"In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical." I was reminded of this by Brent Nyitray, CFA and a director of capital markets - especially relevant to remember whenever the government continues to try to push lenders and the Agencies to extend credit to "underserved" groups. To be blunt, ask any industry vet and they'll tell you that from a credit perspective not everyone deserves to be able to borrow money to buy a home.

As reported in this commentary Saturday Stearns Holdings, LLC (parent company of Stearns Lending, LLC) saw a majority stake in the company being purchased by a private equity group of Blackstone (with over $300 billion in assets under management). It is important to note that Stearns will not fall under the "Finance of America Holdings LLC, a Blackstone portfolio company" umbrella (which includes PMAC, Gateway, and Pinnacle) but instead is part of a Blackstone fund that provides financial services. In fact per senior management this is the private equity fund's only investment in mortgage banking. Capital is king...

"Rob, with the Volker Rule's recent implementation, the question came up over the weekend about 'covered funds' and certain exclusions from the rule as a whole. Can you shed some light?" Without getting into the tall weeds of investment classification, a covered fund is defined as "an issuing entity that solely relies on Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 ("ICA") to claim exemption from registering as an investment company." At its core, the Volcker Rule prohibits banking entities from engaging in short-term prop trading for the firm's own account, subject to certain exemptions, including market making and certain hedging activities. The rule also imposes limits on banks' ownership and sponsorship of "covered funds", which includes hedge funds, private equity funds, and certain other investments, subject to certain exemptions. Yes, there are provisions which exclude certain entities from the definition of the rule. These include securitizations that are solely backed by loans, leases, extensions of credit, secured/unsecured receivables, servicing rights, or interest rate/foreign exchange derivatives. Under this exemption, securitizations including auto loan, credit card, and student loans, would qualify for this exemption and, hence, would not be classified as covered funds, meaning that banks would not be restricted in owning these positions in their investment portfolios.

Speaking of which, there are about 1.8 million Americans owing at least $100,000 in student debt. That is out of about 43.3 million Americans who have any student loans outstanding - out of about 319 million who live in the US. And for those that noticed the WSJ had an article written by Josh Mitchell Saturday discussing student loans. "Nearly 7 million Americans have gone at least a year without making a payment on their federal student loans - a serious delinquency rate of 17% and that doesn't even include those who are under that year mark! Certainly there are companies like SoFi that refinance student loans, but that category has tripled over the last decade to almost $1.2 trillion.

Lenders are very cognizant of the student loan situation. As far back as April Mountain West Financial began requiring all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower's recurring monthly debt obligation: 1% of the outstanding balance OR the actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower). If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.

Penny Mac posted a new announcement regarding changes to student loans and properties with solar panels.

Speaking of ages and generations, how is that skate-boarder and shredder dude Tony Hawk is 47 years old? For some reason I think of him as some guy in his 20s. And what is the "Next Generation Independent Mortgage Banker training program"? It is an effort to attract new, younger, more diverse mortgage bankers into the industry.

Here is an interesting take on the Millennial generation and the paradox of the labor market. How come, this far into the recovery, are Millennials still living at home with their parents? How is this possible with an unemployment rate of 5.3%? Historically, a 5.3% unemployment rate was associated with booming economies. This speaks to the disconnection between the data and what people actually perceive (and why, despite the data, people think we are still in a recession). According to the data, the labor market is strong, and those that put a lot of stock in that data believe that wage inflation is right around the corner, and therefore the Fed should start hiking rates. On the other hand, some point to the situation with the Millennial generation and say the data is, if not misleading, just not capturing the whole picture. They believe the underemployment rate (which is around 10.5% and represents people who have part-time jobs and want full-time jobs) is a better representation.

And Saturday this commentary continued the debate about the legality of MSAs. In response I fielded this note from David Stein with Bricker & Eckler. "Rob - on the subject of MSAs:  Richard Cordray was the keynote speaker at Bricker & Eckler's Midwest Financial Services Conference last Thursday. After his prepared remarks, he opened the floor to 30+ minutes of questions from the crowd of lawyers and compliance officers. Question number one from the crowd:  MSAs.  He was very well-read on the subject and direct and acknowledged the fact that RESPA's language allows certain marketing relationships. He was attuned, however, to what he phrased as 'slush' money floating around, lenders paying for access to referrals under the guise of an MSA. He indicated that the CFPB is closely studying the issue, and may actually issue written guidance. There was no assurance that formal guidance would be issued, however.  His comments did reflect the language adopted by the Lighthouse and PHH cases, and he referred to those cases by name. Based on his remarks, I believe there is a middle ground approach that will be compliant with RESPA and which will satisfy the CFPB but the devil will be in the details as to how originators actually comply with a carefully crafted policy."

While we are on it, since I continue to be asked about it, as a reminder earlier this month the CFPB issued private mortgage insurance cancellation and termination guidance to explain HPA requirements and describes examples from CFPB's supervisory experience of PMI cancellation and termination procedures that violate HPA or create a risk of noncompliance. Topics in the bulletin include borrower-requested cancellation, PMI refunds, annual disclosures, final and automatic termination, LTV requirements and seasoning.

Turning to the markets, on Friday the FHFA published an overview of GSE risk-sharing programs undertaken to date. It is an interesting read for those who are interested in the continuing evolution of the various risk transfer models.

Remember when all the experts thoughts a September rate hike by the Fed was inevitable? That was before global stocks took a beating, oil took a tumble hitting lows not seen since 2009, and even growth in the United States is pretty much below 2%. All of this has pundits asking if the Fed's Quantitative Easing program worked or not, and if the Fed should continue meddling at all.

Meanwhile, back the ranch, LOs and brokers have (once again) increased calls for renegotiations while lenders are dealing with margin calls from dealers due to large mark-to-market losses on outstanding security positions. And dealers don't renegotiate security positions.

We'll have a pretty busy week for scheduled economic news - all of which are pretty minor compared to the continued global gyrations we're witnessing. Still, it's good to know about them. Today we'll have some forgettable Chicago Fed number. Besides Consumer Confidence tomorrow has a glom of housing stats: the FHFA House Price Index, Hew Home Sales, and the series of S&P Case Shiller composite indices from back in June. Wednesday the 26^th is Durable Goods - always volatile. Thursday is Initial Jobless Claims, the GDP figure, Personal Consumption Expenditures, and Pending Home Sales. And we wrap up the week with Personal Income and Consumption, more Personal Consumption Expenditure numbers to measure inflation, and some University of Michigan figures. The 10-year closed Friday at 2.05% and this morning we're down to 1.96% and agency MBS prices are better between .250-.50 on continued global economic worries. Global problems could easily freeze up the Fed from raising short-term rates next month.

Upcoming events

Tomorrow, on August 25, ATS Secured is hosting a webinar, "TRID Buyback Risk: Involve Investors Early," presented by the man who led the final TRID rule, Richard Horn. The webinar will be offered at no charge to those who sign up for a free ATS Secured account. To learn about ATS Secured and register for the platform, click here. (Non-users can sign-up for $49.)

Arch MI is offering up some September complimentary webinars, audio streams through your device, no telephone connection required. "Learn at Your Convenience in these 1-Hour webinars." Conquer the Components Understanding the Aspects of a Loan File Wednesday, September 9th - 10am Pacific. Master the Mystery, Navigating and Evaluating Personal Tax Returns, Thursday, September 10th - 12pm Pacific. Analyzing Appraisals for Single-Family Residences, Friday, September 11th, - 10am Pacific. Loan Processing Using the 1003 as a Roadmap, Tuesday, September 15th, - 10am Pacific. Seizing Market Share in a Purchase Market, Creating Separation Between You and Your Competitors, Wednesday, September 16th, - 10am Pacific. Negotiate the Numbers, Understanding Self-Employed Borrowers and Business Tax Returns, Wednesday, September 16th, - 12pm Pacific. Mortgage Fraud, Everything Old is New Again, Thursday, September 17th, - 12pm Pacific.

It's time for the MMBA crab-feast social again. Register now for this September 24^th event.

The preliminary program for Northeast Conference of Mortgage Brokers and Professionals is now available. On September 28 - October 1 in Atlantic City, the theme of the Conference focuses this year's program on how attendees can grow their companies and prosper given the current economic conditions and regulatory environment. Click the link for more information and registration details.

TMBA's 15th Annual Reverse Mortgage Day will be held at the Driskill Hotel in Austin, Texas on September 9th with a welcome reception on Tuesday, September 8th. This event will bring industry professionals from all over the country to the Lone Star State seeking strategic options and information about the business of reverse mortgage lending. Attendees include upper management from the nation's leading reverse mortgage lenders, loan officers, real estate attorneys and title companies. Click here for details and registration.

Jobs and Opportunities

CrossCountry Mortgage is looking for highly motivated, licensed, and experience mortgage loan originators to join its team, "and be a part of one of the fastest growing companies in the nation. You will be joining a direct lending team that is positioned for growth. Our stability and professionalism nationally will allow you to create and maintain solid relationships with real estate agents and other third party referral sources by providing industry leading service to borrowers through our MSA platform. We work with several investors as well as sell directly to the agencies and have our own servicing portfolio. Opportunities are available in AZ, CA, TX, IL, MI, CO, VA, FL, and OH. CrossCountry Mortgage is non-depository mortgage lender headquartered in Brecksville, OH. If you are interested in joining one of the fastest growing lenders in America, contact Carmen Scalise (440.262.3290), Director of Talent Acquisition. All inquiries are confidential.  

In other company news, wholesale & correspondent clients should know that "Parkside Lending has continued to enhance its Expanded Jumbo offering!  Go to 95% LTV/CLTV on loan amounts up to $1,000,000 without Mortgage Insurance on a 1 unit, O/O Purchase or R&T Refi.  NOOs up to 65%LTV/CLTV, 1 - 4 units, with no price hit for occupancy up to 60% LTV. For additional information on programs or becoming approved please send an email to info@ParksideLending. com. And Parkside has expanded its footprint and welcomes the following new members to its Sales Team:  Dan Mahoney (MA), Dana Shawgo (KS), Dee Albanese (Tampa, FL), Jerry Sanchez (Miami, FL), Joan Knisely (Virginia/DC), and Kendra Cutuli (Los Angeles, CA). Parkside Lending still has open positions for Senior Account Executives.  Are you interested in working for a company that cares about you, allows you to cover all channels that are offered, is known for helping their clients close more loans with our sensible approach to underwriting, has an innovative suite of mortgage products, and proprietary technology?  Furthermore, because Parkside doesn't have a retail channel its clients can be confident that Parkside will not compete for their customers. Come experience the power of Caring with Parkside Lending."  Interested parties should contact Rick Nelson or apply at Parkside Lending.