June 19: Cap. Mkts. Exec Looking, Upcoming events incl. M&A discussion & Jobs & Housing Driving Rates

Winston Churchill said that, "If the present tries to sit in judgement on the past, it will lose the future." No argument there in mortgage banking. But veering away from lending for a moment, who could predict that nearly 40 years ago the enduring popularity of "Animal House"? I mention this because we lost Flounder over the weekend, at only 63 years old.

  Upcoming events

 Finastra, formerly D+H, will be hosting a joint, complimentary webinar on June 29th at 1PM CT with Gartner's Craig Focardi on Emerging Technology Trends in Mortgage Lending and Finastra's Head of Retail Lending Product Management, Steve Hoke. "This one hour live event will help you to learn about the emerging trends in the mortgage market around cloud systems, paperless workflows, RegTech and multi-channel mortgage fulfillment including mobile."

 Zelman & Associates is offering up a short conference call for its institutional investor clients on Monday to discuss key takeaways from our May homebuilding survey. If you're interested in listening to the Homebuilding Survey Conference Call: Replay Number: 800-332-6854, Replay Passcode: 989455, link to survey: Homebuilding Survey: Order Growth Remains Solid While Price Accelerates Further.

 OpenClose, a multi-channel loan origination system (LOS) provider, and QuestSoft, a provider of automated mortgage compliance software, will host a joint webinar covering the new CFPB HMDA regulations, how they will impact organizations, and outline specific plans to make compliance with the new HMDA rules the most efficient and time-saving process in the mortgage industry. The webinar will be held on June 21, 2017 from 1:00 p.m. - 2:15 p.m. EDT.

 Throughout the month of June, Essent will be releasing valuable insights on Millennial Homebuyers. Visit the new page here, to view the Infographics and Fact Sheets, as well as sign up to receive the complete study at the end of the month.

 FAMC published its June Wholesale Monthly Customer Training Calendar. This month's calendar offers a variety of training opportunities such as "Mortgage Fraud", "LinkedIn for Beginners", "Self-Employed Borrowers", "How to Review an Appraisal", and "HomeReady is a Home Run".

 Register early for MMBBA's September 14^th Crab Feast Social and save money.

 With the successful implementation of the Loan Review System (LRS) on May 15, 2017, FHA approved lenders are now using the system for most Title II Single Family quality control functions. As part of its continuing commitment to ensure a successful transition, FHA is hosting a live webinar on Wednesday, June 28, 2017, to describe best practices and address common questions that lenders have about LRS. You must register to attend this free, online webinar. Attendees will receive the link to access the webinar and other details with their registration confirmation.

Will the pace of M&A accelerate later this year or perhaps in 2018? And how can you position your company to take advantage of whatever may ensure? Join the String Opportunity-2017 Webinar featuring Jeff Babcock & Jim Cameron of the STRATMOR Group for a presentation on "M&A Market Conditions - Opportunities for Midsize Independent Lenders". You will discover answers to those questions plus more during STRATMOR's June 29^th webinar.  

 Sign up for the June 21st Silicon Valley CAMP 2017 Lender EXPO. Come hear me present the latest news in the mortgage economy, and then "hear how three Top Producers created, built and sustained remarkable mortgage businesses in different ways - a distinguished panel moderated by SV CAMP President Richard Wang." LUNCH is included, and admission is FREE to members but ONLY if you pre-register.

 Capital markets

 Jobs and housing are the lynchpins of the U.S. economy. A hot employment or housing market can push rates higher, and vice versa. Late last week we had some disappointing housing data that came in much worse than expected with a -4.9% decline in permits for May compared to forecasts of an increase.  Housing starts were off -5.5% for the month compared to expectations of a +4.1% increase. There were also prior month negative revisions for April.  Multifamily starts which tend to be volatile were off -9.7% but single family starts also dropped with a decline of -3.9%.  The permit data included a -1.9% decline in single family month over month data.  Regionally the south and the Midwest had the largest drops in permits. 

 Going back even farther, if one looks at the May jobs report, it showed that the labor market has lost some steam. The headline payroll gain surprised to the downside and came on top of sizable downward revisions to the prior two months. Notably, the three-month moving average gain has steadily declined from about 200,000 in February to 121,000 in May. The drop in the unemployment rate to the lowest level in 16 years was because of a large decrease in the labor force that outpaced a decline in household employment. Certainly uncertainty looms large for both the fiscal and monetary policy outlooks over the next year.

 In the past week US job openings reached an all-time high of over 6 million, a promising development as the labor market continues to create jobs. Hiring, however, dipped in the past month, and reveals structural challenges for the US economy as the new job opportunities may be mismatched with the skills job-seeking workers can provide. Though the non-manufacturing index dipped slightly in May, surveys suggested continued expansion in the service sector; economic expansion this year will likely exceed that of 2016. There have been no notable changes in the CPI or retail sales in the states, and though housing starts recently declined they are expected to rise to an annualized rate of 1.207 million.

 And a glance overseas indicates that economic expansion in the Eurozone is expected to continue sluggishly through recent political uncertainty settling in the UK, and the ECB is not expected to raise policy rates anytime soon. Elsewhere, Chinese industrial production fell shy of expectations and Australia's labor market added a notable 37,400 jobs.

Investors are certainly thinking about these economic trends. Friday U.S. Treasuries, and MBS prices, improved slightly as both the Housing Starts and Michigan Sentiment reports missed economists' expectations. The Atlanta Fed reduced its forecast for Q2 residential investment growth to 0.4% from 1.8% on the former report. We also heard the first public remarks from FOMC participants since Wednesday's rate decision today and Dallas Fed President Robert Kaplan said that the Fed must be very cautious in raising rates further. And Minneapolis Fed President Neal Kashkari believes that the Fed should wait for the current lull in inflation's upward path to end before hiking rates again. And that there are others on the Committee who are probably agree.

 Investors in fixed-income securities, like MBS, have other options as well. Mortgages have modestly outperformed Treasuries since the beginning of the year, thanks largely to "carry." A carry trade is a strategy in which an investor borrows money at a low interest rate to invest in an asset that is likely to provide a higher return. The lack of rate volatility or spread volatility has nudged many investors, especially money managers, into carry trades in order to generate market, or better, returns. The Fed announced a tentative plan for winding down buying MBS ("tapering"): with the Fed releasing their plan for balance sheet normalization and hinting at a September announcement, things change. As a result, investors have been reluctant to be overweight MBS, to the benefit of corporates.

 Over the weekend we had another election for the press to hash over - this time in France. Macron's party won a commanding majority in parliament following second round elections on Sunday. His Republic on the Move (LREM) party controls 350 seats (out of 577) in the lower house (although turnout hit a record low).

 There is no scheduled news here in the U.S. of much consequence today or tomorrow. Wednesday we'll see the MBA's application numbers for last week as well as May Existing Home Sales. Thursday things heat up a little with June Philadelphia Fed, May Import Prices ex-oil and Export Prices ex-ag., Initial Jobless Claims, and the FHFA Housing Price Index. Friday is May's New Home Sales and a bevy of Fed speakers. To start the week, we find the 10-year's yield, which ended last week at 2.16%, unchanged, and agency MBS prices a shade better than Friday night.