Two top wholesale lenders are armed as a result of the price of a loan sold to a government-sponsored agency (GSE) because of the high risk of a loan during a recession.
Lender, Home point When United Wholesale MortgagesSay Fannie Mae When Freddie Mac In mid-2021, we began to charge an additional 15 basis points for third-party loan or wholesale loans. According to an analysis provided by Homepoint, wholesale lenders are currently paying at least $ 279 million. Rising mortgage rates We are already reducing the profits of lenders.
Willy Newman, CEO of Homepoint, said: “One segment of the business is treated differently.”
A United Wholesale Mortgages A spokeswoman said the surcharge was part of the “2007/2008 perspective of an old school that was out of date.”
Prices, Federal Housing Finance AgencyHowever, the agency’s attitude towards third-party loans in terms of capital risk provides the basis. A FHFA spokesperson said the GSE has the discretion to set its own price as long as it meets the FHFA minimum price guidelines.
The FHFA declined to comment on whether it considers wholesale loans inherently risky or provides data to support its stance.
The mortgage industry is emerging after an amazing number of years, and while 2022 still has great opportunities for the industry, it is also a key point for market participants. Recognizing the upcoming transition, Penny Mac is making changes to ensure that 2022 forms the basis for the long-term value of its wholesale partners.
Provided by: Penny Mac
Fannie Mae said it will price loans to comply with FHFA’s enterprise regulatory capital framework. rule It manages GSE’s capital standards. This rule defines the wholesale loan risk multiplier as 1.1. This is higher than the risk multiplier for loans incurred on other channels. A single mortgage cannot have a total risk multiplier (combination of many risk factors) greater than three.
A Fannie Mae spokesperson said the GSE has a higher capital charge on wholesale loans.
“To stay compliant with the required capital return threshold, Fannie Mae adjusts the price to the combination of collateral received. TPO is one of the pricing features,” said a spokesman. ..
Homepoint said both GSEs are charging an additional fee. However, a Freddie Mac spokesman who adheres to the same rules said he would not assess the additional charge of 15 basis points for wholesale loans. Freddie Mac refused to provide a basis for pricing wholesale and other origination channels and did not answer questions about how to pass the 1.1 risk multiplier of the wholesale loan capital rules. ..
Wholesale lenders argue that data on wholesale loan delinquency and loan quality dispels the idea that wholesale loans are more risky. That wasn’t the case until the Great Recession, when mortgage brokers made mistakes in many of the riskiest underwriting operations on the market.
According to Homepoint’s analysis, the default rates for non-bank and bank wholesale loans from 2005 to 2008 were 14.9% and 16.3%. On the other hand, the default for loans not created by a third party did not exceed 13%.
According to a recent analysis of defaults provided by Homepoint that the company used to explain the problem to its mortgage brokers, the default rate for loans launched between 2018 and 2019 was around 0.2% on all channels. It is changing.
“Specifically, data on delinquency and loan quality through wholesale channels confirms that broker loans are not only equal to retail, but often better,” said a UWM spokesman. ..
One of the differentiators that both Homepoint and UWM have focused on is the performance of wholesale channels with a small number of borrowers.They especially want to provide a rationale for revising a given capital rule. FHFA focused on promoting equity In mortgage finance.
The top 10 wholesale lenders have fewer traditional qualified 30-year mortgage borrowers than the top 10 non-bank retail lenders, with only 725,000 loans out of 1.12 million by non-bank retail lenders. However, more than 25% of these borrowers are minorities, while retailers are only 16%.
Therefore, Homepoint and UWM argue that not only are additional charges impacting revenue, but they also penalize borrowers for whom GSE must provide services. If FHFA wants more equity in the mortgage market, it doesn’t make sense to penalize the wholesale channel, UWM and Homepoint argue.
“The most worrying part of this extra charge is the impact on affordable purchase lending for brokers and wholesalers doing important business,” said a UWM spokeswoman. “We fully expect FHFA and all industry players to treat wholesale and retail loans equally in the near future.”