June 30: Sales jobs & business opportunity; originator census survey; another lender purchased; it’s all about Greece & rates

You say you don’t care about Greece? How about a potential default closer to home, like Puerto Rico? Switching gears: “One.” That is the extra second that June 30th has today to correct clocks for the earth’s rotation. “330,820.” That is the number of times America’s net worth could travel around the earth if dollar bills were place end to end. How much money is that? American’s net worth is now $84.9 trillion. We could travel to the sun and back 42 times on the backs of a first quarter climb in stocks and home prices. This is an increase from $83.3 trillion in the final months of last year with stock portfolios rising $487 billion and home values increasing by $503 billion. These rising home prices are helping to rebuild Americans’ ownership of their homes. Home equity was equal to 55.6 percent of the value of U.S. housing in the first quarter, the highest ratio in more than eight years (36.9% during the recession in 2009). Greater household wealth can lift spending and economic growth. “When consumers feel richer, they are more likely to spend from their wealth, rather than just from income.” Like a trip to Greece.


On the jobs front, National MI continues to grow and is looking for an Account Manager in Minnesota and North Dakota. The person should be prepared to “utilize their expert understanding of the residential mortgage industry and their existing relationships in the MN and ND market. This individual will build strong relationships with key senior level client advocates and influencers, and assertively drive new business. He/she will meet with clients on a daily basis, clearly communicate the National MI value proposition, articulate industry and client trends, and use their superior presentation, communication and interpersonal skills to fearlessly develop opportunities, train and educate clients, and grow profitable market share within their assigned territory. National MI is a U.S.-based, private mortgage insurer enabling low down payment borrowers to realize homeownership.


And for business opportunities, a small but very well-established New York mortgage banker is searching for a buyer. This lender operates out of its headquarters (no branch network) and has full New York State mortgage banking licensing. The company has a well-known name with a pristine reputation, no legacy issues, and a good location, and its very experienced senior management could stay on, for a time if needed. This could be an ideal situation for a mortgage banker that does not want to wait for 18-24 months for New York to process a mortgage banking application. Please send confidential inquiries to me at rchrisman@robchrisman.com.


Hey, congrats to Len Israel – I knew him “way back when”. Michigan’s Flagstar Bancorp ($11.6 billion) hired him to lead its mortgage division, and he is now the president of mortgage banking operations and will report to Alessandro DiNello, chief executive. Len will manage all aspects of Flagstar’s mortgage business and help expand its correspondent, wholesale and retail sales channels. And 2,300 miles away Plaza Home Mortgage, a nationwide wholesale and correspondent mortgage banking company, announced that Ed VanDuren has joined the company as senior vice president, correspondent lending. VanDuren will be responsible for helping Plaza build out its low-cost, scalable correspondent lending platform, and enhancing the company’s loan certification program.


Len & Ed, and every other manager out there, wants to know about their MLO staff. According to STRATMOR’s 2013 Originator Census, there are more originators over 60 than there are under 30.  “Have you wondered how your sales force compares to the industry not just on age, but tenure, turnover and most importantly productivity? The STRATMOR Originator Census Survey is your link to gain valuable insights into loan originator demographics. The more you can understand and measure the key attributes of your sales force, the better you will be able to proactively manage them and this, more than anything else, will improve the franchise value of your company. Don’t miss the chance to participate in this year’s survey which covers 2014 results. This survey is open to Retail Originators and our paid participants will receive a comprehensive report showing their Originators key statistics versus the group average as well as against key subsets including Banks versus Independent lenders. To find out more about the survey including cost and how to register visit: STRATMOR Originator Census or contact Nicole Yung.


Geez, those folks at Prospect Mortgage sure wanted the Executive Level Costco cards! Seriously, “CapWest Mortgage, based in Overland Park and a Preferred Lender for Costco Members, has just announced it is being acquired by California-based Prospect Mortgage, one of the nation’s largest independent mortgage lenders.” “One of Prospect’s stated strategic objectives has been to capitalize on the emerging Consumer Direct market by expanding and enhancing its capabilities in this channel. Prospect has the resources to scale CapWest’s successful model to fulfill an expanded spectrum of lead sources and products. CapWest (a division of Farmers Bank & Trust) will operate as a separate division under Prospect Mortgage, and Monte Robbins, currently President of CapWest, will become a Divisional President for Prospect responsible for the call center’s growth and operations. Costco will retain CapWest Mortgage as a Preferred Lender for Costco Members through the acquisition.” Bring on the $1.50 hot dog/soda combo!


No, it isn’t the first time, nor will it be the last time, a lender is purchased. Why? W.R. Robbins, Chairman and CEO of Farmers Bank & Trust, observed, “Home lending is changing rapidly, and it is a change being led by well-capitalized, smart entrepreneurs who understand how to leverage technology to create a wonderful consumer experience in this highly regulated, complex market space…”


Speaking of “highly regulated,” yesterday the commentary noted how the SEC (not the CFPB) was now turning its gaze to executive compensation through the mandates of Dodd-Frank. A Bank Director survey on compensation finds the Top 5 ways CEO compensation is linked to bank performance are: strategic plan and/or corporate goals (55%); return on assets (28%); asset quality (27%); CEO compensation is not tied to performance indicators (25%); and ROE (24%). And on the diversity side of things, it turns out that none of the 22 largest U.S. investment banks or financial firms have ever had a female CEO. Data show that women account for nearly half of midlevel managers in the finance and insurance industries but just 29% of senior officials. Banks may be trying to correct this, motivated in part by studies that show benefits from diverse management teams, said Elisabetta Bartoloni, a partner at Heidrick & Struggles.


Continuing along those lines, many of the calls I was on yesterday discussed how the Supreme Court ruled that the CFPB could use the “disparate impact” theory in housing discrimination cases. Many intelligent folks are saying that it no longer matters whether a lender intended to discriminate, all that matters is the numbers. Although the Court tried to explain that this doesn’t mean lenders are under a quota system, every lender pretty much thinks that. Are we having fun yet?


Rates and the bond markets are currently at the forefront of discussion out there…


It doesn’t surprise many analysts that bank holdings of U.S. Treasuries continue to rise. U.S. banks have been under tremendous pressure to shore up their balance sheets, and what better instrument than the good faith and credit of Washington D.C. In 2014 commercial lenders increased their net holdings of Treasuries to $615.6 billion, according to data from the Federal Reserve. If this trend continues many predict downward pressure to interest rates, which ultimately could lead to a flattening of the yield curve. Banks have been net buyers of Treasuries and other agency debt for 14 straight months, equaling the longest streak of gains since June 2003. Wells Fargo writes, Demand for Treasury securities by banks should continue, as increased regulatory requirements will make holding Treasuries more attractive relative to other assets and types of lending. Although we expect interest rates to migrate modestly upward over time, we are looking for the yield curve to flatten over the coming years. This should keep downward pressure on the net interest margin, as banks’ cost of funding increases relative to their revenues. However, we maintain the view that yields, particularly at the long end of the curve, will continue to experience greater volatility.”


The demand for agency mortgage backed securities (MBS) has a direct impact on how well, or not, home loan prices do relative to Treasuries. Domestic banks could have added MBS earlier this year and bank holdings of Treasuries as a percentage of total securities holdings is at the highest level since 2000 (21%), while the amount of agency MBS in the total securities portfolios of large domestic banks declined to 51.2% at the end of 2014.


Clients count on LOs to know what’s going on with home loan rates, right? “But the avalanche of financial and economic information you need to follow to stay on top of rate movements can seem daunting. Vantage Production has a new complimentary e-book called Home Loan Rate Drivers that will help you anticipate and explain rate movements confidently to clients, prospects and referral partners. Download your copy now.”


So you think Greece as some currency issues? In Zimbabwe a trillion won’t even get you a cup of coffee.


There is some good news! Goldman Sachs thinks that the Federal Reserve will likely continue buying bonds for a year after it raises interest rates to soften any effects on the economy. The Fed will have to decide what to do with $216 billion from maturing Treasury securities next year.


Greece and their creditors are at an impasse, with the Greek government scheduled to vote to determine whether to accept the creditor demands. The European Central Bank froze their Emergency Liquidity program at the same level as last week, making the Greek banks more or less insolvent. ATMs are out of money and the banks will be closed for the next five days. If they cannot get a deal with creditors, Greece will have to start printing money in order to keep the banks solvent, which would pave the way for their exit from the Euro.


Does it make a difference? Sure it does – especially for our bond market and interest rates. The Greek economy is only about 2% of the Eurozone but in order to support European banks which hold Greek sovereign debt, the ECB will probably announce further measures to support the banking system, and that means more Quantitative Easing. This will cause the Bund to rally, and relative value trading will pull the US 10 year along for the ride.


But as Janet Yellen will tell you, low interest rates are creating issues for retired savers as well as the Fed. How would you like to be managing the Teamster’s pension fund, or your own retirement fund that you want 100% safe, and be earning less than 1%? As was pointed out to me last summer at a conference, the added risk pension funds and insurance companies are taking in order get the return they need to meet their actuarial obligations is becoming more and more obvious. Since these funds can’t earn the mid / high single digit returns they need in government debt and investment grade corporate debt (or even MBS for that matter), they have two options: either fudge the assumptions regarding expected growth of their assets and liabilities or take more risk. They seem to be doing both.


So we saw the result yesterday. U.S. Treasuries soared after investors scrambled to safety following the breakdown of negotiation between Greece and its creditors over the weekend. A referendum on a bailout extension is to be voted upon on July 5th, but that will be after the June 30th deadline for Greece’s 1.55 billion euro payment to the IMF. Prime Minister Alexis Tsipras decided to hold a referendum on July 5th to let Greeks decide if they want to stay in the eurozone at the expense of pension and cuts and no debt forgiveness. If Greece doesn’t make its 1.55 bln euro payment to the IMF on June 30th (and they already said today that they wouldn’t), IMF Managing Director Christine Lagarde has the option of not reporting the missed payment to the executive board for a month. She has indicated that she will not delay. Greek banks did not open on Monday and ATMs allowed only $60 of withdrawals per depositor per day. The banks are supposed to reopen on Thursday.


In this country, Pending Home Sales in the U.S. rose 0.9% in May, and are now at their highest level of sales since mid-2006. For scheduled news today, which really are minor compared to what is happening in Europe, we’ll have the April Case-Shiller 20-City Index, June Chicago PMI, and June Consumer Confidence numbers.


Yesterday the U.S. 10-year T-note rallied by 1.25 points but mortgages lagged, as you’d expect, but agency MBS still improved by .5-.75. Monday we saw a 2.33% close, and the U.S. 10-year is at 2.37% this morning with agency MBS prices worse about .250.



It is well known that men and women communicate differently. Gals want someone to listen to them; guys just want to fix the issue and move on.





(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