I have decided that I am ready, mentally and physically, to win $1 billion - and it is out there for the taking. Quicken Loans is offering a $1 billion grand prize for completing the perfect college men's basketball championship bracket in March. In addition to the potential grand prize, Quicken Loans will award $100,000 each to the contest's 20 most accurate 'imperfect' brackets and a guaranteed $1 million to inner-city Detroit and Cleveland non-profit organizations dedicated to improving the education of young Detroit and Cleveland residents. So what if the odds of someone randomly predicting a perfect bracket: 1 in 9,223,372,036,854,775,808 (yes, that's nine quintillion-to-one); if he or she knew basketball the odds improve to 1-in-128 billion. Hey, that is still better than when my Cal MBA buddy Tony Bari told me, "There is no chance that you will pass this stats class." (I managed to.) We can only expect to hear more about the contest, which at this point is limited to the first 10 million entrants, one per household. (And don't hector me with, "Is a lender encouraging gambling?" questions - write to Quicken or Mr. Buffett. Yes, Warren is insuring the event.)

Forget the supposed tidal wave of property listings from the shadow inventory (which disappeared due to modifications, cash buyers, appreciation, and government programs), we're now experiencing a tidal wave of servicing hitting the market from companies needing revenue. MountainView Servicing Group, LLC ("MountainView"), as exclusive sale advisor, is pleased to enclose for your review and consideration this $150 million FNMA non-recourse servicing portfolio that is being made available to the national market. It is also the exclusive sale advisor for a Fannie Mae MSR portfolio with total unpaid principal balance of $2.4 billion. ("Quality features of this offering include 100 percent first-lien and 99.7 percent fixed-rate product -86 percent 30-year fixed-rate loans, a weighted average original FICO of 765, a weighted average original LTV of 76 percent, a weighted average interest rate of 3.69 percent, and no delinquencies.)

Want a construction loan investor? No sweat. Non-QM? Piece of cake. Now that QM is a reality, many lenders are evaluating the risks of doing Non-QM and some have already decided they want that business while others are still on the fence. How do you find Non-QM lenders? Mortgage Elements has added a new category to its database for Non-QM lenders, so if you are looking for Non-QM Lenders (or any other loan program like foreign national or super jumbo), go to www.MortgageElements.com.  It's very easy to use and covers all the product types - 3 clicks and you can view a list of lenders doing that program in your state. It's free for all mortgage professionals to use and free for wholesale and correspondent lenders to be listed. Wholesale and correspondent lenders can e-mail MPaoletti@MortgageElements.com to be added to the database.

(Occasionally folks ask about 2nd/equity lines. I am not a product specialist - too hard to track scores of lenders in 50 states - but there are currently only a handful of lenders doing 2nd/Equity Lines in the TPO channel and many of them will only do a 2nd behind their own first. Ten years ago, of course, piggyback loans were all the rage with borrowers doing 80/10/10 or 80/15/5 to avoid obtaining mortgage insurance. When those loans went bad, the second lenders took big hits - and will continue to do so. LOs have been watching for more 2nd lenders to re-enter the market but one suspects, after the big loses they took and will take, they may not be able to charge a high enough rate to justify the risk.)

One way to slow down an overheating lending market is to raise the amount of capital banks have to hold. Switzerland knows this, and doubled the amount of mortgage risk buffer. And while we're bopping around the world, the Kenyan home market is out of reach of most wannabe owners - due, in part, to 18% home loan interest rates.

Is business really moving away from larger banks and lenders to smaller lenders? That is obviously a question that more companies would like to hear "yes" than would want to hear "no." Here is one reporter's take on it: http://thenationalrealestatepost.com/big-banks-losing-out-to-smaller-banks/. Although smaller lenders tend to have a better grasp of the community, many analysts are skeptical. Forget HR, accounting, secondary, shipping, the advertising budget, whatever. Who is better able to afford a staff of 5 compliance people at, let's say, $25,000 a month: a company doing $25 million a month or a company doing $100 million a month? A simplified example, but plenty of companies who were doing $50 million a month a year ago who are now doing $25 million a month are running numbers.

What does industry vet Al Crisanty think of the broker biz? Here you go. (Hint: brokers are relevant.)

Joel Kan, Director of Economic Forecasting for the MBA, recently sent me the MBA's Builder Applications for New Home Purchases survey for December 2013. The MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and city levels. While the survey shows a decrease of 11% to mortgage applications for new home purchases, this number does not include any adjustment for typical seasonal patterns. Now, some fun-with-numbers (all furnished by the MBA). Conventional loans composed 63% of loan applications, FHA loans composed 19%, RHS/USDA loans composed 1% and VA loans composed 17%. The average loan size of new homes increased from $295,523 in November to $300,444 in December. MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 402,000 in December 2013.

(Read More: MBA Purchase Application Data Suggests Lower New Home Sales)

Speaking of the MBA, Bill Killmer (SVP, Legislative and Political Affairs) and Steve O'Connor (SVP, Public Policy and Industry Relations) sent out the "MBA Advocacy Update" noting that, "The Senate on Thursday passed the Homeowner Flood Insurance Affordability Act, which would delay for up to four years significant premium increases that are being phased in under new government flood maps. The bill included an MBA-supported amendment to clarify National Flood Insurance Program escrow requirements - a major area of concern for lenders. During consideration of the bill, MBA activated its Mortgage Action Alliance to voice industry opposition to an amendment that would have placed unnecessary limitations on force-placed insurance and significant new burdens on the process for tracking insurance. The overall bill, which passed 67-32, now heads to the House where its fate is far from certain."

(The amendment, sponsored by Senator Kay Hagan (D-NC), clarifies that only first liens originated after the statute's effective date must have escrow requirements for flood insurance. Additionally, as a result of strong MBA advocacy, an amendment by Senator Jeff Merkley (D-OR) was successfully defeated. This amendment, which was withdrawn, would have placed limitations on force-placed insurance and prohibited insurers from providing free tracking and administration services to servicers. Attention now turns to the House, where MBA has been laying the groundwork for consideration of the escrow provisions.)

Although the House still has to weigh in on it, NAR's president Steve Brown liked it. "The Homeowner Flood Insurance Affordability Act, S. 1926, passed by the Senate...is the time-out Realtors first advocated when dramatic flood insurance premium increases went into effect on October 1, 2013. 'This legislation will help homeowners nationwide who are experiencing financial hardship as a result of extreme flood insurance rates that are the unintended consequence of the Biggert-Waters reforms to the National Flood Insurance Program. Congress needs to hit pause on the unforeseen price increases and negative market effects of the reforms while the Federal Emergency Management Agency can complete an affordability study and research the true impact of the law. NAR data show that through January 2014, four months into the law's implementation, more than 40,000 home sales were estimated to be either delayed or canceled because of increases and confusion over flood insurance rates.'"

Also last week, House and Senate negotiators agreed to a Farm Bill that contained an MBA-supported provision to ensure communities are not kicked out of the U.S. Department of Agriculture's rural housing programs. The House passed the conference report on Wednesday, and the Senate is expected to follow suit tomorrow. We'll wait for the vote.

For company-specific news, Real Estate Mortgage Network, Inc. (REMN) changed its name to HomeBridge Financial Services, Inc. REMN, now HomeBridge, is one of the largest privately held mortgage lenders in the country. "The Company's new name reflects its focus on providing a bridge to an easier home mortgage process for its retail customers, wholesale brokers and correspondent sellers. HomeBridge has come a long way since its founding in 1989. HomeBridge currently comprises nearly 1,300 associates, more than 70 retail branches from coast to coast, two separate wholesale operations and a growing correspondent division. You may remember that in the fall of 2012, the Company launched its correspondent division, HomeBridge Funding, and a second wholesale division, HomeBridge Wholesale. These two divisions will keep their names while REMN Wholesale, the Company's original wholesale division, will retain its name and continue to operate as a separate and distinct business unit." You can find more information on each division online at www.HomeBridgeInc.com.

And sorry for the delay on this one, but Prospect Mortgage acquired former Impac branches in four Western states. The acquisition should add approximately 40 LOs to Prospect's origination platform across 12 branches in California, Washington, Oregon and Idaho. Included in the acquisition are portions of Impac Mortgage's operations team, including the hiring of approximately 15 operations personnel in those states. "We are seeing an increase in acquisition opportunities from independent mortgage bankers and brokers as we head into 2014." (Prospect Mortgage is backed by Sterling Partners, a private equity firm with approximately $5 billion of assets under management and offices in Chicago, Baltimore, and Miami.)

Rates are actually doing well - in fact MBS prices rallied during January. If it weren't for the cost of actually doing a loan increasing, the rally might be passed through to borrowers - I am hearing of margins actually increasing. That aside, the economic news from last week was useful: real GDP posted its second consecutive quarterly above-trend gain in the fourth quarter, rising at a 3.2 annual percent pace, as expected, and the Fed announced an additional reduction in the pace of its asset purchase program. (Softer data in recent months, however, bring into question whether the Fed will announce another round of tapering at the March meeting.)

This week is pretty light for scheduled news in the U.S. - except for Friday. Today is the ISM Manufacturing Composite Index and Construction Spending. Wednesday is the MBA application index & ADP employment numbers, along with ISM Services. Thursday has weekly Initial Jobless Claims and International Trade. Friday we'll see the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. But overseas' news may move our markets more than in the recent past - think of China's manufacturing numbers and currency problems with Europe's emerging markets. For numbers, the 10-yr closed Friday at 2.67% and this morning its yield, and MBS prices, is nearly unchanged.

(Okay, think back to high school chemistry for this one.)


A chemistry teacher is recruited as a radio operator in the First World War.


He soon becomes familiar with the military habit of abbreviating everything. As his unit comes under sustained attack, he is asked to urgently inform his HQ.


"NaCl over NaOH! NaCl over NaOH!" he says.


"NaCl over NaOH?" shouts his officer. "What do you mean?"


"The base is under a salt!" came the reply.