see...10-year rates are close to 6-month lows, Fannie 3.5% MBS prices are
at a 6-month high, yet the refinancing index is at a 6-year low. Has
nearly everyone who could refinance done so already? You'd think that
with those "great" unemployment numbers on Friday, rates would have
moved higher. But it doesn't help that hundreds of thousands of jobless
workers give up looking for work every month - more on this, and its
impact on the markets, several paragraphs down.
Portfolio Lending is opening a new office in Fairfax, VA, and is
looking for additional underwriters, processors, and IT staff
(preferably with a degree in Management Information Systems) in the
immediate area. The company is a retail lender in the Washington DC
Metro area, is an approved Fannie & Freddie seller, "offers a great
compensation package with matching 401K, and its origination staff is
knowledgeable and seasoned." Interested applicants should email Banks
Gatchel at bgatchel@firstportfolio. com.
Due to growth, PMAC Lending Services is looking to hire a Compliance Manager to join its team in PMAC's corporate office in Chino Hills, CA. The
Compliance Manager will primarily be responsible for monitoring,
assessing, and implementing State and Federal compliance parameters and
guidelines as well as performing periodic reviews of mortgage
transactions to ensure compliance with company guidelines and applicable
regulatory requirements. "Think you are up for the challenge? Apply here."
PMAC was founded in 1995, has offices and operations centers
nationwide, and is a nationwide direct lender and seller servicer with
Fannie Mae, Freddie Mac & Ginnie Mae.
And Envoy Mortgage is looking for branches to join its team. "Why
are top branches gravitating towards Envoy? Recognized as one of the
Nation's top mortgage lenders, Envoy Mortgage offers only the best of
the best in resources, professionalism and stability required by top
mortgage producers to amplify their earning success! Envoy Mortgage is
designed to give our branches and originators the highest quality of
top-tier tools and services available such as paperless technology and
eSign, interactive hands-on training and breakthrough marketing
potential with unlimited access to Marketing materials and support. Our
investment in valuable resources and our network of outstanding service
produces consistent results with strong customer loyalty, consistent
referrals and customers for life. We have teamed up with some of the
industry's best and are seeking to add top-performing branch partners
and originators to our line-up. Do you like to win? Then be a part of a
champion mortgage team! Propel your pipeline to the next level and
experience the Envoy difference by contacting RecruitingTeam@envoymortgage. com for current open opportunities."
How many days do we have to cure a GFE tolerance violation? The Mortgage Bankers Association of the Carolinas wrote, "Regulation X provides: 'If
any charges at settlement exceed the charges listed on the GFE by more
than the permitted tolerances, the loan originator may cure the
tolerance violation by reimbursing to the borrower the amount by which
the tolerance was exceeded, at settlement or within 30 calendar days
after settlement.' -12 CFR 1024.7(i)."
important event scheduled for next week (May 13th) is a live webcast
hosted by the Brookings Institution in which they will have a conversation with Federal Housing Finance Agency Director Mel Watt about the future of Fannie Mae and Freddie Mac.
Ya'll remember Director Watt, right? He took over from Ed DeMarco, and
this is the first time in 5 months that Mr. Watt will be making public
statements. At this point, it is unclear if he will make any major
policy announcements, but it is likely that the recent slowdown in
housing activity has caught his attention. Will the FHFA direct Fannie
& Freddie to loosen up the GSE credit box so that they become more
willing to make loans to first-time home buyers with lower credit scores
(700-740)? Perhaps - the smartest guys in the room point to lending
standards in other consumer products (credit cards, auto loans, water
heaters, whatever) easing. Credit standards remain very tight and are
not reflective of where we are in terms of the credit cycle.
on with this macro look at lending, most lenders have seen a
significant drop in mortgage, and therefore MBS, issuance during the
first quarter. Lenders are already moving down the credit curve. (Don't confuse accepting different credit standards as accepting lower documentation or income standards
- investors don't much care for that right now, so put those IndyMac
guidelines away.) Wells Fargo retail lowered the minimum FICO for
conventional mortgages from 660 to 620, but one has to keep these
announcements in perspective as average FICO for purchase originations
is still around 750. And it apparent that the
large correspondents view their competitors not as other
correspondents, but Fannie & Freddie, as well as the non-banks
of the players, I continue to hear analysts scale back their estimates
for 2014 production volume. Granted, much of this decline will occur in
the big banks, but as an industry it is a concern. It is also important
to keep in mind that even in the years (2004-2006) when gross issuance
levels were closer to what we expect for this year, the issuance in the
non-agency market was much stronger. It is practically non-existent
right now as banks are holding on to portfolio product to earn income.
time-to-time we get mired down in the tall weeds; the drudgery of the
mortgage industry, sometimes we forget other analysts are looking at our
little world from a different perspective, with different expectations.
good now-and-then to step back and look to see how mortgage banking as a
whole is performing, by looking at how publicly traded banks are
performing. I think
this is where I'm supposed to insert some disclaimer that I'm not
recommending the purchase, or sale of, yada yada yada. Here we go....
Flagstar Bancorp, Inc (FBC):
Flagstar reported an operating miss driven by a sharply higher loan
loss provision and a fair value loss on repurchased loans. Analysts have
cut their 2014 and 2015 estimates primarily driven by lower assumed
loan growth. According to reports, weaker-than-expected operating
results were driven by a sharply higher loan loss provision ($112.3
million from $14.1 million in 4Q) and a fair value loss on repurchased
loans ($21.1 million). Gain-on-sale income rose modestly to $45.3
million from $44.8 million in 4Q, and the GOS margin rose to 101 bps
from 66 bps. Total origination volume was down 22.5% Q/Q to $5.0 billion
from $6.5 billion. Analysts have a stock price target set at $22.
PNC Financial Services Group (PNC): PNC
reported strong quarterlies that demonstrated the strength of its
business model and the significant capacity it has to cut expenses in
what is widely considered a difficult operating environment for a bank.
Analyst's reports which I have read state that lower asset yields, the
run-off of acceptable yield, and poor mortgage banking results were more
than offset by a significant drop in the expense base. Considering the
mortgage bank lost money this quarter (even though gain on sale margins
benefited from a big hedging gain), analysts believe there remains
significant room for the company to cut expenses and improve the
efficiency of the overall business. PNC reported period-end loan
balances of $198B, representing a 1.3% increase compared to 4Q13. As
evidenced in the prior quarter, CRE and C&I lending were the primary
drivers behind the growth as both categories rose by 4.5% and 3.1%,
First Horizon National Corp (FHN): FHN
reported an operating earnings number in-line with analyst estimates, a
penny better than the street estimate of $0.15/share, but the stock
still traded down. Analysts believe the pressure on the stock was
primarily due to a 10 bps drop in net interest margin (which is
performance metric that examines how successful a firm's investment
decisions are compared to its debt situations), combined with the
continued deterioration of profits from the Capital Markets segment and
toned down comments from large regional banks regarding M&A
activity. This quarter FHN's stock still trades a little cheap on both
tangible book value and earnings compared to mid-cap bank and asset
Fifth Third Bancorp (FITB): FITB
traded off about 4% following the most recent earnings release,
primarily because the company reported its second consecutive quarter of
higher charge-offs and guided to a higher charge-off rate for 2014.
This was the first time the company reported two consecutive quarters of
higher charge-offs since 2009. This may be slightly disconcerting to
investors, as the emergence of higher charge-offs in an environment
where credit quality has been improving the last few years will
obviously cause the market to re-assess the blind-faith assigned to
improving credit trends. Broader credit trends for the company remain
positive, and analysts have little reason to believe the recent tick-up
in charge-offs will reveal a broader long-term change in credit trends
for FITB. While mortgage income was down roughly 13% sequentially due to
a significant decline in origination volume, FITB reported $109M in
mortgage revenues compared to a $99M estimate. The stronger than
expected mortgage banking number was primarily driven by better than
expected hedging results and gain on sale margins (up to 241 bps from
227 bps in 4Q13). The improving margin was likely due to the bank's
recent exit from the wholesale lending channel in March. Going forward,
management expects mortgage banking revenues to decline to $425M in FY14
from the $700M seen in FY13.
Synovus Financial Corp (SNV): SNV
reported another decent operating result and guided to a continuation
of its expense saving initiatives that have been in place for the past
couple of years. Operating metrics were generally in-line with
expectations as core PPNR remained stable in what is otherwise a
seasonally-weak quarter and loan growth continued to move higher. SNV
grew period-end loan balances 0.5% from 4Q13, primarily due to a 2.1%
increase in CRE loans, though partially offset by a 4.3% decline in land
loans and 3.8% decline in residential loans. Excluding the sale of
Memphis branches that occurred during the quarter (which was previously
announced), total loans grew 1.0% from last quarter. The pickup in loan
balances is a positive sign given management continues to guide to 4-5%
loan growth in 2014. Analysts currently estimate average loan balances
will grow 4.5% in FY14 and 7.9% in FY15.
Turning to the markets, last week was
a very interesting week for U.S. economic data. For employment it was
the best of times - or so we thought. Nonfarm payrolls bid adios to the
sluggish pace of employment growth during the winter months and shot up
by 288,000 jobs in April with upward revisions to February and March.
The unemployment fell to 6.3 percent. The drop in the unemployment rate, however, was due to a significant decline in the labor force.
And if more people give up on looking for work, well then, the economy
is not as hot as the headlines suggest. But GDP, earlier in the week,
was poor: the first estimate of 2014Q1 real GDP growth was a sad +0.1% -
much less than the 2-3% everyone is hoping for.
neither a weak GDP report nor a strong payroll report had any
significant effect: Treasury rates continued range-bound as the Fed
predictably stayed on course in last week's policy statement. That being
said, the 2.59% Friday close on the 10-yr attracted some attention since the last time we were down here was February 1.
economic news this week there just isn't much to be excited about.
Today we'll have an Institute of Supply Management non-manufacturing
number, tomorrow is the trade balance, on Wednesday are some Nonfarm
Productivity and Unit Labor Costs, and Thursday is Jobless Claims. So
the market may continue to trade on last week's more important news, or
it may glom onto some news from overseas.