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Freddie Mac STACR Servicer Performance Observations

By Christine Brunie & Stella Lu

Oakleaf Group analyzed the mortgage data representing the underlying collateral backing the Freddie Mac STACR credit risk transfer transactions.  This data represents 28,305,404 loans originated between from 2012 and 2020[1]

According to freddiemac.com the Credit Risk Transfer (CRT) program has transferred $9.1 billion of credit risk on $231 billion of single-family mortgages.[2]  On March 18, 2020 Freddie Mac announced the suspension of single-family foreclosure and evictions and confirmed and expanded forbearance and modifications programs.[3] The forbearance plans provide borrowers with payment relief up to 12 months.  According to Freddie Mas’s COVID-19 CRT FAQs document the delinquency status for loans in forbearance will continue to advance.  This advance does not result in a modification loss or principal write-down.  It could cause a lockout of principal based on the delinquency test.[4]  

Due to the limited duration of the COVID-19 disruption so far, our analysis relates to the 30 and 60+ day past due rates on the CRT loans.  Below is a chart showing 30 day and 60+ day delinquency rates for the top servicers participating on the STACR transactions.

30 Day Delinquency Rate (%) for Top 50 Servicers by UPB, 2019-12 through 2020-05. #1: Wells Fargo Bank, N.A. – 159.45 Billion, #2: JPMORGAN CHASE BANK, NATIONAL AS – 84.07 Billion, #3: NEW RESIDENTIAL MORTGAGE LLC – 65.95 Billion, #4: U.S. BANK N.A. – 62.1 Billion, #5: TRUIST BANK – 57.54 Billion, #6: MATRIX FINANCIAL SERVICES CORPOR – 44.91 Billion. #7: CALIBER HOME LOANS, INC. – 33.26 Billion, #8 – OTHER – 474.64 Billion


[1] All data retrieved on June 23, 2020 from Freddie Mac’s website, here: https://freddiemac.embs.com/FhlDiscl/menu.php?s=1

[4] https://crt.freddiemac.com/_assets/docs/covid-19-crt-faqs.pdf

60 Day Delinquency Rate (%) for Top 50 Servicers by UPB, 2019-12 through 2020-05. #1: Wells Fargo Bank, N.A. – 159.45 Billion, #2: JPMORGAN CHASE BANK, NATIONAL AS – 84.07 Billion, #3: NEW RESIDENTIAL MORTGAGE LLC – 65.95 Billion, #4: U.S. BANK N.A. – 62.1 Billion, #5: TRUIST BANK – 57.54 Billion, #6: MATRIX FINANCIAL SERVICES CORPOR – 44.91 Billion. #7: CALIBER HOME LOANS, INC. – 33.26 Billion, #8 – OTHER – 474.64 Billion

30 day past due Wells Fargo delinquencies in April (7.20%) were 2 times higher than their peers’ average (3.50%) and in May (4.51%) they were 1.8 times higher than peers’ average (2.51%).  To gain a better understanding of this disparity, we drilled down to the state by state composition and average loan balance by state.  Below is a state level comparison of the loans serviced by US Bank (USB), JP Morgan/Chase (JPM), New Residential (NewRez) and Wells Fargo (WF). 

60+ Day past due Wells Fargo delinquencies in May (6.45%) were 2.1 times higher than their peers’ average (3.05%).

30 days past due by state May 2020

30 days past due by state May 2020

Wells Fargo delinquencies are to be higher than their peers across essentially all states.  Below is a summary of the top three servicers (JPM/NewRez/USB) versus Wells Fargo based on the May 2020 data. 

Top Servicers Compared to Wells Fargo 60+ Day - STACR May 2020 Data

The Roll Rate Performance MoM for the Top Servicers shows a similar trend:

30-day and 60+ day delinquency rates – roll rate performance month-over-month for the Top Servicers

While the 30-day delinquency rate had been stable across all servicers, a slight uptick was experienced in March, followed by a significant uptick in April driven by COVID related delinquencies.  Similar performance was experienced by the 60+ day delinquency rate.  However, the 60+ % increased exponentially from April to May – due to April’s 30 day delinquencies rolling into the 60+ day bucket.

Wells Fargo and JP Morgan Chase experienced the greatest percentage increase, Wells Fargo 60+ % was 1.8 to 2.4 times the levels experienced by the other top services.  What is the driver behind Wells Fargo higher than their peer’s delinquency performance?  To confirm that loan size was not a driver, we examined the average unpaid principal balance for the top servicers and did not find major variances across the top servicers. 
 

JP Morgan Chase

 

 

New Residential

 

 

State

April Average UPB

May Average UPB

State

April Average UPB

May Average UPB

California

$306,774

$305,253

California

$320,270

$320,476

Florida

$192,407

$191,448

Florida

$206,280

$205,611

Louisiana

$170,849

$169,481

Louisiana

$193,465

$192,028

Nevada

$206,454

$204,963

Nevada

$217,104

$215,852

New Jersey

$269,335

$267,776

New Jersey

$273,408

$272,303

New York

$288,857

$287,634

New York

$290,264

$289,697

US Bank

April Average UPB

May Average UPB

Wells Fargo

April Average UPB

May Average UPB

California

$315,101

$313,177

California

$295,441

$293,381

Florida

$207,819

$206,694

Florida

$203,906

$202,560

Louisiana

$170,849

$169,481

Louisiana

$193,465

$192,028

Nevada

$206,454

$204,963

Nevada

$217,104

$215,852

New Jersey

$269,335

$267,776

New Jersey

$273,408

$272,303

New York

$288,857

$287,634

New York

$290,264

$289,697

According to the RMBS Credit Indices: June 2020 provided by Kroll Bond Rating Agency[5], the 30+ day delinquency rate across the high and low LTV CRT indices was between 5%-6%, and the 60+ day delinquency rate was between 1.80% to 2.10% (these figures include both Freddie and Fannie Mae CRT mortgages).


 

Figure 3: CRT Low LTV Delinquency Index June 2017 through June 2020Figure 4: CRT High LTV Delinquence Index June 2017 through June 2020

Our analysis provided a few answers - but also prompted many more questions. One thing that's for certain is, due to the wide variance in servicing performance, CRT Investors would do well to closely monitor the performance of the collateral underlying their positions.

 

[5] https://www.krollbondratings.com/documents/report/36166/rmbs-credit-indices-june-2020