For LOs who feel "enough is enough" with regard to the proposed Pre-Licensure Education Expiration Policy on education, timelines, and requirements, here is your chance to comment through NMLS.

Out in California the Bank of Marin ($1.8 billion in assets) said it will discontinue the mortgage brokerage operation it acquired from Bank of Alameda (CA), after determining the activity was too commodity-based to make a reasonable return. It is certainly hard to earn the small revenues that a commodity business generates if a company is trying to offer a specialized product! But folks are trying different combinations. KeyBank ($88B, OH) will acquire investment bank and capital markets firm Pacific Crest Securities. Guaranty Bank and Trust Co. ($2B, CO) will acquire Cherry Hills Investment Advisors for an undisclosed sum. Cherry boosts opportunity for the bank in the investment advisory business. Boston Private Bank & Trust Co. ($6.5B, MA) will acquire wealth management firm Banyan Partners LLC for about $60mm in cash and stock. Banyan has $4.3B of client assets under management. Boston plans to create a new subsidiary that will combine its existing wealth management business with Banyan's business.

The FDIC tells us that of the 6,730 FDIC-insured banks nationwide, the 22 largest hold 62% of the $12.75 trillion of assets controlled by all domestic commercial banks and savings institutions as of 3/31/14.  Each of the 22 banks has at least $100 billion of assets. And the big are becoming bigger: every week there are fewer banks as they seek to increase efficiencies, lower costs, and expand geographically through joining forces with others. Announcements during the last week include (in Texas) First Bank & Trust Co. ($624mm) acquiring Texas Savings Bank ($78mm) and Vantage Bank Texas ($328mm) will acquire D'Hanis State Bank ($47mm). Yesterday Columbia Banking System, Inc. and Intermountain Community Bancorp jointly announced a merger - the combined company will have approximately $8.2 billion in assets with over 150 branches throughout Washington, Oregon and Idaho.

In Indiana First Merchants Bank ($5.4 billion) will acquire Community Bank ($272mm) for $46mm in cash and stock. Nearby in Iowa First Security Bank and Trust Co. ($464mm) will acquire Hampton State Bank ($74mm). Michigan's mBank ($579mm) will acquire The Peninsula Bank of Ishpeming ($131mm) for $13.3mm in cash and stock. Up in Massachusetts Cape Ann Savings Bank (468mm) will acquire Granite Savings Bank ($70mm).

Going to Ohio (home of Akron, rubber capital of the world), the Vinton County National Bank ($766mm) will acquire The Citizens Bank of Ashville ($105mm) for about $12.2mm in cash or 1.4x tangible book. Farmers Bank & Trust Co. ($840mm, AR) will acquire 1st Bank ($309mm, TX). In nearby Louisiana Catahoula - LaSalle Bank ($121mm) will acquire Bank of Jena ($72mm). Last but not least, out in California Bank of the Sierra ($1.5B) will acquire Santa Clara Valley Bank ($127mm) for $15.3mm in cash.

But First Mountain Bank ($137mm, CA) and First National Bank of Southern California ($177mm, CA) have terminated their previously announced merger after the OCC would not approve the sale under the agreement's legal terms and conditions. First Interstate Bank ($7.6B, MT) will close eight branches following its acquisition of Mountain West Bank ($634mm, MT) due to close proximity to existing branches. And Florida's Landmark Bank ($279mm) will close one branch it recently acquired from its takeover of failed Valley Bank (there are valleys in Florida?). And last Friday Eastside Commercial Bank, Conyers, Georgia, was closed and business transferred to Community & Southern Bank of Atlanta, Georgia.

As an owner of a midsize independent mortgage banking company, what is the feasibility of negotiating an economically attractive sale of your enterprise under current market conditions?  Jeff Babcock (STRATMOR Group) addressed this topic at the recent Western States Secondary Marketing Conference. (STRATMOR is an active player in the M&A space, specializing in transactions within the midsize market sector.) Citing the current STRATMOR transaction pipeline as the source of his observations, Babcock reported that, "There is very strong investor demand for well-managed retail origination platforms. These buyers are motivated to acquire (rather than to build through recruiting which can be slow, expensive and risky) to achieve their ambitious scale objectives. Today's mortgage company buyers are generally larger independents and regional  bank-owned lenders who offer a qualified seller strategically attractive and impactful acquisition synergies. While there remain some private equity investors exploring for opportunities, STRATMOR has found that existing lenders can justify better values, bring cultural compatibility and offer more synergies."

Jeff's note continued. "By 'qualified sellers,' we mean retail lenders with a high purchase share for 2014 YTD, sustainable earnings track record in 2012-2014 YTD span and a solid reputation with counterparties and competitors.  Such prospective sellers may find that they have greater enterprise value by merging than continuing to struggle for market share as an independent. Every deal in the STRATMOR transaction pipeline involves a substantial premium value to be paid to the seller. STRATMOR's marketplace experience confirms that it's a misconception that all deals today involve necessitous mortgage company sellers who command no premium value."

What have the states been up to lately?

Florida recently enacted provisions regarding consumer collection practices in House Bill 413. Under HB 413, "a person may not engage in business in Florida as a consumer collection agency without first registering in accordance with the law, and thereafter maintaining a valid registration." Further, the Financial Services Commission may adopt rules requiring electronic submission of forms, documents and required fees as well as establish time periods during which a consumer collection agency is barred from registration due to prior criminal convictions of, or guilty or no contest pleas by, an applicant's control persons, regardless of adjudication.

Hawaii recently amended several provisions of the Secure and Fair Enforcement for Mortgage Licensing Act in Senate Bill No. 2817. The bill clarified definitions such as "elder," "sole proprietorship", and became effective on July 1, 2014.

What is going on in Utah? Recently FINCEN, that would be the Financial Crimes Enforcement Network by the way, published the first issue of SAR Stats (SAR = Suspicious Activity Report). The release examines only data contained on the more than 1 million unique FinCEN SAR's with filing dates between March 1, 2012 and December 31, 2013. The adoption of the new unified SAR form and the implementation of e-Filing enable the financial industry to report suspicious activity more swiftly and with more specificity. The changes also mean the data presented in this issue are a new baseline for financial sector reporting on suspicious activity. The overall 1.4 million data points retrieved for this report are organized and presented by industry. So what exactly is going on in Utah? Well according to SAR Stats, the state ranks first in 'Filings Ranked by U.S. States for "Other" Financial Institutions' (between May 2012 and December 2013) with 7,256 overall filings, constituting 25.3% overall....California is a distant second with 3,450 filings.      

A correction! Yesterday I mentioned an underwriting clause that addressed VA loans, moving, and equity. (I wish I could say that I put that in just to see who was reading the commentary, but I can't.) It turns out that the VA requires no equity to offset the rent payment. In other words, the VA does not require equity in a departing residence to offset the mortgage payment with new rental income.  Many lenders have that overlay, but it is not a VA requirement. And here is a note from a lender: "We are mini-corr lenders and sell most of our VA loans to Flagstar. Here is what Flagstar's VA guides say regarding the departure of a current residence: 'Rental income from the property the borrower is vacating may be used to offset the current mortgage payment, provided there is no evidence the property will be difficult to rent; Document the rental income with a current lease agreement; Under no circumstances, may rental income be included in the borrower's income; If there is no current lease agreement, the underwriter may offset the payment with prospective rental income, provided there is evidence the local rental market is very strong. To demonstrate the amount of the prospective rent and the local rental market is strong, obtain one of the following in writing: appraiser's analysis or analysis from a real estate agent having no interest in the transaction. The analysis may not come from the listing or selling realtor or any realtor who is employed with either realtor.'" Thanks everyone!

Keeping in line with government loans, the Collingwood Group's Managing Director Karen Garner published a blog titled "FHA Enforcement: The Real Cost of Non-Compliance."  The post outlines the issues lenders and servicers may face if they fail to perform certain tasks required by FHA as well as the potential penalties that could be sanctioned if a violation is found.  Lenders and servicers have recently come under increased scrutiny from the U.S. Department of Housing and Urban Development (HUD) to ensure they are complying adequately with FHA requirements.

"Is volatility going to pick up in October?" Plenty of smart people think that it will. We've had a long spate of the markets not doing much of anything, regardless of economic news, overseas buyers, religious turmoil, geopolitical conflicts. Volatility has been so low - like rates, it has nowhere to go but up, right? With QE 3 ending, and the gentle hand of the Fed being lifted out of the demand equation, things will go back to pre-QE. And yes, capital markets staffs are dreading dusting off the extension and renegotiation polices. Experts think that banks will absorb most of the excess net supply the Fed doesn't - we'll see.

But for now, steady as she goes: sure, we have some intra-day buying and selling induced rate movements, but I can't remember the last time I saw a gaggle of investors change prices intra-day. The Fed continues to buy about $2 billion of agency paper a day, and selling by originators is thought to be less than that. Agency MBS prices closed down/worse about .125. The National Association of Realtors (NAR) reported a 2.6 percent month-over-month rise in existing-home sales last month to a seasonally adjusted annual rate of 5.04 million. May sales were revised slightly upward to a rate of 4.91 million.

For news today we'll have Initial Jobless Claims (expected slightly higher) and New Home Sales (expected down about 5%). At 11AM EST the Treasury announces details of next week's auctions of 2-, 5- and 7-year notes (e: $93 billion). For numbers the 10-yr closed at 2.46% and today is sitting at 2.48% with agency MBS prices worse about .125.


On the jobs front, a large Irvine based California mortgage banker is expanding. It was recently recognized as "the #1 independent mortgage banker by purchase volume in Southern California, America's Top 100 Mortgage Companies by Mortgage Executive Magazine, and multiple recipients of "Best Places to Work" awards by the OC Register and the OC Business Journal. New American Funding is adding operational staff in all of their growing branch locations which include N&S California, Tustin as well as Nevada, Arizona, Colorado, Texas, Washington and Missouri. New American Funding is especially interested in VA underwriters and is currently offering a signing bonus for Underwriters who possess their LAPP and SAR.  Interested candidates should submit confidential resumes or inquiries to