“i before e except after c” except when you run a feisty heist on a weird beige foreign neighbor. Pretty clever. Is there anything new and “clever” going on in lending out there? Yes there is – here’s an interesting story on a company in San Francisco that is doing its best to refinance student debt, which in turn lowers the debt level of younger people and as a result eventually helps the first time home buyer market! And as we know, first time home buyers lead to move up buyers. (The article notes that SoFi is “moving into moving into the mortgage and consumer loans business.)
Three thousand miles away, a rapidly-expanding mortgage lender is looking for loan officers to work out of its newly-opened East Coast headquarters in New York City. The company is launching a next-generation online platform that will enable you to close qualified leads (from both your personal network and our lead engine) with unparalleled speed and ease. Competitive pricing and a veteran processing staff will support you in delivering a superb borrower experience, with many of our borrowers returning for subsequent home financing needs. The company is seeking LOs licensed in select Northeastern states (NJ, CT, PA, DC), with special consideration being given to LOs holding additional licenses in other Northeastern states. If interested, please send your confidential resume to me at [email protected] and I will forward them on.
And in the middle of the country, Jordan Capital Finance (JCF) is hiring in its Northbrook IL office a Chief Financial Officer, to lead all financial, accounting, banking, and reporting systems for the Company. JCF provides private money financing for real estate investors who buy, renovate, or rent residential real estate. We operate in 12 states. JCF is growing aggressively and is extremely well capitalized (by a leading private equity firm). The CFO will work closely with the CEO (Mark Filler) on all aspects of the business. The candidate will have ten years accounting experience (CPA required). Please send inquiries and resumes to Ms. Aeron Berg.
On the flip side of new jobs, about 60 percent of the workforce at Milwaukee’s Shelter Mortgage Co. will be laid off in November, following the company’s acquisition earlier this month by New Penn, according to a letter filed with the Wisconsin Department of Workforce Development.
Mergers and acquisitions continue to be rampant. The latest FDIC data on bank branches finds the number of US bank branches slipped to the lowest annual level in 9 years in Q2 2014. The number came in at 94,725 vs. 96,339 1Y ago (-1.7%) and 99,550 from the peak in 2009 (-4.8%). Let me know when the consumer starts being better off…
On the mortgage side, a few weeks ago this commentary mentioned rumblings of Mutual of Omaha and Guild. Sure enough, “Mutual of Omaha Bank is expanding its correspondent lending relationship with Guild Mortgage Co.” – read that however you see fit, but here is the release. The Lincoln Journal Star noted, “Mutual of Omaha Bank is outsourcing its mortgage origination business.”
On the banking side during the last week, the boards of FHLB Des Moines and FHLB Seattle have agreed to merge, moving the first-ever merger of this sort into the hands of the FHFA for approval and then to the members of each for ratification. The combined FHLB would have $119 billion in assets, be headquartered in Des Moines and have 1,500 members in 13 states. On a smaller scale, Metcalf Bank ($1.2B, MO) will acquire Douglas County Bank ($295mm, KS). In New York Putnam County Savings Bank ($976mm) will acquire CMS Bank ($273mm) for about $25mm in cash. In John F. Kennedy’s home state East Cambridge Savings Bank ($882mm) will acquire Chelsea Bank ($58mm). In Barack Obama’s political home state, Busey Bank ($3.4B) will acquire Herget Bank ($273mm).
Citizens National Bank ($1.3B, TX) will acquire 5 branches from Bank of America for an undisclosed sum. The branches hold about $400mm in deposits. Old Line Bank ($1.2B, MD) said it will close 4 branches as it seeks to reduce costs. The bank estimates the closures will save it $1.6mm pre-tax in 2015. In an effort to support future expansion and reduce costs, First Financial Bancshares ($153mm, KS) said it is combining its subsidiary banks under one name. As such, The Lawrence Bank ($74mm, KS) will be renamed and consolidated into Great American Bank ($78mm, KS). In Huey Kingfish Long’s state, United Community Bank ($186mm) will merge into Community Bank ($391mm) as the affiliated banks are consolidated.
HomeStreet, Inc. ($3.2 billion WA; NASDAQ:HMST) has entered into a definitive agreement under which Simplicity Bancorp, Inc. (NASDAQ:SMPL) will merge with HomeStreet, and Simplicity Bank, a federally chartered savings bank institution, will merge with HomeStreet’s subsidiary, HomeStreet Bank. The merger, subject to customary closing conditions, including shareholder and regulatory approvals, is at .97 tangible book.
Speaking of mergers, Jeff Babcock from STRATMOR wrote to me recently and cagily observed, “Over the last 15 months, the mortgage industry has been predicting an inevitable movement towards consolidation, especially among the independent mortgage banks. Last week, we received news that affirms this trend with announced acquisition of Cobalt Mortgage (Seattle) by Caliber Home Loans (Dallas). In representing Cobalt, the STRATMOR Group has some insight into the motivations of both buyer and seller. Although Cobalt will originate almost $4 billion in 2014, ownership recognized that greater production ‘critical mass’ is rapidly becoming a requirement to compete in a marketplace where compliance, technology infrastructure and scale economies are key success factors. Capital strength will be essential to developing and funding non-agency product menus and the retention of loan servicing. At the same time, Caliber Home Loans determined that acquiring a high performing platform with an outstanding Regional reputation was the most expedient strategy to accomplish its ambitious growth objectives. This transaction may prove to be the largest deal of year among the independent mortgage banking sector. The confluence of shared objectives between buyer and seller made this a natural marriage of highly respected powerhouse organizations. As always, STRATMOR would welcome conversations with mortgage banks who are considering their sell-side strategic objectives. (Certain principals of STRAT MOR are licensed investment banking agents of M&A Securities Group, Inc., an unaffiliated company).
Stefan Ingves, chairman of the Basel Committee on Banking Supervision, has clarified that banks will have a floor for capital requirements. The group is pushing for a minimum for all banks, regardless of internal estimates of what they need: Reuters. (Remember when Wells Fargo called itself a “community” bank? Or even a regional bank? With $1.6 trillion in assets, and operations in places like Moscow, Dublin, and Dubai, I haven’t heard Wells use that term lately.)
“Rob, are there any new correspondent lenders out there gaining market share?” There aren’t really any new lenders, exactly. What we’re seeing, however, is a business shift. As has been mentioned numerous times in the commentary, Freddie and Fannie have done a masterful job going around the aggregators and picking up business directly from small and mid-sized lenders. I won’t engage in a discussion of the pros and cons of that strategy, but suffice it to say that well-known investors are not only dealing with a dwindling overall market, but due to Fannie & Freddie’s efforts a smaller piece of that smaller market. Not only that, but there has been a reshuffling of the usual suspects. Wells Fargo & Chase are still on top, but Citi was not even in the top 10 in the 2nd quarter (it was #13), per National Mortgage News. The top five were rounded out by PennyMac, U.S. Bank Home Mortgage, and Flagstar Bank.
Coming up fast are Franklin American Mortgage, Freedom Mortgage, BB&T, and Stonegate. And sneaking into the top 10 is Walter Investment Management – not exactly a household name. We then go on to SunTrust, Redwood Trust, Citi, Nationstar Mortgage, and Caliber Home Loans. All have different stories, demands for servicing, geographic and product specialties, and so on. But you can see the shuffling when one compares it to, say, the 1st quarter of 2013 when the top 10 were Wells, Chase, U.S. Bank, PennyMac, Flagstar, BB&T, Franklin American, Ally, Citi, and SunTrust.
And if anyone is thinking about entering the correspondent channel, there is even a book telling you how to do it. And no, this is not a paid announcement. “Correspondent Lending Best Practices” is the subject of a new “eBook” from OpenClose. “Unsure about the correspondent market? Don’t have the proper tools or fail safes in place? Now there’s a free eBook that give you best practices on how to proceed as well as help you avoid some common mistakes. ‘Not So Fast, Correspondent Lenders’ will help correspondent lenders through the precarious, road and suggest checks and balances that are needed to do it successfully. The eBook provides insight on what to ask, how to avoid common pitfalls, and help on choosing the right tools and staff.” And heck, “free” is a good price, right?
One hears about the big names involved in lawsuits. But I am often asked who the small guys are? Who are the entities behind class action lawsuits? News this week helps shed some light on “the small guys” involved. “The Triaxx entities withdrew their objections to the proposed Countrywide $8.5 billion settlement.” As the resolution of modification repurchase claims raised by Triaxx was the largest impediment to approving the settlement in its entirety, this event is a very positive sign for RMBS bondholders. However, other objectors also mentioned mod repurchase claims in their appeal, so it is not obvious that Triaxx’s withdrawal completely resolves this issue. The remaining objectors to the settlement include the Chicago Policemen Funds, US Debt Recovery Entities, American Fidelity Assurance Company, among others. Given that the Chicago Policeman Funds requested that the case be reargued in its entirety, and other objectors appealed the settlement for different reasons, there is still some uncertainty as to how the legal process would work going forward for this case, or whether remaining objections would be resolved/settled before court hearings are scheduled.
The Federal Home Loan Bank of San Francisco announced that the Cost of Funds Index for August 2014 was 0.667%, a slight decline from a month earlier when the index was 0.676%. The August COFI index is based upon the average interest expenses incurred by 12 financial institutions; this data is then used to calculate variable rate loans. As a discretion, The FHL Bank of San Francisco states that they do not guarantee the accuracy of the data that they receive from participating institutions. Furthermore, if the bank reported information in error, they will not revise the data. So after two consecutive months of increases, the COFI relented and returned to its all-time low. In May, COFI fell to 0.667 percent — the lowest it’s ever been based on the oldest available data going back to July 1981. ARMs accounted for 11.9 percent of all pricing inquiries in the U.S. Mortgage Market Index report from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Sept. 26.
This leads us to the markets. Anyone truly wishing for lower rates – be careful what you wish for as we’d rather not have the U.S. economy go back into a recession. The 10-year’s yield closed Wednesday at 2.40%, and although agency MBS prices did not fully participate in the rally, it is only a matter of time. They still improved about a half a point, with many lenders leaving rate sheets alone to see how things settle out. This time rates were pushed down due to rampant rumors of Ebola incidents sparked another “flight to quality”. Thomson Reuters reports that, “Overall, yield based buyers are again sidelined until they throw in the towel on return or are otherwise convinced these rates will hold. Hedge funds are better sellers from the recent wides, supply is average at just above $1 billion today, with many likely digging in a drawing a line in the sand ahead of Friday’s payrolls.”
The only news out today is the usual Initial Jobless Claims (+293k last). Also out is 10AM EST’s August Factor Orders which are expected lower from the +10.5% print last time around. In the early going there isn’t much changes in pricing with the 10-yr sitting at 2.41% and agency MBS worse about .125.
A woman goes into a pet shop. She sees a beautiful parrot with a sign on its cage: $10 OBO.
The lady asks the pet shop owner, “Why so cheap?”
The owner says “This bird used to live in a brothel, so he says a lot of inappropriate things.”
The lady can’t pass up the deal and decides to get the bird anyway.
She gets the bird home and the first thing the bird says is, “Finally cleaned up this dump, and the new madam isn’t bad looking.” The lady finds it amusing.
Her two teen daughters get home and the bird says, “New ‘ladies’ in the house, business will be booming tonight.” The girls are shocked but laugh it off.
A few hours later the woman’s husband gets home and the bird says, “Hey Keith.”
(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.)