Comment Detail

Comment

1. What are the benefits, costs, and implications of the pooling concepts proposed in this RFI? Are they consistent with maintaining UMBS fungibility?

BENEFITS:
- One of the positive changes in this RFI is the creation of the “Single Lender Pooling for Loans with Low-Value Characteristics.” This would allow FHFA to get much more granular and pick out which loans should not be going into the multi pool. We believe that there is a benefit to address anomalies in prepayment speeds by directing certain seller/servicers, whose policies encourage borrowers to prepay significantly faster than average, to deliver their production into single-lender pools. Behavior would change dramatically from the origination community knowing that their production could get directed to this category, thus incenting better behavior which would incent better lending practices specifically centered around Net Tangible Benefit in regards to determining if that borrower should complete a refinance or not. Not consistent with UMBS fungibility.

COSTS:
- Technology would have to be updated across all institution types giving certain institutions an unfair advantage. This cost would eventually have to be recouped by the institution which would increase the cost and interest rate offered to the American borrower solely due to this change.
- There would be substantial loss of income from institutions ranging from Mortgage Originators, REIT’s, money managers, insurance company’s etc. this would be a large cost/loss of revenue which would be a company altering change to institutions investing in these securities. Again, resulting in a higher cost and interest rate to the borrower.
- Limiting choice for a consumer is never a good thing, this does exactly that. This is a cost to the America borrower.
- Keep in mind specified pools range drastically in coupon in relation to the cohort which the RFI does not address, limiting seller/servicers to 20-30% of production into specified pools relative to note rate (by coupon) would be devastating to specified pool production causing an increase in cost and rate to the borrower. If this is what was intended, then this would be moved to the benefit section but for investors only and not the American borrower.
- Increasing costs and limiting choice for the American borrower is not consistent with UMBS fungibility.

IMPLICATIONS:
- This would implicate the reasoning around why UMBS was created. Was it for the American borrower or was it for the end investor?
- The RFI mentions that it is a “similar to those under the Ginnie Mae II program.” Which isn’t accurate due to FNMA/FGLMC’s “implicit guarantee” is much different than GNMA’s “guarantee via HUD, VA, & USDA government backed Insurance”
- Cost to service a loan could increase due to all loans being forced into the multi issuer pool
- This would reward poor behavior of lenders from a pre-pay perspective and use the smaller and better behavior of lenders to compensate for them. Again reducing competition and choice for the American borrower.
- FHFA should seriously consider and understand the implications of their actions of limiting choice, punishes those who exhibit good behavior, and rewards the larger poor behavior lenders.
- Will make the secondary market significantly less dynamic which will in turn create less demand from the origination community, thus causing higher interest rates and costs to the American borrower.

a. What types of loans or pools of loans would be best suited for the multi-lender pooling approach? What types of pools are beneficial to stakeholders, including specific market participants such as REITs, and the broader housing finance system?

- FNMA/FGLMC pools which were originated with the proper Net Tangible Benefit

b. What types of loans or pools of loans would be best suited for the non-TBA eligible single-lender pooling approach? What types of single-lender pools would be beneficial to stakeholders and the broader housing finance system? What types of loans or pools of loans would not be appropriate for individual single-lender pools and why?

- FHFA should incent good behavior and discipline poor behavior regardless of origination volume of the originator, this RFI does not seem to have that intent.
- It is less about loan characteristics and more about lending practices from the originator

2. Which approaches to pooling (i.e., the Enterprises’ current approaches, FHFA’s proposed approach, or other approaches) are preferable and why?
- Forcing lenders to deliver via the ash window is again, limiting choice.
- FHFA should focus on the amount of servicing strips being retained by originators instead of Specified vs. Multi pooling method. Limiting the amount of servicing strips to be sold to the agencies would increase the value of the security for the investor far greater than FHFA limiting pooling options for the originator/borrower.

a. If there are other pooling options that FHFA should consider, please specify and describe how UMBS fungibility could be better maintained under an alternative option and discuss other benefits, costs, and implications.

- Promote choice, fair lending, and a robust secondary market.

b. Would more aligned pooling practices facilitate the issuance of UMBS by market participants beyond Fannie Mae and Freddie Mac? If so, why?

- No, not really. The lack of definition surrounding the Qualified Mortgage Rule and it having not truly been adjudicated yet is causing pause within the PLS market.

3. What benefits, costs, and other considerations should FHFA weigh as it reviews options?

- If this change is good for the American borrower, tell us why and how much better their price gets. This way the change is quantifiable.

4. Should the Enterprises require or otherwise incentivize production of multi-lender pools? If so, how might the Enterprises do so? How might the Enterprises update any such incentives over time to support the performance of the TBA market?

- Improve and alter G-Fee’s based on a specific set of parameters that is set, published, and monitored by the agencies. I am told all originators have the same G-Fee. My father always tells me, “everyone should be treated fairly; not equally.” Incent good behavior, don’t limit optionality.

5. Should seller/servicers that have extraordinarily high prepayment rate performance be barred from inclusion in multi-lender pools and required to form non-TBA-eligible single-lender pools? If so, for what reasons or under what conditions? Should there be any instances where the single-lender, high-prepaying pools would be TBA-eligible? If such action is taken, should it be aligned across the Enterprises? Please explain your reasoning and the ramifications of your position.

- Yes, the reasons and conditions are all reasons you know.

a. How should prepayment performance be measured at the seller or servicer level?

- By tracking CPR.

b. In contrast to pooling limitations, should other measures be taken with regard to excessive prepayments? If so, what measures would you recommend?

- Track Lenders that are significantly above the prepayment cohort. But set the expectation clearly so it is something that can be monitored to from the origination level all the way to the secondary market level.

6. Should FHFA prescribe limits to the issuance of specified pools through or by the Enterprises? If so, how should a specified pool be defined and how might FHFA apply limits? How might FHFA update any such limits over time to ensure that specified pooling does not unduly impair performance of the TBA market? No, limiting the issuance of specified pools and putting specific requirements as to what loans can be placed into specified pools will be harmful to borrowers as it will make mortgage rates more expensive. Investor demand for specified pools is dynamic and can change quickly. Limiting this within the market will eliminate these opportunities for seller/servicers whose loan production has desirable characteristics, such as slower prepayment speeds. Again, limiting choice and further narrowing home affordability.

7. How might the Enterprises add value to the process of pool formation from whole loan/cash window purchases that are ultimately securitized? For example, would it be useful for the Enterprises to publish advance schedules of planned security issuances with information on security type, security size, and loan purchase bids? If so, what type of advance communications and schedule would you recommend?

- Have the cash window and whole loan execution compete with seller/servicer MBS issuance, regardless of Multi or Specified. Simply allowing the cash window to be the specified funnel is not the answer.
- Promote home affordability, lending in underserved areas, and products that help first time home buyers, this is not being done enough.

8. If changes are to be made to pooling practices, how should such changes be implemented to ensure a successful transition and minimize market disruption? How should the Enterprises or FHFA communicate to the markets to both maintain liquidity and facilitate a transition?

- The only changes that should be implemented are changes that provide more options and allow for more market place to be more dynamic. FHFA needs to encourage diversification along various characteristics other than the originator.