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Mortgage production defect rates in the third quarter of 2023 showed continued improvement, even as origination volume was hard to come by, the latest Aces Quality Management report found.The company's post-closing review process categorizes file errors using the Fannie Mae defect taxonomy. Defects are indicators of, but not necessarily proof of, fraud.In the third quarter, the defect rate of 1.67% was 5 basis points better than 1.72% in the second quarter and a high point of 2.47% in the third quarter of 2022.That is the lowest rate since the first quarter of 2020's 1.56%, at the very end of which, restrictions related to the Covid-19 pandemic affected all parts of American life.Lenders have gotten a better handle on quality in their loan creation processes following that spike one year ago, said Nick Volpe, Aces executive vice president, in a press release. The decline in origination volume may have worked in some manner to the advantage of originators."While fewer loans may afford lenders the opportunity to intensify their focus on quality, it's clear that maintaining high standards amidst market fluctuations remains paramount," Volpe said. "The persistence of this trend underscores the industry's adaptability and dedication to ensuring the integrity of lending practices."Issues around income and employment remain the most common defect found, at a 23.4% rate, an improvement from the second quarter's 31.25%.Income documentation problems fell to a 27% share of the category, from 47% for the prior period. But income calculation issues had a 55% share."Amidst the backdrop of fighting for every loan, one would expect the calculation subcategory to make up the majority of defects in the income/employment category – with many harder-to-qualify borrowers going through the process," the Aces report said.The company saw increases in defects related to loan documentation as well as borrower and mortgage eligibility issues.Normally, loan documentation can swing wider than other categories going between quarters. But, Aces said this quarter's shift was more pronounced, up nearly 7 percentage points to 19.15% from 12.5%.It blamed the increase on closing documentation deficiencies, followed by upfront document collection in the application processing subcategory."These types of defects are often attributed to sloppiness in the manufacturing process," Aces said.General eligibility accounted for 52% of the borrower and mortgage eligibility defects. Typically, it means cash-out refinance requirements are not being met, the property listed for sale being used to secure a refinance, an excessive debt-to-income ratio and deficiencies in general requirements for various other loan types."As more and more loans that are harder to qualify enter a lender's pipeline, it is imperative that underwriting account for nuances associated with a borrower's specific situation and chosen loan type," Aces said.The liabilities category defect rate also increased from quarter-to-quarter, to 11.35% from 8.33%. While not as prevalent, appraisal-related defect rates grew to 4.26% from 3.47%.Although Federal Housing Administration-insured mortgages made up 24.11% of the file reviews, the defect rate was 42.61%.At the other end of the spectrum, conventional loans were 59.55% of reviews but 48.7% of files with defects. Veterans Affairs-guaranteed loans were 14.22% of the quality checks but just 6.96% of the errors."Last year, the lenders that thrived were those who embraced quality control and proactively prepared for the evolving market landscape," said Trevor Gauthier, CEO at Aces. "We eagerly anticipate witnessing lenders maintain their steadfast commitment to prioritizing quality as they navigate future market dynamics."

Another cyber hack has hit a mortgage lender, with the latest exposing personal data of over 200,000 people.    On Q Financial reported details of the security incident in a filing with the Office of the Maine Attorney General last week, initially learning of "suspicious activity" on Feb. 20 coming through vulnerabilities in the software program Screenconnect. The application is used for remote access to the On Q computer network. Upon notification, On Q began an immediate investigation and installation of a patch to the Screenconnect software, which is owned by Connectwise, before discovering data had been compromised. "On March 14, 2023, the investigation determined that the Connectwise vulnerability permitted an unknown individual to gain access to our computer network and the personal information of some of our clients was exfiltrated from our network," the company wrote in a letter sent to affected customers.Personal identifiable data, including names and Social Security numbers, belonging to 211,650 individuals nationwide were found to have been exfiltrated, the filing stated.In its letter, the company said it would offer a year of credit monitoring and fraud assistance services from Transunion subsidiary Cyberscout but said it saw no evidence personal data had been misused thus far. Neither On Q Financial nor its legal representatives responded to a request for comment on Thursday. Last year, the Scottsdale, Arizona-based lender originated $692.5 million worth of loans, with the majority of business coming from the Western U.S., according to S&P Global. The company is licensed in 44 states and the District of Columbia.The latest cyber hack announcement is one of dozens of attacks to have hit mortgage lenders, servicers and title insurance agencies of all sizes in 2023 and 2024. On multiple occasions, including breaches involving Planet Home Lending and Carrington Mortgage Services, fraudsters similarly gained access to company systems and data through vendor software, pointing to increasing risk found in third-party vulnerabilities. Other incidents were proven or alleged to be ransomware attacks, where cyber criminals deny victims access to their data until a designated sum of money is paid.The wave of cybersecurity events affecting the mortgage industry is shining the spotlight on fraud reporting, contributing to a recent call from Ginnie Mae for timely notifications after they happen. The order was announced in an effort to ensure Ginnie Mae issuers are able to meet their obligations to investors and minimize impact to mortgage stakeholders. News of On Q's filing quickly caught the attention of attorneys around the country this week, paving the way for likely future litigation. On Wednesday, Oklahoma City law firm Federman & Sherwood said it had begun an investigation into the data hack and asked for victims to come forward to discuss potential legal action.  

Ginnie Mae on Wednesday issued its first warning about rules around prepayments in some time, noting that it has observed upticks "in some elements of its program."The Department of Housing and Urban Development agency, which serves as the guarantor for a large government mortgage-backed securities market, told issuers in an online bulletin that it could take action if that activity exceeds allowable limits."This could include warranted sanctions," Ginnie warned in its Notes & News bulletin.The warning comes as a change in monetary policy direction has contributed to rates lower than last year's peak, spurring prepayment activity in some recent originations.Historically, Ginnie's biggest concern has been with serial refinancing in securitized mortgages that the Department of Veterans Affairs partially guarantees at the loan level.Ginnie supports housing for veterans, first-time homebuyers and older adults in the U.S. and sells bonds it guarantees to investors both domestically and internationally.In other news, it recently held its first Latin America investor roundtable in an effort to broaden this customer base.One of the takeaways from the event Ginnie partnered with the Inter-American Development Bank on was that mortgage markets in the two regions share some common concerns, according to Julia Gordon, commissioner of the Federal Housing Administration."Despite differences in the structure of our housing finance systems, we all face similar challenges, such as natural disasters, affordability and reaching underserved populations," Gordon said in a press release.Ginnie and other U.S. agencies have been producing higher volumes of securities to sell to investors recently.In a report for global market participants, Ginnie Mae found that total U.S. agency real-estate mortgage investment conduit issuance of late reached a high not seen since April 2022. Combined, the single-, multifamily and reverse mortgage issuance in that category from Ginnie Mae, Fannie Mae and Freddie Mac totaled $26.2 billion during February. Ginnie alone contributed $14.9 billion to REMIC issuance, marking its highest volume since February 2022.Ginnie had a 55% market share in February. It's accounted for the majority of REMIC issuance on a monthly basis since November.REMICs, which are backed either by whole loans or MBS, distribute cash-flows from mortgages in ways not possible in typical pass-through securities in order to meet a greater variety of investor needs.Meanwhile, Ginnie MBS issuance in February totaled $30.9 billion in February, up from $28.1 billion the previous month, according to a separate report issued last month. Its outstanding portfolio increased to $2.54 trillion in February from $2.53 trillion in January.Monthly MBS issuance at Ginnie went through a period in which it trended downward between its peak of $89.7 billion in April 2021 and its low point of $24.2 billion in February 2023, but it's bounced back a little since then. It rose as high as $39.2 billion last June.The market is watching to see whether seasonal homebuying will lift MBS issuance to that level again this year. Based on the numbers available to date, Ginnie MBS issuance generally has been trending a little higher than in 2023.

Mortgage rates were little changed this week, even though the benchmark 10-year Treasury rose to its highest level since November, according to Freddie Mac.It is unlikely that a large drop in rates is on the horizon, the government-sponsored enterprise continued."Since the start of 2024, the 30-year fixed-rate mortgage has not reached 7% but has not dropped below 6.6% either," Sam Khater, chief economist at Freddie Mac, said in a press release. "While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term."The average for the 30-year fixed rate mortgage on April 4 was 6.82%, up 3 basis points from the prior week, the Freddie Mac Primary Mortgage Market Survey found. At this time last year, the 30-year loan averaged 6.28%.The 15-year FRM actually fell 5 basis points to 6.06% from 6.11% the prior week, but was up from 5.64% one year ago.However, the 10-year Treasury yield topped out at 4.43% on April 3, compared with 4.20% at its March 27 close. It closed on April 3 at 4.36% and by 11:30 a.m. eastern time the next morning was down to 4.34%.Zillow's rate tracker was more reflective of the movements in the 10-year, up 22 basis points as of late morning Thursday at 6.66% from an average of 6.44% the prior week."If the Fed leaves the short-end higher for longer, we think there could be more limited downside in floating-rate preferred [stock] because the coupon should remain in the double digits in most cases, versus if the Fed cuts rates, we think the likelihood is for mortgage-backed securities spreads to tighten, which could help support fundamental value across the capital structure," Eric Hagen, an analyst at BTIG, commented in his April 2 Mortgage Finance Roundup report.MBS spreads are another consideration for lenders in pricing mortgage loans."We still think banks like JPMorgan [Chase] can undercut the independent mortgage banks on price, although we're not looking for depositories to show quarter-to-quarter production numbers which are as strong as the most scaled non-bank correspondent lenders like Pennymac," Hagen said.Bond traders were bearish this week, selling off Treasurys as data about manufacturing and jobs showed the U.S. economy remained strong, a Bloomberg report noted. When demand for Treasurys declines, prices will also drop and the yields rise.More jobs data that could impact Treasury yields and thus mortgage rates will be available on Friday when the monthly Bureau of Labor Statistics report is released.

Total single-family property taxes nearly doubled the rate at which they rose in 2023, increasing by 6.9% to $363.3 billion, according to data from 89.4 million homes analyzed by Attom.That rise compared to 3.6% in 2022, and marked the biggest jump seen in the last five years. That confirms other reports and anecdotal evidence indicating that this cost has been rising at a fast clip, which could put strain on mortgage performance in some areas."Property taxes took an unusually high turn upward last year, pushing effective rates up, while huge gaps in average tax bills between different parts of the country remained in place," said Rob Barber, CEO at Attom, in a press release. "Tax increases were likely connected at least in part, to inflationary pressures on the cost of operating local governments and schools."The past year's jump brought the average effective property tax rate up by 4.1% to 0.87% or $4,062 on the typical home, compared with a 3% and 0.83%, respectively, the previous year; but as Barber notes, there's a fair amount of regional variation.Illinois led all states in effective tax rate at 1.88%, according to Attom's calculations. Attom bases the effective tax rate on the percentage of average estimated market value of home, resulting in calculations that indicate Hawaii had the lowest effective tax rate at 0.31%.Based on dollar amount, the priciest states were in the Northeast, led by New Jersey's $9,488 average property-tax bill. That amount was nearly 10 times that of the state with the lowest average tax bill, West Virginia, where the average was just $989."Disparities in how much homeowners pay in different parts of the country are usually related to a couple of important things: varying levels of government services and reduced economies of scale in metro areas with many small municipalities," Barber said.Smaller municipalities that don't have shared services and operate their governments and school systems independently generally can't operate as efficiently, he noted.In addition, some jurisdictions may react to the strain from higher property taxes by taking steps to lower them. Texas voters approved a ballot measure last year aimed at lowering school district property taxes by $18 million.The highest single-family property tax bills than can be found in certain counties, according to the report, noting that there are 1,502 of them in total where the number tops $10,000.The top two counties in this category are Essex and Bergen counties in New Jersey, where the average property tax bills were $13,145 and $13,112 last year, respectively. The third is Nassau in New York at $13,059.Rounding out the top five are San Mateo and Santa Clara counties in California at $13,001 and $12,462, respectively.Attom is a curator of real estate data. The company analyzed state, metro and county-level property tax information from county tax assessor offices nationwide for its study. It derived estimated home values used in the report from automated valuation models.

United Wholesale Mortgage is defending itself from explosive allegations in a media investigation and class action suit that the lender defrauded borrowers by billions of dollars. The first-ever report by Hunterbrook, a venture capital-backed outlet, claims UWM holds independent brokers captive and overcharged borrowers by hundreds of millions of dollars. The publication's editorial board suggests the wholesale giant is at risk of wide-ranging consequences, and shared its findings with regulators and a law firm that filed a class action suit. The lengthy article and its attached research points to over 8,000 independent mortgage brokers who sent 99% or more of their loans to UWM, volume that powered the company to the top of the industry. The lawsuit accuses "corrupt UWM loyalist" brokers of breaching their fiduciary duty to home buyers, part of racketeering charges against the firm in a new Michigan lawsuit. The report also compares UWM's $70 million net loss last year against a $600 million dividend in 2022 to CEO Mat Ishbia and his relatives, who control a holding firm with the majority stake in the company. "UWM has systematically and intentionally corrupted the wholesale mortgage channel through fraudulent practices to line its own pockets and those of its senior executives, including Mr. Ishbia, at the expense of everyday Americans," said John Zach, an attorney with Boies Schiller Flexner LLP. Hunterbrook said it shared its research with the law firm ahead of publication. The lender allegedly responded to Hunterbrook queries with a cease-and-desist. UWM in a statement Wednesday afternoon called the lawsuit a sham, and slammed Hunterbrook's affiliation with Hunterbrook Capital. The lawsuit has no mention of Hunterbrook's research or Hunterbrook Capital. "Although the real party behind it is a hedge fund named Hunterbrook, the lawyers concealed the hedge fund's involvement," a statement from a UWM spokesperson said. "Hunterbrook's business model is to sensationalize public information to manipulate the stock market, thereby enriching their wealthy funders at the expense of regular investors, many of whom are hard-working UWM employees." Hunterbrook Capital took a short position in $UWMC, a long position in $RKT, and purchased derivatives at undisclosed amounts. The entity said it raised $100 million to make trades based on its affiliate's articles, scoops only based on publicly available information. Reporters continued to update the story Wednesday afternoon, sharing instances of UWM deleting marketing content the story scrutinized.Zach, the attorney who filed the suit, responded to UWM's comments Wednesday afternoon by saying the company didn't attempt to address the fraud in its statement.The article was compiled by veteran reporters and legal and financial experts over a thousand hours, including reviews of Home Mortgage Disclosure Act data. Hunterbrook also shared a website where consumers can see if they were "ripped off" by their mortgage broker.The probe and lawsuit focus heavily on UWM's "All-In" mandate, already the subject of multiple lawsuits both from and against the lender. The so-called "ultimatum" bars brokers from working with Rocket Mortgage and Fairway Independent Mortgage Corp., and prevents brokers from shopping rates once they've locked-in a rate with UWM. Of the 30,229 brokers who sent at least one loan to UWM last year, 12,936, or 42%, sent more than 75% of their mortgages to the company. Another 8,665 sent more than 99% of their loans to UWM, the report claims. The proportion of brokers going all-in has increased since 2020, with 75% or more submitters accounting for 48% of UWM's origination volume, Hunterbrook found. Reviews of HMDA data allegedly showed borrowers with UWM loans paying on average more than $865 over the median cost for such loans with other lenders, controlling for interest rate and type. Home buyers working with a 99% or more "steerer"  broker paid over a thousand dollars more per with UWM than the median cost with other broker-generated loans, the lawsuit claims. The consumer overpays in the aggregate were at least $400 million between 2021 and 2023, the suit claims. Hunterbrook acknowledged its research was limited by the absence of borrower FICO scores in HMDA data and other variations such as lender credit reporting; it defended its reporting in a breakdown of its analysis.The report and lawsuit also take aim at the firm's sponsored website, known as MortgageMatchup.com. It characterizes the site as a proxy for loyalty, suggesting UWM doesn't disclose its backing and support of brokers with advertising, gifts and other benefits. The lawsuit seeks claimants who paid for a mortgage with UWM from March 5, 2021 to the present, with brokers who referred 75% or more of their loans to UWM among at least five separate transactions with the giant. Hunterbrook's article also attributes a profanity-laden voicemail slamming competitor Rocket Mortgage to Mat Ishbia, allegedly sent to Anthony Casa, former head of the Association of Independent Mortgage Experts. Casa, today president and CEO of UMortgage, left AIME in 2020 after lewd comments referencing Ishbia and a Rocket executive's spouse. A federal judge recently handed a victory to UWM in one of its "All-In" lawsuits, tossing a complaint from America's Moneyline over its alleged violation of the ultimatum. The Pontiac, Michigan-based business posted a net loss of $62.5 million in the fourth quarter, but remained in line with Rocket as the industry's top originators.

Ocwen Financial Group plans to rebrand its parent company, as well as the names of its operating units to Onity Group.Shareholders must first approve the name change, with the vote taking place at its annual meeting on May 28."We are very excited about rebranding to Onity as it demonstrates our extensive transformation into a balanced and diversified mortgage company and the confidence we have in our business, our capabilities and our team," Glen Messina, chair, president and CEO of Ocwen said in a press release.Over the past five years, he continued, Ocwen has grown its mortgage servicing and subservicing portfolios, built a scalable servicing platform, added multi-channel originations and asset management capabilities, and established multiple capital partner relationships to enable capital-light servicing growth.But some of those changes, especially in the servicing platform, were a result of legal and regulatory actions. Ultimately a settlement forced Ocwen to switch to Black Knight's MSP.As part of that change, it purchased the company Messina formerly headed up, PHH in 2018.The Consumer Financial Protection Bureau, along with a group of 30 state regulators and/or attorneys general, sued Ocwen for servicing violations in 2017. All but the CFPB settled the case and a federal judge in Florida dismissed the bureau's remaining complaint last year.But in February the CFPB filed an amicus brief in a pay-to-play lawsuit.The new name, Ocwen explained, reflects the capabilities of a hard-working team with a can-do attitude and problem-solving culture.Specifically, the word Onity contains the phrase "on it," which conveys action and the promise of dependability, performance and support."We understand what our customers want and the important role we have in delivering on their needs," Messina said. "We believe our new brand genuinely represents how we operate and our focus on delivering results consistent with what our customers expect from us."If approved, Ocwen will become Onity and start trading under the "ONIT" ticker symbol in June. For the time being, PHH Mortgage and Liberty Reverse Mortgage will continue to use their current names, but will be rebranded with Onity at an undermined later date.In separate Ocwen news, it announced that former NMI Holdings CEO Claudia Merkle has joined its board of directors and Phyllis Caldwell, who was Ocwen's chairman at the time of the PHH deal, will be leaving as of the annual meeting.

A federal judge has partially granted Cenlar's motion to dismiss allegations of Real Estate Settlement Procedures Act violations in a loan modification case that highlights what courts may view as priorities in formal borrower communications.Judge Edmund Sargus Jr. in the Southern District of Ohio's Eastern Division allowed the portion of the claims that center on a document known as notice of error to move forward, but dismissed other claims related to a request for information in the case, O'Keeffe v. Cenlar. The case centers on a dispute plaintiffs say arose after one of them asked for a correction on a name spelling in a modification agreement, which was reportedly recorded without an adjustment to billing.Plaintiffs allege they then received a new, corrected mod that the servicer said it revised because the earlier one was not as intended. They refused to sign the new modification because they found a $90,000 difference in it unacceptable.During the dispute, plaintiffs sent out both a request for information and a notice of error.The NOE notified the company that plaintiffs considered the refusal to accept payments under the terms of the recorded modification as an error. It also notified Cenlar that they considered the interest, fees and charges they received based on billing under the original terms of the loan to be errors.The RFI requested "call logs, recordings service notes and records of communications between Cenlar and plaintiffs" in addition to "all documents from January 2021 to the present" related to the issues at hand."Plaintiffs' sole damages arising from Cenlar's allegedly inadequate RFI response appear to be the costs incurred in preparing and transmitting the QWR — costs which this court has found insufficiently concrete," Sargus said in an opinion and order filed last week, which JD Supra reported on earlier.However, the judge said he did see alleged damages as potentially "arising from the NOE."The content of the servicer's response to the NOE played a role in his conclusion, according to the court document.Sargus said NOE responses are supposed to contain either a correction or "a reasonable investigation" that ends with "a written notification that includes a statement that the servicer has determined that no error occurred," reasons for that determination and how borrowers can obtain supporting documentation.So "the mere fact that Cenlar would have concluded that no enforceable loan modification existed after conducting a reasonable investigation does not absolve them of the responsibility of conducting a reasonable investigation and explaining their belief," he said.The case is part of a broader body of law that servicers and attorneys are reviewing to update compliance parameters for handling the qualified written requests under RESPA.Another recent legal development exemplifying the broader body of litigation centered on responses to formal borrower communications is a case involving Specialized Loan Servicing and allegations made by a former couple, Michael and Renita Russell.The dispute involves a loan that dates back to a period when loose, securitized mortgage underwriting was common and a housing crash complicated distressed mortgage servicing. However, plaintiffs allege it wasn't until 2019 that SLS "erroneously added $276,582.70 as 'prior deferred principal'" to it."The 'prior deferred principal' should not have been added since that sum was already included in the modified unpaid principal balance," they said in court documents, noting that it brought their debt to an unmanageable level of $946,239.60 in excess of the value of their home.Their amended complaint filed in January in California's Superior Court alleges that although the servicer filed a 72-page response to their qualified written request about the issue, the documentation was "in violation of RESPA in that SLS provided no information to account for the significant increase."The plaintiffs eventually applied and received approval for a short sale. Their home sold for $793,918.78 and the amount was applied to their higher stated debt obligation, but they allege "the actual debt obligation at the time of the short sale was about $600,000," and it should have returned funds to them.SLS does not comment on legal proceedings, according to an emailed statement from a spokesperson at Computershare, its parent company.The servicer did file a cross complaint in February, alleging that "plaintiffs' financial mismanagement was the predominant, if not sole, cause of plaintiffs' default on the loan, inability to reinstate the loan, sale of the property and any damages." It also attempts to divide the couple's interests based on their separation.In turn, the plaintiffs have filed a demurrer to the cross complaint.The demurrer alleges that "SLS continues to argue that plaintiffs' claims are for wrongful foreclosure and therefore the plaintiffs could afford the subject real property is at issue" but that information is incorrect given that the home was sold instead in a short sale.In addition, plaintiffs asserted that "at all times relevant herein, Michael and Renita were a married couple acting jointly to protect community property that was held by Michael and Renita as joint tenants," further alleging that "the cross complaint is frivolous, for the sole purpose of delay."No further action in that case was anticipated until June at the time of this writing.

Although fourth quarter mortgage originations were flat year-over-year, nonbank lenders that could provide products through multiple means were able to grow their business during that tough period, a Morningstar DBRS recap found."In addition to affordability challenges, seasonality and competition also impacted volumes and pricing," the report from Shaima Ahmadi, assistant vice president, North American financial institution ratings, said. "However, on an individual company basis, those with omnichannel organization models continued to grow originations in [the fourth quarter] as they were able to capture a higher share of the market versus those with less diverse channels and refi heavy models."The top mortgage lenders benefited by undertaking business restructuring and making strategic shifts in order to capture more purchase business, Ahmadi said.A shift underway that might not be going well is taking place at Finance of America, which had been at one point a multi-channel forward lender. After several previous strategy shifts, the company elected to focus on reverse mortgages. As part of that strategy, it bought American Advisors Group, which helped to drive FOA to a 40% market share in that segment."Despite market share gains, when excluding forward organizations in 4Q22, FOA's reverse mortgage origination volume was down a significant 56% YoY in 4Q23," Ahmadi pointed out."Meanwhile, Rithm Capital Corp. has made a number of acquisitions of mortgage servicing and alternative asset management businesses over recent years as part of the company's strategic shift to become a real estate asset manager. Companies also continue to diversify their basket of mortgage loan offerings with added complementary services."The Mortgage Bankers Association's fourth quarter industry profitability survey found that independent mortgage bankers and bank mortgage subsidiaries, both public and privately held, lost an average of $2,109 on every loan produced.Furthermore, servicing was a net financial loss for the group of $24 per loan, while operating income for this function, which excludes amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on bulk sales, was $108 per loan.Mortgage servicing rights proved to be a double-edge sword in the fourth quarter. Companies reported fair-value losses on their MSR portfolios — a requirement of mark-to-market accounting that is tied to potential prepayments — but servicing fee income was up.The publicly traded nonbank lenders tracked in the Morningstar DBRS report had a 6% increase year-over-year in their portfolios. But that ranged from a 14% gain at Mr. Cooper, which was active in the bulk purchase market, to declines of 5% at Rocket and 4% at United Wholesale Mortgage; UWM has been a strategic seller of servicing rights as part of its risk management strategy, executives noted on its fourth quarter earnings call.FOA actually had a larger percentage increase at 38%, but that was primarily reverse servicing picked up in the AAG deal, and among the nine companies listed, it has by far the smallest portfolio.Even though its portfolio is now smaller, Rocket bought MSRs originated with high rates for the potential refinancing opportunity."Given where mortgage rates currently are, borrowers have little incentive to refinance," Ahmadi said. "However, some companies indicated that they expect a meaningful rebound in refinance activity when rates fall below 6%." While the MBA thinks rates will sink under that mark, Fannie Mae's latest forecast calls for them to just get to that level by the end of next year.For the group losses narrowed as improved gain on sales margins were partially offset by lower origination volume.Gross gain on sales margins, inclusive of fee income, net secondary marketing income and warehouse spread, was 334 basis points in the fourth quarter, up from 329 basis points three months prior, the MBA survey reported."We would expect margins to remain under pressure in 1Q given the negative impact seasonality typically has on both 4Q and 1Q," Bose George, an analyst with Keefe, Bruyette & Woods said in an April 1 note on the survey. "Industry profitability is likely to be flat to down in 1Q as volumes should once again be low due to the seasonality associated with the quarter and the elevated average mortgage rate."Several public companies also reported major one-off expenses, including Pennymac Financial Services, which recorded $158.4 million in expenses from an arbitration ruling in favor of Black Knight (now part of Intercontinental Exchange) over mortgage servicing technology including allegations of breach of contract and misappropriation of trade secrets.Meanwhile, Mr. Cooper's November 2023 cybersecurity incident hit its results to the tune of $27 million.Ahmadi also noted that the nonbanks had higher leverage ratios year-over-year for the fourth quarter, as debt levels increased slightly but was primarily caused by financial losses eroding company equity."During [the fourth quarter], nonbank mortgage companies were active in the high yield market, raising unsecured funding, which was partially used to pay down upcoming maturities in 2025, which we view positively for their credit profiles," Ahmadi said. "Indeed, unsecured debt issuances increase nonbank mortgage companies' financial flexibility by decreasing balance sheet encumbrance."Both Rocket and Pennymac Mortgage Trust were able to reduce their leverage ratios. But FOA's debt-to-equity ratio increased to 97.8x compared with 49.7x one year prior, while Ocwen's was at 27.2x, versus 22.9x over the same period.

"The office commercial real estate sector is under stress more than other parts of the sector and there's heterogeneity around the country," Barr said. "We're just looking very carefully at banks that have heavy concentrations in office commercial real estate where there are significant expected price declines."Al Drago/Bloomberg WASHINGTON — Federal Reserve Vice Chair for Supervision Michael Barr Wednesday said liquidity pressures that caused instability in the banking sector in 2023 have largely subsided, but new risks continue to concern federal regulators. In the remarks — delivered to a crowd at the National Community Reinvestment Coalition's Just Economy conference — Barr said regulators are particularly focused on certain banks that have high levels of unrealized losses on securities on their balance sheets as well as those with concentrated investments in commercial real estate. Particular kinds of CRE properties — namely offices — he said, pose more risk than others. "The office commercial real estate sector is under stress more than other parts of the sector and there's heterogeneity around the country," he said. "We're just looking very carefully at banks that have heavy concentrations in office commercial real estate where there are significant expected price declines."Regulators have sounded the alarm over the past year regarding the risks banks face as CRE property values have fallen as many workers now permanently work remotely. As to when the concerns over CRE could subside, Barr said it will likely take years given the varying times at which properties are refinanced and appraised. "Commercial real estate properties refinance at a periodic cycle. Those are not all done in one year or one month; those are being refinanced slowly over time, so over the next two to three years," he said. "We're going to see how properties deal with that refinancing in a higher interest rate environment than the extremely low interest rate environment they were operating in pre-2019."The Fed official also touched on the agency's approach to considering bank mergers, at a time when its fellow bank regulators — the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — recently updated their own merger consideration policies. Barr said while the Fed is evaluating its guidelines on approving mergers between banks, the central bank is unlikely to update its policies at this time."I think it's a pretty robust process that follows our existing guidelines in this area," he said. "We are working with the other bank agencies and the Justice Department, to see whether those should be updated. But that's work that we're thinking about on an interagency basis rather than just us doing something."Barr also spoke to interviewer Victoria Guida of Politico about the ongoing legal battle over an overhaul of implementing regulations for the 1977 Community Reinvestment Act — reforms that have been in the works for years under two administrations. Banking trade groups sued the regulators arguing, among other things, that the final rule goes beyond the scope of the statute and violates the Administrative Procedure Act. The opponents of the CRA won a procedural victory in March when a Texas judge issued an injunction against the renewed CRA, postponing enforcement of the rule until the suit is resolved. While Barr would not comment directly on the suit, he did push back on the spirit of the lawsuit, saying Congress gave regulators ample latitude to update the CRA when necessary."They wrote it in 1977 in a broad way, and they left it to the banking agencies to make sure that CRA kept working over time," he said. "It was written in such a way that it permits the bank agencies to get together periodically as we did in 1995 and now, almost three decades later in the 2023 rule, to make sure that it keeps pace with the modern world we live in."Another agency rulemaking that has elicited industry backlash is the Basel III endgame capital requirements, which would compel banks to increase the ratio of equity they use to fund themselves. Fed Chair Jerome Powell said recently — while testifying to the House Financial Services Committee in March — that he expects broad and material changes to the rule before it's finalized.  Barr dismissed any "external chatter" about the rule, and focused on the particular comments the agency is carefully considering."We take all the comments we get on these kinds of issues very seriously, we're taking these very seriously. I expect we will make adjustments to the final rule," he said. "I think it will be a good, strong rule when it's done, but we're going to make changes along the way."