CRA Changes; New Lender; Mortgage and Appraisal Books for Your Staff
What is more relaxing than breakfast in bed? IHOP is there for you, and is testing IHOP home delivery in various states. Roshambo to see who answers the doorbell? In even more exciting news, we now have a new threshold for the smaller loan exemption from appraisal requirements for higher-priced mortgage loans. Heavyweights CFPB, OCC, and the Fed ratcheted it up slightly.
Startup
Under the category of bank-owned lenders, bemortgage is "the new kid on the block." Operating out of Chicago, the company is a division of Bridgeview Bank Group founded by industry veterans...that collaborated to develop an innovative and strategic company in an evolving industry. On the LO role, Rob Sampson, CEO and co-founder, stated, "They will have access to the best programs, pricing, and tools so they can grow their business and deliver the highest levels of customer service. Top industry performers will be provided real mentorship opportunities by pairing them with peers and mentoring emerging talent. This approach is the backbone of our new company." To aid in their growth, the company will launch a New Truth in Lending, a campaign intended to speak candidly about the mortgage process from each loan officer's point of view."
Bank News
Federal bank regulatory agencies have amended their respective Community Reinvestment Act (CRA) regulations primarily to conform to changes made by the Consumer Financial Protection Bureau (CFPB) to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA).
As mentioned in this commentary last week, a story in the Wall Street Journal ran a story that indicates some larger banks have dropped their holding company structure regulated by the Fed, to reduce costs and simplify oversight. Some of the largest banks operating without a holding company structure are First Republic Bank ($81.0B, CA), Signature Bank ($40.8B, NY), Sallie Mae Bank ($19.4BUT), Bank of the Ozarks ($20.1B, AR), BancorpSouth Bank ($14.9B, MS), BMW Bank of North America ($9.9B, UT) and Towne Bank ($8.4B, VA). There are pros and cons, of course.
Certainly, the cost of regulation enters the decision making of some banks to be acquired or merge with others. In the last week or so it was announced that Heartland Financial ($9.8B, IA) will acquire Signature Bank ($390mm, MN) for about $53.4mm in cash (9.5%) and stock (90.5%) or about 2.06x tangible book. In West Virginia WesBanco Bank ($9.9B) will acquire First Sentry Bank ($666mm) for $101.4mm in stock (100%) or about 2.02x tangible book. In Minnesota Deerwood Bank ($501mm) will acquire Plaza Park State Bank ($210mm), and down in The Sunshine State First Federal Bank of Florida ($1.5B) will acquire CBC National Bank ($651mm) for $83.2mm in cash.
Banks borrow money, typically in the form of deposits, which are liabilities, and make loans, which are assets. They are keenly aware of interest rates and the spread between the two. If one looks at interest rate cycles from 1990 through October 2017 one sees that there are similarities between them - and differences. So far in 2017 the Prime and 1 yr. CMT (Constant Maturity Treasury) rates increased over 50 bps, but the 10 yr. CMT yield has taken a different course. In prior rising interest rate cycles, the 10 yr. CMT rate has been roughly the same as the Prime rate at this point in the cycle which means today's 10 yr. CMT rate would be closer to 4.25%. Instead it is wallowing around 2.35%. Does this mean some or all interest rates will continue to rise, or does it mean the rising interest rate cycle is nearing its peak? Nobody knows the answer to this, and if they say they do, guard your wallet.
Most banks are prudently holding down their regular deposit rates, with varying degrees of success. Savvy depositors want to earn more on their deposits, and aren't afraid to change banks to receive it - or negotiate with their current bank. These deposit rates are often much higher than the posted rates. Non-standard deposit pricing and special promotions are not included in the FDIC national average deposit rate calculations which hold down both the average rates, and the FDIC rate caps.
This is causing more deposit activity to occur above the FDIC rate caps than in the past, and is creating a concentration of funding for some banks which could be "taken away" by the regulators under adverse circumstances - not unlike what can happen with brokered deposits. Something else for us to worry about, huh?
Capital Markets
Monday saw a further narrowing of the spread between the 2-yr yield and the 10-yr yield, down to 62 basis points versus 125 basis points at the start of the year. Does it seem to be slowing the economy? No. Could it? Yes. Just something to be aware of. It doesn't help the adjustable rate mortgage share of the overall market. The 10-year treasury yield hit an overnight low of 2.326% from 2.354% at Friday's close then slowly and steadily trekked higher to close at 2.37%.
In other news that isn't seeming to matter, at this point, Fed Chair Yellen announced she will resign from the Board of Governors, effective when Jerome Powell is sworn in as Fed Chair. President Trump will have four seats to fill on the seven-seat Board of Governors. The economic news that was released,
This morning: the Chicago Fed National Activity Index for October (+.65) and Philly Fed non-manufacturing index for November (-8.3). Coming up is October Existing Home Sales which is projected to increase 0.6% m/m to 5.42mn annualized. Things are definitely fading into the holiday as we find the 10-year yielding 2.36% and agency MBS prices ever so slightly better than last night's close.
Books for the Holidays
Congratulations to anyone who can write a book, and there are several (that I know about) in the biz. And with the reasonable prices, good gifts for your staff. Or for your boss! No, these are not paid ads. In no order, we have...
"My Client the FBI: How a real estate appraiser assisted the FBI before and after the mortgage crisis in cleaning up a broken system." Written by Donald Gossman, you can read more about it here along with thank you notes from the Feds and a link to Amazon to purchase.
Michael Rosser and Diane Sanders penned "A History of Mortgage Banking in the West," a "book that should be read by politicians and business leaders everywhere." Order at www.upcolorado.com and use promo code ROSS17 to knock 20% off the price.
"Buy Your First Home Today" was written by John Mallett is a good book for LOs to give their clients. "Empower your life, build your wealth, own the home of your dreams."
Anne Elliott composed "Mortgage Risk: A Blueprint for Smarter Origination." The book is meant for underwriters, sales managers, LOs and appraisers.
"Hacked. Screwed. Gone." By Jim Deitch is a "A-Z blueprint to protect your business from accidental & malicious information security threats."
Jason Myers authored "Becoming the Successful Mortgage Broker." Jason also wrote "The Successful Mortgage Broker." "Becoming a millionaire in the mortgage industry doesn't happen by chance. When you lay the proper foundation, you create the opportunity."
From Texas comes Michael Jones (Georgetown Mortgage) with his tome, "Reset" about a loan officer who is bumping along the bottom and re-ignites his career with some simple process changes and effort.
"The Uncommon Commodity: A Common-Sense Guide for New Managers" was composed by Doug Thorpe. "A collection of many thought provoking stories, tips, anecdotes, and life hacks to help you grow as a manager."
Products and Jobs
Prime Mortgage Lending, Inc. is pleased to announce that Adam Haller, a Chartered Financial Analyst and leader in CFA Society North Carolina, has joined us as Director of Mortgage Finance Technology. Adam will focus on implementation of automation in mortgage loan origination, development of mortgage industry accounting software, and financial analysis to support best execution of mortgage sales into secondary market. Adam is an experienced business professional, delivering financial and economic analysis to banks and institutions. Since 2008, he has been developing proficiency in risk management within the mortgage banking industry. Prime Mortgage Lending will benefit from Adam's areas of focus which include interest rate risk, mortgage valuation, behavioral finance, technology, and process improvements. Adam earned a Masters of International Business Studies from the Darla Moore School of Business at the University of South Carolina. Prime Mortgage Lending is growing, to join our team or to learn more about Prime Mortgage Lending, visit www.GoPrime.com.
GSF Mortgage Corp. has recently launched its Single Close Construction Program for FHA, VA, and USDA construction lending. Since its launch, GSF has approved more than 60 builders to offer their products. This low down payment construction option is a great alternative in markets that are strapped for inventory. GSF Mortgage is one of the few lenders in the country offering new construction lending for the 100% LTV USDA product. If you are a branch manager, loan originator or processor with construction lending experience or would like to offer construction lending products please, reach out to Rich Obermeier at (262) 957-8901.
loanDepot has announced a partnership with a Texas-based real estate technology company, OJO Labs. As the new mortgage provider for the artificial intelligence-powered assistant known as OJO, consumers will be able to engage in a personalized mobile experience leading up to their home purchase, accessing invaluable mortgage information prior to interacting with a Loan Officer. This will give the LO a complete picture of the borrower's needs before even speaking with them. As consumer behaviors continue to evolve, merging loanDepot's digital lending platform, mello, with OJO's breakthrough technology is generating a powerful tool to drive value for LOs and local real estate agents. OJO, the interactive assistant, will deliver homebuyers personalized micro experiences through human-like conversations via text message and offer digital mortgage pre-qualifications through its integration with mello. Yet another example of loanDepot's constant effort to remain at the forefront of an increasingly digital mortgage industry. Interested in being on the cutting edge of the mortgage industry? Contact Peter Tenfjord.
Priming for a head start on 2018, Angel Oak Mortgage Solutions is continuing to build its stellar team by adding Wholesale Account Executives in markets across the country, specifically in San Francisco, Seattle, Los Angeles and New Orleans. To continue to deliver an extraordinary customer experience while realizing record monthly volumes, it is also hiring underwriters and other operations positions in its Atlanta headquarters. As more companies realize the benefits of offering non-QM products, it only makes sense to work with the market leader. Visit JoinAngelOak.com or learn more about what it's like to work for Angel Oak by watching the Top Mortgage Employer's interview from the Mortgage News Network.
Tired of paying per click charges for MSP and Fiserv? Well now you can stay on MSP and Fiserv without paying those massive fees. How you might ask? A group of servicing technology veterans have developed a new software that sits on top of MSP and Fiserv which gives your team a full digital interface for your servicing team while eliminating all click charges. Due to the enormous disruptive threat of such a software, the company and software are in stealth mode still. If you are interested in learning more, email me and I will forward your note.
"Mortgage Branch Leaders are largely in the dark regarding compensation opportunities available today. Companies are now willing to open the vault. Much like pro sports, ownership is sharing revenue down to the playing field. Many offer lucrative P&L Models but the new trend is the equally rewarding hybrid plan geared up for those who want the financial benefits of managing a P&L without the hassle of becoming a CPA. The Hybrid is 100% compliant. "A valued client once told me at the end of the day, it's just math". In the hybrid model, companies simply agree to pay into an increased static Basis Point Model. For companies looking to grow their presence, hire the right leadership, or expand its existing operations, reach out to Jim Boghos, President Boghos Search Group (407-790-7500, ext. 100)."
Congrats to Ken Whisler who New American Funding has named Regional VP to cover and expand the company's presence in its Central and Southern Texas market.