M&A, UDAAP Settlement, TARP Update, Upcoming Events, Wells Eyeing Non-Agency Issuance

By rchrisman@robchrisman.com

A student in chemistry class was instructed to create a new substance by mixing some special ingredient with water. But the student chose the wrong ingredient and the teacher realized mixing it with water would create an explosion.

He stopped the student and asked him to first stir the water in the bucket for five minutes before adding the ingredient. The student wanted to know what that would accomplish.

The teacher answered, "It will give me time to get away."

Want to help educate a real estate agent, or a home buyer? Show them this site. "...comprehensive, accurate, and reliable neighborhood information. From environmental hazards to criminal offenders, school ratings to crime..." 

Jobs, personnel changes, & business opportunities

 "A Top-10 Retail Lender with a deep-pockets parent is looking to purchase/merge originating lenders with production of $500 million-$6 billion annually. We offer extremely competitive compensation, pricing and sales support structure. The key areas where we would like to add new teams as part of our family are; NC, SC, VA, IL, MI, MW, TX, OK, Northeast, OH, AL, LA and MS. We are not opposed to other areas of the country as well, however. We will negotiate the best terms for the best companies. A 'plug n play' approach allows for smooth transitions with little interruption to business flow." If interested in having an initial discussion, please email me so a direct connection can be made; please specify opportunity. 

The government and lending

 UDAAP, with its treble damages, is a bear. The FDIC announced a settlement with the Bank of Lake Mills, Freedom Stores, Inc., and Military Credit Services, LLC, for Unfair and Deceptive Practices, and it requires restitution to harmed consumers including military service members and their families. "The Federal Deposit Insurance Corporation (FDIC) announced settlements with Bank of Lake Mills, Lake Mills, Wisconsin, and two of its institution-affiliated parties, Freedom Stores, Inc. and Military Credit Services, LLC (MCS), for unfair and deceptive practices, in violation of Section 5 of the Federal Trade Commission (FTC) Act.

 "As part of the settlement, the bank, Freedom Stores, and MCS stipulated to the issuance of respective Orders for Restitution and Orders to Pay Civil Money Penalties (collectively, FDIC Orders). The FDIC Orders require restitution of approximately $3 million to harmed consumers, and assess civil money penalties of $151,000 against Bank of Lake Mills, $54,000 against Freedom Stores, and $37,000 against MCS. The Orders require a restitution plan that covers all past and present borrowers who, from 2013 to 2015, received loans originated by the bank through Freedom Stores and MCS, and were harmed by the practices identified as being unfair or deceptive."

 What were the companies accused of doing? Charging interest to consumers who paid off their loans within six months when the loans were promoted as six-month interest free. Selling add-on products in conjunction with loans originated by the bank without clearly disclosing the terms of those products. And failing to provide consumers the opportunity to exercise the monthly premium payment option in conjunction with the purchase of optional debt cancellation coverage on loans originated by the bank through the Freedom Stores and MCS channels.

 Did you know that 24 million people work for the government in one form or another? And if it cuts back government payrolls (as some politicians have suggested) will those people be soaked up in the private sector? Billionaire ex-CEO of Microsoft and current owner of the LA Clippers, Steve Ballmer, revealed a database aimed to report, record and track government spending. In fact, it's more than just spending, it also factors in deductions or lack of revenue. The project involves "a small army of economists, professors and other professionals have been assembling as part of a stealth start-up over the last three years called USAFacts. The database is perhaps the first nonpartisan effort to create a fully integrated look at revenue and spending across federal, state and local governments."

 Remember TARP? The U.S. Treasury Department has announced plans to sell $57 million worth of bank stocks, which were bought through the Troubled Asset Relief Program. According to the department's figures, $275.8 billion of bailout funding has now been recovered, with around $66.2 million still outstanding.

Housing's share of GDP came in 15.6% in the fourth quarter. Historically, that number has been around 18%. Housing continues to punch below its weight, as evidenced by tight inventory. It is hard to know exactly why homebuilding continues to be weak - credit is an issue, as is the general post-bubble caution, along with local land use regulations. 

 Trainings and Events:

 Today I am attending the WMLA conference in Cody, WY.

 California's MWF is hosting a CalHFA seminar May 17^th at 8:30am-12:30pm in Long Beach in conjunction with Genworth Financial. If you would like to attend, please email Lisa Holland for details. This is just one of our many homebuyer assistance products, and the session includes training on all CalHFA programs, borrower and property eligibility, processing, documentation, and income calculations.

 Data privacy and security risks are increasing for every company. Gain a better understanding of privacy compliance, risks, and the steps needed to protect your business. Join Lorman Education Services on May 17^th for a live webinar to learn what every Attorney, Privacy and Compliance Officer should know.

 Learn about Plaza's renovation product offerings -- the Fannie Mae HomeStyle Renovation loan. The HomeStyle renovation loan is a single-close loan that enables borrowers to purchase a home that needs repairs, or refinance the mortgage on their existing home and include the necessary funds for renovation in the loan balance. This webinar is scheduled for May 17^th, register now.

 Are you registered for the Great Northwest Mortgage Expo on June 13^th? Be part of the area's exciting conference and trade show for LO pros bringing together hundreds of mortgage brokers, loan originators and bank and credit union lending officers from throughout the northwest for an event full of education, networking and fun.

 Capital markets

 If you think rates have been steady, you're right, and at least one quantitative measure bears that out. The Merrill Lynch Option Volatility Estimate, based on over-the-counter options on Treasury's maturing in two to 30 years, has fallen to its lowest level since August 2014 to settle at "55.2203."

 Private label, jumbo market? Reuters' Dan Freed reports that Wells Fargo is hoping this year to sell bonds backed by mortgages without government guarantees for the first time since the 2008 financial crisis. Franklin Codel, who runs Wells Fargo's consumer lending division, stated, "This year one of our aspirations is to come back to the market with a couple of deals and we're looking at making sure we can structure those properly ... to try to test the market and see what we can do there to help bring confidence back."

 "Never bet against the Fed" which released a new purchase schedule and its 30-year conventional purchases are shifting up in coupon to 4.0s at the expense of 3.5s. Based on recent statements it seems that the Fed remains on track to raise interest rates twice more this year (the odds of a June bump is over 75%) and potentially begin tapering their MBS purchases. This week a WSJ article asked, "What Happens When Central Banks Stop Buying Bonds?" It mentions that Central Banks have been the world's largest bond buyers with the European Central Bank holding $4.5 trillion in assets and the Fed holding roughly $4.4 trillion as part of their quantitative easing (QE) programs.

 Some expect bond yields to rise when the Fed begins to slow or unwind their position like what happened during the 2013 taper tantrum. Don't forget the "flow" effect of QE which is the impact that daily purchases by central banks have on the markets. Bonds typically are stockpiled by banks who may be more willing to offer investors better prices if they know they can sell large amounts to an end investor (for MBS this would be the Fed). If this goes away, then are other investors (money managers, REITs, banks) positioned to take up the slack?

 In terms of the actual bond market, yesterday Treasuries, and agency MBS prices, began the day slightly higher and ended the day that way despite strong inflation and jobs numbers. The new 10-year note improved nearly .125 in price to yield 2.40%.

 This morning we already had more inflation news with the Consumer Price Index: +.2%, core +.1%. Retail Sales also came out for April at +.4%, ex-auto +.3%. Later are minor releases that cover business inventories and consumer sentiment. In the early going rates are lower versus last night with the 10-year at 2.36% and agency MBS prices better .125-.250.