PHH & Radian Stock Buybacks; Ocwen Settlement; Redwood Shutters Portion of Conventional Conforming Biz
Underwriters will want to know that IBISWorld has identified the top ten sectors with expected rapid growth price in 2016.
Legal services are expected to see an increase next year, as roughly 66
percent of revenue generated by industries in legal services comes from
business and corporate clients. Cybercrime and fraud will tick prices
up 3.3 percent and employment law services should rise 3.2 percent in
2016. Turning towards the construction sector, the cost of plastering
and drywall services should rise 7.7 percent next year, along with
painting services and landscape architecture and design services at a
5.9 percent and 3.4 percent increase, respectively.
PHH announced the completion of its $100 million buyback program,
announced on Nov. 4, 2015. The company repurchased 6.35 million shares
at an average price of $15.75. $150 million remains on the company's
$250 million repurchase authorization, which will be outstanding until
year-end 2016. The company noted that the decision on whether to
repurchase additional shares will be based on regulatory developments,
the company's capital structure, liquidity position, and other potential
uses of cash including investments in growth. The pace of the buyback
was quicker than we had modeled. However, because of the weak results we
forecast in 4Q15 and in 1H16, the quicker pace has a limited effect on
our EPS estimates but is more accretive to book value than our forecast
because of the repurchase price.
Ocwen agreed to pay a fine for $2 million
settling yet another legal issue. "The U.S. Securities and Exchange
Commission said Ocwen misstated its profits in parts of 2013 and 2014 by
using asset values provided by a Cayman Islands firm that former
Chairman Erbey also ran, rather than an independent company, as it had
stated." A note from the company stated, "The terms include that Ocwen,
without admitting or denying liability, will pay a $2.0 million civil
money penalty and consent to the entry of an administrative order. As
previously disclosed in the Company's SEC 10-Q filing in October 2015,
Ocwen has reserved funds for payment of this settlement...'We are pleased
with the resolution of this U.S. Securities and Exchange Commission's
(SEC) investigation. As previously disclosed in our October 2015 SEC
10-Q filing, funds have already been reserved to address this
settlement. Ocwen remains committed to full compliance with all legal
and regulatory requirements and will continue to fully cooperate with
regulators on any matter brought to its attention.'"
Recall that the Federal Housing Finance Agency (FHFA) issued a final rule
revising its regulations governing Federal Home Loan Bank Membership.
This final rule adopts several provisions including, but not limited to
preventing the circumvention of the statute's membership restrictions by
ineligible entities by defining the term "insurance company" to exclude
captive insurers. I mention this because the residential lending
business is very aware of these companies and any news that directly
impacts residential Real Estate Investment Trusts.
the start of the year REIT stocks are down (aren't all stocks down due
to global worries about dragging economies?): Invesco -11%, Annaly -6%,
Two Harbors -20%, for example. In fact lots of mortgage-related stocks
are down since January 1, bucking the thinking that another refi boom
will help bottom lines, and hopefully no one out there has their entire
401(k) in Nationstar or Stonegate stock.
comment includes Redwood Trust. This year, which is less than three
weeks old, has seen RWT -20%, down over 6% yesterday alone. Redwood plans to restructure its conforming loan operations by discontinuing the acquisition and aggregation of conforming loans for resale to Fannie Mae and Freddie Mac,
and instead "focus on direct conforming-related investments in mortgage
servicing rights and risk-sharing transactions" while maintaining its
approvals with the agencies. Redwood also plans to implement a workforce
reduction, which primarily impacts employees engaged in and supporting
the Company's residential mortgage loan business. The reduction
represents approximately 15% of the company's fixed compensation expense
at December 31, 2015 and a headcount reduction of 25%.
conforming business activities utilize less than 5% of the Company's
capital, while its investment portfolio, which utilizes 85% of the
Company's capital base, continues to exhibit strong credit performance
and remains a steady and growing source of income." "Our conforming loan
purchase and sale operations generated a pre-tax loss of $10 to $11
million in 2015 or a loss of $7 to $8 million on an after-tax basis
based on our preliminary full-year 2015 results. This included interest
and fees of approximately $12 million associated with $5.2 billion of
loan purchases, and operating expenses of approximately $22 million,"
said Christopher Abate, Chief Financial Officer.
Redwood announced that it will restructure its operations by
discontinuing the acquisition of conforming loans for resale to Fannie
Mae and Freddie Mac. This business reduced EPS by $0.10 a share in 2015.
The restructuring will also free up $45 million of capital. The company
noted that it will focus on direct conforming-related investments in
mortgage servicing rights and risk-sharing transactions. RWT's
announcement is not surprising given the competitive correspondent
lending market. But it remains to be seen how the company will now participate in GSE credit-risk-sharing transactions.
MI companies are certainly interested in risk sharing developments, so let's see what they've been up to lately.
MGIC has published its operating statistics for December.
New notices dropped 10.5 percent YoY but increased 19.9 percent MoM and
cures of 5,258 were down 13.7 percent MoM. The cure ratio did decline
to 79.7 percent from 110.7 percent in November. The ending delinquent
inventory of 62,633 was up 0.3 percent MoM from 62,445 compared to a 2.7
percent decline in November. Ending delinquent inventory was down 21.6
percent YoY and paid claims increased 0.9 percent MoM versus a drop in
November of 11.9 percent. Net rescissions and denials rose to 81 from 63
the month prior and new insurance written equaled $3.3 billion in
December, up from $3 billion in November.
Radian announced a $100 million repurchase program.
The authorization is effective immediately, may be transacted through a
10b5-1 plan, and will expire on December 31, 2016. The repurchase
program is about 4% of the market cap. As of 3Q15, RDN had $710 million
of holding company liquidity. In December, the company contributed $375
million to Radian Guaranty and an affiliate to comply with PMIERs,
bringing holding company liquidity down to $335 million. The company
also has roughly $250 million in debt maturities coming due in 2H17.
Arch MI has published its winter 2016 Housing and Mortgage Market Review,
reporting that the likelihood of home prices to decline nationwide over
the next two years is 6 percent although oil & natural gas
producing states are at a higher risk due to declines in energy prices.
This includes states like North Dakota, Wyoming, West Virginia, Texas
and Alaska. North Dakota had the highest Arch MI Risk Index due to the
2.9 percent decline in employment over the past year and home prices are
estimated to be overvalued by 20 percent. Texas has the top five
riskiest MSA's with a 26-36 percent chance of house prices declines in
Its MBS business wasn't mentioned, but Barclays will cut about 1,000 jobs in investment banking worldwide
and close its cash equities business in Asia as new Chief Executive Jes
Staley wields the axe in a bid to reduce costs and boost returns.
Keeping with related news U.S. Treasuries, and other fixed-income securities like MBS, had another good day Wednesday. Not that anyone cares about our economic data anymore, but we continue to receive news that our economy is NOT zooming along:
consumer price indices for December missed expectations while the
housing starts/building permits data were mixed. Housing starts were
less than expected but building permits were higher - although quickly
explained away by noting the entire gain was due to a 62% jump in the
Northeast and that was likely due to a change in tax or building codes
as the East Coast girds its collective loins for "stormzilla," Initial
Jobless Claims came in +10k to 293k, the highest in quite some time,
versus the prior week. And the January Philadelphia Fed was "-3.5". We
closed our benchmark 10-year Wednesday at 1.98% and this morning it is hovering around that level with agency MBS prices unchanged.
Jobs and Announcements
Speaking of growth, Arch Mortgage Insurance is actively seeking a passionate and enthusiastic sales representative for the South Texas territory
to join its dynamic sales team! "If you are an experienced,
results-driven sales professional in the mortgage industry with strong
contacts in Texas and a proven record of developing and implementing
sales strategies to expand and sell new business, apply today at firstname.lastname@example.org.
Arch Mortgage Insurance is the U.S. based mortgage insurance division
of Arch Capital Group Ltd., a leading insurance and reinsurance
specialty lines underwriting company operating through its subsidiaries
located worldwide. We are committed to our employees and offer
competitive compensation, valuable benefits and an energized culture of
AmeriSave Mortgage Corporation
is expanding its Traditional Retail and Consumer Direct channels in the
first quarter of 2016 and has an immediate need for Retail Loan
Officers and Producing Sales Managers in Georgia, North Carolina, Florida, California and Michigan and Call Center Loan Originators in
Atlanta, Charlotte, Detroit and Louisville. For retail LOs "we foster a
culture that promotes teamwork with access to Senior Leadership and
Underwriting teams, have an aggressive non-bank lender compensation plan
with a guaranteed monthly forgivable draw and purchase leads provided
daily, a dedicated full service Marketing Department with company
provided personal website, and in-house Processing, Underwriting, and
Closing. Call Center LOs are "invited to leverage our progressive
technology platform and lead generation machine. AmeriSave is willing
to provide training and licensure for candidates in Call Center
positions with Mortgage Sales Experience." NMLS ID #1168; applicants
should contact Jason Hultgren, SVP.
And do you want to work for a company that is not only expanding but is TRID ready? Assurance Financial, Baton Rouge, Louisiana, is
hiring branch managers and MLOs in Colorado, Arizona, New Mexico,
Louisiana, Texas, Mississippi, Alabama, Tennessee, Florida, Georgia,
Arkansas, North Carolina and South Carolina. The company has a
15-year history of closing loans on time and is not letting TRID
interrupt that record. Paul Peters, CMB, Sales Recruiting Manager,
reports that Assurance has closed several hundred loans under TRID
without any significant delays. For more information, contact Paul Peters (225-239-7948) or visit www.LendTheWay. com.
In related news Hammerhouse, LLC has launched its 6th Annual Survey for Mortgage Leaders and Producers. The
32-question survey focuses on the "Six Core Components"- Business,
Leadership, Culture, Operations, Technology, and Geography. "With our
6th survey, we will continue to analyze year over year trends relative
to the concerns, needs and wants of the life blood of this industry:
YOU, the Leaders and Producers. Additionally, we will home in on what
creates alignment and the right Model Match for long term performance
and retention. The results will be posted on March 31st. Participation
is free, takes about 3 minutes, and respondents will be entered in the
raffle for a free iPad. Click here to take the survey.
In personnel changes, congratulations are due to Bill Beckmann, President and Chief Executive Officer of MERSCORP Holdings, Inc.
and Mortgage Electronic Registration Systems, Inc., on his appointment
by the MBA to the leadership role of Chairman of the Mortgage Industry
Standards Maintenance Organization (MISMO).
And congrats to Bela Donine who Impac Mortgage Corp.
announced is rejoining Impac as Executive Director of Channel
Development for the Company's AltQM product line and will report to Bill
Ashmore, president. Bela will be responsible for the positioning and
growth of the AltQM programs in the mortgage marketplace, the refinement
of the Company's AltQM strategies and goals, cultivate existing key
customer relationships, identify new business opportunities, oversee the
development of AltQM training curriculum, content and approach and work
with various Impac Committees specific to AltQM.