Are we destined to have robots making home loans? I sure hope not, although no one has ever accused robots of being shilly-shally. And I sure hope that the cover of this recent New Yorker is not prophetic.
The CEO of Stifel Financial said while the number of bank M&A deals has been flat from 2017 vs. 2016, he expects an increase in bank M&A in 2018 due to regulatory changes. For mortgge banks, this isn't the first, won't be the last... another lender was purchased, this time in Northern California. The Capital Corps, LLC, which caters to "non-traditional borrowers," has made a "strategic investment" in Commerce Home Mortgage. Commerce has 25 lending offices located in California, Arizona, Colorado, Florida and Georgia. For its part, "The Capital Corps target borrowers come from the 27% of the U.S. population the FDIC identifies as underbanked who are unable to obtain loans from banks due to overly burdensome or technical documentation requirements that do not reflect on the borrower's true credit-worthiness..."
Of course, a mortgage company doesn't have to invest in other mortgage companies. Nationstar, uh, I mean Mr. Cooper, the nation's largest non-bank mortgage servicer and a leading mortgage lender, confirmed its role in Matic Insurance Services' funding round and announcing the forthcoming availability of Matic's services in Mr. Cooper's digital mortgage application interface (coming in 2018). Yes, Matic Insurance Services announced the completion of a $7M Series A Funding round led by Mr. Cooper and leading insurance carriers Nationwide and National General Insurance with support from VC firms Anthemis and ManchesterStory Group.
"Matic's technology connects homebuyers with insurance carriers, mortgage lenders and mortgage servicers to make homeowner's insurance a more integrated part of the home purchase process. The result is a simpler, faster policy selection process that can save borrowers money and reduce loan delays...Mr. Cooper's integration with Matic will make it easier and faster for borrowers to secure a homeowner's insurance policy when purchasing a home through Mr. Cooper."
J.D. Power does more than just rank cars. It released its 2017 U.S. Primary Mortgage Origination Satisfaction Survey showing which lenders hold the highest marks in consumer satisfaction. Tied for first place are Guild Mortgage Company and Quicken Loans. "One revelation of the survey showed the mortgage industry's promise of technology creating a faster and easier mortgage origination process does not appear to be fully recognized, as mortgage customers are reporting slower purchase processes. The study also found that overall satisfaction with mortgage originators decreased, eight points on a 1,000-point scale, from last year due to a perception of a slower process, despite a significant increase in the number of customers applying online.
"For the first time in the survey's history, refinance and purchase customers cite online as the most frequent method of submitting a mortgage application. A total of 43% of borrowers indicated they applied digitally in 2017, up from just 28% the year before. However, satisfaction among consumers who applied online plummeted by 18 points from last year, and trails in-person applications by 10 points."
Mr. Smith Goes to Washington
A gaggle of Senators, including Senate Banking Committee Chair Mike Crapo, proposed a plan for rolling back parts of the Dodd-Frank Act for small and regional banks. Nope, no independent, non-depository mortgage banks involved. And I'd put the odds of it going through at about 100:1, but it shows the sentiment of some politicians. Perhaps some part of will make it through, so there is a slim chance of Congress making a change to rules passed after 2008.
A change to the definition of "mortgage originator" under TILA that should benefit the manufactured housing industry? Present. Cutting compliance costs for community banks? It's there. Raising the threshold for labeling banks as too big to fail to $250 billion in assets from the $50 billion set in the 2010 Dodd-Frank Act? That too, over 18 months. Banks with less than $100 billion in assets would get immediate relief. Some QM portfolio lending changes? Yup.
Past GOP efforts to overhaul Dodd-Frank have failed because Democrats argued they went too far in gutting safeguards that are meant to protect consumers and to ensure Wall Street doesn't cause another meltdown. What is the wisdom of rolling back so many of Dodd-Frank's protections with almost no gains for working families? "Banks made record profits last year and it looks like executives will get bigger bonuses this year. Hourly wages have stagnated for 40 years, and too many Americans are still feeling the impact of the 2008 financial crisis. Who needs help the most?"
Isaac Boltansky opined, "We continue to believe that odds favor passage of a regulatory relief package, but our sense is that the package will take months to fully form and therefore expect passage in mid-2018. Given the package's bipartisan support, it represents the most significant legislative step toward a regulatory realignment in the financial services sector since the Dodd-Frank Act was enacted.
"QM Portfolio Safe Harbor. The package includes a provision that would appear to extend the Qualified Mortgage (QM) rule's safe harbor to loans originated and retained in portfolio by banks or credit unions with less than $10B in assets. The GOP had previously pushed for all depositories to enjoy the portfolio safe harbor, but the $10B asset threshold is a sound compromise. Our sense is that this provision could help covered banks at the margin, but its impact on the mortgage market will likely be limited."
And don't forget that the Department of Veterans Affairs has been aware that lenders have been repeatedly selling military homeowners new loans, often with risky terms that are detrimental to the borrower, for over a year but has yet to act. "Consumers, including veterans, may be being harmed. We know investors are being harmed. Borrowers from FHA are being harmed," said Chris Killian, managing director and head of securitization at SIFMA. "The sooner they fix it, the better."
With that in mind, last month Ginnie Mae and VA joined forces and announced the formation of the "Joint Ginnie Mae - VA Refinance Loan Task Force." The task force will focus on examining critical issues, important data and lender behaviors related to refinancing loans and will determine what program and policy changes should be made by the agencies to ensure these loans do not pose an undue risk or burden to Veterans or the American taxpayer. The task force will focus on examining critical issues, important data and lender behaviors related to refinancing loans and will determine what program and policy changes should be made by the agencies to ensure these loans do not pose an undue risk or burden to Veterans or the American taxpayer. It will also examine the impact of establishing stronger seasoning requirements for VA-guaranteed loans that are securitized into Ginnie Mae Mortgage Backed Security pools. Additionally, the task force will work to ensure Veterans understand the costs and benefits of refinancing, and ensure robust borrower outreach and education programs are augmented for this purpose.
Ginnie Mae's recent announcement details its new Platinum WAC ARM pool types and eligible collateral related to the anticipated new Platinum WAC ARM pools and Platinum Jumbo Only pools planned for December of 2017.
Although it bounced a little last week, the persistent flattening of the US yield curve may have far-reaching effects and ultimately lead to a slowdown in the US economy, according to several market participants. For a decent primer, here is a story that explores the causes behind the flattening and possible future scenarios.
Yesterday there was much ado about nothing: some intra-day volatility, some shifting among coupons, securities, and maturities, but nothing worthy of me droning on about. Yield curve flattening resumed after a brief respite at the end of last week. The 2s10s spread compressed by three bps to 71 bps. The 10-year yield touched a low of 2.37% early in the day before spending most of the session grinding higher to close unchanged at 2.400%. As did much of the agency MBS market.
In terms of supply and demand in mortgage land, we can expect the Fed to buy a daily average of $1.17 billion per business day of various securities and coupons. Of course, this will gradually fade away as the NY Fed lowers its balance sheet.
For today we have a bevy of Fed President speakers. But for actual numbers, an increase this morning in the NFIB Small Business Optimism Index for October showed small businesses were more optimistic in October as sales expectations grew. We've also had the October Producer Price Index (remember when inflation even existed?) which was +.4%, core +.4% for goods & services - stronger than expected. Tuesday begins with the 10-year at 2.40% and agency MBS prices not much different versus Monday's close, so rates are roughly unchanged.
Employment and Products
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Last Wednesday the Sales Mastery and Maxwell teams released the Official Recap of Todd Duncan's 2017 Sales Mastery Event exclusive to Rob Chrisman subscribers. Because so many asked for it, we have released it again today! I have known Todd for many years and he and his team put on an incredible event. It should be on the short list of must attend events for all performance driven lending teams and loan officers. For 2017 they celebrated the 25th Anniversary of the Sales Mastery Event in San Diego and beyond the incredible weather, it was one to remember. Whether you attended or not, this recap will be a treat. Inside you'll find a conference overview, professional guidance from the nation's top producing LOs, plus tips and notes from sessions that you can start implementing in your approach today. Download your exclusive copy today!
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