As mortgage bankers gear up to see what the Shipping Department dresses up as tomorrow, let's take a quick look at some demographics. There is now a larger cohort of unmarried young adults who are driving the overall homeownership rate down as they are less likely to own a home. The creation of household formations plays an important role in homeownership rates among young adults and is one of the main reasons the average age of first time home buyers is now 31 years old.
There were plenty of smoke signals yesterday regarding Provident Funding Associates, LLC. as the broker herd was spooked. (There are several "Providents" around the nation, so the rumors may not have involved the well-known California wholesaler that bills itself as, "The Undisputed Price Leader since 1992", known to live off of volume and accepting loans from brokers who adhered to tight margins and guidelines.) The rumor is that a major announcement will be made regarding the cessation of doing business in several states - perhaps as many as 25. Given the current regulatory environment, the range of state-specific foreclosure laws, and the increased costs of doing business in multiple states, it would not be surprising.
You ask, "Are costs for lenders and vendors going up?" You bet they are - how can they not when in some companies underwriters are down to one loan a day.
And just because you settled with the CFPB, or Fannie, or HUD, or whoever, doesn't mean that you're not going to be on the receiving end of a lawsuit (or a complaint) from a borrower. Just ask Castle & Cooke. The "fun" never ends! As a reminder even though the CFPB got its pound of flesh out of Castle and Cooke the issue has now gone to the consumers who have filed a class action lawsuit in July. C&C is in the "response" period, but the clock is ticking. There is speculation that this case, if successful, could actually establish a legal precedent for repayment of three times MLO commissions from the MLOS, along with fees, interest, and resetting the interest rate to what the borrower could have received.
Along those lines, congrats to PHH and the industry in general. You remember PHH, right? The PHH that was facing a $16.2 million legal battle over a mortgage modification? The lower court's ruling on damages was mostly tossed out. Reminiscent of the case where the woman sued McDonalds because of hot coffee, if the damages had stuck this PHH case would have made anyone question why any of us write and service loans. Or want hot beverages.
And many in the industry are waiting for the rating agencies to bear some of the brunt for their mistakes in rating mortgage-related securities. Their wait may be ending as this story describes moves that S&P is making toward a settlement.
Lastly, "The defendants in the lawsuit brought by Benjamin Lawsky, the Superintendent of the New York Department of Financial Services, using his Dodd-Frank enforcement authority have filed an appeal with the U.S. Court of Appeals for the Second Circuit. Under Dodd-Frank Section 1042, a state AG or regulator is authorized to bring a civil action for a violation of the Dodd-Frank prohibition of unfair, deceptive or abusive acts or practices. The defendants, a large subprime auto lender and its individual owner, are seeking to overturn the district court's order denying their motion to modify a preliminary injunction entered by the court freezing the defendants' assets and enjoining them from engaging in new loan business. In their motion, the defendants also sought to reduce the fees of the receiver appointed by the district court. The defendants must file their brief by December 8. In addition to Mr. Lawsky's lawsuit, we have also been following lawsuits filed by the AGs of Illinois and Mississippi using their Dodd-Frank enforcement authority."
I don't foresee any argument when I claim that most folks have set foot in a bank during their lifetime. Analysis of the 10 largest US banks at the end of the 2nd quarter finds that there were 94,725 bank branches in the country and this group controlled 33% of them (30,858). Of note, the top 5 banks have 24% of all branches nationwide or about 300% more on average than the next 5 largest. Drumroll please... Wells Fargo (6,314), JPMorgan (5,682), Bank of America (5,096), U.S. Bank (3,238), PNC (2,821), BB&T (1,843), Regions (1,673), SunTrust (1,514), Fifth Third (1,348), and Toronto Dominion (1,329). That is a lot of overhead!
Bank M&A, and one closure, continued to be announced in the last week. Last Friday the National Republic Bank of Chicago, Chicago, Illinois, was closed by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver who in turn entered into a purchase and assumption agreement with State Bank of Texas, Dallas, Texas, to assume all of the deposits. San Diego Private Bank ($340mm, CA) will acquire First Security Business Bank's loans and deposits ($74mm, CA). And Heartland Financial USA ($6B, IA) will acquire Community Bank & Trust ($520mm, WI) for about $52mm in stock or roughly 1.55x tangible equity.
Plenty of independent mortgage banks would like to see a more level playing field when it comes to bank & mortgage bank originators. So let's talk about the NMLS. "The Greater Midwest Lenders Association 'GMLA' has submitted our comments letter about the proposed changes to the Mortgage Call Report. The GMLA represents 12 Midwestern states that comprise over 5000 state registered company licensees and over 55,000 MLOs. GMLA is calling on the State Regulatory Registry/Conference of State Bank Supervisors "SRR/CSBS" that run the NMLS to establish clear bright lines regarding the definition for mortgage loan applications. The SRR/CSBS proposal also asks for comments regarding multiple new data fields to be included in the proposed Mortgage Call Report. Some of the new fields to be included are tracking of loan amount changes during the application process and the creation of new QM and Non-QM loan data fields on the MCR Standard Report that mortgage brokers typically use for MCR reporting. We urge everyone to submit comments by October 30, 2014. Click here to download our letter to SRR/CSBS. For more information on how to comment visit the NMLS web site: NMLS Resource Center."
Is your company waiting for all the big companies to embrace electronic signatures? You might be waiting a while - many might be getting the feeling that Google knows the risks involved and others might be overlooking it.
Our friend the Fed ("damn it, Janet!") was in the news yesterday. Yes, the Federal Funds Target remains 0-25bp. Yes, the Prime Rate remains unchanged at 3.25%, the Discount Rate at 0.75%. But the focus was on Quantitative Easing. To the surprise of no one, the FOMC announced the conclusion of QE3 asset purchases. The Fed will continue to reinvest principal payments and maturing Treasuries which will be rolled over at auction. There was the usual information about the economy - nothing we didn't know already - and said that the low interest rate environment would likely remain in place "for a considerable time" after the end of asset purchases and after the Fed's stated thresholds for unemployment and for inflation have been reached. Stay tuned for its next meeting in mid-December.
During the day we saw some volatility in rates although there really weren't any big surprises, and a few price changes flew through the e-mail at the end of the day. The 30-yr. agency mortgage-backed securities finished lower/worse about .250 and the 10-yr. T-note closed at 2.30%.
For thrills today we had Jobless Claims (283k prior, it came out +4k at 287k), and advanced Q314 Real GDP (+4.6% previously, it was 3.5% annual growth). The Treasury auctions its final fixed rate note of the week with $29 billion 7-yr notes going off later today. The 10-yr is at 2.31% and agency MBS prices are better by a few "ticks" (32nds).
The StoneHill Group is searching for Business Development Managers in the West, Southwest, Midwest, and the Northeast territories. The StoneHill Group, Inc. is a nationwide provider of QC outsource services and is headquartered in Georgia. The ideal candidate should currently reside in the specified regional territories. The role of the Business Development Manager requires 5 years' experience as a regional business development manager/account executive, as well as possessing extensive industry contacts. To review the full job description and to submit an application and resume, please visit the StoneHill Group, Inc. Careers Page at the link above.
Up in Illinois, Jordan Capital Finance (JCF, formerly Hilco Real Estate Finance) has an opening in its Northbrook office for a Senior Vice President, Sales and Business Development to lead the pursuit of new business. JCF provides private money financing for investors who buy, renovate, sell and rent residential real estate. "We currently operate in 12 states. The SVP, Sales and Business Development will play a pivotal role in revenue generation for the company, working with a team of JCF Business Development Directors and establishing and executing a profitable, efficient business development strategy. The company is embarking on a very aggressive growth strategy that will include additional loan products, states, and distribution channels. JCF is extremely well funded by Garrison Partners, a leading New York private equity firm. The candidate must have outstanding business and academic success, and a very strong work ethic." Please send a confidential resume to Ms. Aeron Berg.
And last but not least today, 2014 has been a year of organic growth for PRMG. "Along with an aggressive national advertising campaign signifying PRMG's strength, size and stability, the company has been actively recruiting on all fronts and in all channels attracting highly qualified mortgage professionals across the country. As a result, PRMG has recently opened up three additional retail branch offices throughout the country. The new retail branches will be slated with the task of reaching out and establishing relationships with realtors, builders and other referral business partners on a local level, developing new business opportunities, and providing the best combination of loan products and service to the communities they serve." Laurie Gable has joined as a new Retail Branch Manager in St. George, Utah, Mark Toth, heading up the new Brick, NJ Retail branch office, and Dean Adler has been hired to run PRMG's retail branch Manager for the Weston, FL branch. Additionally, PRMG announces the hiring of Jodie Johnson as the Retail Operations Manager of the PRMG Seattle Retail Branch, headed up by Dave Davis, Retail Branch Manager. For confidential inquiries about opportunities, please contact National Marketing Director Paul Lucido.