Agency News; Fannie's eClosing Project; Why So Much M&A?

Hiring quick-thinking candidates is important, and Martin H. contributed, "There's another great answer to the traditional interview question, 'What is your biggest weakness?' The answer: 'Sometimes I get so wrapped up in my work that I forget to cash my paycheck.'"

Day by day, week by week, the total number of banks continues to lessen. It is not because they are being shut down as in prior years, but they are merging or being acquired by other banks - and rarely are banks with more than $20 billion in assets doing the buying. The RMA reports a survey of community bank members finds respondents cite the the biggest catalysts for M&A activity are new market expansion opportunity, shareholder return, increased regulatory cost, increased regulatory burden, lack of organic growth, and increased competition (11%).

Just in the last week or so it was announced that Entegra Bank ($984mm, NC) will acquire OldTown Bank ($113mm, NC) for about $13.5mm in cash or roughly 1.16x tangible book. Wilmington Savings Fund Society ($5.1B, DE) will acquire Penn Liberty Bank ($639mm, PA) for about $101mm in cash (40%) and stock (60%). In New Hampshire Bank of New Hampshire ($1.2B) will acquire Community Guaranty Savings Bank ($113mm) for about $12.9mm in cash or roughly 1.57x tangible book. In the home of the Everglades CBC National Bank ($548mm) will acquire First Avenue National Bank  of Ocala ($118mm). MainSource Bank ($3.3B, IN) gazed east and decided it will acquire Cheviot Savings Bank ($576mm, OH) for about $197.4mm in cash (50%) and stock (50%). In the home of Wall Drug Great Western Bank ($9.8B) will acquire Home Federal Bank ($1.2B) for about $140mm in cash (25%) and stock (75%). In Michigan The First National Bank of Norway ($96mm) will acquire First National Bank of Crystal Falls ($73mm). And why constrict yourself to only banking? Five Star Bank ($3.3B, NY) will acquire investment advisory firm Courier capital for $11.3mm to $14.0mm in cash and stock. Courier has more than $1.2B in assets under management.

The National Information Center has released consolidated financial statements for bank holding companies for the third quarter of this year. Consolidated financial statements are not as comprehensive as the soon-to-be-released Quarterly Banking Profiles, however they provide a good early estimate of changes in bank assets and liabilities. The report shows that agency MBS holdings increased $30.7 Billion for the top 50 banks by assets in their HTM and AFS portfolios during Q3 15. Demand was strong for both Conventional and GNMA pass throughs. Bank of America Corporation had the largest rise in agency MBS holdings, adding $23.4B, followed by PNC Financial Services group which added $4.3B. JPMorgan Chase further reduced its holdings by $4.5B. Holdings of non-agency MBS of the top 50 banks decreased $6.7B, while CMBS holdings rose $4.8B. Treasury holdings declined $8.2B, while agency debt holdings fell $1.7B quarter-to-quarter.

The latest edition of ProfitWise News and Views, Published by the Community Development and Policy Studies Division of the Federal Reserve Bank of Chicago, is now available. Topics include a summarization of the second quarter convening at the Fed: NHS of Chicago's annual Community Banks Partnership meeting, panelists discussing the housing market for 'millennial' buyers, and the regulatory landscape for community banks and the exploration of community benefits agreements and ordinances in Detroit. This month's feature focus is a profile of IFF - formerly Illinois Facilities Fund - a CDFI in its 27th year of operation, as it expands its financial and development services to a broad collection of Midwestern states.

Turning to Agency, in this case Freddie and Fannie, news...

Fannie Mae's Housing Industry Forum published an article on CFPB's eClosing pilot, which says the pilot puts the industry one step closer to an "eClosing being the norm." CFPB Director Richard Cordray is quoted, saying CFPB strongly believes eClosings will be a "more efficient and accurate process that will save time, cut costs and raise consumer satisfaction." Jennifer Parker, Fannie Mae's product development manager for eClosing/eMortgage, tells us Fannie Mae is supportive of customers looking to adopt eClosing solutions. "We have a specialized team ready to assist lenders with considerations and strategies for eClosing implementations." To learn more, contact Jennifer Parker (202-752-4756).

While we're on Fannie (the subject, not literally) the Mortgage Bankers Association (MBA) sent a letter to FHFA Director Mel Watt urging action to reduce the continued taxpayer risk exposure posed by the housing GSEs, Fannie Mae and Freddie Mac.  The letter specifically calls on the FHFA to require greater use of up-front risk sharing by the GSEs, particularly with deeper private mortgage insurance (MI) coverage, to de-risk loans before they are acquired by the GSEs.

MBA President and CEO Dave Stevens highlighted the "imperative that the GSEs reduce their retained risk in order to avoid any increase in taxpayers' investment in the enterprises," and stated that "multiple forms of up-front risk sharing should be piloted including deeper cover mortgage insurance (MI)."  Stevens goes on to say that risk sharing "should not advantage certain lenders relative to others" and that "[the MI] approach would be operationally easiest for the vast majority of lenders."  In addition, the MBA letter detailed reasons why the MI industry is such a reliable counterparty and well positioned to bear additional housing finance risk.  

The collection of mortgage insurance companies concurred. "USMI could not agree more. The MI industry has covered more than $50 billion in claims to the GSEs since the beginning of the financial crisis, resulting in substantial taxpayer savings.  USMI member companies never stopped paying claims, and never stopped writing new coverage.  MIs are subject to rigorous new capital and operational standards under the Private Mortgage Insurer Eligibility Requirements (PMIERs) issued by the GSEs with oversight by FHFA.  The MI industry has attracted billions in new capital since the crisis, and is well positioned to raise even more.  Further, as of October 2014, MIs operate under new master policy agreements, which provide assurances about the consistent handling and payment of mortgage insurance claims and bring greater transparency and clarity to contractual protections for lenders and investors."

NewLeaf Wholesale announced updates to its Conventional guidelines as a result of Fannie Mae's announcement on the High Balance eligibility changes and the new HomeReady product that will be available with DU 9.3 release. NewLeaf guidelines will be updated to reflect the changes and will be effective on December 14. All changes impact DU loans.

Fannie Mae's new Loan Delivery application is now available to all lenders. The new Loan Delivery application accepts existing ULDD Phase 1 XML import files, as well as the updated XML file for ULDD Phase 2, providing a transition window to delivering ULDD Phase 2 data by the June 27, 2016 mandate. The old Loan Delivery application will remain available for use until Feb. 1, 2016. For information and training (including live web seminars) to help you get started, visit the new Loan Delivery page.

The Federal Home Loan Bank of San Francisco released the October 2015 Cost of Funds Index (COFI), which reached 0.649 percent, slightly down from 0.651 in September. The COFI is calculated based on the actual interest expense reported by the Arizona, California and Nevada savings institutions members of the Bank that meet the criteria for inclusion in the COFI. For October, 11 institutions reported COFI data and changes in the COFI affect interest rates on ARM loans.

While we're talking about rates, fixed-income securities took it on the chin Thursday and it had little to do with anything here in the United States. It was a "curve-steepening trade" as Eurozone sovereign debt yields spiked in reaction to the European Central Bank's rate decision. Yes, the ECB delivered more monetary stimulus and cut its deposit rate by 10 basis points to -0.30%, but it slightly under-delivered on market expectations. An easy way to sell dollars is to sell bills, notes, and bonds, and that is what happened. The U.S. Dollar Index took losses against all of the major currencies after the European Central Bank's governing council cut the central bank's deposit rate by 10 bps to -0.30% and extended its EUR 1.1 trillion asset purchase. In fact the euro had its 4th largest intra-day move versus the dollar in the currency's 16-year history.

So the ECB disappointed the markets by not increasing the size of the Asset Purchase Program despite dropping the deposit rate further into negative territory and expanding the list of targeted instruments. The smarter guys in the room say that this means the ECB may be closer to the end in terms of accommodation. Is the economy in Europe really doing that well? For action in prices, 10-year T-notes lost about 1.25 (and closed at 2.33%); fortunately mortgage didn't fare as badly but still everyone was changing mortgage pricing Thursday as the day wore on.

Today for thrills and chills we had the November employment data. Nonfarm payrolls were expected to increase by about 190k, were +211k, the unemployment rate is forecasted to increase 0.1% to 5.1% and came in at 5.0%, with hourly earnings rising 0.2%, and that is where they came in. Almost as an afterthought we've also had the October trade deficit ($43.89 billion). So the numbers came in very close to expectations, and afterward we find the 10-year yield at 2.35% with agency MBS prices worse by .125 versus Thursday's close.

Jobs and Announcements

In Ops job news, a 20 year old company in the northeast is looking for an experienced SVP of Retail Operations who can be based at HQ or work remotely. The company is a Ginnie, Fannie, and Freddie approved lender, issuer and servicer with a large servicing portfolio. 100% of all loans are servicing retained and the company is currently funding $1B per month in loan originations through correspondent, third party origination and retail channels. Candidate should have experience with all aspects of retail loan origination. If you are interested please forward your resume to me.

Hats off to Comerica Bank which celebrated 50 years in warehouse lending! "Comerica Bank is excited to announce the significant milestone of a 50-year commitment to warehouse lending. Since 1965, Comerica has been known for its customer-centric approach to warehouse lending as well as its agility in meeting the ever changing needs of the residential mortgage market. The bank has warehouse lending relationships in excess of $4 billion as of September 30, and successful partnerships include small- to mid-sized mortgage bankers as well as the ability to serve larger mortgage banking firms, including publicly-traded companies, through the agency of syndicated facilities. Please contact Von Ringger at 313.222.9285 to learn more about Comerica's experienced relationship managers, responsive service and deep understanding of the mortgage industry. Comerica Bank, raising expectations of what a bank can be.  Equal Opportunity Lender."

In product news, Sandra James has worked hard to make 4506-Transcripts.com a leader in providing fast results for banks, mortgage bankers, and legal firms who need to process 4506-T forms from the IRS. (In fact 4506-T is currently averaging a 3-day turnaround time.) Today, Sandra is pleased to announce that 4506-Transcripts.com will now be providing Verification of Assets, Verification of Employment, and Transcript Summaries as a new service. And to keep the good news rolling, Sandra has now made Resident Screening available through Private Eyes, Inc. Private Eyes, Inc. is a pre-employment background screening company who specializes in background checks, with the right balance of speed, accuracy, and great customer service. For more information, call 925-927-3333 or email Sandra directly.

And Secure Insight has just launched a new enhancement to its vetting platform that includes the verification of private network email addresses for settlement agents to ensure that borrower NPPI and lender business and legal documents are not transmitted and shared through public IP space, reducing the risk of fraud, theft and computer virus infections.  If you are a lender and not verifying an agent's email network, contact Secure Insight!

Congrats to Amy Ramsey who has joined Indecomm, a leading provider of mortgage technology, training, and outsourcing services, as the National Sales Manager for the Mortgage Learning Division. Amy will be responsible for Indecomm Education, Professional Services, Consulting and Doc Management Solutions.

LenderLive announced that Scott Banks has joined the firm as senior vice president of Finance, Mortgage Services. He will be overseeing the Investor Reporting, Treasury and Bank Reconciliation functions, as well as the development of budgets, forecasts, financial reporting, and analyses to support new business initiatives and show return on investment.

And Jay Kirsch, formerly from Freddie Mac Multifamily where he most recently served as Asset Management & Operations Client Relationship Manager, has joined Greystone as a Managing Director. In this role, Mr. Kirsch will focus on production of small balance loans across the Freddie Mac and Fannie Mae platforms. Greystone has originated over $500 million in volume under Freddie Mac's Small Balance Loan offering.