Secondary Market Corner 8/31/20
By: Pete Radigan, Senior Consultant
The dust has started to settle on FHFA’s “Great Fee Robbery”, as the Adverse Market Refinance Fee (AMRF) has been postponed to December 1, 2020. Kudos to the mortgage industry in a concerted grass roots effort to respond with letters to the Congressional Delegations and Regulators; made all the difference in FHFA reconsidering the implementation date. An additional “atta boy” to the aggregators that agreed to honor the pipeline locks including extensions of their correspondent lenders. Job well done.
On the business side, the initial AMRF announcement quickly impacted secondary market desks; with interest rates increasing on average 1/8% across the board. The bond market remains accommodative with the 30-year conforming to 10-year treasuries remaining in a tight trading range with the 10-year treasuries at 73 basis points.
The “Corner” has observed:
primary/secondary rate between the implied mortgage bond rate and the interest rate offered to the borrowers continues to be wider than normal
lender margins still north of 103.00 Net Target Price.
The COVID-19 dynamics and lower interest rate environment has elevated balance sheet risk with forbearance/loss mitigations coupled with portfolio runoff. As the market is flush with current production at record low interest rates it may be a good opportunity to sell/buy loans as a balance sheet strategy to replace runoff and reduce credit risk in the portfolio.
SCA’s Mortgage Exchange trading platform is ready to help our clients with the expertise to execute trades and flow sales to increase profitability and reduce balance sheet risk. For more details, email pradigan@scapartnering.com.
Secondary Market services and whole loan trading offered by Spillane Consulting Associates, Inc.
Spillane Consulting Associates has served the residential mortgage lending business since 1991. We have specialized in mortgage banking consulting services and provided quality control reviews, risk management and process consulting and employee training to credit unions, community banks and non-depository institutions. We are a thought leader on the strategic growth of residential mortgage lending. You can learn more by visiting our website, or scheduling a meeting with me or one of my colleagues.
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