Fannie Mae and Freddie Mac jointly announced
that David M. Applegate was named CEO for Common Securitization Solutions, LLC, the entity charged
with developing and operating the Common Securitization Platform. Common
Securitization Solutions, LLC is jointly owned by the GSEs. Like an old rich
couple in mediation, each GSE also placed two representatives on the Common Securitization
Solutions Board of Managers, each with plenty of titles on their business
cards: David Lowman - Freddie Mac EVP, Single-Family Business, Jerry Weiss -
Freddie Mac EVP and Chief Administrative Officer, Terry Edwards - Fannie Mae
EVP and Chief Operating Officer, and Rick Sorkin - Fannie Mae SVP,
Single-Family Pricing Strategy and Structured Transactions.
In the
Pacific Northwest Banner Corporation (the holding company for Banner Bank
and Islanders Bank), and AmericanWest Bank announced the signing of a
definitive agreement pursuant to which AmericanWest's holding company will
merge with and into Banner and AmericanWest Bank will merge with and into
Banner Bank. The merged banks will operate under the Banner Bank brand.
And a couple
thousand miles away in Kansas The Bankers Bank announced its acquisitions of
Advance Mortgage Corporation (AMC) and American Processing Services Corporation
(APSC) both of Overland Park, Kansas. Bruce Howard and Jim Wilson will
remain co-presidents of AMC, now named Bankers Mortgage Corporation and John
Markert will remain President of APSC, now named American Procession Solutions
Corporation or APS. (Founded in 1985, The Bankers Bank serves over 290
community financial institutions in the southwest. The company offers a wide
range of correspondent banking products and services designed to help community
financial institutions prosper.)
Yes, bank
and lender numbers across the United States continue to drop through
consolidation - and there just aren't a whole lot of new ones opening up.
Sterling Bancorp (NYSE: STL) and Hudson Valley Holding Corp. (NYSE: HVB)
announced that they have entered into a definitive merger agreement in a
stock-for-stock transaction valued at $539 million, and impacting customers in
the greater New York metropolitan area. Iberiabank ($15B, LA) will acquire the
holding company of Old Florida Bank ($833mm, FL) and New Traditions Bank
($518mm, FL) for about $259mm in equity or about 1.85x tangible book. Also in
the Cajun State Community Trust Bank ($3.5B, LA) will acquire 4 branches in
Houston, TX with $15mm in loans and $135mm in deposits from Whitney Bank
($19.2B, MS). A private investor that lent the parent company of Advantage Bank
($260mm, CO) $2mm back in 2013 will acquire the bank for about 42% of tangible
book. In Oklahoma, where the wind rushes, First United Bank and Trust Co.
($2.5B) will acquire First American Bank ($290mm) for an undisclosed sum.
Berkshire Bank ($6.3B, MA) will acquire Hampden Bank ($698mm, MA) for $109mm in
stock, which is approximately 1.3x tangible book.
Wesbanco Bank
($6.3B, WV) is moving across the boarders and said it will acquire ESB Bank
($1.9B, PA) for about $324mm in cash and equity or roughly 1.9x tangible book.
Also in the state made famous by "The Deer Hunter," S&T Bank
($4.8B) will acquire Integrity Bank ($812mm) for about $155mm in cash and
equity, and Riverview Bank ($440mm, PA) will acquire The Citizens National Bank
of Meyersdale ($87mm, PA) for about $8mm in cash and equity. Two thousand miles
away in California Pacific Commerce Bank ($207) will acquire Vibra Bank
($151mm) for a reported 1.2x tangible book. In one of the states where pot is
legal, Bank of Colorado ($2.6B) will acquire MontroseBank ($233mm), and
Centennial Bank ($482mm, CO) will acquire 5 branches from Mutual of Omaha Bank
($6.8B, NE). In the state with the newly elected Republican Governor, First
State Bank of Illinois ($293mm) will acquire Kenney Bank and Trust ($32mm, IL).
Michigan's Chemical Bank ($6.2B) will acquire Monarch Community Bank ($187mm,
MI) for $26mm in stock.
Returning
to lenders, Irvine, CA based Homebridge Wholesale has earned Mortgage
Professional America Magazine's prestigious 5-Star Lender rating for its
compliance support, technology and its training and education. Congrats!
"MPA's 5-Star Lenders were chosen after an exhaustive survey in which the
magazine asked mortgage originators to rate their lenders in a variety of
areas. 'We didn't award the 5-Star rating lightly,' said MPA editor Ryan Smith.
'We asked thousands of originators to assess their lenders - and believe me,
they didn't pull any punches. Out of more than 200 lenders evaluated, only a
handful earned top marks in any of the five categories we examined.'"
I hope
their applications are bucking the trend. Yesterday the MBA told us that
mortgage applications in the U.S. declined for a second week. The total number
was down 2.6%, with refinances down 5.5% and purchases were up 2.6%. The share
of applicants seeking to refinance declined to 62.9 percent from the prior
week's 64.5 percent.
Near and dear to anyone lending money
anywhere near water, regulators have proposed an amendment to flood insurance rules
that would require banks to escrow premiums and fees for flood insurance
for loans secured by residential improved real estate or mobile homes after Jan
1, 2016 unless the bank or loan qualifies for a statutory exception. The
proposal also eliminates the requirement to purchase flood insurance for a
structure that is part of a residential property located in a special flood
hazard area if that structure is detached from the primary residential
structure and does not also serve as a residence. Put another way, a read of
the data indicates that there are certain exceptions from the escrow
requirement under the new flood regulations as amended. These include: loans
that are in a subordinate position to a senior lien secured by the same
property for which flood insurance is being provided; loans secured by
residential improved real estate or a mobile home that is part of a
condominium, cooperative, or other project development, provided certain
conditions are met; loans that are extensions of credit primarily for a
business, commercial, or agricultural purpose; home equity lines of credit;
nonperforming loans; and loans with terms not longer than twelve months.
As a
reminder, since I continue to be asked about it, HUD released its Qualified
Mortgage Rule: Announcement of Intention to Adopt Changes Pertaining to
Exempted Transaction List (FR-5812-N-01). This Notice advises
mortgagees that HUD is amending its "qualified mortgage" definition
and adopting certain changes in an amended Consumer Financial Protection Board
(CFPB) final rule. Read HUD's Notice. HUD will
adopt the changes that CFPB made to the exemption for non-profit transactions
from its qualified mortgage standards. The effective date of these changes was
November 3. HUD will not adopt the CFPB's points and fees cure provision.
Instead, FHA-approved lenders may cure certain errors that occur in origination
before submission for insurance endorsement.
Hey, consider
yourself lucky that you aren't a lender in Kenya. Rates are about 22%, and
the Kenyan government is negotiating with local banks to reduce the interest
rates. Who cares about the free market? In Denmark the opposite is true: you
can obtain a 30-year fixed rate mortgage for 2.50%!
And investors are snapping up those covered mortgage bonds.
We've
had a fair amount of news this week that has done nothing to move rates.
Yesterday we learned, through the ADP numbers, that companies added more
workers in October than the previous month, a sign employment growth is still
on track for its best performance in 15 years. Private sector employment
Increased by 230,000 Jobs in October. The construction industry added
28,000 jobs over the month, above last month's gain of 13,000. The ISM's
Non-Manufacturing Business Activity Index came in at 60%, whatever that means,
but it was down slightly from September.
This morning
we'll have weekly Jobless Claims and the preliminary Q3 nonfarm productivity
(+2.3% higher last time). For numbers we had a 2.35% close on Wednesday on the
10-yr T-note yield, and this morning we're at 2.33% - look for rate sheets
to be about where they've been all week.
Market Report:
Not a good
start this morning in the bond and MBS markets ahead of tomorrow’s employment
data. Prior to 8:3 the 10 traded unchanged and the open in MBS trading started
with the price for 30 yr Fannie’s up 8 bps. Weekly claims and Q3 data at 8:30
turned the rate markets to unchanged. Weekly claims at 8:30 declined 10K from
last week to the lowest we have seen in a very long time, at 278K; the
expectations were for 283K. The four-week moving average, a less-volatile
measure of job cuts, reached the lowest level in more than 14 years; to
279,000, the lowest since April 2000, from 281,250. Employers have added an
average of more than 227,000 jobs a month so far this year, according to Labor
Department data.
Two other
reports at 8:30 also better for the economy than had been thought; Q3
productivity expected at +1.5% from originally reported 2.3% in Q2. Q3 up 2.0%
and Q2 revised from +2.3% to +2.9%. Q3 unit labor costs were thought to be
+0.8% but increased just 0.3%. A nice support for the equity markets; although
productivity declined from Q2 the better than expected read along with the less
increase in unit labor costs implies businesses are enjoying more for less in
terms of output costs as productivity held better than what economists were
thinking. The key stock indexes were trading lower prior to 8:30 then began
rallying on the three data points.
In the EU,
the ECB meeting left interest rates unchanged at its meeting today. Mario
Draghi saying the central bank’s program of buying some bonds will last at
least two years. There was no additional stimulus announced today; Draghi
testing his power with EU members on more stimulus later this year. Draghi
facing resistance for more QE, particularly the idea of buying sovereign debt
for EU members. Germany will oppose it and earlier this week reports were that
10 of the policy members on the ECB are against the move. Inflation (or the
lack of it) is the mountain he has to scale; Draghi saying the central bank’s
program of buying some bonds will last at least two years. Bernanke said
yesterday he believes that the ECB will find it challenging to implement monetary
easing on a large scale amid political and legal barriers. Bottom line; the EU
economy is stalled; its currency is rapidly declining, when the ECB releases
its new outlook next month it will once again revise its growth outlook lower.
Inflation in the EU was 0.4% in October, barely improving from a five-year low
of 0.3% in the previous month. Unemployment of 11.5% in September was still
near a record. Other than in the currency markets, the ECB meeting today has
little influence on near term trading in the US.
Yesterday’s
elections will remain a hot topic for the rest of the Congressional session but
after the initial assessments yesterday today quiet. The President held his
‘mandatory press conference’ after the results talked the talk as did Mitch
McConnell the new Senate majority leader; will they walk the walk?
At 9:30 the
DJIA opened +13, NASDAQ -2, S&P unch. The 10 at 9:30 2.37% +3 bps and 30 yr
MBS price -8 bps from yesterday’s close and -5 bps from 9:30 yesterday. This
morning’s pricing based n MBS trading should be slightly lower than yesterday
We noted yesterday that lenders were taking a conservative stance on pricing,
lenders priced a little weaker than the market was actually trading---setting
up for employment tomorrow.
We didn’t
report on the weekly MBA mortgage applications yesterday, the data was released
later than usual. Last week mortgage applications declined again, down 2.6%.
The purchase index improved 3.0% while the refinance apps declined 6.0%.
All of our
technical indicators, chart patterns and models are now bearish. Call your
attention to the 10 yr chart above; there is a very significant channel that
has developed over the past couple of weeks. Trading channels are significant
for us; especially this one that so is holding very well from highs to lows.
Today expect little change ahead of employment tomorrow morning.
PRICES @
10:00 AM
• 10 yr note: -5/32 (15 bp) 2.36% +2 bp
• 5 yr note: -1/32 (3 bp) 1.64% +1 bp
• 2 Yr note: unch 0.53% unch
• 30 yr bond: -11/32 (34 bp) 3.08% +1
bp
• Libor Rates: 1 mo 0.155%; 3 mo
0.231%; 6 mo 0.326%; 1 yr 0.555%
• 30 yr FNMA 3.5 Nov: @9:30 103.17 -8
bp (-5 bp from 9:30 yesterday)
• 15 yr FNMA 3.0 Nov: @9:30 103.61 -6
bp (-3 bp from 9:30 yesterday)
• 30 yr GNMA 3.5 Nov: @9:30 104.29 -9
bp (-11 bp from 9:30 yesterday)
• Dollar/Yen: 114.72 +0.08 yen
• Dollar/Euro: $1.2428 -$0.0058
• Gold: $1143.20 -$2.50
• Crude Oil: $77.75 -$0.93
• DJIA: 17,496.32 +11.79
• NASDAQ: 4618.69 -2.03
• S&P 500: 2021.19 -2.38
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