(Yes, I know that I have used this
before, but it is worth an occasional repeat.)
One night at Cheers, Cliff
Clavin said to his buddy, Norm Peterson:
"Well, ya see, Norm, it's
like this. A herd of buffalo can only move as fast as the slowest buffalo. And
when the herd is hunted, it is the slowest and weakest ones at the back that
are killed first. This natural selection is good for the herd as a whole,
because the general speed and health of the whole group keeps improving by the
regular killing of the weakest members!"
He continued. "In much the
same way, the human brain can only operate as fast as the slowest brain cells.
Excessive intake of alcohol, as we know, kills brain cells. But naturally, it
attacks the slowest and weakest brain cells first. In this way, regular
consumption of beer eliminates the weaker brain cells, making the brain a
faster and more efficient machine! That's why you always feel smarter after a
few beers."
The Fed's latest report on
household debt and credit finds US households owed $12.25 trillion at the end
of the first quarter, up 1.1% from the end of 2015. Overall, housing debt
represents about 72% of the total, while non-housing debt is the remaining 28%.
If we wade into the weeds, mortgages (70%), student loans (11%), auto (9%),
credit cards (6%) and home equity lines of credit (4%) are of interest.
Speaking of debt, what do you think the CFPB would think of borrower's collateral in the form of naked photos?
iServe Residential Lending is back in the news, and
as part of its branch support and passionate interest in the education of the
Real Estate community, complimentary seminars are regularly offered
throughout the U.S. Over the coming months, VA Financing Seminars
will be held throughout key locations with a focus upon the many benefits
of the VA home loan. Although iServe has a complete offering of loan products,
it has taken the lead in assisting real estate professionals to better
understand VA financing. iServe believes strongly that VA financing is the
most "common-sense" product on the market today, and unfortunately
the most misunderstood. The overall goal is to help our qualified military
heroes secure their home front with a benefit they have so deservingly
earned. The next seminars will be in Allentown PA, Scottsdale AZ,
Chesapeake VA and Reno NV. For additional information on these or future
seminars, new branches or originator opportunities, contact Allen Friedman
for the Western U.S. (415-298-2500) or Rick Trew for the Eastern U.S. (619-869-0408).
Next week Mayer Brown is
offering a free webinar 11AM PDT on June 23 titled,
"RESPA Enforcement: Lessons Learned, the PHH Appeal and What's Still on
the Table": the ramifications of the PHH decision, lessons learned
from recent CFPB enforcement cases, including Egbahli, discuss marketing and
promotional activities still in the table, and CE credit." "RESPA
enforcement has been among the CFPB's highest priorities since it opened its
doors for business five years ago. This means lenders, homebuilders, realtors,
title companies and other settlement service providers must ensure that their
policies and procedures comply with this complicated act. Please join Phil
Schulman as he discusses the impact of the PHH Corporation appeal
pending before the US Circuit Court of Appeals, lessons learned from other
recent RESPA enforcement cases, RESPA's impact on marketing and promotional
activities, including advertising agreements, lead-generation arrangements,
Internet advertising and event sponsorships." E-mail Jeremy Fegley with
questions or to register, or click the link above.
Today HomeBridge
Wholesale is conducting FNMA Homestyle and 203K Renovation training.
In Northern California,
the CAMP Silicon Valley Chapter Officer's Installation event is on Friday, June 24th and
will feature California Real Estate Commissioner Wayne Bell officiating the
installation of Richard Wang as president and the incoming board members. The
location is Maggiano's Little Italy Restaurant, Santana Row, San Jose.
For more information, contact TJ Roberts at 408-802-8522.
Summer CAMP 2016 is California's premier destination event
for the California mortgage industry. Held at Napa's Westin Verasa, Summer CAMP 2016, August 7th-10th,
provides attendees the opportunity to meet exclusive vendors and learn from the
best in the business.
Join
the CFPB for a free public webinar with Acting Deputy Director David
Silberman where it will provide an overview of the recent updates it has made
to the eRegulations tool. The webinar will take place on Wednesday, June 22 from
2-3PM EDT.
Join Julia M. Wei Esq.
from the Law Offices of Peter N Brewer for a free webinar on Tuesday, June 21st, covering the essentials of
partition actions in California. As more and more "baby boomers"
are inheriting property, and with the popularity of co-ownership investments in
the Bay Area, this webinar will cover the basics of partition actions that real
estate professionals need to know. REALTORS® will learn about how to
proceed in transactions where co-owners may not agree, while homeowners &
investors will discover the mechanics of how to address divergent ownership
interests among family members or co-investors.
FHA's
appraisal training is coming to Boston, MA. Topics will include property
inspection requirements, appraisal validity period, manufactured homes, water
and septic, attic and crawl spaces inspection. Space is limited so register now for this June 24th
live training.
Are you ready for The
National Association of Women in Real Estate Businesses (NAWRB) 3rd Annual Conference being held in Orange County,
CA. on August 30th and 31st? This years' session will
address topics from the power of and challenges in women's homeownership to the
importance of increasing the number of C-suite women in America's boardrooms.
Register today to secure your chance of learning what the future of housing has
in store for you.
Turning to the markets, fixed-income
security prices are doing well but the servicing values are fading - nearly by
the day. As mentioned several times in this commentary, companies that
decided to be aggressive last year and into the first quarter of this year and
pay up for servicing have paid the price. And continue to pay the price.
Granted, existing borrowers are "stickier" - who the heck wants to go
through refinancing with its costs and delays and compliance hurdles - but
refis are surging. And when a borrower refis a loan that the servicer thought
they were going to have on their books for a while, well, someone has to pay
the price.
And thus LOs who thought
they could guess where rate sheets were going to be based on the MBS
market...can't. And capital markets vets find themselves explaining how
mortgage servicing rights work, and why the bank aggregators (Wells, Chase,
Citi, US Bank) and others are seeing a resurgence in volumes at the expense of
the agency/co-issue execution. As the world turns!
The latest MBA
profitability study for the first quarter, in part, reflects this trend in
retreating servicing values. Yes, the figures showed that mortgage bankers are starting to rebuild after the financial storm
caused by TRID at the end of the fourth quarter: profits roughly doubling at
the start of this year compared to the end of last year. The Mortgage Bankers
Association's Quarterly Mortgage Bankers Performance report stated that
independent mortgage banks and mortgage subsidiaries of chartered banks reported
a net gain of $825 on each loan they originated in the first quarter of 2016.
However,
profits still have a long way to go to get back to the level witnessed in
the first quarter of 2015 when independent mortgage banks and mortgage
subsidiaries of chartered banks recorded a net gain of $1,447 on each loan they
originated. This time around average production volumes were down slightly from
the fourth quarter of 2015. The volume by count per company averaged 2,196
loans in the first quarter of 2016, down from 2,265 loans in the fourth quarter
of 2015.
THE
Marina Walsh, MBA VP of Industry Analysis, observed that, "Production
profits in the first quarter of 2016 showed modest improvement over the fourth
quarter of 2015 despite declining volume and an increase in per-loan production
expenses...Compensating for the cost increases were higher production revenues
that grew by $431 per loan (16 basis points) over the fourth quarter."
Total production revenue (fee income, secondary marking income and warehouse
spread) increased to 378 bps in the first quarter of 2016, compared to 362 bps
in the fourth quarter of 2015.
One
other key area in the report was its findings on mortgage-servicing rights. As
noted in this commentary a few weeks ago, the first quarter's historically
low interest rates pulled down the performance of Nationstar
Mortgage, Walter Investment, and Ocwen Financial thanks
to the impact of negative adjustments to the "fair value" of each
company's mortgage servicing rights portfolio.
Walsh
said, "On the servicing side of the business, a drop in mortgage interest
rates resulted in mortgage servicing right (MSR) impairments and hurt
profitability. Net servicing financial income dropped to a loss of $118 per
loan serviced in the first quarter, from gains of $107 per loan in the fourth
quarter."
The report stated that servicing operating income, which excludes
MSR amortization, gains/loss in the valuation of servicing rights net of
hedging gains/losses and gains/losses on the bulk sale of MSRs, remained
relatively flat at $205 per loan in the first quarter of 2016, from $207 per
loan in the previous quarter. Total loan production expenses - commissions,
compensation, occupancy, equipment, and other production expenses and corporate
allocations - increased to $7,845 per loan in the first quarter of 2016,
from $7,747 in the fourth quarter of 2015. And productivity decreased to 2
loans originated per production employee per month in the first quarter of 2016
compared to 2.4 in the fourth quarter of 2015.
Speaking
of the MBA, a big congrats are due to CMG's Chris George who was nominated
to be the eventual Chairman of the MBA! He's a huge fan of mortgage banking
and of taking an active role in advocacy.
Tuesday was a decent day
in the fixed-income markets. MBS ended narrowly changed - barely enough to
impact borrowers. We began the day with a little rally due to activities
overseas (German rates going negative, stock markets selling off). The usual
entities were in selling mortgages and the usual entities were in buying them.
The 10-year note & agency MBS prices were pretty much unchanged. The
upcoming Brexit vote in Britain next week about whether or not they will remain
a part of the European Union continues to drive the market: forecasts that the
Brexit vote will pass have driven yields lower.
Today we've had the MBA's
survey of 75% of the retail application data for last week (-2.4%, with
purchases -5% and refis -1%). We also had the May Producer Price Index figures
(+.4%, core +.3%), and the June Empire Manufacturing Survey (+6.01). Coming up
are Industrial Production and Capacity Utilization will be released at 9:15AM
(expect 0.1% and 75.4, respectively). Later today will be the FOMC decision
with the statement at 2PM EDT followed by Fed Chair Yellen's press conference.
We closed the 10-year at 1.61% and this morning after the initial spate of
news its at 1.62% with agency MBS prices worse a shade.
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