What are companies doing about their aging populations - or do they even care? For Realtors, the median age is 57. For mortgage bankers, the median age is 78. Okay, I just made that up - it is probably close to the Realtor number, although when I tried to find it on the NMLS site, I had no luck. But next week's MBA conference will be collection of mostly Caucasian, age 40-60, males wearing blue suits and ties, which is indicative of the industry. Yes, I said it, and yes, there will be some folks outside that generalization (thank goodness!), but bringing youth into lending, given the public relations issue our industry has had, is an ongoing theme at various meetings and conferences. Let's keep it up!
The strongest, collective voice for community-based lenders in Washington is the Mortgage Bankers Association. "MBA is the place to be for your business and our industry. Approximately 80 percent of MBA's membership consists of independent mortgage banks and community banks, and MBA is laser focused on offering membership services. In fact, MBA has been busy developing education and compliance resources targeted at this important member segment, while its advocacy team has been fighting for policies to protect the role these lenders and servicers play in their local housing markets. In short, MBA is the leading advocate for real estate finance on Capitol Hill, speaking with One Voice on behalf of our diverse membership - especially community-based lenders." MBA wants your company to be part of the voice of the real estate finance industry: contact Tricia Migliazzo at firstname.lastname@example.org to learn more about how it pays to be an MBA member. Tricia will be at MBA's 100th Annual Convention, which begins this Sunday in Washington, D.C.
By the way, congrats to Ms. Migliazzo: Dave Stevens, President and CEO of the MBA, recently announced her appointment as Vice President of Membership in MBA's Residential Policy & Member Services Group. "Ms. Migliazzo brings to MBA nearly a decade of management experience in the mortgage banking industry. She joins MBA from Lenders One/Altisource Portfolio Solutions, where she most recently served as Director of Business Development/Capital Markets/AFO, growing the cooperative by recruiting members and investor partners while influencing program and product utilization for increased revenue growth."
Yes, there are a lot of opportunities to meet and catch up at the MBA Annual next week in DC - I know I'll be there! And there are even opportunities to learn. STRATMOR is offering a series of sessions to demonstrate their MortgageSAT product, which helps lenders measure borrower satisfaction and be compliant with CFPB requirements, benchmark their satisfaction compared to others, and figure out how to improve borrower satisfaction. In this tougher climate it's important to deliver high quality service to be competitive. Attendees will also learn about early results. Learn more and sign up here.
We're all seeing the industry scale back, and companies looking to weather the storm over the next six months are becoming more efficient or scaling back dramatically. Bloomberg had an article noting that CashCall Inc., a lender run by Paul Reddam (remember DiTech Funding?) is cutting its office space by 40% in Orange County, California. "The company has almost doubled its office presence in the past three years to more than 400,000 square feet (37,000 square meters). Now it is seeking to sublet about 40 percent of its space as rising interest rates start to hurt lenders, said Jay Carnahan, founder of Orion Property Partners Inc., the Irvine, California-based brokerage representing CashCall...Wells Fargo & Co., the country's biggest mortgage lender, has eliminated more than 5,700 jobs in its home-loan unit since midyear, and JPMorgan Chase & Co. plans to reduce its mortgage-banking employees by 11,000 this year. PNC Financial Services Group cut at least 7 percent of its residential-mortgage workers this month."
(Mortgage originations probably will drop to $1.1 trillion next year, down 31 percent from the forecasted 2013 total, with refinancings likely to plunge 61 percent to $388 billion, per the MBA.)
But hope springs eternal out there - we have a new cooperative: The Mortgage Collaborative. It is based in San Diego (maybe it can find some office space to the north in Orange County from CashCall) and is founded by John Robbins and David Kittle, former chairmen of the Mortgage Bankers Association (MBA), Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals (NAHREP), and Jim Park, former chair of the Asian Real Estate Association of America (AREAA). Acosta and Park co-founded a San Diego-based REO asset management company, New Vista Asset Management. The independent, member-owned cooperative will be comprised of mortgage lenders initially, but may incorporate mortgage brokers at some point, and is "designed to help members compete more effectively by using their collective buying power to lower costs for third-party services, such as settlement services and title insurance, and getting better deals when selling loans to an investor in the secondary market, including Fannie Mae and Freddie Mac, or when obtaining warehouse lines, which are lines of credit that mortgage companies use to fund loans at closing and before they receive funds from investors." One can read all about it.
And we have a new entrant in the wholesale lending arena. Skyline Financial Corp., a direct lender and technology developer, has announced the launch of NewLeaf Wholesale, a wholesale lender servicing mortgage brokers and bankers in the Western United States. Part of the NewLeaf family of mortgage companies introduced by parent Skyline in Q4 2013, NewLeaf Wholesale marks the return of CEO Bill Dallas to wholesale lending. "NewLeaf Wholesale is a direct-to-agency lender presenting a large portfolio of loan products enhanced by clear credit parameters and prompt decision making and closing, a business model suited for the emerging purchase market. In Q1 2014, NewLeaf Wholesale will integrate with NewLeaf Lending's proprietary mortgage technology, the Intelligent Marketing Platform (iMP), designed to reduce loan production times and improve information flow from loan shopping through closing, streamlining the mortgage experience for Brokers' clients."
Things aren't so rosy in the non-agency/jumbo world, however. The Wall Street Journal carried a story about how Shellpoint Partners LLC, the mortgage finance firm controlled by mortgage bond pioneer Lewis Ranieri, pulled its second bond issue from the market after finding bids were too low relative to the price it could get for underlying loans. "The firm just last week restructured its issue backed by jumbo residential mortgages too large for government backing, removing some riskier loans in return for better outlook on losses by debt-ratings firms.
"Issuance of non-agency debt has suffered since the Federal Reserve began hinting it may cut its financial stimulus efforts, a move that investors expect will increase bond yields and consumer interest rates. Investors worry that the loans taken out near record-low interest rates will be refinanced at slower rates, extending the life of a bond and reducing principal repayments that can be reinvested at higher rates." CSFB's Peter Sack, a managing director in the structured-products group, said that he expected little, if any, issuance through year-end.
"Pricing on jumbo mortgage bonds 'is terrible because investors have concerns on both credit and extension risk,' said John Kerschner, global head of securitized products at Janus Capital Group" per the WSJ. "Meantime, a new type of debt security developed by Fannie Mae and Freddie Mac that appeals to investors who want to bet on mortgage credit--rather than only interest-rate risk in standard Fannie and mortgage Freddie bonds--has also taken demand from jumbo issues, Mr. Kerschner said."
The article goes on to say, "Fannie Mae's deal that pushes some credit risk onto private investors drew so much demand this month that the firm reduced some yields by a full percentage point before pricing. Most investors stood by their orders even as yields were cut, according to one investor who bought the deal. Last month, PennyMac Mortgage Investment Trust had to cut prices at least twice on its debut non-agency mortgage bond to draw demand. Shellpoint's issue saw better pricing than the PennyMac issue but still fell short, said a person familiar with the deal."
But switching back to agency products, yesterday Freddie announced, "To make our eligibility requirements more transparent to borrowers, effective October 27, 2013, we will use the note date of the mortgage being refinanced, instead of the Freddie Mac settlement date, to determine eligibility for our Freddie Mac Relief Refinance Mortgages offering. As a result of this change, the mortgage being refinanced must have a note date on or before May 31, 2009. This revised requirement applies to both Relief Refinance Mortgages - Same Servicer and Relief Refinance Mortgages - Open Access, including those originated under the Home Affordable Refinance Program (HARP). Loan Prospector® and the Freddie Mac Loan Look-Up Tool will be updated by October 27, 2013, to support this change."
And here is Fannie's announcement of the same.
(Read More: Fannie and Freddie Announce Expanded HARP Eligibility Dates)
Why would rates go any higher with our economy limping along? European concerns seem to have disappeared, Asia is cruising along, and there is no way that the Fed is going to scale back QE III with the U.S. economy where it is. Yesterday we were given a reminder of that when Non-Farm Payrolls climbed less than projected. (Few serious analysts even care that the jobless rate fell to an almost four-year low, given that it doesn't include people without jobs who have given up looking for work.) And the financial press will be talking about the partial shutdown's impact on GDP for months - at least until the next possible shutdown in January.
So the Fed will keep buying billions of MBS every day, as will hedge funds, REITs, money managers and other "real money" (investors). And with demand solid and supply still languishing, prices will go up and rates down. Agency MBS prices were better, depending on coupon, by .5-.75 - and whatever rate sheets didn't reflect that yesterday will probably catch up today.
For news today, we've had the MBA's application index reflecting what lock desks already knew: apps were down .6%, refis -1.3%, purchases were +.7%. At 8:30AM EDT is the delayed September Import Prices (+0.2 expected from flat), and at 9AM EDT is Augusts FHFA House Price Index (+8.8 last). The 10-yr closed yesterday at a yield of 2.51% and in the early going is down to 2.50% and MBS prices are better a smidge.