July 17: Ops & retail jobs; banker branch numbers, income, and M&A; builder trends definitely point higher; upcoming events

Boy how things have changed. Life is so expensive now; maybe that’s why the living arrangement stats have changed so dramatically since 1967. In the 1960’s just over 30% of 18-24 year olds lived at home; now over 50% for both 18-24 year old men and women live with their parents. 10% of 25-34 year olds lived at home in the 1960s and now almost 20% live at home. Apparently, for whatever reason, the idea of marriage has declined; in 1967, 70% of adults lived with a spouse, now just barely over half share a home with a partner.


One lender that is continuing to expand is iServe Residential Lending. It is an up and coming national mortgage banker that I cover regularly. As a result of iServe’s on-going expansion, iServe has contacted me regarding “an immediate need for experienced closers/funders in its Nashville and San Diego Operation Centers. Licensed in 23 states and growing, iServe is a lender many are contacting. Email iServe’s Director of Operations, Brett Vargo, for immediate consideration. If you are a retail Branch looking for a new home, I also urge you to contact industry veteran Allen Friedman.  ‘You will find a stable home with iServe, including a complete menu of products, in-depth training, extensive marketing support, and all the tools your team will need for fast and hassle-free fundings.’”




They’ve been supervised, to one degree or another, throughout history. Despite the importance of supervision of banks and large financial institutions, how this process goes about has remained relatively in the dark. This is due to confidential nature of the information of banks and the supervising activities and actions are also at times confidential. But, as banking is one of the most regulated and supervised sectors, how does this supervision work? In a recently released staff report by Liberty Street Economics, they explore the Federal Reserve’s supervision of large, complex banking and financial institutions. The Federal Reserve System is responsible for the supervision of bank holding companies (BHC’s) and certain other financial institutions in the United States.


So what is banking supervision? Banking supervision includes overseeing these institutions to make sure they are in compliance with law and regulation. This is the difference between supervision and regulation that some people blur together; regulation creates the rules BHC’s operate under and supervision is making sure companies comply with the set rules. However, on top of assessing compliance, the supervising party makes sure that the institutions are not engaged in any unsafe or unsound practices and if they are, the Fed makes sure that the institutions take steps to correct these issues.


Bank employment was 1.6 million in early 1986, peaked at 2.2 million in 2007, and is now 2 million. The number of FDIC insured institutions peaked at over 18,000 in early 1986. In the 1st quarter of 2015 they numbered 6,400, a 65% decline. And the trend continues. During the last week or so we learned that in Missouri First State Community Bank ($1.8B) will acquire Central Bank ($264mm). In Mississippi BankFirst Financial Services ($741mm) will acquire Newton County Bank ($162mm). Premier Bank was closed by regulators a week ago and sold to United Fidelity Bank, fsb ($300mm, IN) under a purchase and assumption agreement. United gets 2 branches, all deposits and essentially all of the assets. In Oklahoma BancFirst ($6.6B) will acquire Bank of Commerce ($202mm). And American Riviera Bank (Santa Barbara, CA) has agreed to acquire The Bank of Santa Barbara.


There are still more than 90,000 bank branches in the US, but experts say trends point to another 15% (about 13,500) being closed in the coming years as consumer behavioral changes continue to impact the industry. (Yes, I know the article is from last year, but sums things up nicely.)


We’ve certainly had our fill of big bank earnings this week. Citigroup’s profits rebounded in the second quarter from the same period a year ago, when the bank recorded a multibillion-dollar legal settlement with regulators. It earned $4.57 billion after payments to preferred shareholders as the bank cut expenses across the board, sharply higher than the $102 million it earned a year earlier. The bank had 15 percent fewer branches than it did a year ago. Citi Holdings, the bank’s “bad bank” that holds the bad mortgages and other toxic securities left over from the financial crisis, made a modest profit in the quarter of $157 million, compared with the $3.4 billion loss the business had a year ago.


JP Morgan’s mortgage banking net income fell 20% in the quarter. Wells Fargo also reported, and noted that mortgage banking revenues fell 1% in spite of the fact that originations rose to $62 billion from $47 billion. Well’s market share fell to 13% from 28% three years ago. Most viewed JPM and WFC’s mortgage banking results as largely in line with expectations. Wells Fargo showed a 26.5% Q/Q increase in volume to $62 billion and a 12.9% Q/Q decline in applications. JPM reported an 18.6% Q/Q increase in volume. WFC reported a decline in its gain-on-sale (GOS) margin to 1.88% from 2.06%, while JPM’s GOS margin was down to 0.70% from 0.83% Q/Q. Both companies reported meaningful positive MSR marks. Once again WFC was able to meet expectations primarily through the help of reserve releases.


Bank of America (remember when it had correspondent, wholesale, and was a huge retail powerhouse in residential lending?) also announced that its net income was $5.3B (+130% YOY); noninterest expense (-3% YOY). Other data of interest YTD: loan growth (+1%); FTEs (-3.0%); 4,789 branches (-1%). And for Q2 US Bank showed a net income of $1.5B (-1% YOY); noninterest expense (-3% YOY). Other data of interest YTD: loan growth (+0.4%); FTEs (NA); 3,164 branches (-0.4%).


Banks or mortgage banks, here is a quick list of upcoming events that we haven’t mentioned before.


“As you know, great referral partnerships aren’t built on donuts and gift baskets. Learn the secrets to building referral partnerships that stick. Register for this July 23 webinar from Vantage Production. You’ll know where to start, 4 questions you simply must ask, 4 behaviors that build strong bonds, and 3 tactics to be a trusted resource.


If you’re in Northern California, the CAMP Silicon Valley Chapter Officers Installation event is July 30th, and features Tom Pool, California State BRE Assistant Commissioner officiating the installation of Richard Wang as its next president as well as the incoming board members. And the venue is very cool: the Mountain Winery located in the hills above the city of Saratoga. For additional information, please contact TJ Roberts at 408-802-8522.”


Check out and register for the available MGIC August Webinars: How to review an appraisal, Evaluating income and assets, MGIC basics, Self-employed borrowers personal tax return analysis, Self-employed borrowers business tax return analysis, Explaining TRID to real estate agents, LinkedIn strategies for loan officers, TRID: TILA-RESPA Integrated Disclosure – A Special Webinar with David Luna of Mortgage Educators and Compliance, Twitter strategies for loan officers and Understanding the condo appraisal.


Nebraska Mortgage Association’s Fall Conference registration is underway. Click the link for NMA’s September 16th-17th Fall Conference Registration Information.


Register now for Plaza Home Mortgage’s Wholesale FHA 203K streamlined webinar. If you can’t make this July 22nd Webinar; register anyway and the recording will automatically be emailed to you.


The Mortgage Coach will be interviewing Simon Sinek on July 22nd at 1PM EDT. “The goal is do business with people who believe what you believe.”


Builder trends?


Yesterday the NAHB Housing Market Index came in at “60”, the strongest reading since early 2007, or 2005 on some metrics. While builder sentiment has remained buoyant, it hasn’t really translated into housing starts which are lagging. In many areas prices remain high and inventory remains tight. “The fact that builder confidence has returned to levels not seen since 2005 shows that housing continues to improve at a steady pace,” said NAHB Chairman. “As we head into the second half of 2015, we should expect a continued recovery of the housing market.” “This month’s reading is in line with recent data showing stronger sales in both the new and existing home markets as well as continued job growth,” said NAHB Chief Economist David Crowe. “However, builders still face a number of challenges, including shortages of lots and labor.”


But the positive building trends have been going for many months. For those interested in housing the MBA Builder Applications Survey showed that February applications for New Home Purchases were up. “An increase in mortgage applications to builders in February over strong January numbers bodes well for new home purchases this year,” said MBA Vice President of Research and Economics Lynn Fisher.


Zelman and Associates’ February Land Development Survey showed improvement in acquisition demand, development activity, bid prices and capital availability. Several respondents indicated that the improved sales pace for builders to begin 2015 has stimulated renewed interest in replacement lots. The development index increased in January, supporting a potential 10% growth in community count across the industry over the next year. Development activity still remained high despite oil concerns and acquisition demand increased for the first time in eleven months. Finished lot demand increased and raw land demand increased. Finished lot value was up 12% YoY in the fourth quarter of 2014 and finished lot supply was down 2% YoY but is expected to increase 5% over the next year.


Zelman & Associates’ May Homebuilding Survey indicates that May is the third most important month of the year from an order standpoint, with 9.5 percent of annual orders. May represented another strong month of activity as order and price growth was comparable to April. Order growth was consistent with the past two months at 25 percent and the second half of 2015 public builder order growth estimate stands at 23 percent. Net order prices increased 4.6 percent in May and the majority of builders mentioned limited resistance from buyers and a positive outlook on margins in the second half of the year. Builders also highlighted a growing positive outlook at the affordable segment and the solid improvement in new home sales and housing starts in April posed another strong month for May. To learn more about the May Homebuilding Survey, contact Ivy at ivy@zelmanassociates.com.


Recently the Mortgage Bankers Association (MBA) has published two “charts of the week,” the first highlighting MBA builder application survey and new housing starts. Single family housing starts fell more than 15 percent within the first two months of the year while MBA’s Builder Application Survey (BAS) Index and estimates of new home sales rose in January and February. The builder mortgage applications for new homes have led housing starts by about two months over the last few years. New home sales are recorded at the time a purchase contract is signed and mortgage applications are made at the same time as the sales contract. When housing production is slow, signing a contract and mortgage application prior to the housing start is not uncommon. The second MBA’s chart of the week was the purchase mortgage application loan sizes and house prices. An increase in average loan sizes for purchase transactions has outpaced the recovery in house prices. MBA’s Weekly Application Survey for the week ending March 6th indicated that the average purchase loan size has risen to $294,900, whereas the average purchase loan size was $50,000 less at the end of 2007.


Bopping over to interest rates, the 10-year ended Thursday at 2.35% in spite of news regarding a steady employment picture, strong homebuilder sentiment, and economic weakness in the region covered by the Philadelphia Federal Reserve. 2 and 5-year notes sold off while the 30-year bond rallied, implying that the market believes that the data will induce the Fed to raise rates sooner than it should and thereby limit long-term real GDP growth or inflation. The big international news was that the Greek parliament approved the austerity measures agreed to on Sunday between Prime Minister Alexis Tsipras and Greece’s official creditors, and that the Eurogroup agreed “in principle” to begin discussions with Greece to extend a new 3-year bailout to the country.


This morning we’ve had the June CPI and Core CPI figures (+.3%, +.2%, as expected) and June Housing Starts and Building Permits (+9.8%, +7.4% – both stronger than expected). Coming up is July’s Michigan Sentiment figure. After the inflation & housing numbers the 10-year is up to 2.37% and agency MBS prices are worse nearly .125.



(Here’s a little puzzle for a summer Friday.)

The Wyoming rancher’s will was as follows: the eldest son inherits 1/2 of his estate, the second son 1/3, and the third son 1/9. The rancher dies owning 17 steers. The sons began to bicker, because if applied, the will would require butchering bovines to meet its terms.

The local livestock merchant heard the story and told the sons he could solve their dilemma. He said, “First, let me loan the estate one steer. Then the eldest son can inherit 9 steers (1/2 of the 18 steers). The second son gets 6 (1/3), and the third son gets 2 (1/9).

Then all you need to do is pay me back the leftover steer!”

(Figure it out for yourself.)





(Copyright 2015 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