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SOMB 2 - Profitable Production Management, SM Revisited & MBSs and CMOs
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SOMB 2 - Profitable Production Management, SM Revisited & MBSs and CMOs
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SOMB 2 - Profitable ProductionManagement, SM Revisited & MBSs and
CMOs
Main sources of income - ANS-1) Fees negotiated at origination
2) Interest income
3) Gain on sale of loan into the secondary market
4) Servicing Release Premiums (SRP)
5) Servicing income (one or the other)
Other sources of income - ANS-1) Note rate
2) Warehouse rate (interest rate for the warehouse line)
3) Administration fees
4) Wire fees (paid by the borrower to cover costs)
Profitability to a mortgage banker (current state) - ANS-Profitability equates to the ability
to create a two high quality products (mortgage itself & the servicing rights) that can be
sold in the secondary market and profit can be realized.
** Top-line growth, expense reduction & bottom line
Fee Negotiated at Origination examples (point with the consumer) - ANS-1) Loan fee
2) Discount points
3) Processing fee
4) Administration fee
5) Lock fee
6) Underwriting fee
7) LO comp
8) Flood cert fee
9) Tax services fee
10) Lender inspection fee
11) Courier fee
12) Doc prep fee
Gain on Sale (for lenders) - ANS-Method 1: Whole loan sale (then retain or release
servicing)
, Method 2: Bulk Sale
Method 3: Best efforts (lower price then mandatory, & lender owns less risk)
Method 4: Co-issue (sell loan & servicing to separate investors at the same time)
Structure 1: Assignment of Trade (AOT)
Structure 2: MBS
Hedge Gain/Loss
Servicing Income - ANS-Fixed Rate = .25
Arm = .375
FHA/VA loans less than a year old = .44
What metric does a servicer use to calculate servicing income? - ANS-BPS (Basis
points)
On what day is the borrowers payment considered late? - ANS-The 2nd (the late fee
isn't charged until the 16th)
Expenses - ANS-1) Channel size and location (Retail, wholesale & correspondent)
2) Employee Training
3) Insurance
4) Available working capital
5) Employee expense (most expensive resource)
6) Risk Management
7) Available staffing pool and experience
8) Technology
9) Marketing
When does a servicer want the borrower to pay? - ANS-16th to the end of the month so
servicer can charge a late fee and not report 'late' to the credit bureau
Future home buyers segment opportunity - ANS-Foreign-born residents
What keeps renters from buying? - ANS-1) Information
2) Affordability
3) Credit
4) Confidence
Key terminology for SM: Basis Point - ANS-One one-hundredth of one percent (0.0001)
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