(Thanks to Molly D. for this one.)
Knock knock.
Who's there?
Dishes.
Dishes who?
Dishes Sean Connery.
"Everybody is a genius. But if you judge a fish by its
ability to climb a tree, it will live its whole life believing that is
stupid." Different people are good at different things, and top LOs pride
themselves on product knowledge. Here's a helpful website if you want to know
who is doing high-rise condos in Missouri, jumbo ARMs in Wisconsin, or anything
else, in any state: www.mortgageelements.com. (Select a state, then a program.)
In job and broker product news, FundLoans.com is a residential wholesale
jumbo non-QM lender. "At FundLoans.com we take a common-sense approach to
looking at your loan. We don't underwrite like a bank, we underwrite like a
private fund. We thrive in the super jumbo area and love working with
self-employed borrowers.
Joe Garrett writes,
"'Any ideas on a warehouse lender that'll let us fund non-QM products?' Answer:
BOFI Federal Bank is one that comes to mind. They do non-QM loans for
their portfolio, so it was easy for their Warehouse division to understand that
product." (And, as noted in the first paragraph, if you're interested in which
lenders are doing non-QM products, go to www.mortgageelements.com, click on the state, and then
select a program.)
Mergers & Acquisitions news
On the bank side, it was announced that in Illinois Busey
Bank ($5.4B) will acquire South Side Trust & Savings Bank of Peoria
($665mm) for about $133.4mm in cash (30%) & stock (70%). And in Ohio the
Farmers National Bank of Canfield ($2.0B) will acquire The Monitor Bank ($43mm)
for about $7.8mm in cash (15%) & stock (85%). On the non-depository side of
things, it is not hard to hear the rumors of well-known lenders acquiring
smaller lenders, as well as talk of some big mergers out there.
Interestingly, and thanks to Ken S. for passing this
along, the bank M&A 2017 "Deal Tracker" shows that pricing is up
year-over-year. "The number of bank merger and acquisition deals during
the first two months of 2017 was just one short of the total from the year-ago
period. Through Feb. 28, S&P Global Market Intelligence counted 37 deal
announcements in the banking sector with an aggregate disclosed deal value of
$5.65 billion and a median price-to-tangible book ratio of 164.7%. The
prior-year period saw 38 deal announcements with an aggregate disclosed deal
value of $5.84 billion and a median price-to-tangible book ratio of 124.8%. The
full year 2016 had 246 deal announcements with an aggregate disclosed deal
value of $25.28 billion and a median price-to-tangible book ratio of 131.8%.
Legal & regulatory updates
Congrats to Ellen M. Warwick, former Director for
Enforcement and Compliance for the Office of the Comptroller of the Currency
(OCC), who has joined Buckley Sandler LLP as a Senior Counsel. In
addition, Brendan Clegg, a former Attorney from OCC's Enforcement and
Compliance Division, who worked with Warwick for the past three years, joined
the firm as an Associate.
Settlements were in the air yesterday. First, Wells
Fargo, Royal Bank of Scotland Group Plc, and Deutsche Bank AG have reached a
$165 million class-action settlement over their underwriting for Kansas
City's now-bankrupt subprime lender NovaStar Mortgage Inc. The
settlement resolves claims that offering materials prepared by the banks misled
investors into believing that loans underlying roughly $7.55 billion of
NovaStar mortgage-backed securities they bought were properly underwritten, and
were safe. The defendants denied wrongdoing in agreeing to settle.
You remember NovaStar, right? It had specialized in
lower-quality residential mortgages, including many packaged into what proved
to be risky securities issued in 2006 and 2007.The company filed for Chapter 11
protection last July, and is not contributing to the payout.
But that isn't the end of it, of course. Holders of $2.2
billion of the NovaStar securities are not expected to join in the settlement.
The plaintiffs' lawyers plan to seek legal fees of up to $46.2 million, or 28
percent of the settlement amount, plus up to $3.5 million for expenses, per
settlement papers. And the case only involves the New Jersey Carpenters Health
Fund.
Next up was Nationstar Mortgage ponying up $1.75 million to
resolve a "matter" related to data reporting under HMDA with the CFPB.
The matter was related solely to technical data record issues rather than
actual wrongdoing against customers. There are also no non-monetary penalties
or restrictions associated with the settlement, so business should continue as
normal.
While we're on HMDA, the industry, and vendors, are
pressing ahead with changes related to the Home Mortgage Disclosure Act,
now administered by the CFPB. It is important for every company to know they
why, what, who, when and how of revised HMDA requirements. We've certainly been given
plenty of warning and lead time! We'll see a data reporting expansion, and
lenders need to know the implications of the new data requirements on loan
pricing, sale, and repurchase. How is it being rolled out in your company? What
are the operational impact and considerations, the policy implications and
company behavior?
The scope of covered institutions has narrowed. A bank,
savings association, or credit union will not report unless it meets the
asset-size, location, federally related, and loan activity tests under current
Regulation C and it originates at least 25 home purchase loans, including
refinances, in both 2015 and 2016. In 2018 a new standard test is primarily
volume-based. Companies must report if fundings included at least 25 covered
closed-end mortgage loans or at least 100 covered open-end lines of credit in
each of the two preceding calendar years. And the CFPB is implementing a new
reporting tool that will use a new LAR file specification standard for
reporting, pipe-delimited versus comma-delimited.
The CFPB is working on HMDA, having taken it over from
HUD, offering up a webinar and especially
when it concerns small entities complying with new
rules and regulations. There is information about collecting and
reporting HMDA information about ethnicity and race, as
well as its general filing instructions guide.
If you'd like a timeline for HMDA the CFPB has set out key dates to observe. And
lastly on HMDA any technical questions can be emailed to hmdahelp@cfpb.gov.
Capital Markets and Trading
In execution news Compass Analytics rolled out the "first fully
web-enabled version of its mini-bulk trading platform ("CompassBid")
for sellers." The website is now available as a standalone offering and is
further supported with optional outsourced Whole Loan Trading Services.
"CompassBid provides sellers full bid automation including investor
eligibility and pricing, sellers' full range of executions, data file
normalization and encryption, market spots, full bid transparency and
reporting, purchase advice reconciliation, integration to risk management and
LOS systems, and other trading best practices to provide comprehensive best
execution. The new sell-side web version is accompanied by further enhancements
to mini-bulk buy-side capabilities." (Contact Sarah Slagle
for more info.)
What does Goldman Sachs know that you don't? Goldman
has become the largest buyer of severely delinquent home loans from mortgage
giant Fannie Mae over the past year and a half. The WSJ reported that
Goldman has acquired nearly two-thirds of $9.6 billion in loans the agency has
auctioned, government records show.
Turning to interest rates, First American Chief Economist
Mark Fleming had some thoughts on how the results of the FOMC meeting might
impact housing. "Reports have suggested, or surely will, that this rise in
mortgage rates will be the demise of the housing market. That's just not so.
Yes, many existing homeowners will have a financial disincentive to sell
because they would lose their lower than prevailing mortgage rates in doing so,
the so-called rate lock-in effect. I have suggested that this is one of the
reasons we see low inventories in most markets today, but it's not as simple as
that.
"More importantly, affordability remains high and our
survey data shows that mortgage rates would have to be significantly higher to
have any meaningful impact. In terms of affordability, on Monday we released an
analysis of affordability assuming the mortgage rate was
4.75 percent. What did we find? Even at the higher mortgage rate, for most
markets a median income can purchase more than the median priced
house."
"Why is this? The house buying power that borrowers have, even with rates
below five percent, remains historically strong. It would take a significantly
higher mortgage rate to significantly erode the real, house-buying power
adjusted, price of housing. So, what would be the mortgage rate that dampens
demand? Based on our Real Estate Sentiment Index, on a national level, title
agents and real estate professionals said that the mortgage rate would need
to hit 5.4 percent, 1.2 percent above the current rate, before homebuyers
declined to enter the market."
Well, the big news yesterday, as noted above, was the Fed
raising short-term rates. So, what did the bond market do? Prices improved and
long-term rates dropped! Perhaps removing some uncertainty helped, as did
thoughts about the future, as did the fact that perhaps we were
"overdone" on the upside. The Fed set the fed funds range 25bp higher
to 0.75 to 1.00%. Traders immediately looked at the rest of the year, and the
thoughts of fed funds hikes in coming years were unchanged for both this year
and next (3 each in total) with 2019 have one more hike. The 10-year note price
improved .75 and its yield dropped to 2.50%. Agency MBS prices and the 5-year
T-note improved about .5.
This morning we've already seen news from across the
globe: central bank decisions from the Bank of Japan (unchanged), Swiss
National Bank (unchanged), Hong Kong (raised), Peoples Bank of China (raised),
Norges Bank (dovish), and the Bank of England (unchanged). Through the results,
we are reminded that the jobs and inflation picture in various parts of the
world vary.
In this country, we've had the usual Thursday Initial
Jobless Claims (241k), February Housing Starts & Building Permits (+3.0%,
-6.2% respectively), and the Philadelphia Fed Manufacturing Survey (March 32.8,
falling less than expected). With this beehive of activity rates are
slightly higher versus last night: the 10-year is at 2.53% and agency MBS
prices are worse about .125.
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