“You know you’re old if they have discontinued your blood type.” You also know you’re old if you think “vendor management” consists of making sure there is enough soda pop and Skittles in the lunch room machines. But under Dodd-Frank, and its enforcement arm the CFPB, making sure your vendors are compliant will be critical: http://deloitte.wsj.com/riskandcompliance/2013/12/02/managing-third-party-vendor-compliance-under-the-cfpb/. Once again, one must ask, “Can small companies really afford to dedicate resources to do this in a thorough manner, knowing that the costs are passed through to the borrowers’ price?” Or perhaps can they not afford to…
Larger companies are certainly hiring. I have been asked to help a well-capitalized independent mortgage bank in California in its search for an experienced CIO. The candidate will occupy a very visible position within the organization, overseeing hardware and software related technology advancements and IT support staff of approximately 30 individuals including programming and report design, and be expected to live in or relocate to California. The mortgage bank is licensed in several states with a wide-ranging retail branch network, and has a well-established servicing portfolio. Please send confidential resumes to me at [email protected].
On the production side, HomeBridge is seeking to add branches to its expanding company. “Are you a lender that has been successful in the past, but lacks the capital you need to get to the next level? Do you have a good team, but are having a hard time navigating the compliance issues, agency approvals and changes that never seem to stop coming? HomeBridge Financial Services, Inc. (http://www.homebridgeinc.com/), which until recently was known as Real Estate Mortgage Network, Inc., is one of the largest privately held, non-bank lenders in the U.S. Over the last 25 years the company has grown to include nearly 1,300 associates in more than 70 retail branches across the country, along with a correspondent division and two separate wholesale operations. In 2013, it closed just under $7 billion in home loans, a 30 percent increase over 2012. To learn more, reach out to either Peter Norden at [email protected] or Joel Katz at [email protected].
Maybe they’ll pick up some resources from Chase. JPMorgan Chase announced that a couple thousand positions would be eliminated, changed, restructured, whatever term you’d like to use. I’d heard rumors of large numbers of LOs leaving the bank for several weeks now – perhaps they saw the writing on the wall: http://www.ibtimes.com/jpmorgan-chase-nysejpm-cut-2000-additional-jobs-1557673. Or is it 5,000? Here: http://www.huffingtonpost.com/2014/02/25/jpmorgan-job-cuts_n_4853266.html. Or 6,000: http://www.reuters.com/article/2014/02/25/jpmorganchase-brief-idUSWEN00CM220140225. Or 8,000? I can’t keep track: http://www.usatoday.com/story/money/business/2014/02/25/jpmorgan-chase-job-cuts/5803057/. I knew that I should have grown up and become a compliance guy! Seriously, many attribute these activities to QM, and thus the CFPB. (“JPMorgan Chase is scaling back its mortgage products as the market cools. The company plans to eliminate 22 of its 37 mortgage products and programs by the end of 2014, according to a Tuesday presentation to investors. It has already jettisoned 12 and plans to get rid of 10 more by the end of the year.”) And thus the consumer loses 60% of the available mortgage programs at Chase. And should we assume some of those 15 programs left are Private Banking? In that case, most consumers do not have $1 million in cash in JPM, so the damage could be even worse. One wonders when the other big guys will follow suit.
Yesterday the commentary discussed signing bonuses and LOs moving from one lender to another. I received this note from the Atlantic Seaboard. “I went through this in 2006-2007 as well. In my market I can literally fill up my calendar with lunches/meeting with management from competing mortgage companies, big banks, small banks, and correspondent lenders. They all ask for me to break out production from 2013 and to prove how much of my volume was purchase volume. Two weeks later I have an offer for a 3 month sign-on bonus (usually from $5-10k), accelerated basis points payout for 3-6 months, and a more aggressive comp plan overall. The colleagues that I see leaving for these offers are mostly big refi producers, and their business is slow now. They need the sign on bonus as a salary for three months and hope to convert to purchase producers. They will likely fail, however, as three months is not a long enough period to make that change. Some were probably on the verge of being fired for lack of production and were approaching 4-6 months negative on their draws. So an offer from another lender with a 3 month sign-on bonus was a no brainier for them. In one move they went from being -$8-12k in the hole to positive $5k a month.”
There are a lot of folks predicting what is going to happen to housing. (Meanwhile, “down in the trenches”, LOs, processors, and underwriters are grappling with every deal.) Continued stagnant mortgage credit supply and demand conditions likely were anticipated three years ago in the Treasury report, Reforming America’s Housing Finance Market. We do not think it is just the weather. Benign technical conditions persist but valuation changes warrant a move up to neutral on the agency MBS basis and down to neutral on AAA CMBS. We reiterate our constructive views on legacy CMBS and non-agency MBS, with a preference for CMBS. AAA CLOs appear particularly attractive at this point: http://research1.ml.com/C?q=xCGLq8GlVm4.
Way back when, the CFPB said that it would only examine banks with assets north of $10 billion, but was capable of examining non-depository mortgage banks of any size. And thus it spoketh, and banks with assets of less than $10 billion breathed a sigh of relief. And there was peace. But now the OCC has its own supervision manual on safety and soundness – for all banks: http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/a-mb.pdf.
Switching gears, the MBA’s Advocacy Group notes that, “Private mortgage insurers (MIs) have begun filing new master policies with state regulators, paving the way for clearer coverage and greater efficiencies in the industry. The revised master policies were developed at the direction of FHFA and formalize the implementation of various loss mitigation strategies developed during the housing crisis to help troubled homeowners. Other provisions include a robust rescission framework that clarifies when and under what circumstances a policy may be rescinded, as well as the establishment of specific timeframes for claims processing. MBA has advocated for up-front risk sharing, which would bring additional private capital in front of the GSEs and has the potential to lower costs for homebuyers. An important component of this effort is reassuring lenders and investors that MI coverage will be there when it is needed. The new master policies and enhanced eligibility standards are both critical in this respect.”
February has been a huge month for MSR trades, so much in fact I believe I may be a little behind in my reporting. What appears below is what I have seen over the last week, and what I believe is a great indicator of market appetite at the moment. Phoenix Capital Inc was offering a mix of $1.3 billion bulk Fannie Mae and Ginnie Mae mortgage servicing rights. The package composite for Conventional Fixed Rate: $770M UPB, 91/9% (30/15yr), WAC 4.021%, WaNSF 0.2505, WaLa $195k, WaFICO 751, WaLTV 76%, 45% (wholesale) 27% (correspondent) 27% (retail). The package composite for the portion of Government: $527M UPB, 75% FHA, 22% VA, 3% USDA, 98/2% (30/15yr), WaC 3.834, WaNSF 0.3131, WaLA $205k, WaFICO 692, WaLTV 96%, 40% (correspondent) 33% (wholesale) 27% (retail).
MountainView Servicing Group LLC has had plenty to offer as of late, including a FNMA portfolio with a package composite of 99.8% fixed rate 1st lien product, WaC 3.81%, WaFICO 745, WaLTV 80%, WaLA $162k, with production originating in TX (41%), OH (23%), CO (14% ) and IN (4%). MIAC recently represented a seller of $404mm in FNMA/GNMA with a package composite of 100% FRM 53/47% (GNMA II/FNMA), WaC 4.145%, WaDEL 0.21%, 61% (retail) 39% (wholesale), 86% Full Doc, and 14% Streamlined, with a geographic concentration of originations in Colorado; as well as a second offering of $178mm GNMA Multifamily Mortgage Servicing Portfolio: 100% GNMA FRM, WaLa $8.9mm, WaC 3.714%, 100% Retail Originations, with a weighted average loan Age of 24 months.
And last but not least, Interactive Mortgage Advisors is brokering for a seller, $1.294B in GNMA bulk residential MSR’s with 100% (retail), 100% (including IRRRL) Full Doc, WaFICO 688, WaLTV 94.4%, with a WaLa $183k.
Ocwen recently announced last week the pricing of its offering of MSR-backed notes through its OASIS program. The company estimates that $123.5mm of proceeds will be generated. The notes are secured by MSRs relating to $11.8B of FHLMC mortgage servicing. Ocwen will pay 21 bps on the UPB of the pool to note holders. The average servicing fee for the reference pools is 31 bps. The final maturity is February 2028.
I’m pretty sure if Jean-Babtiste Say was still alive and working as a real estate agent or loan broker, he’d completely forget about his classical economic theory which, in a nut shell, suggests that “supply creates its own demand.” If it did, Jacksonville, FL would be a boomtown. This month, Zillow is releasing a new inventory metric to help shed light on the available housing inventory across the country. The methodology for the inventory metric is straightforward. Each week, a count of the number of single-family, condominium and cooperative housing units listed for sale on Zillow is taken. The median of these values within a month is calculated as the monthly value, and a seasonally adjusted value is reported; this seasonally adjusted series is then smoothed using a three-month rolling average. According to Zillow, currently the metric is reported for 1,615 counties and 648 metropolitan regions. The Ups and Downs of Rising and Falling Inventory.
Tuesday rates improved while stocks didn’t do much. But of particular interest to those in residential lending were the new Case-Shiller home price figures showing that national home prices were up 11.3% for 2013. The 10- and 20-City Composites posted increases of 13.6% and 13.4% for 2013. The rate of increase is slowing, however, giving “the smartest guys in the room” something to discuss. Brad Hunter and the team at Metrostudy expect home prices to rise at a much more moderate pace this year than they did last year. Many home builders were boosting prices at annual rates in excess of 20%, and buyers were driven to buy, in order to beat further increases. That frenzy died out in the second half of 2013, after the Fed announced the planned “taper” of bond purchases and mortgage rates spiked higher. In 2014, builders in most areas will find that pricing power is limited. Homebuilders will still find that they have some “headroom” for more price increases this year, but not nearly as much as last year. Higher prices of land and lots, and higher labor costs will cause builders to look for higher prices, but the realities of affordability will mean that they can no longer raise prices with impunity.
Back to national trends, price appreciation is slowing as rising mortgage rates combined with harsh winter weather to “cool” home purchases over the past few months. Some say that smaller increases mean more homes will remain affordable as the labor market improves, helping maintain the rebound in residential real estate that has boosted growth.
The Conference Board’s index of U.S. consumer confidence fell to 78.1 in February from 79.4 the prior month, less than expected. I wouldn’t be very confident, either, if it was -18 degrees outside and my kids were stuck at home beating on each other.
But when the dust settled MBS were up/higher about .375, and the yield on the risk-free 10-yr was 2.70%. (If you’d saved $1 million and buy it when you retired, you could earn $27,000/year for the next ten years.) Later today we will have the Mortgage Bankers Association’s mortgage application survey and January’s New Home Sales (expected -3.4%). We’ll also have two Treasury coupon auctions: $13 billion in a 2-year floating rate note at 11:30AM EST and $35 billion in a 5-year note at 1PM EST. In the early going this morning we’re at 2.72% and MBS prices are a shade worse.
An old, blind cowboy wanders into an all-girl biker bar by mistake.
He finds his way to a barstool and orders a shot of Jack Daniels.
After sitting there for a while, he yells to the bartender, “Hey, you wanna hear a blonde joke?”
The bar immediately falls absolutely silent.
In a very deep, husky voice, the woman next to him says, “Before you tell that joke, Cowboy, I think it is only fair, given that you are blind, that you should know five things…
1. The bartender is a blonde girl with a baseball bat.
2. The bouncer is a blonde girl.
3. I’m a six-foot tall, 175-pound blonde woman with a black belt in karate.
4. The woman sitting next to me is blonde and a professional weightlifter.
5. The lady to your right is blonde and a professional wrestler.
Now, think about it seriously, Cowboy. Do you still wanna tell that blonde joke?”
The blind cowboy thinks for a second, shakes his head and mutters, “Well no! Not if I’m gonna have to explain it five darned times.”
(Copyright 2014 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.)