Letter on CFPB Exams; Good Site for Bank Research; Bank M&A Continues; Purchase Loans Cost More than Refis?!
I am in Kansas today. Before the congratulatory e-mails flood in, I mention this because I flew here. (In an airplane.) Per our very own Transportation Security Administration, TSA checkpoints at US airports collected 4 guns per day in 2012 from passengers boarding airplanes, a total of 1,525 guns seized during the year. And more guns were confiscated at Atlanta's airport than any other airport in the nation. What are those people thinking? I think twice about even wearing a belt.
On the job front, Essent Guaranty continues to grow their mortgage insurance business. They insured over $11 billion of new originations in 2012 and continue to expand their sales and underwriting teams. Essent currently has 40 sales professionals, and is looking for a California-based National Account Manager and talented Account Managers throughout the country. Additionally, Essent is hiring Underwriters in their Irvine, CA; Winston-Salem, NC; and Radnor, PA offices. Interested parties should submit their resumes to: EssentCareers@essent.us.
On the lending side, New Penn Financial is also hiring. New Penn is aggressively looking for Account Executives in the following markets: WI, MN, IL, OH, LA, IN, TX (resumes should be sent to Brad Hlavacek at bhlavacek@newpennfinancial .com), OR, WA, CO, and Northern CA (resumes should be sent to Scot Baker at sbaker@newpennfinancial .com), and Pittsburgh & Philadelphia PA (resumes should be sent to Robert Germano at rgermano@newpennfinancial .com). The company (gonewpenn.com), one of the newest players in the jumbo market, has "become very aggressive in recent months with their product offerings." In addition to the jumbo news; New Penn Financial also has full agency approval with Fannie, Freddie, and Ginnie, and has earned a coveted spot on Inc. 500's fastest growing companies in 2012.
And a clarification is due for yesterday's search by Mortgage Grader (mortgagegrader .com) for retail loan officers. MG is looking for personnel with both a DRE license AND an NMLS license (not "or"); resumes should be sent to Jeff Lazerson at JLazerson@mortgagegrader .com.
I lose track of all the organizations that are out there. And there are plenty! The latest one out there to attract some attention is the Center of Capital Markets Competitiveness, which wrote a letter to the CFPB regarding examination procedures. In a letter sent last week to Director Cordray, the group suggested several steps "based upon the actual experiences of numerous individual businesses" for the CFPB to take "to eliminate inefficiency and unjustified burdens in connection with its supervision and investigatory processes." In the area of investigations, it states that the CFPB's practice is to issue "extremely expansive" requests for information. Noting that it is unaware of another agency that "routinely issues such broad demands," the Chamber urges the CFPB to reconsider its policy and adopt an approach that is consistent with that of the FTC and other federal agencies, and in the area of supervision, suggests six steps the CFPB should take to improve the supervisory process. First, improve training of supervision staff to address a lack of experience with the exam process. The Chamber observes that frequent turnover in staff and insufficient training has resulted in dramatically different competency levels among members of supervision teams and between teams and may be the reason exam teams have little decision-making authority.
Second, eliminate inconsistent approaches to exams, such as some entities receiving multi-year schedules of exam plans or quarterly "closing letters" and others not receiving such schedules or letters. Third, create an end-point to eliminate open-ended exams and improve the closing letter process so that an examined entity has the opportunity to review the letter and identify factual errors before the letter goes to Washington for approval. Fourth, clarify the role of enforcement lawyers in the exam process. The fifth suggestion is to end misuse of the supervision process through demands for huge amounts of data that can require businesses to incur significant costs, are often unfocused, overly inclusive and not coordinated with other regulators, and may be for the purpose of enhancing the CFPB's understanding of the marketplace rather than to perform its exam function. And lastly, end use of the supervisory process in lieu of the notice-and-comment process to create compliance standards. Here is the actual letter.
Just how much HARP business is being originated? "Lots" probably isn't a solid answer. The FHFA released Home Affordable Refinance Program (HARP) data for November 2012 and (drum roll please) the data show that HARP volume was strong in November, increasing 42% month over month (October was down 11%) and hitting 129,746 loans, while non-HARP GSE refis were up a more moderate 27%. The release also included moderate upward historical revisions for Fannie Mae HARP data based on a revised program definition, in line with Freddie Mac's definition. (If you want more numbers, HARP volume as a percentage of total GSE refi increased to 23% from 21% in October, and high LTV loans - to borrowers with LTVs above 125 - increased 43% month over month to 30,670 loans.) Fannie Mae's HARP data now includes second homes and investment property refinances with LTVs over 80, consistent with Freddie Mac.
But where does HARP go from there? Most expect the absolute level of HARP volume to remain elevated over the coming quarters, which will certainly help gain-on-sale margins in 2013, if not longer.
Banks are huge originators of HARP loans. "Rob, where is a good place to begin to do research on a bank?" That is a very broad question, as different groups have different pieces of information about certain banks. But here is a good starting point.
Bank M&A continues, with yesterday word breaking that F.N.B. Corporation (NYSE: FNB) and PVF Capital Corp. (NASDAQ: PVFC) jointly announcing the signing of a definitive merger agreement pursuant to which F.N.B. Corporation will acquire Ohio's PVF Capital the parent of Park View Federal Savings Bank, in an all-stock transaction. The acquisition of PVF Capital Corp. will provide F.N.B. Corporation with an additional $782 million in total assets, $634 million in total deposits, $600 million in gross loans and 16 banking offices in the Greater Cleveland, Ohio area. As a result of the transaction, F.N.B. Corporation will expand its Cleveland presence and have a top fifteen deposit market share in the Cleveland, Ohio metropolitan statistical area.
The STRATMOR group discussed M&A valuations recently. "We see a big impact on M&A valuations based on the level of purchase volume that is generated. But a review of the data may reveal something much more complex. We recently conducted a statistical analysis of data from over 40 lenders who participated in the MBA/Stratmor Peer Group in an effort to figure out the difference in fulfillment costs by loan mix. Senior partner Dr. Matt Lind used a regression analysis to determine that over 84% of the observed difference in fulfillment costs across the 40 lenders in the sample can be explained by loan mix and that the difference in cost was...drum roll please...approximately $950 more to process a purchase loan than a refinance loan. Does this make intuitive sense? First, there is more underwriting and processing for a purchase-it typically requires more credit-related documents (income, assets, etc.) and there is the sales contract to review as well. Title work is more complicated. And then there is the pressure of time. When you get a purchase loan, you have to hit the closing date, usually the end of the month, and that forces you to staff for peak period demand, resulting in lower productivity during the first three weeks of the typical month. When you have a purchase loan in process, you have to keep both the consumer and the Realtor updated on the progress - anyone who has dealt with Realtors knows about the need to be responsive.
"You have to be prepared to handle questions from the closing table and you have to be sure the documents are there on time. That all adds up to real money. And that does not even factor in the sales costs associated with the transaction-anyone who has tried to hire a good purchase LO knows they are more expensive that the more readily available refinance agent. Of course, if you can charge more for a purchase loan than the extra processing cost is worth it. However, we all know that is not the case. In fact, many of our clients have pricing that is LESS for purchase loans, in an effort to maintain relevance to referral sources and thus protect against higher rates and lower volumes in the future. As lenders prepare for 2013, many are considering that increasing purchase volume is the Holy Grail to enable them to continue to maintain strong profits as refinance volumes wane - but watch for tougher loan processing and higher costs. Lenders should take a hard look at your own numbers (costs and revenue) and ensure that you have the processes and pricing in place to originate purchase loans profitably." (For more questions on the study of cost of refinances versus purchases, contact Dr. Matt Lind at matt.lind@stratmorgroup .com.)
Lastly, we had word from Bloomberg yesterday that "OneWest Bank FSB, the lender formed out of the remains of failed IndyMac Bancorp Inc., has held informal sales talks in recent weeks with at least two potential buyers": UnionBanCal Corp. and U.S. Bancorp (which has reportedly pulled back). "Billionaires George Soros and John Paulson formed part of the private-equity group that rescued IndyMac and revived it as OneWest in 2009. OneWest, which has absorbed two other failed banks, had $25.8 billion of assets at Sept. 30 and almost 80 branches, according to the FDIC." It would appear that the "smartest guys in the room" are making some money from their investment. After the FDIC seized IndyMac after a run on the lender in 2008 led to the third-largest bank failure in U.S. history, "OneWest Chairman Steve Mnuchin, a former partner at Goldman Sachs Group Inc., led investors who put up $1.55 billion to kick start OneWest four years ago. In addition to Paulson and Soros, the consortium also included Michael Dell, founder of computer maker Dell Inc., and J. Christopher Flowers, who created private- equity firm J.C. Flowers & Co. The value of Paulson's stake has more than doubled, and the investors recouped some of the investment through a $500 million dividend in the fourth quarter, according to a Paulson letter sent to investors in January and obtained by Bloomberg News. OneWest earned $121 million in the third quarter, compared with a loss of $57 million a year earlier, according to FDIC data. The Paulson letter indicates that OneWest was valued at $2.89 billion as of January, based on the $704 million valuation Duff & Phelps Corp. placed on Paulson's 24.4 percent stake."
Rates have managed to creep up a little recently - I guess we're seeing a little more nervousness about how and when the Fed will dial back its present $85 billion/month purchase program. Later today we'll have the minutes from the last FOMC meeting, which reminds me, the last time a Federal Reserve chairman was outvoted at a Fed meeting was 27 years ago this week (2/24/86). (The recommendation of Fed Chairman Paul Volcker was outvoted at a Federal Open Market Committee (FOMC) meeting regarding his recommended action on short-term interest rates. Ben Bernanke has experienced 38 dissenting votes during his 58 meetings in his 7 years as chairman but has never been outvoted.) The 10-yr has crept up to 2.04% and MBS prices could be as much as .125 worse.
Just got off the phone with a friend who lives in northern Newfoundland.
She said that since early this morning the snow has been falling and is nearly waist high. The temperature is dropping way below zero and the north wind is increasing to near gale force.
Her husband has done nothing but look through the kitchen window and just stare.
She says that if it gets much worse, she may have to let him in.