Apr. 7: Secondary job, new condo product; Consumer Direct workshop & other events; disaster updates; why some mergers fail

It is wrong to say that all Millennials are living with their parents watching reruns of “The Wild Thornberrys.” Many are out there accumulating wealth, and according to Zillow, the city with the greatest share of wealthy Millennials earning more than $350,000 per year with, 8.7 percent of households headed by a Millennial is Arlington, VA. The second most populous city of “young and rich” Millennials is San Francisco, as 7.8 percent of Millennial-headed households earn more than $350,000 annually, followed by Huntington Beach, Sunnyvale, and Seattle. When comparing popular places for young adults to live, there are some similarities seen between Millennials and Baby Boomers. Arlington also had the largest share of rich Baby Boomers, with 7.9 percent earning more than $350,000 per year, followed by both Cambridge and Ann Arbor.


First California Mortgage Company is continuing its nationwide expansion and is growing its team by adding a Secondary Marketing Manager. The position will be responsible for Daily Rate Sheet Pricing, Managing the Lock Desk, Hedging, and Securitization & Sale of Loans. The ideal candidate will have 5 years of experience in Secondary Marketing; experience using Optimal Blue and Compass Analytics preferred. This position will be in Petaluma, CA. “First California Mortgage is a FNMA & FHLMC Seller/Servicer, GNMA I & II Issuer, and jumbo and non-QM lender operating across multiple platforms: retail, wholesale, consumer direct and Affinity. The Company has been voted as one of Mortgage Executive best places to work, Inc. 5000 fastest growing, and Mortgage Executive Top 100.” Please send inquires & resumes to HR Director Shannon Thomson.


Under the “new products” banner, Parkside Lending’s Condo Concierge is a great way to take the hassle out of condo loans. We collect ALL of the Condo or PUD documentation, including anything required for a full review as well as an updated Master Insurance Policy (exclusive of HO-6 if that is required). For a modest fee you can focus your attention on your borrower’s needs while we chase down the paperwork. Contact your account executive or info@parksidelending.com for more information about how we make Condo and PUD loans easy.


Upcoming events? Sure – who doesn’t want to learn something new or get together with colleagues over a fine glass of Chablis?


Nearly every lender we speak with is either activity expanding their Consumer Direct efforts, OR talking about the trends of others. Some think that CD is taking off like a Rocket (pun intended) while others feel that it’s still very refi centric, and thus subject to pressure when rates go up. The reality, however, is a bit more complicated, and that is why STRATMOR is running a Consumer Direct Workshop May 10-11 in Denver CO. This popular event allows CD executives to meet directly about the CD channel, and dig into the performance metrics of the channel.  For example, last year we learned that over 40% of retail loans being produced were through direct efforts, but also learned that purchase units through CD had doubled in the past five years. Attendees of this workshop include CD executives, as well as bank executives looking to expand direct cross sell to their bank customers. Garth Graham and the folks at STRATMOR have even more insights this year: click Consumer Direct Workshop for more details.


Down in California the Greater Sacramento CAMP Chapter is bringing back its annual Lender Fair and Trade Show. The 2016 Spring Fiesta Lender event includes food and a hosted bar. Don’t miss this opportunity to mix and mingle with other professionals and meet many of the vendors who support us in this industry. This event is FREE for CAMP members who pre-register, $10 for future CAMP members, and $20 at the door. The event is April 14th at the Sacramento Association of Realtor Building, 2003 Howe Ave. in Sacramento. For more information, contact CAMP Sacramento President Leo Whitton.


WMBA’s April 19th dinner meeting at The Overlake Golf and Country Club will include a loan officer panel and honor past President’s. Panelists include Mike Dorman, Loan officer for The Dorman Team – Evergreen Home Loans, Danny Forbes, Mortgage Loan Officer – Umpqua Bank, Loann Le – Bank of America, and Oleg Tkach Senior Mortgage Loan Officer – Guild Mortgage Company. Registration deadline is April 14th at noon.


ABA will be holding its annual Real Estate Lending Conference, April 17-19, 2016 at the Grand Hyatt in San Antonio. The event is built by bankers, for bankers, and features residential and commercial tracks.  The agenda covers market trends and practices, profitability, process engineering, underwriting, appraisal issues, regulatory challenges, strategic choices, and much more. Complete program details are available here.


The OMBA Annual Convention will be held May 2-4, 2016 in Columbus at the Sheraton at Capitol Square, 75 E. State Street. Speakers include MBA Chairman & Quicken Loans CEO, Bill Emerson; “Lykken on Lending” radio talk show host and mortgage banking consultant, David Lykken; myself, and many others. Additional information and registration are available here.


Disaster updates?


Sun West posted information regarding new counties in Mississippi declared by FEMA as disaster areas for the incident date of March 9th. For loans submitted with an appraisal dated on or before the incident period end date or for those submitted without an appraisal, Sun West will require an interior and exterior inspection prior-to-funding or purchase of any loans with subject properties that are determined to be at risk. The inspection must verify that the property is sound, habitable and in the same condition as when it was appraised.


On 3/25/2016 FEMA identified 4 additional Louisiana parishes as eligible for assistance to supplement individual recovery efforts in the areas affected by severe storms and flooding beginning on March 8, 2016, and continuing. Until an incident end date is declared, AmeriHome Mortgage will require re-inspections for all properties in the affected parishes, irrespective of appraisal date.


Hundreds of residents of Flint, Michigan, filed a racketeering lawsuit yesterday targeting Gov. Rick Snyder and other state and local officials over lead contamination of the city’s drinking water. Filed in U.S. District Court in Flint, the suit is one of many arising from the decision to switch the Flint supply from the Detroit water system to the Flint River in April 2014 to cut costs. The move was supposed to be temporary, until Flint could join a new water authority that would pipe water from Lake Huron.


Ditech has posted specific requirements regarding the water contamination emergency in Flint, MI. A water quality test for all properties located in Genesee County serviced by the public water system, unless the appraiser states that the subject is not serviced by the Flint Michigan Water District, to determine if water is safe and potable. Water test must show that water quality is within maximum contaminant level (MCL) standards set by EPA and local health authority. Refer to investor links for FHA, VA, Fannie Mae and Freddie Mac additional requirements and information.


Switching gears to why some mergers and acquisitions work and others don’t, one area that has plagued deals in the past from seeing the best results is culture. Is a lender or bank merging with another lender or bank that you’ve been competing with, and despising, for decades? Is there too much “history” to make it work, even if the financials and footprints work perfectly?


Lenders and banks may have differences from others in operating structure, hierarchy, dictatorial management vs. more open styles, pay structures and other factors. Here too, candidates should evaluate things very carefully before jumping into the pool, if success is to be truly achieved over the short and long term.


Certainly there are lots of factors to consider. A study done several years ago (Gubler) looked at mergers across various countries during the 1980s and 1990s. It used accounting data to compare post-merger profit performance 5 years after the merger to control groups of firms in the same industry. It found that the most common result, interestingly with common patterns across countries, was increased profitability but reduced sales. Meanwhile, about 41% of all mergers reviewed failed to have a positive impact on profits.


A study out of Wharton discussed why mergers fail. (It is about 10 years old, but nothing has changed.) The study notes that there have been “hundreds of studies” looking at the long-term results of mergers and that researchers estimate the failure range is between 50% and 80%. That is downright ugly. Let’s look at some other research by KPMG from 2015. This survey of 100 community banks found the areas tagged as the three biggest drivers of company revenue growth over the next 1 to 3 years are: asset and wealth management (32%), mergers and acquisition activity (28%), cross-selling (28%) and new market segments (25%).


And the most recent 2016 bank M&A survey results from Bank Director found that 67% of banks say they need to grow significantly to compete in today’s marketplace. Further, the minimum asset size respondents indicated most frequently was needed to be competitive were: $1B (32%), $500mm (22%), other (17%) and $5B (16%). Other surveys have found while roughly 50% of banks are interested in potentially acquiring another bank, close to 90% have no interest in selling.


There is the issue of staffing. What percentage of each institution is support staff? There are challenges at the higher echelon levels too as there will be duplication of positions. There will be multiple CEOs, heads of production, CIOs, capital markets, CFOs, etc. who have to be sifted, and this will entail a lot of pain as some may have to leave. Departments have to be realigned or closed. The private sector is ruthless and the higher pay scales carry an unemployment trade-off as they use euphemisms such as shareholder value for downsizing. If one of the biggest benefits of an M&A deal is combining staffs, or acquiring talented individuals, failing to lock in key personnel through contracts before a deal is announced can result in the loss of some of the very people that made a deal attractive.


There will be plenty of mergers, and acquisitions, in lending and banking in 2016. Doing homework and analysis is critical, and as Steve Brown from PCBB notes, “It is also important not to fall in love with a given target because a bad price or bad culture can blow up any deal and your own bank post-deal.”


With a lack of new banks being formed, and others continuing to merge, it doesn’t take a rocket scientist to figure out that the number of institutions is diminishing. Some say it is a fact of life, critics say that it is due to the burden and cost of over-regulation. Just in the last week it was announced that in Virginia Blue Ridge Bank ($267mm) will acquire River Community Bank ($114mm) for about $12.4mm in cash and stock. Western Alliance Bank ($14.2B, AZ) will acquire the US franchise finance hotel business from GECC. And in ‘Bama First State Bank of DeKalb County ($99mm) will acquire First Bank of the South ($84mm). And Chicopee Savings has agreed to merge into Westfield Bank to form the largest bank headquartered in in Hampden County in a $110 million deal. (The move continues a trend of bank mergers driven by technology needs and a drive for market share.)


Many say that the Federal Reserve is a lagging indicator of economic conditions rather than a leading indicator. Yet we pay attention to their speeches and minutes from their meetings to see if we can learn anything more. Yesterday’s release of the March meeting minutes showed that a few members wanted to hike in March, but most share the views expressed by Yellen last week when she said that the current situation warrants more caution. Certainly policymakers were divided on what to do next. They look more unified than anticipated, given some recent point/counterpoint from Fed speakers but there’s nothing in the Minutes that would suggest they’ll delay a rate hike if economic conditions improve–especially global economic conditions.


Fixed-income securities declined/worsened slightly Wednesday. Blame it on the Fed, blame it on the price of oil, blame it on the stock market, blame it on the anything you like. But everyone admits that volatility in interest rates has been low, and no one minds. Certainly the Minutes from the Federal Reserve’s March meeting suggest the central bank is unlikely to raise interest rates this month.


This morning we’ve already had Initial Jobless Claims for the week ending 4/2 (267k, down 9k). And that about does it for the day…except for another speech by Fed Chair Yellen this evening after the markets are closed. When folks headed home the 10-year was yielding 1.75% and this morning its at 1.74% with agency MBS prices better by nearly .125.



An elderly man had a massive stroke and the family drove him to the emergency room. After a while the ER doctor showed up with a long face.

“I’m afraid grandpa is brain dead but his heart is still beating.”

“Oh dear God” cried grandma, “we’ve never had a politician in the family before!”





(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)



Rob Chrisman