BRUCE GOETSCH National Sales Manager bgoetsch@myservion.com 651-497-4734 myservion.com We provide financial institutions and borrowers the support they need to reach their financial goals. Re-envisionyour mortgage strategy. Correspondent Retail Wholesale Delegated Conventional FHA, VA, USDA Jumbo/Non-Conforming Quality control Contract processing Contract closing Servicing Appraisal review Servion Mortgage is a DBA of Servion, Inc. NMLS #1037 Equal Housing Lender partnership channels mortgage products additional services manage this exposure beyond the scope of this column, which your brokers can explain. Still, it’s safe to say 2022 is built for a bond like an SBA 7(a). Also in the discussion Mortgage-backed securities (MBS) come in several different adjustable-rate models. Among the more popular are collateralized mortgage obligation (CMO) floaters. These have some of the characteristics of an SBA, in that there are no periodic caps, and they float based on money-market indices, such as the secured overnight financing rate (SOFR). One comment is that they have very low priority to cash flows, so their prepayments and average lives can fluctuate wildly. Most investors don’t mind, as CMO floaters’ appeal is their quick reaction to rate changes. Be careful of those lifetime caps, however: They could be in the 4.0% range, which means their market values will lose some ground in higher rate scenarios. Commercial MBS, such as Freddie Mac’s “Ks,” also come in floating rate structures. Their indices are often SOFR, and they also have no periodic caps. Because Freddie Ks are collateralized by multifamily projects, they, too, can see very inconsistent cash flow if some of the larger properties experience prepayments. Again, like CMOs, these usually come to market with little or no premium, so the early payoffs may not hurt the yields. You’ll want to pay attention to the lifetime caps on these as well. All told, the expected path of monetary policy in 2022 should bode well for money-market alternatives, both for price stability and yield. Bonds that are submerged could be nicely complemented by short-duration instruments. Floaters may just be the answer to restore some levity to your investment portfolio. SBA preferred service provider Holtmeyer & Monson has been ICBA’s endorsed SBA lender service provider since 2006. H&M assists community banks in the underwriting and servicing of SBA loans, and can also provide secondary market assistance. For more information, visit holtandmon.com or call 800-340-7304. ICBA Securities names new directors ICBA Securities recently added these leadership bankers to its board of directors: Tommy Bates, Legends Bank, Clarksville, Tenn.; Blake Heid, First Option Bank, Paola, Kan.; Craig Wanichek, Summit Bank, Eugene, Ore.; and Aza Bittinger, Community Bankers Association of Ohio, Columbus, Ohio. Jim Reber is president and CEO of ICBA Securities, ICBA’s institutional, fixed-income broker-dealer for community banks. He can be reached at jreber@icbasecurities.com. 9 ISSUE 5 | 2022
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