The last time I checked Americans enjoy living indoors, especially given storms like today’s in the Northeast. How’s this for a combination of edifices and technology: If you think you don’t understand how blockchain works, how about 3-D printers? Here's a printer that printed an entire house in 24 hours!!
In the last week or so it has been relatively quiet on the bank side of things. But we've seen two big bank deals. It was announced that Iberiabank ($21.6B, LA) will acquire Sabadell United Bank ($5.8B, FL) for about $1.03B in cash (78%) and stock (22%). And Sterling National Bank ($14.2B, NY) will acquire Astoria Bank ($14.5B, NY) for about $2.2B in stock (100%) or about 1.6x tangible book. In addition, Customers Bancorp (Wyomissing, PA) will be selling its BankMobile Division to Flagship Community Bank (Clearwater, FL). On the flip side, Proficio Bank ($68.2mm, UT) was closed last Friday and the FDIC sold it to Cache Valley Bank ($374mm, UT) under a purchase and assumption agreement. Cache Valley Bank gets the sole branch, $65mm in deposits and $60.1mm of the assets of the failed bank.
Whether a bank with a mortgage arm, or without, what are the "Top 10 Worst Seller Characteristics?" STRATMOR's Jeff Babcock had an answer as to what practices tend to deter buyers, thereby reducing a seller's marketability, and detract from a given seller's enterprise value.
"The first is that a substantial portion of production volume is originated in DBA branches and/or 'for-profit' branches. By comparison with branches which are branded with the corporate identity, DBA and for-profit branches are perceived as less loyal and greater flight risks, even though the data suggests that that might not necessarily be true. Originator compensation plans where the Loan Officer can select options tied to revenues (aka 'pick-a-pay plans'). Such plans are typically categorized as non-compliant by buyers in spite of the fact that some such plans may have been vetted by the seller's attorneys.
"Any degree of pricing variance within a given MSA creates a potential exposure to Fair Lending compliance. Arrangements where the branch manager and/or loan officer can select the investor. Such arrangements generally work against secondary marketing best execution and can be a source of cultural problems. An exempt sales force (e.g., originators designated as 'outside sales people'). Buyers have learned that an exempt sales force increases exposure to class action lawsuits initiated by originators.
"Situations in which seller's executives and/or selling shareholders account for a substantive share of current production introduces a degree of difficulty to the negotiating process. Situations in which the seller's geographic production footprint is scattered are generally not viewed favorably. Buyers strongly prefer to acquire a lender that has established a significant market presence in few selective markets.
"The existence of a major legal matter or regulatory action which cannot be resolved or settled prior to the closing date can be problematic. Buyers prefer that ownership of the selling entity be concentrated in the hands of a few players. Multi-ownership (say more than five shareholders) increases the complexity of the negotiations. Existence of an Employee Stock Ownership Plan (ESOP) generally renders the seller to be unmarketable."
Jeff's answer wrapped up with, "While many of the impediments to a lender's marketability can be characterized as 'low hanging fruit' that can quickly be corrected, many lenders will have impediments that simply cannot be eliminated or require substantial time and attention to remedy. What is important, in STRATMOR's opinion, is that lenders objectively and periodically assess their marketability as part of their strategic planning and build appropriate actions into their operating plans."
Do you think that "trimming a little fat" off your budget is relatively straightforward and easy? What about $6 billion dollars' worth? Under Donald Trump's proposed budget HUD will get about 14% less than last year. It looks like most of the cuts will fall on community development block grants and public housing maintenance. It doesn't appear (at least initially) that the mortgage side of things is affected at all, although government housing advocates are upset.
And here's an interesting observation about FHA loans: "...some borrowers have begun to refinance out of FHA loans following a change to the FHA policy on mortgage insurance cancellation that no longer allows borrowers to drop mortgage insurance coverage when they reach 20% equity. So the only way to stop paying the standard 85-basis point premium on the average FHA loan is to refinance into a conventional loan with LTV of 80 percent or less. And that's exactly what in-the-money FHA borrowers are doing. They are refinancing into conventional loans, spurred on in part by the incentive of dropping their mortgage insurance premium."
FHA is in the final stages of the technology development for the new Loan Review System (LRS), and will soon be announcing the system implementation date. Lenders will use LRS to interact with FHA on most Title II Single Family quality control processes, including: Various Post-Endorsement Loan Reviews, Unconditional Direct Endorsement Authority Test Cases, Lender Monitoring Reviews and Lender Self-Reporting of Fraud and Other Material Findings. LRS will not be used to manage any aspect of FHA's standard (non-test case) loan origination or endorsement processes.
Ginnie Mae has added "Multiclass Securities Guides Update." Which leads us to...
Capital Markets Update
Despite a decline in monthly securitizations guaranteed by the Government National Mortgage Association, the Ginnie book of business reached a record. As of Jan. 31, there were $1.79 trillion in Ginnie Mae mortgage-backed securities outstanding, per data from the Washington-based firm. That marked the biggest book of business ever for the government-owned corporation based on its own historical numbers going back to 1990.
Rain or shine, high rates or low, the NY Fed continues to buy securities, adding to its balance sheet. When the Fed will stop, no one knows for sure, since it is dependent on our economy's strength, as well as overseas event beyond the control of anyone in this country. And there exists the small possibility that it could sell assets. As to the timing of all this, Morgan Stanley ventured a guess as to when the Federal Reserve will stop its MBS reinvestments: 2018. Its team of actuary folks and economists think that the Federal Reserve is on course to end reinvestments of its mortgage-backed securities holdings next year, as policymakers attempt to shrink a balance sheet that swelled following the financial crisis.
Most of 2017 has seen the benchmark 10-year T-note, a proxy for all rates, trade between 2.30% to 2.60%. We're above that now after it hit 2.61% Thursday. It didn't help anyone looking for lower rates that in Europe, European Central Bank President Mario Draghi said that they are forecasting faster growth and inflation in 2017 and 2018 than they had previously. (The European Central Bank's Governing Council decided to keep monetary policy on its current course.) The U.S. economic data was very light although import prices excluding oil and export prices excluding agricultural both climbed by 0.3% m/m in February. Initial jobless claims remain near four-decade lows and the data series is losing its value for a variety of reasons.
By the time the proverbial dust settled yesterday the 10-year note had worsened .375 to yield 2.60%; 5-year T-notes and agency MBS prices worsened nearly .250 resulting in plenty of intra-day price changes.
This morning we had out monthly set of employment data - full speed ahead for a Fed hike next week. Nonfarm Payrolls, expected +200k, came in at +235k. Hourly Earnings, expected to increase slightly, were indeed +.2%; the Unemployment Rate, expected to remain unchanged at 4.8%, dropped to 4.7%. And after yesterday's run up in rates, and this morning's unemployment data, we find the 10-yr waffling around 2.59% with agency MBS prices surprisingly better by .125 versus last night's close.
Trainings and events:
You are cordially invited to Michigan Mutual Inc.'s first ever 203k Training Extravaganza! Director of Wholesale Lending, Greg Campbell, will offer his expertise as he takes you step by step through his 203k process. Please join us at the Westin Hotel (Southfield, MI), or tune into the presentation live from your computer, Monday, March 20. Lunch will be served at 11 a.m. and the presentation will take place from 12 p.m. - 1 p.m. RSVP here. We hope to see you all there! Michigan Mutual is an agency direct/seller/servicer/issuer established in 1992 and based in Port Huron, Michigan.
Are you ready for the Spring rush? Essent's training department would like to help you prepare for success with many course options available to you in March through Essentials training.
Join Vantage Production President & CEO Sue Woodard as she uncovers top profit-enhancing strategies from the Vantage Production Expert Faculty, in the fast-paced, value-packed webinar, "Top Producers Panel: 12 Money-Making Strategies From the Vantage Production Faculty" on Tuesday, March 14th at 3PM ET; click here to register now!
Fannie Mae is offering a webinar presented by its Servicer Support Center, to help get started and access the reports in Fannie Mae Connect. Learn more and register for a webinar on March 23 or March 27 at 2:30 p.m. ET.
You say you've always wanted to meet former Denver Bronco Terrell Davis? Your opportunity awaits at the 26th Annual Rocky Mountain Mortgage Lender Expo on Thursday April 20th.
Focus on Assets with Plaza's March 14th webinar. This module will look at eligible sources for funds to close and reserves (if applicable) as well as the requirements for asset documentation. The course is designed for the participant to gain an understanding of eligible and ineligible sources of funds, interested party contributions (IPC's), what constitutes a "large" deposit, using retirement funds for closing vs. reserves, earnest money deposits, and acceptable documentation for assets.
Consumers' FICO Scores can provide insight and perspective on their future behavior. Check out MGIC's webinar, with Mike Olden, American Reporting Company's Vice President - Sales and Education. There are 3 webinars to choose from: Wednesday, March 15th, Tuesday, March 21st, or Tuesday, April 18th. Get updated on FICO score and credit updating.
Looking for a 203K training? Check out Sun West's training calendar.
Jobs and Announcements
Mortgage Equity Partners, a veteran independent mortgage banker in New England, is searching for lenders operating in the region who would like to merge or sell. The ideal candidate is funding less than $15 million a month. There are several purchase options available depending on the situation. For a confidential discussion, please e-mail Mark Lance to be connected with management; principals only please.
And three thousand miles west, Pacific Residential Mortgage has just recently begun a search for experienced mortgage bankers and mortgage banking teams. PRM, a Fannie Mae direct mortgage banker headquartered in Portland, OR, is looking to grow its current locations in Oregon, Washington and Idaho and begin expansion into new markets as it moves from 2016's $845 million towards $1 billion in 2017. Voted as one of the "100 Best Companies to Work for In Oregon" several years running, Pacific Residential is proud that the average tenure of its originators is over 10 years! If you are looking for a new opportunity with a stable and reputable company, please email your resume to Angelo C. Stratigos, VP of Production at this link: PRM. All correspondence with be held in confidence.
STRATMOR Group is looking for product and account manager for the borrower satisfaction research products. MortgageSAT is the leading provider of borrower satisfaction research for the mortgage industry, with over 150,000 completed surveys annually. This position will work with industry veteran Garth Graham, and will work directly with existing and new clients to ensure that MortgageSAT delivers value to the lenders who use it. Can work remote, but preference will be given to those in the Ann Arbor MI area, to work closely with the existing MortgageSAT product team. Candidate should have a background in the mortgage industry, have strong project management and analytical skills, and be able to provide actionable insights and recommendations to C Level executives. Contact Garth Graham for details.
Congrats to Lisa Brinkley! NCS (National Credit-reporting Inc.) announced that Lisa has joined its team as SVP of Business Development. Binkley, a recognized industry expert in third-party verifications, quality control and valuations, will lead NCS's solution development team and support members of NCS's sales team as a subject matter expert in multiple disciplines. "We must establish greater access to innovative and automated processes for mortgage origination, even beyond Fannie's D1C program," stated Binkley. "I look forward to accelerating NCS's commitment to moving beyond the expected by deepening our relationships in automation and information services."