Penny Mac’s new and “ambitious” business model pleases investors
Some companies can't wait to get their employees back to the office full-time. Synchrony Financial is not one of them.
The company handles credit cards issued under the names of popular retailers, such as Amazon and Lowe’s, and it’s the largest financial service provider to tell workers not to expect a large-scale return to the office.
“One of the lessons we learned from the pandemic is that offering flexibility leads to a more productive,engaged workforce,” a Synchrony spokesperson said told CNN. “Work flexibility has become central to our new way of working.”
Synchrony, previously part of the General Electric (GE) empire, said its US employees will have three working options: virtual (work from home), hoteling (work from home but in-person for key activities) and hybrid (work from home or in the office three to four days a week).
PennyMac Financial Services recently hosted a compelling investor day event, laying out a clear path toward achieving a 20% ROE over the medium term. And, the investors liked what they saw.
“In contrast to management's prior focus on profitability, the recent investor day seemed to emphasize the potential for market share growth ahead,” a note from Opel Investment Research said.
“Notably, PFSI highlighted some ambitious medium-term targets (in a normalized industry volume/margin scenario), including maintaining its leading position as the top correspondent lender while also growing its market share in the broker space to become the third-largest player (up from the current seventh ranking),” the note stated.
In line with these targets, PFSI also projects an impressive climb through the rankings in retail and servicing to fifth and third, respectively. This guidance was accompanied by specific numbers showing PFSI's mortgage origination targets by channel, along with an impressive c. $800 billion servicing portfolio goal.
“While the ROE target might seem ambitious at first glance, it is consistent with PFSI's track record,” the note said.
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Latin homeownership soars despite climbing prices
Amid the recent real estate bull market, one fact has been often overlooked: More than half of homeownership growth over the past decade has come from the Latino population. That trend is expected to continue. A study by the Urban Institute forecasts Latino buyers will comprise 70 percent of homeownershipgrowth from 2020-2040, serving as the growth engine of American home buying. In fact, the Urban Institute suggests that Latinos will be the only ethnic or racial group that will experience a higher homeownership rate over the next couple of decades.
Meanwhile, the price of homes continues to climb.
House prices rose nationwide in April, up 1.8 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices rose 15.7 percent from April 2020 to April 2021. The previously reported 1.4 percent price change for March 2021 was revised upward to a 1.6 percent increase.
For the nine census divisions, seasonally adjusted monthly house price changes from March 2021 to April 2021 ranged from +1.2 percent in the West North Central division to +2.6 percent in the Mountain and Middle Atlantic divisions. The 12-month changes ranged from +13.0 percent in the West North Central to +20.6 percent in the Mountain division.
“House prices recorded another monthly and annual record in April,” said Dr. Lynn Fisher, FHFA's Deputy Director of the Division of Research and Statistics. “This unprecedented price growth persists due to strong demand, bolstered by still-low mortgage rates, and too few homes for sale.”
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With Josh Pitts & Jacob Gaffney
Two major people movers from around the mortgage industry; Fannie/Freddie update
UpEquity, the tech-enabled mortgage platform creating a better way to buy a home, today announced the addition of Andy Pruitt as Chief Technology Officer. Pruitt, the former CTO at OppLoans, will guide the production of UpEquity’s proprietary automated underwriting engine and continue to build out its team of engineers.
Reggora, an appraisal software company that is modernizing theresidential real estate valuation experience for lenders, appraisal vendors, and borrowers, today announced another addition to its leadership team. Mike Phillippi, instrumental in the breakout success of Snapdocs, has taken the role of Vice President of Marketing.
During the last year, Reggora has attracted several other prominent industry leaders, including former Ellie Mae Chief Executive Officer Jonathan Corr who recently joined the Board of Directors and Katharine Loveland from Accenture who joined as Vice President of Customer Success. This team adds tremendous value to the company and will collaborate with Brian Zitin and Will Denslow, who co-founded Reggora in 2016, to positively transform the appraisal industry.
Fannie Mae and Freddie Mac may have been waylaid on their journey back to private hands. But the way things are moving, some big players in the mortgage business could end up in a better place. (WSJ Paywall.)
The Supreme Court ruling last week that the government’s sweep of the housing giants’ profit didn’t exceed their regulator’s statutory authority and that presidents can readily replace the head regulator was a one-two blow to Fannie and Freddie’s shares, which are down more than 40% in the past week. It means the Biden administration can now appoint a new chief overseer rather than keep the holdover from the Trump administration, who was seeking to release the companies from government conservatorship during his term.
Mortgage insurers such as MGIC Investment offer additional credit protection on GSE guarantees. They might benefit if the Biden administration puts more measures in place to help homeowners stave off default as pandemic measures wind down, though credit risk is already mitigated by the economic recovery, notes KBW analyst Bose George. More volume flowing through the system would also be a boost to insurers. Though longer term, more expensive or constrained Fannie and Freddie guarantees might potentially have expanded the role of private mortgage insurance.
Any new direction for the GSEs isn’t likely to spark a new boom for mortgage stocks, as volumes are already historically quite large. And originators face much more immediate concerns such as rising rates, the constrained supply of homes and narrowing loan profitability. Investors also weren’t pricing in much if any radical Fannie and Freddie overhaul to begin with, according to Jefferies analyst Ryan Carr. Plus, Mr. Biden’s full plans for the entities remain unclear.
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