What can you buy on minimum wage? Well, I guess that's a relative question; relative to a number of factors such as where you live, your current monthly expenses, and savings rate; however, I'm going to guess 'not much'. Zillow writes, "In 2013, 3.3 million Americans worked in a job that paid at or below the federal minimum hourly wage of $7.25. For many of these workers, finding affordable housing is a constant challenge. Still, nearly two-thirds of suburban minimum wage earners, and nearly half of urban minimum wage earners, owned their own home. Of course, the ownership rate does not capture important differences in home size, amenities, convenience and quality, but is nonetheless illustrative of the options that minimum wage earners frequently encounter."

It sure helps to know what is going on in the industry and in the real estate sector. Richey May, the leading public accounting firm serving the mortgage industry, recently announced a significant price reduction for its Richey May Select benchmarking product, which includes quarterly peer-to-peer financial benchmarking data and operational metrics. Full access to the customized quarterly peer benchmarking reports and industry-wide financial and operational data is now available for only $750 quarterly, down from $1,500. Participation among independent lenders is growing steadily and Richey May is focused on adding a substantial number of companies to the platform in the coming months. To learn more about participating, or to discuss the benefits of the Richey May Select product, contact Trevor Reinhart at Richey May or visit their website.

Arch MI has released its new Housing and Mortgage Market Review . The summer edition features the latest Arch MI MSA-Level and State-Level Risk Index values, which estimate the likelihood of home price declines based on local economic and housing market data, such as affordability, unemployment rates, housing starts, foreclosure rates, etc. According to the latest data, the probabilities of regional home prices being lower in two years remain low to moderate. The highest-risk areas continue to be concentrated in Florida, New York, New Jersey and the area around the California-Arizona border.

And Merrill Lynch thinks home prices are overvalued and will go nowhere over the next few years. Home prices were undervalued about 6% relative to incomes at the end of 2011, and have now rebounded to levels that are 9.7% overvalued. Of course all real estate is local, and there is always the possibility that incomes begin to rise as the labor market tightens.

Narrowing our focus a little, the FHFA report on mortgage investors turned a lot of heads Thursday. But on the CFPB side, its Policy Guidance appears to be spurred by the CFPB's concern that mortgage brokers may be transitioning to the mini-correspondent lender model in light of GFE and HUD-1 disclosure requirements and the mortgage loan originator compensation and points and fees rules, both of which govern when mortgage broker compensation must be disclosed and when such compensation must be included in the points and fees calculation. But who has the risk, and who actually uses their money to fund the loan?

The CFPB states that it will closely monitor these practices to ensure that companies are not evading the requirements that afford consumers certain protections. Accordingly, the Policy Guidance summarizes the scope of Regulations X and Z, and specifically notes that both regulations draw a distinction between table-funded and secondary market transactions (the former are subject to Regulations X and Z; the latter are not). The CFPB highlights that the applicability of these regulations to mini-correspondents and their transactions is not determined by the title of the parties involved but, rather, the nature of the transaction.

The Agencies and other impacted groups knew of the FHFA OIG report ahead of time, of course, and had time to comment.  The CMLA responded with, "The FHFA Inspector General released a report on trends in GSE mortgage purchases, which shows a purchase increase from nonbank lenders. The biases and unsupported speculation regarding nonbank lenders is extremely disappointing - one would and should expect higher quality analysis from regulators. Equally disturbing, the report exhibited a bias towards large, too-big-to-fail banks, largely ignoring the failure of a number of large banks during the financial crisis that were major loans sellers to the GSEs. In contrast, numerous non-bank, community-based lenders honored their obligations to the GSEs and repurchased loans where mistakes were made, utilizing their own financial resources. In addition, these community lenders did so without receiving a dime of TARP money. CMLA supports the enhanced risk management controls referenced in the report, which have been put in place by the GSEs. These controls serve to strengthen loan quality at the point of origination by the lender that is dealing directly with the consumer, a far more effective method than relying solely on after-the-fact controls. The CMLA will work with the FHFA and GSEs to ensure their responses to this report will continue to permit well-managed, well-capitalized community-based lenders to fulfill their vital role in meeting the home financing needs of consumers."

As a reminder, since there continues to be questions about it, When the OCC issues guidance...well, I guess you take it. Collectively "the agencies" have jointly issued supervisory guidance on risk management practices for home equity lines of credit (HELOC) approaching the end-of-draw period. "As HELOCs approach scheduled maturity or repayment phases, borrowers could face substantial payment shock when they are required to start amortizing principal. Borrowers may be unable to meet new payment terms or refinance existing debt as economic conditions and property values may have changed since origination. As HELOC draw periods approach expiration, the agencies expect lenders to manage risks in a disciplined, prudent manner; to work with troubled borrowers to avoid unnecessary defaults; and to engage in appropriate risk recognition." The guidance describes five core operating principles that should govern management's oversight of HELOCs nearing their EOD period, as well as 10 EOD risk management expectations that promote a clear understanding of potential exposures and help guide consistent, effective responses to HELOC borrowers who may be unable to meet contractual obligations.

The secondary markets (versus the primary markets where originators are working with borrowers) continue to heat up. Investors are clamoring for yields - and happy to buy non-QM pools and other assets, almost regardless of risk. (Here we go again!) BlackRock reportedly will launch another sale of once-toxic residential mortgage-backed bonds tomorrow, seizing on a dramatic shift in demand for such assets and a rebound in prices since the crisis. Last week it sold $3.7 billion in an all-or-nothing sale to Credit Suisse. This week's $4.4 billion sale of the same stuff (backed by UBS collateral) will supposedly be split up. I know several folks who "retired" from the business and are making a market in this product - they must be salivating! Whatever happened to the term "toxic assets"? Loans and pools of loans that sold at 20 cents on the dollar have rebounded to 70 cents on the dollar. IFR reports that TRACE data indicate Credit Suisse has already placed a majority of the bonds it bought in the first auction, and it paid even more than that, as the bonds fetched a second-best bid 73.16 cents from Goldman Sachs.

The implications of this price action are not lost on originators and buyers of non-QM loans. We've seen a huge growth in certain lenders offering expanded criteria loans (it is important to differentiate between credit risk and operational risk!). Elapsed time between foreclosures and short sales and new lending is collapsing. Are the lenders who are racing to the bottom of credit risk being followed by investors racing to the bottom? Lenders typically don't offer a product unless there is a market. So what is the difference between this go-around and what we were seeing ten years ago? In my chats with lenders, it appears to be that the loans, for now, are fully documented. We will see how long that lasts - there isn't much new under the sun. The markets hope that pre-securitization due diligence is top priority nowadays. Many believe that a large, trusted company will step up to make it an integral part of the securitization/whole loan sale process - probably a global firm that's connected to financial markets but also has risk and legal businesses.

Turning to rates, without much new information coming out of the U.S. last week we had plenty of room to react to the terrible plane crash and other geopolitical risks. Economic data last week (basically retail sales, the producer price index, inventory growth, and a sad housing starts number) did little to move us out of the range. Lots of economists think that consumer spending was a bit stronger in the second quarter, and that inflation will pick up a little in the second half of the year. (It really doesn't have anywhere to go but up, right?) But that Housing Starts number is a problem: it posted a second monthly decline in June raising some questions about the pace of the housing market recovery. More forward looking building permits data also slowed but remain well above the latest level of starts. But for the week the 10-year note gained about .250 in price and the yield declined nearly four basis points - not much of a move.

Like sands through an hourglass, so go the weeks of scheduled economic news. As we always seem to learn, it is the unexpected events, usually overseas, that seem to move the markets more than the mundane news coming out of the United States. But you should at least know what's coming out. Today are some Chicago Fed numbers; tomorrow are the Consumer Price Index and another house price index (this time from the FHFA) and Existing Home Sales. Thursday is Initial Jobless Claims and New Home Sales, and then Friday is Durable Goods Orders. This morning the 10-yr, which closed Friday at a yield of 2.48%, is roughly unchanged as are agency MBS prices.


Commerce Mortgage, a well-established mortgage banker with a 20 year track record continues to expand its Wholesale Division. "Offering a unique JUMBO product line with quick in-house underwriting, no Investor approval requirements, local AMC options, in addition to FNMA and FHA/VA programs with no overlays, Commerce Mortgage has developed a track record of performance allowing for quick purchase closings which is being widely  embraced by the mortgage broker and real estate communities." Commerce is currently seeking Wholesale Account Executives, in Northern California, Southern California, Colorado and Florida. Candidates must possess 2 years' current experience with active producing accounts; interested parties should send an email/resume to Shabi Asghar, President. You also can visit Commerce Mortgage where rate sheets, matrices, guides, and broker applications can all be accessed without a password.

On the retail side, "Are you great at selling, but could use more leads?" Military Home Loans is a VA focused lender in San Diego, CA and needs an experienced Loan Officer (anywhere in CA and with at least 1 year of experience) to help work an excess of leads. The company has a family atmosphere, offer competitive rates and pricing, along with a fast and experienced support staff. The ideal candidate has NMLS licensing in California and needs to be in good standing. A military background is a plus but is not mandatory. Send confidential inquiries and/or your resume, and most recent 12 months production numbers (units and volume), to Shiraney Sim.

Maybe these folks can pick up some talent from Rushmore Home Loans, rumored to have cut back a large number of its employees. And Bloomberg reports that Standard & Poor's has cut 16 members of its U.S. commercial mortgage-backed securities group and moved other analysts across the country...Peter Eastham is stepping down as the group's head...'Standard & Poor's Ratings Services is realigning its U.S. CMBS team to increase its resources around the country and better leverage its staff...'"