I
am hearing that lock desk activity is picking up, which is nice to see. New
apps mean running credit, and just in time for changing your clocks this Sunday
(in most states) the CFPB has published a blog post for consumers about disputing errors on their credit
report.
Speaking of changes, bank
transitions continue to take place. Only five have been closed
this year, including two on Friday: Vantage Point Bank, Horsham, PA became part
of First Choice Bank of Mercerville, New Jersey. And Millennium Bank, National
Association (VA) didn't make it to the next one. It became part of Virginia's
WashingtonFirst Bank. Also reducing the number of banks is the continued
M&A, with recent nominees being Southern Bank ($941mm, MO) acquiring
Peoples Bank of the Ozarks ($273mm, MO) for $22.9mm in cash and stock or about
1.49x tangible book, and Oconee State Bank ($280mm, GA) announcing it will
acquire Stephens Federal Bank ($158mm, GA) for an undisclosed sum.
The
Federal Housing Finance Agency (FHFA) announced it has reached a settlement
with Société Générale, related companies, and specifically named individuals
for $122 million. The settlement resolves claims in the lawsuit FHFA v. Société
Générale, et al alleging violations of federal and state securities laws in
connection with private-label mortgage-backed securities (MBS) purchased by
Fannie Mae and Freddie Mac during 2006.
A
group of non-borrower surviving spouses of Home Equity Conversion Mortgage
(HECM) recipients filed a class-action lawsuit against HUD
alleging that the agency did not prevent them from being foreclosed upon after
the death of their spouses as required by federal law. This lawsuit follows a
federal court decision from last year
that found that HUD violated federal law with a rule which allows a lender
to foreclose on or demand repayment from a surviving non-borrowing spouse where
the deceased spouse had received a HECM.
This
is of interest, of course, since one of the mortgage products that contributed
to the housing crash is booming again: New home equity credit line
borrowings soared 42% in the final three months of 2013 and were up sharply
for the entire year, to $111 billion. But does this point to a return to the
"my house is an ATM" mentality that characterized excessive home
equity borrowing from 2004 through 2007, just before the crash? Should
consumers - and the banks doling out the cash - be cautious about this trend?
Researchers at Experian Information Solutions estimate that originations of
HELOCs rose 58% in the final quarter of last year in the Western states, 38% in
the Northeast and 36% in the Midwest.
It
is especially interesting since Chase listed stand-alone 2nds as one of the
products being eliminated from its product line up going forward. Perhaps
the bank, which anecdotally has become more aggressive in pricing other
products, wants to stay away from borrowers with lower credit scores: new
equity credit lines extended to owners with "deep subprime" scores
(300 to 499) increased faster than in previous years and averaged more than
$60,000, roughly triple the amounts in late 2010. Serious delinquencies in
outstanding HELOCs continued to be low, generally well under 1%. A rebound in
owners' equity due to rising home prices is helping fuel this. (Between the
third quarter of 2012 and the same period last year, Americans' real estate
equity expanded by $2.2 trillion, according to the Federal
Reserve.) Depository commercial banks are also pushing equity line
products: home equity lines are much less expensive than a refi, and have less
paperwork. Besides, think of the sale skills involved in refinancing someone
with a 3.5% 30-yr fixed into a 4.25% 30-yr fixed rate loan!
There is a
correction to yesterday's investor updates. Changes to CSFB's guidelines
were mistakenly attributed to Redwood Trust. It should have read: "Credit
Suisse has made a number of underwriting updates, including raising the maximum
LTV/CLTV for all ARM and 15-year amortized products from 75 to 80% and allowing
second home purchases, rate/term refinances, and cash-out refinances of
co-ops. With regard to risk assessment, borrowers who do not meet the
three tradeline requirement will be considered eligible if they have six months
additional reserves and the loan has a DTI below 35, LTV below 65%, or FICO
above740; and first-time homebuyers' payment shock may not exceed 250% when
deposits and gifts are verified with the borrower. The additional LTV
requirements for multiple financed properties have been removed, and condo
projects with less than 10 units will be permitted provided that they are
typical for the area and the appraisal shows similar comparables. Hobby farms
will also be permitted if the property has between 10 and 20 acres, does not
have any income-producing attributes, and has a land to value ratio of 35% or
below."
We had a lot of news yesterday,
but it had little impact on the markets. Personal Incomes rose by 0.3%, in line
with expectations while Spending rose by 0.4%, above the 0.1% expected.
Inflation, as measured by the Core Personal Consumption Expenditure, was also
in line at 0.1%, while the year-over-year Core ticked down to 1.1% from 1.2%. Inflation
is still a non-issue. The ISM Manufacturing Index in February rose to 53.2,
more than expected.
So instead of trading much off
of this news, the stock and bond markets turned their attention, once again, to
overseas - in this case Russia & Ukraine. From a human perspective, it is
difficult, but the resulting nervousness caused money to flow toward dollars,
and an easy way to do that is to buy fixed-income securities. And thus the
10-yr yield ended the day at 2.61%. And there is no scheduled news in the U.S.
to move things, so direction comes from Asia/Europe again.
"Unfortunately" things have quieted down over there, and yesterday's
market moves have reversed themselves somewhat so the U.S. 10-yr.'s yield is
back up to 2.64% and agency MBS prices are worse a shade in the very early
going.
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