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Competition for mortgage underwriters has never been fiercer

Record-setting mortgage originations coupled with a resurgent private-label securitization market have created an expanding demand for loan underwriters at a time when they are in scarce supply. HW+ Premium Content
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Record-setting mortgage originations coupled with a resurgent private-label securitization market have created an expanding demand for loan underwriters at a time when they are in scarce supply. 

That demand-supply imbalance has led to hiring blitzes, lucrative salary offers and bonuses that may help individual firms attract talent, but it also tends to exacerbate the shortage of underwriters available for competing companies. Because, in the end, everyone is seeking to draw from the same limited pool of candidates. 

The causes of the underwriter shortage are varied, but it is most pronounced in the private-label market, industry insiders contend.

“We’ve grown in excess of 100 employees already in two-and-a-half quarters, that’s underwriters,” said John Levonick, CEO of Charlotte-based Canopy, a third-party due-diligence (TPR) firm that started doing business in the second quarter of 2021. “And we’re actively hiring. Underwriter pay exceeds five digits, and many of them have the opportunity to get … overtime.”

Michael Franco, CEO of New York-based SitusAMC, one of the largest TPR firms in the business, said his company has added 2,400 employees organically over the past two years, not counting personnel added through acquisitions. He stressed that is across all facets of the organization, including underwriters for residential mortgage originations and private-label securitizations as well as the firm’s commercial operations.

“We had about 2,800 employees as of December 2019 across residential and commercial, and now we’re up to 7,300 [including organic hires and employees added via acquisitions],” Franco said. “Are we planning to double the size of the firm every two years? Probably not. But we will continue to hire as needed.”

Chris Guidici, managing director of business development at Illinois-based TPR firm Wipro Opus Risk Solutions, said “there’s definitely been a shortage of underwriters,” adding that has resulted in a lot of flux and shifting in personnel across firms.

“I’ve seen a person leave here to go to another firm, and then go to yet another firm, all within six months,” Guidici said. “We’ve had to do three compensation adjustments just to slow down attrition and to attract new talent, the most recent one done within the last three to four months. … This [the underwriter shortage] came on everyone in a quick fashion over the past year to year-and-a-half.”

HousingWire interviewed executives at more than half a dozen companies, including TPR firms, loan-trading companies and bond-rating agencies, to take the pulse of the industry on the scramble for underwriting talent. All agreed the causes of the shortage are varied and complex. 

One major dynamic at play is that the same pool of underwriters is in demand for both loan originations, and, on the backend of the process, for doing due-diligence for private-label loan-pool securitizations. And the demand, hiring incentives and pay for underwriters are generally much better right now on the origination side of the equation — with that demand being fueled by a booming origination market. In addition, providing due-diligence services as an underwriter for private-label transactions simply requires more time and a more robust skill set than is required on the mortgage-origination side of the business, TPR firm executives said.

A recent report from the Federal Reserve Bank of New York illustrates the explosion of mortgage originations during the past year. The report reveals that over the four quarters ending the second quarter of 2021, “mortgage originations reached a historic high, with nearly $4.6 trillion in mortgages originated.”

“You have a much higher origination market overall than you did in 2019, so there’s more underwriters being employed in actual [loan] origination jobs,” Franco said. “At the same time, there’s a greater need for underwriting talent within the private-label side of the business [because it’s expanding, too], and there’s just so many underwriters out there, right?”

Levonick added that mortgage originators have lured underwriters with lucrative compensation packages, including “signing bonuses and salaries way beyond what the market could bear on the due-diligence side” for the private-label market.

“The originators just swooped in and said, ‘Hey, let’s do $5,000, $10,000, $20,000 signing bonuses, and performance bonuses that are guaranteed for end-of-year production,” he said. “And there’s just no way for due-diligence to really compete with that.”

Levonick said contributing to the problem is the fact that many larger TPR firms provide both front-end origination-underwriting services as well as back-end secondary market underwriting services. “And they might push their underwriters to the higher-margin opportunities on front-end [origination side],” he added.

Joseph Mayhew, chief credit officer at Texas-based Evolve Mortgage Services, which also provides TPR services, said the mortgage market is still in a low-rate environment. So, he explained, there’s “a lot of business happening” on the origination side, compared with the resurgent but still relatively small private-label market — which represented about 3.5% of the overall residential mortgage-backed securitization market as of August of this year, according to a report from the Urban Institute’s Housing Finance Policy Center. The bulk of mortgage securitizations are done through the so-called “agency” market — which is dominated by the government-sponsored enterprises Fannie Mae and Freddie Mac and to a lesser degree Ginnie Mae. Fannie and Freddie’s market share during the pandemic rose to nearly 60% of all new mortgages, up from 42% in 2019, according to the Urban Institute.

On the origination side, mortgages produced for the GSEs also dominate the playing field, so that business is generating a huge demand for underwriters.

“That’s where your seasoned underwriters are staying because it’s 90% to 95% of the business,” Mayhew added. And it is steady business, as opposed to the more sporadic securitization market featuring loan pools that can feature multiple, varied mortgage products. 

“[The explosive loan-origination business] has diverted underwriters that might normally be on the due-diligence [private-label] side because it’s just more profitable for [companies] … because there’s more of it to do, and you can do it faster [than providing underwriting services for private-label transactions],” Mayhew added.

Mayhew said it’s simply harder and more time-consuming to do underwriting/due diligence for private-label transactions. He said most of the origination market today involves “automated underwritten deals that go through one of the GSEs, and you don’t use the same skill set for that.”

“There aren’t as many automation tools to help on the TPR [private-label] side, and what I’m seeing is we are having to teach the old ways of craftsmanship and getting loans reviewed in a more manual way,” he added. “Ultimately, it’s a different style of underwriting. We have enough underwriters overall for the industry, but we don’t have enough for the [residential mortgage-backed securities, or RMBS] market segment.”

Even as the demand for underwriters continues to surge across both the origination and securitization segments of the business, Roelof Slump, managing director of U.S. RMBS at New York-based Fitch Ratings, said there also has been a concurrent explosion of new third-party due-diligence firms over the past few years — all competing for the same pool of underwriting talent.

“We’ve certainly seen an increase in the number of TPR firms out there in the market,” he said. “There’s more TPR firms active today than you had two years ago.” (There are at least two dozen TPR firms active in the market, based on lists of approved TPR firms issued by bond-rating agencies.)

“Some might have better technology, which may mean the work is more efficient, and they can handle more loans [per underwriter], and it remains to be seen how that plays out,” Slump added. “But at least … there’s certainly a robust, deeper market of TPR firms currently available to issuers.”

Still, according to Tom Piercy, managing director of Colorado-based Incenter Mortgage Advisors, those multiple TPR firms are still competing for talent from the same limited pool of underwriters. “That same underwriter on the front end [doing originations] also is in demand on the back-end [for securitizations],” he said.

John Toohig, managing director of whole loan trading at Raymond James, added: “So all of these companies are fighting for the same talent, and it’s really fascinating to watch the musical chairs. You’ll call one person at one firm, and then you’ll call him again six weeks later and discover he’s moved over to [another firm].” 

Finally, another major contributor to the shortage of underwriters in the industry is the strengthened regulatory and industry-standards environment of today, which has been beefed up considerably since the global financial crisis and related housing-industry crash some 15 years ago.

“One of the things due-diligence firms face is that the rating agencies have a level of expectation around experience, and three years is the relevant amount of experience [for an underwriter],” said Bill Shuey, director of securitization operations at Wipro Opus. “Some of the things that happened pre-Dodd Frank during the financial crisis have made everyone very cognizant of making sure that you have a competent underwriting staff, which is a good thing. But it does contribute to a shortage [of underwriters].”

Fitch’s Slump said all of these forces and more acting on the demand for and supply of underwriters will likely “continue to contribute to a slowing-down effect as [private-label] deals come through [for review and rating].”

“Ultimately, the TPR firm needs to be an independent third-party entity,” Slump added. So, he said, an issuer “can’t just bolt on a review and say they’ve done the diligence.”

“The industry is trying to come up with alternatives, and better ways of thinking about it [the underwriter challenge],” he said. “But at least from a number-of-firms standpoint, there’s certainly a robust, deeper market of TPR firms currently available to issuers. We’ve continued to watch that growth.”

This is part II in HousingWire’s three-part series on the repercussions of an industry-wide underwriter shortage. Check out the first story in the series here, and look for part III to be published later this week. 

The post Competition for mortgage underwriters has never been fiercer appeared first on HousingWire.

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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