"Those who have knowledge, don't predict. Those who predict, don't have knowledge.” But what if you use knowledge to predict? Research by Goldman Sachs finds 33% of Millennials say they won’t need a bank in 5 years. How do you like them apples?

Per this NY Times article, despite claims to the contrary, bank lending isn't being impeded by onerous regulations. Lenders are often caught in the crossroads of regulations and credit decisions: making sound underwriting decisions in a compliant manner that help the consumer in a cost-effective manner.

Donald Trump thinks the CFPB's structure makes it "unaccountable" to the American people. The U.S. Circuit Court of Appeals for the DC Circuit, in response to the CFPB's Petition in the PHH Case, has vacated the decision of the three judge panel and will hear the case en banc (full court) on May 24, 2017. CFPB's brief is due on March 10th. While the issues the Court directed the parties to brief the constitutional issues in the case, it would be expected that the CFPB will brief the interpretation of Section 8 ( c) (2) of RESPA as well. As a result of the Court's decision, the statutory provision that would not permit removal of Director Cordray except for cause remains in effect thereby limiting the ability of the President to replace him prior to the expiration of his term in July, 2018 (unless the full Court were to accept the decision of the three judge panel which removed "for cause" from the statute). 

Last week Senator Mike Rounds, a member of the Senate Banking Committee, introduced S. 365, which seeks to amend the Consumer Financial Protection Act of 2010 to bar the transfer of funds from the Board of Governors of the Federal Reserve System to the CFPB. The bill also would require the CFPB to turn over all penalties it obtains to the United States Treasury. Sen. Rounds also reintroduced the "Taking Account of Institutions with Low Operation Risk (TAILOR) Act" (S. 366)-a bill intended to ease regulatory burden on local banks and credit unions. Read more here.

In a February 10 blog post, House Financial Services Committee Chairman Jeb Hensarling called for the abolition of the CFPB, and recommended that the President "immediately fire CFPB Director Richard Cordray." Law firm BuckleySandler writes, "Specifically, Rep. Hensarling expressed his belief that the CFPB is 'arguably the most powerful, least accountable agency in U.S. history,' and his concern that the agency 'defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.' For these reasons, Rep. Hensarling  stated  he believes that 'even with good policy, the CFPB would still be unconstitutional.' Ultimately, he argued that the CFPB 'must be functionally terminated,' which he said could be achieved by ending the Bureau's funding through a reconciliation bill."

Nothing like this goes unanswered on, of course, and Senate Banking Committee Ranking Member Sherrod Brown issued a statement responding to Rep. Hensarling's proposal. Senator Brown's response noted, among other things, that "71 percent of Americans approve of the [CFPB]'s mission," and that "[t]he Hensarling proposal would transform the Bureau from an effective watchdog into a toy poodle."

Continuing with the CFPB notes, the full D.C. Circuit has agreed to take a fresh look at the panel's ruling from last year, giving the Obama-era agency a second chance to fight for its life in a showdown with the Trump administration. The U.S. Court of Appeals for the D.C. Circuit granted the Consumer Financial Protection Bureau's (CFPB) petition to hear PHH Corporation vs. CFPB en banc. This order means that the CFPB can continue to operate as Congress intended during the pendency of the en banc proceeding, and is an important first step toward a decision by the full Court invalidating the panel's previous and unprecedented 2-1 ruling.

The CFPB recently challenged the panel's decision, which undermined the CFPB's independence to regulate the financial services industry and protect consumers from Wall Street greed in holding that the President may remove the CFPB Director without cause.

In November, consumer and civil rights organizations filed a friend of the court brief in the case. In January, consumer and civil rights advocates filed a motion to intervene. In the filings, they pressed their concerns that the Trump Administration may not uphold the Dodd-Frank Act reforms that created the consumer protection agency and led to the recovery of billions of consumer dollars.

Leading consumer advocates and civil rights groups praised the Court's decision and are hopeful that the full court will uphold the CFPB's independence and rule in favor of American consumers. Over the last five years, the CFPB has used its independent authority to provide nearly $12 billion in relief to 29 million consumers. [Editor's note: to save you from breaking out the calculator, this is $414 per consumer.]

The groups issued a statement, which in part read: "The court's decision to hear the petition is a step in the right direction. We need a strong and independent CFPB agency and director now more than ever," said Mike Calhoun, president of the Center for Responsible Lending. "If the 2008 financial crisis showed us anything, it's that people need an independent regulator to look after the interests of consumers. We've already seen conservative members of Congress and their political allies attempt to weaken CFPB's authority for meritless reasons, but Director Cordray has led the Bureau with a steady hand and worked tirelessly with his staff to return billions of dollars back to hardworking people across the country harmed by abusive financial practices. The Center for Responsible Lending will continue to support the CFPB as the agency fights to maintain its independent structure so it can carry out its mission."

The CFPB hasn't been sitting on its hands, to its credit. On February 8 it released its monthly complaint report for December 2016. The report focused on complaints about mortgages. Along with debt collection and credit reporting, the report stated that mortgages are consistently among the three products and services generating the most complaints to the CFPB, and that since July 21, 2011, mortgages have been the second-most-complained-about product, representing 24 percent of all complaints. The most common issues raised by consumers are problems that arise when they are unable to pay their mortgage, such as issues related to loan modifications, collection, and foreclosure. Such issues were raised in 49 percent of complaints about mortgages. Other common issues raised in consumer complaints relating to mortgages include making payments (such as the misapplication of payments (33 percent)), applying for a mortgage (9 percent), signing the agreement (5 percent), and getting an offer of credit (3 percent).

Last week it published a Request for Information seeking information about the "use or potential use" of "alternative data" and/or modeling techniques that might help increase access to credit for consumers who otherwise lack sufficient credit history. As explained by the Bureau in a press release, "millions of Americans" have insufficient credit history to produce a credit score. Accordingly, the Bureau is seeking public feedback on the benefits and risks of utilizing alternative sources of information-such as bills for mobile phones and rent payments-that may be used to make lending decisions involving consumers whose lack of credit history might otherwise exclude them from lending opportunities.

Mortgage credit availability has been improving for quite some time, and started toward the end of last year, according to the MBA. But GoRion notes, "U.S. Housing Recovery Leaves Many Behind as Credit Restrictions Squeeze Out Key Lending Segments".

An MGIC recent bulletin announced increases to maximum LTVs and loan amounts, decreases to minimum credit scores and additional updates to its Standard Underwriting Requirements. These underwriting changes are effective with MI applications we receive on or after Feb. 17, 2017.

First Community Mortgage posted a reminder that Overdraft/NSF activity can be an indicator of financial mismanagement and credit risk. Overdrafts/NSF activity may require explanation and if severe, could warrant a decline.

ditech is introducing a new quarterly Risk Advisory newsletter. Each newsletter will provide information on the most frequent post-fund material defects identified in the previous quarter, frequently asked questions, future product and guideline updates as well as other underwriting trends and topics of interest. The Risk Advisory will be published online, with current and past versions in the Job Aid Section of its site.

Franklin American's recent updates? Always read the full bulletin for details, but here are some highlights: Expansion of its Conventional High Balance Fixed Product to include 20 and 25 year terms. Loans originated using Day 1 Certainty are eligible for purchase. Removal of the requirement for processed transcripts for borrowers with income derived solely from W2 wages and the income type does not require tax returns. Removed the overlay requiring a 720 FICO and 45% DTI to allow the entire down payment to be gift funds on standard Conforming Fixed rate, HomeReady & Conforming Fixed 97 products. Removed the 8% real estate commission cap on Conventional, FHA, VA & USDA products.

Wells Fargo Funding is allowing the use of stock options to meet reserve requirements (post-closing liquidity) for Non-Conforming Loans purchased on or after February 21. Stock option grants must be fully vested and not restricted (either by the company or IRS, such as being subject to Rule 144). Must be from a publicly traded company listed on the NYSE, AMEX, or NASDAQ. May be part of a qualified or non-qualified plan.

The capital markets: not much going on

The talk yesterday was concerning the Federal Open Market Committee meeting minutes, and if/when the Fed would raise rates. While the FOMC meeting minutes indicated that another rate hike would be appropriate "fairly soon", it was not enough to substantially increase the odds as soon as the March meeting. The minutes went on to note moderate inflation risks while seeing downside risks to growth due to the appreciation dollar. Of importance to the MBS market was agreement to begin discussions regarding balance sheet reinvestment policy with implications still expected to be a late 2017 event at the earliest.

Aside from that, there isn't much to talk about, so I won't waste your time. The 10-year closed yielding 2.42%, about where it has been much of this, and last, week. And agency MBS prices didn't move much versus Tuesday's close.

Today: weekly jobless claims (244k) and the Chicago Fed National Activity Index for January (-.05). Later we the FHFA Home Price Index for December. The 10-year is yielding 2.39% and agency MBS prices are better by about .125 versus last night.

Jobs and Announcements

In job news, here is a Warehouse Lending Relationship Manager opportunity. An active national mortgage warehouse lender is seeking to add to its professional team an individual with significant and successful experience attracting and on-boarding high quality mortgage banker relationships throughout the mid-West and Eastern U.S. The right individual for this position will be eligible for an attractive performance based compensation package. Interested parties can respond directly to me and I will forward their interest to the lender. Confidential resumes should be directed to me; please specify opportunity & excuse any delays due to travel.

As a part of Nationstar Correspondent's continued focus on making doing business easier for their Correspondent clients, on February 10^th, Seller Guide Update 2017-01 advised clients that effective immediately, loans originated by lenders participating in the Fannie Mae Day 1 Certainty Initiative (Fannie Mae's Desktop Underwriter® (DU®) Validation Service) are eligible for purchase by Nationstar Mortgage with no overlays or additional documentation requirements. The DU validation service offers lenders an opportunity to deliver loans with more certainty, greater speed and simplicity. Whether you are a current client or are interested in partnering with Nationstar Correspondent, contact your region's Sales Account Executive by clicking on the 'Contact Us' tab of Nationstar Correspondent's website. Click here to view Nationstar Correspondent's 2016 highlights and strategy for 2017.

For companies looking to start or expand their wholesale channel, a group of Wholesale Mortgage veterans with AEs & Operational personal are looking for their next opportunity to team up with an established mortgage banker. The group's footprint covers the Mid-West & Western states, with a track record of steady sustainable business. Customer service to the broker base is the most important component looked for, followed by a full spectrum of Fannie, Freddie & Ginnie products. The group is looking to base the opportunity on results delivered, not promises or coming off a historically exceptional year. The mortgage banker should be financially stable, with the ability to systematically digest the entire book of business. If you are interested in starting this confidential conversation, please email wholesaleopportunity@mail.com.