Alec Hollis to speak at HW Annual Oct. 4

Alec Hollis to speak at HW Annual Oct. 4
All eyes have been on the Federal Reserve as the housing industry tries to account for the Fed-driven slowdown of the housing market. As a result, lenders have been closely watching and planning for how this impacts their portfolios and business given the increase in mortgage interest rates. To help shed some light on how companies are strategically navigating the economic changes in the market, we’re hosting a Q&A with Alec Hollis, managing director at ALM First Financial Advisors, during the Vanguard Forum at HousingWire Annual.

HW Media CEO Clayton Collins will join Hollis on stage to dig into what Hollis is witnessing when it comes to the impact of the current rate environment and what a lot of his client discussions have been focused on. For background, ALM First provides valuation and investment advisory services for its clients.

Hollis will also touch on two of the biggest topics that lenders are concerned about — liquidity and MSR hedging. This includes addressing the pros and cons that he is seeing in the space and how it is impacting IMBs.

Here’s a quick preview of what Hollis will be covering in his Q&A.

HousingWire: What else would you highlight when it comes to the biggest risks that lenders are facing right now and what they should be watching for?Alec Hollis: Absolutely. Last point would probably be a broad one — focus on what you can control. This includes establishing conservative policies and procedures. Some lenders try to “over-automate” functions, which can be a pitfall of attempting to scale. Scaling can be achieved through creating strong policies and procedures — a process. If people follow a process then the results become more consistent. MCD example. But this should include ensuring flexibility is possible when it’s required. Ensuring your analytics are time-tested is also vital in a fast-moving market. This includes pull-through and hedge ratios. Back-testing hedging relationships — by taking investor price relative to a TBA — can be valuable in ensuring your hedge ratios are set properly. “Empirical durations”.

Don’t miss Hollis’ Q&A at HousingWire Annual to get an even deeper breakdown of these essential concepts. There has been a lot of changes in the housing space, but with advice from leaders like Hollis, companies can find ways to remain successful. 

HousingWire Annual

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

Don't miss the Vanguard Forum at HW Annual Oct. 4

Rene Rodriguez announced as the Vanguard Forum keynote speaker at HW Annual Oct. 4

Alec Hollis will be speaking at The Vanguard Forum, an invitation-only, sub-segment of HousingWire Annual on Oct. 4. All invited guests are HousingWire Vanguard Award winners and other high-growth C-Suite professionals. Join us at HW Annual for the content, connections and insights you need to win in this environment. To register, go here, and if you have questions about this forum or how to get invited to the Vanguard Forum, reach out to
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The housing market correction will be deep, and ugly

The housing market correction will be deep, and ugly

You think things are bad in the housing market now? Stick around and see if mortgage rates climb into the 7% range.

If it happens, the current origination forecast of $2.2 trillion in 2023 will look awfully rosy. Even the most battle-tested industry players are preparing for one of the strongest housing market corrections in decades.

Federal Reserve Chairman Jerome Powell sent a clear message during a press conference following the announcement of the central bank’s decision to hike the federal funds rate by 75 basis points on Wednesday: the ongoing housing market correction, which brought the largest mortgage rates increase in four decades, is far from at an end.

Mortgage-backed securities are right about the worst place on the duration spectrum for this move. Freddie’s weekly survey is hopelessly low today – actual 30-year-fixed rates are well over 6.5% now.  Matt Graham, CEO of MBS Live

“Builders are having a hard time finding lots, workers and materials,” Powell said. “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.”

So far, the tightening monetary policy led the 30-year fixed mortgage rate to 6.29% this week, up 27 basis points from the previous week, the Freddie Mac’s Primary Mortgage Market Survey (PMMS) showed on Thursday. A year ago at this time, rates averaged 2.86%.

“The housing market continues to face headwinds as mortgage rates increase again this week, following the 10-year Treasury yield’s jump to its highest level since 2011,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Impacted by higher rates, house prices are softening, and home sales have decreased. However, the number of homes for sale remains well below normal levels.” 

Some market watchers were hoping to see Powell express some willingness to tone down the tightening. These observers were based solely on the expectation that existing policies will have the desired effect to bring inflation closer to the 2% target, according to Matt Graham, founder and CEO at MBS Live. 

“But the biggest takeaway for the mortgage industry is that Powell remained completely unflinching in his commitment to hike rates as much as it takes to tackle inflation,” Graham said. “Between yesterday afternoon and today, the entire financial market is in the throes of adjusting to that new reality. Mortgage-backed securities are right about the worst place on the duration spectrum for this move. Freddie’s weekly survey is hopelessly low today – actual 30-year-fixed rates are well over 6.5% now.” 

My guess is that traditional lenders will most likely be charging points to stay in the high 6s or pushing into the 7s now.Blake Bianchi, CEO of Future Mortgage

Where did the ‘correction’ bring us?

Freddie Mac’s index compiles only purchase mortgage rates reported by lenders during the past three days. Other estimates, however, show that rates are even higher. 

The 30-year fixed mortgage rate was at 6.62% on Thursday afternoon, up 20 basis points compared to the previous day, Mortgage News Daily reported.

According to, which surveys from the 10 largest banks, the primary mortgage rates are currently hovering around 6.4%. Rates are up over 300 basis points year-over-year, the largest trailing 12-month increase since the early 1980s, analysts from the investment banking firm Keefe, Bruyette & Woods wrote in a report on Wednesday. 

“This creates a very challenging environment for volume-sensitive businesses such as mortgage originators and title insurers,” the analysts said. “Given the magnitude of the move in rates, we think there could be a downside to current estimates for industry volumes in 2023.” 

Fannie Mae’s latest forecast, which was published this week, projects total mortgage origination activity at $2.44 trillion in 2022 and $2.17 trillion in 2023. 

Owners may be locked into their existing homes as mortgage rates rise, and the 3% rates from last year may not be back anytime soon.Nadia Evangelou, an economist at NAR

Wwith rates at this level, the entire mortgage market is 150-200 basis points (or more) out of the money to refinance, KBW analysts said. In addition, purchase activity has also declined materially in recent weeks. The Mortgage Bankers Association purchase index is currently 21% below 2021 levels and 26% below 2019 levels. 

To understand the impact on borrowers, this week’s increase in mortgage rates to 6.29% resulted in a monthly payment on a $400,000 loan of about $2,470, compared to $1,660 a year ago, according to Nadia Evangelou, National Association of Realtors senior economist & director of forecasting, said in a statement. 

“Owners may be locked into their existing homes as mortgage rates rise, and the 3% rates from last year may not be back anytime soon. While the nation suffers from a severe housing shortage, lower mobility can make housing inventory even tighter and cause home prices to continue escalating.”  

However, the median-priced home is worth about $80,000 more than in 2020 and $200,000 more than in 2012. “Thus, having positive equity in one’s home may ease the effects of rising mortgage rates on mobility.”

Where is the housing market heading? 

Looking ahead, loan officers have started to expect mortgage rates at the 7% level, a sign that the housing market correction will bring even greater affordability challenges in the year to come. 

A few years of 5-7% interest rates on mortgages are going to be good for the economy, great for buyers, as demand becomes less insane, and more sustainable long-termSean Grapevine, Branch Manager for UMortgage

“After the Fed raised rates yesterday, we now see the 10-year Treasury up today at 3.697%. My guess is that traditional lenders will most likely be charging points to stay in the high 6’s or pushing into the 7’s now,” said Blake Bianchi, founder and CEO at Boise-based brokerage Future Mortgage. “Mortgage brokers like us are most likely in the low-mid 6s on a primary residence.”

Bianchi said that in the current landscape, rate shopping has become more critical than ever, as saving half a percent or paying no points can financially impact buyers in this market. “The good news is that we see it is driving down prices, so buyers can get into a home for a better price and less competition and hopefully refinance later to improve their loan situation,” he said.

Sean Grapevine, a branch manager for UMortgage based in Atlanta, said Wednesday’s Fed decision pushed rates up by 50 to 75 basis points over the last couple of weeks, which is not entirely bad for the housing market. 

“Rising rates from the Fed do cause some temporary pain as people adjust to the differences, but a few years of 5-7% interest rates on mortgages are going to be good for the economy, great for buyers, as demand becomes less insane, and more sustainable long-term,” he said. 
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Freddie Mac rolls out agency’s 10th STACR note offering

Freddie Mac rolls out agency’s 10th STACR note offering
Freddie Mac is launching its 10th credit-risk transfer transaction of the year via its Structured Agency Credit Risk (STACR) program, bringing the total note offerings through its two flagship STACR series programs to $12.8 billion so far in 2022.

The new credit risk transfer (CRT) offering, STACR 2022-DNA7, outlined in a presale report by Kroll Bond Rating Agency, involves a $616 million note offering backed by a reference loan pool of 69,144 residential mortgages with an outstanding principal balance of $19.9 billion. 

CRT transactions to date, and going forward, could prove to be a wise fiscal prophylactic for note issuers such as Freddie Mac, given the direction of the market — as described in the KBRA bond-rating report.

“The Federal Reserve has signaled that the policy response to rising levels of inflation may be a series of rate increases over the course of 2022,” KBRA notes in its bond presale report. “CPRs [conditional prepayment rates, a measure of early loan payoffs] may continue to slow and may remain low in such a rising interest rate environment as borrowers have ‘locked in’ low mortgage financing and have a reduced incentive to refinance.

“Lower prepayment rates extend the average life of mortgage portfolios and can generally cause a larger set of borrowers to be exposed to economic stresses, which can lead to increased levels of defaults and losses.”

Freddie’s latest CRT transaction, based on a tally of deal data to date, brings the total volume of reference pool single-family loans to nearly $326 billion for the nearly $13 billion in STACR risk-transfer note offerings so far this year. The reference pools for the STACR credit-risk transfer (CRT) transactions to date in 2022 are composed of a total of some 1.1 million single-family mortgages. 

The offering totals were tallied across the agency’s two flagship STACR risk-sharing vehicles, which to date include seven STACR-DNA and three STACR-HQA series offerings. The STACR-DNA series is designed for reference-pool mortgages with loan-to-value (LTVs) ratios ranging from 60% to 80% while the STACR-HQA series is designed for high LTV loans (80% to 97%), according to the agency.

Through Freddie Mac’s STACR transactions, private investors participate with the agency 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 STACR 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

The leading underwriters for the loans in the reference pool for Fannie’s 10th STACR offering, slated to close Sept. 30, per the KBRA report, are United Wholesale Mortgage, 8.9% of the loans; Rocket Mortgage, 8.1%; Wells Fargo, 6.6% and J.P. Morgan Chase Bank, 4.1%, according to the KBRA report. The leading states for the loan originations are California, 14.3%; Florida, 10.4%; and Texas, 7.6%.

The bulk of the loans in the reference pool, 70.4%, are less than six months old, according to KBRA’s report, with another 29.2% aged between six and 12 months. The average balance for the loans is $289,105, with the maximum balance at nearly $1.6 million.

The initial STARC deal of this year, STACR 2022-DNA1, was a $1.4 billion note offering issued against a reference loan pool of 190,774 residential mortgages with an outstanding principal balance of $33.6 billion. In the second offering, STACR 2022-DNA2, Freddie issued a $1.9 billion note against a reference pool of 143,889 single-family mortgages valued at about $45 billion.

Since then, Freddie has issued eight additional STACR credit-risk sharing offerings through the STACR DNA and HQA flagship series, including the most recent offering, for a total of 10 offerings to date. The leading originators for the single-family mortgage reference pools linked to those transactions are UWM, J.P. Morgan Chase, Wells Fargo, Pennymac, Rocket Mortgage, Amerihome and Newrez LLC, according to presale reports from KBRA and DBRS Morningstar bond rating agencies.
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Compass announces another round of layoffs

Compass announces another round of layoffs
Compass announced another round of layoffs in a Sept. 20 filing with the U.S. Securities and Exchange Commission. In June, the company cut 450 employees. Read on for more.

Fannie Mae unveils $700M CIRT deal

Fannie Mae unveils 0M CIRT deal
Fannie Mae has finalized its ninth Credit Insurance Risk Transfer (CIRT) transaction of the year, transferring some $700 million of mortgage credit risk to private insurers and reinsurers, the agency announced.

The deal, CIRT 2022-9, involves a covered loan pool of 69,000 single-family mortgages valued at $21 billion. The coverage, which became effective Aug. 1, entails Fannie Mae retaining risk for the first 55 basis points of potential loss on the covered loan pool.

“If the $115 million retention layer is exhausted, 23 insurers and reinsurers will cover the next 335 basis points of loss on the pool, up to a maximum coverage of $700 million,” Fannie Mae states in its announcement of the transaction. The insurance coverage is provided based on actual losses over a 12.5-year term.

Through the CIRT transaction, a portion of the credit risk on mortgages backed by Fannie Mae is shifted to insurers in the private sector. Fannie Mae pays monthly premiums in exchange for insurance coverage on a portion of the designated reference loan pools. 

The mortgages in the covered loan pool have loan-to-value ratios ranging from 60.01% to 80%. The loans, acquired in October 2021, are fixed-rate, mostly 30-year term “and were underwritten using rigorous credit standards and enhanced risk controls,” according to Fannie Mae  

In total, the nine CIRT deals so far this year provide insurance for potential losses on the covered loan pools up to a maximum of some $6.6 billion on a collective basis. The covered mortgage loan pools in the nine transactions to date include a total of some 635,000 mortgage loans valued collectively at $193 billion — based on a tally of announced CIRT deals. 

How insurance offerings can improve the borrower experience

Over the past few years, lenders have put a microscope to their processes to see where they can improve the borrower journey. But there may be one area they’re still overlooking. 

Presented by: Liberty Mutual

Since the CIRT program’s inception in 2013 to date, Fannie Mae has acquired nearly $22 billion in insurance coverage on a total of $730 billion of single-family loans, according to Fannie Mae’s deal announcements.
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Lenders target growing Hispanic homeownership market

Lenders target growing Hispanic homeownership market
Guaranteed Rate and CrossCountry Mortgage have their eyes fixed on serving more Hispanic borrowers, who are expected to make up 70% of homeownership growth in the U.S. over the next 20 years.

Chicago-based Guaranteed Rate this week rolled out an expanded Language Access Program, which has applications and loan servicing in Spanish for consumers in all 50 states. A Spanish website and mortgage applications tool to help Hispanics overcome language barriers went live this week by CrossCountry Mortgage.

Details on loan documents can have a big impact on homebuyers especially when it comes to making one of the most significant financial decisions, Arlyn Kalinski, vice president of LEP compliance at Guaranteed Rate said. 

“Let’s take loan disclosures as a prime example. These documents reveal critical details on loan terms, projected monthly payments, and how much the consumer will pay in fees and other costs to get their mortgage (closing costs),” Kalinski said.

With the new mortgage program, customers receive loan estimates and closing disclosures in Spanish as well as a real-time digital version they can save. 

CrossCountry, which it claims to have “hundreds of Spanish-speaking loan officers,” will be partnering with organizations focused on “advancing sustainable Hispanic homeownership and are embedding ourselves within this community,” Laura Soave, chief brand officer at the Brecksville, Ohio-headquartered firm. 

How To Increase Production and Help Customers Achieve Wealth Through Homeownership

This case study explores how Fulton Mortgage Company achieved its goal of delivering a more personalized, digital mortgage experience for borrowers, while also increasing production and return on assets.

Presented by: Mortgage Coach

The new program and tool launches come as potential Hispanic home buyers face a tight housing market with historic low level of supply for affordable homes. Areas of high Hispanic concentration are suffering the most severe impacts of this housing underproduction, and thus, seeing higher home prices, according to the National Association of Hispanic Real Estate Professional (NAHREP).

The U.S. Mortgage Insurers points out that Hispanics are the youngest of any ethnic or racial demographic in the United States to purchase a home. In a survey conducted by the National Association of Realtors in 2021, 34% of new Hispanic homeowners “purchased a home between the ages of 18 and 24, as opposed to only 17% of the general population.” 

In 2021, Guaranteed Rate originated more than $116 billion in purchase loans and refinances. Inside Mortgage Finance pegged the firm as the eighth largest mortgage lender in the country in the first six months of 2022, originating $33.3 billion in loans.

CrossCountry, founded in 2003 by Ronald Leonhardt, has more than 8,000 employees with nearly 600 branches across 50 states. The Ohio firm ranked 18th on the list of top 50 mortgage lenders, originating $16.9 billion in the second quarter or 2022, according to Inside Mortgage Finance. 
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