My brain can't keep track of all the statistics coming out of lending. But you won't find many people who will argue that real estate & credit have not rebounded. Zelman and Associates reported that in Q3 of 2014, the total number of loans in delinquency and in the foreclosure process was down 20% YoY and 50% lower than the peak in Q4 of 2009. In November, default notices declined 15% based upon 11 states and were down 9% YoY and the number of homes repossessed by lenders decreased 9%. REO filings are currently at the lowest level since mid-2007 and REO listings were down 16% YoY. The total industry owned 275,000 properties in REO inventory as of 3Q2014 down 21% YoY and 59% below the peak.

Education holds the key to economic success according to a report published by Wells Fargo Securities Economics Group. The report found that in 2012, 32.7% of White students obtained a four-year college degree, whereas less than half of that share of Blacks and Hispanics received a college degree. More than 40% of Blacks and Hispanics had either some college or received an associate's degree in 2012, which is greater than their White counterparts. Research has also discovered that the median income for those who hold a bachelor's degree is $50,360, compared to a median income of $29,423 for those who only have a high school diploma, whereas an associate's degree leads to a median income of $38,607. People who have obtained a graduate degree see a median income of $68,064. College enrollment remains high for all races, but the percentage of those graduating with a bachelor's degree falls for Blacks and Hispanics. The study also found that Millennials put more importance on college education than previous generations, with Black and Hispanic Millennials still needing to increase college enrollment to improve labor and income prospects. Asian-Americans between the ages of 18-24 years old, have the highest rate of college enrollment at 59.8%, followed by Whites (42.1%), then Hispanics (37.5%) and African Americans (36.4%). Both African-Americans and Hispanics are earning more bachelor's degrees each year, but associate's degrees are still an important alternative for both races.

But in general mortgage lenders are worrying more about lackluster demand impacting margins, according to the latest Fannie Mae Lender Sentiment Survey. The biggest headache remains regulatory, of course. Lenders anticipate a modest housing expansion in 2015. It seems like the homebuilders agree. It is all going to hinge on the return of the first time homebuyer.

What is holding down stronger growth in the mortgage market? When people ask me to comment on what I believe is hobbling the mortgage market, I usually resort to faking an illness and then make a quick exit. As a longtime friend of mine joked, "It's equivalent to asking the question, 'What's wrong with Los Angeles? Is it the smog? Is it the freeways? Is it the crime? Is it the crowded population?" Yes, yes, yes, and yes. Last month Wells Fargo noted, "Mortgage financing activity remains a central linchpin for the economic and housing outlook. Recent data indicate that lending standards are easing and supply is increasing in the mortgage market.  Yet, residential mortgage debt has fallen to historically low levels while the housing recovery remains sluggish. In addition, mortgage debt continues to decline on a year-over-year basis.

But although growth in mortgage lending is slow, the holidays are no excuse to stop servicing flow, just ask Mountain View Servicing which has two deals outstanding; the first a $2.7 billion FNMA/FHLMC non-recourse servicing portfolio which is 100 percent fixed rate 1st lien product, 100 percent retail, 80% purchase origination, WaFICO 746, WaLTV 79%, WAC 4.51%, average loan size of $207k, with production in California (17.6 percent), Arizona (16.4 percent), Utah (16.4 percent), and Colorado (9.7 percent); the second a $252 million FNMA non-recourse servicing portfolio which is 100 percent fixed rate 1st lien product, WaFICO 750, WaLTV 79%, WAC 4.06%, average loan size of $249k, with an almost all Texas production (99.3%). Phoenix Capital Inc. has two projects; the first is Project Nelson a $304 million bulk Fannie Mae, Freddie Mac and Ginnie Mae MSR package offered by an independent mortgage banker established in 1989. Nelson is $231MM of conventional/$73MM of Gov't, with 4.345/4.19% WAC, 738/687 WaFICO, and 87/95% WaLTV; the second is Project Ingram a $800M bulk Fannie Mae A/A and FHLMC ARC servicing rights package which is 100% fixed rate WaFICO 749, WaLTV 70%, WAC 4.23%, average loan balance of $243k, 82% CA originations, with 86% of the package originated by correspondent channel.

Growing up and living in California all my life I can recall seeing the first residential solar array in my neighbor's yard. It required a substantial portion of their backyard, a crane to move the panels into position, and if I remember correctly the breakeven date on the investment was sometime around 2027....needless to say, at that time, solar was more of a way of life, than any sort of economic arbitrage. Times have changed; solar is more efficient, is easier to finance, upfront costs are coming down, and if you believe what you read in Bloomberg, thanks may be due in part to the secondary markets. Jody Shenn writes, "Renovate America Inc., a closely held company that works with municipalities to let homeowners use property liens to borrow cheaply for energy-efficiency improvements, is expecting more sales of a new type of bond tied to the financing. New York hedge fund 400 Capital Management LLC, with more than $1 billion of assets under management, helped bring the first $233 million of securities into the market this year, including $129 million of notes last month that helped finance 6,858 projects that will save homeowners 6.7 million kilowatt-hours in energy and 4 million gallons of water annually, according to an e-mailed statement today." Like I've always said, banking needs more acronyms; the debt is backed by liens called Property Assessed Clean Energy assessments (PACE with a silent lower-case 'A', I guess), which are similar to property taxes, created as consumers are given funds for work such as solar-panel installations, better windows and artificial turf. Renovate America calls its product the Home Energy Renovation Opportunity, or Hero, program.

Banks out there know that the Winter 2014 issue of Supervisory Insights was released this week. It looks at key aspects of interest rate risk (IRR) management, including the implementation of effective governance processes, the development of key assumptions for analyzing IRR, the development of an in-house independent review of IRR management systems, and what to expect during an IRR review. "Banks need to be prepared for a period of increasing interest rates," stated Doreen R. Eberley, Director, Division of Risk Management Supervision for the FDIC. "The articles in this issue of Supervisory Insights, which were prepared by FDIC field examiners who specialize in IRR reviews at community banks, can help banks identify the potential risks and take steps to mitigate the risks where needed." "Effective Governance Processes for Managing Interest Rate Risk" discusses supervisory expectations for a community bank's IRR governance process, identifies potential risks associated with a period of increasing interest rates, and discusses approaches for mitigating IRR as needed. "Developing the Key Assumptions for Analysis of Interest Rate Risk" describes common sense approaches for developing the assumptions necessary to analyze interest rate sensitivity in the current environment. "Developing an In-House Independent Review of Interest Rate Risk Management Systems" describes ways that smaller institutions may be able to effectively and economically perform an in-house IRR independent review. Finally, "What to Expect During an Interest Rate Risk Review" describes what examiners focus on during an IRR review, supervisory expectations with respect to IRR, and communication with the FDIC during an examination.

But are rates going up? No one knows for sure - remember all the smart guys a year ago saying we'd be at 3% on the 10-yr in 2014? It closed yesterday at 2.20%. We did have a little news yesterday. Besides a decent Jobless Claims number, the Philadelphia Fed Manufacturing Business Outlook Survey diffusion index of current activity decreased 16 points to 24.5 in December from a reading of 40.8 in November.  And the Conference Board's index Leading Indicators Increased 0.6% in November, increasing for third month in a row. Ken Goldstein, Economist at The Conference Board, observed, "The biggest challenge has been, and remains, more income growth. However, with labor market conditions tightening, we are seeing the first signs of wage growth starting to pick up."

The headlines were grabbed by the stock markets while 30-yr agency MBS prices sold off - they are down nearly ½ point the past two days while the 10yr note is off more than 1.5 points and its yield higher by 15 basis points. There is no scheduled news today and the 10-yr, and MBS prices, are unchanged from Thursday's closing levels.



On the jobs front, Fannie & Freddie seller/servicer American Capital Corp (ACC) is gearing up to increase business in its Wholesale channel. The name has changed from ACBN to ACC Wholesale, but the "feel like a big fish" offering to brokers is still in place. ACC is looking for Account Executives for the following areas: Seattle, Texas, San Diego, Pasadena/Santa Barbara. AEs have the ability to bring on Retail and Wholesale clients as well as originate themselves if they are licensed.  Please email Allen Cravello if you would like to be considered.

And earlier this week the commentary mentioned San Francisco's Social Finance expansion in to mortgage lending this year. Social Finance is searching for directors of business development and sales for SoFi Mortgage. The candidates (to be based in or near Charlotte, Chicago, Dallas-Fort Worth, Los Angeles, Philadelphia, Seattle and Washington D.C.) will help grow SoFi Mortgage origination volume through direct contacts with Realtor, and Realtor & professional networks, with the goal being $100 million in origination volume per month. The desired skillset includes 5+ years of experience in mortgage or real estate sales, established Realtor networks and relationships, the ability to work in a fast-paced and entrepreneurial organization and ability to travel. One will have the opportunity to "help create a truly disruptive financial services company." SoFi is an entrepreneurial company with freedom to take responsibility and define outcomes, offering a competitive salary with quarterly performance bonus, share options, and benefits. For a full job description, confidential inquiries and resumes should be sent to

(American Banker featured SoFi in a story earlier this week, and highlighted plans for the company to do an IPO in 2015. "SoFi's mortgage product fits into an extremely niche market, because of the borrower demographic it is targeting. Many of its loans do not meet do not meet the Consumer Financial Protection Bureau's underwriting guidelines issued this year. Most residential home lenders currently have a low risk tolerance, and are unwilling to underwrite outside of those standards. However, lenders that are (SoFi included) operate in a small, but highly competitive market. At least half of all SoFi's mortgages would be considered nonqualified mortgages, because the debt-to-income ratio exceeds the CFPB's 43% threshold.")