There is always something new in the legal arena, right? Below is news that JPMorgan Chase is pursuing remedies. Is it “legal” for Zillow to compete with real estate agents, or private investors, or to out-bid individuals or families in buying a house? My guess is “yes,” and they have plenty of lawyers to make sure – and join Blackstone and others in buying up single family homes. (More below on this Chase and Zillow news.)

Legal Updates

Remember the case of the monkey selfie? Even though all the parties settled last September, the court has refused to dismiss the case. (Worth clicking on just to see the darned monkey.) Forget all that stuff about court backlogs…

In a more serious matter, Phil Stein, and attorney with Miami’s Bilzin Sumberg Baena Price & Axelrod LLP, sent, “Ten years after the financial crisis, mortgage companies and regional/local banks are still getting hit with new breach of contract and indemnification claims related to loans sold before the crisis. The latest case in point involves demand letters that JPMorgan Chase is sending out to lenders throughout the country. The letters pertain to loans sold by originators to EMC, Bear Stearns and Chase prior to 2008. Chase then pooled those loans with loans it originated on a retail basis, depositing the pools into RMBS trusts. Institutional investors, among others, subsequently sued Chase, alleging securities fraud and other causes of action. Chase ultimately settled with 21 institutional investors for $4 billion. Now it is seeking to recoup from originators sums that it claims to be owed as a result of the settlement payments it agreed to make. The kinds of claims that Chase is making raise several interesting issues and potentially strong defenses for the originators now receiving the demand letters. Originators are thus well advised to carefully and thoroughly evaluate their legal options when they receive these letters.”

Zillow and Builder News

Love ‘em or hate em, Zillow is building on a program called Zillow Instant Offers in which sellers upload information about their homes and receive offers from local investors within 48 hours. The sellers also get an assessment of the home’s market value from an agent, allowing them to choose between a fast sale and selling their property the traditional way.

And Zillow is going to start playing the role of investor, bidding on homes in Las Vegas and Phoenix using cash from its balance sheet to finance acquisitions. “In a phone interview, Chief Marketing Officer Jeremy Wacksman described the program as a test, projecting the company will own 300 to 1,000 homes by the end of the year. Unlike traditional home-flippers who bet they can make money on home appreciation, Zillow plans to profit by charging sellers a fee in addition to agent commissions. Wacksman said most owners who use Instant Offers wind up selling their homes the old-fashioned way, but that people like to have choices.”

But wait – there’s more! In builder news, Opendoor, partially funded by Lennar, uses computer algorithms to buy and sell houses. For the past year, the companies have been testing a way to make it easier for Lennar’s customers to offload their houses and trade up to new ones. Now Lennar is part of a group that is furnishing Opendoor with $135 million in funding as the San Francisco-based startup seeks to expand this year from six U.S. markets to more than a dozen. Fifth Wall, a Los Angeles venture capital firm backed by Lennar and other real estate companies, led a $35 million equity investment and served as a matchmaker for the partnership. Lennar provided $100 million in debt, mostly through its Rialto Capital subsidiary. The companies, which first tested the trade-up program in Las Vegas last spring, are aiming to offer it in every market where Opendoor operates.

Capital Markets

Jobs and housing drive the economy and recall that last month we mentioned that nonfarm payrolls appeared to exhibit a seasonal pattern in the first quarter from 2010 – 2017, suggesting that the seasonal adjustment process may not be able to completely account for all seasonal factors. It is possible that the Q1 2009 decline of 2.3 million, the largest drop since Q3 1945, created a shift that could be causing disruptions to the seasonal calculation. Due to this seasonality, two months in the quarter have similar values, while the remaining month appears as an outlier. For Q1, January’s gain was 176,000, February’s was 326,000, and March came in at 103,000; showing that February is the outlier for the quarter. Even though we are 9 years removed from 2009’s disruptive drop in payrolls, the seasonality has not faded from the data. Understanding this pattern allows us to recognize that an outlier month is the result of underlying effects from the massive drop in payrolls during the recession.

Looking at Friday’s markets, the stock market continues to grab headlines. Weakness in shares of U.S. banks and finance firms added to the political and trade tensions weighing on the market. Treasury yields slid, and oil rose for a fifth straight day, reaching its highest level since December 2014. All major U.S. benchmarks ended lower in lighter-than-normal trading, as Wells Fargo warned that its better-than-anticipated Q1 results may change as a settlement with regulators looms, loan volume dropped, and mortgage-banking results trailed predictions. JPMorgan Chase and Citigroup posted quarterly earnings that topped analysts’ expectations but shares of both companies plunged as JPMorgan Chief Executive Officer Jamie Dimon said, “The environment is intensely competitive, and lending was flat for the quarter.”

The final session of the week for Treasuries was very quiet, keeping the 10-yr yield inside a three-basis point range; it closed the week above the 2.80% threshold. The final news of note from Friday was no new news regarding VA loan churning, though a decision regarding Freedom Mortgage and few others is due soon. Odds of Freedom being kicked out of multi-issuer to the custom program seems unlikely.

Over the weekend, the Syria strikes proved to be a non-event for risk, and so perhaps the focus is now moving towards the continuation of earnings season and the so far positive reports from Wells, BofA, Citi, and Chase. This should be a broader sign for equity strength in the short term. And the same forces that tend to drive stocks higher may push rates higher as well.

March retail sales kicked off this week’s scheduled news. With expectations being for a 0.4% reading and 0.2% ex-auto, sales were actually +.6% and +.4%. The April Empire State Manufacturing Index, seen declining to 17.0 from 22.5 previously, came in at 15.8. The final releases for the day are the NAHB Housing Market Index for April, with experts forecasting a one-point increase from March to 71, and the 4pm release by the Treasury of February TIC data.

Tomorrow sees March Housing Starts (seen increasing to 1268K) and Building Permits (up to 1315K), March Industrial Production (dropping to 0.3%), and March Capacity Utilization (roughly unchanged at 77.8%). Wednesday provides the usual weekly MBA Mortgage Index, but of note is the release of the March Beige Book in the afternoon. Thursday, we have claims numbers before a quiet Friday. We start the week with rates higher versus Friday evening: the 10-year is yielding 2.85% and agency MBS prices are worse .125.

Employment and Personnel Moves

Phoenix-based Goldwater Bank welcomed several new top-performing professionals to its team! Branch Manager Joe Jensen in St. George, UT brings his background in construction lending to Goldwater where both one-time-close and interim construction programs will help him grow his business. In Colorado Springs, Branch Manager Victoria Markowski is focused on delivering on deadline for her realtors. In Minnesota, Branch Manager Nate Raich and team are focused on “Refined Lending” and are excited to have a full suite of products to offer their customers. New Ohio Branch Managers Todd Liguzinski and Matt Panigutti have built a new consumer direct team for the Bank and are excited about the technology offered. In Houston, Branch Manager Jason Turner has built a team to take advantage of his expertise in website SEO. Charles Owens, SVP & National Sales Manager, noted, “We remain focused in 2018 to grow our business; not to be the biggest, just the best.” If you’re interested in hearing more about Goldwater Bank’s sales-centric platform, please contact Rett Babb, Division Sales Manager (713-503-8898).

Caliber Home Loans, Inc. is excited to announce that Chad Smith, a senior residential lending executive in Direct Lending, has joined Caliber as EVP, Head of Recapture and Consumer Direct. Chad will lead all Recapture and Direct to Consumer efforts, transforming the way Caliber interacts with its customers and leverages its servicing portfolio of more than 650,000 customers. His fresh perspective will be an asset to Caliber as it continues to provide superior solutions to its customer base – one of the largest of any non-bank financial institution. Loan Consultants interested in joining Caliber’s world-class team can contact Jeremy DeRosa.

Are you a seasoned Account Executive or part of a team looking to make a change? “Want to work for a company that ‘gets it?’ At Western Bancorp, we get it. Your customers are the lifeblood of your business and every loan counts. That’s why we offer an array of loan products and underwrite TBD’s as part of our business – even Jumbo’s! We offer both broker and non-delegated correspondent channels, and we don’t have a retail division to compete with you or your brokers. We are a growing, energetic team of professionals dedicated to providing the highest quality of service to you and your customers – our job is to make you look like a hero. We’re looking for Account Executives in several markets including Oklahoma, Texas, Arizona, Colorado, New Mexico, Oregon and California. Send your confidential resume to Bridget Clark for immediate consideration.”

A veteran builder finance and residential construction lending executive is searching for a lender interested in building a best-in-class residential construction lending program (CTP/renovation). Market conditions have changed, and all lenders are now focused on a smaller market opportunity. Lenders with niche product solutions, specialty lending and fulfillment capabilities stand a greater chance to succeed. Interest rates are on the rise, housing inventory is low, and much of the available homes are tired and in need of renovation or repairs. Couple this housing dynamic with the natural disasters of 2017, displacing thousands of families. This mortgage industry leader has developed a strategic plan and solution to address the inventory shortage, aged housing stock challenges, and the connectivity between production builders and construction-to-perm financing (including innovative construction lending technology to make the program highly scalable). Should your business plans include a focus on residential construction lending, and you need direction and leadership, please email residentialconstructionloans@gmail.com.