Mr. Cooper sells reverse servicing portfolio, Blend issues IPO valuation & more of the week's top news

July 9, 2021 5:41 PM

Mr. Cooper sells reverse servicing to Mortgage Assets Management

Mr. Cooper on Monday announced the sale of its reverse mortgage servicing portfolio, exiting the business that allows for home equity withdrawal by borrowers age 62-plus.

The divestiture of the Champion-branded business to Mortgage Assets Management reduces the unpaid principal balance of Mr. Cooper's servicing portfolio by $16 billion. It also decreases Mr. Cooper’s balance sheet by $5 billion in federally insured Home Equity Conversion Mortgages and other assets. (HECMs are the dominant form of reverse mortgage.)

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New modular homes aim to cut construction time 80%

Van Metre Homes, a builder serving the Northern Virginia counties of Loudoun, Fairfax, Fauquier, Frederick, and Prince William, announced the launch of its POWERhaus line of modular properties. The homes come fitted with clean energy technology, like magnetic induction cooking systems, electric car charging ports and solar paneling, to get each house down to net zero energy consumption.

The line of factory-made homes are designed for “plug-and-play” construction, in which each room gets connected at the building site. This cuts builder waste since it allows for bulk materials to be ordered for the pods’ exact dimensions. Manufactured homes overall typically sell at a lower price point than traditional single-family homes due to their reduced construction costs — currently a major issue restricting home builder activity. Even though lumber futures came down from an all-time high in May, they remain inflated compared to historical norms.

The manufactured homes take under two months to build — a sharp contrast to the average of about seven months for a single-family property, according to the U.S. Census Bureau.

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Regulators expected to advance Biden agenda despite 'acting' tag

The Supreme Court's decision last month allowing President Joe Biden to fire the Trump-appointed head of the Federal Housing Finance Agency not only resets the policy trajectory of Fannie Mae and Freddie Mac's regulator. It also meant yet another agency without a Senate-confirmed leader.

Three financial services regulators are now led by an "acting" appointee. After Biden ousted FHFA Director Mark Calabria, senior agency official Sandra Thompson was quickly named as the interim director. She joined Dave Uejio, acting director of the Consumer Financial Protection Bureau and acting Comptroller of the Currency Michael Hsu.

Without permanent heads in place, long-term policy goals such as reforming the Community Reinvestment Act and charting a future for Fannie and Freddie could be slowed, some observers said. But analysts say that the acting leaders are likely taking their cues from officials within the White House and the Treasury Department, giving the administration greater power to set policy.

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Sun Capital purchases LoanLogics

Private equity firm Sun Capital Partners acquired LoanLogics, a digital mortgage audit software provider, as one of its initial investments in its newly established technology vertical.

Terms of the deal were not disclosed. LoanLogics, headquartered in Jacksonville, Fla., had a post-money valuation of between $50 million and $100 million following a 2016 investment according to Crunchbase.

"The support and resources Sun Capital is capable of providing to companies like ours will enable us to continue to ensure quality performance for our clients, enhance our operations and serve the rapidly modernizing mortgage technology market," LoanLogics CEO Bill Neville said in a press release.

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Blend values IPO at $414M, completes Title365 buy

Blend Labs' initial public offering could raise as much as $414 million in gross proceeds if the stock sells at the upper end of its $16 to $18 per-share range.

The mortgage technology provider is looking to sell 20 million shares of its Class A stock and also has a 3 million share underwriters' option. Less than 10% of the total Class A stock will be outstanding after the IPO of approximately 208.7 million shares. The prospectus estimates the IPO will deliver net proceeds of $309.5 million at $17 per share. That amount rises to $357 million if the underwriters' option is exercised.

Blend, which is used by major banks, is set to launch its offering in a market that has recently proved challenging for nondepository lender IPOs. Every mortgage company that has launched one recently has cut both the number and dollar amount of shares.

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Fannie, Freddie forbearances hit lowest level since March 2020

The number of mortgages in coronavirus-related forbearance decreased for the 18th consecutive week, dropping 4 basis points between June 21 and June 27, according to the Mortgage Bankers Association.

Home loans in forbearance plans represent 3.87% of all outstanding mortgages, about 1.9 million homeowners. That reflects a decline from 3.91% the week earlier and the lowest level since 3.74% on April 5, 2020. The shares of forborne loans at independent mortgage bank servicers and depositories both fell 3 basis points to 4% and 4.11%, respectively.

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Mortgage applications decline for a second week

After falling to its lowest rate of activity in almost a year and a half, the influx of mortgage apps slowed even further last week, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, which tracks total mortgage volume based on a survey of MBA members, dropped a seasonally adjusted 1.8% from the prior pre-holiday week ending July 2. On an unadjusted basis, the decrease came in at 2%. Compared to the same week in 2020, the index was 19.2% lower, seasonally adjusted.

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Mortgage rates hit lowest point in months

Freddie Mac avg rates, July 8, 2021.jpeg

Mortgage rates slid for a second consecutive week, with 30- and 15-year fixed rates falling to levels not seen since winter, as mixed jobs data pointed to signs of a potentially softening economy.

The 30-year fixed rate mortgage averaged 2.9% for the weekly period ending July 8, down eight basis points from 2.98% the previous week, according to the results of Freddie Mac’s Primary Mortgage Market Survey. One year ago, the 30-year average came in at 3.03%. While rising inflation concerns in the spring seemed to set the stage for interest rates to climb, the opposite occurred, with rates falling four out of the last five weeks.

“All told, mortgage rates now sit near their lowest level since February, fully reversing the sharp upward movements from earlier in the year,” said Zillow economist Matthew Speakman in a statement. “While longer-term changes in rates are likely to be to the upside, the shift in the market’s outlook suggests that rates have little reason to move sharply higher anytime soon.”

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Home prices expected to grow 7% through Q2 2022

Home prices nationwide will increase 7% through the second quarter of 2022 with no signs of the hot sellers' market slowing through the next few months, Veros Real Estate Solutions said.

"Buyer demand is strong in nearly every market in the country," Veros CEO Darius Bozorgi said in a press release. "We are squarely in a seller's market and buyers have no choice but to put forward the best offer they can, frequently making offers above asking price, to secure the home they want to own."

Furthermore, low interest rates should continue for the foreseeable future, even with rising inflation, added Eric Fox, Veros' chief economist.

"Despite that, [Federal Open Market Committee members] have not slowed the pace of bond buying," Fox added. "They have their foot on the accelerator full speed ahead and are only thinking about discussing slowing down."

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FHA delinquencies pose most risk to these metros

High delinquency rates on Federal Housing Administration loans are concentrated in 10 metropolitan statistical areas, and they turn out to be very similar to those that also experienced distress during the Great Financial Crisis, according to American Enterprise Institute research.

Those metro areas, ranked in part by the number of delinquent loans, are Atlanta (42,268), Houston (40,147), Chicago (28,792), Dallas (22,302), Washington, D.C. (20,285), Baltimore (17,851), Riverside, Calif. (17,622), San Antonio (14,491), Fort Worth (12,866) and Philadelphia (12,490).

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Private equity firms to buy Lereta

lexpoint Funds and Vestar Capital on Tuesday announced that they plan to acquire Lereta, a national tax and flood services vendor that works with mortgage servicers.

Financial terms for the acquisition of the company, which is currently held by funds owned by Tarsadia Investments as well as Lereta management, were not disclosed. Management will retain a minority stake in the company and its current leadership and structure will remain intact.

Lereta, previously known as Lenders’ Real Estate Taxes, is reportedly seeing growth in part because many loans have refinanced and changed hands in the busy market. That complicates the sensitive task of managing property tax payment in conjunction with a borrowers’ loans. As a result, many mortgage companies have sought additional help to improve the service levels in this area.

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Home buying, selling sentiments hit extremes in June

An increasing number of consumers found the home buying landscape more unwelcoming than ever in June, as housing prices kept climbing with no relief in sight.

The share of borrowers who thought it was a good time to buy a home dropped to a new Fannie Mae Home Purchase Sentiment Index all-time low of 32% from 35% in May and 61% the year before. A 64% share said June was a bad time to buy, dropping the net percentage to -32% from -21% in May and 34% a year ago.

Despite the largely unfavorable conditions, potential home buyers should continue driving the intense competition in the market.

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Starter home prices are growing 7 times faster than renter income

Market conditions are growing more challenging for renters who are trying to become first-time home buyers as down payment savings timelines expand.

Housing affordability fell below historical averages in half of the country in the second quarter, with the lower end of the market seeing the greatest extremes. Starter home prices are appreciating at nearly seven times the pace of renter income, according to Zillow.

This disparity in growth rates added a year to the amount of time a typical consumer would need to save for a 20% down payment compared to 2016. To keep stride with Zillow’s projected 14.9% increase in home prices for the next year, renters will need to reserve an additional $369 per month.

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7 candidates to lead Fannie and Freddie's regulator

Andrew Harrer/Bloomberg

Following President Joe Biden’s June 23 ouster of Mark Calabria, speculation has intensified about the administration's pick to run the Federal Housing Finance Agency and therefore chart a new path for the mortgage giants Fannie Mae and Freddie Mac.

It remains to be seen how quickly Biden will nominate a permanent FHFA director. After all, he has yet to send Congress a name for another key financial regulatory position: the head of the Office of the Comptroller of the Currency. But given how quickly the administration moved to fire Calabria after a key Supreme Court decision and how important housing is to the economic recovery, a nomination could come soon.

After the Supreme Court ruled June 23 that the president has the authority to fire the FHFA director at will, Biden exercised that power almost immediately. Later in the day, senior FHFA official Sandra Thompson was named acting director of the agency.

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