Every lender should know a little about demographics. The Millennials receive the publicity, but the population aged 65 and older is expected to grow by 66 percent through 2035, an increase of more than 31.4 million. Given that the entire adult population is projected to grow by 49 million during this twenty-year period, the disproportionate rise in the cohort aged 65 and older will shift that group's share of the population from 15 percent to 21 percent.

The Servicing Markets

The servicing market continues to be the subject of conversation. With $1.6 trillion (yes, with a "t") of servicing Wells Fargo is still the alpha gorilla. But non-banks such as Freedom Financial (with roughly $100 billion in servicing) continue to gain ground, and there are plenty of companies servicing a billion or less who prefer it on their balance sheet. In general non-depository banks work hard in developing customer loyalty but typically don't have other services to sell customers such as car loans, personal loans, checking accounts, and the like.

In terms of value, it hasn't changed much for current note rates: give or take, it seems to be clustered around 4:1 (meaning current agency servicing is worth about a point). What buyers will pay, however, for something worth one point fluctuates between .75 and 1.25 depending on the state mix, age, delinquency, borrower characteristics, etc. And buyers continue to look at the operational risk of servicing a portfolio of loans.

What has garnered a fair amount of attention is the lukewarm market for Ginnie Mae servicing in recent months. Some servicing advisors tell clients to hold onto it if they can. Per Inside Mortgage Trends, Ginnie Mae "flow" transfers (a measurement of sale activity) fell to $8.03 billion in the fourth quarter of 2016, the lowest quarterly reading of the year. Bulk activity was healthier at $30.1 billion in 4Q16, but some of that is attributable to one seller offloading a large portfolio. The quarter prior just $8.9 billion in Ginnie bulk rights changed hands.

A while back, although still very relevant, Fitch predicted that origination activity will fuel nonbank servicing growth. While nonbank servicers are expected to continue to gain greater market share in 2017, much of that growth will come from their own loan origination activity rather than mortgage servicing rights purchases and subservicing. Nonbank servicers have grown their market share from 4% to 32% between 2008 and 2015 through MSR and subservicing deals.

myCUmortgage announced that it has launched its new mortgage servicing operation that will re-design the options available to credit unions for servicing. myCUmortgage is a leading Credit Union Service Organization (CUSO), wholly-owned by Wright-Patt Credit Union. "By building a mortgage servicing operation, myCUmortgage can now use its member-centric approach to help credit unions service their members' mortgage needs. Some benefits include a cooperative pricing model where servicing costs for all client credit unions are lowered as myCUmortgage volume rises. Self-service tools to assist members at the point of member contact, including the ability to accept payments in the branch, regardless of whether the loan is a credit union portfolio or has been sold to an investor. Access to a series of reports and dashboard tools to better manage their mortgage programs."

Let's see what the servicing brokers have been up to in recent months.

MountainView Servicing Group recently had three MSR packages out for bid. The first a $1.12 Billion FNMA/FHLMC non-recourse servicing portfolio. The package was a 100% fixed rate 1^st lien product package, with a 762 WaFICO, 70% WaLTV, 3.36 WAC, low delinquencies, average loan size of $260k, with top states: California (12.0 percent), South Carolina (7.4 percent), Florida (6.3 percent), and North Carolina (5.7 percent). The second was a $491 million FHLMC/FNMA non-recourse servicing portfolio which was a 99.9% fixed rate, 100% 1^st lien product, with a 4.38 WAC, 726 WaFICO, 82% WaLTV, low delinquencies, average loan size of $158k, with top states: Texas (13.9 percent), California (7.7 percent), New Jersey (7.4 percent), and Oregon (5.7 percent).

Finally, the third package was a $920M FNMA/FHLMC, 93% Fixed Rate, 100% 1^st lien product, with 753 WaFICO, 72% WaLTV, 3.82 WAC, no delinquencies, average loan size of $200k, with top states: California (22.9 percent), Texas (10.3 percent), Pennsylvania (5.9 percent), and Illinois (4.5 percent). Incenter Mortgage Advisors offered a $1.2 Billion Fannie Mae/Freddie Mac Bulk MSR portfolio. The 4,872-file package originated from an independent mortgage banker with strong net worth. The pool has 8 mos. of seasoning, with a 3.857% WAC, 737 WaFICO, 70% WaLTV, a $241k average loan balance, with top states: California (52%), Texas (8%), Florida (5%) and Michigan (4%).

Phoenix Capital's Project NEMO was a $478M Fannie Mae and Freddie Mac bulk MSR package. The portfolio was 73% FNMA, 27% FHLMC 91% Fixed 30, 8% Fixed 15, 1% ARM, 4.279% (F30) Note Rate; 3.527% (F15) Note Rate; 3.522% (ARM) Note Rate 0.251% wAvg Net Service Fee Avg Bal $262K Geography: 88% CA, 3% FL, 1% AZ, 726 WaFICO, 74% WaLTV, 80% Single Family/PUD Properties, 84% O/O, 39% Purchase Originations 100% Wholesale Originations. Prestwick Mortgage Group was the exclusive broker for a bank offering a $57 Million Pennsylvania FHLMC ARC package. The total portfolio had a 4.23 WAC, $100,776 average unpaid principal balance, 0.2500% weighted average net service fee, all loans except for one in Pennsylvania, 1.426% delinquency ratio - all 30-day delinquents - with no foreclosures, 763 WaFICO, and a 63% WaLTV.

Capital Markets

Secondary marketing staffs continue to try to eke out every basis point in execution. But there are a few global trends that should help pricing to borrowers, since demand in the secondary markets are a significant part of interest rates. These have been going on for quite some time, and will continue through 2017 and beyond. For example, here's an article titled, "Alignment, Uncertainty Challenge GSE Single Security Initiative."

And we have Fannie Mae and Freddie Mac, backed by the tax payer due to being in conservatorship, continuing to transfer credit risk away from the public and to investors willing to pay for it. Faith Schwartz's third instalment in her monthly CRT series is titled, "Credit Risk Transfer in a New World - The Waterfall of Risk Falls Squarely on Private Capital."

In terms of rates themselves, I noticed several intra-day price changes for the worse yesterday as Treasury yields remain at or near 52-week highs. Investors seem to be downplaying cheaper oil's potential dampening effect on inflation and instead focusing on a robust U.S. labor market that might cause the Fed to hike four times this year - starting this week. For example, yesterday we learned that the Conference Board's U.S. Employment Trends Index rose to 131.39 in February from 129.91 in January - the highest in 16 years.

If you like numbers, Monday the 10-year note worsened nearly .250 to yield 2.61% and 5-year notes worsened about .125. But agency MBS prices sold off nearly .250, mimicking the 10-year for a change.

This morning we've seen the NFIB Small Business Optimism Index remaining near its 12-year high. Not that it will influence the Fed this week, but we've also had our read on inflation with the February Producer Price Index (+.3%, strong; +2.2% year-over-year). We're starting the day with Stella in the Northeast and with the 10-year at 2.61%; agency MBS prices are little changed from last night.

Jobs and Announcements

Orange Coast Title Company has an opportunity for a national operations executive in its Pittsburgh location. As the National Operations Manager for Orange County Title (one of the largest independently owned title insurance companies), you will be responsible for all aspects of operational fulfillment for our title and settlement site including profit and loss, cost containment, productivity standards, compliance, fraud controls, underwriter/state audits, in addition to growth trajectory with volume forecasts and capacity planning. You will oversee all staff, accounting and human resources activities while developing and implementing policies, procedures and workflows to achieve high levels of productivity and efficiency. The ideal candidate will have a broad knowledge of the loan origination and servicing space and experience in building/maintaining client relationships in the title and settlement industry, be self-motivated for this fast-paced, competitive environment, and technology savvy. Travel required. Position reports to division's SVP/General Manager in Southern California. Resumes should be sent to Melissa Cadena.

Offering retail, wholesale, and correspondent, "Why join the Mortgage Solutions Financial family? We are privately held. We are big enough to compete with the big boys but will always keep our soul as we grow. We have limited organizational layers: MSF has exactly 2 people between you and our CPO, Robert Clennan. Our organizational structure allows us to be responsive and accountable to deliver on promises we make. Our TPO senior leadership team has over 65 years' of TPO experience to successfully navigate the current 'Survival of the Fittest' market. And we believe in a 'Mission of Lifetime Employment': our compensation package and benefits are second to none, full medical, dental, vision, and even a 401k match - the things you need for a successful CAREER! If you believe that who you achieve success with, is just as important as what you achieve, the Mortgage Solutions Financial family is the place for you. Send your resume today to Steve Chavira or call (719) 447-0325."

Looking for some good news? This is from Ralph DellaCamera, Chairman of Stamford, CT and San Diego, CA-based mortgage holding company National Asset Direct and its iServe Subsidiaries. Checkout this timely and informative video entitled "Why We're Bullish on the Mortgage Market". In it, Ralph explains, with U.S Census industry data and full visual support, why he believes the best days are ahead for the mortgage industry. In fact, to support this position, iServe is actively recruiting LOs to staff their current offices across America, as well as open new ones in selected markets. Interested LOs can have a confidential conversation with National Recruiter Rick Trew at 615.306.0585. Again, be sure to view this short and upbeat video: "Why We're Bullish on the Mortgage Market"

In product developments, "for the past 5 years Mortech has been delivering 'best in class' mortgage data APIs, and has recently started expanding their mortgage data API offerings. Using these APIs, Lenders are now able to integrate their Buy Side/Sell Side rate information, lead capture, and loan officer directory to custom lender websites, Smart Applications, Loan Origination Systems, and Secondary platforms. Looking for a single source to manage your online rate quoting experience? Mortech is also the trusted source to get your mortgage rates out to sites like Zillow, LendingTree, QuinStreet, and Smart Asset, processing millions of transactions daily." Interested in learning more about Mortech APIs? Reach out to Josh Lehr at Mortech today.

In wholesale & correspondent news, "AnnieMac provides banks & credit unions with a turnkey solution! AnnieMac Home Mortgage will be exhibiting its unique platform at the ICBA live event in Texas March 15-19. AnnieMac's Financial Institution Division has exploded onto the scene with options exclusively for Banks & Credit Unions providing turnkey Private Label, Correspondent and Wholesale solutions to partners nationwide. Complete product line including our newest ELITE Jumbo series." For those attending the ICBA LIVE event, visit booth 158 to learn about becoming a partner. Contact Michael Mandio (845.641.0541).

Lots of companies are out there trying to retain key employees and let others look for jobs. "Is the grass greener on the other side for your employees? A 40% Loan Originator turnover rate in STRATMOR's 2016 Compensation Connection indicates it may be for some. Participate in the 2017 STRATMOR Compensation Connection to find out how your turnover rate compares to peers. In addition to turnover rates, productivity, total compensation and incentive structure, this year delves deeper into benefits to look closer at PTO, Healthcare, 401K, and Educational Assistance offerings by lenders. Don't miss out on your chance to find out how your compensation and benefits compare to industry standards and peers. To participate, visit our site; for questions regarding this program, please email us here."

Congratulations to Dan Fichtler. He will be the MBA's Assistant Director of Secondary & Capital Markets within the Residential Policy group. "He comes to MBA from the U.S. Department of Treasury, Financial Stability Oversight Council where he served as a Policy Advisor. In his position at Treasury, Dan performed quantitative and qualitative research to monitor potential systemic risks in financial markets, including the mortgage, money, fixed income and derivative markets."