New LO Comp Plan and All-Cash Deal Stats

By rchrisman@robchrisman.com

Did I read that sign or headline right? (Part 2 of 4)

Seen during a conference:

FOR ANYONE WHO HAS CHILDREN AND DOESN'T KNOW IT, THERE IS A DAY CARE ON THE 1ST FLOOR.

Notice in a farmer's field:

THE FARMER ALLOWS WALKERS TO CROSS THE FIELD FOR FREE, BUT THE BULL CHARGES.

Message on a leaflet:

IF YOU CANNOT READ, THIS LEAFLET WILL TELL YOU HOW TO GET LESSONS.

On a repair shop door:

WE CAN REPAIR ANYTHING. (PLEASE KNOCK HARD ON THE DOOR - THE BELL DOESN'T WORK.)

Proofreading is a dying art, wouldn't you say?

Man Kills Self Before Shooting Wife and Daughter

Something Went Wrong in Jet Crash, Expert Says

Really? Ya' think?

Police Begin Campaign to Run Down Jaywalkers

Now that's taking things a bit far!

The media, both social and unsocial, are filled with thoughts about the presidential debate last night. Housing was not an issue, since, overall, things are pretty good. But let's start with something non-mortgage with a favorite trivia question. Who is buried in Grant's tomb? Nobody is buried in Grant's tomb. President & Mrs. Grant are entombed there. A body is buried only when it is placed in the ground and covered with dirt.

There are only 7 days left to register for the longest running loan officer training event in the industry - Sales Mastery. Todd Duncan's Sales Mastery Event is set to begin next Tuesday October 4th in Palm Desert, California. I'm excited about this event as I will be sharing the stage with a roster of industry experts and world-class keynote speakers. Click here for more info and to register for the event: www.salesmasteryevent.com

 Mortgage Bankers of the Carolinas is also still accepting registrations for its 60^th Annual Convention next week. For more information, click the link for MBAC 60th Annual Convention.

 On October 12^th, just outside of Washington, DC, MBA's Stress Testing for Mid-Size Banks Workshop, is ready and designed to help banks between $10 billion and $50 billion in size get this done right. Learn how to build and improve your stress-testing framework directly from regulators, banking colleagues and other industry experts.

 Plaza Home Mortgage'sTraining Calendar is updated for the month of October. Available trainings include USDA, Bay Doc Basics, Split Premiums and much more.

 TMBA offers an impressive calendar of events. On November 7^th & 8^th its 66^th Annual Educational Seminar and Workplace will be taking place.

 NMLS approved course providers are advised that a new State-Specific Education Notice has been posted for Florida. Effective January 1, 2017, FL will require 2hrs of NMLS approved state-specific PE. Additionally, MLO's licensed in the state will also be required to complete 1 hour of FL-specific CE as a condition to renew their license for 2018. The new requirements are in response to Florida's adoption of the Uniform State Test (UST). The FL notice and all other Education Notices are available on the policy page of the course provider section of the NMLS Resource Center.

 ReverseVision, software and technology provider for the reverse mortgage industry, will host its second annual UserCon in San Diego February 8-10. Last years' inaugural conference saw strong attendance with 67 different companies, four of the top five reverse lenders in attendance and overwhelming positive feedback.

 Switching gears from events to compensation for LOs, as a reminder, the CFPB put out a 541 page memo on Loan Officer Compensation, officially called a Final Rule and Official Interpretation, CFPB Final Rules for LO Compensation.

 But there are still some interesting things going on with comp plans. Atlantic Bay Mortgage Group, which is both a lender and a servicer, recently launched a new payment plan that "eases mortgage bankers' financial concerns by providing additional earnings for the life of the loan, which creates a continuous income stream and implements a long-term planning solution...a way to reward their top producing loan officers with a Progressive Earnings Plan.

 "When a loan is closed, the company retains the servicing rights of the loan, meaning the company that collects the money from the borrower, and receives a yearly fee for servicing related activities. Most companies keep 100% of the servicing fees, whereas Atlantic Bay's Progressive Earnings Plan will give a portion of that money to the mortgage banker that originated the loan. Eligibility for the Progressive Earnings Plan includes employees of Atlantic Bay who originate more than $14 million in retail loan volume in a calendar year. The loans must also be closed in the name of, and funded by Atlantic Bay Mortgage Group."

 I am already fielding questions about whether or not the FHFA will increase its conforming conventional loan amount limits for Freddie and Fannie. Two things. First, historically it isn't announced until around Thanksgiving, so stand down. And second, in many parts of the nation jumbo rates are lower than conforming rates, and with more lenient underwriting in many situations, so will raising the conforming loan limit by $5 or $10k make or break a loan officer's career? Probably not. But any increase would be the first one in nearly ten years, and give the financial press something to talk about.

 That being said, the MBA's recent Chart of the Week shows that as of the second quarter of 2016, the FHFA's seasonally-adjusted, expanded-data house price index (HPI) was nearly identical to the level of the index observed in the third quarter of 2007. "This benchmark price level is important because GSE conforming loan limits are not allowed to rise again until house prices exceed their pre-crisis levels, designated by the FHFA as the price level from the expanded-data HPI in the third quarter of 2007.

 But nothing is simple, and as the MBA points out the FHFA, and the statistics majors that work there, produce three different HPIs: the all-transactions, the purchase-only and the expanded-data HPI. I won't dive into the weeds, but all three indexes are repeat sale indexes but with varying components. In particular, the "expanded-data" HPI goes beyond GSE data to also incorporate information on home sales financed with mortgages insured by FHA as well as other home sales transactions observed in deed records. "Since the crisis, the expanded-data HPI has lagged the other two indexes and this is the first time that it has returned to 2007 levels.

Extrapolating from price levels during the second quarter of this year, the FHFA could raise the conforming loan limit for the calendar year 2017, the first such increase since 2006."

 Periodically Freddie Mac releases its Cash-Out Refinance Report, and the 2^nd quarter it showed a pick up in the amount of refinance borrowers who increased their loan amount by at least 5% to 41% from 38% in Q1. Total equity cashed out was estimated at $13.3bn vs. $11.4bn previously.

 And what about good old-fashioned all cash deals, the kind real estate agents and sellers like? During 2/16, cash home sales were 35.7% of all transactions, their lowest February reading since 2008 and a 2.5 percentage points decline Y-o-Y. Cash sales were 59.2% of REO sales, 35.6% of resales, 32.6% of short sales and 15.2% of new home sales. Traditionally, cash transactions were 25% of sales and should be back there by late 2018. AL had the most cash sales at 51.7%, FL followed at 49.2%.

 Going back to the summer of 2015, all cash sales dropped to 31% in June, according to Corelogic. The historical, pre-bubble average is close to 25%. This speaks to the lack of first time homebuyers. It also speaks to an increase in gettable loans as that number reverts to the mean, even if home sales remain flat.

 While both the investor share of home sales and the share represented by distressed properties are setting post-crash lows, the share of cash sales remains elevated. CoreLogic reported that in May cash sales represented 30 percent of home sales, down 1.7 percentage points from April and was 2.5 points lower than a year earlier, it remains 5 points higher than the average before the housing crisis. CoreLogic estimates that, at the current rate of decline, it will return to a 25 percent share by mid-2018.

 Cash sales continued to account for a significant portion of all home sales in April with CoreLogic reporting that 32% of home sales that month were all cash, down 1.6 percentage points from March and 2.8 points from the previous April. For the first four months of this year cash sales made up fractionally more than a third of home sales, the lowest start for any year since 2008. 

 Cash sales peaked in January 2011 when they accounted for 47% of all home sales. At that point, 24% of home sales were from lender-owned inventories (REO) and a majority of those sales were cash.  Cash continues to dominate in the REO market, constituting 57% of those transactions in April 2016, but the REO share of sales has fallen to only 6% of the overall total.

 Switching to something near and dear to many (food), many economists monitor restaurant traffic as a sign of the health of the economy. Since the Great Recession eating out seemed like the thing to do with food service and drinking establishments sales climbing since 2Q 2010. At the end of last year that changed, however, with sales at food and drinking establishments dropping 0.2%. This along with the fact that food& beverage store sales have climbed 2.9% since the end of last year, points towards more Americans dining in instead of eating out. Special food services, which in part reflects food truck sales, is the only category of eating out that has improved since last year, rising 1.8 percent.

 The highest food & beverage store gain was in specialty food stores and beer which climbed 6.3%. Even though the food services and drinking establishment (eating out) growth has gone down, employment in this sector is stronger than ever, growing 2.9% from last year's level. But it seems the food & beverage stores employment is also growing bringing rise to an interesting shift in the way Americans eat their food. Wells Fargo says, "the substitution effect for sales and employment between dining out and food consumed at home appears to be a shifting. An underlying trend worth noting."

 Rates? They're doing just fine. Monday Treasuries, and other fixed-income securities, rallied - if for no other reason than stocks sold off. But that isn't a real reason, as we have seen time and time again. We did have New Home Sales which slightly beat forecasts, but the data series is volatile and has only a small impact on GDP growth. We wrapped up Monday with the 10-year yielding 1.59%, slightly better than the 1.60s that we saw last week.

 Today we'll have the July Case-Shiller 20-city Index at 9AM ET, September's Consumer Confidence at 10AM ET, and a $34 billion 5-year T-Note auction. In the early going the 10-year is down to 1.57% with agency MBS prices better by .125 versus Monday's close.