For me the last seven days included California, Texas, Nevada, and Illinois. What am I seeing? Some companies are doing well. Others aren’t, and unfortunately, probably more fall into this latter category due to margins and volumes both dropping. Here’s a note from a warehouse rep in the Southeast. “Rob, everyone knew, at some point, rates were going to head higher, and that refis were going to slow. We’re seeing plenty of independent mortgage bank owners who seem to be eternally optimistic, talk about how technology will change their business, believe their profits will rebound, believe they will outlast their competition. Those same people are lousy at knowing when to sell their company. But we’ll see plenty of that this year, I think, more than in 2017.”
Products and Training
CMPS Institute has announced the release of a new web site, as well as the creation of a new parent company called Momentifi. "Since 2005, we’ve had the honor and privilege of training and coaching over 8,000 of the nation's top loan originators,” says Gibran Nicholas, CEO and founder of CMPS and the Momentifi companies. “Now we’re expanding our training and coaching to sales professionals, team leaders and CEOs from all walks of the financial and housing industry.” The Momentifi strategic coaching retreats are all-inclusive, and they take place in 5-star, world-renowned resorts such as the Auberge du Soleil in Napa Valley, and the Esperanza resort in Cabo San Lucas, Mexico. “Momentifi Coaching incorporates the six key ingredients that are crucial to creating and maintaining positive momentum in any business,” says Gibran. Click here to learn more at the free orientation scheduled for this Thursday, March 22.
It’s mid-March. And we all know what that means—we’ve pretty much abandoned our New Year’s Resolutions. Spending time multitasking without getting much done. With the market at record lows, this is not a time to fall back into old habits. That’s why on Thursday, March 22nd from 10-11 AM PST/1-2 PM EST, Sierra Pacific Mortgage is offering a free, engaging, and info-training webinar entitled “The Top 9 Most Effective Time Management Tips You’re Not Using.” This unique webinar covers more than time management; it provides the scientific reasons why we revert to old habits as well as how to turn our goals into highly productive, life-enhancing, awe-inspiring habits! Click here to register. Talk about time well spent.
With the busy season returning, it's worth rethinking your approach to self-employed income calculation. LoanCraft now has more than 250 banks, mortgage companies, and credit unions using its innovative Tax Return Analysis. This is a report service, not software. LoanCraft does the work of scanning the data from returns and setting up the file. Simply upload tax returns and receive a full income analysis within four hours for a standard price of $25. It's a great way to improve the output and accuracy of the production team. By the way, LoanCraft will have a booth at the upcoming MBA Technology conference in Detroit. Contact Ron George or visit LoanCraft.
Built Technologies, the leading provider of secure, cloud-based construction lending software, has formed a strategic alliance with Baker Hill, the #1 provider of member business lending services. The alliance will expand access to Built’s construction loan administration software and Baker Hill’s latest lending and risk management solution, Baker Hill NextGen. “Through this strategic alliance, Built and Baker Hill are making it easier than ever for financial institutions to drive productivity and profitability in all areas of construction lending, including consumer, home builder finance, and commercial,” said Chase Gilbert, CEO and co-founder of Built. This strategic alliance is the latest step in Built’s continued focus on bringing construction lending into the digital age.
Capital Markets
Remember several months ago every day the yield curve would flatten? That trend ended, but we saw a flattening of the yield curve last week as market participants kept an eye on this week’s FOMC meeting. Wednesday the Federal Reserve is expected to raise the target range for the fed funds rate by 25 basis points, from 1.50% to 1.75%, yet the real news will be if the accompanying interest rate projections show a median estimate of four rate hikes this year versus three currently.
Looking back to the end of last week, the University of Michigan's preliminary Index of Consumer Sentiment for March jumped to 102.0 in March from 99.7 in February, well above expectations. The March reading is the highest level for the index since April 2004. The Index was driven entirely by households with incomes in the bottom third. Near-term inflation expectations increased to their highest level in several years. Elsewhere, January Job Openings were 6.312 million, after the prior reading was revised to 5.667 million from 5.811 million.
Looking to this week, the Fed Trade operation will see the desk purchase up to $815 million of 30YR conventional 4% ($515mn) and 4.5% ($300mn) today. Outside of the Fed, the U.S. calendar for scheduled news is non-existent until Wednesday when we received the MBA’s application data for last week, Existing Home Sales, and the FOMC rate decision (look for another increase). Thursday has Initial Jobless Claims and the FHFA House Price Index. Friday holds Durable Goods and New Home Sales. We start the week with rates up a shade from Friday’s close: the 10-year is yielding 2.87% and 30-year agency MBS prices are worse .125-.250.
Mergers and Acquisitions
The last big announced merger in the lending biz was, of course, Florida’s Ocwen Financial and PHH Corp (with its mortgage servicing platform) for about $360mm in cash. The combined company will service 1.9 million loans with unpaid principal balance of $328 billion. (A huge servicer but still dwarfed by Wells’ $1.5 trillion.)
There were 245 bank mergers among U.S. banks in 2017, marking a 2% increase over 2016. Plenty of banks are doing well on their own. For example, Bank of America said it will open 500 new branches in various markets around the US over the next 4 years, as it pushes into new regions.
Not that they would merge, but reports say that Amazon is looking for bank partners to target younger customers with a checking account-like service soon. Amazon hopes to cross-sell their Prime membership to bank customers to grow that business, with the chatter saying JP Morgan is one of the banks being considered.
What has been happening in recent weeks in terms of bank mergers? In Massachusetts Salem Five Cents Savings Bank ($4.7B) will acquire personal and commercial insurance agency Cape Ann Insurance. The Evansville Teachers Federal Credit Union ($1.5B, IN) will acquire American Founders Bank ($113mm, KY). Heritage Bank ($4.1B, WA) looked south and will acquire Premier Community Bank ($401mm, OR) for about $88.6mm in stock (100%) or about 2.22x tangible book. Civista Bank ($1.5B, OH) will acquire United Community Bank ($543mm, IN) for about $114.4mm in cash (100%) or about 1.61x tangible book. RCB Bank ($2.8B, OK) will acquire Central Bank and Trust Co ($323mm, KS). In New York Medina Savings and Loan Association ($54mm) will merge with and into Generations Bank ($292mm) for fair value as determined by a third-party appraisal as the transaction is structured as a merger with a mutual entity. In Iowa United Bank of Iowa ($1.5B) will acquire First Trust & Savings Bank ($38mm). In Missouri recently formed Stark Bancshares Inc. will acquire Farmers State Bank ($63mm).
Skyline National Bank ($548mm, VA) will acquire Great State Bank ($139mm, NC) for about $14.5mm in stock (100%). In California First Choice Bank ($904mm) will acquire Pacific Commerce Bank ($536mm) for about $110.4mm in stock (100%) or about 1.9x tangible book, Citizens Business Bank ($8.0B) will acquire Community Bank ($3.7B) for about $878.3mm in cash (20%) and stock (80%) or about 2.47x tangible book, Bank of Southern California ($480mm) will acquire Americas United Bank ($235mm) for about $44.1mm in cash and stock. In Missouri OakStar Bank ($700mm) will acquire First National Bank ($194mm). In Michigan Eaton Federal Savings Bank ($295mm) will acquire SSBBank ($66mm).
“Mortgage origination company owner/operators are inherently ‘serial entrepreneurs’ who are reluctant to forego their independence. After running their own show for a long time, will they be happy reporting to a boss? “We frequently hear that cultural incompatibility with the buyer organization might drive away key producers; ‘big risk that I cannot bring across my originator sales force.’ There is a widespread concern that the buyer will impose material changes to originator compensation and disrupt the seller’s proven successful business model.
“Retaining the seller’s current management team is often mentioned as an issue. The buyer’s consolidation of redundant functions will mean elimination of jobs for ‘loyal managers who were instrumental in getting us to where we are.’”
“Then there is always the industry scuttlebutt that mortgage company acquisitions fail more often than succeed; ‘the amount of the proposed up-front premium amount is not sufficient to compensate me for the risk of a failed transaction.’
“We frequently hear that cultural incompatibility with the buyer organization might drive away key producers; ‘big risk that I cannot bring across my originator sales force.’ There is a widespread concern that the buyer will impose material changes to originator compensation and disrupt the seller’s proven successful business model.”
With the rise in rates, decrease in volume, and decrease in compression, the residential lending environment has changed. Dr. Rick Roque, founder of Menlo Company and a key figure responsible for over $3.5 billion in retail mid-market mortgage banking acquisitions, predicted in the Summer of 2017 - , “The collapse in refinance production volume and driving margin compression for mortgage banking firms leaves many $500M-$2B retail platforms seeking acquisition or financial partnerships to either grow more aggressively with less risk, or no risk at all.”
And Marissa Vest, Sr. Mortgage Banker who took over Menlo in July 2017, wrote, “Companies seek acquisitions opportunities for different reasons. For example, Alamo, CA-based RPM acquired several firms entering new markets and increasing market-share around companies who have 20+ year track records in their respective markets. Such acquisitions were performed not from a position of weakness, but one of strength with tremendous growth opportunities that lay ahead. Another such example of this is Silverton Mortgage Specialists and its newly announced relationship with Berkshire Hathaway. Such a deal will enable Silverton to continue its rapid growth while retaining its name, leadership and corporate identity.”
Jobs and Promotions
“At Mason-McDuffie Mortgage we are looking for talented, entrepreneurial Loan Officers, Teams, and Branches to join our growing family. We are excited to be putting the finishing touches on our new SWIFT Success platform, designed for the modern Loan Officer. This new platform includes our SWIFT App powered by Blend, SWIFT CRM powered by Jungo, and our BOOST Coaching just to name a few. We have created a new customer success team focused on helping our Loan Officers take full advantage of this new platform. We were proud to be recently named as a Top 10 Mortgage Company in Customer Satisfaction by SocialSurvey, along with being a Top Workplace by the Bay Area Newsgroup. Those interested in learning more about our award-winning social media, concierge service, creative technology, and culture designed to help you succeed, please visit us here.”
In correspondent job news, a well-known, fast growing, national Top 20 correspondent lender (offering delegated best effort and mandatory products that are 100% retained) seeks a strong AE for its Northern California and Pacific Northwest region. Candidate must live in the sales territory and have existing correspondent relationships. Confidential inquiries should be addressed to me for forwarding on to the principals.
Plaza Home Mortgage, Inc. has a rare opportunity for a qualified Account Executive role in the Mid-Atlantic region with a strong producing territory. This individual will have access to an existing client base that offers substantial income and has even more untapped potential. Join a growing team with a very competitive compensation plan, top-rated training in the industry, real-time marketing support and a regional operations center with unmatched support! For more information on this opportunity, please contact Deborah Robertson, (917-680-6506). Plaza is an EEOC employer and follows all laws relating to fair employment. Company NMLS #2113
Capsilon has tapped Ginger Wilcox as SVP Marketing where she will be responsible for leading marketing, brand positioning and growth for all Capsilon products. As CMO and Chief Industry Officer, Wilcox led brand marketing, customer acquisition, communications and strategic partnerships.
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