The New Face of the Secondary Marketplace

This piece originally appeared in the May 2023 edition of MortgagePoint magazine, online now.

Mark Tribuna is the Senior Advisor for CRA Note Exchange, offered by CBC Mortgage Agency, a national provider of down payment assistance for low- and moderate-income homebuyers. Tribuna, who holds a bachelor’s degree in computer science from Saint Anselm College, oversees the secondary mortgage trading platform that enables organizations like Habitat for Humanity affiliates to sell their nontraditional notes to banks looking for opportunities to invest in the communities they serve.

During a financial services career spanning more than three decades, Tribuna has worked for New American Funding, Guardian Mortgage Company, and Habitat for Humanity International.

Below, Tribuna discusses how the secondary marketing platform has transformed from trading exclusively second-mortgage down payment assistance loans to additionally handling first-lien notes for affiliates of Habitat for Humanity International.

Q: When was CRA Note Exchange formed?
CBC Mortgage Agency (CBCMA) originally established the CRA Note Exchange in 2015 as a web-based marketplace to sell second-mortgage notes accumulated through its down payment assistance activity. The whole idea behind the exchange was to help increase liquidity to entities like Habitat for Humanity, so they could build more affordable housing while simultaneously helping financial institutions meet their obligations under the Community Reinvestment Act and gain CRA credits. To date, approximately $31 million in loans have been purchased by financial institutions through the exchange.

Q: How did the exchange wind up selling notes for affiliates of Habitat for Humanity?
The idea stems from my initial involvement in the CRA Note Exchange. I had been doing work on behalf of a Habitat for Humanity affiliate in Dallas in 2018 when I learned of CBC Mortgage Agency and the exchange. As I learned more about the exchange, I realized it would work wonderfully for Habitat affiliates that held notes on the homes they were helping to build for low-income working families. I knew first-hand how badly affiliates needed cash so they could help more homebuyers. Ultimately, I came on board, and the platform was modified to accommodate Habitat affiliates.

Q: Are these also second mortgages?
No, they’re first mortgages. While the CRA Note Exchange was originally intended for second mortgages for Habitat affiliates, we modified the platform to handle first mortgages. It’s been a real game-changer. Because we’re now able to handle trading both first and second mortgages, we can serve a much larger number of nonprofits and other entities that provide affordable home loans, as well as offer more opportunities for banks and other financial institutions to meet their obligations under the Community Reinvestment Act.

Q: Are there other mortgage exchange platforms for the Habitat affiliates to utilize?
There are other exchange platforms for trading mortgages. But most of these platforms require loans to already be in marketable condition—they don’t help entities looking to sell notes get their loan files in order, which is a very labor-intensive process.

This is a big obstacle for sellers, because most nonprofits generally don’t have the bandwidth to properly organize their files for sale into the secondary mortgage marketplace.

Because we have a lot of experience in getting notes in salable condition, however, we’re happy to help. In fact, we have one affiliate, Habitat for Humanity of St. Augustine/St. Johns in Florida, that sold its first ever notes using the exchange.

Q: How does your current pipeline of loans look?
Our pipeline is very robust considering we just started working with Habitat affiliates. We now have several affiliates using the exchange, and so far, they have posted an aggregate of nearly $ 8 .5 million in loans to the platform that we hope to have sold by the end of this year.

Q: Do the loans sell at or near par?
Because the notes are at 0% interest, banks need to make a profit from them. So, we see loan sales at discounts of as much as 40%. By being able to access larger numbers of potential bidders on these notes, however, affiliates can generate significantly more liquidity for their homebuyer programs and do it far more efficiently than if they had to go at it alone. The CRA Note Exchange also gives financial institutions the ability to find and buy notes based on their individual CRA goals. They can even search for opportunities by census track.

At the end of the day, we’re reducing the costs of buying and selling notes for both financial institutions and entities like Habitat affiliates, so they can lower their own costs, increase loan affordability, and increase access to homeownership. It’s very fulfilling work, to say the least.