Action at CFPB; Capital Markets Product
Thanksgiving week already! Let’s temporarily shift from residential lending to economics. According to the SalaryforPilot website, Air Force pilots earn an average yearly salary of $107,950, while Naval and Marine aviators earn $70,550 per year. That’s decent, given the benefits. Yet the U.S. Air Force has a 2,000-pilot shortage. With unemployment already low, and commercial airlines offering signing bonuses when existing pilots are up for reenlistment, market forces are impacting employment - just like the mortgage biz.
CFPB
Here's something to think about. If the CFPB "dials things back," wouldn't the states step in and increase their consumer-focused regulatory levels? Multi-state lenders certainly wouldn't like that. Since the state regulators have been in regular communication with the CFPB and knowledgeable as to the Bureau's regulations and impact upon consumers (the protection of whom the states have always viewed as their primary function) it can be expected that we will see more state regulation as the CFPB's role is reduced. In Pennsylvania, for example, a recent bill supported by the Department of Banking and Securities to license mortgage servicers, incorporated the CFPB servicing regulations. This is a trend that may become viable for other states regarding those CFPB regulations that might be eliminated or reduced in effect. This is, of course, speculative at this point but it should be considered as we move ahead representing the industry in the states.
According to media sources, President Trump is expected to select Mick Mulvaney, the current Director of the White House Office of Management and Budget (OMB), to serve as the interim Director of the CFPB upon Richard Cordray's resignation at the end of this month. The CFPB is not going away, and neither is Dodd-Frank, although policies and procedures may change. And do we really want it to, given that lenders and vendors in the industry spent billions of dollars implementing the Dodd-Frank framework in our businesses.
Mulvaney is a former South Carolina congressman and served on the Financial Services Committee. Mulvaney had previously been quoted during interviews as being dissatisfied with the CFPB's performance and even said its lack of accountability showed it to be a "joke". He was one of those in Congress who reportedly wanted the CFPB to be eliminated. Certainly, the administration intends to reduce federal regulations and the CFPB would make a prime target.
Julian Hebron of The Basis Point issued his thoughts on the future structure of the CFPB.
Ever heard of Think Finance? It doesn't matter - the CFPB has. On November 15, the CFPB announced it had filed a complaint against Think, a Texas-based service provider, alleging that it had assisted in the collection of loans that were, in whole or in part, void under state law. The complaint filed in the U.S. District Court for the District of Montana alleges that the service provider, which provided services to three tribal lending entities engaged in the business of extending online installment loans and lines of credit, along with two companies responsible for the collection process (collectively defendants), assisted in the collection of loans that consumers were not legally obligated to pay based on identified states' usury laws or licensing requirements.
And last week the CFPB published two RFIs (Request for Information) concerning free access to credit scores. The first RFI requests information related to (i) consumers' experience when accessing free credit scores, and (ii) the experience of companies and nonprofits when offering free access to credit scores to their customers and the general public. The Bureau plans to use the information gathered through the RFI to, among other things, "identify educational content that is providing the most value to consumers, and additional educational content that the Bureau or others could develop to increase consumers' understanding of credit scores and credit reports."
The second RFI requests information on companies that provide existing customers free access to a credit score. This information will be used to update OFE's March 2017 list of companies that offer this service. Law firm Buckley Sandler wrote, "Following its update to the list, the CFPB intends to publish information to educate consumers about the availability of credit scores and credit reports and how this information can be used effectively."
Capital Markets
Compass Analytics announced expansion of its suite of industry-leading products with new API methods, deeper pipeline and LOS integration and automation. Building on its mobile-friendly platform and full-featured API that provides clients with innovative customization, greatly expanded lock desk automation and a modern user experience, Compass Analytics has added multiple new features to their product, pricing and eligibility engine, CompassPPE ("CPPE"). To support its ongoing expansion, Compass has also hired two industry veterans. Ralph Armenta has joined as Managing Director of Strategic Sales and will build on Compass' strategic initiatives and Investor Services, through which Compass will enable Investors to source CRA, and implement more granular pricing/margin strategies. Nancy Pollard joins as Managing Director of Pricing Technologies and will lead CompassPPE strategy, CPPE implementation, account management and investor guideline teams.
Turning to the economy, last week we had the release of the Household Debt and Credit report. Overlooked by many, LendingTree Chief Economist Tendayi Kapfidze had some comments. "Although debt is at a new high, household debt servicing is not. The financial obligations ratio and household debt service ratios remain favorable because of income growth and low interest rates. In particular, the mortgage debt service ratio of 4.44% for Q2 2017 is the lowest since 1980.
"Mortgage debt is at a high but the ratio to home values is not as home price appreciation is outpacing new mortgage debt. Owner's equity in real estate of 58.4% in Q2 was the highest since Q1 2006, when home price weakness began. HELOC balances continue to fall indicating that home owners are not accessing their record equity for consumption. This favorable picture is dependent on low rates, which may face some upward pressure but not to an extent we think will put borrowers under significant pressure. It is also dependent on strength in home prices which we expect to continue given tight housing inventory and a strong labor market."
For the actual bond market, the yield curve is the story. The 2-yr note (think ARM pricing) settled unchanged for the week while 10s and 30s recorded solid gains. The continued pressure on the yield curve compressed the 2s10s spread to 63 bps from 74 bps one week ago, and the 2s30s spread contracted to 107 bps from 122 bps ten days ago. Typically, yield curve flattening reflects the market's belief that a growth slowdown is in the cards, but some analysts believe that this time around demand for longer-dated Treasuries is being driven by yield differentials rather than growth concerns.
This week will see US bond markets closed Thursday with an official early close on Friday (and an unofficial one on Wednesday). For excitement this week, besides Turkey Day, today we have October Leading Economic Indicators, tomorrow October Existing Home Sales, some Chicago Fed figures, Wednesday is the weekly MBA Mortgage Index, weekly initial jobless claims, October Durable Orders, final November Michigan Sentiment, and the minutes from the November FOMC meeting.
Overnight the big news we saw the collapse in German coalition negotiations, although the financial market fallout has been very mild. For those quantitatively inclined, last week ended with the 10-year yielding 2.35%. This morning rates are nearly unchanged with the 10-year at 2.35% and agency MBS prices worse about 1 tick (1/32nd) versus Friday's close.
Events
Lenders One has opened registration for their 2018 Winter Conference in Scottsdale, Arizona at The Westin Kierland Resort & Spa. The March 4-7, 2018 event is focused on the theme, Visualize, homing in on the data and technology we see for the future of our industry. Michael Kuentz, recently named President of the co-op, is most excited for the innovation Lenders One seeks to bring in 2018. Since his hire 18 months ago, the cooperative has grown with 37+ new members, proprietary technologies and more opportunities for members to connect in small formats. See why some of the best industry relationships are formed at our conferences with a special offer only available through December 31, 2017. Contact Lauren Ketchum for more information. Members can register through December 22 for an early bird discount.
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Jobs and Products
A top 20 lender is looking for an experienced leader to fill the role of Controller. Candidate will oversee the growth of the accounting department, and should have experience with all aspects of loan origination including securitization and servicing. The position is in the Philadelphia/Southern New Jersey area and relocation packages are available for the right candidate. If you are interested, please send me your confidential resume me for forwarding.
For lenders, Direct Valuation Solutions has redefined its three divisions - DVS Direct, DVS-AMC and DVS Review Services. "DVS Direct offers lenders who want to work directly with the best appraisers an efficient and seamless Web-Based Software platform. We are the only software that has fully integrated borrower and appraiser payment processing (no more accounting hassles). DVS-AMC utilizes the technology developed by DVS Direct to provide exceptional communication, quality, and speed as it relates to the appraisal process and, DVS Review Services, when coupled with DVS Direct, assists lenders with appraisal quality control, offering the expertise of an 'in-house' appraisal review staff without the overhead. Want to make 2018 exceptional & successful? Contact us - we can help (888.931.0040).
My good friends at NRL Mortgage in Houston, TX have weathered the storms with no problem at all. "They have a culture that is infectious and a 'work hard, play hard' mentality. There is a reason why top branches and originators are gravitating towards this lender with over 55 locations throughout 46 states (including DC). Join a company that makes decisions every day for the benefit and improvement of the sales team. If your numbers are stale due to the lack of support, experiencing anxiety from an unorganized team before closing or need solid processing support - then this is the right opportunity for you. Interested branches that produce $5M - $30M monthly or independent mortgage companies that produce $100M - $600M annually that are looking to leave some of the headache behind and focus on production and earnings are encouraged to send a message." If interested please confidentially email President, Ron Zach.
"Assurance Financial, headquartered in Louisiana, is continuing our aggressive company and branching growth. We are looking for good markets and great people in all attractive locations across the country. Specific to Charlotte, North Carolina, we are seeking a producing branch manager and talented MLOs to build a dynamic production office while partnering with the "closing on time" support from our existing Charlotte loan operations center. In addition, we are seeking an experienced Eastern Regional Production Manager to assist us with supporting and expanding existing Eastern Time Zone branches as well as bringing on new branch opportunities in this territory." For immediate consideration and more information, please call or write Paul Peters, CMB, Recruiting Manager (225-239-7948).