Given the latest tax plan, will the mortgage interest deduction stay, but become worthless? The GOP blueprint would double the standard deduction for individuals and couples, making the mortgage interest deduction worthless for anyone who doesn’t itemize. Stay tuned…
Here's a little trivia for tonight's Happy Hour: baby boomers control about 67% of all bank deposits.
JPMorgan has partnered with PayPal to allow Chase customers to link cards to PayPal accounts. Meanwhile, Citibank has also partnered with PayPal to allow Citi customers to pay using ThankYou points at merchants that accept PayPal.
For a Basel III update, The Basel Committee for Banking Supervision is close to reaching an agreement on capital rules for banks. France has complicated the final negotiations -- expected to take place on at this week's International Monetary Fund meeting in Washington, D.C. -- by setting a hard line against any additional capital requirements for banks. The industry waits for the potential impact on servicing rights.
Wells Fargo, the third-largest U.S. bank by assets but #1 residential lender in the retail and correspondent channels, said its third-quarter profit fell 19 percent, due mostly to a $1 billion mortgage litigation accrual. For the quarter, loan growth and the net interest margin disappointed, but expense management helped soften the blow. Yes, "The Coach" took a $1 billion mortgage litigation accrual in the third quarter because it is in talks with a task force from the U.S. Department of Justice, per Chief Financial Officer John Shrewsberry. Wells Fargo has had a sales practices scandal, opening perhaps 3.5 million accounts in customers' names without their permission, signing others up for unwanted auto insurance, charging some for a mortgage rate-lock feature they did not request, and tacking other costly add-ons to accounts. This is all in addition to the same challenges as competing lenders: a drop in mortgage refinancing, interest income rising slowly after a prolonged period of rock-bottom rates, expensive technology investments, and new regulations.
House Democrats have urged bank regulators to remove Wells Fargo's bank charter because of their 2016 fraud scandal. They argue that this scale of "egregious consumer abuses" could threaten the safety and soundness of the financial system.
So the big banks reported earnings. When one looks at Bank of America, Chase, Wells Fargo, and PNC, mortgage production increased +7% QoQ on average, which compares with industry expectations for flat production QoQ. MSR fair value marks rose +1%, while gain on sale margins dropped 2%. Focusing on Wells, given its current status as the #1 lender, mortgage banking income dropped 37% from last year (from $1.7 billion in Q3 of 2016 to just over $1 billion in Q3 of 2017). Net servicing income saw a year-over-year decline of 14%, from $359 billion last year to $309 million.
Bank "shutterings" have fallen way off this year, but we had one Friday. The Farmers and Merchants State Bank of Argonia, Argonia, Kansas, was closed, and bank regulators entered into a purchase and assumption agreement with Conway Bank, Conway Springs, Kansas, to assume all its deposits.
Throughout all this, the bank mergers and acquisitions continue, for varying reasons...not the least of which is the cost of banking and its perceived potential liabilities. Playing some catch up here with announcements, Advia Credit Union ($1.4B, MI) will acquire Peoples Bank of Elkhorn ($230mm, WI). Also in Wisconsin, Associated Bank ($29B) will acquire Bank Mutual ($2.7B) for about $482mm in stock (100%) or 1.6x tangible book. In Big Sky Country Opportunity Bank of Montana ($704mm) will acquire Ruby Valley Bank ($90mm) for about $18mm in cash (55%) and stock (45%) or about 1.29x tangible book. In Oklahoma BancFirst ($7B) will acquire First Bank & Trust Co ($280mm) and First Bank of Chandler ($90mm). Associated Bank ($30B, WI) will acquire wealth management firm Whitnell & Co.
In Louisiana Business First Bank ($1.2B) will acquire MBL Bank ($323mm) for about $76.1mm in cash or about 1.57x tangible book. Alabama's Troy Bank & Trust ($853mm) will acquire
First National Bank of Brundidge ($94mm). In Indiana MutualBank ($1.6B) will acquire BloomBank ($398mm) for about $65.6mm in cash (29%) & stock (71%) or about 1.58x tangible book. Out in Colorado Guaranty Bank and Trust Co ($3.4B) will acquire Castle Rock Bank ($144mm) for about $23mm in stock (100%) or about 1.45x tangible book.
JLL Research finds that since the financial crisis, banks and credit unions have closed over 10,000 branches or about 3 per day. Although bank branches are closing, the end of the branch is not yet upon us. In fact, the number of branches for institutions with <$10B in assets slightly increased by 0.2% last year, while branches of all other banks went down by 2.3%, according to FDIC data.
Steve Brown with PCBB points out that, "At a high level, rural areas still depend on community banks. Indeed, community banks account for more than 67% of all deposit growth in rural areas, with nearly 4.8 branches for every 10,000 people vs. 2.6 branches for every 10,000 in urban areas. One issue to consider here, though, is that deposit growth is climbing fastest in metropolitan areas. Further, bigger bank customers are doing more of their banking through electronic or alternative channels in cities, rather than in branches. Given the cost of branches and the rapid growth of digital banking, a higher proportion of branches that remain open, or are
Opening, are in rural areas. As such, branches need to add higher value."
To reiterate the Fed meeting minutes last week, an interest-rate increase in December has strong support among the members of the Federal Open Market Committee, minutes from its September meeting show. Officials said they were confident the economy is growing steadily, despite the slow rise of inflation. The minutes showed three schools of thought within the Fed. The largest group felt that another rate increase would be warranted unless the medium-term outlook changed notably. The second group said that their decision would depend on how the data come out between mid-September and mid-December. The smallest group, comprised of the Doves, wanted to defer any further rate hikes until inflation was "clearly on a path toward" 2 percent.
U.S. Treasuries ended last week's abbreviated week on a higher note, though a weak September CPI dominated Friday's headlines and did little to clarify the underlying inflation trend the Fed is seeking. There's now some chatter the Fed would be prudent to hold off on a rate hike at its December meeting, however a 2.2% YoY increase, up from 1.9% in August, does not run afoul of the Fed's price stability mandate. The implied likelihood of a December rate hike ticked up to 82.9% from 82.7% yesterday, according to the fed funds futures market
Looking to this week, today we have the release of October's Empire Manufacturing numbers. Tomorrow sees September Import/Export Prices, the Industrial Production & Capacity Utilization couplet, and October NAHB Housing Market Index. Wednesday has September Housing Starts & Building Permits, and the Fed's Beige Book, while Thursday has weekly job claims & the Philly Fed Survey. Friday has September Existing Home Sales. We find rates a shade higher versus Friday, with the 10-year yielding 2.29% and agency MBS prices down .125.
Jobs, Products, and Recruiting Tools
National MI is expanding its sales team and adding an additional Sales Account Representative who will reside in Boise, ID market. Responsibilities include to promote the sale of National MI products, services, and programs to clients through a consultative selling approach via personal sales calls and email/phone contact. This individual will also assist in sourcing new business from originators, and will manage the relationships of specific clients by serving as a customer advocate, educator, and loan issue problem-solver. Experience in client relationship management and training is imperative, and strong research, process improvement, and presentation skills are required. Headquartered in the San Francisco Bay Area, National MI is a U.S.-based, private mortgage insurer enabling low down payment borrowers to realize homeownership. National MI has a GREAT culture, compensation and benefits. For the complete job posting, see National MI's careers page.
DocProbe, "the nation's premier providers of trailing document fulfillment services, is currently looking to further expand our close-knit Business Development team in the West Coast and Northeast regions as well as other nationwide positions. The is an exciting opportunity for Account 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 Libi Pruzansky. We will also be attending the MBA Annual Conference in Denver on October 22nd-25th to present our services. Please email Nick Erlanger to schedule an appointment with a specialist."
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"Altisource, a leading provider in end-to-end services and technologies to the mortgage and real estate industries, is seeking an energetic, creative, and motivated National Sales Executive to join its rapidly growing Origination Solutions team. The Origination Solutions group delivers best-in-class products and services that help mortgage originators and investors operate, scale and protect their business. As a National Sales Executive, you will help build the Altisource Origination Solutions vertical book of clients using your world-class solutions selling and enterprise relationship building skills. You'll be tasked with identifying and closing deals on client partnership opportunities that can be best served by Altisource's Originations Solutions platform throughout the nation. If you are ready for an exciting challenge with huge growth upside and you have an impressive enterprise sales background within the mortgage industry, the Altisource team has a home for you. What are you waiting for? Apply today!"
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FundingShield - has teamed up with NFP Corp. aa global top insurance brokerage and Pioneer Underwriters to launch an enhanced New York State Crimes Insurance Policy that provides Lenders in the state of New York with the highest level of protection to date in the event of theft of client funds by law firm partners. No other insurance policies provide this coverage which many lenders are required to demand of their legal service providers who conduct closings on their behalf. Benefit to NY State lenders is coverage in the event of fund misappropriation by law firm partners in line with best practices and funding security requirements. Benefit to NY State lawyers is enhanced policy coverage, in many cases at lower cost, that provide your clients with insurance for the risk that theft takes place by bad acting law firm partners. FundingShield is a financial technology company focused on closing wire fraud prevention, secure mortgage payments and third-party service provider risk & compliance with solutions for lenders, borrowers and title companies trying to manage fund movements and counterparties. For more information please contact Info@fundingshield.com and also review the Press Release on the partnership.
Ohio, Georgia, North/South Carolina, Indiana, and Florida Branch Managers - if you are looking for a highly innovative retail mortgage platform whose systems are in place to help you grow, email Marissa@menlocompany.com to learn more. The Platform offers low end FHA to high end Jumbo ($1-$5M new construction), non-warrantable condos, and true foreign national products. Again, email Marissa Vest to review a structured compensation package for you and your production team.