Our Census Bureau is at it again. Did you know that 5 million U.S. veterans are living in areas designated as rural between 2011 and 2015 per a new report? Rural veterans had median household incomes more like those of rural non-veterans than urban veterans ($53,554 compared with $52,161 and $59,674, respectively). The poverty rate for all rural veterans was 6.9 percent but unfortunately increased by level of “rurality,” to a high of 8.6 percent for veterans in completely rural counties.

You can't tell the players without a program...

It isn't the first, and won't be the last in 2017. Remember all those rumors about Stearns Lending, LLC? Well, they true. Flagstar Bancorp, Inc. announced the signing of a definitive agreement under which it will acquire the Residential Mortgage Delegated Correspondent Lending platform of Stearns along with certain related assets. Things should wrap up by early March. Change is constant: it wasn't that long ago - 2015 - that Blackstone took control over Stearns.

"The acquisition of Stearns' correspondent platform gives us a tremendous opportunity to expand our market share in the delegated space," remarked Alessandro P. DiNello, Flagstar's president and CEO. It will certainly shift some volume from the non-bank to bank category. "Flag" is no slouch: for the nine-month period ended in September, FBC produced $18 billion through its correspondent channel of 729 counterparties, or 75% of total originations (this was the most recent breakout for correspondent production). The company originated a total of $34.5 billion in 2016. Stearns' business consists of approximately 250 correspondent relationships accounting for over $7 billion of agency and governmental residential mortgage loan production annually. "Stearns' employees and subcontractors associated with the delegated business will transition to Flagstar."

Assuming A+B=C, and not A+B= some portion of C, upon closing "the acquisition will make Flagstar the 4th largest correspondent mortgage loan originator in the United States, based on year-to-date volumes through September 30, 2016 as reported by Inside Mortgage Finance." [Let's hope there was no overlap of those 250 correspondent clients, right?]


Government & lending

"Well the good old days, may not return.

And the rocks might melt, and the sea may burn...

Well some say life will beat you down.

Break your heart, steal your crown."

I am positive that Tom Petty was not thinking about regulations when he wrote those lyrics. But plenty of originators seem to want the "good old days" back when it comes to regulatory reach and expense. An administration official told reporters that Dodd-Frank "in many respects was a piece of massive government overreach" and that some of the rules within the law, passed in the wake of last decade's financial crisis, "may have even been unconstitutional." Trump said at a prior meeting that Dodd Frank had damaged the country's entrepreneurial spirit, limited access to credit, been horrible for business and was a disaster. "Disaster" may be a stretch.

So last Friday, Donald Trump signed an executive order which directed a review of Dodd-Frank. There were the expected breathless headlines in the business press (with a stroke of a pen, Donald Trump eliminates Dodd-Frank, he's "gutting" Dodd-Frank), however this is just a "review and report back to me" order. A full repeal of Dodd-Frank would be impossible, and probably would not be supported by the lending industry: we have spent the past 6 years becoming compliant with Dodd-Frank - do we really want to have to adopt some new system?

Trump has signed more than 20 executive orders, presidential memorandums or proclamations since taking office a month ago. The Constitution gives every president executive power but doesn't define executive orders. Here is a primer on what Congress says about executive orders. They are not final, and they are not automatically the power of the land. Barack Obama issued 277 orders during his presidency, of varying degrees of success; Franklin Roosevelt issued over 3,700! The Administration's ability to mandate change with respect to legislative and regulatory reform is limited, as many key financial regulators are independent agencies. Particularly with respect to the CFPB, President Trump's ability to push for reform is limited so long as Richard Cordray remains director. But would a "CFPB board" be more difficult to effect predictable and controlled change?

As Brent Nyitray, Director of Capital Markets with iServe Residential Lending, observes, "The unintended consequences will be addressed, but the structure will probably remain in place. These will turn out to be addressing the CFPB and small banking regulation in order to get credit flowing for smaller borrowers, addressing the Volcker rule to encourage market making, and the fiduciary rule, which many financial advisors interpret as a gag order and a limitation of the investment options menu. What does this mean for the mortgage business? Probably not much, although the biggest potential is in an easing of CFPB enforcement and an increase in mortgage products as the private label securitization market returns." 

The industry and the government arguably want changes to parts of the financial system that result in better consumer choices, help growth and competition, etc. But plenty of folks chomping at the bit should remember that the system needs to pass legislation to accomplish much of substance, though Trump's move is an effort at momentum. For example, the U.S. Treasury has months to consult with all the agencies to meet the principles. It's a study, and a process that must play out. Hensarling's Choice Act will probably be re-introduced, but anything that impacts the budget will take time and effort and creative thought.

From bank's perspective on their lending practices, if there is any restraint on bank lending it is probably international capital rules and not Dodd-Frank. Bank are making plenty of loans. "Higher capital rules can slow lending but Dodd-Frank doesn't set capital requirements. Those are decided internationally by regulators from 27 countries that gather at the Basel Committee on Banking Supervision."

So President Trump issued an Executive Order establishing Core Principles for financial regulation. Under the Order, the financial system will be regulated in a manner consistent with those principles. The Core Principles are to: (a) "empower Americans to make independent financial decisions and informed choices" (b) "prevent taxpayer-funded bailouts" (c) "foster  economic growth and vibrant financial markets through more rigorous regulatory impact analysis..." (d) "enable American companies to be competitive with foreign firms..." (e) "advance American interests in international financial regulatory negotiations..." (f) "make regulation efficient, effective, and appropriately tailored" and (g) "restore public accountability with Federal financial agencies and rationalize the financial regulatory framework."

The Order requires the Secretary of Treasury to consult with the heads of the agencies that are members of Financial Stability Oversight Council (FSOC) and report to the President within 120 days of the Order and periodically afterwards on the extent which laws, treaties, regulations guidance, reporting and recordkeeping requirements promote and/or inhibit the Core Principles.

The members of the FSOC, in addition to the Secretary of Treasury, are agency heads of the Federal Reserve, OCC, CFPB, FHFA, SEC, CFTC, FDIC, and NCUA. Dodd Frank reform efforts will be likely be led by White House National Economic Council Director, Gary Cohn and it is hoped he will take a deliberative and holistic approach and that substantial change might not occur quickly. Changes are more likely going to target ways to cut compliance costs, reduce pressure on smaller asset banks, and hopefully change enforcement methods.


Capital markets update

Yesterday we had a rally where bond prices improved and rates dropped. (Yes, they move inversely.) There wasn't much in the way of reasons although ThomsonReuters attributed it to "risk off fashion on renewed concerns about Europe, with a divergence amongst bond yields between bunds and other EU members notably France and Italy (and Spain and of course Greece) on jitters regarding upcoming elections and the increasing voice from anti-EU parties." Of course, that could all reverse itself later this week, right?

The 10-year note improved .625 and the yield ended Monday at 2.41% whereas the 5-year note, which more closely mimics MBS prices, and MBS improved .375. This morning we've already seen the December trade deficit (narrowing to $44.3 billion). Coming up are second-tier numbers like the Redbook Weekly Same-Store Sales Index, JOLTS job openings (Dec), and Consumer Credit, but also the first leg of this week's quarterly Refunding when $24 billion of 3-year notes are auctioned. We find rates slightly higher with the 10-year yielding 2.44% and agency MBS prices worse .125 versus last night.


Jobs and Announcements

In wholesale job news Ditech Wholesale is hiring talented experienced AEs in key markets across the country. "We are focusing on VA, FL, GA and NC on the Eastern Seaboard (led by Tony Petronio); NV, AZ and TX in the Southwest (led by Zeenat Zonte); UT, WA, ID, and Central Valley CA for the Northwest (led by Michelle Thiebaud)  "With the rise in interest rates, we understand that territory expansion and alignment are now at a premium. With our recent move back into Wholesale, we are in a fortunate position to have some wide-open geographies, allowing our AEs the unique opportunity to be first in market and capture large footprints with more customers at their disposal. Our leadership has proven success in strategically navigating through market volatility increasing our overall market share year over year." Click here to review the job description and apply today or contact Owen Welch in HR with questions.

Brad Binder, a 15-year veteran powerhouse producer has joined Homeside Financial as its VP, Retail Sales Manager in its Cleveland market. "I made the move to join Homeside because of their focus on delivering game-changing technology to the mortgage industry-tools like the Homeside Pro app allow me to provide a next-level experience to my clients and business partners." "Brad is a rock-star, his speed and approach are unparalleled. I couldn't be more confident in his ability to grow and lead the Cleveland market," stated Chuck Shackelford, Homeside Senior Vice President & Divisional Manager. "Want to be part of a modern mortgage lender? Brad is seeking loan officers to join his team. For a closer look at what it's like to work at one of the only mortgage companies Glassdoor acclaimed as a 'Best Place to Work,' visit http://recruiting.gohomeside.com today."

iServe Residential Lending's nationwide VA specialist, John McDade, is taking iServe's 2017 VA Tour on the road, with the goal of demonstrating to Realtors and originators throughout the country the amazing attributes of the greatest Veteran's benefit of them all: VA Financing. This often-misunderstood program is made simple to understand by McDade, himself an Air Force Veteran and 40-year mortgage industry officer who has personally originated over 5,000 VA transactions. The tour is scheduled to hit many cities in the areas where iServe has a lending office including Temecula, CA (March 1st), San Diego (March 2nd), and Murfreesboro, TN (March 9th).  Each guest receives a $600 VA appraisal certificate for their client. More dates are on the way. The top five benefits of VA Home Loans? 1) No money down; 2) No mortgage insurance; 3) No DTI restrictions; 4) Common sense underwriting and 5) No flip rules. To inquire regarding the VA Seminar Tour, or, for positions open for iServe branches and originators nationwide, please call Allen Friedman (415.298.2500) or national recruiter Rick Trew (615.306.0585).

Congrats to Pat Gilmore who Silvergate Bank has announced as its senior vice president in charge of its Correspondent Lending Division. This division purchases single family residential mortgage loans originated by the Bank's network of correspondent mortgage banking firms. Pat's extensive residential mortgage industry experience of over 25 years has included key management positions with well-known investors & lenders where he significantly grew the company's sales organization and delivered multi-billion-dollar annual mortgage loan origination volumes. "Pat's exceptional mortgage lending experience, skills and accomplishments make him especially well qualified to lead correspondent mortgage lending for Silvergate," said Derek Eisele, the Bank's president and chief credit officer. Pat's office telephone number is 858-362-6300 (e-mail above) if you'd like to contact him regarding opportunities or signing up as a client.

XINNIX, The Mortgage Academy is offering a complimentary Candidate Interview Guide, "10 Questions for Assessing Candidate Drive," designed to help you find the right talent for your new loan officers. This powerful guide will equip you with the best questions to identify top talent for your sales team. Interested in learning more ways to grow your organization and production in 2017? Sign up for the XINNIX LEADERSHIP Program beginning March 8th or contact us online for more information.

In retail job news Assurance Financial continues to expand after increasing production by 29% in 2016 while opening several offices in new markets throughout the country! The company has a solid reputation for closing loans on time, appealing to anyone wishing to grow their origination business. Our back office supports its mortgage loan originators and branch managers so they can focus on originating more new loans rather than worrying about closing their pipeline. Assurance plans to expand its footprint further this year by selectively hiring producing branch managers and MLOs in good markets. For more information, contact Paul Peters, CMB at 225-239-7948 or visit LendTheWay.com/Careers.