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37 » VISIT US ONLINE @ DSNEWS.COM RISING RATES, SQUEEZED SUPPLY HAVE HOUSING INDUSTRY'S ATTENTION Today's rising interest rates have some market participants concerned, according to a Moody's Investors Service report. Crimped housing supply, coupled with the higher cost to borrow, is chipping away at optimism, with some participants feeling that conditions in their housing-related domains are going seriously downhill. For the second year in a row, in tandem with its annual U.S. Housing and Housing Finance Conference, Moody's surveyed debt issuers spanning a variety of industries exposed to the housing space. e company's survey includes answers from issuers in corporate finance (homebuilders), financial institutions (mortgage lenders and insurers), public finance (housing finance agencies), and structured finance (residential mortgage-backed securities issuers and single-family/multifamily real estate investment trusts). "Tightening housing supply and increasing interest rates will have the biggest effect on issuers as they drive up the cost of homeownership—issuers expect more substantial price increases than last year— and potentially shut out many first-time homebuyers," Moody's reported. Besides housing supply—a new category for 2018—the other most pressing concern on industry members' minds is demographics. "Market participants expect demographics to become a more significant driver of industry conditions over the short- and long-term as millennials entering the housing market and downsizing baby boomers compete for the same smaller homes and rentals," Moody's reported. Amid moderating concerns over tax rates and regulatory issues, issuers feel that visibility in their industries is "medium to good." is is a positive marketplace barometer, indicating issuers feel upbeat about the ability to move their companies in the right direction in the foreseeable future. As for GSE reform, most respondents don't expect it to happen until the next presidential election. "Ninety-one percent of respondents feel that at least one of the two GSEs—Fannie Mae or Freddie Mac—will survive any reform measures, while 34 percent feel that there will be no government guarantee on conforming mortgages," the survey reported. FITCH EXAMINES TOP SERVICERS According to the latest installment of Fitch's U.S. RMBS servicer handbook, the American servicing landscape is undergoing significant shifts, much of it driven by merger and acquisition activity among servicers such as Mr. Cooper and Ocwen. 'Strategic positioning and M&A activity are radically changing the mortgage servicing sector as we see it today," said Fitch Managing Director Roelof Slump. "Perhaps most notable is one of the biggest names in the space in Nationstar Mortgage, LLC, (now rebranded as Mr. Cooper), which will be merging with WMIH Corporation in a transaction expected to close later this year. Meanwhile, Ocwen Financial (parent of Ocwen Loan Servicing, LLC) is working towards the acquisition of PHH Corporation, a residential mortgage servicer and originator." Even with mergers in the works, both Mr. Cooper and Ocwen's servicing portfolios continued to scale back between Q 3 and Q 4 2017. Mr. Cooper's servicing portfolio dropped from $493.8 billion to $470.7 billion during that period, whereas Ocwen saw a similar decline from $181.6 billion to $173.3 billion. JPMorgan Chase went from $821.8 billion in Q 3 2017 to $816.4 billion in Q 4 2017. On the other hand, Wells Fargo's portfolio increased across the two quarters, rising from $1.46 trillion to $1.5 trillion. CitiMortgage, meanwhile, scaled back dramatically in Q 4, shrinking its servicing portfolio from $172.6 billion to $137.5 billion. Flagstar Bank grew its servicing portfolio to $97.9 billion in Q 4, up from $91.1 billion in Q 3. Many smaller nonbank servicers moved to pick up the slack in Q 4, according to Fitch. Caliber Home Loans increased its servicing portfolio to $134.9 billion in Q 4, up from just shy of $102 billion in Q 4 2016. LoanCare jumped its servicing portfolio from $217.8 billion in Q 3 2017 to $228.9 billion in Q 4. Rushmore Loan Management Servicers increased its servicing portfolio from $25.1 billion in Q 3 to $30.3 billion in Q 4. Specialized Loan Servicing, LLC, saw its portfolio hit $71.8 billion in Q 4, up from $62.9 billion in Q 3 and $54.9 billion in Q 4 2016. Fitch also noted the addition of Planet Home Lending to the list of residential mortgage servicers it tracks and rates. Primarily involved in sub-servicing Ginnie Mae loans, Planet's portfolio as of December 31, 2017, consisted of approximately 80,000 loans with a total unpaid principal balance of $12.7 billion. "Another month of job additions implies more households are in a position to buy a home. However, recent existing-home sales activity, at around 5.5 million per year, is well below its potential. That's because similar home sales were occurring during the 2001 and 2002 period, when the housing market was considered fairly normal and somewhat boring, and well before the subprime-led bubble." - Lawrence Yun, NAR Chief Economist on the Bureau of Labor Statistics April Employment release VERBOSITY

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