One can focus on how to obtain a free sandwich today, since it is National Sandwich Day, or focus on the new tax proposal. NAR: "...at first glance it appears to confirm many of our biggest concerns about the Unified Framework. Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that." The proposal includes caps on mortgage interest deductions for existing and newly purchased homes at $500k while limiting state and local property tax deductions at $10k: interest can only be deduced on mortgages worth up to $500K vs. $1M, although existing loans will be grandfathered in, impacting move up buyers.
Mortgage Insurance Tidbits
The storms in Texas and Florida, and the fires in California, may drive some short-term noise in the delinquency stats this autumn, but most analysts do not expect any significant impact on the underlying credit risk the MIs actually insure. What's crossed my email lately on Arch, Essent, Genworth, MGIC, NMI, Old Republic, and Radian?
NMI Holdings, Inc. reported record third quarter 2017 financial results, beating expectations via higher net premiums earned. The parent company of National MI reported net income of $12.3 million for the third quarter ended September 30, 2017. This compares with net income of $6.0 million, or $0.10 per share, in the prior quarter, and net income of $6.2 million, or $0.10 per share, in the third quarter of 2016. Chairman and CEO Bradley Shuster said "National MI delivered record financial results, including record new insurance written of $6.1 billion, record net premiums earned of $44.5 million, and record pre-tax income of $19.5 million. We continued to make significant strides in customer development, activating 25 new customers in the third quarter and 98 new customers for the year-to-date."
Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. announced the launch of a new website, new.mi.genworth.com, that allows loan officers, underwriters, processors and other lending professionals to visually track every part of the mortgage insurance (MI) application process through close.
MGIC published a good summary of last week's National MBA conference.
Capital Markets, LIBOR, and Mr. Powell
The world doesn't run based on surveys, but it does seem to run on acronyms. Almost 80% of investors in a Bank of America Merrill Lynch (BAML) survey say they would like the London Interbank Offered Rate (LIBOR) to remain but they want a "more robust methodology." Don't forget that the Federal Reserve has tasked the Alternative Reference Rate Committee (ARRC) with the responsibility of the transition from U.S. Dollar LIBOR to a new benchmark replacement rate. ARRC set up an index called the Broad Treasury Financing Rate (BTFR). The BTFR rate contains a broad set of US treasury market based financing transactions, also known as repo transactions. Thus far, the BTFR rate appears to be the best replacement for U.S. Dollar LIBOR although daily volatility of the index will likely need to be smoothed using a geometric average, transaction volume will need to substantially grow, and an actively traded futures and derivatives market in this new index rate must develop.
Although he still must be confirmed by the Senate, which is pretty much a rubber stamp, Jerome "Jay" Powell has been nominated by President Trump to be next chairman of the Federal Reserve when Janet Yellen's term as Chair expires in February; her term on the Fed doesn't end until 2024. (This is the first time in 40 years that an incoming administration has not tapped the sitting Fed Chair for a second term.) Yellen has done a fine job. In general, Powell has aligned himself with her on a regular basis, and so the markets gave the news, which was expected, a shrug.
Fed policy is not expected to diverge much in the short term, and remember that Yellen is scheduled to be at the helm until February. At this point "policy" is gradual rate hikes over the next few years and a steady reduction in the balance sheet. The Fed is expected to raise its benchmark interest rate again in December, likely Ms. Yellen's final act as chair.
Colleagues consider him a centrist and pragmatist. Powell is the G.O.P. version of Yellen, with the added kicker of wanting to reduce regulation. But he lacks the deep background in economics of some of his predecessors (Greenspan, Bernanke, and Yellen), and he has expressed skepticism in the past about the unconventional measures that the Fed took after the recession.
Mr. Powell could also depart from the Fed's current trajectory when it comes to regulating banks and other financial institutions - rules Mr. Trump has said should be loosened. But given his low profile over the five years in the Fed, we know little about his inclinations or policies. And don't forget that it is very hard to map the course of the Fed since there are four other Fed Governor slots to fill! Brainard will be the only Obama appointee holdover.
Yesterday was the release of the Republican tax bill. The proposal calls for a larger standard deduction, the elimination of special interest deductions, and a new Family Credit to replace the Child Tax Credit. The proposed plan will preserve the home mortgage interest deduction and allow taxpayers to write-off the cost of state and local property taxes. The current seven tax brackets would be replaced with rates of 0%, 12%, 25%, and 35% while the top tax bracket is proposed to remain at 39.6%. Of interest to the mortgage markets were caps on mortgage interest deductions for existing and newly purchased homes at $500k while limiting state and local property tax deductions at $10k.
Looking at the bond market, which continues to trade in the same range we've been in all year, U.S. Treasury and agency MBS prices climbed on Thursday in a curve-flattening trade. The 2s10s spread compressed to a fresh 2017 low of 73 bps and the 10-year closed yielding 2.34%. The market began inching higher in overnight action, but the advance accelerated in the morning after the release of the tax proposal. But don't forget initial jobless claims which are holding at historically low levels, underscoring the tightness in the labor market.
But that was...then. This morning we've had the usual first-Friday-of-the-month employment data. Nonfarm payrolls were expected to increase 300k but only rose 261k, the unemployment rate was expected to increase slightly and came in at 4.1%, and the average workweek forecast to remain unchanged and it did. Definitely "playing second fiddle" to all this was the September trade deficit which widened to $43.5 billion. We start the last day of the week with rates slightly lower than Thursday's close: the 10-year is yielding 2.34% and agency MBS prices, the drivers of rate sheets everywhere, are better by .125.
Jobs and Products
"PrimeLending strengthened its position as a premier lender for residential homebuilders through a new strategic venture: Jet HomeLoans, LLC, a PrimeLending affiliated business arrangement, has just opened its headquarters in Fernandina Beach, FL. The company offers a complete solution for mortgage lending developed by PrimeLending, a perennial top national mortgage lender known for streamlined processes and advanced technology solutions. Diana Dilallo Tarzia will lead Jet HomeLoans as VP - Managing Director. Diana, a nationally recognized leader in the mortgage industry, has begun assembling a stellar team of proven professionals, handpicked to ensure the success of this homebuilder affiliated business model." In addition to Florida, Jet HomeLoans is expected to operate in Colorado, Georgia, Maryland, South Carolina, Texas, Virginia and West Virginia. For information on PrimeLending's Affiliated Business model, please contact Mike Matthews (972/852-8238) or Susie Garza (972/448-0367).
More Organic Growth for PRMG Wholesale and Correspondent Division! Paramount Residential Mortgage Group, Inc. is actively Hiring Experienced Wholesale and Correspondent Account Executives to help support and serve the entire Western United States / Pacific Northwest / Mountain / Midwest / Northeast and Southeast regions. "Built by Originators for Originators, PRMG is consistently ranked in the TOP 25 of the TOP 100 Mortgage Companies in America, and Ranked in the TOP 5 of the 50 Best Companies to Work for In America. PRMG has made it their #1 mission to provide the best combination of product, pricing, fulfillment, marketing, compensation and advanced technology to our Wholesale and Correspondent customers! PRMG is licensed in 47 states and employs nearly 1,600 people within 100 branches throughout the country! Isn't it time that you take a good hard look at PRMG? Click here to apply online and learn more!" Or send a resume to Paul Lucido, National Marketing Director.
And yesterday this commentary published a notice for PRMG's retail channel. "Built by Originators for Originators, PRMG Retail continues to expand its footprint nationwide by opening 7 new branch locations during the month of October. PRMG is devoted to growing its retail platform and is always looking for Motivated Loan Originators to support the mission to being 'Progressively Better in All that They Do.'" I inadvertently excluded the contact for PRMG retail: Chris Sorensen(909.262.0452).
Caliber Home Loans is excited to announce it ranked as the fastest growing lender among the top ten banks and non-banks in the nation, as reported by Inside Mortgage Finance's Top Mortgage Players for the First Half of 2017. While the overall market declined by 6 percent, Caliber grew its volume by over 22 percent, far outpacing its competition. Caliber looks forward to continuing its positive momentum, as it focuses on expanding its product suite and growing its distribution force across the nation. If you are a top producer, looking to join a fast-paced company with a diverse culture and productive workforce, Caliber is interested in speaking with you. For more information on growing your career with Caliber, visit joincalibernow.com or contact Burghardt Patton.
"With 2017 coming to an end, what steps are you taking to position yourself for growth in 2018? What is your bank doing to support that growth? Maybe you haven't even thought about it. US Mortgage Corporation would love to talk to Loan Officers, Branch Managers and Area Managers about its plans for 2018 and how US Mortgage supports its originators. Learn firsthand how their Marketing Department generates exclusive leads. Learn about the advancements they have made with their Technology and how it can help you. Learn more about their Sales and Operational Support and how it frees up your time to network and originate. I encourage you to start taking the steps to set yourself up for a successful 2018. Speak directly with the President, Scott Milner, and find out how they will help you grow. Send confidential resumes/inquiries to Scott Milner. Management is also looking to open more branches throughout the country if you are ready to take the next step!"
In wholesale job news, Ditech Wholesale is hiring talented experienced Account Executives in key markets across the country. "It's a great time to be in Wholesale for today's salesperson as seasoned companies are looking for top talent, and the purchase market is poised for a terrific 2018. Some companies are turning towards the 'desk AE' model, believing that phone/email time can replace face time, but Ditech has chosen not to move that direction, believing personal relationships will matter more than anything else as the market shrinks and products expand. We are currently looking for seasoned AE's and offer a unique blend of wholesale values overlaid onto correspondent disciplines. We are one of the very few companies that can do both well (says Wells Constantine, National Sales Manager). We are focusing on NC/SC, VA and Tampa, Orlando, Miami, FL for the Eastern Seaboard, led by Tony Petronio; CO, NV and Houston, TX for the Southwest, led by Zeenat Zonte; UT, MO, ID/WY/MT and Sacramento, CA for the Northwest, led by Michelle" Click here to review the job description and apply today or contact Cari Watkins in HR with questions"