Marijuana Election Results and Lending, and oh, The Election

 

By rchrisman@robchrisman.com

The election results can be confusing. But maybe the fellow narrating this short video could help explain things, just as he does the turbo-encabulator.

Friday is a day to honor veterans. Different people do that in different ways, and one way is for a restaurant chain to offer a free meal to those who served their country. Pass this list along to a vet, and hats off to those establishments.

"Think social media marketing is dead? Let's do the math:  The average LO has 338 Facebook friends. Just 3 auto-posts a week adds up to 52,728 potential impressions annually to people they know. And that's just Facebook! Derivian Information continues to roll out LOsocialbot 'Enterprise' for mid to larger sized retailers. Originators love the service because it posts great content for them. Compliance loves it because it provides review, release and archiving for all the LO's social outlets.  If you're looking to put a bow on your social media marketing efforts, contact Jason Lutz."

 Regarding the residential lending environment, Rick Roque, co-founder of Menlo, a banking M&A and Retail Management practice, writes, "We have a new President, and the only thing for certain is rates are expected to go up in the next 30-60 days - as many have been predicting since 2010. With this as a backdrop, lets summarize a few things. What do an improving economy, low unemployment (4.9%), 2.5-3% wage growth, and appreciated inflationary pressures over the summer (to over 1.4%) have to do with Branch Managers and Loan Officers looking for better opportunities? It means the percent of purchase business is going to increase more dramatically in 2017 and 2018, and mortgage lenders will be aggressively marketing and recruiting for new loan officers. Why is this a problem? Every wholesale & correspondent mortgage bank, along with Federal/State Chartered banks will rapidly seek to enter or expand their retail platform to pursue purchase business. This is great for competing wages for loan officers, but it also poses significant risks for loan officers today.

 "The risks are that these lenders, especially wholesale lenders, have very poor branch support processes, personnel and marketing services, and heavily restrictive branch manager agreements. The key is to identify a mature, innovative and supportive Retail Mortgage Banks that will equip you to be very competitive. The increase in purchase levels will heavily favor mortgage banks over State and Federally chartered banks whose cultures are slower to move amidst the competition. It is clear that independent mortgage banks, branch managers and loan officers from Depository Banks, Wholesale Lenders and Retail Mortgage Banks in Massachusetts, Connecticut, New Hampshire, Maine, Rhode Island and Florida investigate more serious and competitive opportunities in these markets - and there are a few highly competitive platforms - but you need to know what you are looking for, otherwise, it could be a very risky pursuit." If you are looking to investigate opportunities for your company to be purchased/ acquired OR your LO production team/branch would like to join a heavily competitive and well capitalized mortgage bank in these states, contact all Dr. Rick Roque (413.297.6895).

Congratulations to Caliber Home Loans, Inc.'s Matt Schilling who is its new Senior Vice President of Strategic Growth. Mr. Schilling will be responsible for leading Caliber's Strategic Growth, Small Mergers & Acquisitions and Talent Acquisition initiatives.

 And congrats to Bill Elliott, CMB, AMP, of Envoy Mortgage, who has received the New Mexico Mortgage Lenders Association's Mortgage Lender of the Year Lifetime Achievement Award.

 PHH not only came out with its earnings but also announced that it was exiting the private label solutions (PLS) segment in early 2018. Mortgage origination trends were strong. During the earnings call management noted it had entered into an agreement in principle with New York DFS. The company is in negotiations with FHA and MMC, and management noted that negotiations might spill into next year. PHH saw higher-than-expected loan sale volume and higher gain on sale margin. Loan sales of $3.0 billion surpassed estimates, and the gain-on-sale margin (as a percentage of closings) came in at 2.95%.

 PHH also announced a sale of $120 million of Ginnie Mae MSRs (mortgage servicing rights) at a modest gain. Pricing in the Ginnie Mae MSR market has been challenging and some holders have recently taken negative marks to reflect this. The fact the PHH could sell this at a premium suggests that their carrying values on the other MSRs are likely to be seen by the market as being reasonable.

 Now that the bi-partisan campaigning is over (based on the CNN exit poll, 9 percent of voters ages 18-29 went for third parties!) let's switch, as some would suggest, disaster news.

 Correspondent Lenders must adhere to Fifth Third's Disaster Policy located in Chapter 7, Section C of the Correspondent Seller Guide Underwriting Guide and the disaster policy overlay in the Overlay Chart. Federal disaster areas currently affected include a wide range of counties in North Carolina and Florida.

 AmeriHome posted: on 10/17/2016, FEMA issued Amendment No. 1 to DR-4283 granting four Florida counties Flagler, Putnam, St. Johns and Valusia, individual assistance to supplement recovery efforts in the areas affected by Hurricane Matthew beginning October 3, 2016, and continuing. Hurricane Matthew's effect on South Carolina, beginning October 4^th, has been Amended, No. 2 to DR-4286, granting 15 South Carolina counties individual Assistance. In addition, Amendment No. 5 to DR-4285 granted North Carolina counties Martin, Tyrell and Washington assistance and Amendment No. 6 to DR-4285 granted Craven county in North Carolina individual assistance as well.

 Per recent AmeriHome Correspondent bulletins, on 10/24/2016, FEMA issued amendments granting assistance to areas affected by Hurricane Matthew. Amendment No. 3 to DR-4283 granted inclusion for Duval county in Florida. Amendment No. 4 to DR-4284 granting three additional GA counties aid, Evans, Liberty, and Long. Amendment No. 8 to DR-4285 adding Lee, Moore, and Wake counties in North Carolina.

 In response to designated counties in South Carolina and North Carolina that were declared disaster areas, Ditech created an interactive web site that links to FEMA's site. It is the responsibility of each Correspondent Client to monitor the FEMA web site and obtain the required re-certification when there is a Major Disaster Declaration that includes Individual Assistance up to purchase by Ditech.

 In response to Hurricane Matthew in Florida and in response to a Federal Disaster Declaration, M&T Bank will enforce the Disaster Re-Inspection Policy for all properties located in the affected counties.

 Find updated FEMA DECLARED DISASTER COUNTIES document located on the FCMKC's Knowledge Center > Full Guidelines > Declared Disaster Counties. Disaster policy and procedures can be found in the product Full Guidelines.

 Because of Hurricane Matthew, occurring in Virginia from October 7 (incident start date) and continuing (incident end date TBD), the President issued a federal disaster declaration on November 2 for the following counties / independent cities: Chesapeake, Newport News, Norfolk, and Virginia Beach.NewLeaf Wholesale requires that all subject properties in the areas impacted by the disaster require evidence that the subject sustained no damage from the identified disaster.  If the subject property is in an impacted area listed above, with a completed appraisal dated prior to the incident start date, a 1004D re-inspection completed by the Appraiser must certify that the property is free from the applicable natural disaster damage.

 Hertford county in North Carolina has been added as a disaster area per FEMA as well as both Brunswick and Halifax county. Plaza has updated its list of impacted areas accordingly. For additional details on Plaza Natural Disaster Policy and inspection requirements, please click here.

 On 11/2/2016, FEMA issued DR-4285 granting individual assistance to Chesapeake, Newport News, Norfolk, and Virginia Beach in the commonwealth of Virginia to supplement recovery efforts in the areas affected by Hurricane Matthew beginning October 7, 2016, and continuing. In addition, Hertford county in North Carolina has been added as well. AmeriHome clients are reminded to review its disaster policy requirements.

 My cat Myrtle, for some reason, was intent on following the marijuana voting around the country. Due, perhaps, to the plant's relation to catnip? Regardless, California, Massachusetts, Maine and Nevada voters approved recreational legalization, joining Washington and California. Arizona voters appeared to have rejected recreational legalization, along with not re-electing Sheriff Joe Arpaio. On the medical side, Florida, Arkansas, and North Dakota all voted in favor of medical cannabis, and Montana appeared likely to also approve it.

 The results may force Congress to resolve differences between federal and state laws that have paralyzed much of the banking industry. Under Obama, federal authorities largely took a hands-off approach to state-level legalization efforts. But an incoming administration more skeptical of drug reform could easily reverse that approach. Although marijuana is legal with several states at the state level, it is not legal at the Federal level. Which of course leads to the issue that any FDIC bank, or government agency like Freddie, Fannie, or Ginnie, not being able to accept marijuana-related income on loans in their programs. But what about banking the marijuana industry. Same thing - many banks that report up to federal regulators can't accept that income, and won't handle those deposits. But banking marijuana businesses is not illegal. It's a permissible activity but banks need to be very thorough in their review of all the risks involved. The strong wins across the country will increase pressure on Congress to reconsider how the Federal Government treats this Schedule 1 illegal drug (harmful with no medical use), including access to banking.

 There are plenty of questions. What about someone who owns a rental house, and the tenant's income comes from a marijuana-related business? What about problems caused by marijuana cultivation in and around residences (water, heat, & humidity often lead to mold)? What if a housing complex in a state with legal weed has its loan with Fannie Mae, or receives subsidies from the Federal Government? Things can become complicated, and conflicting, in a hurry. The Agencies and investors' contractual agreements with lenders place the burden on the lender to assure that they are conforming to existing rules, regulations, and laws.

 Marijuana's drug classification has banks nervous about working with legal business owners and the lenders are fearing a backlash like massive fines and perceived instances of money laundering from federal regulators and law enforcement if they conducted business with legalized marijuana sellers.

 Property values in Washington and Colorado have certainly done well after legalizing marijuana - although a direct cause & effect is tenuous. In Colorado Amendment 64 gives local governments the authority to regulate commercial activities associated with the recreational use of marijuana. Most counties in Colorado have either already passed bans on recreational marijuana retailers or have delayed making a decision and placed a moratorium on pot business.

 There isn't much to talk about with the bond market, other than the environment has shifted today. Trump, on the campaign, called for the repeal of the Dodd-Frank Wall Street reform law, and he advocated for U.S. Supreme Court justices in the mold of the late Antonin Scalia. Remember that Yellen's term as Chair of the Fed doesn't expire until 2/3/18 but Trump has made critical comments of her on the campaign trail. Donald Trump's electoral victory, by roiling global financial markets, could upend Federal Reserve officials' plans for raising short-term interest rates at their meeting in mid-December.

 Yesterday U.S. Treasuries sold off (rates moved higher) as investors adjusted their bets on the future favoring a Clinton Administration. The only U.S. economic data release was job openings for December which slightly missed expectations. The $24 billion 3-year Treasury auction printed a high yield roughly in line with market expectations although the bid-to-cover and indirect bids were lower than usual. The 10-year note dropped .250 in price and got within 0.5bp of the recent high (1.88%), hitting 1.876% before bouncing modestly; agency MBS fared better.

 We've had the usual MBA Mortgage Index for the week ending 11/5 (-1.2%). But the big story is the result of the elections, and the apparent swing toward a complete Republican government. As usual the stock market is garnering the press, but the U.S. 10-year yield, as a proxy for our interest rates, hit an overnight low of 1.71% but has since bounced. Expectations for stepped up fiscal policy and a more hawkish Fed under a Trump White House is weighing on the long-end of the yield curve. Coming up is a $23 billion 10-year Treasury auction. We find the 10-year this morning up to 1.95% and agency MBS prices worse than Tuesday's close by .250-.375.