Atlanta has too much snow and slush, and is staying home. California, however, is in the midst of a terrible drought - and it is only February. Thanks to James Hedvall for sending along this map showing us water conditions around the nation. The nation will be watching California politics (farmer versus fisherman, LA versus San Francisco) heat up over this issue during 2014 unless the rains come. Speaking of California, a court in San Jose (the 6^th District Court of Appeal) ruled that tenants who have a lease on rental property when the owner defaults on a mortgage loan have the right to stay in their home until the end of the lease. The court also said tenants have the right to sue the bank that took over the property if they are evicted after the foreclosure, overruling a judge who had decided that the foreclosure ended the lease. Deutsche Bank was unavailable for comment.

There are plenty of millionaires out there in California, although many of them are setting up residence in Nevada or Texas. A study by Phoenix Marketing International finds the top 5 states with the highest percentage of millionaire households per capita (ratio of millionaires to total households) in order are: MD (7.70%), NJ (7.49%), CT (7.32%), HI (7.18%) and AK (6.75%). The bottom 5 states are: MS (3.63%), AR (3.73%), ID (3.76%), WV (3.82%) and KY (3.84%). Finally, states with the greatest number are: CA (12.9mm); TX (9.4mm); FL (7.6mm); NY (7.4mm) and PA (5.1mm).

Florida's Digital Risk eliminated 40% of its work force, certainly impacting Central Florida's economy.

Bank mergers & acquisitions continue to motor along. Within the last week it was announced that the Stephenson National Bank and Trust ($318mm, WI) will acquire Bank North ($125mm, WI) for an undisclosed sum. Leighton State Bank ($118mm, IA) will acquire Monroe State Bank ($25mm, IA) for an undisclosed sum. Columbia Bank ($2.0B, MD) said it will close 5 branches. First National of Nebraska has filed with the OCC to combine its subsidiaries First National Bank of Omaha ($14.3B, NE), First National Bank & Trust Co of Columbus ($444mm, NE), First National Bank ($441mm, NE), First National Bank South Dakota ($368mm, SD), Fremont National Bank & Trust Co ($300mm, NE) and Platte Valley State Bank & Trust Co ($422mm, NE) together as one bank.

In a story yesterday in CNN, Fannie & Freddie are on the verge of paying the government bailouts all back. "Later this month, Fannie Mae and Freddie Mac are likely to report earnings that will result in them paying the U.S. Treasury more than the $187 billion they received starting in 2008. Since the beginning of last year, Fannie and Freddie have been turning over virtually all profits to the government each quarter. Before that, they were paying a 10% dividend on the preferred stock held by Treasury. That change has meant a windfall for Treasury, which controls 80% of each company's stock." Uh, and why would Congress want to turn that income stream back over to stockholders? "A recovery in the housing market, coupled with accounting rules that produced huge one-time gains at both firms last year, also resulted in much larger payments."

The story goes on to say, "But not everyone is happy about the prospect of taxpayers being made whole for the rescue of the firms. In fact, there are two federal lawsuits challenging the current repayment schedule. In one suit, hedge fund Perry Capital argues that the larger repayment violates the 2008 law that authorized the bailout. They contend that if profits are being returned to taxpayers, the government should give up some shares in return. That would increase the value of the shares held by private investors, including Perry Capital, that account for 20% of the firms' stocks. Other private investors, who bought Fannie and Freddie before the housing bust, include community banks, pension funds, university endowments and foundations."

I received this note: "We are now being told by several legal sources that affiliate title companies fees for broker don't need to be counted in the 3% fee rule for QM.  Are you hearing anything about this? We were told only lenders, correspondents and table funders needed to count the affiliate title fees into the 3% fee rule.  When management heard this from inside and outside counsel we concluded that it doesn't make any sense that brokers would be excluded from that rule.  We are also hearing from one of our brokers, when we informed then they needed to restructure a loan because it didn't met the QM standard, they said other lenders are not counting those fees toward the 3% rule."

The CFPB discounts that notion, and requests lenders to take a look at the actual language of the definition of points and fees for closed-end mortgages, which is found in 1026.32(b)(1); specifically, 32(b)(1)(iii)(C) is what's relevant here (and even more specifically, see the words within that paragraph that should be regarded): (b) Definitions. For purposes of this subpart, the following definitions apply: (1) In connection with a closed-end credit transaction, points and fees means the following fees or charges that are known at or before consummation...(iii) All items listed in §1026.4(c)(7) (other than amounts held for future payment of taxes), unless: (A) The charge is reasonable; (B) The creditor receives no direct or indirect compensation in connection with the charge; and (C) The charge is not paid to an affiliate of the creditor;". Yes, it appears that means that fees paid to affiliates of brokers aren't included in the Points and Fees test unless they otherwise would.

Keeping on with regulations, Illinois has adopted several changes to the registration fee requirements for loan originators. The changes included the addition of an exempt entity registration fee, constituting a $657 increase from $2,043 to $2,700 annually. This fee is broken down into an investigation fee and initial application fee. Nicole Legere of Bankers Advisory writes, "The applicant must pay a $1,500 dollar non-refundable investigation fee which is an increase from the prior fee of $1,135 dollars. The applicant must also pay an initial license fee of $1,200 dollars which is an increase from the prior fee of $908 dollars. These fees can be paid separately or as a singular combined fee based on the discretion of the Director of the Division of Banking. Applicants for license renewal will face the same overall increase in fees as the annual licensing fee is being raised to $2,700 dollars." These changes have already been implemented.

Oregon has amended the provisions regarding Foreclosure Avoidance Notice. The amendment provides the form and content of the notice that is to be issued by a beneficiary, when the beneficiary determines that a grantor is not eligible for any foreclosure avoidance measure, or that the grantor has not complied with the terms of a foreclosure avoidance measure to which they have agreed. The new provisions also provide the address to which a copy of the notice must be sent. The form can be found on the Oregon DOJ website.

Justin Flake at TruHome Solutions wrote to me recently on a compensation rule: "We recently received the clarification from Washington copied below. It requires all processing and underwriting managers to be licensed as LOs. Have you heard any grumblings about this? It doesn't make any sense to require an employee whose sole responsibility is to oversee a group of processors or underwriters to take a test designed for LOs, not to mention fulfill annual license renewals and continuing education requirements. Has anyone else in Washington come up against this? Have they come up with any solution short of licensing their managers?"

The Washington State Department of Financial Institutions writes, "It has come to our attention that clarification is needed on the following rule WAC 208-620-301. Your managers, including branch managers, must license individually as mortgage loan originators if they conduct the following activities: (1) Take residential mortgage loan applications, negotiate the terms or conditions of residential mortgage loans, or hold themselves out as being able to conduct these activities; (2) Supervise your loan processor or underwriting employees; or (3) Supervise your licensed mortgage loan originators."

As further clarification Washington writes, "(1) Any manager or any person who takes a residential mortgage loan application in Washington, negotiates the terms or conditions of a residential mortgage loan on Washington property, or holds themselves out as being able to conduct those activities, must have a Washington MLO license. Washington licensed MLOs must work from a licensed location. (2) Any manager who directly supervises loan processor or underwriting employees must hold an MLO license. The MLO license can be from any state. Washington licensed MLOs must work from a licensed location. (3) Any manager who directly supervises Washington licensed MLOs must themselves hold a Washington MLO license. Washington licensed MLOs must work from a licensed location. For items (2) and (3) we are looking for licensure of the day to day operational supervisors. The supervisory plan must be written. The details of the plan and how it is implemented must include consideration of the location of the supervisor and employees supervised, the number of employees supervised, and the volume of work performed by the supervised employees. You must maintain your written supervisory plan as part of your business books and records."

Stocks and bonds were influenced yesterday by Federal Reserve Chair Yellen's Monetary Policy testimony to the House Financial Services Committee. Her remarks were in line with expectations and markets responded accordingly with longer-term Treasuries and MBS lagging on the prospects of less Fed buying, while continued accommodation via low rates aided the risk trade with the major equity benchmarks rallying over one percent. Rates worsened, with the 10-yr closing at 2.72% and agency MBS prices for current 30-yr production worsening about .250. For those with a broader view of things, and worried about lock desk staffing, in recent research Bank of America Merrill Lynch projected gross issuance to increase from $68 billion in January to $80 billion in March, and to exceed $90 billion through the summer. Meanwhile, they predict Fed's takeout of issuance by early summer will be down to 43 percent from 77 percent in January.

For thrills today we had the MBA application numbers (-2% with both purchases and refis dropping), and the 1PM EST Treasury auction of $24 billion 10-yr T-notes. Yup, that's it. Rates are higher this morning with the 10-yr up to 2.74% and agency MBS prices worse about .125.

This isn't really a joke, but it is worth skimming at least to learn something about Russia's leader: http://www.cracked.com/article_19128_7-reasons-vladimir-putin-worlds-craziest-badass.html.

(The Borowitz Report notes that with the Olympics underway, hundreds of visitors to Sochi are complaining that they checked into expensive hotel rooms only to find them decorated with seminude portraits of Russian President Vladimir Putin. The portraits, showing Mr. Putin shirtless and riding a variety of mammals, adorn the walls of virtually every hotel room constructed especially for the Olympics and were created at a cost of over two million dollars, Olympic officials said.

Tracy Klugian, who travelled from Ohio with his wife to attend the Sochi Games, said that he was appalled to find his hotel room dominated by a gigantic portrait of a shirtless Putin riding what appears to be a bear. Said Mr. Klugian, "I did not travel thousands of miles just to be grossed out."

For his part, President Putin has been dismissive of the complaints, today calling the hotel guests "babies who cry."

"These people who are complaining about what is on their walls should be grateful," he said. "At least they got one of the hotel rooms with walls.")