CFPB Addresses Bankruptcy; What MI Company Earnings Tell Us - Will Arch Buy a Competitor?
Do mortgage loan originators think that they can’t go to prison for something they did ten years ago? They'd better think again. And let's not forget that the CFPB has made it clear that it has the right to hold originators responsible for defects in their employer's compensation plan. Are we having fun yet? (If you need a reminder as to the CFPB's goals, here is a list.)
Last week was a big week for the CFPB in terms of education. On April 26th, it published a notice in the Federal Register that makes available a report summarizing findings related to the Bureau's consumer testing of sample periodic statement forms for consumers in bankruptcy. The Bureau reopens the comment period of the 2014 proposed mortgage servicing rule until May 26, 2016 to seek comment on the report. Amendments to the 2013 Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), is posted in the Federal Register and available to accept comments.
And the CFPB published a notice in the Federal Register that makes available a report summarizing findings related to the Bureau's consumer testing of sample periodic statement forms for consumers in bankruptcy. The Bureau reopens the comment period of the 2014 proposed mortgage servicing rule until May 26, 2016 to seek comment on the report, which is available here. Learn more and comment here.
The private mortgage insurance business continues to make waves, and last week was no exception as many MI firms posted their earnings - and industry analysts often use their results as a bellwether for the health of the industry.
But first, is Arch MI in the mood to buy another private mortgage insurance company? Let's ask the CEO.
Certainly the company is making some coin. Arch Capital Group's mortgage insurance segment had a 77% year-over-year increase in operating income as net premiums written increased by 105%. New insurance written by Arch MI U.S. increased 34%, but Arch's market share growth trails National MI, whose NIW grew to $4.3 billion from $1.7 billion for the first quarter of 2015. There was $23.9 million of operating income for the segment in the first quarter of 2016, up from $13.5 million one year ago.
Arch MI U.S., as well as other MI companies, continues to diversify where its business is coming from: no MI company can ignore the increase in market share by the credit unions around the nation. Figures show that in the last go-around 69% of Arch's first-quarter new insurance written of $2.9 billion came from banks and mortgage bankers. But a year ago, in the first quarter of 2015, Arch MI U.S. had NIW of $1.8 billion, of which 50% came from banks and mortgage banks.
National Mortgage Insurance Corp. cut its losses in the latest quarter. But the mortgage insurance company also saw a reduction in its new business. In the quarter that ended on March 31, 2016, new insurance written worked out to 6 percent less than what was written in the final quarter of last year. In the last few years National MI focused on offering transparent and competitive borrower-paid rates that are based on a disciplined, risk-based approach.
Radian (RDN) reported that in the first quarter it took a number of steps to improve its capital structure by repurchasing shares, reducing its convertible debt and acquiring reinsurance as well as position itself for growth by strategically targeting new lender channels and revising pricing to remain competitive. The 1st quarter results showed credit trends were healthy, with a pick-up in cure activity driving a larger-than-expected favorable reserve development. But the company saw lower revenue and margins in the real estate services segment, which continues to post choppy results and is likely to remain a volatile contributor to near-term earnings as the integration and cross-selling initiative gradually unfolds.
RDN has $390 million of capital at the holding company and a PMIERs capital surplus of $500 million. It expects to be able to redeem its $325 million surplus note in the next three months which would increase capital at the holding company but reduce its PMIERs surplus by the same amount. In the first quarter Radian had lower losses and higher investment income. New insurance written was down 14% year over year, insurance in force up 2%, and delinquent inventory down 24%.
For the full year, Radian management maintained its guidance of flattish volume in the $40-41 billion range. If the results from four of the seven insurers (excluding AIG, ESNT and GNW), are any indication, new insurance written decreased 11% sequentially, implying RDN is still around 18% market share. (NMIH and Arch appear to have gained share at the expense of MGIC.) Radian's management appears to be shooting for credit unions. And why not since just 4% of its volume in 2015 came from the channel versus an estimated 8-9% for total mortgage originations. Radian told analysts that in the first three months 35 new customers began delivering business, 11 new credit unions signed master policies and credit union volume increased 32% year over year. According to the company, credit union volume skews more heavily towards borrower-paid monthly policies.
Genworth had earnings per share that seemed to beat most estimates although there were no major capital or strategic surprises. Like other MI companies Genworth has other lines of business, and the company continues to work through its U.S. life insurance restructuring plan, which consists of putting life/annuities into runoff, reducing annual cash expenses, repatriating its Bermuda based BLAIC subsidiary, and attempting to legally separate its long-term care business.
Genworth's MI biz had its operating income come up nicely compared to the 4th quarter. Analysts thought that this was due to, you guessed it, higher premiums and lower incurred losses in the U.S.
MGIC Investment Corporation's shareholders have elected the company's current eleven directors to an additional one-year term. But the company has seen its stock price take some hits recently. MGIC Investment dropped 9% in the wake of its first-quarter earnings report. The mortgage insurance provider saw its revenue and net income per share drop by nearly half, missing the consensus forecast among investors. CEO Patrick Sinks pointed to some of MGIC's more favorable trends, including "adding high quality new insurance, continu[ing] to experience positive credit trends, and maintain[ing] our traditionally low expense ratio." Nevertheless, overall new insurance written fell about 8% from year-ago levels, and although the percentage of loans delinquent fell by about a quarter, the percentage of insurance still in force from a year ago fell below the 80% mark.
But what would the industry be without a little controversy? A federal judge has okayed a California lawsuit by Pacific Investment Management Co that accuses American International Group - better known as AIG, and UG's parent - of lying about its subprime mortgage exposure prior to its 2008 bailout. Fortunately, it is not directly related to the MI biz.
NYCB Mortgage posted LPMI updates. Effective for loans registered on or after 04.01.16, only a 30-year term is available with Lender Paid Mortgage Insurance (LPMI). LPMI is available on Conforming Fixed and Conforming Standard ARM products with the following guidelines: 1-2 Unit owner-occupied, primary residence only. Purchase or rate/term refinance transactions only. See Product Pages for LTV restrictions. Loan approval will be dependent on mortgage insurance eligibility for transactions requiring mortgage insurance.
Turning to the bond markets, and trying to figure out if anything is going to move rates this week, we sure do have a lot of scheduled news this week - most of it focused on the job situation. As always, analysts have expectations for what the numbers are going to show, and these forecasts are already baked into current interest rates; when the actual announcement varies from the expectation is what moves rates.
Taking a quick look back at last week, and specifically Friday, we had a small rally in bond prices (so rates dropped slightly). Fortunately mortgage-backed securities (MBS) outperformed despite higher treasury prices which saw 10-year yields hit a high of 1.88%.
Over the weekend China will release its April updates for both manufacturing and non-manufacturing PMIs. But here in the States, where, in spite of all the inherent faults in the data, economists tend to think economic announcements are more reliable today we start off with second-tier numbers with the Markit US Manufacturing PMI, ISM Manufacturing numbers for April, and Construction Spending for March. Tomorrow isn't much of anything.
Wednesday we'll have the MBA's figures about applications echoing what lock desks already know. But we'll also have the ADP employment figures, the trade balance, Nonfarm Productivity, Factory Orders, Durable Goods, and Unit Labor Costs. On Thursday the 5th, besides consuming some margaritas later in the day, we'll digest the Challenger Job Cuts and Initial Jobless Claims. We finish off the work week with all the employment/unemployment data.
For actual rates we closed Friday with the 10-year yield at 1.84% and this morning (in the very early going) it's down to 1.82% with agency MBS prices a shade better.
Jobs and Announcements
On the more constructive side of the ledger I received this note. "I joined Norcom because of the entrepreneurial environment, I stay because of the family culture. We all help each other, whether it's our job to or not. I love Norcom's values that everyone truly embodies, from the owner to the pre-underwriters." (Jake Coker, Norcom Mortgage Branch Manager, Chapin, South Carolina) Licensed in 27 states with 33 branches,Norcom Mortgage is actively growing in North and South Carolina and is coming off of another record year. Norcom Mortgage is a direct Freddie & Fannie seller/servicer, and Ginnie issuer. If you are a loan officer or branch manager looking to make a move, please contact Steve Harris.
Moving up the Atlantic Seaboard, Presidential Bank Mortgage, a division of Presidential Bank, FSB, is "one of the best kept secrets in the Metro DC area and is looking for Loan Officers in its Fairfax, Gaithersburg, and Bowie branches! Many of our LOs, Processors, Underwriters and Closers have been together for 20+ years and our Senior Management Team has been together for over 25 years! We have a wide range of programs from competitively priced jumbo and portfolio loans to First Time Home Buyer programs including State Bond and Grant Programs. All processing, underwriting and closing is done locally within the branch network, giving us control of the transaction and allowing us to close loans without delays. Presidential is a Fannie/Freddie Direct Lender and lends throughout the US (except CA & NY). We offer loan officers a great opportunity to grow into the leaders of tomorrow. Come see why people make Presidential their long termcareer choice!" All interested parties please submit resumes to David Burruss (703.286.9389).
And in appraisal job news Valuation Partners, a leading national AMC, "is looking for a sales star to join its winning team. We rank in the Top 10 of privately held AMCs with a goal to be #1. As Vice President- Regional Manager, the successful candidate will be responsible for increasing sales in CA, OR, WA, AZ, UT, NV, ID, and WY. We are seeking an individual based in Southern CA with client relationships throughout the West. Strong networking skills, a deeprolodex, proven sales results, and razor sharp hunting skills are critical success factors for the position." For confidential inquires or resumes, please contact HR DirectorNicki Brazeau (419.418.5244).
And Arch MI has some May Webinars: Master the Mystery: Navigating and Evaluating Personal Tax Returns Tuesday, May 10 10am Pacific; Loan Processing: Using the 1003 as a Roadmap Wednesday, May 1112pm Pacific; Mortgage Fraud: Everything Old is New Again Thursday, May 12 10am Pacific; Seizing Market Share in a Purchase Market: Creating Separation Between You and Your Competitors Thursday, May 12 12pm Pacific; Analyzing Appraisals: for Single-Family Residences Tuesday, May 17 12pm Pacific; Negotiate the Numbers: Understanding Self-Employed Borrowers and Business Tax Returns Wednesday, May 18 12pm Pacific; Conquer the Components: Understanding the Aspects of a Loan File Thursday, May 19 10am Pacific