In this issue…

CECL – Current Expected Credit Loss: A CORE Competency?

Dean Hurley, Director, Capital Markets Group
Jeffrey Zuckerman, Vice President, Capital Markets Group

Current Expected Credit Loss (“CECL”, ASC 825-15) is the Financial Accounting Standards Board’s (FASB) new model for calculation of loan loss reserves, which requires consideration of multiple scenarios looking out over the lifetime of the instrument. These standards replace those now in use for preparing Allowance for Loan & Lease Losses, (“ALLL”), purchased credit-deteriorated assets, available-for-sale, and held-to-maturity debt securities. Read more…

An update on the MSR market following Brexit

Mike Carnes, Director, Capital Markets Group

Home mortgage rates tend to move in the same direction as U.S. Treasuries but as-is traditionally the case, seldom is there a one-for-one relationship. Such was the case on Friday, June 24 when the US Market awoke to the knowledge that the British electorate voted to leave the European Union which meant the beginning of a two-year negotiation over the terms of departure from the E.U. Read more…

New Developments Regarding MIAC’s Generic Servicing Assets – GSAs™

Jennifer Howell, Senior Vice President, Capital Markets Group
Yuqing Lin, Analyst, Capital Markets Group

Many mortgage servicing rights (MSR) market participants have come to rely on MIAC’s GSAs over the past 20 years. We are proud to announce several new enhancements to our GSA study. GSA’s are MIAC’s daily pricing of representative benchmark mortgage servicing rights. As an industry leading broker of MSRs, MIAC’s valuations of MSR’s are considered the most defensible and accurate in the industry. Read more...

Whole Loan Execution

Brendan Teeley, Vice President, Whole Loan Sales & Trading

Residential loans fall into one of two categories: Agency — eligible for programs offered by Fannie Mae, Freddie Mac, or Ginnie Mae (FHA/VA) — and non-Agency. As of late 2015, Agency loans are approximately 90% of new originations. The importance of the non-agency market is disproportionate to its market share, because non-Agency programs, typically sold through whole-loan execution, are often where lenders can find a niche to differentiate themselves from the competition. Read more…

What is a Mortgage Servicing Right (MSR)?

Mike Carnes, Director, Capital Markets Group

By definition a Mortgage Servicing Right, herein referred to as MSR(s), is a contractual agreement where the right, or rights, to service an existing mortgage are sold by the original lender to another party who, for a fee, performs the various functions required to service mortgages. As a servicer, firms are responsible for collecting borrower payments including Principal and Interest as well as Taxes and Insurance, and then remitting those payments to investors, insurance companies, and, if applicable, taxing authorities.  Read more...

Choosing a Hedge Vendor and Preparing for Hedging

Douglas Mayers, Senior Vice President, Client Solutions Group

At a high level, considerations for how to choose 1) a pipeline hedging vendor and 2) the type of engagement with a hedge advisor, are dependent on characteristics of the lending institution, including: Type of institution, Evolutionary stage of the firm, and Staffing. These macro considerations help narrow the field of hedge advisors to be assessed. The answers to the three questions above will guide the firm to an appropriate place on the spectrum of engagement styles – with Full Service at one end, and Self Service at the other. Read more…

MIAC Perspectives – Summer 2016