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PennyMac touts broker channel gains as earnings rebound
PennyMac Financial Services reported some green shoots in its origination business, part of a larger earnings recovery that was somewhat dampened by hedging losses.The California mortgage giant posted a $39.3 million profit in the first quarter, following a $36.8 million net loss to close 2023. The rebound, also a 29% improvement from the same time last year, was driven in part by far smaller settlement obligations to technology rival Black Knight. The multichannel lender recorded slight quarter-over-quarter declines in production pretax net income, coming in at $35.9 million, and overall volume of $21.7 billion. Its correspondent and broker gain-on-sale margins ticked up however, with the broker direct channel leaping from 79 basis points to close 2023 to 103 in the recent period. Its consumer direct lock volume was also up 35% quarterly. The company said it counts over 4,000 brokers, up 36% from the same time last year. PennyMac Chairman and CEO David Spector attributed the broker margin and population gains to his firm's technology and more jumbo home loan activity, among other reasons."There was a period of time a year or two back when there was irrational pricing taking place in this part of the market, and I think we've seen a kind of a return to more rational pricing," he said, appearing to refer to the wholesale pricing wars of yesteryear.The firm's servicing operations recorded $4.9 million in pretax net income in the first quarter, up from a $95.5 million loss in the last three-month stretch. PennyMac also saw $170 million in mortgage servicing rights fair value gains, a figure offset by $294.6 million in hedging declines for a $125 million total decline. Executives, responding to analyst questions about the hedging loss, said the company had an increased exposure to interest rate volatility and cited the inverted yield curve. "We were seeing pretty significant potential costs for maintaining our typical hedge position," said Daniel Perotti, senior managing director and chief financial officer. "We needed to identify if we wanted to accept those hedge costs or open up certain exposures." Company leaders said PennyMac has since repositioned its hedge in the second quarter to a "more traditional profile."PennyMac's revenue meanwhile wavered at $305.7 million ending March, down from the fourth quarter's $361.9 million mark and slightly up from $302.8 million at the same time last year. Spector and Perotti also addressed the company's Department of Veterans Affairs loan profile in speaking on the upcoming VA Servicing Purchase program, or VASP. The initiative is a successor to the VA's pandemic-era partial claim for its distressed borrowers.PennyMac counts 4,700 VA loans in a deep delinquency position, or $1.2 billion of unpaid principal balance among its vast servicing portfolio. Executives appeared cautiously optimistic when asked about VASP."Where we have potential concern today is around the moral hazard and how that could eventually play out," said Perotti.
CFPB offers specifics on servicing fees subject to crackdown
The Consumer Financial Protection Bureau circulated information about what sorts of mortgage servicing fee issues it's seen in examinations lately.The bureau said it's found problems with certain property inspection charges, fees that loan mods should eliminate and improperly labeled line items, according to its latest Supervisory Highlights report.CFPB Director Rohit Chopra spoke about the crackdown on mortgage fees Wednesday on a White House press call to discuss the Biden administration's efforts to eliminate so-called junk fees in many areas of the economy."Our CFPB oversight goes on site to these mortgage servicers and we found all sorts of illegal junk fees, prohibited property inspection fees, deceptive notices to homeowners violating loan modification rules for struggling borrowers," Chopra said on call with reporters that was live streamed on YouTube. "We really hope that our reforms in these markets are going to lead to more fair and competitive pricing," he continued. "I also think it's going to restore a little bit of trust that people really need in the banking system, because they're really tired of all of this fee creep across the economy."What follows are more details about the fees the bureau has been cracking down on and some other related concerns the CFPB identified in examinations between April and December of last year.Charges for excessive inspectionsIf a borrower has gone too long without making a payment, inspections often are supposed to occur, and servicers who pay for them may charge fees to consumers in certain instances.But there are some exceptions within major government-related mortgage investor Fannie Mae's guidelines where inspections should not occur. The bureau said it found those exceptions ignored in some cases."In total, servicers charged hundreds of borrowers fees for property inspections that were prohibited," the CFPB saidThere are exemptions if there's right-party contact or a full payment made in the last 30 days, a performing loss mitigation option or bankruptcy plan, according to the bureau.Failure to provide loss mitigation reliefWhen a delinquent borrower enters an agreement on a foreclosure alternative, the servicer is generally supposed to stop charging late fees. In the case of rules for COVID-19 modifications under Regulation X, servicers must waive some past charges.The bureau said it found some servicers weren't following these directives.Generic itemizationCiting rules in Regulation Z calling on servicers to provide "a brief description of the transaction" in billing statements, the CFPB said it called on some mortgage companies handling consumer payments to be a little more descriptive when they itemized charges after finding some weren't.To get an idea of what's not acceptable to the bureau, consider its description of one instance in which it reportedly found "the general label 'service fee'" used to correspond with "18 different fee types."Escrow issuesThe bureau also said it ran into issues with servicers not distributing money from escrow accounts in a timely way. That's something that's supposed to be done under Reg X so long as consumers aren't more than 30 days late."Examiners found servicers attempted to make timely escrow disbursements, but the payments did not reach the payees. The servicers did not resend the payments until months after," the bureau said.That led to late fees that the bureau found "servicers only reimbursed after the borrowers complained."Communication and records retentionThe CFPB also mentioned issues around borrower contact and reporting in its report, some of which could lead to improper fees.The bureau showed concern that some notifications servicers are supposed to provide to borrowers approved for expedited foreclosure prevention or alternatives broke rules against unfair and deceptive practices. Some borrowers reported as approved actually hadn't been, according to the CFPB.The bureau also found that other notices improperly indicated delinquency in cases where they shouldn't have because borrowers either had made all their payments, were testing a modification plan or had an "inactive" loan due to a payoff or short sale.The bureau also flagged shortcomings in notifications required under Reg X.These notifications are supposed to acknowledge receipt of loss mitigation applications, indicate if they are complete or not and provide timely information on deadlines for accepting offers, but instead they were missing this information.Other Reg X violations included following through with or documenting timely, good-faith, live customer contact that is supposed to occur within the first 36 days a payment is late.A similar concern was reported regarding "early intervention notices" that are supposed to be sent within the first 45 days borrowers are late on obligations "and against every 180 days thereafter." Finally, the CPFB also found that servicers in some cases failed to retain documentation that's supposed to be held for a year after a loan discharge or transfer.Kate Berry contributed reporting to this story.
Figure Technology Solutions taps former SoFi exec as CEO
Figure Technology Solutions, the parent company of Figure Lending, tapped Michael Tannenbaum, a former Brex and SoFi executive, to lead the company during its push to go public.The new CEO, whose experience in the financial services industry spans over 15 years, has helped companies scale and grow, which can strategically benefit Figure as it looks to increase its influence in the HELOC and financial services space.During a six year stint at Brex, an AI-powered spend platform, Tannenbaum increased the headcount of the company from a three person team in 2017 to more than 1,200 employee and to a multi-billion dollar valuation, a press release published Tuesday touted. He was the chief operating officer prior to his departure to Figure.Tannenbaum also served as a chief revenue officer at SoFi Technologies, a company that Mike Cagney, the founder of Figure used to oversee. Cagney and Tannenbuam worked together at SoFi for at least three years, LinkedIn shows.The executive will join Figure's board of directors effective immediately, the company announced Tuesday. Meanwhile, Cagney will shift into a new role of executive chairman. "We are excited to welcome Michael to Figure at a pivotal period of growth for the company," said Cagney in a press release. "Michael's outstanding track record of implementing transformative capital market solutions at global fintech companies, keen ability to attract and nurture top talent, and deep understanding of our business will be a significant asset to Figure."As Figure has set its course to go public, it has ramped up efforts to attract more mortgage lenders to use its technologies, possibly to better its valuation.In mid- April it opened the door for retail and wholesale lenders to use its DART system, a lien and eNote registry service. Soon after it launched a machine-learning-powered chatbot to improve its customer service and streamline its HELOC offerings. A month prior, Figure "submitted a draft registration statement on Form S-1 with the U.S. Securities and Exchange Commission (the "SEC"), relating to the proposed initial public offering of its equity securities," it announced. Thus far, no determination has been made regarding the number of shares to be offered and the price range for the proposed offering. The offering is subject to market conditions as well as the completion of the SEC's review process, the company said.Companies tapped to take FTS public include Goldman Sachs Group Inc., JPMorgan Chase & Co. and Jefferies Financial Group Inc, a Bloomberg report pointed out. Valuation of the company is predicted to range between $2 billion to $3 billion.
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