Depository banks know that, per the AARP, more than 67% of US
assets are controlled by individuals age 50+, with this group representing more
than 67% of all bank deposits. If you don't think that lenders view reverse
mortgages as a growth industry, you're wrong - it may be the last chance to
lend to this generation, right? There is a lot of bank M&A going on and
it is not always confined to banks: Fifth Third Bank ($141B, OH) will
acquire Retirement Corporation of America (RCA), a registered investment
adviser providing retirement education & planning nationwide.
In warehouse news, First Tennessee Warehouse Lending announced expanded
support for construction loans. Now best-in-class reliability and
ease-of-use comes with even more flexibility. Frankly, warehouse lines
often seem like they are all the same. But First Tennessee can really
make a difference with expanded hours for wire transfers, virtually perfect
reliability, broad product support, high marks for ease-of-use, and the
knowledge and experience needed to smoothly and quickly deliver your securities
and distribute your cash. Whether you originate 100 loans per month or
1,000, First Tennessee will make your life easier. You can meet them at the
IMBA in Palm Springs, or call Scott
Walker (901.759.7770).
Parkside Lending has expanded its guidelines on FHA, and
you are going to want to take note. "Effective January 23, we have removed
all DTI overlays and will now accept ratios evaluated by FHA TOTAL
Scorecard/DU. In addition, our minimum FICO is now 620 and we allow downgrades
to manual underwrites per FHA Handbook. For more details, contact your AE
or sales@parksidelending.com.
Come experience the power of caring on your next FHA loan with Parkside
Lending."
But there is plenty of bad news to go around.
HomeStreet Bank ($6.2B, WA) has agreed to pay $500,000 to settle SEC charges of improper hedge
accounting violations, including unsupported adjustments to effectiveness
testing that led to more favorable accounting practice.
Citigroup Inc. ($222 billion) saw its mortgage
units fined $28.8 million for keeping home borrowers in the dark about options
to avoid foreclosure and making it difficult for them to apply for relief, per
the CFPB. CitiMortgage will pay an estimated $17 million to compensate wronged
consumers, as well as a civil penalty of $3 million; CitiFinancial Services
will refund approximately $4.4 million to consumers, and pay a civil penalty of
$4.4 million. The CFPB said the subsidiaries neither admitted nor denied the
findings in the consent orders. (We've heard that one.) The lesson? Don't give
"the runaround to borrowers" on mortgage servicing by keeping
borrowers in the dark about options to avoid foreclosure or making it difficult
for them to apply for relief.
The Banc of California ($11 billion in assets) had
its CEO and Chairman Steven Sugarman "resign." It doesn't help that
the company is being investigated by the U.S. Securities and Exchange
Commission about whether the bank misled investors. Banc of California has
named Hugh Boyle, its chief risk officer, as its interim president and CEO. J.
Francisco A. Turner, chief strategy officer and principal financial officer,
will partner with Boyle as interim chief financial officer and president.
Robert D. Sznewajs, the board's chair of the Joint Audit Committee, will assume
the role of chairman.
The returns have been good, but stockholders have $100
million less since the Banc of California ponied up that sum for the naming
rights on Los Angeles's new soccer stadium. There are concerns raised about
deals benefiting Sugarman's family and board members, and Sugarman's brother is
a minority investor in the soccer team. The bank's shares plummeted in October
after the financial website Seeking Alpha published an anonymous short seller's
report alleging ties between its leadership and an imprisoned con man.
There is more negative press about Wells Fargo's retail
bank behavior. Bloomberg reports that WFC charged some homebuyers fees to extent promised rates when
the bank failed to process their mortgage applications on time.
Another day, another settlement. Societe Generale
SOGN.PA agreed to pay a $50 million civil fine to settle U.S. claims that
it defrauded investors in connection with the marketing and sale of residential
mortgage-backed securities. The U.S. Department of Justice announced the
settlement on Friday, and said the French bank acknowledged having committed
misconduct.
A U.S. judge refused to dismiss a lawsuit seeking to hold Deutsche
Bank AG liable to investors, including dozens of portfolios from BlackRock
Inc and Pacific Investment Management Co. (PIMCO), for losses on poorly
underwritten residential mortgage-backed securities. The proposed class-action
lawsuit sought to recover "significant monetary damages" arising from
Deutsche Bank's alleged "failure to discharge its essential duties"
as trustee of 62 trusts created between 2004 and 2008, and which issued notes
backed by about $90.3 billion of home loans. U.S. District Judge Jesse Furman
in Manhattan denied its request to dismiss representations-and-warranties,
servicer-notification and event-of-default claims.
In CFPB news, last week republican senators Deb
Fischer (NE), Ron Johnson (WI) and John Barrasso (WY) introduced a bill (S. 105) that would amend the Consumer Financial Protection
Act of 2010 to replace the CFPB's current single director with a bipartisan,
five-member board. The proposed leadership structure would be like that of
other financial regulators, including the FDIC, SEC and CFTC.
Mortgage rates...
Longer term mortgage rates are set by supply and demand -
the magical hand. So what if the New York Fed, which has been buying agency MBS
to the tune of $1-2 billion a day recently, stopped? Last week Philadelphia Fed
President Harker reiterated that the Fed should consider ending reinvestments
once the Fed funds rate reaches 1%, consistent with other earlier statements
from Fed officials.
And look at the impact the FHA MIP about-face had on
things. The Ginnie market has been roiled by the surprise FHA MIP cut of 25bp
weeks ago followed by its rollback last Friday. And there are prepayments to
grapple with based in changes like that: the rollback removes the longer-term
impact but short term disruptions may alter January and February FHA prints.
MIPs present an easy lever for reducing the government mortgage footprint, and
Congressional Republicans have called for them to go higher.
Unless you've been living under a rock you know that
Donald Trump is now our president and that is all that has been talked about
for some time now. So let's change the subject to something that NEVER gets
talked about here, interest rates and the housing market. The Federal Reserve
has talked nonstop about how they would like to see inflation reach their
benchmark rate of 2% and it looks like that has finally happened. Last week we
learned that both headline and core inflation rose above 2 percent over the
year for the first time since mid-2014. This bodes well for the future of
interest rate hikes - if you want to see them.
The housing market has continued to improve in most areas.
Housing starts jumped 11.3% in December. Wells Fargo noted that, "The jump
was not all that surprising given November's drop, but the bounce back was
larger than expected." It also seems that this growth is set to continue.
"Looking at 2016 as a whole, the annual average for permits is running
ahead of starts, which points to a pickup in activity in the year
ahead." However, existing home sales are expected to fall for the
month of December. On top of that, "Homebuilder confidence retreated 2
points in January from its cycle high of 69 in December, as the recent jump in
mortgage rates slightly offset builders' post-election confidence bump."
Breakeven inflation expectations for five-year and 10-year
horizons have risen since election day-by 31 basis points for the five-year
and 27 basis points for the 10-year. This is important to note for the future
of FOMC interest rate hikes. Some people are projecting that inflation is going
to continue its rise, however we have witnessed FOMC members consistently
over-forecast inflation as well as their response via the fed funds rate.
Policy proposals to scale back financial regulations and reduce the tensions
between regulators and the regulated, however, may free up bank capital and
allow for greater lending.
Moreover, if there is a greater expectation for domestic
economic growth, then both bank and non-bank credit may open up. Thus, interest
rates may not rise as much or as quickly as some analysts are projecting.
Perhaps the increase in inflation will not be sustained significantly in the
future. If so, then the Fed may be able to live with less than the three funds
rate increases projected for 2017.
For example, Monday U.S. Treasuries and agency MBS
rallied/improved, and rates moved back to where they were in the middle of last
week. The MBS market opened the week in impressive fashion amidst light
volumes, closing tighter on the day led by lower coupons which were supported
by solid demand with treasuries rallying in "risk off" fashion ahead
of today. The 10-year improved more than .5 in price to close yielding 2.40%
while the 5-year note and MBS prices improved .250-.375 depending on coupon and
maturity.
This morning we're influenced by overseas news. Britain's
Supreme Court has ruled that the UK government must hold a vote in parliament
before beginning the process of leaving the European Union. Turkey raised rates
(9.25% overnight funds), and the Italian Constitutional Court ruled on the
legality of current election laws.
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