May 15: Mortgage jobs & company funding; Johnson Crapo update; why CEO’s don’t rely on interest rate predictions

With so many economic indicators that flood my email account each month, I hate to introduce another one for fear of paralysis. However, I will pass along this one simply due to its originator, the Federal Reserve Bank of Chicago and its CFNAI. The Chicago Federal National Activity Index is a monthly index of U.S. economic activity constructed from 85 data series (or indicators) classified into four groups: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. Much of its current value derives from its ability to capture U.S. business cycles, and the current reading is “mixed”. It’s an economic indicator not for the faint of heart, but rather for the economist we all know is hiding deep down in our psyche, which may occasionally ask questions like, “If me and the post-close gal were caught stealing the last two cupcakes from the break room…” (FYI, always be the first one to confess…don’t ask me how I know this.)


Lenders, and most of the economy, run on capital. 10 Mile Capital is a U.S. based specialty finance company that provides capital to build and grow great mortgage banks. Qualified mortgage banks can receive up to $10 million of non-dilutive capital to acquire loan originators, open new origination channels, retain servicing, or pursue other business expansion opportunities. If you are an independent mortgage bank needing capital to expand your business, please contact Tim McAvenia, Senior Vice President, at (“We are not an investment bank or a broker. We do not seek control or ownership of the companies that we finance.”)


And on the jobs side of things, a progressive Northeast aggregator of prime jumbo residential loans is looking to fill two interesting positions. The first is in National Correspondent Sales to cover banks, community banks and credit unions nationally. Relocation is not required. The second position is in Contract Finance to provide support in new account approvals and transaction management.  This position is based in New York City. The company is a residential mortgage conduit aggregator focused on opportunities in the non-agency jumbo sector, and the management team has a vast array of experience in the lending and securitization industry. Interested parties should send their confidential resumes to me at


Are your borrowers satisfied? STRATMOR launched MortgageSAT last year, a product that measures borrower satisfaction of closed loan customers.   STRATMOR surveyed over 5,000 borrowers who closed loans in the past few months.  The average satisfaction rate was 89 out of 100, which was an increase of 3 points in the past few months.  So, slow volume may help drive happier customers, but like many “averages” the key is drilling into the numbers to figure out what drives satisfaction for each lender, and for each loan type.  For example, the most recent data shows that affluent borrowers actually have a satisfaction rating of 6 points less than others.  Contact STRATMOR for more details on this program.


For you fans of Congress, the Senate Banking Committee has a markup on S. 1217, Housing Finance Reform and Taxpayer Protection Act of 2013 today at 10AM EST. The bill is expected to pass out of the Committee but due to not getting more Democratic support Senate Majority Leader Reid is not likely to schedule a vote on Johnson Crapo by the full Senate.


“Meetings: None of us is as dumb as all of us.” Remember all those smart folks who said rates were going higher this year? Well, so far they’re dead wrong. That may change, of course, but if any of them put their money where their mouths were, well, they’ll have to keep working like everyone else. Nothing is more natural than speculating on the future, especially because no one knows what will happen in the future. And when there is uncertainty (and when isn’t there?), economic pundits strive to differentiate themselves from others. And why not – there is nothing to be gained from saying what everyone else is saying. And when was the last time you heard “one of the smartest guys in the room” say that they didn’t know enough to even venture a guess? Wouldn’t that be cool if those that made a living out of predicting the future suffered every time they guessed incorrectly? Stock analysts, or those that trade their own positions, jump to mind. I’ve been telling groups for a few months that rates could very well be exactly here in six months, but few will remember that. So I do what I can to educate folks why I think that – it is important to think for oneself, and know what moves the markets.


We all, unfortunately, have an appetite for dramatic predictions. How did that work out for the Mayans? Or the Branch Davidians? Experts who claim to be more certain about the future are more in demand in the media, in spite of being less likely to be correct. I know of plenty of people who refuse to watch CNBC because of this phenomenon. Often times when someone claims they know what a stock is going to do, or where interest rates are heading, people give them more credibility than those who admit that they can’t predict the future, even when the latter were just as accurate!


The media doesn’t help. Mistaken forecasts are rarely mentioned (Bill Gross and Meredith Whitney have made some major incorrect predictions) so there’s little downside to being bold and wrong unless their own money is at stake. In fact, if you’re right the rewards can be immense – maybe they write a book about you, or even a movie. One great prediction can allow “the expert” to live off their success for a long time. But is it repeatable? On the trading desk we told clients, when they asked about where rates were going, “Hey, if I knew that, I’d be on a beach somewhere.” Being able to predict where the markets are going, in any kind of repeatable manner, is nearly impossible – but teaching people about making their own minds up is very important (for me). People wonder what I do in my off hours: here is a paper on this very topic by Jerker Denrell and Christina Fang. It says that anyone who predicted an extreme event had worse overall forecasting records than their peers:


But when you look at the CEOs and CFOs of major lenders, think about it: they typically plan for the worst, hope for the best, and do their day-to-day work regardless of where rates go. Few take chances when it comes to the markets. Pipeline hedgers advocate “sticking to the model” and being flat. CEOs are better at predicting trends than they are where rates are going. But there are big rewards when someone makes an extreme prediction and it turns out to be right. And success tends to breed overconfidence. But rarely do CEOs stick their necks out – there is too much at stake, like the future of their employees and companies. And thus they watch for trends, focus their employees on performance and improving the here and now, and let the “smartest guys in the room” take random stabs on where rates are going.


Speaking of looking at things globally, and the role that compliance occupies, I received this note. “Mercury Network just published another white paper and this one will be really valuable for anyone as the industry gears up for Third-Party Oversight in appraisal operations. Last year, both the CFPB and The OCC issued new bulletins to emphasize their requirements for third-party oversight, and also made it clear that lenders are liable for their service providers. We’ve already gone through several audits with big lenders, so we can share some best practices and questions to ask so lenders avoid pitfalls with service providers.  We included 14 recommendations for what to look for in a reliable partner for compliance with the new requirements.”  The new white paper is free here:  Third-Party Oversight Requirements.


And this note. “With originators still recovering from last January, the confusion surrounding the already finalized Dodd-Frank rules remains outstanding. With 24.6% of Dodd Frank rules yet to be written, it’s clear that we may be in for more surprises yet. In this article, we’ve created 10 points to summarize some of the principal aspects of Dodd Frank as it relates to mortgage originators: ‘Dodd Frank Wiki [An Originator’s Cheat Sheet]’. Thank you Cody Miles at MortgageDashboard.


On to a little lender and investor news!


First Guaranty Mortgage Corporation (FGMC), a Virginia Corporation, announced today that Marla Grassgreen has joined the company as Director – USDA Program Manager.


And congrats to Ed Abufaris! Amerisave Mortgage Corporation announced that Ed Abufaris has been named as President. Ed joined Amerisave in January 2011 as Executive Vice President of Wholesale and Correspondent Lending and is credited with the continued success of the TPO channel.  In 2012 he was promoted to Executive Vice President of Sales, leading both the TPO and Retail sales teams.  Ed has also been a member of the Amerisave Senior Leadership team since joining the company.


Regarding the current credit environment, I received this note. “Many companies have decided to go the route of taking more credit risk. Price is on the top of every secondary manager’s mind when determining where to send loans. This may be very short-sighted! The most important part of making loans to borrowers with lower credit scores comes after the loan closes; when the loan is serviced. First Mortgage Corporation, with 40 years of experience serving the borrowing needs of the low-to-moderate income borrower, excels at servicing government loans with risk-layering. Price has no value if the loans are not well-serviced and you end up with EPD’s and repurchase demands. FMC’s seriously delinquent rate for these most challenging FHA/VA loans is just 3.03%, compared to the top 20 FHA Servicers at 7.67%.  Traditional FHA borrowers require “high touch”, and FMC prides itself on overstaffing its servicing department to meet the needs of the underserved. Many of the players in the space today allow these loans to be subserviced which can lead to increased defaults.  Who would you rather have service your toughest FHA loans?” (Contact Sharon Magnuson at for more information.)


ditech, besides confusing spell checkers and auto-capitalization software, reminded the industry that it “will pursue a different business model than its predecessor, which was primarily a direct-to-consumer provider. The company will use three sales channels for its mortgage and refinance loans: direct-to-consumer, via a website and 800-number, retail, via nearly 200 loan specialists located throughout the country, and the correspondent market, partnering with 600+ financial institutions. (The ditech brand originated in 1995 when the name came from a combination of “Direct” and “Technology.” See? And you think you don’t learn anything new.)


M&T Bank correspondent released its product bulletin 2014-014 addressing Declining Markets & CEMA effective May 7th. Its recently published declining market list is being withdrawn and reverting back to the published list from July 2013. For M&T treasury programs, use the 03-031 exhibit from July 2013 until further notice. The bulletin also reiterates the requirement of the NMLS number on the CEMA document. Disaster area alerts have been updated for Arkansas, Mississippi, Florida and Alabama. For questions or clarification, contact your account executive.


Regarding the markets, as one trader put it, “The 10yr went out at 2.54%, after going as low as 2.52% earlier today (lowest yield on 10yr this year) with FN3.5’s finishing the day 5+ ticks tighter to the 5yr & 1+ tick tighter to the 10yr.” What does that mean? It means that rates are lower than earlier in the week, and that while supply from mortgage bankers is lagging the demand is strong, and so their prices improved more than “ordinary” Treasury securities. Yesterday’s price movement was attributed by Thomson Reuters to “strengthened expectations that the ECB will announce further accommodation at its June meeting, including a cut in its benchmark rate, in response to low inflation.” Agency MBS prices are at their best levels since Halloween, but loan level price adjustments and gfees have changed since then.


It is pretty darned early, and I due to a speaking engagement to WAMP in Seattle I had to send this out prior to news coming out. But we can all look forward to the April Consumer Price Index (expected +0.3%), the May Empire State Manufacturing Survey, and Initial Jobless Claims (expected unchanged at 319k). And then at 9:15 EST we’ll have April Industrial Production (+0.1 versus +0.7 last) and Capacity Utilization (unchanged at 79.2) and then May homebuilder sentiment (+2 to 49) and the May Philly Fed Index. In the early going the fixed income market, and rates, are unchanged from Wednesday’s closing levels.



Okay, I don’t quite know what to make of this one. On the one hand, neither my cats Myrtle or Gusto would be capable of this – this cat saving a boy from a dog attack is truly noble – and great to watch. On the other hand, do we really have to have numerous cameras trained on every aspect of our daily lives? But this video is worth 60 seconds. (Skip the ad to see the video.)



(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.)

Rob Chrisman