae deal announcement.

Fannie Mae unveiled its eighth Connecticut Avenue Series (CAS) credit-risk transfer deal of 2022 in late July, a $626.3 million note offering backed by a reference pool of 67,844 single-family mortgages valued at $20.4 billion.

With the completion of the CAS 2022-RO9 transaction, Fannie Mae will have brought 53 CAS deals to market, issued some $59 billion in notes and transferred to the private sector a share of the credit risk on more than $1.96 trillion in single-family mortgage loans.
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Fed hikes rates by 75 bps to rein in still-hot inflation

Fed hikes rates by 75 bps to rein in still-hot inflation
The Federal Reserve (Fed) on Wednesday raised the federal funds rate by another 75 basis points, to 3%-3.25%, bringing it back to a level last seen in March 2008.

The decision was expected by most Fed observers, and comes as mortgage lenders and real estate brokerages struggle to adjust to a Fed-driven slowdown of the housing market. 

According to the Federal Open Market Committee (FOMC) statement, although recent indicators point to modest growth in spending and production, job gains have been robust in recent months and the unemployment rate has remained low.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the FOMC said in the Wednesday statement. “Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity.”

The committee anticipates that ongoing increases in the target range will be appropriate, meaning another 125 basis points in hikes still to come in 2022, with a federal funds rate topping out well above 4%. The FOMC’s Summary of Economic Projections now shows a funds rate midpoint of 4.375% at end-2022 and 4.625% at end-2023.

“No changes were made with respect to their ongoing plans to reduce the size of their balance sheet,” said Mike Fratantoni, the chief economist of the Mortgage Bankers Association. “Rate volatility is high due to both uncertainty regarding the Fed’s next moves and the lack of a steady, consistent buyer for Treasuries, and particularly mortgage-backed securities.”

Since the Fed has started a tightening monetary policy to slow inflation, it has resulted in a cumulative 300 bps hike: 25 bps in March, 50 bps in May and three 75 bps increases in June, July and September.

Inflationary pressures resulted from the decision to maintain rates at 0%-0.25% between March 2020 and March 2022 to stimulate economic activity during the COVID-19 pandemic, marking a period of easy money that gave rise to the hottest mortgage market in U.S. history. 

Consequently, inflation in the U.S. hit 8.3% in August, down from 8.5% in July but still higher than the 8.1% expected by observers, the Bureau of Labor Statistics reported on Sept. 13. One of the primary drivers has been housing costs, with shelter costs accounting for about 25% of inflation in August. Shelter costs rose 6.2% in August from a year before, and were up from 5.7% in July.

That inflation came in hot raised the specter that the Fed would increase the benchmark rate by 75 or even 100 bps today.

In the housing market, the tightening monetary policy has brought mortgage rates to the mid-6% level and helped bring rents to record prices, according to firms that track the rental market.

Existing-home sales declined in August for the seventh consecutive month and home prices dropped sequentially from July, evidence that the Fed’s policies have cooled the housing market in recent months.

According to the Fed’s latest Beige Book report, home sales fell across all 12 Fed districts and the prospects for future improvement anytime soon are dim as well. “The outlook for future economic growth remained generally weak, with … expectations for further softening of demand over the next six to 12 months,” the report states.

“We’ve had a time of a red-hot housing market all over the country – famously, houses were selling to the first buyers by 10% above the asked, before they even see the house. So, it was a big imbalance between supply and demand and house prices were going up at an unsustainable fast level,” Fed Chairman Jerome Powell said during a press conference. “Builders are having a hard time to find lots, workers and materials.”

But Powell said the deceleration in prices should bring the market closer to its fundamentals, which is a good thing, according to him. “For the longer term, what we need is supply and demand to get better aligned, so house prices go up at a more reasonable pace and people can afford houses. Probably, the housing market needs to go to a correction to get to that place.”

Rate hikes also impact real estate investors. “Debt is becoming very expensive very quickly,” said Veena Jetti, founder of the Dallas-based real estate investment firm Vive Funds. “We will likely see operators that bought in the last few years without interest rate insurance finding it tough to service the debt.”

Whether the latest rate hike has already been ‘baked in’ to mortgage rates remains to be seen. “It’s possible that expectations of a rate hike are already priced into the market, as we just saw mortgage rates hit 6% last week,” said Steve Reich, chief operations officer at Finance of America Mortgage. “Interest rates hitting their highest levels since 2008 coupled with persistent inflation means some homebuyers may take a step back from the market and wait until rates come down. However, there are still opportunities in today’s market for potential homebuyers.”
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Hot home-equity market fueling securitization deals

Hot home-equity market fueling securitization deals
New York-based Unlock Technologies, a fintech operating in the shared-equity market, and real estate investment firm Saluda Grade, have closed a $180 million private-label securitization (PLS) backed entirely by Unlock-originated residential home-equity agreements (HEAs).

The PLS transaction, called UNLOK 2022-1, involves $144 million of unrated senior Class A notes, $18 million of mezzanine Class B securities and $18 million of mezzanine Class C securities.

“The senior debt offering in the securitization was oversubscribed, with participation across mutual funds, credit funds, banks and asset managers,” Unlock’s announcement of the deal states. “All investors in the transaction were first-time participants in securitizations backed entirely by home-equity agreements [HEAs].”

Unlock’s HEA contracts typically feature 10-year maturities and involve a 3% origination fee based on Unlock’s original investment, which is not a loan. The general premise is that Unlock provides the homeowner with cash upfront — normally 10% of the home’s current value. In exchange, the homeowner inks a contract providing the company with a slice of the homeowner’s future equity. That future share is normally 17%, collected when the home is sold, refinanced or via a buy-out of the contract, according to Unlock’s website.

“Unlock directly addresses consumers’ desire to improve their financial situations by accessing their largest asset, their home equity,” says Unlock CEO Jim Riccitelli. “As the HEA asset class achieves mainstream adoption from traditional financing sources, we will continue to provide creative financing solutions to many thousands of deserving families that cannot qualify for traditional home-finance products like HELOCs [home-equity lines of credit] and cash-out refinance loans.”

Last year, Unlock and Salude Grade teamed up for their initial PLS offering, GRADE 2021-WL1, a $153 million unrated securitization backed, in part, by Unlock-originated HEA contracts along with other mortgage assets acquired by the securitization trust.

A combination of fast-rising home values and the fact that nearly two-thirds of borrowers with at least some home equity have mortgage rates below 4% — and would not benefit from refinancing — is helping to propel a resurgent market for tapping into home equity. The interest rate for a 30-year, fixed-rate mortgage averaged 6.47% on Tuesday, Sept. 21, according to Mortgage News Daily.

Black Knight reports in its Mortgage Monitor Report for the second quarter that the amount of tappable home equity nationally hit $11.5 trillion in the second quarter — after accounting for homeowners retaining at least 20% equity. That figure is up by around $500 billion from the first quarter and $2.3 trillion year over year.

San Francisco-based fintech company Unison is another shared-equity company taking advantage of the hot home-equity market. Earlier this year Unison completed a $443 million private-label offering backed by its shared-equity contracts, called residential equity agreements, or REAs. 

Unison, launched in 2004, joins another California-based fintech competitor, Point, in pursuing efforts to tap the secondary market to create more liquidity for the financing of shared home-equity contracts. This past fall, Palo Alto-based Point partnered with Redwood Trust — a Mill Valley-California-based real estate investment trust — to complete a $146 million securitization deal backed by contracts that are similar to REAs. 

Traditional home-equity lending in general is on a roll this year, with the combined volume of home-equity lines of credit (HELOCs) and traditional closed-end home equity loans up 47% from January to May of 2022, compared with the same period last year.

Nearly $69 billion in HELOC credit limits and $27 billion in closed-end home-equity loans were originated over the first five months of 2021. That compares with $101 billion in HELOC volume and $38 billion in closed-end home-equity originations over the same period this year, according to a new report by the Urban Institute’s Housing Finance Policy Center.

Securitizations backed by home-equity loans or shared-equity agreements, however, are still relatively rare to date. A recent DBRS Morningstar report notes that from 2019 to the present, a total of only nine residential mortgage-backed securities (RMBS) offerings valued at $2.6 billion have been completed involving HELOCs as collateral.

One of those deals made its way to the market this year. That deal, dubbed GRADE 2022-SEQ2, was a $198.6 million RMBS offering also sponsored by Saluda Grade. It was backed by 2,327 loans that included a mix of both closed-end second-lien mortgages and HELOCs, according to a presale report by Kroll Bond Rating Agency (KBRA).

The loan originator for the RMBS offering was Spring EQ LLC, which focuses on originating second-lien mortgages, including closed-end home equity loans and HELOCs. The initial note purchaser for the RMBS offering, which closed in April 2022, was Raymond James & Associates, according to the KBRA report.

“More potential issuers have looked to add HELOC securitization funding this year, especially given the dramatic rise in home values providing increased home-equity availability,” the DBR Morningstar report notes.

Increasing demand from institutional capital also is helping to bring added financing and liquidity to the shared-equity market, according to Ryan Craft, CEO of Saluda Grade. That is expected to result in an uptick in securitization deals involving share-equity contract assets in the future.

“Our mission is to programmatically issue Unlock securitizations, dramatically increasing available liquidity for the American homeowners that need it most,” Ryan said.
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How LOs are dealing with a mortgage rate lockdown

How LOs are dealing with a mortgage rate lockdown
Mortgage rates in the 6% range have frozen the housing market, forcing loan officers to find business outside their wheelhouses.

Business is at a “dead stop,” said a retail loan officer in Michigan. With mortgage rates nearly doubling from the start of 2022, the LO, who has more than 20 years of experience in the industry, says it’s painful to see deals simply disappear. People just aren’t moving, and who’s trying to get a refi now?

“I go into real estate offices and Realtors have zero listings for the week,” said the LO, who requested anonymity to protect the business of her partners. “I feel bad trying to convince somebody that it’s a good time to buy and get a mortgage. Am I really doing my fiduciary duty by trying to convince them?”

During the past 18 months — when refis were low-hanging fruit — the LO closed around $3 million a month. This month, she is lucky to have $2 million in her pipeline thanks to closing deals on a construction loan, a condo and a vacant lot. And it’s going to get worse.

“Next month I’m expecting to close $400,000 and nothing lined up for November,” she said.

The Michigan LO’s struggling business is a microcosm of the mortgage industry, where loan officers can no longer string together deal after deal as they did during the pandemic. With rates firmly in the 6% territory as a result of the Federal Reserve’s goal to combat inflation, many LOs must hustle to win business outside their usual stomping grounds.  

LOs interviewed by HousingWire said that most of their past clients don’t have a reason to sell their houses and that prospective buyers are waiting on the sidelines unless life happens — job relocations, marriage, divorce, pregnancy and death.

If the first-time homeowners are not moving because they can’t afford to, it freezes up the entire lower end of the market.Mark Glebman, Caliber Home Loans

Housing prices started to inch down in July, but were still 14.5% higher than last year. With mortgage rates at an elevated level, it’s no surprise that rate lock volume hit a three-year low in August. 

“The premise of a mortgage rate lockdown is simple: so many American households have such low mortgage rates that some will never move once rates rise, which then locks up housing inventory,” said Logan Mohtashami, Lead Analyst at HousingWire. Mortgage rates moved up so quickly and then held for an extended period, people not moving has become a real risk, he wrote in a recent column.

Mark Gelbman, a loan officer at Caliber Home Loans in Michigan, sees first-time homebuyers and owners who need to move as the biggest victims in a higher rate environment. 

“Homeowners need to move because of family size and jobs,” Gelbman said. They can’t make that jump to expanding into a bigger house because of higher mortgage payments, he explained. 

One of Gelbman’s clients, who has been on the market for at least a year, was priced out in 2021 due to “overbidding.” Overbidders have exited the market, but the client now faces a different problem — her monthly mortgage payment would be far outside her comfort zone. 

“If the first-time homeowners are not moving because they can’t afford to, it freezes up the entire lower end of the market,” Gelbman said. Addressing a shortage of inventory is a serious concern, especially as fall and winter approaches when total inventory traditionally drops. 

According to Mohtashami, the country has been experiencing a “savagely unhealthy housing market,” with inventory levels at around 1.16 million, below the 2019 range of 1.52 million to 1.93 million. 

I’m going to start offering reverse mortgages because I know the average age of people there is 62. That’s going to be a new market for meLonnie Glessner, loan officer at Draper and Kramer Mortgage Corp.

The mortgage industry was on a “sugar high” in the last two years, added Lonnie Glessner, senior vice president of residential lending at Draper & Kramer Mortgage. Finding out why people are moving is important, he said. 

“Just to move to a larger home, better neighborhood, people aren’t going to be doing that anymore because the payment of their mortgage is going to go up substantially.” 

By virtually any measure, homeowners today are financially in a strong position. Credit scores are at record highs, and equity positions have never been stronger. Despite the market slowdown, it hardly resembles the subprime mortgage crisis of 2007, loan officers and mortgage brokers said.

But for loan professionals, relief doesn’t pay the bills. The reality is sales opportunities will be fewer for the foreseeable future.

Mortgage rates from the past two years were “outlier numbers,” Fahad Janvekar, loan officer at Fairway Independent Mortgage Corporation said. After spending a couple months at a refinance call shop, he moved to focus on purchase mortgages in November 2021. 

Janvekar, like many other LOs, is looking for unique circumstances where people have to move out of necessity. While some LOs plan on moving to the broker channel for higher margins or exiting the industry, those planning to stay in the retail business are offering more loan products or getting licenses in other states to cast a wider net for borrowers. 

Glessner will close his first renovation loan in 10 years and plans to tap into the market of reverse mortgages, a loan available for seniors aged 62 and over to borrow money against their home equity. One of his offices is located at Estes Park, Colorado, where he sees demand for reverse mortgages.

LOs that remain will get stronger and better. I’m going to work through it. Donna Fox, an LO at Lake Michigan Credit Union

“I’m going to start offering reverse mortgages because I know the average age of people there is 62. That’s going to be a new market for me,” he said. 

He also closed one bank statement loan this year, a non-qualified mortgage (non-QM) loan, which was expected to take off with accelerating home prices and higher interest rates pushing borrowers outside the Fannie Mae and Freddie Mac credit boxes. 

“One of my concerns with non-QM lenders is, will they still be around when they are closing?”

As rates rise, lenders are struggling to sell in the secondary market as investors are seeking higher yields. This liquidity problem caused non-QM lenders including First Guaranty Mortgage Corp and Sprout Mortgage to shut down. 

The downcycle is going to shake out LOs who weren’t in the industry for the long haul, said Dana Fox, loan officer at Lake Michigan Credit Union. “LOs that remain will get stronger and better. I’m going to work through it. I produce, I have 20-plus years of experience and I’m very involved in the local Board of Realtors.” 

LOs, including Fox, say it’s hard to predict how long mortgage rates will remain elevated and it won’t be until the first quarter of 2023 to get a clear picture of which direction they’ll move. 

It’s time to go back to the basics, Glessner said. “Going through client databases, checking in with homeowners to see what’s going on in their lives, getting referrals and that’s where the old-fashioned forward calls could help. It’s all about relationships.”
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