Fun with government numbers: approximately 52.2 million people in the U.S. participated in major means-tested government assistance programs each month in 2012, according to a U.S. Census Bureau report. Right or left, Democrat or Republican....yes, Libertarians, too! Participation rates were highest for Medicaid (15.3%) and the "Supplemental Nutrition Assistance Program," formerly known as the food stamp program (13.4%). Those under 18 were more likely to receive means-tested benefits than all other age groups. In an average month, 39 percent of children received some type of means-tested benefit, compared with 17 percent of people age 18 to 64 and 13 percent of people 65 and older. As an armchair economist it would be interesting to compare these numbers to, say, twenty-five years ago.

Anyone pushing bi-weekly mortgages should know that Paymap Inc., a payment processor that is part of Western Union, and LoanCare, a mortgage servicer that serves as a subservicer for ServiceLink (which is majority-controlled by Fidelity National Financial), were cited by the CFPB for wrongfully promising "tens of thousands of dollars in interest savings" to consumers if they made more frequent mortgage payments. (LoanCare is a mortgage servicing subsidiary of ServiceLink. ServiceLink is a majority-owned subsidiary of Fidelity National Financial. Black Knight Financial Services is also a majority-owned subsidiary of Fidelity National Financial, but is otherwise unaffiliated with ServiceLink and LoanCare.) The Consumer Financial Protection Bureau is charging two companies more than $38 million in total charges for allegedly steering consumers into a mortgage payment program that cost them millions of dollars in fees. The "Equity Accelerator Program" deducted automatic payments for a mortgage on behalf of the consumer, but also typically charged a $295 enrollment fee as well as a $2.50 transaction fee for each debited payment. As a result, about 125,000 consumers paid more than $33 million in fees since July 2011, the CFPB said.

Colorado-based Paymap has agreed to return $33.4 million in fees to affected consumers and pay a $5 million civil penalty, while LoanCare in Virginia has agreed to pay a $100,000 penalty. Both companies have agreed to the order without confirming or denying the allegations. While there are many companies that offer borrowers the option to lower their interest rate costs by making biweekly, or more frequent mortgage payments, the CFPB said the named companies did not actually make those mortgage payments. Instead, it held the payments until it was due within the typical monthly period and then charged a transaction fee.

In banking news, a Financial Stability Board requirement that the world's biggest banks hold enough liquid assets to cover up to 20% of liabilities is set to be completed by the end of September. The rule is necessary to end "too big to fail" banks, Chairman Mark Carney says.

Certainly bank M&A announcements continued as the reasons to merge and acquire continue to outweigh the drawbacks. (And there certainly aren't many new banks being formed.) Just in the last week we learned that Southern States Bank ($340mm, AL) went across the border and will acquire Columbus Community Bank ($122mm, GA) for $21.4mm in cash. In neighboring Florida Harbor Community Bank ($1.3B) will acquire Florida Citizens Bank ($231mm). Missouri's First State Community Bank ($1.8B) will acquire Central Bank ($264mm). HomeTrust Bank ($2.6B, NC) said it will consolidate 6 branches in NC and TN, as it seeks to reduce operating expenses and adapts its physical network to address shifting customer banking preferences toward mobile and online technology services. In Mississippi, Planters Bank & Trust Company ($855mm) will acquire Covenant Bank ($222mm). First Financial Bank ($7.3B, OH) will acquire Oak Street Holdings (Oak Street makes commission-based loans to insurance agents and brokers). In Texas Independent Bank ($4.3B) will acquire Grand Bank ($576mm) for $80.1mm in cash (30%) and stock (70%). In Illinois Union Federal Savings and Loan Association ($108mm) will acquire First Federal Savings and Loan Association of Kewanee ($64mm, IL). And east of me, in California, Suncrest Bank ($195mm) will acquire Sutter Community Bank ($66mm) for about $9.4mm in stock (100%).

In a move sure to turn some heads, Prospect Mortgage, LLC, and known for its purchase business lending, announced its decision to discontinue marketing activities that depend on Marketing Services Agreements (MSAs). Prospect expects this action to be complete by the end of the third quarter. "Recent interpretations of RESPA requirements introduce substantial uncertainty as to the rules and requirements applicable to MSAs. Prospect has taken every precaution to ensure that it is complying with the rules and guidance under applicable law. However, in light of these recent rulings, Prospect believes that MSAs are no longer a viable marketing tool for the industry."

The news came as rumors of Wells Fargo, Bank of America, and Cornerstone making similar moves in similar business channels increased. Doug Long, Prospect's President of National Lending, stated "We have worked very hard at Prospect to establish strategic priorities for the company that will allow us to succeed in this new era for our business. Prospect prides itself on our commitment to providing the highest level of customer service. We provide value to our customers through our ability to offer a broad array of products and the deep industry knowledge of our professionals. Given the uncertainty surrounding the use of MSAs, Prospect has made the decision to discontinue marketing activities that depend on these agreements. This decision has no impact on our continuing efforts and commitment to deliver the highest level of value and service to our customers and clients."

In better news, at least for some lenders, J.D. Power Reports released its customer satisfaction report headlined by, "Mortgage Servicers' Focus on At-Risk Customers Negatively Impacts Mortgage Experience of Majority of Other Borrowers." Quicken Loans ranked highest in its Primary Mortgage Servicer Satisfaction for a second consecutive year. The report notes that "mortgage servicers are spending a disproportionate amount of time and resources on at-risk customers, compared with customers who are current with their payment, adversely impacting satisfaction for the majority of their customers." You can check the report out at 2015 U.S. Primary Mortgage Servicer Satisfaction Study.

"At-risk customers-those currently behind in their mortgage payments or concerned about keeping current during the next year-represent only 15 percent of the survey respondent pool. Despite being a relatively small percentage of the total population, this group has been a primary focus of such regulatory agencies as the Consumer Financial Protection Bureau (CFPB) and the Government Sponsored Enterprises-Fannie Mae and Freddie Mac (GSEs)-that own or guarantee the majority of conforming home loans. Mortgage servicers consider their primary 'customers' to be the owner of the loan (i.e., GSEs and Investors) rather than the end borrower, who has limited power to decide which mortgage company services their loan."

Servicers weren't surprised to read, "...when customers aren't able to resolve their issue completely via the website, 67 percent ultimately turn to a live agent to resolve the issue, which increases both the cost and the negative impact on satisfaction. An additional 14 percent of customers give up trying to resolve their issue with the company altogether, which might give them the impetus to turn to the CFPB or other regulatory agencies."

Turning to the markets, I still have the silver dimes and quarters I'd accumulated in the 1960's from bank tellers. But now they are worth less. How are falling commodity prices going to affect near-term inflation? Slow global growth is a big reason why many commodities have taken a spill along with over-supplied markets - who is a natural buyer of gold? The Bloomberg industrial index has fallen about 25% over the last year as growth in China, which consumes the largest amount of metals in the world, continues to slow. WTI oil has dropped 20% over the past month due to over supplied markets and the Iran deal that would boost global supply. Every aspect of agricultural commodities except corn has all moved down in the past month.

Taking all of this into account, the CRB commodity index has fallen almost 18% since May 2014. Now how does this affect inflation? Wells Fargo found that a 10% drop in the CRB index, if sustained, would shave 0.4% points off the year-over-year rate of consumer price inflation. However, with core inflation there isn't much to worry about; a 10% drop in CRB index would only affect core inflation by 0.1% points. Since the Fed tends to focus more on the core inflation, this is little cause for concern. 

Yesterday the lack of volatility in the bond market continued - in spite of a strong 5-year note auction and the usual announcement after the Fed meeting. The National Association of Realtors' Pending Home Sales Index fell 1.8% in June and May was revised to +0.6% from 0.9%. Regarding the Federal Open Market Committee..."The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent..." The 10-year note yield backed up to 2.29% from 2.25%.

I am in Honolulu attending the MBAH State Conference, so it is dark and early. This morning we've had Initial Jobless Claims for the week ending 7/25 (up 12k to 267k) and more importantly the first look at GDP for the 2^nd quarter. Consensus thought we'd see 2.6% growth from -0.2% in Q1, and it was +2.3% while the 1^st quarter was revised higher to +.6%. Later on is a $29 billion 7-year note auction. After the GDP news the 2-year yield hit a multi-year high, the 10-year is up to 2.31% with agency MBS prices worse .125-.250.

Jobs and Announcements

In jobs & expansion news, Pulte Mortgage has openings for loan originators, loan processors, DE underwriters, and a VP, Regional Service Center Manager (Processing Manager), all part of the growth of its Denver headquarters operation. "Find out what it's like to work at the 2015 Winner of Colorado's Best Places to Work - Pulte Mortgage - as voted by its own, long-tenured employees! PMC is a wholly owned subsidiary of PulteGroup, a Fortune 500 company, and has been a proven leader in the mortgage industry for over 42 years. We focus on a total rewards package with high base salaries, competitive monthly incentives, stellar, top level benefits, a fully vested 401k match, tuition reimbursement and much more! You can send your resume or your referrals' resumes to PMResumes@pulte. com or visit our website.

Hamilton Group Funding, a rapidly growing mortgage banking firm headquartered in the Fort Lauderdale, FL area, is seeking experienced underwriters proficient in conventional, FHA/VA and USDA mortgages. While employment in the home office is preferable, the company has 35 offices in 11 states, and is open to a remote location. Hamilton has a strong management team, award-winning technology, and competitive compensation with full benefits. Inquiries should be made to Amanda Smith.

Colonial National Mortgage is growing, and is hiring for a wide range of operations and production jobs. It is hiring newly created key positions including a Technology & Process Improvement Manager (to lead the new LOS implementation), a BSA/AML Compliance Manager (ACAMS Certification preferred), a Business Process Analyst - Mortgage Operations; and a Business Support Manager - Servicing at its Fort Worth headquarters. Their CU Members Mortgage division is seeking Mortgage Loan Officers in Phoenix, Bremerton (WA), Newport Beach (CA), Las Vegas, and Dallas. And its Retail division, Colonial National Mortgage, is looking nationwide for the best of the best Loan Officers. Founded in 1952, the company has $1 billion in assets and is privately held by choice to ensure our focus remains on our customers and not the expectations of Wall Street. Colonial is rated "Five Stars - Highly Recommended" as one of the strongest financial institutions in the country by Bauer Financial, and has earned Fannie Mae's Four STAR award for customer service and foreclosure prevention, as well as the highest achieving STAR Performer for best practices in General Servicing, Collections/Loss Mitigation and Neighborhood Stabilization in 2014. Visit the Colonial Careers Page. (Equal Opportunity Employer, M/F/Disability/Vet.)

Unfortunately for the industry we learned that Cornerstone Mortgage, Inc.'s President and CEO, James E. Dean, passed away on July 24. Co-Founder, Senior Vice President and Chief Operating Officer, Angi Stevenson has appointed Brad Bradford, as Senior Vice President.