MBA mortgage applications drop to a 22-year low
This week saw talk of Wells Fargo scaling back its mortgage division (possibly greatly exaggerated), MBA mortgage applications dropping to a 22-year low, and U.S. retail sales resiliently remaining flat despite a drop in gasoline prices, though the biggest story was Ginnie Mae and FHFA releasing jointly updated seller/servicer requirements.
To be eligible for Ginnie Mae and GSE loans, issuers/servicers need a net worth base minimum of $2.5 million plus add-ons of 25-basis points for GSE servicing, 35-basis points for Ginnie product, and 25-basis points for private-label and other servicing loans. Tangible net worth or total assets must be greater than or equal to 6%.
TBA rule, requiring IMBs to hold 2.5% in reserves is gone
“Origination liquidity” has been significantly reduced and the requirements recalibrated to better reflect expected margin call risk. Fannie did confirm that the TBA rule, requiring IMBs to hold 2.5% in reserves, is in fact gone. It’s a win for the prospect of hedging in general since the 50-basis points liquidity on IRLCs appears to be regardless of best efforts or hedged pipelines. Importantly, FHFA and Ginnie Mae extended the implementation timeline to provide servicers sufficient runway to adjust to the new requirements. Agency lender letters are expected to come out in September.
In times of lean volume, lenders need to maximize their gain on sale, as such they must fully-leverage the secondary mortgage markets.
It’s a reminder that the industry is constantly shifting and evolving. Over the past few years, MCT has been focused on the sophistication of best execution which has evolved with a proliferation of potential loan sale executions due to more buyers, more approved buyers, fee adjusted considerations, mandatory versus best efforts delivery, AOT, co-issue, etc.
Our clients have shown a willingness and desire to move away from the status quo, or “the way it’s always been done,” to implement new processes and technologies. That has led to the digitization of workflows that were once “black box” processes, thereby increasing efficiency, transparency, and access to actionable data (e.g., automated AOT, digital TBA trading, and whole loan sales via marketplaces).
Lenders need to maximize their gain on sale
In times of lean volume, lenders need to maximize their gain on sale, as such they must fully-leverage the secondary mortgage markets. We are always pushing the boundaries of digitization and automation in pursuit of efficiency, transparency, and profitability for our clients. At the same time, we pay cautious and necessary consideration to security and privacy of client data and information. We have a 20-year track record of doing what’s right for our clients.
We meet clients wherever they are in their growth cycle. If a client wants to benefit from our technology and also desires hands-on support, we’re there for them. And if they opt for autonomous use of our award-winning, all-inclusive capital markets platform, we’re ready to enable them. Near-term and long-term, it’s about helping our clients thrive. Contact us today to learn more.
Looking for more tips on how to navigate this period of increased volatility? Hopefully, you attended our webinar on Improving Profitability to Counter Market Headwinds. We have also published several blogs over the last few weeks, including Strategies for Mitigating Risk in a Volatile Market, which provide more subject matter on the current market. As always, contact us if you are looking for a better suite of secondary marketing products or more guidance on how to manage market volatility.