The Fed’s latest report on household debt and credit finds US households owed $12.25 trillion at the end of the first quarter, up 1.1% from the end of 2015. Overall, housing debt represents about 72% of the total, while non-housing debt is the remaining 28%. If we wade into the weeds, mortgages (70%), student loans (11%), auto (9%), credit cards (6%) and home equity lines of credit (4%) are of interest. 

Turning to the markets, fixed-income security prices are doing well but the servicing values are fading - nearly by the day. As mentioned several times in this commentary, companies that decided to be aggressive last year and into the first quarter of this year and pay up for servicing have paid the price. And continue to pay the price. Granted, existing borrowers are "stickier" - who the heck wants to go through refinancing with its costs and delays and compliance hurdles - but refis are surging. And when a borrower refis a loan that the servicer thought they were going to have on their books for a while, well, someone has to pay the price.

And thus LOs who thought they could guess where rate sheets were going to be based on the MBS market...can't. And capital markets vets find themselves explaining how mortgage servicing rights work, and why the bank aggregators (Wells, Chase, Citi, US Bank) and others are seeing a resurgence in volumes at the expense of the agency/co-issue execution. As the world turns!

The latest MBA profitability study for the first quarter, in part, reflects this trend in retreating servicing values. Yes, the figures showed that mortgage bankers are starting to rebuild after the financial storm caused by TRID at the end of the fourth quarter: profits roughly doubling at the start of this year compared to the end of last year. The Mortgage Bankers Association's Quarterly Mortgage Bankers Performance report stated that independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $825 on each loan they originated in the first quarter of 2016.

However, profits still have a long way to go to get back to the level witnessed in the first quarter of 2015 when independent mortgage banks and mortgage subsidiaries of chartered banks recorded a net gain of $1,447 on each loan they originated. This time around average production volumes were down slightly from the fourth quarter of 2015. The volume by count per company averaged 2,196 loans in the first quarter of 2016, down from 2,265 loans in the fourth quarter of 2015.

THE Marina Walsh, MBA VP of Industry Analysis, observed that, "Production profits in the first quarter of 2016 showed modest improvement over the fourth quarter of 2015 despite declining volume and an increase in per-loan production expenses...Compensating for the cost increases were higher production revenues that grew by $431 per loan (16 basis points) over the fourth quarter." Total production revenue (fee income, secondary marking income and warehouse spread) increased to 378 bps in the first quarter of 2016, compared to 362 bps in the fourth quarter of 2015. 

One other key area in the report was its findings on mortgage-servicing rights. As noted in this commentary a few weeks ago, the first quarter's historically low interest rates pulled down the performance of Nationstar Mortgage, Walter Investment, and Ocwen Financial thanks to the impact of negative adjustments to the "fair value" of each company's mortgage servicing rights portfolio.

Walsh said, "On the servicing side of the business, a drop in mortgage interest rates resulted in mortgage servicing right (MSR) impairments and hurt profitability. Net servicing financial income dropped to a loss of $118 per loan serviced in the first quarter, from gains of $107 per loan in the fourth quarter."

The report stated that servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, remained relatively flat at $205 per loan in the first quarter of 2016, from $207 per loan in the previous quarter. Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations - increased to $7,845 per loan in the first quarter of 2016, from $7,747 in the fourth quarter of 2015. And productivity decreased to 2 loans originated per production employee per month in the first quarter of 2016 compared to 2.4 in the fourth quarter of 2015.

Speaking of the MBA, a big congrats are due to CMG's Chris George who was nominated to be the eventual Chairman of the MBA! He's a huge fan of mortgage banking and of taking an active role in advocacy.

Tuesday was a decent day in the fixed-income markets. MBS ended narrowly changed - barely enough to impact borrowers. We began the day with a little rally due to activities overseas (German rates going negative, stock markets selling off). The usual entities were in selling mortgages and the usual entities were in buying them. The 10-year note & agency MBS prices were pretty much unchanged. The upcoming Brexit vote in Britain next week about whether or not they will remain a part of the European Union continues to drive the market: forecasts that the Brexit vote will pass have driven yields lower.  

Today we've had the MBA's survey of 75% of the retail application data for last week (-2.4%, with purchases -5% and refis -1%). We also had the May Producer Price Index figures (+.4%, core +.3%), and the June Empire Manufacturing Survey (+6.01). Coming up are Industrial Production and Capacity Utilization will be released at 9:15AM (expect 0.1% and 75.4, respectively). Later today will be the FOMC decision with the statement at 2PM EDT followed by Fed Chair Yellen's press conference. We closed the 10-year at 1.61% and this morning after the initial spate of news its at 1.62% with agency MBS prices worse a shade.

Training and Events

Next week Mayer Brown is offering a free webinar 11AM PDT on June 23 titled, "RESPA Enforcement: Lessons Learned, the PHH Appeal and What's Still on the Table": the ramifications of the PHH decision, lessons learned from recent CFPB enforcement cases, including Egbahli, discuss marketing and promotional activities still in the table, and CE credit." "RESPA enforcement has been among the CFPB's highest priorities since it opened its doors for business five years ago. This means lenders, homebuilders, realtors, title companies and other settlement service providers must ensure that their policies and procedures comply with this complicated act. Please join Phil Schulman as he discusses the impact of the PHH Corporation appeal pending before the US Circuit Court of Appeals, lessons learned from other recent RESPA enforcement cases, RESPA's impact on marketing and promotional activities, including advertising agreements, lead-generation arrangements, Internet advertising and event sponsorships." E-mail Jeremy Fegley with questions or to register, or click the link above.

Today HomeBridge Wholesale is conducting FNMA Homestyle and 203K Renovation training.

In Northern California, the CAMP Silicon Valley Chapter Officer's Installation event is on Friday, June 24th and will feature California Real Estate Commissioner Wayne Bell officiating the installation of Richard Wang as president and the incoming board members. The location is Maggiano's Little Italy Restaurant, Santana Row, San Jose.  For more information, contact TJ Roberts at 408-802-8522.

Summer CAMP 2016 is California's premier destination event for the California mortgage industry. Held at Napa's Westin Verasa, Summer CAMP 2016, August 7th-10th, provides attendees the opportunity to meet exclusive vendors and learn from the best in the business.

Join the CFPB for a free public webinar with Acting Deputy Director David Silberman where it will provide an overview of the recent updates it has made to the eRegulations tool. The webinar will take place onWednesday, June 22 from 2-3PM EDT.

Join Julia M. Wei Esq. from the Law Offices of Peter N Brewer for a free webinar on Tuesday, June 21st, covering the essentials of partition actions in California.  As more and more "baby boomers" are inheriting property, and with the popularity of co-ownership investments in the Bay Area, this webinar will cover the basics of partition actions that real estate professionals need to know. REALTORS® will learn about how to proceed in transactions where co-owners may not agree, while homeowners & investors will discover the mechanics of how to address divergent ownership interests among family members or co-investors.

FHA's appraisal training is coming to Boston, MA. Topics will include property inspection requirements, appraisal validity period, manufactured homes, water and septic, attic and crawl spaces inspection. Space is limited so register now for this June 24th live training.

Are you ready for The National Association of Women in Real Estate Businesses (NAWRB) 3rd Annual Conference being held in Orange County, CA. on August 30^th and 31^st? This years' session will address topics from the power of and challenges in women's homeownership to the importance of increasing the number of C-suite women in America's boardrooms. Register today to secure your chance of learning what the future of housing has in store for you.

Jobs and Announcements

In job news, in California, finance company SoFi is searching for experienced underwriters to join its high-quality jumbo team in its Sonoma County office (north of San Francisco). SoFi Lending Corp. has been lending in the mortgage space since Fall of 2014, has grown originations 240% YoY, is now available in 26 states and Washington, D.C., and has been approved as a seller and servicer with Fannie Mae. About its product mix and business model, "Sixty-five percent of SoFi's purchase customers are first-time homeowners who have what we call a 'millennial mindset.' Our products offer convenience and speed through a range of purchase-focused products that help them to be competitive in the attractive real estate markets in which they live. SoFi has made a strong technology investment to improve transparency and efficiency in the mortgage process by marrying the convenience of an online application process with exceptional live, personal support." The company recently received the highest possible credit rating from Moody's on a new bond deal. Please contact Vice President of Mortgage Michael Tannenbaum for more information.

Job fairs and training of all types are the order of the day!

Stonegate Mortgage Corporation and Stonegate Direct are on the grow! Management is looking for Mortgage Advisors, TPO Account Executives and Operational staff professionals. "If you're ready to start an exciting career, come and learn about their excellent compensation plans, comprehensive benefits and flexible schedules from informational sessions with the Stonegate Mortgage and Stonegate Direct teams at their Job Fair, June 22." Visit the Stonegate Direct Lake Forest, CA location at 25520 Commercentre Drive - 2nd floor, any timebetween 3:30 PM and 7 PM.

Three thousand miles away Ditech is hosting a Business Social at its Fort Washington Office -1100 Virginia Drive, Fort Washington, PA on Thursday, June 23 from 5-8PM. "Come out and meet our management and peers from all teams including our Sales team comprised of Loan Officers and our Operations team of processing, closing, funding and underwriting team members! Register here, or walk-in without registering. If you can't attend submit your resume by using this link. For more information, contact our Recruiters.  at opportunities@ditech.com

iServe Residential Lending is back in the news, and as part of its branch support and passionate interest in the education of the Real Estate community, complimentary seminars are regularly offered throughout the U.S. Over the coming months, VA Financing Seminars will be held throughout key locations with a focus upon the many benefits of the VA home loan. Although iServe has a complete offering of loan products, it has taken the lead in assisting real estate professionals to better understand VA financing. iServe believes strongly that VA financing is the most "common-sense" product on the market today, and unfortunately the most misunderstood. The overall goal is to help our qualified military heroes secure their home front with a benefit they have so deservingly earned. The next seminars will be in Allentown PA, Scottsdale AZ, Chesapeake VA and Reno NV. For additional information on these or future seminars, new branches or originator opportunities, contact Allen Friedman for the Western U.S. (415-298-2500) or Rick Trew for the Eastern U.S. (619-869-0408).