Residential: MBA conference session spotlights MSR valuation best practices

MBA conference session spotlights MSR valuation best practices

With the rewards of investing in the residential mortgage servicing rights (MSR) asset come significant accounting and management challenges. Many of those challenges are based on how frequently the asset can change in value and the overall opaqueness of what’s causing the change in value.

Holders of the asset recognize these challenges and gather annually at the Accounting and Financial Management Conference of the Mortgage Bankers Association (MBA). Both seasoned and new investors view the conference as must-attend education on current best practices for MSR valuation.
In the MSR Valuation and Assumptions session at this year’s conference, being held this week through Wednesday in Orlando, panelists from three firms that provide independent valuation of MSRs are offering their perspectives on how to better model, analyze and report on the asset. The panel will review the importance of the valuation function, current assumptions used in the valuation process, how to best analyze interest rate scenarios, the decision between the two different types of accounting treatment for MSRs, stress testing the asset, and the latest enhancements in off-the-shelf and third-party valuation models.

Mark Garland, managing director and head of MSR valuation at MountainView Financial Solutions, a Situs company, is one of the three panelists in this session. Garland has been a frequent presenter at the annual conference, sharing insights gained as a MSR valuation analyst and leader at MountainView. He works daily on portfolios of some of the largest holders of the MSR asset and will also provide insights gained from his prior accounting roles at Dovenmuehle Mortgage Inc. and the mortgage division of PNC Financial Services.

“Whether you’re a portfolio manager or analyst solely focused on this financial asset or a CFO or accountant where the asset is very significant to your balance sheet, the dynamic nature of MSRs requires continuous education in order to make your work as precise as possible,” said Garland.

Firm advising GSE investors updates plan to end conservatorships

An investment banking firm has released an updated proposal for recapitalizing Fannie Mae and Freddie Mac designed to allow the mortgage giants to exit conservatorship.

The revised blueprint by Moelis & Co. LLC, which serves as a financial adviser to some Fannie and Freddie shareholders, incorporates a plan by the mortgage companies’ regulator for them to adopt risk-based capital requirements. The original Moelis plan released in June 2017 had drawn mixed reviews from the industry.

Like the original Moelis document, the update calls for recapitalizing the government-sponsored enterprises (GSE) in the next four years and issuing new GSE common and preferred stock into the capital markets. Unlike most housing finance reform proposals, the Moelis proposal would not require legislation.

But the updated blueprint released last Friday incorporates the Federal Housing Finance Agency’s (FHFA) post-conservatorship regulatory capital framework for the GSEs, which is currently in the rulemaking stages. In compliance with the FHFA proposal, the Moelis blueprint calls for a “payment of an ongoing market-based commitment fee” to the Treasury Department for its explicit guarantee.

Read more: American Banker

Servicers can’t slack on compliance as states step up oversight, says S&P

While the foreclosure crisis is over and federal regulators are being less assertive on enforcement actions, mortgage servicers can’t let their guard down about compliance, according to Standard & Poor’s.

That’s because lax federal oversight is being supplanted by state regulators and attorneys general stepping up enforcement activities.

Some of the recent positive news for the “beleaguered industry” included: acting Consumer Financial Protection Bureau Director Mick Mulvaney’s statements at the Mortgage Bankers Association annual convention, the Senate Banking Committee’s approval of Kathy Kraninger for the permanent job, the dropping of Real Estate Settlement Procedures Act cases against PHH and Zillow, and Brett Kavanaugh’s elevation to the U.S. Supreme Court.

Read more: National Mortgage News

Equity-rich US properties increase to new high of 14.5 million in Q3 2018

ATTOM Data Solutions, curator of the nation’s premier property database, last week released its Q3 2018 U.S. Home Equity & Underwater Report, which shows that in the third quarter of 2018, nearly 14.5 million U.S. properties were equity rich — where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value — up by more than 433,000 from a year ago to a new high as far back as data is available, Q4 2013.

The 14.5 million equity rich properties in Q3 2018 represented 25.7 percent of all properties with a mortgage, up from 24.9 percent in the previous quarter but down from 26.4 percent in Q3 2017.

The report also shows more than 4.9 million U.S. properties were seriously underwater — where the combined estimated balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value, representing 8.8 percent of all U.S. properties with a mortgage. That 8.8 percent share of seriously underwater homes was down from 9.3 percent in the previous quarter but still up from 8.7 percent in Q3 2017.

“As homeowners stay put longer, they continue to build more equity in their homes despite the recent slowing in rates of home price appreciation,” said Daren Blomquist, senior vice president with ATTOM Data Solutions.

Read more: ATTOM Data Solutions

The best winter housing markets for homebuyer bargaining power

House hunters are starting to gain more leverage at the negotiating table.

Homebuyers have been battling rising home prices and competitive bidding wars in recent years, but many local markets are finally showing signs of more favorable conditions.

Cities where price cuts are becoming more frequent, rent appreciation is accelerating and affordability has improved are giving purchasers more room for negotiation and lenders a better shot at seeing more business from borrowers, according to Zilllow.

While winter is the slowest time of the year for home sales and mortgage activity, lenders are projected to generate 20% of their annual origination volume during the first quarter of 2019, including $226 billion in purchase loans, according to Mortgage Bankers Association data.

Here’s a look at five housing markets where homebuyers can expect to have more negotiating power this winter:

  1. Orlando, FL
  2. Boston, MA
  3. Seattle, WA
  4. Las Vegas, NV
  5. Charlotte, NC

Read more: National Mortgage News

Mortgage delinquencies creep up, but healthy economy keeps them tame

Mortgage delinquencies inched up, in part from natural disasters hindering homeowner performance, but a stronger economy is still keeping them low, according to the Mortgage Bankers Association.

The delinquency rate for single-family residential properties rose slightly to 4.47% of all loans outstanding at the end of the third quarter, marking an increase of 11 basis points from the same period a year ago.

The share of loans with foreclosure activity dipped one basis point to 0.23% quarter-over-quarter, the lowest this percentage has been since the fourth quarter of 1985.

“Despite the small [delinquency rate] uptick this quarter, the healthy economy is overall supporting low mortgage delinquencies and foreclosure inventories,” Marina Walsh, vice president of industry analysis at the MBA, said in a press release.

Read more: National Mortgage News

Click here to subscribe to Situs Newswatch.

Thank you for choosing the Situs Newswatch. If you want to see your company here or have an idea for coverage, please respond to this email or email for more information.


General. This disclaimer applies to this publication and the verbal or written comments of any person presenting it. In this publication Situs Group LLC taken together with its affiliates are collectively referred to as “Situs”.

Forward Looking Statements. Forward looking statements (including estimates, opinions or expectations about any future event) contained in this publication are based on a variety of estimates and assumptions. There can be no assurance that any such estimates and/or assumptions will prove accurate, and actual results may differ materially.

No advice. Situs advises that no statement in this publication is to be construed as advice of any kind, including, without limitation, as a recommendation to make any investment or to buy or sell any security or as investment advice. The examples contained in this publication are intended for use as background on the real estate industry as a whole, not as support for any particular real estate investment or security.

Information. Certain information contained in this publication includes articles, data, calculations and/or figures that have been prepared by and obtained from others, including publically available sources. Such information has not been audited or verified by Situs. This publication does not purport to be complete on any topic addressed. This publication may contain the subjective views of certain Situs employees and may not necessarily reflect the collective view of Situs or certain Situs business units.

Logos, trade names, trademarks and copyrights. Certain logos, trade names, trademarks and copyrights included in this publication are strictly for identification and informational purposes only. Such logos, trade names, trademarks and copyrights may be owned by companies or persons not affiliated with Situs. Situs makes no claim that any such company or person has sponsored or endorsed the use of any such logo, trade name, trademark and/or copyright.