“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that is stupid.” Different people are good at different things, and top LOs pride themselves on product knowledge. Here’s a helpful website if you want to know who is doing high-rise condos in Missouri, jumbo ARMs in Wisconsin, or anything else, in any state: www.mortgageelements.com. (Select a state, then a program.)

Mergers & Acquisitions news

On the bank side, it was announced that in Illinois Busey Bank ($5.4B) will acquire South Side Trust & Savings Bank of Peoria ($665mm) for about $133.4mm in cash (30%) & stock (70%). And in Ohio the Farmers National Bank of Canfield ($2.0B) will acquire The Monitor Bank ($43mm) for about $7.8mm in cash (15%) & stock (85%). On the non-depository side of things, it is not hard to hear the rumors of well-known lenders acquiring smaller lenders, as well as talk of some big mergers out there.

Interestingly, and thanks to Ken S. for passing this along, the bank M&A 2017 "Deal Tracker" shows that pricing is up year-over-year. "The number of bank merger and acquisition deals during the first two months of 2017 was just one short of the total from the year-ago period. Through Feb. 28, S&P Global Market Intelligence counted 37 deal announcements in the banking sector with an aggregate disclosed deal value of $5.65 billion and a median price-to-tangible book ratio of 164.7%. The prior-year period saw 38 deal announcements with an aggregate disclosed deal value of $5.84 billion and a median price-to-tangible book ratio of 124.8%. The full year 2016 had 246 deal announcements with an aggregate disclosed deal value of $25.28 billion and a median price-to-tangible book ratio of 131.8%.

Legal & regulatory updates

Congrats to Ellen M. Warwick, former Director for Enforcement and Compliance for the Office of the Comptroller of the Currency (OCC), who has joined Buckley Sandler LLP as a Senior Counsel. In addition, Brendan Clegg, a former Attorney from OCC's Enforcement and Compliance Division, who worked with Warwick for the past three years, joined the firm as an Associate.

Settlements were in the air yesterday. First, Wells Fargo, Royal Bank of Scotland Group Plc, and Deutsche Bank AG have reached a $165 million class-action settlement over their underwriting for Kansas City's now-bankrupt subprime lender NovaStar Mortgage Inc. The settlement resolves claims that offering materials prepared by the banks misled investors into believing that loans underlying roughly $7.55 billion of NovaStar mortgage-backed securities they bought were properly underwritten, and were safe. The defendants denied wrongdoing in agreeing to settle.

You remember NovaStar, right? It had specialized in lower-quality residential mortgages, including many packaged into what proved to be risky securities issued in 2006 and 2007.

The company filed for Chapter 11 protection last July, and is not contributing to the payout.

But that isn't the end of it, of course. Holders of $2.2 billion of the NovaStar securities are not expected to join in the settlement. The plaintiffs' lawyers plan to seek legal fees of up to $46.2 million, or 28 percent of the settlement amount, plus up to $3.5 million for expenses, per settlement papers. And the case only involves the New Jersey Carpenters Health Fund.

Next up was Nationstar Mortgage ponying up $1.75 million to resolve a "matter" related to data reporting under HMDA with the CFPB. The matter was related solely to technical data record issues rather than actual wrongdoing against customers. There are also no non-monetary penalties or restrictions associated with the settlement, so business should continue as normal.

While we're on HMDA, the industry, and vendors, are pressing ahead with changes related to the Home Mortgage Disclosure Act, now administered by the CFPB. It is important for every company to know they why, what, who, when and how of revised HMDA requirements. We've certainly been given plenty of warning and lead time! We'll see a data reporting expansion, and lenders need to know the implications of the new data requirements on loan pricing, sale, and repurchase. How is it being rolled out in your company? What are the operational impact and considerations, the policy implications and company behavior?

The scope of covered institutions has narrowed. A bank, savings association, or credit union will not report unless it meets the asset-size, location, federally related, and loan activity tests under current Regulation C and it originates at least 25 home purchase loans, including refinances, in both 2015 and 2016. In 2018 a new standard test is primarily volume-based. Companies must report if fundings included at least 25 covered closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years. And the CFPB is implementing a new reporting tool that will use a new LAR file specification standard for reporting, pipe-delimited versus comma-delimited.

The CFPB is working on HMDA, having taken it over from HUD, offering up a webinar and especially when it concerns small entities complying with new rules and regulations. There is information about collecting and reporting HMDA information about ethnicity and race, as well as its general filing instructions guide. If you'd like a timeline for HMDA the CFPB has set out key dates to observe. And lastly on HMDA any technical questions can be emailed to hmdahelp@cfpb.gov.

Capital Markets and Trading

In execution news Compass Analytics rolled out the "first fully web-enabled version of its mini-bulk trading platform ("CompassBid") for sellers." The website is now available as a standalone offering and is further supported with optional outsourced Whole Loan Trading Services. "CompassBid provides sellers full bid automation including investor eligibility and pricing, sellers' full range of executions, data file normalization and encryption, market spots, full bid transparency and reporting, purchase advice reconciliation, integration to risk management and LOS systems, and other trading best practices to provide comprehensive best execution. The new sell-side web version is accompanied by further enhancements to mini-bulk buy-side capabilities." (Contact Sarah Slagle for more info.)

What does Goldman Sachs know that you don't? Goldman has become the largest buyer of severely delinquent home loans from mortgage giant Fannie Mae over the past year and a half. The WSJ reported that Goldman has acquired nearly two-thirds of $9.6 billion in loans the agency has auctioned, government records show.

Turning to interest rates, First American Chief Economist Mark Fleming had some thoughts on how the results of the FOMC meeting might impact housing. "Reports have suggested, or surely will, that this rise in mortgage rates will be the demise of the housing market. That's just not so. Yes, many existing homeowners will have a financial disincentive to sell because they would lose their lower than prevailing mortgage rates in doing so, the so-called rate lock-in effect. I have suggested that this is one of the reasons we see low inventories in most markets today, but it's not as simple as that.

"More importantly, affordability remains high and our survey data shows that mortgage rates would have to be significantly higher to have any meaningful impact. In terms of affordability, on Monday we released an analysis of affordability assuming the mortgage rate was 4.75 percent. What did we find? Even at the higher mortgage rate, for most markets a median income can purchase more than the median priced house." 

"Why is this? The house buying power that borrowers have, even with rates below five percent, remains historically strong. It would take a significantly higher mortgage rate to significantly erode the real, house-buying power adjusted, price of housing. So, what would be the mortgage rate that dampens demand? Based on our Real Estate Sentiment Index, on a national level, title agents and real estate professionals said that the mortgage rate would need to hit 5.4 percent, 1.2 percent above the current rate, before homebuyers declined to enter the market." 

Well, the big news yesterday, as noted above, was the Fed raising short-term rates. So, what did the bond market do? Prices improved and long-term rates dropped! Perhaps removing some uncertainty helped, as did thoughts about the future, as did the fact that perhaps we were "overdone" on the upside. The Fed set the fed funds range 25bp higher to 0.75 to 1.00%. Traders immediately looked at the rest of the year, and the thoughts of fed funds hikes in coming years were unchanged for both this year and next (3 each in total) with 2019 have one more hike. The 10-year note price improved .75 and its yield dropped to 2.50%. Agency MBS prices and the 5-year T-note improved about .5.

This morning we've already seen news from across the globe: central bank decisions from the Bank of Japan (unchanged), Swiss National Bank (unchanged), Hong Kong (raised), Peoples Bank of China (raised), Norges Bank (dovish), and the Bank of England (unchanged). Through the results, we are reminded that the jobs and inflation picture in various parts of the world vary.

In this country, we've had the usual Thursday Initial Jobless Claims (241k), February Housing Starts & Building Permits (+3.0%, -6.2% respectively), and the Philadelphia Fed Manufacturing Survey (March 32.8, falling less than expected). With this beehive of activity rates are slightly higher versus last night: the 10-year is at 2.53% and agency MBS prices are worse about .125.

Jobs and Announcements

In job news, First Cal, a national mortgage bank, is looking for a Regional Call Center Manager in the Phoenix market. The Company is both a FNMA & FHLMC Seller/Servicer, GNMA I&II Issuer, and jumbo and non-QM lender. The Manager will recruit and lead a call center team for its Consumer Direct channel and will play a key role in the growth and expansion of First Cal's current Consumer Direct Production. The ideal candidate will have 3-5 years of a call center experience with a proven track record in sales management, strategic leadership, recruitment, and cost management. Please send inquires & resumes to Shannon Thomson.

In job and broker product news, FundLoans.com is a residential wholesale jumbo non-QM lender. "At FundLoans.com we take a common-sense approach to looking at your loan. We don't underwrite like a bank, we underwrite like a private fund. We thrive in the super jumbo area and love working with self-employed borrowers. Our company has seen tremendous growth and is currently hiring both experienced Account Executives and Account Managers, looking for team members who thrive when challenged and aspire to deliver a level of service unparalleled in the mortgage industry. Come join the nation's newest, fastest growing, and most competitively priced Jumbo Non-QM lender as we thrive in this lucrative new space. We are hiring in the following markets: CA, FL, TX, AZ, CO, WA, OR."  Email your resume today for additional information and consideration to David Hidy (760-388-5888).

In personnel news, Wildcat Lending, a hard money lender based in Dallas, TX, announced the hiring of Kevin Shipman as its new Chief Lending Officer. Kevin brings 12 years of lending experience in the Texas market with top production and management experience and his focus will be strictly on developing new business and growing the loan portfolio. The partners believe Kevin's hire will be a game changer for their business, and the industry as a whole. Please congratulate Kevin by emailing him.

PRMG announced it has "enhanced its strategic operations and capital markets leadership Team for 2017." "PRMG places a high-focus on Strategic Ops and Capital Markets with the recent hiring of Emily Vondrak as its new Director of Strategic Operations and Collateral Management; and Valerie Chopra as its Director of Capital Markets. Both Emily and Valerie bring over 17-20 years of experience to their respective fields. Emily will be highly instrumental with implementation and execution of company directives related to the entirety of strategic operations and management of collateral, and Valerie will be establishing new business relationships and maintaining existing relationships with Capital Markets partners and working in concert with Secondary Marketing. Both will report directly to PRMG's newest Partner Gary Malis, Chief Strategy & Capital Markets Officer. Voted No. 1 of the 50 Best Companies to Work for in America, PRMG employees over 1,300 people with 93 branches across the country.  To learn more, please email Paul Lucido, National Marketing Director, PRMG. Or Email Valerie Chopra or Emily Vondrak.

Joe Garrett writes, "'Any ideas on a warehouse lender that'll let us fund non-QM products?' Answer: BOFI Federal Bank is one that comes to mind. They do non-QM loans for their portfolio, so it was easy for their Warehouse division to understand that product." (And, as noted in the first paragraph, if you're interested in which lenders are doing non-QM products, go to www.mortgageelements.com, click on the state, and then select a program.)