Bank Mergers; Trends in Rental Markets, Distressed Properties and Refis; Vendor Updates

For a deviation from the topic of millennials living at home, since the industry seems so focused on the behavior of this group (just like we were all focused on their behavior while they were growing up), we have the Census Bureau's Co-resident Grandparents and Their Grandchildren: 2012. According to the report, of the 65 million grandparents in the U.S. in 2012, ten percent (7 million) lived with at least one grandchild. In 2012 almost 3 million grandparents were "grandparent caregivers", who had responsibility for grandchildren under 18 years old. About 4 million households contained both grandparents and grandchildren under 18, where more than 60% of these families were headed by a grandparent and one third of them had no parent present. Co-resident grandparents are also more likely to be unable to work due to an illness or disability and are more likely to be in poverty. The increase in grandparents living with grandchildren may be due to increase in life expectancy, single-parent families, and female employment.

Plenty of them rent, which is of great interest to opportunistic LOs who love showing clients that it is more expensive to rent than to buy. CoreLogic came out with a new product called RentalTrends, a monthly report that highlights rent amounts, rent per square feet, capitalization rates and vacancy rates based upon property type. RentalTrends covers all 50 states and more than 17,500 zip codes and uses data from CoreLogic Rent Amount model to determine fair-market rent. This tool can be used throughout the housing industry to aid lenders, services, investors and property managers to determine the best markets for buying, selling and holding rental properties.

And Zelman & Associates published a report identifying an improved distressed market, as loans in delinquency and in the foreclosure process have declined 44% from the peak in Q4 of 2009, with currently more than 1.4 million in some form of foreclosure. The improvement in the distressed market has alleviated the negative impact of REO on the market, as servicers have reported a strong demand for REO properties in Q3 of 2014.  Late stage delinquencies are expected to normalize within 3 to 4 years and short sale activity is expected to trend 10% lower in 2014 and 15% in 2015. Completed foreclosures have decreased to 12% in 2014 and are predicted to be at 10% in 2015.

I had a chance to read the Collingwood Group's recent lender survey (October) and found question #6 very interesting. It reads: In last month's survey 89% of respondents said regulations were hurting their business. What new regulations are causing the most anxiety? It's interesting to note that "almost two-thirds of survey respondents told us that CFPB Rules are causing the most anxiety. Many questioned whether the CFPB rules serve the interest of the borrowers and felt that the agency is too focused on "fault finding" and "fining." Other respondents cited that it is not one source of regulations that cause anxiety but rather the volume of complex and sometimes contradictory regulations are what is most burdensome. According to the group's report, 74% cited the CFPB, 9% cited FNMA/FHLMC concerns, 6% state regulations, and 3% FHA program requirements. When asked how business conditions fared this year over last year, about half of the respondents dubbed conditions either "a little worse" (22%) or "a little better" (31%). Those who reported that business conditions are "a little better" explained that they are "slowly originating more loans" and that the "purchase business provides a degree of stability not possible in a refinance environment." The Collingwood Group's Mortgage Industry Outlook can be found here.

Comerica Bank published their October residential construction memo that highlights an optimistic housing market outlook for 2015, as underwriting requirements ease and economic conditions improve. Total housing starts decreased by 2.8% in October, to an annual rate of 1,009,000 units, whereas single family starts increased 4.2% to 696,000 unit annual rate, the best since last November. Total permits increased in October by 4.8% to hit 1,080,000 units and the composite home builders' sentiment index increased to 58, indicating a more confident view by home builders. Mortgage applications for purchases jumped by 11.7% by mid-November suggesting that home sales may improve by the end of the year, further motivating builders. 

According to the latest Ellie Mae Origination Insight Report, refinance activity grew 4% between September and October, accounting for 40% of overall mortgage volume. The average 30-year interest rate for all loans fell to 4.371%, the lowest average since July 2013. The report indicated that 33% of all closed loans in October had an average FICO score of under 700 compared to 28% in October 2013. Other findings include the average time to close a refi dropped from 40 day to 39 days, even with the rise in refinance share and closing rates on purchase loans increased to 66.1%, the highest since Ellie Mae began tracking this data in August 2011.

Throughout it all, banks continue to announce mergers. Just during the last week...Pacific Continental Bank ($1.5B, OR) will acquire Capital Pacific Bank ($237mm, OR) for about $42.4mm in cash (40%) and stock (60%). MidWestOne Bank ($1.7B, IA) will acquire Central Bank ($1.2B, MN) for about $133mm in cash and stock or roughly 1.59x tangible book. MUFG Union Bank ($108B, CA) will close 20 branches in WA, as it adjusts to changing customer preferences focused more on digital delivery. In Michigan Level One Bank ($646mm) will acquire Lotus Bank ($102mm) for about $16.8mm or roughly 1.3x book. In Pennsylvania First Savings Bank of Perkasie ($1.0B) will acquire First Federal Savings and Loan Association of Bucks County ($726mm) and in Nebraska Farmers State Bank ($99mm) will acquire Bank of Stapleton ($25mm).

Also a sign of the times is the huge increase in lenders using vendor services and directing change through various associations. Let's take a look at some recent developments in the "vendor space."

American Bankers Association, according to the news release, has endorsed an array of residential mortgage subservicing services offered by Midwest Loan Services to member banks and their borrowers nationwide.

FormFree Holdings Corporation announced that recent GSE guideline changes allowing third party verification of assets and deposits will allow AccountChek to gain significant market acceptance as the first and only patented verification of assets and deposits (VODA) solution in the marketplace.

Regarding eSignatures, DocuSign sent out a list of 18 correspondent lenders are now accepting electronic signatures from DocuSign on initial loan applications and disclosures? They are Wells Fargo, Sierra Pacific Mortgage, Impac Mortgage, Franklin American, Home Bridge Financial, Washington Federal, USA Direct Funding, Caliber Home Funding, Plaza Home Mortgage, Bank of America (BofA offers correspondent? Maybe it is supposed to be Merrill Lynch?), PennyMac, Chase, US Bank Retail, CMG Mortgage, United Wholesale, Flagstar Bank, New York Community Bank, and American Federal Resources. (Hey, if the list isn't accurate, contact DocuSign.)

AustinHomeSearch.com now features a down payment assistance search, allowing buyers to search specifically for homes that qualify. The site also includes a map search and detail listing view with a new Down Payment Resource icon.

Altisource Portfolio Solutions is discontinuing a lender-placed insurance brokerage it purchased from Ocwen Financial earlier this year, citing uncertainties with industrywide litigation and the regulatory environment.

Altisource Portfolio Solutions S.A. announced it has acquired the Owners.com business to expand Altisource's growing position in the residential real estate industry. "The acquisition adds an innovative, flat-fee MLS service to Altisource's offerings, enabling the company to serve the fast-growing category of limited service home sellers. Owners.com will operate alongside Altisource's online real estate auction marketplace, Hubzu.com.

Mortgage TrueView, a provider of data-driven business intelligence services, announces the release of a new Home Mortgage Disclosure Act (HMDA) scoring and benchmarking tool. The new scores provide lenders with insights into their own lending practices, as well as a comparison to the rest of the industry. Lenders have the ability to understand their own HMDA data in order to both stay compliant and increase loan volume for unintentionally underserved market segments. Mortgage TrueView's HMDA scores measure a lender's decisiveness in approving or denying loan applications.

The StoneHill Group has launched a new software solution to assist mortgage bankers meet their growing compliance requirements at all stages of the loan cycle. LES (Loan Evaluation Software), a web-based tool that can be fully customized to help mortgage bankers manage risk while reducing time-in-file costs, was soft launched in June of this year and is now available to mortgage lenders of any size.

Official news & information from the NMLS Testing & Education Department regarding the Requirement to Issue Course Completion Certificates and Credit Bank on Time can be viewed on the NMLS Newsletter, click here.

VirPack released an interface to the mortgage insurance system of National MI. This interface enables lenders using VirPack's Document Management and Delivery system to very efficiently transmit loan documents that are required for mortgage insurance underwriting directly to National MI. 

A La Mode announced that NDC (National Data Collective), a leading national provider of property data for real estate professionals, has agreed to integrate its data products with a la mode's full range of appraisal form-filling systems. National Data Collective (NDC) will integrate their expansive data services directly into TOTAL, the industry's leading form-filler with no charge for the integration.

The latest Issue of Arch MI's Housing and Mortgage Market Review with a new version of the Arch MI Risk Index is currently available.

The Prieston Group (TPG) announced that Credit Plus, a provider of intelligent insight for mortgage professionals, recently launched a new loan quality control program: QC Review powered by the LoanHD(r) Platform. QC Review enables lenders to run quality assurance checks throughout the entire origination process using real-time QC technology - from pre-closing to beyond closing. An integral part of this new product is TPG's industry leading Reps and Warranties insurance underwritten by Lloyds, London that is included in the cost for loans which have been audited and qualified in QC Review.

When people ask me where yields will be, or should be, in the future I usually tell them the last time I asked my Magic 8 Ball (which sits on my desk and was used to hedge many 'a pipeline) said 'Ask Again Later'...it's as if it misunderstood me or something, like Siri always does. Lucky for us Wells Fargo shuns the use of wizard tools, and concentrates on quantifiable data sets. The economic group writes regarding the Feds decision to remove its QE footprint, "....the Federal Reserve, through its open market operations, will not be buying U.S. Treasury securities to expand the balance sheet. They will, however, continue to reinvest the proceeds of their investments to maintain the size of the balance sheet. Without the added demand from the Fed, will yields begin to rise? Lots of smart folks think that Treasury yields are likely to remain at their currently low levels. Both supply and demand factors in the market dictate that not much will be changing in overall market dynamics."

Continuing this thought, when in doubt, it's always a good idea to look at the supply and demand for any particular instrument; let's pin low supply on the Federal budget deficit, as the federal fiscal year ended in September and it was the lowest since 2008. The smaller deficit means a lower new supply of Treasuries coming into the market. Demand, however, is more robust. WF writes, "On the demand side of the equation, there is no sign of softening demand as global investors continue to flee to the safety of U.S. Treasuries. In addition, foreign central banks continue to snatch up Treasuries. All of these demand pressures are in addition to new international capital requirements that have large financial institutions buying up Treasury securities in order to meet new liquidity requirements. Thus, even with the Fed bowing out of the market, there is still enough demand to keep Treasury yields at their currently low levels." QE Ends, Where Are Yields Headed?

While we're talking about the markets, they are open today, albeit thinly staffed, and we had a spate of news Wednesday cumulating with New Homes Sales. Sales increased 0.7% in October to a seasonally adjusted annual rate of 458,000. The median sales price of new houses sold in October 2014 was $305,000; the average sales price was $401,100. The seasonally adjusted estimate of new houses for sale at the end of October was 212,000: a supply of 5.6 months at the current sales rate.

There is no scheduled news today and yes, the bond markets are open. What is making news is that oil prices are at a 4-year low. The risk-free 10-year T-note had a 2.25% close on Wednesday, and this morning we're at 2.21% and agency MBS prices are better between .125-.250.