Pitbull & Kesha sing:
"It's going down, I'm
yelling timber,
You better move, you better
dance.
Let's make a night, you won't
remember,
I'll be the one, you won't
forget..."
No, I am not talking about the
Castle & Cooke/CFPB situation, expected to be positively resolved any day
now. No, I am talking about that not only did Nationstar report its earnings
this morning (just like everyone else, it is not immune to higher rates and
lower margins - see below), but yesterday broke the news to a portion of its
wholesale employees that they would be Stonegate employees. (As for the other
portion of employees, well...timber!) See below for the details - hopefully the
deal works for all involved.
Meanwhile one of Florida's
most respected Mortgage Banking firms continues to expand across the Southeast
region and is seeking a strong Controller/CFO to serve a network of branches
and corporate accounting needs. A qualified candidate will have
experience in mortgage banking accounting and management. The company has
30 branches in 10 states. If you have the desire to build an exceptional
finance team while working closely with secondary and contribute to a unique
growing franchise please send confidential resumes to rchrisman@robchrisman.com.
"Due to its continued
expansion, The StoneHill Group is searching for a Director of Quality
Control. The StoneHill Group, Inc. is a nationwide provider of QC outsource
services (www.stonehillgroup.com) and is headquartered in
Georgia. The ideal candidate should either live in, or be willing to relocate
to, the Atlanta area. There is no full relocation. The role of Director of
Quality Control will include leading and managing StoneHill Group's QC team and
requires 5 years' experience in a QC Director or Manager role. To submit an
application and resume, please visit the StoneHill Group, Inc. Careers Page at www.stonehillgroup.com.
First Nationstar's earnings. The
company had GAAP EPS of $0.91 on net income of $82
million, pro forma EPS of $1.08, excluding BofA ramp and other one-time
expenses totaling $25 million. At the end of the quarter Nationstar had a
servicing portfolio UPB of $375 billion; pro forma UPB of $415 billion and had
executed new agreements to acquire $25 billion in servicing. For fundings the
company had $8.0 billion with a year-to-date recapture rate of 45%.
"Within originations, we are focused on the profitable creation of
servicing assets, hence our forward emphasis on the core consumer-direct
origination channel. Our strategic initiatives target a lower cost operating
model and the formation of capital vehicles that will generate greater cash
flows. I am confident in our ability to execute as we remain focused on
generating long-term shareholder value."
Far
north of Lewisville, Texas, Stonegate announced that it has entered into
a binding letter of intent to acquire the wholesale lending channel and certain
distributed retail assets of Nationstar Mortgage Holdings Inc. For the
first six months of this year, Nationstar's wholesale lending channel originated
$3.26 billion in mortgages. Pursuant to the terms of the letter of intent,
Stonegate agreed to purchase the assets and offer employment to certain
employees associated with these businesses. "For Stonegate Mortgage, the
acquisition complements the company's existing wholesale and retail channels
and accelerates its geographic expansion."
One has to wonder exactly what
one buys when buying a wholesale channel, besides eliminating a competitor. After
all, rate sheets aren't patented, and employees are free to move, for example -
is there anything worth value? Some will argue "no." But "Since
our founding in 2005, Stonegate has focused on building a fully integrated and
diversified mortgage banking platform. This acquisition enables us to further
drive retail originations and serve an even larger group of mortgage brokers
through our wholesale channel", said Jim Cutillo, Chief Executive Officer
of Stonegate Mortgage. As part of the acquisition, Stonegate will gain a team
of leaders from Nationstar. "We are excited to have such an outstanding
group joining our team to strengthen what I believe is the best non-bank
mortgage company in the industry today...(the deal) fits well within
Stonegate's focus on branch geographic expansion," said Jay Bray, CEO of Nationstar
Mortgage. "The transaction also fits well within Nationstar's strategic
focus on servicing, Solutionstar, consumer direct originations and
correspondent."
With all the turmoil in the
wholesale channel, Flagstar Bank sent me a note out saying that it is committed
to the TPO business. Flagstar continues to bring on new brokers and
correspondents. As part of the on-boarding process there is a 25 bps price
improvement for the first 120 days. For more information check out www.wholesale.flagstar.com. And by the way Flagstar
expects to roll out its QM system training in mid-December.
A couple weeks ago SunTrust
exited wholesale, and now this. These will not be the last big deals done,
and there will be plenty of companies exiting lending over the next six months.
Yes, we can all expect a lot of changes over the next 6-9 months. If rates
stay the same, and the cost to produce a loan continues to go up, is there
really enough business to go around? Is the great business in the first
half of 2013 enough to carry forward into 2014? Jeff Babcock from the STRATMOR
group opined, "The recent market developments have taught us, once again,
that there is no soft landing in the mortgage business. It may have
taken longer than expected for refinance to dry up, but as always it was abrupt
and merciless when it happened. From a broad market perspective, production
volume has fallen at least 25% on average during the 3rd quarter
from the 1st half of 2013. Net Income margins are down, on
average, twice to three times production volume declines. Lenders must spread
fewer loan units over their fixed costs which are inherently difficult and slow
to reduce. However, the operative phase here is 'on average.' STRATMOR had
a very busy MBA Convention, meeting individually with some 50 lenders plus two
group sessions which included another 50 lenders. This was a wonderful
opportunity to gather live fresh market intelligence at the individual lender
level. What struck me was just how variable the key performance metrics
are running from lender to lender. We are hearing from certain
STRATMOR clients (albeit a few) who are anticipating up to 20% increases
in 2013 volume over 2012 levels. At the other end of the spectrum are lenders
suffering 40% to 50% declines which is quickly making them unprofitable.
Averages tend to obscure how individualized this market has become."
Jeff's note continued. "In
between these two extremes, we are observing lenders with a range of strategic
responses. The more successful retail lenders have several common
characteristics. One is they are approved with one or both of the agencies
and as Ginnie Mae issuers; became proficient at selling directly to the
agencies on a servicing retained basis, thereby reducing their secondary
marketing dependence on the Aggregators. Another is that successful lenders
mostly implemented purchase initiatives before mortgage rates started rising.
Before the competition become so intense, the successful lenders were focused
on recruiting efforts during the last half of 2012 and early 2013 which have
generated enough incremental production volume to largely compensate for the
market shrinkage. Successful lenders have a commitment to real sales management
practices have sustained LO productivity despite the reduction in refinance
opportunities. They have adopted a strategic approach to originator
compensation plans and avoided "pick-a-pay" and other potentially
non-compliance programs. Many did organizational right-sizing - aggressively
implemented comparatively early in 2013. And lastly, these companies
demonstrated anticipatory leadership to prepare their organization for more
challenging market conditions. Each lender's circumstances and business
model are unique. Above are some examples of solution which lenders have
deployed in response to the challenges of today's market. (If you're interested
in learning more, or are interested in M&A, contact Jeff Babcock at jeff.babcock@stratmorgroup.com.)
Every residential lender out
there is impacted by what the agencies do or don't do. And the agencies are
under the conservatorship of the FHFA, which has no permanent director. Ed
DeMarco is acting as the director, and there has been a lot of press about the current
nominee, Mel Watt. He has garnered his share of controversy, as everything does
in Washington DC these days.
With this in mind, Dave Stevens
from the MBA noted, "Rob, I read the comment in your commentary about the
MBA statement of support for Mel Watt. As you know the Realtors, Homebuilders,
and the MBA all made statements of support for the nominee. The decision was
made after a lengthy discussion in the board of directors meeting in October,
the same week of the Senate deliberation. The MBA Board, consisting of both
residential and multifamily lenders, feel that a permanent director is needed
to help provide continuity to the policy debate on GSE reform going forward. Ed
Demarco has been a great acting director, but he is limited in his role as a
conservator. Some members raised concerns about continued guarantee fee
increases, loan limit changes, and further reductions in the multifamily
business. The MBA has traditionally supported the Presidents Nominees though
previous administrations for the key housing regulatory bodies and while some
might have different preferences, the vote taken by the board recognized the
fact the Congressman Watt had over two decades on the house financial services
committee, was a Yale graduated attorney, and clearly understood the political
process which could be helpful in the GSE debate that will consume housing over
the next few years. The Board of Directors voted to support the nominee,
consistent with past protocol, and joined the Realtors and Builders in the process."
Ray White with Equifax
Mortgage Services writes, "Your commentary on the QM and having a DTI
unknowingly go over 43% is something lenders need to be concerned with. We have
done some research at Equifax for clients and when they use the traditional
soft pull LQI or LLR solution a gap is created between when you pull the report
and the actual closing. One study found 12.1% of new trades reported within
5 days of closing and 22.2% within 10 days of closing. Lenders need to be using
a credit monitoring tool as it eliminates any gap. Monitoring also allows the
lender to deal issues when they occur and not wait just before closing. Equifax
has large percentage of their using our Undisclosed Debt Monitoring solution
and not only is the gap eliminated, but their loan officers can be more
proactive when new trades or inquires show up on their clients credit
file." (Thank you Ray, and lenders wanting to see more go to www.equifax.com/mortgage/udm.)
Let's chip away at some upcoming
training events, along with some investor & aggregator news - the
flow of changes continues to amaze me.
SIFMA (Securities Industry and
Financial Markets Association) is having its annual meeting next week
(November 11 & 12) in New York. "Helping Americans Succeed, Helping
Main Street Prosper" and brings the leaders of the financial-services
industry together with prominent policymakers, thought leaders and financial
media. "We are honored to have President Bill Clinton and Gov. Jeb Bush
provide our keynote addresses. Featured speakers include Lloyd Blankfein,
Chairman and Chief Executive Officer of Goldman Sachs; Larry Fink, Chairman and
Chief Executive Officer of BlackRock; and Mary Jo White, Chairman of the U.S.
Securities and Exchange Commission." Sounds like the MBA last week: https://www.sifma.org/events/.
Ari Karen will be speaking at the
November 21st Mortgage Bankers of Kansas City luncheon - an
extended program. Anyone who is interested in attending can go to the
MBAofKC site to register: http://www.mbakc.com/november-2013/.
The Mortgage Bankers Association
of New Jersey and the New Jersey Mortgage Bankers Association will be hosting
their annual Joint Mortgage Lending Conference in Edison,
NJ on December 4th. Sponsorship opportunities are still
available; visit http://www.mbanj.com/ for more information.
First Mortgage is
seeing great interest in its new NHF First Down program, which FM recently
rolled out to correspondents lending in AZ, NM, NV, TX & UT. This DPA
2nd combined with an FHA 1st allows borrowers to come in with just .5% down
payment. (Inquiries can be directed to Sharon Magnuson at smagnuson@firstmortgage.com.)
New Penn is
pleased to announce that it has expanded HARP guidelines. New Penn now
offers DTI ratios up to 60%, no foreclosure or bankruptcy seasoning on DURP,
and LTV up to 125% on non-owner occupied. New Penn also offers unlimited
LTV on owner occupied and accepts DU EAI, EAII and EAIII. For more information
on New Penn's HARP guidelines, visit www.gonewpenn.com.
Banc of Manhattan has
released updated underwriting matrices for its correspondent platform product
suite, including DU Exclusive (Conventional Conforming Fixed, High Balance
Fixed, Conforming Conventional Hybrid ARMs, and High Balance ARMs), FHA
(Streamline, Conforming, and High Balance), Open Access, and VA (Conforming and
High Balance).
"Norcom Mortgage
weighs in on the ever popular topic of rates." Their latest blog,
created by Norcom's Christina Sanville, an aspiring economist, provides a
weekly overview of what is going on in the market, how that will impact
mortgage rates and the economics behind it all." If you are
interested in getting on the weekly rate distribution list please e-mail ryan@norcom-usa.com
Turning to rates, there isn't
much going on in the early going. Overnight we had a surprise cut in rates
"across the pond" in Europe. That has caused a bit of a buzz in
markets here, although yesterday we did see a bit of bounce back in agency MBS
prices from Tuesday's debacle - they improved about .125. Today we have Initial
Jobless Claims (335k expected versus 340k last) and the first GDP reading for
Q3 (+2.0 expected). The 10-yr closed Wednesday at 2.64%, and this morning it
is down to 2.62% and agency MBS prices are better by about .125.
A father buys a lie detector
robot that slaps people when they lie, and he decides to test it out at dinner
one night. The father asks his son what he did that afternoon.
The son says, "I did some
schoolwork."
The robot slaps the son.
The son says, "Ok, Ok. I was
at a friend's house watching movies."
Dad asks, "What movie did
you watch?"
Son says, "Toy Story."
The robot slaps the son.
Son says, "Ok, Ok, we were
watching porn."
Dad says," What? At your age
I didn't even know what porn was."
The robot slaps the father.
Mom laughs and says, "Well,
he certainly is your son."
The robot slaps the mother.
Robot for sale.
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