There's a lot of data swirling around the demographic black-hole of lending known as "the Millennials." I've come to the conclusion that this is because the majority of analysts fall into that age category and deep down they enjoy writing about themselves. It's just a theory right now. Zillow writes, "Consider the diverging cases of Boston-Cambridge, Massachusetts and Washington, D.C. They are both versions of the archetypal, walkable cities that many associate with the modern 21st century knowledge economy. And both have large populations of young adults in school or just starting their careers. In this analysis, we compare the housing choices of Millennials-young adults ages 18 to 33-in these two cities." Archetypal? I'll have to look that up - anything with more than three or four syllables and my brain skips over it.

Speaking of jobs and production, the STRATMOR Compensation Connection Survey showed that LO compensation was up 13% in 2013 driven by higher production volumes and that LOs at independent mortgage companies made on average 25% more than bank LOs.  Don't miss the opportunity to participate in STRATMOR's Compensation Connection Survey. By popular request, STRATMOR has reopened all of the original modules for a second round of evaluation but will be closing the survey to participants soon. Be armed with compensation data from 40+ participant companies as you head into budget season.  The results will be cumulative from both rounds.  For full details, visit the 2014 STRATMOR Compensation Connection Survey website or email Angie Middlebrook for more details.

The U.S. Census Bureau's Survey of Construction, which is jointly funded by the Department of Housing and Urban Development, has released its 2013 New Housing Characteristics tables. This release includes never before published data on age-restricted developments, presence of homeowners association, sewer and water systems, framing material and laundry. The report provides estimates of new privately owned residential structures in the U.S and the four regions.

Are we suffering from first-time home buyer blues? We'll try to overlook student debt ratios, relatively stagnant wages over the past six years, and assume those looking for homes fall outside the current beliefs surrounding millennials; in a nutshell, there are still some challenges for these people. As Michelle Jamrisko and Alexis Leondis write in a recent Bloomberg article, "The median down payment for the cheapest 25 percent of properties sold in 2013 was $9,480 compared with $6,037 in 2007, the last year of the previous economic expansion, according to data from 25 of the largest metro areas compiled by brokerage firm Redfin Corp. The higher bar is a symptom of still-tight credit that is crowding out first-time buyers even as interest rates remain near historical lows. Younger adults, who would normally be making initial forays into real estate, are among those most affected, weakening the foundations of the housing market and limiting its contribution to economic growth." There are a number of factors at work here, one being the down payment. As pointed out in the article, "the median down payment for the lowest 25% of homes was 7.5% of the sales price last year, which is up from a low of 3.1% in 2006 and compared with an average 4.2% from 2001 through 2007." For properties in the middle 50%, the share rose to 8.8% in 2013 from an average 8.2% in the seven years leading to the last recession, and for the top quarter it climbed to 20.9% from 19%. As many know, a contributing factor is that fewer first-time buyers are applying for loans backed by the FHA, which require smaller down payments, after the government agency boosted mortgage-insurance premiums.

Most knew going into 2014 that business probably wasn't going to be anything to jot down in your memoirs. Wells Fargo's Economics Group is normally a straight shooting bunch, rarely are they too bullish, or too bearish, which is good because bi-polarity affects many companies these days. The group writes, "The housing market continues to have a difficult time putting the legacy of this past decade's epic bust behind it. Sales of both new and existing homes have been disappointing through the first seven months of this year. Although the sales and new home construction numbers have been disappointing, the housing sector continues to gradually chip away at many of the challenges hanging over the industry." Coming out of an "unseasonably" cold winter, into an "unusually" hot summer, right into an election year, I can't think of another excuse to explain lackluster mortgage numbers than to say demand just isn't there at the moment.

Not too long ago the topic du jour in banking was all the REO's weighing down the market, causing home price stagnation and turning gentlemen into tyrants....that's right, I'm looking at you Florida. OK, so maybe it wasn't that bad, and maybe Florida wasn't the whole problem (or was it?), but things have slowly been improving as Zelman & Associates, write that total REO inventory is down 57% from the peak. "While the 2Q14 pipeline of loans in delinquency and the foreclosure process was down approximately 17% year over year and 44% lower than the peak in 4Q09, there was still an excess of 1.4 million more homes in some form of delinquency or foreclosure relative to a more normal level. The pace at which these homes enter and exit the REO process impacts home price trends, investment opportunities for single-family REITs, potential for-sale inventories and existing home sales. We summarize all of the moving parts in this monthly report, including notices of default and REO filings, REO inventory trends and lender-owned REO listings. Encouragingly for home pricing, the various measures across the foreclosure spectrum, including default notices, REO filings and distressed inventory levels, have posted consistent year-over-year improvement while incremental supply coming to market has stabilized. For the existing sales market, the continued reduction in REO sales is a net negative to closings, but as the pipeline shrinks the impact is becoming less onerous."

As a reminder, last week in the Federal Register (79 FR 50835), the FHA published a final rule. Effective for FHA-insured mortgages closing on or after January 21, 2015, it revises FHA's regulations to prohibit an FHA approved mortgagee from charging the mortgagor interest through the end of the month in which the mortgage is being prepaid, allowing them instead to charge interest only through the date the mortgage is prepaid, and prohibits the charging of interest beyond that date. This change to FHA prepayment regulations is in response to the Ability-to-Repay and Qualified Mortgage regulations (ATR/QM Rule) that became effective January 10, 2014. The ATR/QM Rule defines "prepayment penalty" in closed-end transactions as "a charge imposed for paying all or part of the transaction's principal before the date on which the principal is due." The ATR/QM Rule specifically excludes a post-payment interest charge currently allowed by FHA regulations as a prepayment penalty for FHA loans closed before January 21, 2015. For FHA loans closed on or after January 21, 2015, a post-payment interest charge will be considered a prepayment penalty by the ATR/QM Rule, thus making it necessary for FHA to amend its regulations. Here is one take on the change.

(This prompted one vet to write me, "I find the new HUD Rule rather amusing. HUD makes it sound like the EVIL lenders have been perpetuating a scam on unsuspecting consumers by charging post payoff interest when in fact it is HUD itself that has been REQUIRING the post payoff interest for more years than I can remember.  It is amazing how accountability is so easily transferred.  HUD has no culpability, only the greedy Lenders.')

PennyMac Financial increased its servicing credit facility. A look at its 8-K shows it stated it amended its revolving credit facility used to finance the acquisition of mortgage servicing rights with Credit Suisse. The credit facility was increased to $157mm from $117mm. The total amount that can be borrowed under the credit facility is based upon a percentage of the market value of the servicing rights. Although the increase in the facility is relatively small compared to the overall debt financing available at PFSI, it does indicate PFSI is actively looking to purchase additional MSRs

Homebridge Wholesale accepts Conventional transferred appraisals.

First California Mortgage recently announced a spate of branch openings, including a Dallas branch (in addition to San Antonio, Amarillo, Bryan and Houston), San Diego, a second branch in Los Gatos, CA and now has a branch in Davis, CA.

Franklin American is requiring VA IRRL loans to include a comparison document between the loan to be refinanced and the proposed new loan such as VA IRRL Comparison statement. In addition, USDA loans do not allow electronic signatures.

There's an old joke about two hikers confronted by a bear, and one starts to run. The other yells, "You can't run faster than a bear," and his "friend" yells back, "I don't have to - I just have to run faster than you!" That is exactly what we're seeing in economies around the world. France and Switzerland are flat, China is questionable, Germany's economy shrank by 0.2% last quarter, Italy and Brazil are in a recession, and the Russia/Ukraine conflict is dampening things even further. That leaves the United States, where the slowly improving economy looks good on a relative basis.

Thursday was filled with job news. Applications for unemployment benefits in the U.S. were little changed last week, about as expected. But the total number of people on benefit rolls fell to the lowest level in more than seven years. ADP's numbers...well, once again ADP did not give us a great correlation to today's numbers.

The job news continued today with August payrolls and employment data. Non-farm payrolls (+209k prior, expected around the same), came in at +142k - disappointing (and June and July were revised downward); the Unemployment Rate (6.2% previously) came in at 6.1%; and average hourly earnings came in at +.2%.

Soon after the employment numbers bonds have rallied. The 10-yr T-note is sitting around 2.41% after closing Thursday at 2.45% and agency MBS prices are better by .250-.375.

Jobs And Announcements

Homestar Financial, a Georgia-based mortgage banking firm is seeking qualified Retail Branch Managers in Florida "who will enjoy extraordinary commissions and manager compensation. With over 40 offices, Homestar is a leader in the Southeast in USDA, FHA, VA, conventional and jumbo loans.  Homestar is a company that is focused on closing loans for originators and compensating them for what they accomplish. If you would like to join a company that you will never leave, contact John Berry, Division Manager, for a confidential conversation."

And The Wholesale Lending Division of Carrington Mortgage Services, LLC announced that it has appointed David Grosteffon as divisional sales manager for Strategic Accounts. In his new position at Carrington, Grosteffon will manage the company's focus on establishing strategic alliances with leading community banks and credit unions. For community banks and credit unions interested in learning more about Carrington's government programs with qualifying credit scores down to 550, contact David Grosteffon and/or visit Carrington, by the way, just became a Ginnie Mae Master Sub Servicer, announced plans to expand its operations in the state of Indiana creating up to 360 new high-wage jobs by 2019, and is licensed in 45 states.

For those wondering about your career, Carrington Mortgage Services is having a Career Webinar next Thursday, September 11, from 10-11AM PDT. "Join Carrington Mortgage Services and Ray Brousseau, EVP Mortgage Lending, to learn about opportunities for Loan Officers, Managers and Branches...great compensation, benefits and wide variety of programs that can help you take your performance and sales to the next level." Here is the Registration Web Link.

Congrats to Jon Mulkin who is leaving BBVA Compass and going to New York City to run mortgage for Morgan Stanley.