Flood Insurance Status; Banks in the News; LO Products
Remember when everyone waited with bated breath for Fannie & Freddie’s loan limit announcement? (It happens every year around Thanksgiving, in recent years after the FHFA releases its home price index.) But that was in the days when jumbo rates were much higher than conventional conforming rates. Now plenty of banks are hungry for jumbo loan assets, there aren’t the g-fee hits with jumbo loans, and some of the loan level pricing adjustments are less, so rates have dropped. In many parts of the nation jumbo rates are more attractive than those offered by F&F. But conforming loans represent a large portion of the market, and the new limit gives us a feeling for how housing values have done over time. And so, we wait.
Flood Update
A few weeks ago, by a 237-189 vote, largely on party lines, the House (not the Senate) approved H.R. 2874, the 21st Century Flood Reform Act. The bill renews the National Flood Insurance Program for five years; provides for an overhaul of flood mapping requirements; exempts commercial and multifamily properties from mandatory purchase requirements and lays groundwork for a more robust private flood insurance market. The House passed flood insurance renewal and remember that President Trump signed a three-month extension to the NFIP at the beginning of September to provide Congress additional time to establish a long-term financial solution for the program.
The 21st Century Flood Reform Act (H.R. 2874) is designed to better facilitate compliance and clarify guidance for lenders and borrowers. Among several things, look for it to "Change annual limits on premium increases for insurance obtained through the NFIP, require FEMA to consider the differences in flood risk between coastal and inland flood hazards when establishing premium rates, allow private insurers to continue selling policies on behalf of the NFIP, while also being allowed to sell their own private flood coverage, and amend the Flood Disaster Protection Act of 1973 to increase penalties against lenders and GSEs for violations of the mandatory purchase requirement from $2,000 to a maximum of $5,000 per violation."
H.R. 2874 is now in the Senate's hands. They have until December 8, unless the can is kicked down the road again.
Bank News
In the Northwest, HomeStreet Bank has received better press than this story in the Seattle Times about its executives mismanaging the bank. No one ever wants to read, "poor returns, bloated cost structure and inefficient operations," about their company.
Ally Bank is rolling out a new service that will allow customers to engage in banking activities using Amazon's Alexa. Ally said customers can get account balances, track recent transactions and deposits, transfer money and access deposit product interest rates using voice commands. Ally joins other major global banks using voice recognition technology that include Barclays, HSBC, Santander, TD, USAA, Wells Fargo among others.
Bank lending numbers are undershooting expectations according to the WSJ, despite an economic backdrop that is generally relatively healthy. Business lending growth has declined to the lowest level since Q1:11. The sluggish bank lending trends are weighing on bank stocks.
S&P Global Market Intelligence reports that through November there have been 220 M&A transactions in the US banking sector vs. 217 at the same point last year.
The FDIC reports Q3 statistics for community banks from Q3 2016 to Q3 2017 as follows: count 5,294 (-4% or about 1% decline per quarter as has been historically the case), interest income (81% of total income), noninterest income (18% of total income), asset yield (4.19%), cost of funds (0.54%), ROE (9.34%), ROA (1.04%) and efficiency ratio (63.8%). Also, the NIM for community banks at 3.65% is about 10% above the NIM for all insured institutions at 3.30%.
The Office of the Comptroller of the Currency (OCC) issued guidance to provide transparency regarding its framework for evaluating certain types of licensing applications. The guidance outlines the impact of an overall Community Reinvestment Act (CRA) rating of "Needs to Improve" or "Substantial Noncompliance" (together, less than satisfactory CRA performance rating) or a less than satisfactory CRA rating in one or more geographic rating areas, on a bank's application.
This guidance applies to all national banks, federal savings associations, and federal branches of foreign banks (collectively, banks) that are subject to the CRA. It also applies to state-chartered institutions subject to the CRA that propose to convert to a federal charter.
The OCC regulations implementing the CRA list the application types for which a bank's CRA rating of performance must be considered in the agency's review as follows: branch establishment, branch relocation, main or home office relocation, a Bank Merger Act filing involving two insured depository institutions, conversion from state to federal charter, and conversion between federal charters (collectively, covered applications).
When the OCC reviews an application, the facts and circumstances pertaining to the specific transaction dictate whether the OCC will approve or deny the application.
Capital Markets
Is the yield curve like the weather, where everyone talks about it, but no one can do anything about it? Investors continue to ponder the yield curve as the 2-year Treasury sits around 1.75% while the 10-year is at 2.35%. The spread difference of 60bp is low historically, and hit 58 basis points yesterday, but there are good reasons for this. These include a Fed that is raising rates and comments from the U.S. Treasury that it plans to shift government funding from longer maturities to short ones (pushing short maturity prices down and thus yields higher) and currency related pressures from Japan and Europe (weighing on the long end, keeping those rates low). Major investors are not skittish yet, but are watching this and monitoring... will it hit 30 basis points?
The U.S. Treasury market, and with it agency MBS prices, didn't move much despite a stronger-than-expected new home sales report for October, the issuance of new supply, and an acknowledgment from Dallas Fed President Kaplan that he thinks another rate hike is likely warranted in the near future. (Since this is a mortgage newsletter, those new home sales figures were strong: There was sales growth in all regions, led by a huge pickup in sales in the Northeast (+30.2%) and the Midwest (+17.9%), underscoring the solid demand for new homes.)
Monday the 10-year risk-free Treasury ended the day at 2.33% and MBS prices improved a couple ticks - barely noticeable to borrowers or LOs if anyone sends out a rate sheet anymore. Federal Reserve Chair nominee Jerome Powell begins his confirmation hearing today in front of the Senate Banking Committee. His prepared remarks were released and indicated support for the current course of operations: raising rates, shrinking the balance sheet, supporting growth in the jobs market, and gradually moving inflation to the intended target range.
This morning we've had another salvo of news. Advanced economic indicators consisting of goods trade (68.3), retail inventories (-.4%), and wholesale inventories (-.4%). The FHFA and S&P/Case-Shiller House Price Indexes for September will come out soon. The FHFA results will probably lead to the 2018 conforming loan limit news. Also we'll have November's consumer confidence, the Richmond Fed manufacturing and services indexes, and the November Dallas Fed Texas Services Index - all pretty much non-market movers. The 10-year is currently yielding 2.32% and agency MBS prices are better by .125.
Employment and LO Products
"With the recent changes in FICO® Score requirements, it's become even easier for borrowers to qualify for a home purchase. FHA, VA, 203(k) Renovation, and even jumbo loans have seen significant drops in credit scoring minimum requirements. This leaves a huge opportunity for loan officers to service a wider range of borrowers--should their company decide to invest in product development. One company jumping into the fray is loanDepot, offering more than 300 unique lending products, allowing its lending officers the opportunity to capture more clients and grow market share for the business by serving need states with tailored products. Standing behind every branch and loan officer, the company empowers its employees to maximize earning potential by providing the products, speed and operational support needed. For loan officers looking for a new opportunity on a winning team, loanDepot is a pioneer in product innovation and a company you should consider. To learn more about what products they offer, contact Cassidy O'Sullivan."
Floify, the mortgage automation app for top-producing LOs, has been receiving rave reviews over their newest and most powerful update ever - custom fields, layouts, and business rules! These widely-adopted enhancements have proven to be incredibly useful in making the loan workflow for LOs and their borrowers far more efficient and enjoyable. Using custom fields, LOs have been creating unique layouts that display valuable loan information for their borrowers and teams - all on one centralized, web-based dashboard. Additionally, business rules have empowered LOs to utilize conditional logic that can dynamically show/hide fields, forms and inputs, and even swap layouts on-the-fly. As you can imagine, the possibilities are endless... With these new features, and more on the way, Floify has helped LOs close loans an average of 8x faster and increase annual loan volume by more than 11%. To see Floify in action and lock in a 25% discount, request a live demo.
Lenders One has announced FinLocker as its newest preferred provider on their National Programs platform. A paperless, financial data and analytics platform, FinLocker gives lenders access to critical borrower information via a trusted third party that can be used to streamline the lending processes for mortgages, reduce costs and improve consumer experience. Join Lenders One and FinLocker this Wednesday, November 29, at 2PM EST for a webinar examining trends in digital mortgage and how lenders should be thinking about collecting and protecting borrower data. FinLocker will share how their solution responds to challenges on how to create "customers for life." Register now or contact Lauren Ketchum for more information on how to join Lenders One.
MGIC is seeking an "ambitious sales professional to join the East Central Region Sales Team as an Account Manager. "As an Account Manager, you will develop and maintain strong, long-lasting client relationships as well as grow business by identifying new business opportunities in the Indianapolis market. The ideal candidate must have a college degree, strong presentation and communication skills, and the ability to travel with occasional overnight. This person will report directly to Jane Hurst, Sales Manager. If you are a self-motivated, entrepreneurial spirit and experienced sales professional, then MGIC may be the right fit for you! Please send your resume to Nancy Vang-Lee, Senior Talent Acquisition Partner."
"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)."
How will you onboard and train new loan officers in 2018? ORIGINATOR is the game-changing solution from XINNIX, the Mortgage Academy, to equip new mortgage professionals with the skills and knowledge they need to immediately become valuable producing members of a team and fast track a successful career in mortgage lending. Upon program completion, new loan officers earn the distinction of XINNIX Certified Originator (XCO), signifying them as the industry's finest trained professional. In fact, XCO's average 4.3 applications during their first month of production. Do you want your rookies to earn their place as the industry's best? Click here to learn more about ORIGINATOR!
Lightweight digital mortgage solutions continue to gain traction in the market and have evolved with even more features to help lending teams speed up close times and improve the borrower experience. Maxwell just released their ability to embed their digital platform directly on your domain, allowing you to have all the features and benefits of Maxwell under your brand and URL. "The borrower experience and the success of your brand is the focus of everything we do at Maxwell," says John Paasonen, CEO of Maxwell. "We think the ability to embed Maxwell directly into your own domain helps achieve both and allows lending teams to provide a seamless digital experience that borrowers expect." To learn more if Maxwell can help your business, you can email Sales or request a demo here.