May 11: Agencies continue to transfer risk; blockchain & AI lender news; advice from senior female exec

Everyone is very important at work. In fact, indispensable, right? The time Americans actually take off from work has declined from 20 days per year in 1987 to 17 days in 2017 when the average worker didn’t take six of their paid vacation days on average, which in aggregate amounts to 705 million days of travel that were not used to relax and recharge. Is that admirable?

Peck o’ Tech

The more lending heads down the artificial intelligence path, the more cybersecurity you need, right? I’ve heard plenty of company’s IT staff’s efforts to nudge employees to click on unknown links and then receive an instructional warning from management. “Click here to see a list of employees receiving raises in the next pay cycle.” “Click here for improvements to company benefits plan.” “Click for $50 company-sponsored Nordstrom’s gift card.” “Click here to see your revised PTO schedule.” Returning to security, no one is immune from making mistakes. An associate in a Vancouver law firm was duped into wiring the money to a Hong Kong bank account by fraudsters with knowledge of the firm’s work on a real estate deal. Cybersecurity spending for some large banks has tripled in the past few years, with financial firms spending an average of $3,000 per employee. Money alone cannot address the issue, and financial firms need a well-planned and properly governed security program.

There’s lots going on in the blockchain world. This week Figure Technologies announced it had closed an up to $1 billion uncommitted asset-based financing facility on the Provenance.io blockchain. And the Federal Reserve Bank of Boston is acknowledging that blockchain technology is becoming more mainstream and will require regulation. The regulator has proposed the creation of “supervisory nodes” within blockchain systems.

Women being seen and heard

Periodically this commentary prints letters from women or people of diverse backgrounds in the lending, real estate, or related businesses. (Submit something if you’d like to give advice to females or people of color new to our biz!) Colleen Kennedy, a Senior Field Sales Manager for Genworth Mortgage Insurance, has worked in mortgage sales for 20 years following various positions in project management and distribution. Colleen’s advice is geared toward sales professionals.

“Always answer the next question, the one they didn’t ask. A decent sales professional will know her stuff and be good at follow-up. When you think bigger than that you’ll become a more valuable partner. If you consistently focus on how you can help your customer rather than how they can help you meet your goals, you’ll be more successful than imaginable.

“Stay off the naughty list. Most companies require you do some basic administrative and reporting tasks. Get those done so your sales successes aren’t overshadowed by not completing the prerequisites. Don’t begrudge another person’s success. Applaud them, seek them out and learn from them. Making excuses for why other people do more business is negativity that will not help you at all. Focus on learning and growing.”

Colleen finished up with, “If you feel too comfortable, you’re probably missing opportunities!”

Agency action in the capital markets

Given his past stance of Freddie & Fannie, many were surprised when so many industry groups backed Mark Calabria becoming the next FHFA Director. Yet we can look for some form of GSE capital retention but also continued support for GSE (government sponsored enterprises) Credit Risk Transfers (CRTs), which should be a tailwind for industry participants like PennyMac.

Freddie & Fannie continue to move forward with initiatives that aren’t directly reliant on political decisions, like billions of dollars of transferring credit risk. Dan Fichtler, Director of Housing Finance Policy, for the Mortgage Bankers Association observes, “We continue to be encouraged by the progress the GSEs are making with respect to their CRT programs. For the STACR and CAS offerings in particular, it’s clear that they’ve turned the corner to become better-understood, more-liquid securities, which is increasing investor demand and contributing to tighter spreads. Another very positive development is the decision by both GSEs to issue their STACR and CAS securities as REMICs, which should allow greater investment by REITs.”

Loan originators should know that transferring credit risk away from taxpayers to willing buyers help rates for their borrowers. Let’s see what Freddie’s been up to in the capital markets.

On April 23, Freddie Mac priced a new $1.1 billion offering of Structured Pass-Through K-Certificates (K-091 Certificates), which are multifamily mortgage-backed securities, expected to settle on or about April 29, 2019.The K-091 Certificates are backed by corresponding classes issued by the FREMF 2019-K91 Mortgage Trust (K-91 Trust) and guaranteed by Freddie Mac, which will also issue certificates consisting of the Class X2-A, Class X2-B, Class B, Class C, Class D and Class R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-091 Certificates. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds, typically featuring a wide range of investor options with stable cash flows and structured credit enhancement. Pricing for the deal is as follows. Class A-1 has principal of $83.6 million, a weighted average life of 6.62 years, a coupon of 3.339%, a yield of 2.985% and a dollar price of $101.9947. Class A-2 has principal of $1053.6 million, a weighted average life of 9.79 years, a coupon of 3.505%, a yield of 3.142% and a dollar price of $102.9983. Class A-M has principal of $53.7 million, a weighted average life of 9.91 years, a coupon of 3.566%, a yield of 3.206% and a dollar price of $102.9990. Class X1 has principal of $1.137 billion, a weighted average life of 9.24 years, a coupon of 0.559%, a yield of 3.692% and a dollar price of $4.8129. Class X3 has principal of $193.9 million, a weighted average life of 9.88 years, a coupon of 2.278%, a yield of 5.015% and a dollar price of $18.0817.

On April 12, Freddie Mac an auction transaction for an approximate $363 million of non-performing (NPL) residential first lien whole loans held in Freddie Mac’s mortgage-related investments portfolio. The NPLs are currently serviced by NewRez and are being marketed via four pools: three Standard Pool Offerings (SPO) with bids due by May 7, 2019 and one Extended Timeline Pool Offering (EXPO) with bids due May 21, which targets participation by smaller investors. The sales are expected to settle in July 2019. Freddie Mac’s seasoned loan offerings are focused on reducing less-liquid assets in the company’s mortgage-related investments portfolio including sales of NPLs, securitizations of re-performing loans (RPLs) and structured RPL transactions. To date, Freddie Mac has sold $8 billion of NPLs and securitized more than $50 billion of RPLs consisting of $29 billion via fully guaranteed PCs, $18 billion via Seasoned Credit Risk Transfer senior/sub securitizations, and $3 billion via Seasoned Loans Structured Transaction offerings. To participate, all potential bidders are required to be approved by Freddie Mac and must successfully complete a qualification package to access the secure data room containing information about the NPLs and to bid on the NPL pool(s). The bids are to be made on an all-or-none basis for any pool separately or for any combination of SPO pools together.

Also on the 12th, Freddie announced the pricing of the $553 million SB61 offering, its fourth multifamily mortgage-backed securitization in 2019 backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust, anticipated to settle on or about April 22, 2019. Freddie Mac Small Balance Loans generally range from $1 million to $6 million and are generally backed by properties with five or more units. Freddie Mac is guaranteeing five senior principal and interest classes and one interest only class of securities issued by the FRESB 2019-SB61 Mortgage Trust in addition to acting as mortgage loan seller and master servicer to the trust. In addition to the six classes of securities guaranteed by Freddie Mac, the trust will issue certificates consisting of Class B and Class R Certificates, which will not be guaranteed by Freddie Mac and will be sold to private investors. The OptigoSM Small Balance Loan origination initiative was first announced in October 2014, and expands the company’s continuing effort to better serve less populated markets and provide additional liquidity to smaller apartment properties through a specialty network of Optigo Seller/Servicers and Optigo SBL lenders who source loans across the country. Pricing for the deal is as follows. Class A-5F has principal of $87.0 million, a weighted average life of 3.98 years, a coupon of 2.86%, and a dollar price of $100.4719. Class A-5H has principal of $173.8 million, a weighted average life of 4.15 years, a coupon of 2.95%, and a dollar price of $100.4954. Class A-7F has principal of $90.9 million, a weighted average life of 5.50 years, a coupon of 2.97%, and a dollar price of $100.4832. Class A-10F has principal of $135.5 million, a weighted average life of 7.19 years, a coupon of 3.17%, and a dollar price of $100.4661. Class A-10H has principal of $65.9 million, a weighted average life of 7.24 years, a coupon of 3.29%, and a dollar price of $100.4590.

Freddie priced a new offering of Structured Pass-Through K-Certificates backed by underlying collateral consisting of fixed-rate multifamily mortgages with predominantly 7-year terms. The company expects to issue approximately $1.3 billion in K-734 Certificates, which are expected to settle on or about April 18, 2019.The K-734 Certificates are backed by corresponding classes issued by the FREMF 2019-K734 Mortgage Trust (K-734 Trust) and guaranteed by Freddie Mac. The K-734 Trust will also issue class X2-A, X2-B, B, C, D and R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-734 Certificates. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement. Pricing for the deal is as follows. Class A-1 has principal of $79.4 million, a weighted average life of 4.47 years, a coupon of 3.14%, and a dollar price of $102.0000. Class A-2 has principal of $1,228.9 million, a weighted average life of 6.57 years, a coupon of 3.21%, and a dollar price of $102.0000. Class A-M has principal of $68.0 million, a weighted average life of 6.85 years, a coupon of 3.44%, and a dollar price of $103.0000. Class X1 has principal of $1,308.4 million, a weighted average life of 6.44 years, a coupon of 0.648%, and a dollar price of $3.8212. Class X3 has principal of $224.0 million, a weighted average life of 6.94 years, a coupon of 2.17%, and a dollar price of $12.7684.

On January 24, Freddie Mac priced a new $671.3 million offering of Structured Pass-Through K-Certificates (K-BF3), backed by 23 floating-rate multifamily mortgages with ten-year terms, expected to settle on or about January 31, 2019. The transaction collateral is part of Freddie Mac’s single-asset, single borrower (SASB) execution, which transfers first loss credit risk on either one or multiple properties owned or controlled by a single sponsorship group. Class A, the only offered class has principal of $671.3 million, a weighted average life of 9.76 years, a coupon of 1-month LIBOR + 53 and a dollar price of 100.00. The K-BF3 Certificates are backed by corresponding classes issued by the FREMF 2019-KBF3 Mortgage Trust (KBF3 Trust) and guaranteed by Freddie Mac. The KBF3 Trust will also issue certificates consisting of the Class B, C and R Certificates, which will be subordinate to the classes backing the K-BF3 Certificates and will not be guaranteed by Freddie Mac. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

On February 14, Freddie Mac announced the pricing of the multifamily SB59 MBS offering, backed by small balance loans underwritten by Freddie Mac and issued by a third-party trust. The company expects to guarantee approximately $562 million in Multifamily SB Certificates, which are anticipated to settle on or about February 27, 2019. Freddie Mac Small Balance Loans generally range from $1 million to $6 million and are generally backed by properties with five or more units. This is the second SB Certificate transaction in 2019. Freddie Mac is guaranteeing five senior principal and interest classes and one interest only class of securities issued by the FRESB 2019-SB59 Mortgage Trust. Freddie Mac is also acting as mortgage loan seller and master servicer to the trust. In addition to the five classes of securities guaranteed by Freddie Mac, the trust will issue certificates consisting of Class B and Class R Certificates, which will not be guaranteed by Freddie Mac and will be sold to private investors. The OptigoSM Small Balance Loan (SBL) origination initiative was first announced in October 2014, and expands the company’s continuing effort to better serve less populated markets and provide additional liquidity to smaller apartment properties. Freddie Mac has a specialty network of Optigo Seller/Servicers and Optigo SBL lenders with extensive experience in this market who source loans across the country.

On March 21, Freddie Mac priced a new $908 million offering of Structured Pass-Through K-Certificates backed by floating-rate multifamily mortgages with seven-year terms, expected to settle on or about March 28, 2019. The K-F60 Certificates will not be rated, and will include one senior principal and interest class, one interest-only class, and one class entitled to static prepayment premiums. The one senior principal and interest class, class A, will have principal of $908.3 million, weighted average life of 6.65 years, a coupon of 1-month LIBOR + 49, and an even par dollar price. The K-F60 Certificates are backed by corresponding classes issued by the FREMF 2019-KF60 Mortgage Trust (KF60 Trust) and guaranteed by Freddie Mac. The KF60 Trust will also issue certificates consisting of the Class B, C and R Certificates, which will be subordinate to the classes backing the K-F60 Certificates and will not be guaranteed by Freddie Mac.

On March 15, Freddie Mac priced a $1.4 billion offering of Structured Pass-Through K-Certificate multifamily mortgage-backed securities, expected to settle on or about March 21, 2019. K-089 has three offered classes, as follows. Class A-1 has principal of $106.5 million, a weighted average life of 6.99 years, a coupon of 3.34%, a yield of 3.01%, and a dollar price of $101.9960. Class A-2 has principal of $1.120 billion, a weighted average life of 9.80 years, a coupon of 3.56%, a yield of 3.20%, and a dollar price of $102.9985. Class A-M has principal of $53.9 million, a weighted average life of 9.84 years, a coupon of 3.63%, a yield of 3.27%, and a dollar price of $102.9926. The K-089 Certificates are backed by corresponding classes issued by the FREMF 2019-K89 Mortgage Trust (K-89 Trust) and guaranteed by Freddie Mac. The K-89 Trust will also issue certificates consisting of the Class X2-A, Class X2-B, Class B, Class C, Class D and Class R Certificates, which will not be guaranteed by Freddie Mac and will not back any class of K-089 Certificates. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.

On April 4, Freddie Mac priced a new $1.2 billion offering of Structured Pass-Through K-Certificates (K-090 Certificates), comprised of multifamily mortgage-backed securities, which are expected to settle on or about April 11, 2019. The K-090 Certificates are backed by corresponding classes issued by the FREMF 2019-K90 Mortgage Trust and guaranteed by Freddie Mac. Certificates consisting of the Class X2-A, Class X2-B, Class B, Class C, Class D and Class R Certificates, will be issued but will not be guaranteed by Freddie Mac and will not back any class of K-090 Certificates. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds, featuring a wide range of investor options with stable cash flows and structured credit enhancement. Class A-1 will have a principal amount of $79.4 million, a weighted average life of 6.90 years, a coupon of 3.216%, and a dollar price of $101.9956. Class A-2 will have a principal amount of $1,068.5 million, a weighted average life of 9.81 years, a coupon of 3.422%, and a dollar price of $102.9940. Class A-M will have a principal amount of $50.5 million, a weighted average life of 9.92 years, a coupon of 3.492%, and a dollar price of $102.9933.

After getting all of the Pope’s luggage loaded into the limo (and he doesn’t travel light), the driver notices that the Pope is still standing on the curb.

“Excuse me, Your Eminence,” says the driver, “would you please take your seat so we can leave?”

“Well, to tell you the truth,” says the Pope, “they never let me drive at the Vatican, and I’d really like to drive today.”

“I’m sorry but I cannot let you do that. I’d lose my job! And what if something should happen?” protests the driver, wishing he’d never gone to work that morning.

“There might be something extra in it for you,” says the Pope.

Reluctantly, the driver gets in the back as the Pope climbs in behind the wheel.

The driver quickly regrets his decision when, after exiting the airport, the Supreme Pontiff floors it, accelerating the limo to 105 mph.

“Please slow down, Your Holiness!!!” pleads the worried driver, but the Pope keeps the pedal to the metal until they hear sirens.

“Oh, dear God, I’m gonna lose my license,” moans the driver.

The Pope pulls over and rolls down the window as the cop approaches, but the cop takes one look at him, goes back to his motorcycle, and gets on the radio.

“I need to talk to the Chief,” he says to the dispatcher.

The Chief gets on the radio and the cop tells him that he’s stopped a limo going a hundred and five.

“So bust him,” said the Chief.

“I don’t think we want to do that, he’s really important,” said the cop.

Chief exclaimed, “All the more reason!”

“No, I mean really important,” said the cop.

The Chief then asked, “Who ya got there, the Mayor?”

Cop: “Bigger.”

Chief: “Governor?”

Cop: “Bigger.”

“Well,” said the Chief, “Who is it?”

Cop: “I think it’s God!”

Chief: “What makes you think it’s God?”

Cop: “He’s got the Pope for a limo driver!”

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Are You Ready for CECL?” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)