Bank News: Stress Tests, M&A, Values, Underwriting Changes, New Products
“Statistics are like bikinis. What they reveal is suggestive but what they conceal is vital.” We’re always watching home sales & construction – but it is debatable whether tearing down a house and building another adds to housing stock. About 10.2% of single-family homes rose from tear-down starts in 2016, up from 7.7% in 2015.
Bank news
Last week the Fed released the results of its stress tests, and for the third straight year all large banks passed. The tests are designed to measure whether the 34 largest banks will be able to maintain a minimum 3% capital level, even in periods of severe economic downturns. This Wednesday the Fed will announce the results of their qualitative review, which determines whether the banks will be able to move forward with their capital plans and pay dividends to their shareholders. The results of the tests may also help bolster republican backed plans to ease up on financial regulation.
As an example, JPMorgan Chase & Co. announced that it has released the results of its company-run 2017 Dodd-Frank Act Stress Test for JPMorgan Chase & Co. and certain subsidiaries that are subject to the DFAST rules. The information is available on the Chase website at www.jpmorganchase.com under Investor Relations, Events & Presentations, 2017 Dodd-Frank Act Stress Test Results.
So 34 systemically important banks passed their stress tests. The banks are getting better at passing these exams, and the sense is that the Trump Administration will nominate someone to the Fed who will dial back these exams a bit. This week's Fed release of its comprehensive capital review will determine whether the big banks can increase their dividends or buy back stock.
But the Financial Times reports bank stock prices have dropped dramatically as hopes of a Trump tax cut fade, trading revenues decline, and the yield curve flattens. Since hitting peak levels in early March, Goldman is down almost 17%, Wells is down 14% and Bank of America and JPMorgan are each down about 12%. (Citigroup is trading at about 85% of book value, making it the lowest of the largest US banks.)
Certainly, bank M&A continues for various reasons, not the least of which is the age of the bank owners and the cost of regulation. Just this morning word broke that National Bank Holdings Corporation and privately-owned Peoples, Inc., the bank holding company of Colorado-based Peoples National Bank and Kansas-based Peoples Bank, have entered into a definitive agreement for NBH to acquire Peoples. The transaction adds approximately $865 million of assets, $483 million of loans held for investment and $719 million of deposits, as well as a complementary franchise-centric retail mortgage business, which originates over $1.0 billion of mortgage loans per year. Peoples shareholders will receive approximately $36.3 million of cash consideration and approximately 3.4 million shares of NBH common stock, subject to certain potential adjustments. In addition, as part of the agreement, Peoples will divest or wind down its national mortgage business, operated out of its Kansas-based Peoples Bank, by the end of 2017.
In the last week or so it was announced that in California First Foundation Bank ($3.7B) will acquire Community 1st Bank ($373mm) for about $50.4mm in stock (100%) or about 2.04x tangible book. Fiserv will acquire mobile banking and payments software company Montise for $90mm in cash. State Bank and Trust Co ($4.2B, GA) will acquire AloStar Bank of Commerce ($944mm, AL) for about $196mm in cash (100%) or about 1.0x tangible book. Analysts say AloStar's price was negatively impacted by the fact that much of its deposits come from internet and correspondent banking channels.
As announced in CB17-22 Product Updates, Chase Correspondent removed the following overlays: Requirement for escrow holdback funds to be held by title company and allowing funds to be held by Correspondent (applies to Agency and Non-Agency transactions), requirement for Solar Panel Questionnaire Form has been removed (applies to Agency and Non-Agency transactions), comparable sales for Agency transactions, and employment contract overlay for Agency transactions.
Chase also announced that the overlay for corporate relocations on Agency loans was removed. The guides were also updated to indicate loans meeting the applicable Agency requirements are eligible for delivery to Chase. For complete details, review CB17-22 Product Updates.
Alaska, North Dakota, West Virginia and Wyoming previously identified by U.S. Bank Home Mortgage as high-risk states, has added the state of Oklahoma to this list, effective June 19, for any new registrations or locks, the maximum LTV/CLTV/HTLTV will be 80% for any portfolio loan (purchase or refinance) regardless of lien position in the above states. If the loan is an Agency first mortgage, with a USBHM HELOC, fixed rate second or ARM second on the transaction, the 80% LTV/CLTV/HTLTV maximum applies. A CLTV/HTLTV greater than 80% can only be exceeded when the second is from another source other than USBHM.
Flagstar Bank posted information for its customers: During the weekend of Saturday, June 24, Desktop Underwriter (DU) will undergo the following updates for both new casefiles and resubmissions: Several messages, including undisclosed debt messages and error messages, will be updated to better align with HUD Handbook 4000.1. Due to program expiration, Streamline with an Appraisal and Hope for Homeowners will be removed as eligible programs. Because FHA requires a secondary financing amount to be sent to TOTAL Scorecard, DU will send a default value of $0. Lenders are reminded to enter the amount of secondary financing when applicable. Based on discussions with FHA, asset calculations in place prior to last year's August update will be restored.
Loans exercising Freddie Mac's ACE appraisal wavier are eligible for purchase by Wells Fargo Funding. Wells Fargo Funding will treat ACE like a property inspection waiver (PIA) and charge a fee at funding; however, we will apply post-fund adjustments to refund PIA/ACE fees. We will review Loans daily to identify those requiring post-fund adjustments until system support is available in 2018. Post-fund adjustments will be applied to Loans purchased on and after June 19, to refund the PIA/ACE fee.
Wells Fargo Funding has updated its Validation List which is effective as of June 14th.
Effective as of June 13th, U.S. Bank Home Mortgage will again offer a VA jumbo 30-year fixed rate product. VA jumbo product code #2009 can be found on its VA 30 and 15-year program guidelines. A change request will no longer be required as UniteUS will now display applicable VA jumbo pricing and adjustments.
Fifth Third Correspondent provided a link to view the Missouri counties declared federal disaster areas. Also, its updated Ineligible Condo list is available in the Correspondent Connect Online Guides and Forms.
Capital markets
Fannie Mae (FNMA/OTC) announced the winning bidders for its seventh and eighth Community Impact Pools of non-performing loans. The transaction is expected to close on August 15, 2017, and includes approximately 123 loans totaling $31.9 million in unpaid principal balance (UPB), divided between two pools focused in the New York and New Jersey areas. The winning bidders for the transaction were Matawin Ventures XX, LLC (Tourmalet Advisors) for Pool 1 and Community Development Fund IV, LLC (HMC) for Pool 2. In collaboration with Wells Fargo Securities, LLC and The Williams Capital Group, L.P., Fannie Mae began marketing these loans to potential bidders on May 10, 2017. Read the full news release plus Interested bidders can register for future announcements.
Franklin American Mortgage is making improvements to its Correspondent best efforts pricing. The changes will be effective with Best-Effort locks on June 30th, and will only apply to Conventional 30/25-year fixed rate pricing. the new specified grids initially will not apply to TX cash-out transactions or any 97% LTV transactions. Also, an updated SRP schedule will be effective on June 30th. The new SRP schedule will have the same format as our current schedule, and we will provide the new SRP values to you within the next few business days. These new Best-Efforts specified premium pay-ups may change daily, and will be an additional value added to the standard pricing calculation.
Looking at the bond market from Friday, we ended the week on a high note after a nice little rally. In fact, the 30-yr T-bond locked in its fourth consecutive weekly advance while the 10-yr note posted its third consecutive weekly gain (up a couple ticks and closed yielding 2.14%). As you'd expect, given that the Fed has raised short term rates, the yield curve flattened during the week, as the 2s10s spread narrowed to 81 basis points from last Friday's 84.
It's a new week, and folks are wondering about staffing next Monday July 3. Ahead of the holiday we have a lot of potentially market moving scheduled news - and who knows what will come out of Washington DC or overseas. This morning, at 2:30AM Hawaiian Standard Time, we've had Durable Goods for May (-1.1%, worse than forecast, ex-transportation +.1%) and the Chicago Fed National Activity Index (dropping from +.57 to -.26). The Dallas Fed Texas Manufacturing Index (steers and...) for June will be released, and we have a $26 billion 2-year note auction.
Tomorrow, June 27th, we'll see Consumer Confidence and the S&P Corelogic house price figures from April, Wednesday are the trade balance figures, MBA's application data from last week, as well as May Pending Home Sales. Thursday is the third Estimate of Q1 GDP, the GDP Deflator (a measure of inflation), and Initial Jobless Claims. Friday, the last business day of June, is May Personal Income & Spending/Consumption, core PCE Prices, June Chicago PMI, and Final June Michigan Sentiment. We start the week with rates not much different than Friday afternoon: the 10-year is currently yielding 2.14% and agency MBS prices are nearly unchanged.
Jobs and Announcements
A nationally recognized mortgage banker headquartered in Orange County, CA is expanding and looking for experienced Government and Conventional loan processors and underwriters to support its Consumer Direct, Retail and Wholesale operations. "Offering competitive compensation plans with remote positions available, this lender is a Fannie Mae/Freddie Mac seller/servicer and offers all Ginnie Mae and reverse mortgage products. The company fosters a spirit of team work and believes that developing talent creates exceptional teams." Interested parties can send confidential resumes to me.
"With 25+ years of mortgage industry experience, Spiegel Accountancy Corp. is the choice of over 35 mortgage bankers for two reasons: accessibility and expertise. Spiegel's seasoned CPAs actively participate in client accounts to ensure productive partnerships. They're fully credentialed, have decades of experience, and receive ongoing training in specialty areas and new tax law changes. Their deep understanding of the industry makes them uniquely qualified to share best practices and exceed expectations. Spiegel's comprehensive array of services can improve a lender's bottom line and reduce tax liabilities - while maintaining compliance with counterparties and regulators. Learn more about Spiegel Accountancy Corp. here.
SocialSurvey welcomes Matt Curtis to the team as Regional VP of Business Development for the South-Central Region (TX, AR, LA, OK, NM). Matt comes to SocialSurvey with over 15 years of sales experience in the Financial Services industry, as well as 5 years of regional and national sales in the mortgage CRM vertical. "It's more than protecting and strengthening your online reputation. SocialSurvey creates a digital marketing explosion for your LOs, branches, and enterprise." Find out why Matt is so excited about working for SocialSurvey by contacting Ayesha Faiz. SocialSurvey still has openings for RVPs in SoCal, Midwest, and Plains/Rockies regions. Submit your confidential resume to Ayesha. SocialSurvey is offering an exceptional compensation plan that includes base salary, commission, and equity in a rapidly growing tech startup.
In National MI Credit Union news, the company has announced new Credit Union Monthly Rates effective June 26, 2017, and will be a Silver sponsor at the ACUMA Conference in Las Vegas this September. These Credit Union rates will be available in all 50 states and the District of Columbia, and complement National MI's expansive guidelines, particularly in the areas of investment properties and 3-4 unit properties. See http://cu.nationalmi.com/cu-rates/.