MSR portfolio hedging continues to produce positive results
Risk management activities for 14 of the largest holders of residential mortgage servicing rights (MSR) produced an average net gain in asset value of 0.4% during the second quarter of 2018, according to the MSR Industry Report released last week by MountainView Financial Solutions, a Situs company. The largest gain among the 14 companies was 4.5%, and the largest loss was 6.8%.
Net risk management results in the report are calculated as the sum of two components: change in value due to market inputs and assumptions, and change in hedge values.
MountainView’s report has recorded positive MSR risk management results in 21 of the last 22 quarters; Q4 2017 was the only quarter with negative results. Over these 22 quarters, the largest annualized hedge benefit relative to MSR value was 7.9% in Q2 2014, and the smallest benefit (a cost) was -3.2% in Q4 2017.
An analysis of the average net hedge performance for 18 of the largest MSR holders over the last five years shows the industry on average has produced a 2.5% net return on the MSR asset. The top five companies’ performance has averaged 13%, while the five worst performers have averaged only a 3.4% loss. These net results for the largest companies in the industry show that hedges have been performing effectively over the last five years.
MountainView’s MSR Industry Report is produced quarterly using data from press releases of publicly traded companies. Thirteen of the 14 companies in the Q2 2018 report are banks, and one is a non-bank.
The report includes additional metrics for industry MSR results, including detailed analyses of MSR risk measures, detailed analyses of MSR values, additional MSR portfolio characteristics and sensitivities, and trends in unpaid principal balances. All of these data points are reported for the industry as a whole and for the individual companies.
To purchase the Q2 report or a quarterly subscription, email Jason Dekdebrun at MountainView (email@example.com).
Lenders continue to fight for market share with multifamily deals
Multifamily investors are still able to get low interest rates on permanent loans as different lender groups continue to compete for market share.
“The competition between the agencies and life companies is creating bidding wars on the debt side, with increased interest-only and decreased spreads a requisite to win deals,” says Brandon Harrington, managing director with JLL Capital Markets.
Benchmark interest rates like the yield on 10-year Treasury bonds have risen nearly half a percentage point since last year. But the interest rates on permanent loans for multifamily assets have remained relatively stable. To make more loans, lenders are cutting the extra amount that they add to interest rates — the “spread” between their cost of capital and the interest rates they charge borrowers.
“The debt market for multifamily remains very liquid,” says Mitchell W. Kiffe, co-head of national production for the debt & structured finance group at CBRE Capital Markets. “All of the capital sources remain active and are seeking multifamily borrowers.”
Read more: National Real Estate Investor
Report: Nationwide home foreclosures tick up for first time in 3 years
New home foreclosure filings nationwide inched up in July, signaling the first year-over-year rise after three consecutive years of decreases.
The report from Attom Data Solutions is an indication the U.S. housing market may be nearing the end of the cycle, and that home prices will begun to fall, experts say.
Meanwhile, foreclosure starts are also rising sharply in some of the country’s biggest real estate markets, jumping more than 20 percent in Los Angeles and Miami, according to the report.
In L.A., foreclosures jumped 20 percent last month to 1,190; and in Miami they rose 29 percent to 1,119. In both cities, home foreclosures increased for the third consecutive month.
A total of 96 out of 219 metropolitan areas analyzed in the report, or 44 percent, posted year-over-year increases in foreclosure starts in July.
Read more: Real Deal
As rates rise, needs change for refinance borrowers
The rise of mortgage rates over the past few months has triggered a significant slowdown in refinance loans. According to an analysis by CoreLogic, the needs of homeowners who refinance in a rising rate environment is different from the rate-and-term borrowers that dominated the market during the refinance boom.
Frank Nothaft, Chief Economist at CoreLogic, explains how borrowers opt for refinance loans. “Homeowners that obtain a cash-out refinance when rates are at or above the rate on their prior loan may choose a term of up to 30 years on their new loan to keep the change in their monthly mortgage payment as small as possible,” Nothaft said.
The analysis found that the share of refinance loans that cash out some home equity is generally very small during a refinance boom. “During 2012, when 30-year fixed-rates fell to an all-time low, the cash-out share of refinancing fell to 10 percent, the lowest recorded in CoreLogic’s public records data during the last two decades,” Nothaft noted.
Read more: MReport
Mortgage bankers cut three-year purchase forecast
A $65 billion reduction has been made to the three-year outlook for the origination of loans to finance the acquisition of residential properties. The good news is that the bulk of the hit is two years from now.
For the period that began on July 1 and concludes on September 30, mortgage originations – including purchase financing and refinancing – are expected to reach $443 billion.
Home lending volume is then expected to sink to $370 billion in the fourth quarter. A further decline is predicted for the first-three months of next year, when the total is projected at just $328 billion.
The Mortgage Bankers Association, which provided the latest predictions in its MBA Mortgage Finance Forecast, trimmed its third-quarter outlook from $449 billion in last month’s report, while the first-quarter 2019 prediction was reduced from $332 billion.
Read more: Mortgage Daily
HUD fair housing complaint against Facebook came from a rare source
The Department of Housing and Urban Development (HUD) took the very rare step of filing a secretary-initiated fair housing compliant — only three were made in the last two fiscal years — against Facebook.
HUD’s move, along with a separate statement of interest by the U.S. Attorney for the Southern District of New York in a case filed by fair housing advocates, indicated the practices allegedly continued even after Facebook reported disabling those features after their existence became common knowledge nearly two years earlier.
The agency filed only one secretary-initiated complaint in fiscal year 2017 and two the year before that. There were over 8,300 complaints filed in total in fiscal year 2016.
After the initial article by ProPublica appeared in October 2016, Facebook’s ethnic attributes selections were supposed to have been disabled, the company said in November of that year. Advertisers could select who could or couldn’t see marketing materials, but several selections allegedly violated the rights of protected classes under the Fair Housing Act.
Read more: National Mortgage News
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