By Matt Joy, Princeton Mortgage Wholesale
Last Thursday, Ginnie Mae announced their new stipulations for lenders originating VA refinances. Under the new guides, all refi’s insured by VA must meet 2 new requirements… the new app date is 210 days after the first monthly payment on the original mortgage and the new app date is after six full monthly payments have been made on the original transaction. These changes took place after Ginnie Mae took arms and began investigating lenders that were churning VA refi’s and misleading our service men and women into unnecessary refinances… hmmm how do we repay the people that protect our freedom… clearly the answer is to take advantage of them when the get back home and refinance their house as much as possible. For all my Monday Night Football fans… this is a big “C’mon Man!!”. 2 of the lenders affected by the ban won’t be able to originate until Jan 2019… the other has been in timeout since early April of this year and pending a review by Ginnie Mae will be eligible to originate VA refinances in October. As always, our friends from HousingWire covered the situation in much better detail. You can check the full story out right here.
Also, this past Thursday Citizens Bank took full advantage of the repeal of Dodd-Frank Act and acquired Franklin American Mortgage for a cool $511M. This bolsters Citizens servicing portfolio to $41.4B and adds close to $14B in mortgage originations a year… woah that’s a big deal. Let’s break this acquisition down. Right off the bat… the pressure relief value has been hit for Franklin. I don’t know much about their business model, but we all know that getting bought out (especially in the mortgage industry) means something on the financial statement wasn’t where it needed to be to sustain a long-term growth strategy (I could be wrong, but Franklin bought a lot of correspondent paper). The positive for those using Franklin’s mini-corr product is that with Citizens that program should be there to stay… and possibly you could get your warehouse line at a discount from Citizens directly. Not a bad deal for FAM and Citizens. As for Citizens, you instantly get a pop on balance sheet from the mark up of that servicing asset. I don’t know what’s in it… but if it’s full of 2010 – 2012, 3.75% interest rates… that’s a heck of a performing asset. Additionally, Citizens can now cross sell all their banking products and when rates come back around they have a massive opportunity to refinance those borrowers thanks to servicing. The fun part of a deal this size though is the compliance around servicing. I’m assuming Citizens holds all the risk now, but let’s not forget that Bank of America took a beating after the Countrywide buy out. Now… I don’t think this is anything like that… I just know that reps & warrants of servicing transfer deal like the size of this one can be a nightmare. All in all, this is a big deal and makes you think… what other larger lenders are looking to sell?
This isn’t the first nor will it be the last blockbuster M&A in 2018. I’m just curious to see whose next.
Talk to you soon!
Photo by Max Sulik on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.