The Trump administration is working to revise or replace the Dodd-Frank Act, President Donald Trump told a group of CEOs. House Financial Services Committee Chairman Jeb Hensarling has announced the latest draft of his Financial CHOICE Act, which is intended to overhaul post-crisis regulation. A new Republican plan to streamline Dodd-Frank's capital rules, stress tests and many other requirements will be reintroduced in the coming weeks. There are many problems, of course, not the least of which is that much of DF helps the consumer, and financial service companies have already spent countless millions, if not billions, of dollars conforming to the rules which has been passed on to us consumers. "Revise" is more likely than "repeal."
Bank news
We aren't the only country with regulators creating rules for residential lenders. In Australia the bank regulator, APRA, released a new set of macro-prudential rules for mortgage lending in Australia. The broad intention appears to be facilitating the supply of credit into the housing market (especially given the forthcoming supply in apartments) while trying to improve the average quality of lending.
And just this morning American Banker carried a story noting, "A carve-out that shielded billions of dollars in collateralized loan obligations from Dodd-Frank's risk-retention mandate could work against banks and other CLO managers if Dodd-Frank is overhauled."
The US and Europe are becoming hesitant to adopt the Basel Committee on Banking Supervision's capital requirements, which could leave Asian banks the only institutions adopting the international standards, experts say.
Mergers and acquisitions have slowed in the last week or so, probably due to Spring Break. It was announced, however, that in California Pacific Western Bank ($21.9B) will acquire California United Bank ($3.0B) for about $705mm in cash (30%) and stock (70%) or roughly 2.84x tangible book. In Indiana, the Fountain Trust Co ($295mm) will acquire The Farmers State Bank ($72mm) for about $9.43mm in cash (100%) or about 1.73x tangible book adjusted for certain transaction costs or about 1.56x tangible using 12/31/2016 financials. In New Jersey Sussex Bank ($848mm) will acquire Community Bank of Bergen County ($341mm, NJ) for about $45.4mm in stock (100%). And in Washington Anchor Bancorp has agreed to be acquired by Washington Federal, Inc.
And 95% of respondents to the ABA's 24th annual Real Estate Lending Survey described regulation as having a negative impact on business production and consumer credit availability. 91 percent of the typical bank's mortgage loans made last year were qualified mortgages. This finding indicates a sharp decline in the extension of non-qualified mortgages, with the average percentage of non-QM loans falling from 14 percent in 2015 to 9 percent in 2016. Banks are restricting lending to QM segments only, and 45 percent are making non-QM loans only to target markets or with other restrictions. According to the survey, high debt-to-income levels in addition to insufficient documentation continue to be the most common factors prohibiting mortgage loans from meeting QM standards. The survey revealed that single family mortgage loans for first-time homebuyers increased from 15 percent in 2015 to 16 percent in 2016, a record high in the survey's history.
Wells Fargo Funding issued a reminder: Fannie Mae and Freddie Mac (the GSEs) issued the URLA Implementation Guidance and Update on November 1, 2016, clarifying that the redesigned Uniform Residential Loan Application (URLA) is not yet effective and should not be used. The communication confirmed the GSEs' new Demographic Information Addendum may be used as of January 1, 2017, in conjunction with the current URLA dated 7/05 (revised 6/09).
Effective immediately, the following updates are being made to M&T Banks' HARP product pages to clarify requirements when a loan is determined to be either a HPML or a HPCT: Freddie Mac Open Access and Fannie Mae DU Refi Plus (HARP AUS required). A loan designated to be HPML or HPCT is limited to a maximum DTI of 45%, regardless of AUS approval. For all HARP loan products, if a loan is determined to be HPCT, standard HPCT requirements apply including a residual income test.
Flagstar Bank updated its tax transcript guidelines. W-2 or 1099 transcripts are no longer required for wage-earner borrowers, non-employed borrowers (e.g., fixed income documented with an award letter) and commission income less than 25%, with the exception of handwritten income documents and underwriter discretion based on any red flags present in the file 1040 Tax transcripts will be required for the following income types: Self-Employed, Commission greater than 25%, Rental Income documented on Schedule E, Employed by family and Fixed income types such as disability, social security, retirement, child support, alimony, etc., when the 1040's are obtained in lieu of alternative documentation e.g., award letter, 1099, bank statements, etc. effective for table funded transactions registered on or after Thursday, April 6, 2017 and correspondent transactions delivered on or after Thursday, April 6, 2017.
Trainings and Events:
Who doesn't want to spend time in Hawai'i? The Mortgage Bankers Association of Hawai'i annual conference is a couple of months away on June 28th - 30th at the Hawaii Prince Hotel Waikiki. Register today to attend this conference with a fabulous line up of industry speakers and awesome networking opportunities. Don't miss your opportunity to attend this incredible event!
Looking for ways to improve your loan origination skills? Look no further. Essent's training department would like to help you prepare for a successful home financing season. Go here to check out the many course options available to you in April through Essentials training.
Don't miss California MBA's April 27th Mortgage Quality & Compliance Committee (MQAC) webinar on Digital Compliance featuring John Haring, Director of Compliance Enablement with Ellie Mae!
Join the Cato Summit on Financial Regulation, June 6, 2017 in Charlotte, NC. This years' distinguished group of speakers will explore bank regulation, innovation, and the path forward.
Risk assessments are the backbone of any well-built Anti-Money Laundering and Office of Foreign Assets Control compliance program. An efficient and effective program cannot be developed without knowing where one's risks reside. Register for the April 14th "AML OFAC Risk Assessment Cornerstone of An Effective Compliance Shop" live webinar.
Join Michigan Mortgage Lenders Association's on May 2nd to celebrate its Rising Stars. The Rising Star Award recognizes MMLA members, new to the industry, who have excelled in their profession. The award recipients were chosen because of their work accomplishments and their dedication to the mortgage industry and were nominated by their peers. The reception will take from 6 p.m. - 9 p.m. at Motor City Casino's Amnesia Night club.
Capital Markets
According to Cbonds, Fannie Mae has raised $2 billion through a public offering of bonds. The bonds will carry a coupon of 1.875% and will mature on April 5, 2022. JP Morgan, Nomura International plc and TD Securities acted as book-runners for the offering.
This morning we saw the weekly initial Jobless Claims number. The economy is driven by jobs and housing, and despite last Friday's poor March nonfarm payrolls (rising just 98,000), the labor market is tightening. The unemployment rate hit 4.5%, its lowest level since 2007. The labor force participation rate held steady and the employment-to-population ratio rose for the third straight month. The situation makes one wonder, does everyone want a job: STRATMOR Group web site?
Looking at the bond market, we continue to see rates slightly drop during this Spring Break Week. (Don't forget the bond market is closing early today, and is closed tomorrow, so anyone setting rates will err on the conservative side.) The headlines were grabbed by President Trump's comments in an interview with the Wall Street Journal talking down both interest rates and the US dollar, with the 10-year yield hitting a low of 2.26%. And of course, the NY Fed continues to buy $1-2 billion a day of agency MBS using money from early payoffs.
Our bond markets are only partially influenced by U.S. economics. North Korean tensions remain very much in place ahead of a potential nuclear test this weekend and in this country the focus for today will be on bank earnings. Market participants may be watching the forthcoming French election with anxiety over what it might mean for the euro, but Italy's accumulating problems could have much more serious consequences.
Looking at the numbers, yesterday the 10-year closed unchanged (as did MBS prices) yielding 2.30%. This morning we've had weekly jobless claims (-1k to 234k) and the Producer Price Index (-.1%, core flat). Coming up is the University of Michigan Sentiment Index, along with an early close. In the early going we find rates mixed versus last night: the 10-year is yielding 2.25% and agency MBS prices are worse a shade.
Jobs and Announcements
"The National Warehouse Lending Division at PlainsCapital Bank is excited to be a premier warehouse provider for renovation programs. 203K Full, Limited, FNMA HomeStyle or a HUD REO in need of repairs, PlainsCapital Bank Warehouse Lending is ready to provide a facility for these programs. In a housing market with low inventory and home values increasing month over month renovation programs provide a great opportunity for our originating partners to market and capitalize on borrowers looking to use their home equity to update and renovate their homes. We believe in creating great opportunities and strong relationships with our mortgage banking partners. If you are interested in a new residential warehouse lending experience, please contact Pamela Robinson, National Sales Manager, or apply online through our website PlainsCapital Bank National Warehouse Lending Division. Get to know the PlainsCapital Bank SWAGGER on LinkedIn at PCB NWL."
"Citywide Home Loans is looking for a dynamic and passionate National Underwriting Manager to manage, direct, and mentor their busy underwriting team. We need someone who can effectively manage underwriters and regional underwriting managers who are located throughout the U.S. If you are both creative and effective, you might be the right fit for Citywide Home Loans, NMLS ID 67180. Check out this National Underwriting Manager job opening here.
Assurance Financial has a solid reputation for closing loans on time. It's what we do. Our back office supports its mortgage loan originators and branch managers so they can focus on originating more new loans rather than worrying about closing their pipeline. Assurance is expanding its footprint, selectively hiring branch managers and MLOs in good markets. Now is a great time to consider a change! Contact Sales Recruiting Manager, Paul Peters, CMB, at 225-239-7948 or visit LendTheWay.com/Careers.
Mason-McDuffie Mortgage is pleased to announce that it has hired Eric Malone to join its newly formed Business Intelligence Team. "We are very excited to have someone of Eric's caliber to anchor our new BI Team," said Jason Frazier, CIO & Chief Strategy Officer. "Instead of latching on to outdated mortgage lead systems, our BI Team will be re-engineering the traditional lead process along with building our platform from the ground up. It is important that when you are working with Google, Facebook, and other Web 2.0 companies, you have a foundation in creative intelligence as opposed to a legacy mindset," said Frazier. MasonMac's BI Team is just one of many new initiatives that the company has rolled out in the last 12 months to embrace the digital disruption that is happening in the mortgage industry. "When you understand that we are going through the largest cultural and technological shift in our history, you also must accept that being complacent will kill your business," said Frazier.
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