Recently an older gal pal exclaimed, “It’s all fun and games until your metabolism changes.” Are builders changing their business models to assist home buyers? Here's why new construction at lower price points can make the biggest difference in for-sale inventory levels, and pressure on prices.

Capital Markets

What are capital markets personnel watching? No one owns a crystal ball, and Alan Greenspan missed calling the top of the stock market by 3 years. Even a stopped clock is right twice a day, right? I received this note from a well-known company's cap markets manager. "Former Federal Reserve chairman Alan Greenspan spoke out about a bubble Monday afternoon. A lot of us in Cap Mkts have been feeling like the buoyant consumer sentiment numbers don't quite align with the hard economic data we are seeing, and it is only a matter of time before something gives.

"The main takeaway from Greenspan's interview was those looking for excess in the stock market might be better off worrying about bond prices - where he thinks the actual bubble is. Greenspan's view is that real long-term interest rates are much too low and therefore unsustainable, meaning when they move higher they are likely to move reasonably fast. Bond prices are not currently being discounted in the marketplace and despite consensus on Wall Street for persistent low rates, Greenspan isn't alone in warning they will break higher quickly when they do break, mainly as the era of global central-bank monetary accommodation ends.

"Real Treasury yields sit far below where actual growth levels suggest they should be and it's only a matter of time before inflationary pressures hit the bond market. When the bond-market bubble collapses, long-term interest rates will rise and we will enter a stagflation economy not seen since the 1970s - not good for our mortgage prices. Surging real interest rates is not something us in the industry want to hear.  I've been involved at companies where the goal set by senior management is done a year out and not revised until after-the-fact, a catastrophic recipe that leads to knee-jerk reactions later."

In terms of the economy, the last week of July showed moderate economic growth in Q2 as real GDP growth increased to a moderate 2.6 percent annualized rate for the quarter, and more of the same is likely to come in Q3 with balance sheet reductions coming this fall. The Employment Cost Index as well as compensation costs for the past year each grew slightly, revealing that the growth rates of both wages/salaries and benefits are increasing. New home sales rose by 0.8 percent, and though the unit annual rate of 610,000 was below the March peak, the trend looks positive regardless. Remember that the FOMC voted to keep the fed funds rate range unchanged at 1.00-1.25 percent, and it is not expected to change until the December 12/13 FOMC meeting or even later, as weak inflation readings could delay the next rate hike.

Lower oil prices played a large role in the much slower pace of real GDP growth in 2016, but the rebound in oil prices between February 2016 and February 2017 were on pace to boost expenditures for the coming year. However, real and nominal oil prices recently declined over 20 percent from the cycle peak, posing huge risks to energy-related components of real GDP if the decline continues. Wells Fargo equity energy analysts expect rig count in the lower 48 states to peak in the third quarter and decline by roughly 50-100 rigs by early 2018, which matches the behavior witnessed in the seven other cycles since 2000 in which oil prices fell more than 20 percent. And though declining oil prices and rig counts alone are not typically enough to seriously threaten overall structural investment, Wells Fargo's adjusted outlook now looks for outlays to rise about 4 percent in 2017, only to fall 3.8 percent in 2018. And though lower oil prices could be a net positive for the U.S. economy as they lift consumer spending, business fixed investment is expected to post a weaker reading, with the largest decline in structure investment. In short, even if an advance quarterly reading is positive, downward revisions could be lurking in such a volatile market.

Policymakers were confronted with an all too familiar problem after last week's FOMC meeting: inflation came in below target while the labor market continues to tighten and positive economic growth remains steady. Despite a below-estimate unemployment rate headline and core inflation have both trended lower, but puzzled economists struggle to agree on what factors could be causing this. One explanation suggests the supply side has taken a greater role, as competitive pricing in wireless telephone services as well as retail and automotive sectors has brought about price wars which hinder inflation. Furthermore, demand side drivers of inflation will take time to adjust to the equilibrium of scarce labor as employers adjust wages appropriately. As for the FOMC, participants should question not only the slack left in the labor market, but to what extend the demand side is even driving inflation in the first place.

Shifting to the temporal, flighting bond markets, we had a nice little rally to start August off. Yes, we had some weak data that drove rates, a weak economy generally leading to lower rates. Using the 10-year risk-free T-note as a proxy for rates, its price improved by nearly .375 and its yield fell to 2.25%. Agency MBS prices rallied nearly .250.

This morning we've had the MBA's survey of last week's applications (not the same as rate locks, or credit pulls): -2.8%, purchases, at -2%, are the lowest they've been since March. The July ADP Employment report hit (+178k, June revised higher), and then later is the ISM-New York Business Conditions Index. The 10-year is currently at 2.28%and agency MBS prices are worse a few ticks (less than .125) versus yesterday afternoon.


Vendor News and Acquisitions

Fiserv, a provider of financial services technology solutions, is growing its mortgage technology platform by acquiring PCLender, a provider of internet-based mortgage solutions for community banks and credit unions. A few months ago, Fiserv reached an agreement to acquire Monitise, a London-based provider of digital banking technology, for $90 million in cash. Fiserv said that it views PCLender's platform as a "complement" to the company's current offerings because PCLender's solution "simplifies origination, document collection and compliance reporting, streamlining consumer direct and retail mortgage and HELOC loan origination."

Loan Vision, an accounting and financial management vendor, announced that Melville, New York-based US Mortgage Corporation has made the decision to switch from Intuit Quickbooks to the Loan Vision accounting software for mortgage banks with plans to go live on the platform in September. Scott Milner, President of US Mortgage Corporation, said his team made its final decision based on three criteria they determined to be most important: The company needed a tool that was mortgage specific, management wanted a tool that would provide real time information to senior managers and branch managers, and US Mortgage Corporation wanted a tool that would make it easier for the company Treasurer to provide senior management with actionable information based on company data.


Jobs, Products, and Personnel

"Western Bancorp has made yet another great hire by welcoming Lincoln Heacock as its new CTO. Lincoln brings more than 20 years of product and technology experience to help deliver usable, secure, and mobile applications for the fintech industry. Lincoln grew a de novo business from 1,200 customers to over 350,000 customers while growing revenues by over 2900%, and has demonstrated achievements in technology recovery projects, strategic roadmaps and business alignment initiatives. Lincoln will be a critical part of Western Bancorp's executive team to help lead the organization."

Some companies are seeing volatile sales this year-sales are way up one month and down the next. Keeping sales growing while minimizing dips is key, so I checked in for advice from Rosalie Berg, CEO of Strategic Vantage, a top-notch marketing, public relations and social media agency that specializes in the mortgage industry. Rosalie made a valid point. "If companies want to grow, they need to become a household name with their target audience-whether that audience is potential loan officer recruits, referral partners, borrowers, lenders or investors. Businesses will have a hard time being the go-to company if they're not well recognized and trusted, and at Strategic Vantage we continuously solicit press coverage for our clients, so they get mentioned in the press each month, not just sporadically. Being top of mind has been a game-changer for our clients." If you'd like to get public relations, marketing or social media advice or services, reach out to Rosalie Berg or you can visit her company's website

"DocProbe, the nation's premier providers of trailing document fulfillment services, is currently looking to further expand our close knit nationwide Business Development team. The is an exciting opportunity for Senior Business Development Executives with experience selling to Mortgage Bankers, who possess the drive and ambition to make calls, network, and have the face-to-face visits necessary for success. The ideal candidate possesses outstanding interpersonal skills and has an established mortgage banker client base within which they can network. Interested contenders may confidentially submit resume for consideration to Rachel Rosenzweig. We are also excited to announce that we will be attending the Lenders One Summer Conference in Minneapolis 8/6-8/9 to showcase our services. Please click here to schedule an appointment with a specialist."

Impac Mortgage Corp. is breaking ground in Florida! The publicly traded national lender with wholesale, correspondent, and non-delegated channels, and boasting a full product line, steady volume growth, and industry longevity, is establishing an operations base in Ft. Lauderdale. "We're looking for operational staff, both leadership and support roles, including underwriters and account managers to support our East Coast clients in addition to both inside and outside sales professionals" said Todd Kesterson, VP, Wholesale and the site leader of the new facility. All positions come with a competitive salary and full benefits, including 401K. Interested? Going to FAMB? Stop by the Impac booth and meet Todd in person. Or, submit your resume directly to Todd Kesterson.

Do you have the tools to analyze and enhance your mortgage business? Spiegel Accountancy Corp. (SAC) has joined forces with 5X Solutions, a mortgage research, data analytics and technology company, to provide you with better insights into your lending business. The professional alliance combines the powerful technology of 5X Solutions' flagship business intelligence product, Telemetry MBI, with the tax and audit experience of SAC's experts to offer you unique financial solutions to improve efficiency and optimize performance. Going to TMC's Summer Conference? Schedule a meeting through Beeta Leecha learn more. Or, for a no-obligation consultation and additional information, click here.

Ross Mortgage, a regional, full-service residential mortgage lender headquartered in Troy, Mich., recently announced that Tim Ross has transitioned to chief executive officer and promoted Tim Pascarella from vice president and co-branch manager to president of the company. Pascarella began his career with Ross Mortgage 15 years ago, and will supervise Ross Mortgage's statewide network of branch offices, monitor production, and drive company goals. "Tim has been a key contributor to company development throughout his career and has the proven ability to grow our mortgage banking programs with a clear vision that will benefit Ross Mortgage," said Ross. With more than 30 years of experience, Tim Ross expanded Ross Mortgage from a single-office start-up to a multi-branch, full-service company. "I am proud to be represented by a team of mortgage professionals who have built the good name of Ross Mortgage in the communities we serve," said Ross, who will lead the company's senior executive team and will work toward the continued expansion of Ross Mortgage across the Midwest. 

Congrats to Bill Shirreffs who has recently joined LoanStream Mortgage (OCMBC) based in Irvine, as its SVP, National Production Director!

And to Greg Talmadge. Mortgage Broker Services Inc.; dba/Kiel Mortgage, dba/Elliott Bay Mortgage, promoted Greg, their EVP of Capital Markets and Risk Management, to President. Greg has over 25 years in the industry with experience in Originations, Secondary Marketing, Capital Markets as well as Risk Management.

In lender news, Starkey Mortgage announced the launch of its Reverse Mortgage Division headed up by Ken Witte, branch manager, reverse mortgage specialist.