MBA Reports on Lack of Profits for Mortgage Banks; Homebuilder's Misleading Ads; More Mergers
$650,000 is a lot of money for many companies. That was the amount of the latest fine levied by the FTC on a Pennsylvania home builder. Yep, one day you're riding high with the slogan "Zip, Zero, Nada," as Heritage Homes Group claimed
in ads on websites, and in newspapers, flyers, and direct mail, that
consumers could finance their homes without a down payment or closing
costs, and the next day your name is splashed all over the press. But
borrowers were actually required to pay a "good faith deposit,"
settlement costs, and an annual fee, according to the complaint. Yep - be careful with those ads, folks - the FTC is committed to holding mortgage advertisers accountable.
Bank management is certainly trying to stay ahead of the cost-cutting and efficiency curve, and mergers and acquisitions continue at an astounding rate.
(Research firm Coalition reports large banks in Q1 saw revenue from
many activities drop 37% from Q1 2010. Experts say securities firms are
likely to lay off large amounts of staff in coming quarters as they cut
costs to adjust to the new reality of higher capital requirements and
lower profitability. UBS has already announced it will close its fixed
income business and lay off 10,000 employees.) Every week there seem to
be more and more. In Ohio Community Savings Bank ($43mm) will acquire
The Home Building and Loan Company ($38mm). Eagle Bancorp, Inc., the
parent company of EagleBank and Virginia Heritage Bank announced that
they have entered into a definitive agreement where VHB will be merged
into EagleBank, with EagleBank being the surviving institution. National
Bank of Commerce ($751mm, AL) will acquire the four branches of United
Legacy Bank ($229mm, FL). Bank of North Carolina ($3.2B, NC) will
acquire Harbor National Bank ($306mm, SC).
By now everyone and their brother has seen
the latest report from the MBA showing that independent mortgage bankers reported net production losses in the 1st quarter of 2014.
"The significant overall production volume decline in the first quarter
hurt mortgage bankers," said Marina Walsh, MBA's Vice President of
Industry Analysis. "Purchase volume did not pick-up, while refinancing
volume dropped and costs continued to rise. Given these conditions,
companies that managed to break even in the first quarter should
consider that a reasonable outcome." Average production loss was 8.31
basis points (BP) in 1Q 2014, compared to an average net production
profit of 8.72 BP in 4Q, the sixth consecutive quarterly decrease. The
MBA's group had average production volume of $274 million per company in
the 1Q, down from $367 million per company in the 4Q, with the volume
by count per company averaged 1,238 loans in 1Q, down from 1,641 in the
4Q. Secondary marketing income increased to 277 BP in the 1Q, up from 248 BP in 4Q.
Total loan production expenses - commissions, compensation, occupancy,
equipment, and other production expenses and corporate allocations -
increased to $8,025 per loan, up from $6,959 in the 4Q. First
quarter 2014 production expenses were the highest recorded in any
quarter since the Performance Report was created in the third quarter of
And as the commentary has discussed, housing is not going through the roof either. Fannie Mae's May 2014 National Housing Survey
might be of interest to those looking at nationwide trends. The share
of respondents who believe the economy is headed in the wrong direction
remained at 57 percent last month. The percentage of respondents who
expect their personal financial situation to get better over the next 12
months fell slightly to 42 percent. Fabled economist Doug Duncan
observed, "Consumers' lukewarm income expectations and reticence about
the economy seem to be holding back housing demand. This year's spring
and summer home buying season has gotten off to a slow start, even as
mortgage rates have trended lower over the past two months. Our National
Housing Survey data show that economic conditions continue to be the
top concern among consumers who think it's a bad time to buy or sell a
home. While recent housing activity suggests that the worst of the
housing slump may be behind us, this caution
among consumers supports our expectation that the rebound in home sales
will likely be too modest to pull sales for all of 2014 ahead of last
(Read More: Survey Respondents see Home Prices, Interest Rates, and Rents Leveling)
has changed its provisions regarding consumer fraud and deceptive
business practices act by modifying Section 2MM of the Consumer Fraud
and Deceptive Business Practices Act with the passage of House Bill 3380.
The amendment provides that a guardian of a disabled person appointed
under the Guardians for Disabled Adults Article of the Probate Act of
1975 or a parent or guardian of a minor may request that a consumer
reporting agency place a security freeze on the credit report of the
disabled person or minor by sending a request to the consumer reporting
agency. The new legislation took effect on June 1st.
modified its provisions regarding mortgage foreclosures. The "mosquito
state" modified its provisions relating to mortgage foreclosure by
amending the definition of a "small servicer" and clarifying the
Foreclosure Curative Act in House Bill 2213.
Under the amended law, "small servicer" means a servicer that is
either: a small servicer, as defined in Code of Federal Regulations,
title 12, section 1026.41, a Housing Finance Agency, as defined in Code
of Federal Regulations, title 24, section 266.5; or a servicer that has
conducted 125 or fewer foreclosure sales during the preceding 12 months.
The legislation is effective the day following final enactment.
Oklahoma's Department of Consumer Credit has informed NMLS that in accordance with the state's Secure and Fair Enforcement for Mortgage Licensing Act,
and effective November 1, 2013, a licensed MLO in the State of Oklahoma
is required to complete annual continuing education in a classroom
setting at least every two years. The OK-DOCC on April 16, 2014 issued
an Official Declaratory Ruling stating that "a
MLO may satisfy the requirement for completing annual CE in a classroom
setting at least every two (2) years by completing a classroom or
classroom equivalent course as approved by NMLS."
The requirement for an MLO to complete CE in a classroom or classroom
equivalent setting may be met during calendar year 2014 or calendar year
2015. NMLS has posted an Education Notice explaining in detail the new
Maryland's legislature has recently enacted provisions found in Senate Bill 1091
which creates an expedited licensing process for certain mortgage home
loan originators. By adding 11-612.3 to its financial institutions
article, Maryland has altered the way in which background checks may be
required. As part of the application process, mortgage loan originators
are required to undergo a state criminal history background check before
being issued a license in Maryland. Under 11-612.3, the Commissioner of
Financial Regulation must waive the state criminal history check for
applicants who are employed as a registered mortgage loan originator
within forty five days prior to the date on the application for a
license. Additionally, the new section gives the Commissioner the power
to adopt regulations in order to carry out the expedited licensing
process. These provisions become effective on October 1, 2014, just in
time for my Ocean City, MD trip.
amended and reenacted provisions relating to mortgage servicers,
requiring that mortgage servicers be licensed and regulated pursuant the
Louisiana Secure and Fair Enforcement of Mortgage Licensing Act of 2009.
These amendments bring Louisiana mortgage servicers under the same
licensing and educational requirements as mortgage lenders, brokers and
originators. In this chapter, mortgage servicing refers to collecting or
remitting payment for another or the right to collect or remit payments
for principal, interest, tax, insurance or any other payments made in
connection with a mortgage loan.
to rates, it all seems pretty steady. The risk-free 10-yr T-note
continues to sit in the low 2.60's (yesterday closing at 2.64% after
starting off the day at 2.63%). But could rates go lower? You'd think
so, especially after the World Bank lowered its global growth outlook
for 2014 to +2.8% from an original projection of 3.2% at the start of
the year. (2015, however, was unchanged at 3.4 %.) But is the news that
the World Bank used to change its outlook already incorporated into the
bond market? Apparently: on the day the 10-yr barely budged, and agency
MBS prices didn't move either.
have a little more for bond traders to chew on this morning. We've had
the weekly Jobless Claims number (expected to drop by 2k, it was +4k
from a revised 313k), May's Retail Sales (expected +.6%, it was only
+.3% but there were some back-month revisions), and Import Prices for
May (expected +.2%, they were +1.%). And just to give those traders
something to talk about later today, we have a $13 billion 30-year bond
auction at 10AM PST. Early on rates are down slightly with the 10-yr at 2.63% and agency MBS prices better by about .125.
"Looking for innovation? Colorado's Mortgage
Solutions Financial just announced its Certified Loan Program -
removing risk for fraud and manufacturing defects from correspondent
customers for only 10 basis points.
This means a correspondent customer can take advantage of their
incredible product offering - with no fraud or manufacturing defect risk
- at a pretty minimal investment. Mortgage Solutions is a direct
seller/servicer to Fannie, Freddie, FarmerMac, and a Ginnie issuer, and
offers products with zero overlays lending as FHA and VA intended it to
be. Need an IRRRL or Streamline with no score, no appraisal or AVM? MSF
offers these. What's the catch? None we have found." Check it out at MSF Correspondent Lending. And MSF
continues to look for wholesale/correspondent AE's and retail branches
across the country - as well as a mortgage industry recruiting
specialist, who can help it continue MSF's growth. Contact industry vet Greg Grandchamp at greg.grandchamp@msfhome. com. "MSF is obviously doing something right over there."
On the retail side, Paramount Residential Mortgage Group, Inc. is expanding in the Northwest.
Paramount is very proud to announce the recent hiring of David D. Davis
to head up its newest retail branch in Washington State. Mr.
Davis comes to PRMG with 23 years of experience in the Mortgage
Industry. David has been consistently ranked in the Top 10% of
Originators nationally by multiple publications, and was instrumental in
building three mortgage companies in the past (Qpoint Home Mortgage
Loans, Homestar Lending, and Cobalt Mortgage). Mr. Davis has numerous
designations and affiliations with state and nation-wide associations,
is licensed by the state of Washington as a Licensed Real Estate Finance
Instructor; CMPS (Certified Mortgage Planning Specialist); and a member
of the CORE Training, Inc. In
his new position as Branch Manager, David will be responsible for
recruiting; developing a strong presence in the northwest region; and
overseeing monthly production and operations for his branch. Interested
LOs can contact him at ddavis@PRMG. NET.
In an effort to reduce expenses given sluggish conditions, U.S. Bank
announced they have frozen all new hiring, cut nonessential travel and
told employees in a technology unit they will have to take 1 week off
without pay. And the CFO of Fifth Third Bank
reported at a conference that the rollout of high-tech kiosks at its
branches over the past 15 months has allowed the bank to cut 1,000 jobs
(about 19% of retail banking employees.
(While we're on employment, obtaining a job at Goldman Sachs
is difficult...let me rephrase that. Landing a job at Goldman Sachs is
statistically improbable. I've been told only the most qualified
candidates are even considered for openings in their analytics groups;
groups which analyze and evaluate everything from bonds to equities,
from political climates to actual climates, Goldman and their people do
important quantitative work. Oh, and in their spare time they run
regression analysis to determine the upcoming World Cup winner too.)