"Paddy thought his new
girlfriend might be 'the one', but after looking through her knickers drawer
and finding a nurse's outfit, a French maid's outfit, and a police woman's
uniform, he finally decided that if she can't hold down a job, she's not for
him." Speaking of jobs, Dave T. writes, " I have noticed that the originators
attending classes or local association meetings are older, and mostly men over
50 years old and have been in the business in excess of 20 years.
Generally, there are just a few younger (less than 35 years old) LOs. What's
going on?" I discuss it regularly: a lack of retirees (some can't retire),
and a lack of new blood. A 50-year old borrower isn't wild about working with a
24 year old LO who loves to text. (Not all, but most.) And the folks buying
houses are usually not in their 20's - they are mostly living with their
parents or renting. (Not all, but most.) There are other careers that don't
have the recent reputation that residential lending has, many older LOs are
very good at what they do, and few go through school with the goal of being a
LO. There are exceptions, but those are the issues in a nutshell. Great
opportunities!
Michael
Milken does a pretty good job of formalizing the frustrations
that many in the business feel about government's role in housing and home
ownership. "According to the Census Bureau, 65.6% of households owned
a home in 1980. More than three decades and trillions of dollars later, the
needle hasn't budged-it's still about 65%. Subsidized mortgages did create
three things, none of them good..."
In
a similar vein, a study by George Mason University finds 83% of community banks
in the U.S. say their compliance costs have increased more than 5% due to Dodd
Frank. Of course those costs are passed on to depositors and borrowers. The
Mercatus Center at George Mason University recently published the results of a study of the effects
of Dodd-Frank on small banks, defined as banks with less than $10 billion in
assets each. The anonymous, web-based survey relied on responses from about 200
banks and was conducted between July 2013 and September 2013. The study sought
to analyze the impact of increased regulations on different areas of a small
bank's operations, including products and services offered. An overwhelming
percentage of respondents (94%) responded that they would not be adding new
products or services as a result. Respondents had already discontinued or were
anticipating discontinuing residential mortgages, mortgage servicing, home
equity lines of credit, overdraft protection, and credit cards.
But
wait a minute! The last I'd heard, any bank with less than $10 billion in
assets was exempt, per statutes, from CFPB supervision - what's up? It is
apparent that small banks are feeling the impact of Dodd-Frank - and are
consumers better off? Many would say "yes, they are better
protected." That is fine, as we are seeing evidence that any regulations applied
to larger banks and other financial institutions always flow downhill. Small
banks that serve rural and small metropolitan areas may suffer a
disproportionate impact from Dodd-Frank.
Speaking
of which, the bank news continues. First, a correction to a bank merger
I mentioned earlier in the week. The merger in GA was with
Oconee FS&LA in Seneca, SC, not Oconee State Bank in GA. Eastern Bank
Corporation signed a definitive agreement to acquire Bedford, N.H.-based
Centrix Bank & Trust in an all-cash transaction valued at approximately
$134 million. Sterling National Bank ($6.6B, NY) said it will close 10 branches
in coming months due to economic reasons. Bank of Tokyo-Mitsubishi UFJ said it
will rename its U.S. financial holding company from UnionBanCal Corp. to MUFG
Americas Holdings Corp. and its banking unit Union Bank NA to MUFG Union Bank
NA.
Last
week, SunTrust Banks reported in its annual 10-K regulatory filing that
it is currently under investigation for mortgage violations and could face
substantial penalties. The loans & policies in question are related to
"legacy" loans, originated several years ago. Moody's Investor
Services suggests that the resulting settlements and penalties could result in
materially higher costs for SunTrust that would be credit negative for the
bank. SunTrust admitted in its filings that the bank "harmed borrowers and
violated civil or criminal laws by making misrepresentations and failing to
properly process applications for modifications of certain mortgages owned by
the GSEs pursuant to the HAMP guidelines."
SunTrust
has a lot on its plate. The U.S. Attorney's Office for the Western District of
Virginia and the special inspector general for the Troubled Asset Relief
Program are investigating whether SunTrust harmed borrowers and violated laws
by improperly processing mortgage modifications in 2009 and 2010 under the
government's Home Affordable Modification Program. The bank announced that it
has certain substantive disagreements with the government that may prevent it
from reaching a definitive settlement related to FHA-insured mortgage loans.
SunTrust disclosed a new DOJ investigation into the origination and
underwriting of mortgage loans that SunTrust sold to Fannie Mae and Freddie
Mac.
But
the fun for SunTrust's legal & compliance staffs continue. The Federal
Housing Finance Agency's Office of Inspector General is conducting an audit
related to the mortgage repurchase settlements between Fannie Mae and Freddie
Mac, both of which are regulated by the FHFA, and banks like SunTrust.
SunTrust
isn't the only one feeling pressure. JPMorgan Chase & Co will pay
$400 million to settle lawsuits brought by bond insurer Syncora Guarantee Inc
over toxic mortgage-backed securities, according to the insurer. And a federal
judge approved a settlement Friday of a class-action lawsuit against JPMorgan
Chase for its force-placed insurance practices, an agreement that could pay
more than $300 million to about 750,000 mortgage borrowers.
Banks
aren't the only ones on the hot seat. On February 26, the CFPB filed a
complaint against ITT in the Southern District of Indiana, accusing the educator
of violating the Dodd-Frank ban on unfair, deceptive, or abusive practices by
misleading borrowers about job placement rates and salaries after graduation,
misrepresenting information about accreditation and the transferability of
credits, and strong-arming students into high-interest loans that the company knew
students would be unable to repay.
National Mortgage Insurance
Corporation (National MI) has launched a new lender-paid mortgage
insurance (LPMI) program with imortgage, one of the country's leading lenders.
National MI's LPMI program with imortgage is backed by what National MI
believes is an innovative delegated assurance review process. imortgage has
approved National MI as a provider of private mortgage insurance. Through this
relationship, imortgage gains access to a new, well-capitalized source of
private mortgage insurance with enhanced confidence of coverage and rescission
relief available through National MI's delegated underwriting review process.
United Wholesale Mortgage has
rolled out its new UWM Track, which allows brokers to track the status of a
loan in order to provide realtors with up-to-date information. When
viewing their loan pipeline in the EASE portal, brokers can see when a loan is
submitted to underwriting, has its conditions reviewed and cleared, been
approved, when prep and closing documents were sent to the title company, and
when it can be expected to fund.
This daily is about the
mortgage biz, and discusses investors in MBS. But we all need to be reminded
that investors in fixed-income securities have other options - like putting
their money into corporate debt. Corporate supply is on fire so far in March:
Wednesday actually surpassed Tuesday in becoming the most active day of the
year, with 13 deals pricing, for a total of nearly $20 billion. As BAML noted,
"Excluding the $49 billion Verizon deal last year, this is the busiest
2-day stretch in over 3 years." So who has been issuing debt?
Companies like HSBC, McKesson, Texas Instruments, Ford, Hospitality
Properties, AT&T, Xlinx, and so on. Of course one wonders why corporate
debt issuance has increased: it could be they like current rates, possible
expansion plans, and retiring stock or old debt immediately jump to mind.
Continuing on with the markets,
Thursday we learned that the Fed is still buying more than $2 billion a day.
Prices didn't do much, in spite of some economic news, with more weight being
put on today's employment data. This morning we had Non-farm payrolls.
February's number came in at +175k (versus +129k in January), with the
Unemployment Rate at 6.7% and hourly earnings up .4%. The numbers were viewed
as strong (certainly stronger than expected), and this is pushing interest
rates higher. Thursday we closed the 10-yr at a yield of 2.74%, opened this
morning at 2.72%, but it after the employment data we're up to 2.80% &
agency MBS prices are worse .250-.375 - and I don't think anyone wants more
of a crisis out of Russia to cause a flight to quality to push rates down.
AM Tracking Quote:
FNMA 3.5% 100.41 now -49 bps: Lender pricing should start off worse today.
09:31 -49 Open 100.90
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