Where does bank settlement money go? Well, if it is up to New York's Governor Andrew Cuomo, it will go toward building bridges in New York. I imagine that there are other places for it to go that relate to the actual settlement... but what do I know?

Turning to demographics for a moment, we're all aging - it is a fact of life. Mark Weber writes: 110 million people over age 50 by 2020. And builders are still building McMansions with steps!" I agree - bring on the Japanese soaking tub option in the master bathroom! As a side note, the Fed reports the combined wealth of Americans (value of homes, stocks and other assets minus debt and liabilities) reached $81.5 trillion, the highest level on record.

In line with popular belief, BofA Merrill Lynch Global Research reported that the millennial generation will be the largest cohort of home buyers in the coming years, with current homeownership rate at 35.9%, if they are able to overcome current economic hardships. BofAML stated that the decline in homeownership rate for the young is due to a decrease in labor participation, hindering their ability to qualify for a loan. The Federal Reserve Bank of Cleveland reported that the labor participation rate may decline 2+ points by 2022, resulting in a homeownership rate of 62.5%. Employment rates for people aged 55 and older has increased 9.3% since 2004, whereas those aged 16 to 19 years old has seen a 23.3% drop in employment since 2004, and the labor participation for the 20-24 year has declined 6%. The older cohort has a homeownership rate of 80.1%, therefore the 35 and under age group will be the largest group of future homebuyers.

The statistics are obvious; right now the industry is going through a "lull" period and it will take a few years before the industry bounces back. This is because the millennial generation is transitioning from graduating from college and paying off student loans, to starting a career and becoming financially stable and ready to take on the responsibility of buying a home. First time home buyers will drive the market in the coming years.

Fannie Mae came out with its report on why millennials are not buying homes; their research indicated that if the homeownership rates of 2006 had been constant, there would be 2.4 million more first time home buyers today. The younger generation is also spending 30% of their income on housing, which is less than what was seen in the previous decade. Fannie Mae's report stated that "housing costs, decisions related to marriage and childbearing, student debt, length of educational careers, mortgage credit accessibility and cost and lifestyle preference" is deterring millennials from purchasing a home. These may be reasons as to why the median age for first time home buyers is now 31.

But what can our industry do about millennials lackluster desire to buy a home? Educate. Most millennials believe they need a 20% down payment in order to qualify for a loan, but if they knew about programs with minimal or no down payment options, they may rethink that possibility. As Ryan Christensen from the TheREsource.tv pointed out, we need to focus on why millennials should buy a home and how they can benefit from it.

Considering all the (how shall I put this?) mature faces I see at banking conferences every year, I'll assume people can remember the 1980's; more specifically, the Japanese economy during that time. It was robust, to say the least. The decade to follow, however, was anything but robust, and the 1990's have become known as the "lost decade".  While there are differences in economic qualities between our two nations (capacity being one), the United States economy finds itself mired down in years of inefficiencies. So it was with some interest when I read Clear Capital's The Lost Decade. Here to Stay? The group writes, "Two and a half years of recovery hasn't been enough to bring a close to U.S. housing's 'lost decade'," said Dr. Alex Villacorte, vice president of research and analytics at Clear Capital. "With our revised forecast showing only 1.8% growth through 2015, our lost decade, like Japan's, could extend more than 10 years. Though national home price growth since 2012 of 23.5% has outpaced historical annual averages of 3.5%, home prices are still at 2004 levels-a clear indictment of the housing market's weakness only a few short years ago." The period in question, from 2004-2014, where national home prices have been nominally unchanged. As the research groups illustrates, housing is back to 2004 levels without even accounting for inflation, leaving many homeowners with no more equity than when they bought. "This is unusual in the history of the housing market where prices have risen 55% over each rolling 10 year period since 1985."

There is always a demand for money to buy or refinance homes, and there is always capital to be lent out. The question is, of course, at what rate and price do the two meet? We have companies "disrupting" the mortgage sector, per a story out of CNBC, asking readers, "Would you bypass a bank for your next mortgage?" Online lender Kabbage began offering personal loans a week or two ago as it seeks to compete with more established online players such as Lending Club and Prosper. Loans will be for 3Ys to 5Ys at rates of 5.73% to almost 25%.

No one wants a repeat of trends from 2004, of course but as noted above there is always a demand for money and there is always capital to be lent out. MountainView Management Company, which is also involved in brokering and valuing servicing, announced its "Peak Program" targeting for purchase residential mortgage loans to borrowers that are creditworthy but not able to meet current prime mortgage requirements. "The company is responding to demand in the origination market that is not being met by lenders who have significantly tightened underwriting requirements and are adversely affecting consumers who can in fact demonstrate the ability to repay their home loans. The Peak Program from MountainView Management Company will buy from traditional and specialty lenders in correspondent relationships that deliver high-quality, non-prime mortgages to MountainView Mortgage Opportunities Fund III. All loans acquired by the Fund through the program are intended to be held in portfolio for investment. Among the program's highlights are 30-year fixed-rate loans, borrower FICOs in the mid to low 600s, loan-to-value ratios up to 80 percent, loan amounts as high as $2.5 million, and loans to borrowers with bankruptcy or foreclosure at least 12 months in the past. Loans can also be made to borrowers with multiple investment properties, corporate borrowers, and foreign nationals."

"'During the financial crisis, many borrowers experienced life event hardships from lost businesses, lost jobs, divorces and/or illnesses,' said Art Yeend, Managing Director and Head of Sales and Marketing at MountainView Capital Holdings. 'As time has passed and the economy has improved, many of the affected borrowers have now recovered financially but do not qualify for conforming or jumbo prime loans...These borrowers will be prudently and responsibly underwritten and will meet all ability-to-repay guidelines, but our expanded underwriting criteria allows for multiple risk layering not acceptable to prime lenders.'"

And American Banker reports that Deutsche Bank is planning a return to the U.S. mortgage business by again financing home lenders, and it will do so by focusing on a product that most say they are unwilling to sell - receiving the green light to target lenders making mortgages falling outside of new regulatory guidelines. "Deutsche sees enormous potential in nonqualified mortgages...Deutsche cannot stand by as competitors who stayed in residential lending begin to reap the benefits." The story notes, "The decision to finance makers of non-QM loans is significant for Deutsche Bank, one of the many large banks trying to recover from the subprime mortgage crisis. It is also meaningful to the broader housing market, which seeks reassurances that the new mortgage rules, which took effect in January, will not cut off production for all but ultra-safe home loans. The market has the potential to become a $600 billion a year industry for originations, Deutsche Bank researchers said in a recent report."

The story goes on to note that "Many traditional lenders are still hesitant, if not afraid, to offer non-QM mortgages. They argue the Consumer Financial Protection Bureau's Qualified Mortgage and Ability-to-Repay rules are overly restrictive in their intent to prevent banks from making loans to borrowers who cannot afford them. Loans that fail to meet that standard will be denied protection from borrower claims and suits, and that is a major deterrent....That attitude may now be slowly changing, as investors communicate a greater willingness to take on lenders' litigation risks. Sprinkles of nonqualified mortgages have begun to make their way into pools of residential mortgage securitizations, testing investors' risk appetite. They include deals issued by mortgage real estate investment trust Redwood Trust. Now, more lenders are arranging for warehouse financing." Companies like Citadel Servicing, Impac Mortgage, Angel Oak, and JMAC are often mentioned, as well as more than a dozen others. (For a better list, go to www.mortgageelements.com, type in a state, and select the non-QM box.)

ditech rolled out its VA program accepting borrowers with credit scores as low as 600 (no traditional credit is ineligible). By the way, ditech is a Walter Investments subsidiary so it is actually ditech that is driving the gain in correspondent market share.

Impac Mortgage Group Wholesale has loan options for your self-employed borrowers including  Bank statement programs with up to 50% DTI, Min 680 FICO, 5/1, 7/1, 10/1 ARMs, I/O allowed* (*Illinois not included) and LTVs up to 80%.

LDWholesale updates for the week include adjustments for significant derogatory credit events with updated waiting periods to end on the disbursement date of the new loan, updates to its VVOE policy to make it more consistent, updates to costs for pricing for re-locks and Appraisal and property related FAQ's updates.

Turning to the bond markets, with all this going on, rates are almost an afterthought. Things were pretty quiet yesterday, and again over night. For "excitement" we have a $27 billion 3-yr note auction. Monday the 10-yr had a 2.42% close, and this morning is at 2.41% and agency MBS prices are better by a smidge.

Jobs

Bay Equity's wholesale platform, The Private Client Group, is different by design and is looking to expand its geographic footprint by recruiting Business Relationship Managers in the Western U.S. The Private Client Group was created with the simple idea of doing more for our clients. PCG serves a very limited and exclusive group of elite broker partners who share the common goal of putting the borrower's needs first. We're looking to add top level producers to our sales force and offer among the most aggressive compensation plans in the industry. If you'd like more info on how to join the PCG Team please email Executive Vice President John Curtin at john@bayeq. com.

Mortgage lenders across the United States have felt the pain of regulatory compliance this past year. No exception, Academy Mortgage has faced the challenge head on. The Salt Lake City-based independent mortgage lender has a team dedicated to addressing compliance-related lending, licensing, and advertising issues. The team leads the company's efforts to stay up-to-date on all regulatory compliance changes as they happen and to implement changes when required. Academy's diligence in this area was recognized in its successful completion of the CFPB audit. With solid policies and procedures in place, Academy takes the work out of compliance for its Branch Managers and Loan Officers, for example, by offering hundreds of pre-approved marketing materials. Academy attributes embracing regulatory reform as being critical to shoring up the company's long-term sustainability. Loan Officers, Branch Managers, branches, and firms interested in growing their businesses with Academy should contact National Business Development Manager Cassidy O'Sullivan.