"Texas alone accounts for 15% of all new single family homes built in the United States." I find this factoid interesting on a number of levels, and can see why Wells Fargo included it in its July '15 Housing Chartbook. WF writes, "We believe some of the weakness in new home sales and single-family starts is tied to unusually wet weather in Texas and other parts of the Southwest that slowed sales and new home construction in June. We have trimmed our forecast, however, to incorporate growing concerns that slowing global growth will weigh further on the energy sector, mining, agriculture and manufacturing. We look for economic activity to cool off further in Texas and moderate from its recent pace in Colorado and parts of the Midwest." And what about first time homebuyers? Well, challenges still exist for this lending segment, and no doubt will continue to head towards worse, before getting better. First-time homebuyers still face a whole host of obstacles, including sluggish income growth, student loan debt, higher housing prices and the qualified mortgage rule.

Here's a quiz for you. In the first three months of 2015, credit unions accounted for what percentage of residential production? A) 4%, b) 6%, or c) 10%. Or maybe none of the above.

While we're discussing lending trends, Fortress Financial was recently featured in a story in the Wall Street Journal discussing subprime lending.

I received this common sense note from a broker in the West on renting versus owning. "Someone will buy and someone will rent.  This is nothing new.  Larger population, but still the same situation.  Younger generation must get through school, which takes longer in today's world, then get a credit history, which is more difficult in today's world, then get some cash in the bank which is more difficult in today's world, then maybe buy a house, which is also more difficult in today's world. Why is the media/industry fixated on millennials not buying houses?  Baby boomers did not start buying houses until they were past college and working."

The positive trends go back a while. Zelman & Associates published their Mortgage Originator Survey, indicating that positive first quarter results aligns with positive homebuilding feedback. Contacts purchase applications increased 15 percent YoY in March, and the first quarter purchase applications increased 14 percent, which improved from 5 percent at the end of 2014. The credit quality index declined to 65.4 in March, which is the lowest level since the beginning of 2012 and most lenders feel prepared for the upcoming TRID regulations that are to take effect in August. However, the new rule could cause delays in purchase closings. Refinance applications were also up as they increased 53 percent YoY in March and the 30-year fixed mortgage rate was down 60 basis points from a year earlier. To learn more about the Mortgage Origination Survey, contact Ivy at ivy@zelmanassociates. com.

MBA's chart of the week for July 24th highlights the FHFA U.S. purchase-only house price index rising to a level seen in April 2006. The national index of house prices is now just 1.8 percent below the peak level in May of 2007. The regional price indexes range from 11 percent higher in the West South Central region to 12.7 percent lower in the Pacific region. Home prices have still not recovered in many parts of the country though. Wages and salaries are now 16 percent higher and as home prices continue to increase, more households should be able to get out of negative equity.

Bank of America will sell its appraisal management company LandSafe Appraisal to CoreLogic. And in other banking news, SNL Financial reports the top 5 US banks and thrifts based on market capitalization as of the 2^nd quarter in order are: Wells Fargo, JPMorgan Chase, Bank of America, Citigroup and US Bancorp.

The number of banks is certainly declining - not due to them being shut down, fortunately, but due to M&A - mostly with small and mid-tier institutions. Through 2Q, banks have announced 145 mergers vs. 144 at this point in 2014. Of those announced so far, about

85% involve sellers with assets of $500mm or less. Things slowed slightly with the dog days of summer but in the last week we learned that here in Texas Prosperity Bank ($22B) will acquire Tradition Bank ($522mm) for about $76.9mm in cash and stock or roughly 1.8x tangible book. And in Maryland Old Line Bank ($1.3B) will acquire Regal Bank & Trust for about $5.6mm in cash and stock.

Optimal Blue's Tammy Butler sent a note regarding her, "Disparate Impact White Paper with Bonus Readiness Checklist!" "With the recent Supreme Court Ruling upholding Disparate Impact, lenders are required to take a strong look at their Fair Lending Analysis by strongly monitoring their lending in well -served vs. under-served markets, product diversification, pricing parity and pricing exceptions. All of this needs to be done in a real time fashion to demonstrate proper controls to an examiner. For banks, this is going to require updated technology solutions that go beyond static data set analysis. For Mortgage Bankers, this is going to require an entirely new approach to your best practices for monitoring fair lending, guarding consumer interests and demonstrating diversity to an examiner. I've also included a "Disparate Impact Readiness Checklist" to assist you in the discussions, which you will enviably need to have in your company."

The forthcoming Fed rate hike is analogous to the day before you go to the dentist for a root canal....the waiting is the worst part. Katie H writes, "Rob, with the Fed poised to raise the Fed Funds rate after the summer, what can we expect with securitizations post-hike?" After shaking my Magic 8 Ball a few times and not coming up with much besides 'Yes' and 'Maybe,' I decided to dig around and look at prior fed tightenings and the impact on securitizations; historical perspectives get cloudy, as all rate environments are unique, and usually poses very distinct yield curves, but here goes....February '94 - February '95 (3.25 to 6.00%): Issuance dropped sharply during the Feb-to-Feb rate hiking period, from $573B to $360B annualized. Gross and net issuance of 15yrs declined more substantially than the corresponding figures for 30yr mortgages, likely as the flattened curve reduced the incentive for homeowners to take out 15y mortgages. June 1999-May 2000 (5.00 to 6.50%): Gross issuance fell to $469bn during this 12-month period, from $758B in the preceding 12 months. Meanwhile, net issuance fell to $174B from $248B in the same period. As in the 1994 hiking cycle, issuance of 15yr mortgages fell significantly more than issuance of 30-year mortgages. June 2004-June 2006 (1.25 to 5.25%): If you recall the Federal Reserve was a skipping record during this two year period, raising the Fed Funds target by 25bps at every FOMC meeting....

I remember one risk manager told me at the time, "what the Fed lacks in originality, it makes up for with predictability." As with the prior two cycles, gross issuance declined during this period, falling to an average annual rate of $938B, compared with issuance of more than $2 Trillion in the previous 12- month period. Net issuance declined to an annual rate of $150B, down from $315B in the prior 12-month period. Long after everyone is gone, economists will still be studying this period of home finance given the huge subprime-induced housing bubble that subsequently burst.

Up and down, and all around. The U.S. Treasury market gave back early gains Wednesday (the 10-year T-note hit 2.05%) as the equity markets went from deep losses to gains and the 10-year Treasury auction found little buying interest. William Dudley, president of the New York Federal Reserve Bank, said that the Fed could raise rates in September. Gee - is this any earth-shattering news? Heck, the market pretty much expects it - and we all know that as soon as they do the financial news will immediately conjecture about the next increase. As the curve steepened, higher coupons outperformed lower coupons and 15-yr. securities outperformed 30 year securities.

But I'll be darned if the sun didn't come up again today, at least in some of the nation from right to left, and we have a new day of economic chatter. Initial Jobless Claims for the week ending 8/08 and Continuing Jobless Claims for the week 8/01 came out (+5k to 274k), as did July's Retail Sales (expected +.5% they were +.6%). We also had July's Export Price ex-ag (-.2%) and Import Prices ex-oil (-.9%).

And for anyone that wants to tie up their money for 30 years go ahead and buy some of the $16 billion 30-year bond being sold today. After the initial round of economic releases the 10-yr is sitting around 2.17% after closing at 2.13% and agency MBS prices are worse .125.

Jobs and Announcements

Citadel Servicing Corporation, specializing in Non-QM & Non-Prime lending, is expanding its Correspondent Conduit. "Citadel, a leader in Non-QM lending, is committed to guiding Retail Correspondent Sellers through the process of becoming successful and profitable in this underserved and expanding market. By offering comprehensive onsite training on originating and underwriting practices, Citadel believes that Retail Correspondents will quickly augment their current production volumes with enhanced profitability. Citadel's leading industry slate of Full Doc and 24 Month Bank Statement programs with extended ratios is available to those qualified borrowers who don't fit into the Prime Conventional box. Additional features include loan to value up to 85%, interest only, loan amounts to $3MM, no reserves, no seasoning on bankruptcies, short sales or foreclosure  to name but a few of the value added items Citadel programs brings to this part of the mortgage space. Whether it is flow or bulk, if you are interested in learning more about Citadel' programs from an experienced investor who "knows the ropes", please contact Alan Peviani."

On the broker side, rapidly growing Integrity First Financial Group, Inc. has entered the Non-QM, Non-Prime space with its own residential mortgage offering.  Industry veteran Tim Larin, who will lead the "Specialty Finance" division, believes this space is grossly underserved. "Because our product adds theory to a make sense environment we still can maintain the requirements of ATR." Alex Barnett, President of Integrity First, commented that, "With this augmentation in our product line, we feel Integrity First Financial can aggressively serve the communities of the 28 states in which we lend." Integrity First's sustainable growth has resulted in local and national recognition in Inc. Magazine's list of "500 Fastest Growing Privately Held Companies." For more information about how to work with Integrity First, please contact Tim Larin (925.980.6080).

Wells Fargo's mortgage president Mike Heid is retiring after 28 years with the company. After the conclave was completed and white smoke emerged from the Des Moines headquarters, Franklin Codel, currently head of mortgage production, was selected to take the reins on October 1 although Mike will stick around through the end of the year - lots of drawers to empty and acrylic trophies to pack for this short timer after only three decades... And congrats to Franklin, a UT business school grad! Hook 'em.

Also congrats to Carl "Chip" Clements who has joined Kentucky's Forcht Bank as Executive Vice President of Mortgage and Loan Operations. Most recently, he was the Senior Vice President of Lending Operations and Loan Servicing for Republic Bank & Trust in Louisville.

Hey, if you're in Austin on Tuesday come say hello. I will be speaking at the Central Texas Association of Mortgage Professionals' lunch!