Monday, September 22, 2014

The current state of Lender M&A and why mortgage companies, big and small, are moving!

I've been hearing it for a while, "the market is slow, and home appreciation is stagnant." But in South Carolina, for example, many markets are on fire. As Zillow points out in Despite Rising Home Values, Affordability Remains Largely Intact for Buyers, many markets are still experiencing above-normal rates of home value growth, a general slowdown in appreciation is evident. "Among the nation's 35 largest metros, all but Indianapolis experienced year-over-year home value increases in July. Those with the most notable annual increases include Las Vegas (17.4 percent), Riverside (16.5 percent), Miami-Fort Lauderdale (15.8 percent) and Atlanta (14.9 percent)." It's Zillow, so be forewarned, if you click the link expect graphs with multiple colors and plenty of index numbers with strange nomenclatures.

Back in April the commentary mentioned explosive growth at LoanStar Home Lending.  Where are they now?  After launching last November the Portland, Oregon based mortgage bank now has nearly 170 employees from Seattle to Dallas and most points in between. As President & CEO Mike Baldwin explained in a recently produced Mission Statement video, "we're growing, and we are busy!" LoanStar has been busy, with new branches opened in Dallas/Fort Worth, Albuquerque, Phoenix, Clackamas, OR, and Everett, WA since the commentary last reported in April. LoanStar also has a new facility under construction in Vancouver, WA and Orange County, CA slated to open in October. "We continue to attract talent based on our ability to close loans efficiently, a broad offering of correspondent lender relationships, and a top-flight concierge marketing system. Our system is designed to allow originators freedom to originate new loans and relationships and not process loans, conduct damage control, or spend time trying to figure out how to market themselves. That is what the loan officers say they want, and that's what we deliver," says Baldwin. To learn more, visit and contact the regional manager closest to you, or contact Kenn Bartley, SVP Business Development.

 A quick note about Friday's commentary: I noted an example of dumping loan files (with borrower information) in a dumpster. It was really late when I wrote that, or really early, but "Centennial Mortgage" was not involved - Centennial was the municipality - and the company was Colorado First Financial Mortgage. My apologies to any Centennial Mortgage people, living or dead, real or imaginary.

Changes are taking place out there in residential lending - players are changing teams, and teams are changing divisions and conferences. I say that not only because I am receiving a lot of LinkedIn notes and change of e-mail requests (although both are a leading indicator). As this commentary has mentioned for quite some time, the lending industry is either evolving or devolving - I don't know which. Big companies are reevaluating their channels (like Affiliated leaving correspondent), small companies are tired of compliance costs and hurdles, big companies are looking for acquisition targets (Caliber and Cobalt). Rumors are swirling that Mutual of Omaha is exiting residential lending and partnering up with Guild, mentioned below. Lots of small lenders & branches are looking for new homes: shoot me a confidential e-mail if you're "exploring options" - happy to provide free introductions for small branches or LOs sniffing around.

A KPMG banking industry outlook survey of 100 bank executives in the US finds the primary areas these executives say are the biggest barriers to growth for their bank over the next year are: regulatory and legislative pressures (41%); lack of customer demand (25%); pricing pressures (20%); risk management issues (19%); increased taxation (18%); US dollar strength (17%); staying on top of emerging technologies (14%); inflation (12%); labor costs (12%) and a lack of qualified workforce (11%). And any mortgage bank can use those same factors in the decision to scale back or find a larger partner.

But what does a company buy when they purchase another mortgage company? They aren't all walks on the beach and Boone's Farm Chablis in the hotel room. Something is worth what someone else is willing to pay for it, right? Every deal is a little different, of course, and it depends on the sizes involved. The purchases hopes that what they have after the deal closes is something more than leases, cheap vacant office furniture, and vendor contracts that must be phased out. Often a buyout is involved with the owners, cash is "taken off the table" by the seller, and perhaps employment agreements are put in place for key originators. If the seller is large enough to have servicing, that is a big plus. Negotiating deals, of course, is very dependent on the motivation of the buyer and sellers - and there is plenty of motivation right now.

Jeff Babcock with STRATMOR scribes, "After the dismal 1st Quarter results, most mortgage executives have expressed renewed optimism based the robust 2nd and 3rd Quarter production volume recovery.  But we at STRATMOR sense that their mood is darkening as the reality of seasonal downturns looms just around the corner.  If the 4th Quarter of 2014 and 1st Quarter of 2015 origination experience proves to be a repeat of last year, management will be severely challenged to sustain profitability.  The specter of layoffs, margin compression and compensation pressure is disdainful to most mortgage entrepreneurs. Throughout 2014, the mortgage business is experiencing a level of M&A activity not seen for many years. And it's been a true sellers' market for well-managed independent retail mortgage banks. Investor demand remains very strong, so sellers have been successful in negotiating healthy valuation premiums. Every transaction in STRATMOR's deal pipeline reflects this robust marketplace environment."

His note continued. "But what happens to the M&A investor attitude if our industry experiences two consecutive years of semi-annual origination cyclicality and earnings volatility?  The resulting uncertainty will certainly have an adverse impact on deal terms, thereby reducing the premiums paid at closing and deferring more value to a contingent arrangement (aka earn outs). In response to this marketplace stress, STRATMOR anticipates more midsize lenders will be compelled to consider their 'strategic options,' thereby increasing the supply of available acquisition opportunities. STRATMOR's timing advice for prospective sellers: don't wait until next spring to explore your options. It's still a sellers' market and your negotiating position remains favorable." (If larger firms would like some objective feedback and a fresh market perspective, reach out to Jim Cameron or Jeff Babcock if you are interested in discussing M&A opportunities.)

Last week there were a few other deals announced besides the Caliber-Cobalt marriage. News broke that New Hampshire's Regency Mortgage Corp. will be acquired by California's RPM Mortgage. "Regency Mortgage Corp. remains fully intact, charged with growing RPM's New England business. Regency will still operate under the Regency brand and will have all ops remain local...much improved jumbo pricing...a suite on non-QM products that RPM eventual move from NYLX to Optimal Blue... (originators) able to select an RPM-serviced price each day which will allow your contact information to go out monthly with the mortgage statement to your serviced borrowers."


Things have changed with commercial banks and savings institutions insured by the FDIC; these institutions have reported aggregate net income of $40.2 billion in the second quarter of 2014, which is up $2 billion (5.3%) from earnings of $38.2 billion the industry reported a year earlier. The increase in earnings was mainly attributable to a $1.9 billion (22.4%) decline in loan-loss provisions and a $1.5 billion (1.4%) decline in non-interest expenses. Also, strong loan growth contributed to an increase in net interest income compared to a year ago. Lower income from reduced mortgage activity and a drop in trading revenue, however, contributed to a year-over-year decline in non-interest income.


In security news, Freddie Mac priced a new Structured Agency Credit Risk (STACR) transaction totaling $770 million.  This STACR series represents the fifth offering this year that Freddie Mac is transferring a portion of its credit risk on certain groups of loans to private investors. The first HQ Series transaction took place last month on loans between 80 and 95 percent LTVs.


Turning to the bond markets, we continue to be lulled to sleep with low volatility in bond prices and no inflation. Friday we had a smidgeon of economic news with the Leading Economic Indicators: "The LEI's six-month growth trend has been held back slightly by lackluster contributions from housing permits and new orders for nondefense capital orders. Despite concerns about investment picking up, the economy should continue expanding at a moderate pace for the remainder of the year." Rating agency Fitch confirmed its U.S. ratings of AAA - thanks!


But the big news of the week was expected: the Fed further reduced its asset purchases by another $10 billion and kept rates steady. It also decided to keep the language "considerable time" to refer to the period between ending its asset purchases and raising the fed funds rate. And lenders should remember that the Fed sets overnight rates, whereas supply and demand set mortgage rates. Most see rates staying put through the end of the year, and perhaps overnight Fed Funds closer to 1% by the end of 2015.


I don't know how we're here at the last full week in September already, but we are. And we have a whole bunch of economic news, so let's take a look at the menu .Today we have the tasty Existing Home Sales. Tomorrow is the piping hot FHFA House Price Index. Wednesday is MBA applications and New Home Sales. Thursday are Jobless Claims and the always volatile Durable Goods (one aircraft order from a domestic manufacturer can really throw things off). Friday we'll dine on GDP, Personal Income and Consumption, some PCE chatter, and finish off with mints and the University of Michigan Consumer Confidence. For those quantitatively inclined, the 10-yr closed Friday at 2.59% and this morning we're at 2.57% with agency MBS prices a shade better.


Executive Rate Market Report is Here!


Treasuries and MBSs started a little better this morning, just some squaring ahead of Wednesday when the FOMC releases its policy statement. US stock indexes were also slightly better at 9:00. At 8:30 the Fed’s New York Empire State manufacturing index jumped to 27.54 frm 14.69 in August. No direct reaction to it though; the index has been very volatile in the last three months; July index at 25.60, August 14.7 and now 27.54. New orders were up only slightly to 16.86 vs August's 14.14 while employment growth slowed sharply to 3.26 vs 13.64. Shipments, however, do show plenty of strength, at 27.08 vs 24.59. A report best forgotten given the recent volatility and the interior components.

Slightly better open this morning in the bond and MBS markets while the US and Europe’s stock markets weaker. The 10 at 9:00 2.56% down 2 bps frm Friday, 30 yr MBS price +9 bps. At 9:30 the DJIA opened -17, NASDAQ -14, S&P -4; 10 yr note 2.57% -1 bp and 30 yr MBS price +14 bp frm Friday’s close and +33 bps frm 9:30 Friday. Europe and US stock markets soft this morning on reports out of China that there won’t be much stimulus coming. Overnight tonight there will be a report on Chinese manufacturing, given the comments frm China’s finance minister that there isn’t more stimulus coming traders are paying attention to all Chinese economic data.

The August Chicago Fed National Activity index, usually not a report that gets much attention, showed a drop on the index to -0.21 against estimates of +0.35 and +0.26 in July. Consumption and housing pulled down the main index, at minus 0.12 from July's minus 0.13. The employment component fell to zero from July's plus 0.10 reflecting weak nonfarm payroll growth of 142,000. The component that had the best showing in August was sales/orders/inventories, at plus 0.08 vs plus 0.04 in July. The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to better gauge overall economic activity and inflationary pressure, and mirrors other regional Fed indexes.

The main data today, August existing home sales; expected up 0.6% to 5.18 mil annualized units, as reported sales declined 1.8% to 5.05 mil units (annualized); yr/yr sales down 5.3%. Based on the sale pace there is a 5.5 month supply, but supply will likely decline as the winter months close in.

Treasury auctions this week have little more interest to those of us that mainly focus on long term treasuries. With the clock ticking on when the Fed will begin tightening next year (no consensus on when, but it is coming), how the 2 and 5 yr auctions go will be interesting. Recent activity in treasuries has seen a lot more selling at the middle and short end of the curve than the 10 or 30 issues. We would like to see strong demand, especially on the 5 yr but that isn’t likely.

Beside the economic data, which really isn’t much this week, and Treasury auctions; there is a parade of Fed officials taking to the rubber chicken circuit. Today NY Fed’s Dudley just starting his comments. Minneapolis’s Kocherlakota tonight. Every day this week except Friday.

This week’s Economic Calendar:


10:00 am August existing home sales (as reported


9:00 am July FHFA housing price index (+0.4%)

1:00 am $29B 2 yr note auction


7:00 am weekly MBA mortgage applications

10:00 am August new home sales (+4.2% 430K annualized units)

1:00 $35B 5 yr note auction


8:30 am weekly jobless claims (+20K to 300K)

August durable goods orders -17.1%, ex transportation orders +0.8%)

1:00 pm $29B 7 yr note auction


8:30 am final Q2 GDP (+4.6% frm +4.2%; deflator 2.1% unch frm prelim report last month)

9:55 am U. of Michigan final Sept consumer sentiment index (84.6, unch frm mid-month)

A better start this morning as the rate markets continue to work off the oversold conditions that built after the recent increase in rates. The wider condition is still bearish and with the recent slight improvement the markets are no longer in oversold levels based on the momentum oscillators. We have very solid resistance on the 10 yr note at 2.52% and support at 2.64%; we call that no-man’s land now. Short term somewhat better but the wider perspective is bearish. You could look at it as a neutral pattern as long as the 10 sticks within that range.

PRICES @ 10:15 AM

10 yr note: +3/32 (9 bp) 2.57% -1 bp

5 yr note: +2/32 (6 bp) 1.80% -1 bp

2 Yr note: unch 0.56% unch

30 yr bond: +1/32 (3 bp) 3.28% unch

Libor Rates: 1 mo 0.154%; 3 mo 0.233%; 6 mo 0.330%; 1 yr 0.584%

30 yr FNMA 3.5 Oct: @9:30 101.98 +14 bp (+32 bp frm 9:30 Friday)

15 yr FNMA 3.0 Oct: @9:30 102.88 +2 bp (+4 bp frm 9:30 Friday)

30 yr GNMA 3.5 Oct: @9:30 103.15 +8 bp (+29 bp[ frm 9:30 Friday)

Dollar/Yen: 109.13 +0.09 yen

Dollar/Euro: $1.2838 +$0.0009

Gold: $1213.50 -$3.10

Crude Oil: $92.09 -$0.32

DJIA: 17,242.41 -37.33

NASDAQ: 4542.74 -37.05

S&P 500: 2000.58 -9.82


Friday, September 19, 2014

Stearns' new exec; CFPB's auto loan news; upcoming training and events....yaarrrr

Arrgghh... I read in Pirate Quarterly that you could take the entire human population of the earth, put it inside of Texas, and it would still be less crowded than New Yorrrrk City. (So I checked. NYC is 469 square miles, 8.3 million people, so 17,700 people per square mile! Texas is 268,820 square miles, which at 17,700 people per square mile would accommodate 4.75 billion people.) But there are 7.2 billion of us. Fortunately Alaska is twice the area of Texas, so at least we can say one state would hold the earth's population at the same density as Manhattan. For something a little more relevant, check out this cool mortgage map. It shows lending trends over the last several years here in the United States (click on "interactive map" in the text to watch it).

In 2002 I remember looking out my office's window and seeing employees of another mortgage company taking boxes of loan files out to the dumpster without being shredded. The situation was corrected, but it appears that people are still capable of doing these things - and thus comes a similar tale from Colorado and Centennial Mortgage.


"Who will regulate the regulator?" The CFPB once again turned some heads Wednesday, this time addressing nonbank car lenders. "The CFPB is proposing to oversee larger nonbank auto finance companies for the first time at the federal level. The Bureau also released a supervision report that details the auto-lending discrimination that the Bureau has uncovered at banks. The report highlights that the Bureau's supervisory actions against banks will result in about $56 million in redress for up to 190,000 consumers harmed by discriminatory practices...Currently, the Bureau supervises large banks making auto loans, but not nonbank auto finance companies. Today the CFPB is proposing to extend its supervision authority to the larger participants of the nonbank auto finance market. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the CFPB has authority to supervise certain nonbanks the Bureau defines through rulemaking as "larger participants" in a market. Today's proposed rule would generally allow the Bureau to supervise nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year. The Bureau would be supervising them to ensure they are complying with federal consumer financial law. The Bureau estimates that about 38 auto finance companies would be subject to this new oversight. These companies originate around 90 percent of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers." Let's face it - the critics are gaining momentum saying that possibly every fiscal transaction involving a consumer will be eventually overseen by the CFPB.


While we're on the CFPB, nearly a month ago news broke of Flagstar's "eminent" settlement with this bureau. I haven't seen any settlement, but it bears repeating & clarification that this information is a result of Flagstar's servicing operation, and has nothing to do with channel issues such as mini-correspondent. Flagstar's Form 8-K states, "Flagstar Bancorp, Inc., the holding company of Flagstar Bank, FSB (the "Bank"), announced today that the Bank has commenced discussions with the Consumer Financial Protection Bureau, or CFPB, related to alleged violations of various federal consumer financial laws arising from the Bank's loss mitigation practices and default servicing operations dating back to 2011. The Bank previously provided the CFPB with documents and other information concerning the Bank's loss mitigation practices and default servicing operations in response to Civil Investigative Demands received from the CFPB. While the Bank intends to vigorously defend against any enforcement action that may be brought, it has commenced discussions with the CFPB staff to determine if a settlement can be achieved. Those discussions are ongoing."


Returning to bank news, is $8 trillion in loans on the books of banks, a good thing, or a bad thing? I guess, like most things in life, it's all relevant. My answer would be: sometimes good, sometimes bad. The American Bankers Association's Chief Economist, James Chessen, writes, "Banks reached a historic milestone in the second quarter, holding more than $8 trillion in loans on their books for the first time ever. The double-digit increase in business lending reflects increasing confidence, with businesses more likely to consider expansion in an improving economy. We're seeing the natural link between businesses being willing to borrow and a growth in job creation, with around 210,000 new jobs created each month. There has never been a better time for businesses that want to borrow and expand their operations. Rates are low, and a highly competitive marketplace ensures banks will offer a broad menu of options when it comes to structuring loans." While bank assets grow, residential lending continues to under-perform, as Mr. Chessen points out, "total lending is up $377 billion year-over-year, residential mortgage lending remains weak. New regulatory requirements on mortgage lending are not helping, and will continue to dampen a key economic driver. First-time homebuyers are feeling the pinch most intensely."

I head off to the Mortgage Bankers Association of the Carolinas annual conference tomorrow, which made me realize that there are a lot of upcoming events - many of them free and educational. So in no particular order...

In compliance news: Mortgage technology innovator Mortgage Coach and renowned compliance expert Mitch Kider (Mitch is Chairman and Managing Partner of Weiner Brodsky Kider PC and represents his clients in investigative and enforcement matters before the CFPB, the Department of Housing and Urban Development, the DoJ, FTC, Ginnie Mae, Fannie Mae, Freddie Mac, and more) are hosting an online Sales and Marketing Compliance Clinic Tuesday 11AM PST. "Mitch will be covering topics like cooperative marketing with Realtors, disparate treatment, MSAs and desk rentals, how loan officers can best protect themselves, the vital importance of transparency and consistent borrower rate quoting to both the CFPB and states and much more. This call will be attended by the industry's best; from top C-Suite execs to dedicated loan officers. Join the call and learn how to change compliance from a weakness to a competitive advantage. Click here to register.

The MBA/MW's Mid-Atlantic Lender Conference is coming up on Thursday, October 9. It will be held at Waterford at Fair Oaks (in Fairfax, VA), and anyone interested should register by October 2 for the early bird rate. Lunch and happy hour are included at no extra cost. Click on the link above to download pdf with speaker details. Hey, it includes a trade show and happy hour!

In Oklahoma, the OMBA Conference on October 3rd will be presented by Bricker & Eckler LLP and INCompliance. This one-day conference covers the most critical regulatory, compliance and litigation issues facing the industry. Event details include agenda and registration information.

Get ready for a jam packed agenda on mortgage compliance next steps and latest best practices at the Mortgage Regulatory Forum taking place September 22-23, at the Westin Arlington Gateway, Arlington, VA.

On Wednesday, September 24, join WAUSAU Financial Services and Treasury Strategies in a webinar discussing key reasons why paperless onboarding should be on every bank's 2015 project list.

Late November in Washington D.C., American Conference Institute is offering a 2-day conference. Register by September 23rd and join the mortgage servicing compliance summit, topics include MSR transfer risks and much more.

Save the date: Colorado Mortgage Lenders Association 24th Annual Rocky Mountain Mortgage Lenders Expo on April 9th, 2015, more information to follow in the coming months.

Social Media Bootcamp: OC C.A.M.P. registration scheduled on October 1st, Katie Wagner will discuss what not to do with social media for your business. Speaking of Orange County, CA, the 2nd Annual Orange County C.A.M.P Golf Tournament supporting worthwhile organizations is scheduled for October 6th.

Turning to the markets, jobs and housing are keystones of any economic recovery, and yesterday we had updates on both. Housing Starts fell 14.4% in August (following hitting its highest level in seven years) to a 956,000 annualized rate following July's revised 1.12 million pace. And Building Permits for future projects dropped 5.6% to a 998,000 pace in August from a 1.06 million rate the prior month. But Jobless Claims fell 36,000 in the latest week, and are down near post-recession lows.  The four-week moving average of claims, which smooth out weekly volatility, was down 4,750 to 299,500.

Thursday saw the standard buying by the Fed, helping the demand side of the supply & demand equation. Supply from mortgage bankers wasn't anything to be excited about. And thus we find ourselves today not much different from rates during the entire week with the only scheduled economic news being the 10AM data with August's Index of Leading Indicators. The 10-yr's yield, which closed Thursday at 2.63%, is back to 2.60% and agency MBS prices are better nearly .125.

Thursday, September 18, 2014

Executive Rate Market Report

Slightly weaker bond and mortgage markets this morning on a mixed bag of data at 8:30. August housing starts and permits were a clear message that the sector is still struggling. Starts were expected to have declined 5.0% to 1038K, as reported starts crumbled -14.4% to 956K units. August building permits were expected to be up 0.3% to 1054K units, as reported permits dropped 5.6% to 998K. The housing sector is weak, but the data continues to confuse as some of the reports are good while most are soft. Yesterday the Sept NAHB housing market index was better than forecasts, the index increased frm 55 to 59 with most forecasts for the index at 56. Today with starts and permits; where the rubber meets the road instead of opinions, clearly shows the sector is not providing any impetus to the economic recovery. Slow wage growth and tight lending standards continue to challenge the homebuilding industry by placing homeownership out of reach for some Americans. While the headline was soft, decline in single family starts were down just 2.4%, somewhat mitigating the headline that mostly shows multi-family declines.

On the other side of the issue on growth; weekly jobless claims were expected down 10K, as reported claims fell 36K to 280K the lowest in two months and pushing under 300K that has been the level for most of the last six weeks. In July claims fell to 279K then edged back to the 300K area the last month. The four-week average of initial claims, a less-volatile measure than the weekly figure, decreased to 299,500 from 304,250 the week before. The number of people continuing to receive jobless benefits dropped by 63,000 to 2.43 million in the week ended Sept. 6, the lowest since May 2007.

Yesterday the FOMC once again confounded most forecasters that were ‘sure’ that the Committee would change the language in the policy statement to reflect the Fed would be more specific about when it will begin increasing rates. The FOMC left the language the way it has been, that low rates will stay for an extended period. The Fed continues to fret that the employment sector is still soft with many of new jobs low paying and many part time. In the meantime markets have shown little concern that job creation is less than any other recovery in the last 50 years. Continued low interest rates negate a lot of reality; there isn’t many place to invest for the wealthy so stocks continue to climb.

The DJIA opened +40, NASDAQ +15, S&P +5;  10 yr note 2.63% +1 bp and 30 yr MBS price -6 bp frm  yesterday’s close and -22 bp frm 9:30 yesterday.

At 10:00  the Sept Philadelphia Fed business index, expected lower at 23.5 frm 28.0 in August, as reported the index fell to 22.5 but the components were a little better. The employment component increased to 22.2 frm 9.1 in August and new orders to 15.7 frm 14.7. Judge it a mixed and another confounding report, hard to take the increase in the employment component.

Treasury rates and mortgage rates continue to increase even with the Fed ‘assuring’ interest rates will stay low for that extended period of time. No reason now to buy treasuries, the stock market is moving up making new highs on a regular basis and there isn’t any safety needs for investors to park money in sovereign debt (US treasuries). In Ukraine the government in Kiev appears to be weakening against Russian separatists. A Ukrainian law granting self-governance powers to separatist-held areas, while facing a lot of opposition within the Kiev politicians, nevertheless is a victory for Russia. One of Putin’s key plans has been to keep Ukraine frm joining NATO and it now appears he has accomplished that---for the moment. In the mid-east the pot is boiling but it hasn’t boiled over yet to a level that threatens global economies.

Day by day the 10 yr note continues to take out each support as rates move higher. The next level at 2.66% is the last near term support; a break above it will project a run to 2.80%. We don’t expect rates will increase that much when looking at underlying fundamentals but as you know we never fade market action and now everything is pointing to higher rates. Respect the Pizza and don’t assess the market in any other way than bearish. Get the deals done, there is not much likelihood now that rates will decline much. What I can say on a little positive near term view, the bond market is oversold. All near term momentum oscillators are at oversold levels. Doesn’t mean a strong rally is close, it suggests rates may stabilize. It is a day to day thing now in terms of holding/floating.

PRICES @ 10:10 AM

10 yr note: -3/32 (9 bp) 2.63% +1 bp

5 yr note: -4/32 (12 bp) 1.86% +4 bp

2 Yr note: -1/32 (3 bp) 0.58% +1 bp

30 yr bond: +2/32 (6 bp) 3.37% unch

Libor Rates: 1 mo 0.153%; 3 mo 0.234%; 6 mo 0.330%; 1 yr 0.582%

30 yr FNMA 3.5 Oct: @9:30 101.41 -6 bp (-22 bp frm 9:30 yesterday)

15 yr FNMA 3.0 Oct: @9:30 102.67 -14 bp (-25 bp frm 9:30 yesterday)

30 yr GNMA 3.5 Oct: @9:30 102.67 -3 bp (-11 bp frm 9:30 yesterday)

Dollar/Yen: 108.73 +0.36 yen

Dollar/Euro: $1.2894 +$0.0029

Gold: $1221.30 -$14.60

Crude Oil: $94.44 +$0.02

DJIA: 17,239.73 +82.88

NASDAQ: 4587.22 +25.03

S&P 500: 2009.41 +7.84

Tuesday, September 16, 2014

SEC probe of Bankrate; AmeriSave & CertusBank; Macquarie, and non-QM


How can we move forward as an industry when we can't even agree on how to pronounce the acronym for Truth-in-Lending? I have heard "TILA" pronounced "tee-luh" and also pronounced "till-uh." Not only that, but I have seen "RESPA-TILA" and "TILA-RESPA". I am sure the boys and girls at the Federal Reserve know how, especially as they'll be hosting a webinar on how the Integrated Rule will go into effect next August. "Join us on Wednesday, October 1 at 2PM EDT for a 90 minute webinar to answer some frequently asked questions about the TILA-RESPA Integrated Disclosure rule. This will be the third in a series of webinars to address the new rule as creditors, mortgage brokers, settlement agents, software developers, and other stakeholders work to implement it over the next year. In this session, we'll address the loan estimate form with a focus on questions raised by technology vendors." 


On the retail side, you have seen iServe Residential Lending mentioned previously by me over the years. In fact, you may recall that I recently participated in a panel discussion with iServe on VA financing. iServe is a national direct lender licensed in 23 states. "With a complete product menu, a knowledgeable support staff and a robust marketing/CRM platform, iServe continues to look for originators and new branches in key markets throughout the country. If your business model is referral based with Realtors or other referral partners, iServe understands and embraces the need for best in class service with creative marketing tools to support your business relationships." For the Western US, contact Allen Friedman or Rick Trew in the East for additional information. They have a presentation that can be emailed to you that gives some impressive highlights on the company. "When we talk about retention, the support of sales teams, and overall value of the client, iServe is one of the leaders of the pack.  I would urge you to make contact."


AmeriSave Mortgage Corporation has issued a Letter of Intent to CertusBank, N.A. to acquire a large portion of its mortgage division, including the majority of teammates and facilities. "AmeriSave has been seeking a strong mortgage originator for possible acquisition and this agreement will allow the company to expand its footprint by establishing a traditional retail mortgage origination channel to complement its online origination platform. CertusBank, headquartered in Greenville, S.C., has recently undergone a strategic transition toward a more traditional community banking business model and identified mortgage as an area with opportunity for significant changes. AmeriSave's acquisition will include mortgage offices in Georgia, South Carolina and North Carolina. These branches currently employ approximately 40 loan officers." 

Does everyone deserve a home loan? Ask anyone in the industry, and the answer will be, "Of course not." But that doesn't stop lenders from trying to figure out how to lend to low income borrowers. The latest effort comes from Bank of America. Here's the story.  

But as the months go by, there is no question that compliance and regulatory burdens are impacting lenders' ability and desire to lend, which in turn impacts lending, which in turn impacts borrowers. Some readers might be interested in the following white paper from Tom Showalter at Digital Risk regarding the increasing regulatory headwinds facing lenders

(Speaking of regulations and regulators, when the new stuff starts to die down, they seem happy to continue on old cases. Regulators continue to unwind Lehman Brothers Holdings six years after its collapse. About $88.8 billion is expected be recovered for creditors owed about $341 billion, with Lehman's parent company and its units so far paying out $57.1 billion to unsecured creditors, excluding Lehman affiliates.) 

Everyone wants our opinions these days. (I can't check out of a hotel without receiving an e-mail asking how my stay went.) But the Collingwood Group believes your opinion matters and "we want to bring it to the people that matter. The monthly Collingwood Group Lender Sentiment Survey measures business confidence in our industry and the impact of regulation. As a participant you will get inside information from our survey. Be assured that your privacy is important to us and e-mail addresses and other contact information that you provide will be kept strictly confidential." Here is a link to the survey.


Some random lender updates...


Mountain West Financial Wholesale has enhanced its flipping policy. Pricing adjustment for conventional and government flip transactions will be reduced as well on locks taken on or after September 1st.


New Leaf Wholesale has updated credit requirements per Fannie Mae announcement, updates for conventional and high balance products. These updates include extenuating circumstances, bankruptcy, foreclosure, Short Sale, Pre-Foreclosure, Deed-in-Lieu, Charged Off Mortgage Debt, and Restructured Debt and Modified Mortgages.


As a reminder, Sun West Mortgage spread the word that effective for FHA case numbers assigned on or after 08/04/2014, Sun West is accepting HECM Loans with non-borrowing spouse. HECM Loans with non-borrowing spouse must comply with all FHA's requirements as specified in the Mortgagee Letter 2014-07.


FAMC Wholesale website updates regarding its EMB program were completed on September 1st. The complete guidelines for EMB delivery requirements are available for review. Power of Attorney guidelines have been updated to align with agency requirements located in the loan documentation guidelines, and clarification regarding electronic signature policy on USDA loans has been revised. 


As noted above, Impac Mortgage Wholesale is offering AltQM Jumbo Loans with DTIs up to 50%. Purchase or Refi Loans up to $3M, Min 680 FICO, 5/1, 7/1, 10/1 ARMs, I/O allowed (in applicable states), and LTVs up to 80%.


The CFO of Bankrate has resigned and the company said its financial statements for 2011 to 2013 should not be relied upon, amid an examination by the SEC into improper accounting of accruals and expenses.


Who isn't concerned with wage growth nowadays? It's an important issue, and as economists have been pointing out, wages and salaries have been lagging behind for quite some time (even with recent acceleration it is still below what it should be in the business cycle). This is a problem. Wells Fargo's Economics Group writes, "The labor market recovery has shifted into a higher gear in recent months, but concerns over job quality and weak wage growth linger. Wage growth has improved over the past year but, at 2.3 percent. Could the composition of job gains and wage increases be holding back aggregate wage rates?" Ultimately, lagged effects of the labor market weakness between 2007 and 2009 have contributed to growth in average hourly earnings. Specifically, some employers may have restrained wage growth in recent years to make up for the wage cuts they were reluctant to implement during the depths during that time. Joining with many economic papers I have read as of late, Wells concludes with, "We expect to see wage growth pick up gradually over the next year, which should reassure the more dovish members of the FOMC that the labor market is indeed tightening. However, unless wages jump unexpectedly in the next few months, which we do not expect, we believe that the Fed will not feel compelled to raise rates until mid-2015."


The news yesterday consisted of Industrial Production, which fell for the first time since January, and Capacity Utilization (which also fell). The report showed industrial production softening after strong gains during the spring. July's increase was revised down to 0.2% from 0.4%. We also noticed the Empire State Manufacturing Survey which shot higher. The 10-year Treasury note was marked higher by 6+/32, closing at 2.59 versus Friday's 2.61% close. Some of this was due to the weak numbers, some due to the increased risk aversion ahead of the Fed announcement tomorrow.

 Inflation has not been a problem for years. (Eventually it will be, and all those "experts" warning us of inflation will be "right".) Today we had the Producer Price Index numbers, measuring inflation at the producer level - they were unchanged on the headline number. For numbers, since most folks in this biz are quantitative, we had a 2.61% close on Friday on the 10-yr., Monday was 2.59%, before & after the PPI numbers we are at 2.56%; agency MBS prices are better about .125 versus Monday's closing levels