Here we are at Star Wars Day (“May the 4th be with you!”) already, and although things are somewhat quiet in residential lending as vendors and lenders continue to deal with over-capacity while hoping for lower rates and higher volumes, there are some things going on as examples of supply and demand. Supply: Vaulted Deep is a company funded by Stripe, Alphabet, Meta, Shopify and McKinsey, and essentially exists to dump enormous volumes of human waste and carbon dioxide into deep wells in the ground. Brands are paying Vaulted Deep many millions to push waste downward into these wells, including 20 percent of Los Angeles’ sewage sludge! Demand: There certainly isn’t a lot of private equity flowing into residential lending, unlike… the pet medical business. Pets are big business, and $51.6 billion in private equity money, from 2017 to 2023, with $9.3 billion so far this year, has gone into buying up vet practices. Mars Inc. (yes, it owns Skittles) owns and operates 2,000 veterinary practices under the Banfield, VCA, and BluePearl brands, and JAB Holding Company (the Panera people) owns over 1,000 practices under the National Veterinary Associates umbrella. Anywhere from 25 to 30 percent of practices in the U.S. have been rolled up into a larger firm, up from 8 percent a decade ago. And they charge a lot more, so shop around!
Saturday Spotlight: Prudent AI
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“Get instant income certainty with fraud protection.”
In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).
Prudent AI is the default income intelligence platform powering the top non-QM lenders, including Angel Oak, Newfi, Change Lending, Kind Lending, Logan finance and several others. Our intuitive UI and cutting-edge AI enables lenders to pre-qualify borrowers with a single click while providing day-one income certainty and proactive fraud screening.
Trusted by over 50 percent of the non-QM market, Prudent AI empowers lenders to double their loan volume, save 4 hours per application, and keep their operating costs in check as they scale.
Founded in July 2020, our mission is to revolutionize lending by equipping teams with tools that offer them unparalleled speed, accuracy, and confidence in their decision-making.
Looking ahead, Prudent AI is poised for explosive growth as we continue to transform the lending landscape. Our roadmap includes aggressive expansion into new market segments, strategic partnerships with industry giants, and the development of groundbreaking AI solutions that will redefine the way lenders operate. With our unrivalled technology and deep industry expertise, Prudent AI is not just shaping the future of lending – we are creating it.
What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?
At Prudent AI, we prioritize the growth and development of our employees. We offer a dedicated budget for learning and development, allowing our team members to enroll in courses and training programs that align with their professional goals.
Additionally, we foster a culture of knowledge sharing through regular internal sessions. We also encourage innovation by providing our employees with the time and resources they need to work on new ideas.
We believe that we can achieve more when we trust each other, and we are committed to creating a high-trust environment for everyone on our team.
Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable.
At Prudent AI, we have adopted a flexible working model that balances the benefits of remote work with the collaborative spirit of in-person interactions. Our team members work from home three days a week and spend two days in the office. To further strengthen our company culture and promote cross-functional collaboration, we organize regular team dinners and off-site events that bring together teams from multiple locations.
Things you are most proud of that don’t have to do with sales.
At Prudent AI, we take immense pride in our technology, which has been developed with a deep understanding of our customers’ needs. By working closely with lenders from the very beginning, we have built a platform that is intuitive, user-friendly, and incredibly fast. Our customers have become ardent fans of our app, appreciating its ease of use and the speed at which it delivers results.
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
Vendor news of note
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Redwood Trust is known for many things, primarily its market-leading non-agency correspondent and securitization platform for Prime Jumbo loans. Redwood also recently entered the home equity space, with the launch of a brand new Closed-End Second purchase program, as well as Aspire, Redwood’s home equity investment (HEI) direct origination platform. Redwood’s Closed-End Second program is competitively priced and offers 10, 15, 20, and 30-year fixed rate options, allowing up to an 85% LTV and $350k loan amount. And through Aspire, Redwood offers clients opportunities to earn fees on Aspire-originated home equity investments. Please reach out to your Redwood Relationship Manager or contact@redwoodtrust.com for more details.
One of the fastest-growing mortgage banks in the U.S., American Financial Network Inc., (AFN), is teaming up with zavvie, an award-winning software technology company empowering loan officers and real estate agents to win and close more deals with its popular Cash Offer programs. By partnering with zavvie, AFN aims to help turn more buyers into “cash buyers” through more than 1,150 trusted loan originators in 240-plus offices nationwide. According to the National Association of Realtors, cash buyers surged to a decade-high last month. Home buyers paying cash accounted for nearly one in three home sales (32 percent) in January, the highest share since 2014.
Informative Research, a leading technology platform that delivers data-driven solutions to the lending community, announced the integration of Veri-Tax, the market leader in delivering the industry’s fastest verifications, into its proprietary Verification Platform. The integration merges Informative Research’s platform with Veri-Tax’s verification services so lenders can access advanced validation tools that elevate the accuracy and reliability of borrower information. Leveraging its “employer happiness” process, innovative digital tools, and an employer intelligence database of over 4 million transactions and growing, Veri-Tax ensures swift and precise verifications, further bolstering Informative Research’s reputation for efficiency and reliability in the mortgage industry.
Floify, the mortgage industry’s leading point-of-sale (POS) solution, announced an enhanced integration with customer engagement platform Total Expert. This collaboration enables loan originators to effortlessly send pre-populated loan applications to borrowers, leveraging the existing data within Total Expert. This feature is designed to streamline the loan origination process for lenders and enhance the application experience for borrowers by reducing redundant data entry. Benchmark Mortgage, who already uses both Floify and Total Expert, was a beta tester for the enhancement.
LoanCare®, LLC, a top U.S. mortgage subservicer, announced that Fitch Ratings has assigned the company the U.S. residential primary servicer for specialty Closed-End Second Lien products rating of RPS2+; Outlook Stable. In addition, Fitch affirmed LoanCare’s U.S. residential primary servicer for Prime product and specialty subservicer ratings at RPS2+ in 2023, reflecting the company’s strong focus on advancing processes and providing subservicing excellence. The rating validates LoanCare’s comprehensive understanding of the complexities involved in servicing home equity lines of credit (HELOC).
Capital markets: demand driving supply
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If there’s no demand for a manufactured product, whether it be bicycles, boats, or mortgages, then there’s little reason to manufacture it. It is important for loan originators to know that there is demand by investors for their loans, and this demand drives rates and prices for borrowers. Let’s play some catch up on who’s doing what.
Angel Oak Capital Advisors announced the successful completion of their fourth securitization AOMT 2024-4, bringing their total securitization for the year to $1.4 billion in issuance. The firm’s latest securitization results from a strengthening pipeline of loan volume and talent growth across Angel Oak Mortgage Solutions. With an average FICO score of 741, an average loan-to-value ratio of 71.4% and a debt-to-income ratio of 32.4 percent across the securitizations, the senior tranche for all four securitizations received a rating of AAA by Fitch. Growth of the firm’s affiliated mortgage origination arm, Angel Oak Mortgage Solutions, which has contributed approximately 72 percent of the loans to this year’s securitizations, has spearheaded the success and breadth of Angel Oak Capital’s securitizations. Angel Oak Mortgage Solutions has expanded significantly in both origination volume and talent acquisition, a particularly notable accomplishment at a time marked by high interest rates, declining mortgage demand overall and economic volatility. The firm’s year-over-year origination volume for the firm grew over 80 percent from 2023. To supplement this increase in loans, the firm increased its account executive team by nearly 25 percent in the same period.
Recall that in the All Participants Memorandum (APM) 24-01, Ginnie Mae announced modernizations to its Manufactured Housing Mortgage-Backed Securities (MH MBS) program in an effort to expand program participation and support additional liquidity for borrowers for manufactured housing. These enhancements are part of a comprehensive program review that considers the evolving risk environment since the last major program update in 2010. The changes were announced in a White House fact sheet delineating Biden-Harris administration actions to boost housing supply and lower housing costs, which build on the U.S. Department of Housing and Urban Development’s Strategic Plan to enhance the role of manufactured housing in the United States. Drawing from the results of the review and in partnership with the Federal Housing Administration’s (FHA) proposed Title 1 policy changes, Ginnie Mae is revising its issuer financial eligibility requirements in the Mortgage-Backed Securities Guide 5500.3 Rev-1 (MBS Guide) for both institutions seeking approval as Ginnie Mae Manufactured Housing Issuers (MH Applicants) and existing, approved Ginnie Mae MH issuers. These include revisions to the net worth and liquidity requirements that will go into effect on March 1, 2024, for MH applicants and on June 1, 2024, for existing MH issuers.
Capital markets fintech Dv01 and research agency Fitch Ratings announced a collaboration to offer new benchmarks for non-QM and jumbo residential mortgage-backed securities. Data used to help determine the benchmarks comes from deals the data and analytics provider Dv01 helped facilitate, Fitch-rated RMBS transactions and other issuances where parties agreed to provide information to support their initiative. Benchmarks will be available free of charge on Dv01’s web application and aim to provide “the most comprehensive representation,” the companies said. Issuers who onboard their securitized portfolios with dv01, whether or not rated by Fitch, will have deals pooled into a single dataset and be able to benchmark their performance against the broader market. Dv01 clients can also compare individual transactions to those benchmarks. According to the two firms, benchmark data comprise 75 percent of each respective loan segment. The non-QM figure includes data from over 210,000 residential originations made since 2013. Original balances of the loans exceed $100 billion. Meanwhile, the prime jumbo benchmark consists of more than 200,000 loans originated in 2013 or later, with a combined loan balance of $145 billion.
Among the findings coming out of the new collaboration about prime jumbo RMBS was a rise in loan-to-value originations between 2018 and 2020, while mortgages with low FICO scores decreased. The past three years have seen LTVs remain stable even as home prices increased faster than household incomes. In the non-QM sector, debt-to-income loan performance remained stable over the past few years, even while home prices and interest rates surged. The latest agreement between Fitch Ratings and Dv01 is the second announced this month to make use of some of the services both offer. Parent company Fitch Group, agreed to purchase a majority stake in Dv01 in 2022, operating it as a separate division but combining resources. In mid-February, Fitch Ratings rolled out a new interactive RMBS presale report, which gives investors access to loan tapes through an embedded link to Dv01’s application. The presale tapes provide greater insights into factors the agency considered in making credit risk determinations. A recent report looking at overall RMBS performance from Moody’s Investors Service found mortgage securities holding up better than other types of consumer debt. But Fitch has also warned of variations between vintages and loan types, pointing out some 2023 segments are performing weaker than earlier pools due in part to their corresponding higher interest rates.
Freddie Mac announced its updated Single-Family Social MBS and Corporate Debt Bonds Framework, which includes updates to its mortgage-backed securities (MBS) disclosures. The updates are designed to further support underserved borrowers’ access to credit and affordable housing as part of the company’s mission and goals. As part of the framework updates, Freddie Mac and Fannie Mae will rename their existing Social Index as the “Mission Index” in February 2024 and update the formulation of the index in May 2024 and February 2024, respectively. The renamed and reformulated Mission Index will begin to apply to pools issued by Freddie Mac beginning in June 2024 and for Fannie Mae beginning in March 2024. The updated framework sets forth the criteria for Freddie Mac mortgage collateral that is eligible to be pooled, issued, and labeled as “Social MBS” beginning with June 2024 issuances. The label will be applied to an MBS when its underlying pool exceeds a certain score in the Mission Index.
PHH Mortgage’s Ocwen priced a $268.6 million (offered) reverse mortgage RMBS issue, Ocwen Loan Investment Trust 2024-HB1 (OLIT 2024-HB1). With joint bookrunners Barclays, Nomura, and Performance Trust, the capital structure included Class A and classes M-1 through M-4, ranging in rating from AAA (sf) to BB (low)(sf). The expected settlement is 02/22/2024. The Class M4 Notes may only be allocated to U.S. persons, and Class M4 buyers will need to execute a transferee certification and provide a completed Form W-9 for the entity, or entities being allocated bonds. Debt for Tax Opinion exists among Class A, M-1 and M-2, M3 “Qualified Will” Debt for Tax Opinion, and M4 “Should Be” Debt for Tax opinion.
Fannie Mae priced Connecticut Avenue Securities (CAS) Series 2024-R02, an approximately $751 million note offering that represents Fannie Mae’s second CAS REMIC transaction of the year. CAS is Fannie Mae’s benchmark issuance program designed to share credit risk on its single-family conventional guaranty book of business. Year to date, Fannie Mae has issued approximately $1.57 billion of notes under the CAS program. The reference pool for CAS Series 2024-R02 consists of approximately 56,000 single-family mortgage loans with an outstanding unpaid principal balance of approximately $18.6 billion. The reference pool includes collateral with loan-to-value ratios of 60.01 percent to 80.00 percent, which were acquired between April 2023 and July 2023. The loans included in this transaction are fixed-rate, generally 30-year term, fully amortizing mortgages and were underwritten using rigorous credit standards and enhanced risk controls. Fannie Mae will retain a portion of the 1M-1, 1M-2, 1B-1, and 1B-2 tranches, and initially will retain the full 1B-3H first-loss tranche. Wells Fargo is the lead structuring manager and joint bookrunner. StoneX is the co-lead manager and joint bookrunner. Co-managers are BofA, Cantor Fitzgerald, Citigroup, and Morgan Stanley. Selling group members are Minority and Service-Disabled Veteran-owned Academy Securities, Inc. and African American-owned Castle Oak Securities, L.P. With the completion of this transaction, Fannie Mae will have brought 63 CAS deals to market, issued over $66 billion in notes, and transferred a portion of the credit risk to private investors on over $2.1 trillion in single-family mortgage loans, measured at the time of the transaction.
Taking a break from the usual humor and trivia, here is a short video reminder of how there are many good people out there.
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 titled, “Relying on the Fed: How Did This Happen?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2024 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)
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