Florida, also known as “God’s waiting room,” is the nation’s third most populous state, behind California and Texas, with a population of 21.3 million. (California has about 40 million, New York, a popular trivia contest guess, has 19.5 million.) In the last nine years Florida grew 13 percent, third fastest of all states and behind just Texas, Utah (and DC). And at $1.06 trillion, its economy is the fourth largest behind CA, TX, and NY. It’s not all the climate: Florida is one of seven U.S. states that don't impose state income tax. And of the ten American cities with the greatest discrepancy in taxes paid by new home owners and longtime home owners, two are in f the ten American cities with the greatest discrepancy in taxes paid by new home owners and longtime home owners, two are in Florida (six are in California) where the 1992 Save Our Homes constitutional amendment similarly restricts reassessment. Bridgeport (CT) has one of the highest effective tax rates on the median-valued home, while Birmingham (AL) has one of the lowest. (But the average Birmingham resident pays 30% more in total local taxes when accounting for sales, income, and other local taxes.)

Trainings and Events 

On January 9th the Puget Sound Mortgage Lenders Association is having its general dinner meeting in Fife, Washington. Yours truly will be there speaking about the economy, lending trends around the nation, and the importance of customer service.

National MI is offering up the following webinars in January: January 7th: How to Create Your Perfect Presentation for Lunch & Learns, January 16th: Appraisal Review, Recent Changes, and What’s Ahead! January 21st: How to Avoid the Email Delete Barrier and Get More Replies

January 22nd: Crafting Your 2020 Social Media Strategy to Connect with Modern Homebuyers.

MGIC’s January 2020 webinars are currently posted at www.mgic.com/training and registration is open.

Genworth Mortgage Insurance provides complimentary courses to help customers manage, protect and grow their business, delivering you-centric solutions that matter. A new year means new learning, including a series focused on community lending and a webinar dedicated to “Understanding Genworth’s New Master Policy and Rescission Relief.” View the January Training Calendar.

On January 9th is the IP Lunch at Perkins Coie Conference Center in Seattle where John Mitchell, economist, will be providing a current update and discuss the outlook on the national, state and regional economies for the Washington Mortgage Bankers.

LoanStream Mortgage is providing a Webinar, January 10th on NonQM Products in 2020. Register here.

Hudson Cook, LLP announced a monthly webinar series, CFPB Bites of the Month, beginning January 15. Hudson Cook Partners Eric Johnson and Justin Hosie will present monthly updates, including but not limited to: CFPB press, rulemaking, ongoing litigation, supervision and other timely news. The webinars will last just 30 minutes during lunchtime on the third Wednesday of each month.

Confused about the new tax laws? Register for the CAMP-Silicon Valley Chapter’s Breakfast Meeting on January 17th. Guest Randy Warshawsky, EA will be addressing and explaining the new 2020 tax laws.

Collateral Risk Network has launched CRN as a non-profit with an ambitious agenda. Among other things, it will be establishing standards for valuations where non exist. CRN has assembled a fantastic lineup of speakers, including Brian Montgomery (FHA), John Bell and James Heaselet (VA), Ed Pinto (AEI), and Lynn Fisher (FHFA). The Compliance Roundtable on January 21 will focus on the new California “gig economy” law and the impact on the appraisal profession. There are also new data laws emerging that will impact lenders and AMCs. It looks like finally regulators and legislation has caught up to emerging technologies. Contact Karen to learn more.

From February 3-6, MBA’s Independent Mortgage Bankers Conference will be in New Orleans where IMB leadership and their management teams will hear the latest industry happenings and get new perspectives to position themselves competitively for 2020 and beyond. The conference offers unique opportunities for IMB professionals to learn from each other and share solutions, and has a reputation for boasting the largest gathering of IMBs each year since its targeted content is designed by IMBs for IMBs of all sizes and business models.

The Mortgage Bankers Association of New Jersey in conjunction with the NJ Bankers Association and the NJ State Bar Association; will be having dinner with the Commissioner of Banking and Insurance, Marlene Caride, on February 6 at the Hyatt Regency in New Brunswick. The evening will begin at 6PM with a cocktail reception followed by dinner and the program.

Register for FHA’s free, on-site Credit Underwriting Training in Denver on February 11 from 8:00 AM to 4:30 PM. Receive an overview of FHA underwriting procedures and addresses various industry-related FAQs related to FHA’s Handbook 4000.1. This training will also take an in-depth look at a variety of topics including credit, income, and asset (CIA) documentation; manual underwriting; automated underwriting systems (AUS); endorsement protocols; Loan Review System (LRS); and more. 

The Americatalyst Conference is scheduled for February 11th-12th in Dallas. The conference will look at the future of mortgage banking, non-bank lending, technology and its influence, government policy and more. Find out more information by viewing the agenda.

Register for FHA’s free, on-site FHA Appraisal Training on February 12, in Denver from 8:30 AM to 4:30 PM. This training will cover FHA appraisal requirements, including appraisal protocol and updates to FHA appraisal policy as outlined in FHA’s Handbook 4000.1. This training also takes an in-depth look at a variety of appraisal-related topics including property acceptability criteria; minimum property requirements; property defects; appraiser responsibilities and requirements; and more.

On February 19th, in the evening, the Charlotte Regional Mortgage Lenders Association is having its monthly meeting. Come on by and say hello!

The Federal Reserve Bank of Dallas and the Real Estate Center at Texas A&M University have organized Room to Grow: Housing for a New Economy. This one-day Conference in Dallas on February 21st provides industry analysts, economists and experts to learn about the latest trends affecting housing, and discover developments that promise to change home buying.

Capital Markets

I am sometimes asked, “Which U.S. bank is the largest holder of mortgage-backed securities (MBS)?” As some in the industry know, MBS are a type of asset-backed security similar to a bond that is made up of a bundle of home loans bought from the banks/agencies that issued them. Investors in MBS receive periodic payments similar to bond coupon payments.

MBS held by major U.S. banks have changed since the recession, with the proportion of total MBS held by the five largest U.S. banks having steadily declined since the downturn. Despite an increase in the dollar value from $393 billion in 2007 to around $690 billion currently, the share in MBS held by Bank of America, Wells Fargo, JP Morgan, Goldman Sachs, and Citigroup has gone from almost 63 percent in 2009 to less than 37 percent currently.

Bank of America holds the largest portfolio of MBS among all commercial banks in the country, with around $350 Billion of these securities on its balance sheet. Bank of America’s MBS portfolio increased from around $163 billion to more than $230 billion in 2008 thanks to its acquisition of Merrill Lynch. This metric has gradually increased since then, increasing from $234 billion in 2009 to more than $340 billion last year, making up around 18 percent of the total MBS across U.S. commercial banks.

Wells Fargo, the second largest aggregator, saw its MBS value shoot up in 2008, increasing from just around $55 billion to almost $100 billion due to the bank’s acquisition of Wachovia. The figure peaked in 2016 at $178 billion before shrinking over the last couple of years down close to $160 billion. This may have to do with the Fed’s enforcement order restricting Wells Fargo’s ability to grow its balance sheet.

JPMorgan, Goldman Sachs and Citigroup seen their share of MBS decline steadily since the crisis. Bank of America now holds more than half of the total mortgage-backed securities held by the five major banks. Other banks and private issuers are making up for the decline in MBS held by the major banks as the housing market has grown at a steady pace in the U.S.

Looking at rates, U.S. Treasuries pulled back slightly on a lightly traded session to end the year, steepening the yield curve yet again.  (closed at 1.92 percent on Tuesday). The 2-year to 10-year spread widened to 35 bps, stretching back from an inverted position in August. That steepening over the last several months was fueled by improved sentiment regarding growth prospects, and the Federal Reserve stating that it isn't in a hurry to raise its policy rate.

Helping some of those growth prospects was President Trump saying on Tuesday that he will sign the first phase of a trade deal with China on January 15, finalizing an agreement that sees the Asian nation raising purchases of American farm goods in exchange for lower tariffs on some of its products. Beijing has not released any specific information yet on this plan.

What are the actual effects of the Phase One trade deal being signed with China? Since tariffs on mostly consumer goods were not imposed on December 15, this should slightly lower consumer price inflation forecasts, meaning growth in real personal consumption expenditures (PCE) should be stronger from growth in real income. Real business fixed investment spending should increase, though trade policy will continue to exert some headwinds on growth. The signing of the agreement should help real GDP figures in both the U.S. and China, though Boeing suspending production of its 737 MAX airplanes in non-trade-related events will significantly dent U.S. GDP in Q1 2020.

It seems financial markets were not priced for an imposition of tariffs on December 15, which would have weakened stock markets and widened credit spreads. The FOMC likely would have had to consider at least one rate cut in 2020, but with a ratcheting up of trade tensions averted, financial market conditions have not tightened. With GDP growing more or less at its long-run potential rate and with inflation not moving meaningfully above the FOMC 2 percent target, the committee should keep rates on hold through the end of 2021. The FOMC should tighten policy only if GDP growth turned out to be materially stronger and/or inflation significantly higher than their forecasts, though this is a low probability.

After the market was closed Wednesday in observance of the New Year's holiday, today’s new year calendar began with layoffs from Challenger (job cuts announced by U.S.-based employers fell for the second consecutive month to their lowest monthly total since July 2018!). We’ve also received initial claims for the week ending December 28 (-2k to 222k). Coming up is the non-market moving final December Markit manufacturing PMI in about an hour. After that, Treasury will announce the details of next week’s mini-Refunding consisting of new 3-year, reopened 10-year and 30-year securities. We begin the day with Agency MBS prices better by .125 and the 10-year yielding 1.89 percent.



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MLOs should know that, “At AmCap, we offer our originators competitive rates, an extensive suite of mortgage products, flexible underwriting and exceptional compensation because we believe these are, and should be, the industry standard. What truly makes us an exceptional company is who we are, not just what we offer. In order to continue our legacy as a fiscally strong company dedicated to doing right by our employees and our customers, we’re constantly seeking new tools, new products and new opportunities to advance the interests of the loan officers and homebuyers with whom we work.”