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Before You Chime in on G-Fee Changes, Know The Implications; More Bank Mergers
In what has become nearly a bi-weekly feature in this commentary, the list of banks merging, dissolving, waxing and waning continues without stopping.
The regulators, and the CFPB, have never said anything about "leveling
the playing field", and it makes sense for banks to save money and join
forces. Is the consumer better off with fewer, but larger, banks around? We'll see!
In Virginia EVB ($1.1B) will acquire Virginia Company Bank ($134mm) for
about $9.6mm. Down in Georgia United Bank ($1.1B) will acquire Monroe
County Bank ($97mm). Five Star Bank ($3.0B, NY) will acquire insurance
agency Scott Danahy Naylon Co. (a full service insurance agency with
6,000 customers in 44 states). First Tennessee Bank will buy 13 branches
in TN from Bank of America for a 3.32% deposit premium, temporarily
capturing $660mm in deposits. BBVA Compass ($75B, AL) has closed 6
branches in TX as it continues to refine its branch network.
Out in the Golden State California United Bank ($1.4B) will acquire 1st
Enterprise Bank ($776mm) picking up 8 branches in the transaction.
Evansville-based Old National Bancorp and Lafayette-based LSB Financial
Corp. announced the execution of a definitive agreement under which Old
National will acquire LSB Financial through a stock and cash merger
adding its 5 branches. In the Lone Star State Independent Bank ($2.4B)
will acquire Houston Community Bank ($323mm) picking up 6 branches in
the deal. And in the Keystone State National Penn Bank ($8.5B) will
acquire 3rd Fed Bank ($849mm) and its 19 branches in the deal.
The fact that the CFPB
"is aggressively going after mortgage, title and real estate companies
that it believes are violating laws prohibiting payments or incentives
for customer referrals" is not news to those in the industry. What many
will find interesting in this story is what the CFPB actually does with the money it collects.
find myself worrying more and more about the younger generation....which I
shouldn't really be doing; I should still be worrying about the older
generation according to the CFPB's recent report Snapshot of Older Consumers and Mortgage Debt. The Bureau writes, "The
CFPB's analysis of Census data shows that the percentage of homeowners'
age 65 and older carrying mortgage debt increased from 22 to 30 percent
(3.8 to 6.1 million) from 2001 to 2011.16 Additional data from the
Federal Reserve shows that consumers over age 75 had the greatest
increase during this period. The proportion of consumers 75 and older
with mortgage debt more than doubled from 8.4 to 21.2 percent." According
to the report, in addition to mortgage debt, the Bureau found that
older Americans are also carrying more credit card and student loan debt
into retirement than they were during the same period. Student loan
debt into retirement? Are people retiring when they hit 32 ½ nowadays?
to popular opinion, Benjamin Lawsky did not crash the MBA conference
last month; he was actually scheduled to speak. Although rumor has it,
he was initially turned away from entering by a guard who claimed he did
not have the appropriate credentials...the guard has since been fired,
but I've been told Credit Suisse Group
has hired the gentleman as their new Vice President of LOL. When Lawsky
finally took the podium, he mainly discussed his concern regarding
conflicts of interest in providing of ancillary services by special
servicers. "Recently...there has been an evolution in the mortgage
servicing industry. Regulators are - appropriately, in the wake of the
financial crisis - putting in place stronger capital requirements for
big banks. In particular, they are giving those banks less credit for
the - often distressed - mortgage-servicing rights on their balance
sheets...rather than building up stronger capital buffers in response,
many large banks are instead offloading those MSRs to nonbank mortgage
servicers - which are often more lightly regulated." I hate it when
regulators are actually correct; "Now, one of the things we're concerned
about as a regulator is whether these MSR sales trigger a race to the
bottom that puts homeowners at risk. Remember, in most cases, the
compensation to be paid for servicing is fixed by the PSA; it cannot be
diminished," Lawsky said. "So the cheaper a servicer can service those
mortgages, the more profit it expects to earn from the fixed servicing
fees, and the more it can offer the banks to buy these MSRs."
Speaking of the MBA, it spread the word yesterday that the "FHFA announced that it is seeking input on the guarantee-fees that Fannie Mae and Freddie Mac charge lenders.
As you may recall, upon taking office Director Watt suspended planned
g-fee changes, pending a comprehensive policy review. This request for
input seeks to ascertain the optimal g-fee policy to balance the need to
protect the taxpayer against the implications for mortgage credit
availability. The request for input, along with specific questions, can
be found here. Responses are required by August 4, 2014. The MBA will be forming a working group
to review and respond to this request. Any member interested in
participating in crafting this response should reply to this e-mail no
later than cob Wednesday, June 11th."
is a good thing to put this gfee thing in perspective. They impact a
lot of things: the price a borrower pays for a loan, the share of
business MI companies receive, the reason why jumbo pricing is better in
many areas than conforming loans, the level of private capital entering
the mortgage market, etc. In fact, it is no mystery why many borrowers
are not refinancing even with low rates: the gfees and other fees
(upfront fees are called Loan Level Price Adjustments - LLPAs - by
Fannie Mae and post-settlement delivery fees by Freddie Mac) serve to
make conforming conventional loans more expensive by 50-75 basis points.
that in mid-December the FHFA, under Ed DeMarco, had announced a 10
basis point across-the-board increase in guarantee fees and an increase
in upfront fees charged to higher risk borrowers. These increases were
put on hold by Mel Watt after he became director of FHFA five months
ago. Industry experts believe that the announcement and commentary from
the FHFA further reinforces views that Mel Watt will take a broader view
of FHFA's role as conservator of the GSEs, which they believe will be
positive for the housing market.
it isn't a matter of everyone writing in saying they want lower g-fees.
The announcement from FHFA yesterday asks for industry input on a
number of key issues including the appropriate return on capital that
should be driving g-fees, is there a level of g-fees that will drive
private capital back into the market, the impact of rising g-fees on
overall mortgage volume, and whether the GSEs should charge higher LLPAs
if it means that these loans move into FHA programs. The FHFA report
suggests that the g-fees being charged by the GSEs are already
reasonable to cover the risk taken by the government, so perhaps further
broad increases are unlikely. And who knows - the possibility exists
for LLPAs to be reduced and potentially offset by slightly higher across
the board g-fees.
On May 27, Fannie Mae announced numerous selling policy updates.
The announcement includes changes to Fannie Mae policies related to
cash-out refinance transactions to provide additional flexibility and
clarity with regard to delayed finance, continuity of obligation, and
multiple finance properties for the same borrower. The announcement also
details several asset-related updates, including, for example, that
Fannie Mae will no longer require documentation for any deposit on a
borrower's recent bank statement that exceeds 25% of the total monthly
qualifying income for the loan. Instead, Fannie Mae is changing the
definition of a large deposit to 50% of the total monthly qualifying
income, and states that when a deposit includes both sourced and
un-sourced portions, only the un-sourced portion must be used when
calculating whether the deposit meets the 50% definition. Fannie Mae
also announced: (i) updates to the definitions for retail, broker, and
correspondent origination types; (ii) clarification of the requirements
for use of a power of attorney; and (iii) revised requirements for
reporting lender financial statements.
Looking at rates, the big news yesterday driving our markets was not anything that happened between our borders. The
European Central Bank (ECB) announced a package of policy changes
intended to stimulate economic growth in the Eurozone and thereby reduce
the probability of a mild deflationary environment taking hold. The
policy moves can be broadly divided into changes in policy rates
(intended to guide short-term interest rates in the Eurozone lower) and
policies that the ECB hopes will jumpstart lending to the private
sector. The ECB cut its deposit rate below zero for the first time and
reduced its benchmark to a record 0.15%.
is interesting about this, of course, is that it the 180 degree
opposite of what is happening here in the United States as our Fed is
winding down its QE program of the monthly asset purchases. (The Bank of
Japan continues with its asset purchase program begun about a year
ago.) Analysts and investors continue to closely monitor the technical
situation of supply and demand: with the Fed tapering and some seasonal
increase in supply, there are increased risks of temporary technical
imbalances, which will pressure spreads. The Fed is buying about $1.6
billion a day of agency product compared to whatever lenders are
today we've had the unemployment data. Yesterday's rally of about .125
in agency product and in the 10-yr (which closed at 2.58%) is exactly
that: yesterday's news. The Bureau of Labor Statistics told us that
nonfarm payrolls were up 217k, spot on with expectations, and the
Unemployment Rate was 6.3%. The labor force participation rate was
unchanged. After the news, in the early going, we're looking at an unchanged market for rates and prices.
a private mortgage insurance company, is looking for an experienced
Account Manager to join its team in the Chicago, IL market.
The individual hired will provide programs to our customers, and
maintain a strong sales relationship while offering problem-solving
services. The ability to work closely with internal and external
customers including National Accounts, Underwriters, and our Regional
Processing Centers is critical. The primary focus of the Account Manager
will be to identify opportunities for MGIC
to enhance its customer relationships using appropriate customer needs
analysis and program execution. The ideal candidate will have a college
degree and more than 3 years of experience in a sales capacity, ideally
in the mortgage lending industry. Excellent communication and
presentation skills a must as the person will represent MGIC at
seminars, local and national conventions. Compensation will include a
base salary plus an incentive program. To apply please visit MGICJobs.
And out in California First Mortgage is expanding its retail operation and is looking for LOs.
"One of the West's longest established (founded in 1975) and
well-positioned independent mortgage lenders is expanding its retail
operations in Central and Northern California. Throughout its many years
of successful operation, FMC has learned that the production of high
quality loans begins with top quality personnel. FMC is therefore proud
to announce the recent addition to its management team of several
highly qualified and respected individuals who are well known throughout
the Central Valley of California. These include Kirk Nimmo, John Lowe
and Craig Chalk. Although FMC has been serving the borrowing public in
Central and Northern California for many years, it looks forward to
greatly enhancing this service with the addition of such accomplished
individuals." Those interested LOs should confidentially contact Jeana
Kobielsky of Synergy Recruiting Solutions at jeana@synergyrecruitingsolutions. com.
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