December already? There are all kinds of scurrilous M&A rumors out there, or of rumors about companies going belly up, and will continue to be. And have you noticed that, officially, every company think it’s “the greatest thing since sliced bread” when it is purchased? Bread…the total amount of cropland on Earth amounts to 4.62 billion acres, according to a new report from the U.S. Geological Survey. Interestingly, that's about 15 to 20 percent more than earlier estimates, as some areas were previously mapped inaccurately or unmapped altogether. There are 7.6 billion people on the earth. And there are roughly 15.8 billion acres of habitable land. Trivia for Happy Hour!

Servicing Deals

What's happening in the market? Yesterday I discussed how servicing values move. Certainly, one can't dismiss prepayment speeds - no one wants to pay a point for an asset that pays off in three months. Let's play some catch up and look at some deals over the last month or two so you can obtain a sense of the deal flow.

Phoenix Capital brought out Project Iceland $256mm Conventional Bulk + $365mm Government Bulk, Project Aardvark $268mm Conventional Bulk, Project Nighthawk $110mm Conventional Bulk + $30-45mm/month Conventional Flow, and Project Panda $779mm Conventional Bulk Project Paradigm $1.4B Government Bulk.

Prestwick Mortgage Group was the exclusive broker for two packages recently; the first a $524 Million Southeast FNMA/FHLMC. The portfolio is $146,409 average unpaid principal balance, 4.059% WAC, 0.2534% weighted average net service fee, 77.6% retail, 37 months of weighted average seasoning, 49% of the loans are on properties in Virginia; 21% in North Carolina; 15% in South Carolina; and the remainder in 19 other states, 1.425% delinquency ratio (30+), and 750 WaFICO. The second is $266 Million New Jersey/Pennsylvania FNMA/FHLMC. The package is $211,647 average unpaid principal balance, 3.925% WAC, 0.2575% weighted average net service fee, 100% retail originations, 33 months of weighted average seasoning, 69.6% of the loans are on properties in New Jersey; 12.6% in Pennsylvania; 10.5% in New York; and the remainder in 14 other states, with 1.67% delinquency ratio (30+), including foreclosures.

MIAC has had a few offerings recently. The first a $339mm agency package: $239,315 average loan size, 100% fixed rate, 50.79% FHLMC Gold, 49.09% FNMA A/A, 4.501% WAC, weighted average delinquency rate of 0.42%, weighted average loan age of 7 months, 730 WaFICO, 100% retail. The second is $570mm of agency product: $109,365 average loan size, 99.94% fixed rate, 0.06% ARM loans, 100% FHLMC ARC, 3.979% WAC, weighted average delinquency rate of 0.65%, weighted average loan Age of 48 months, 747 WaFICO, with 37.56% retail.  

Incenter Mortgage Advisors has had several. #104381 $35mm Prime Jumbo....48 loans, 3.96% WAC, 71.00% Original LTV, 17 mos WaLA, 764 WaFICO, with 100% FL originations. #104379 $4.16mm HELOCs....27 loans, 5.40% WAC, 81.11% Original LTV, 290 WaRemaining Term, 2 mos WaLA, 21.15% DTI, 749 WaFICO, 71% Owner Occupied, with 60% GA originations. #104390 $13.23mm Scratch & Dent....97 loans, 4.62% WAC, 88.18% WaLTV, 292 WaRemaining Term, 54 mos WaLA, 702 WaFICO, 38.74% DTI, 89% Owner Occupied, with 43% OK originations.

#104380 $9.7mm 5/1 & 7/1 ARMs....23 loans, 4.20% WAC, 73.54% Original LTV, 358 WaRemaining Term, 2 mos WaLA, 742 WaFICO, 3.5.41% DTI, 63% Owner Occupied, with 72% GA originations. #104388 $9.28mm Scratch and Dent....31 loans, 4.04% WAC, 84.83% Original LTV, 351 WaRemaining Term, 5 mos WaLA, 729 WaFICO, 41.35% DTI, 93% Owner Occupied, with CA (23%), CO (13%) and FL (24%). #104399 $14mm QM Jumbo 30yr & 15yr....22 loans, 3.96% WAC, 72.93% Original CLTV, 759 WaFICO, and 90% Owner Occupied.

IMAC #104455 $10mm (18 loans) NYC Investor Hybrid ARMs Loans: $9.7mm UPB, 5.524% WAC, 4.5% Reset Margin, 6/2/6 cap, 51.20% LTV, 5 mos WALA, 745 WaFICO, 100% Rental Prop, 100% NY production. IMAC #104431 $21.86mm (29 loans) Jumbo Fixed: 3.90% WAC, 72.29 Org CLTV, 340 Wa Remaining Term, 2 mos WALA, 768 WaFICO, 33.66% DTI, 100% Owner Occupied, CA (31%), IL (47%), and WI (9%). IMAC #104433 $4.38mm Second Liens (35 loans): 5.57% WAC, 81.01% CLTV, 282 Wa Remaining Term, 2 mos WALA, 748 WaFICO, 26.72% DTI, 75% Owner Occupied, with GA (35%) top state. IMAC #104426 $37mm (39 loans) Jumbo 7/1 ARMs: 4.27% WAC, 68.54% CLTV, 754 WaFICO, 35.59% DTI, 81% Owner Occupied, with CA (87%) top state. IMAC #104422 $6.2mm (29 loans) Bank Originated Hybrids (2/2/5 Cap Structure): 5.411% WAC, 79.14% CLTV, 694 WaFICO, 33.97% DTI, and 2.25% Reset Margin. IMAC #104467 $4.4mm (35 loans) HELOCs & Seconds: 5.58% WAC, 81.204% WaCLTV, 749 WaFICO, 26.56% DTI, 73% Owner Occupied, with 60% GA occupancy.

IMAC #104403 $74mm Jumbo ARMs (101 loans; 5/1 $1.9mm; 7/1 $20.4mm; 10/1 $51.3mm): 3.58% WAC, 72.99% CLTV, 343 Wa Remaining Term, 18 mos WALA, 768 WaFICO, 32.26% DTI, 70% owner occupied, 100% Florida.

Capital Markets

The prices of most things are determined by supply and demand. Chinese portfolio investments, including equities and bonds, in foreign markets totaled $420.6 billion through June, an increase of almost 35% over the comparable period last year, the State Administration of Foreign Exchange said. Almost a third of the total went to the US, making it the top destination for Chinese portfolio investments.

On a similar topic, IFR Markets released an update on month-to-date agency MBS issuance. November gross issuance is poised for the third largest month of the year trailing January ($131.8bn) and likely August ($116.4bn). Projected new issuance, $33bn area, would be the second largest trailing only January's $58.8bn.

Morgan Stanley is advising clients to bet on a yield curve flattening via the 2 year and 10 year spread. Right now, the spread is 58 basis points and Morgan is forecasting that the difference in yields will go to 0 next year. Continued demand from global central banks will support demand for government debt to begin with, and if growth comes in stronger than expected, short rates will increase faster. If growth comes in lower than expected, then demand for duration will keep the 10-year yield low. ARM loan anyone? (Yesterday the 2s10s spread expanded to 62 bps from yesterday's 59 bps while the 2s30s spread increased 4 bps to 106 bps.)

LIBOR news? The Bank of England is expanding its working group that is developing an alternative to the London Interbank Offered Rate in the hopes of getting an alternative index up and running by the end of 2021. The central bank said it is bringing fund managers and nonfinancial companies to join banks in the working group.

Banks continue to relax lending standards on business, commercial and industrial (C&I) loans and mortgages, as banks' willingness to make loans has gained some stability. At the start of an economic expansion, banks appear very willing to extend credit. But as the cycle matures, they become less willing to extend credit, and, in turn, tighten their standards in a cautionary nature.

Banks have reported increased competition from other bank and nonbank lenders, which in part, has led to the easing of standards. Continued loosening of lending standards of C&I and mortgage loans points to sustained confidence in the current state of the expansion. However, banks continue to tighten standards on credit card and auto loans, which may signal some caution in the consumer sector as the economic cycle ages.

With an unemployment rate of just 4.1 percent, and in an environment of modest income growth and surging consumer confidence, theory would suggest robust loan demand. Loan demand, however, remains muted, pointing to a change in consumer sentiment towards debt. Credit card demand has remained unchanged, while there has been a recent uptick in auto loan demand. Possibly attributable to rebound effects in auto-sales due to damage from the recent hurricanes in Texas and Florida. Consumer demand for mortgage loans has slowed, which is expected to reverse as existing home sales edge higher off a recent slowdown.

Without an increase in income growth, loan demand should continue to increase modestly. The Wells Fargo Economics Group forecast calls for an uptick in disposable personal income in Q2 2018, because of the proposed tax reform, followed by a slowdown in disposable personal income growth through the last year of its forecast (2019). Such slowing in income growth suggests consumers may increasingly turn to borrowing to fund their consumption habits in the future.

Not the best day in the ol' bond market yesterday. The 10-yr yield approached its October high of 2.48%. It wasn't the economic news, it was a report that Senator John McCain emailed a statement to reporters noting that he will vote in favor of the Senate tax bill. The selling continued until the early afternoon, but only a portion of the yield curve steepened. The 2s10s spread expanded by a basis point to 63 bps while the 2s30s spread narrowed by a basis point to 105 bps. Agency MBS prices worsened about .250.

Although we're seeing a bit of a bounce back in the bond market, there is not much in the way of market moving news this morning: the November ISM Index, US Markit manufacturing PMI, October construction spending & November ISM manufacturing PMI, and then later auto and truck sales. Rates have come back down in the early going: the 10-year is yielding 2.38% and agency MBS prices have improved .125-.250 from Thursday's close.

Interested in pursuing a career in inside sales? "Parkside Lending is looking for people with mortgage experience and want to grow a career in wholesale inside sales based out of our Chicago office. Parkside has many open areas to call on for inside sales. Start 2018 with a company that is looking to leap into the year with exciting changes." Confidential Inquiries can be submitted to Rick Nelson, Director of Recruiting, or sent to Parkside.

Homespire Mortgage, formerly New America Financial, is pleased to announce the addition of Arch Williams to its Executive Leadership team as VP of Business Development for the Southeast Region. Arch joins Homespire Mortgage with over 22 years of experience in the mortgage industry, specializing in the growth and development of residential mortgage branches. Arch will provide leadership and management to the expansion of the company's presence into the North Carolina, South Carolina and Southern Virginia regions. "Arch brings a wealth of experience and industry knowledge to his position at Homespire Mortgage. He will play an integral part in the company's continued growth," said Chief Operating Officer, Todd Sheinin. Arch Williams joins Homespire Mortgage during a period of rapid growth & expansion. In 2017, the company was ranked on the Inc. 5000 list of Fastest Growing Companies in America and has expanded its presence into 17 states and the District of Columbia since its founding in 2006.

Morningstar Credit Ratings recently affirmed several vendor rankings for Clayton Holdings, LLC and its Green River Capital (GRC) and Red Bell Real Estate, LLC subsidiaries, confirming the outlook for all the rankings is stable. Brien McMahon, chief franchise officer at Radian, the parent of all three companies, said, "In reaffirming their rankings, Morningstar repeatedly called out the experience, capabilities and industry leadership that reside within these companies, which are characteristics that help drive their strong market position as real estate services and technology providers." For more information on each of the rankings, click here.

Radian is adding to its Georgia sales team and is currently seeking an experienced Senior Account Manager in the Atlanta area! Interested? If so, you will be responsible for maintaining and growing existing account relationships, developing and implementing strategies and initiatives to achieve NIW growth objectives, and building on and ensuring customer loyalty. Qualified candidates will have 3+ years of sales experience, preferably within the mortgage industry. This is a great opportunity to put your industry knowledge to work for one of the top mortgage insurers in the country! Please apply directly on our Radian Careers page.

Summit Valuation Solutions is pleased to announce a strong endorsement by the Morningstar rating agency. Noted within the press release, "The Morningstar classification is a direct reflection on Summit's robust vendor oversight program coupled with a dedicated and experienced workforce. The Morningstar classification recognizes the firm's operational infrastructure and client driven performance." Another important citation by Morningstar: "Summit's flexible business and technology model enables the firm to pursue scalable growth on a diversified basis". Summit Valuation Solutions recently became a wholly owned subsidiary of The William Fall Group. Please contact Ron Ahlensdorf Jr. for more information regarding how Summit may be able to assist you in providing valuations on your residential and commercial properties.