Residential: What’s driving the increased trading of home equity loans?

What’s driving the increased trading of home equity loans?

Activity in the secondary market for home equity loans, also known as 2nd lien loans, has ramped up across most market segments in 2018. The spur behind the increased trading has been greater supply driven by higher prices, according to a new report from MountainView Financial Solutions, a Situs company.

“Competition for re-performing and non-performing 1st lien loans has caused investors to look at other asset classes within the residential mortgage market to try to achieve better returns,” said Jonas Roth, a managing director at MountainView and the author of the report. “Those investors have taken a more positive view of 2nd lien loans and driven up pricing. Rising prices have in turn caused more investors that are typically holders of the product to sell and take advantage of current market conditions.”

Pricing for performing 2nd liens has steadily increased year over year and is higher today than it has been in the last eight years. Performing loans with interest rates above 6 percent and borrower credit scores above 660 are trading for 80-100 cents on the dollar and even higher in a few cases.

Re-performing 2nd lien prices also continue to improve. MountainView’s report states that prices are now in the range of mid-40s to high-60s cents on the dollar, after being in the mid-teens to high-20s in prior years.

Non-performing 2nd liens trade as actively as performing and re-performing 2nd liens, according to Roth. As with other market segments, increased pricing since 2017 has led to increased supply. Current pricing for secured non-performing 2nds generally ranges from the mid-teens to high-20s.

MountainView’s report is available for download.


Treasury urges mortgage sector to embrace digital tech

The Treasury Department’s recent report on how to regulate nonbanks drew praise not just from tech startups but also from mortgage industry insiders.

In addition to recommendations for a new federal fintech charter and that regulators pull back from payday lending rules, the report contained a section that might be music to a mortgage banker’s ears, including support for the industry’s automation efforts and another call to soften the use of the False Claims Act against lenders.

The report discussed ways to accelerate adoption of electronic promissory notes — or eNotes — in federal mortgage programs, as well as automated appraisals.

Read more: American Banker


Last line of defense: Claims management

Claims management requires more than just one star player. It does not fall under the scope of one particular position or team. Instead, the expansive activities that directly impact the claims environment generally include property maintenance and preservation, vendor management, eviction, claim preparation, quality assurance, loss analysis, inventory pipeline monitoring, exposure projecting and corporate advance reconciliation, which includes all post-default recoverable and non-recoverable servicer advances.

In order to maximize returns, servicers are charged with successfully navigating dozens of discrete claims-related activities and processes across numerous teams. Failing to do so can lead to diminished qualified claims proceeds and an increased potential for claim-filing inaccuracies. The ultimate payment of reimbursable investor/insurer claims truly does represent the last line of defense from a financial perspective, so it is imperative that the mechanics of milestone activity oversight, intermediate activity coordination, and inventory pipeline monitoring are tightly managed.

Read more: DS News


Healthy demand lifts multifamily rents but supply growth raises concerns

The multifamily market remains steady, but “robust” supply growth raises concern for the near future, analysts say.

Yardi Matrix, Santa Barbara, Calif., said average U.S. apartment rents rose $3 in July to a record high $1,409. Rents are up $41 or three percent year-to-date, in line with growth figures during the same period in recent years.

“That’s encouraging because it once again shows that the expansion has not run out of steam despite headwinds of increased supply and affordability issues,” Yardi Matrix’s Multifamily National Report said.

Peter Muoio, Chief Economist with Ten-X Commercial, Irvine, Calif., agreed multifamily rental demand remains strong but noted climbing vacancies raise the question of oversupply. The multifamily market is “grappling with robust supply” as vacancies have climbed 40 basis points in the past year and are projected to soar by another 110 basis points by 2021, he said.

Read more: Mortgage Bankers Association


The growth of non-agency loan originations

Everyone is talking about the growing non-agency/non-qualified mortgage (QM) market. While non-QM loans currently represent approximately 3 percent of the market, many industry experts, including the MBA and S&P Global Ratings, have predicted the non-QM market will again double in size this year.

Early non-agency/non-QM loans have performed well, with extremely low delinquency or default rates, and are being pooled into private-label residential mortgage-backed securities (RMBS). Q1 2018 saw $6.28-billion in the issuance of non-agency RMBS, which was more than double the activity in Q1 2017.

The trend isn’t driven by new entrants (yet), but larger players who have been in the market for the past few years issuing more securitizations. Caliber Home Loans, for example, issued its first 2018 securitization in January, nearly three months ahead of its first 2017 deal. The $401 million transaction, dubbed COLT 2018-1 Mortgage Loan Trust, included 865 high-balance mortgages mostly originated last fall to borrowers with slightly blemished credit or loan terms that do not comply with the QM rule.

Read more: MReport


GSEs finance fewer loans in 2018 at midway

Fannie Mae and Freddie Mac bankrolled fewer single-family loans through the first half of this year compared to the first six months of 2017.

Collectively, the government-sponsored enterprises (GSEs) financed 1.6 million home-purchase mortgages and refinances in the January-through-June period, the agencies reported. That was down 9 percent from 1.76 million loans in the first half of 2017.

Through the first half of 2018, Fannie Mae’s loan counts fell 10.5 percent to 961,000 and its volume declined by 7.1 percent to $222.7 billion, compared to the same period in 2017.

Read more: Scotsman Guide


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