Tomorrow is Bike to Work Day. My cat Myrtle isn’t a big fan, especially when the sedative wears off and she realizes that she’s in an old milk crate with chicken wire on top on the back of my bike. Lots of people wish that they could afford real estate close enough to bike to work, but real estate agents continue to warn clients that they have to, “Drive until you qualify” when wanting to live near city centers.

Why would it be a surprise to anyone that no one can accurately, consistently predict the future? Or know everything about the current worldwide economy? There are lots of things that that Fed, along with bond market traders, economists, politicians, and anyone reading this, doesn't grasp right now. Few politicians are complaining about unemployment because...unemployment has dropped to pre-crisis levels. But wages for the middle class remain stagnant. (And just wait until the minimum wage goes up to $15 an hour in a few states to see how automated systems and robots increase in popularity.) The traditional relationship between job creation and inflation seems to have broken down. The global economy is changing the rules, if there are any rules anymore - and the Fed is trying to figure it out.

Certainly central governments pumping $29 trillion into economies around the world is unprecedented. What's done is done, of course, and they arguably needed to do that to help restore some growth. Our economy is improving, at least according to most statistics. Of course a major issue is that other economies aren't. The Fed is focused on employment and inflation - and is more focused on employment and inflation in this country than economies overseas - as they should be.

Bubbles? Higher rates aren't the only way to stop them. (Unfortunately) regulation & supervision can also help. The Fed has already issued cautionary notes about the technology and commercial real estate sectors.

Shifting to the bond markets, yesterday volatility returned to the fixed-income sector, driving up hedge costs and driving down profits. U.S. Treasuries had their worst day in months as the long-standing dissonance between the expectations of interest rate markets and the guidance of FOMC officials is being resolved by the capitulation of Treasury investors who are running for the hills: "don't fight the Fed." And if the Fed is leaning toward raising short-term rates in June, well, then the market had better pay attention to it. What sparked it was the release of the minutes from the April 26-27th FOMC meeting. The minutes showed that "most participants judged" that if the economy continued to make progress in the second quarter (in terms of growth, the labor market, and inflation) "then it would likely be appropriate" to hike rates in June.

"Members judged that information received since the FOMC met in March indicated that labor market conditions had improved further even as growth in economic activity had appeared to slow" and that the committee "noted that growth in household spending had moderated, although households' real income had risen at a solid rate and consumer sentiment had remained high. They also agreed that since the beginning of the year, the housing sector had improved further, but business fixed investment and net exports had been soft."

Today we've had all the scheduled data we're to have: Initial Jobless Claims for the week ending 5/14 (-6k to 278k, as expected) and the May Philadelphia Fed figures (-1.8, worse than expected). On Wednesday the yield on the 10-year had shot to up 1.88% - still well within the range it has been in for several months - and this morning we're at 1.87% with agency MBS prices little changed from last night.

Jobs and Announcements

In wholesale job news, "Why break up the band? Bring your whole team! Impac Mortgage Corp.'s wholesale division is on a hard target search for top talent teams: Sales Mangers, Account Executives, you can have it all!  You can stay together, sell a full line of products - from Govies to Non QM, be supported by exceptional underwriters, and have the stability of a company that just celebrated 20 years in the industry. Your location is less important than your drive to be the top team in your region. Think your team has what it takes? Todd Kesterson would like to hear from you."

Banc Home Loans TPO Division is currently undergoing an exciting, rapid national expansion that will require them to add additional operations staff in its Irvine, CA Fulfillment Center. Management will be hiring experienced conventional and government underwriters, wholesale closers and funders, account managers, file set up, and correspondent purchasers to help fill over 40 positions in the coming weeks. "Banc Home Loans TPO offers competitive compensation and a top-notch benefits package. As a division of Banc of California, Banc Home Loans provides the strength of a national bank at the local level. It was recently named one of America's Top Mortgage Employers by National Mortgage Professional Magazine and were included in Mortgage Executive's Top 100 Mortgage Companies in America 2015." To be considered, please forward your resume to Ryan Zaro (Sr. Talent Acquisition Partner), or Erin Steffen (VP, TPO Division). 

In personnel news PRMG announced the hiring of Ricky Wilson as Retail Regional Manager for the Southeast Region.  In his new position as a PRMG Retail Regional Manager for the Southeast Region, Ricky will be reporting directly to Steve Levine, Regional Sales Manager and will be focusing on the development, expansion and acclimation of the Retail Sales teams within the Southeast Region. PRMG is a national leading lender, voted No. 1 of the 50 Best Companies to Work for in America. To learn more about PRMG and/or questions, please email Paul Lucido, National Marketing Director.

Terry Connealy has been named President of the newly formed Mutual of Omaha Mortgage, a joint venture of Mutual of Omaha Bank and Dallas-based residential mortgage lender PrimeLending. The joint venture between PrimeLending Venture Management LLC and Mutual of Omaha Bank is expected to begin operations in the third quarter.

And Houston-based Envoy Mortgage, with more than 60 retail branches, has hired veteran executives Joel Cambern and Joe Tako as regional vice presidents for the Northwest and Southwest retail lending regions, respectively.

Acquisitions and merger news just doesn't stop, and in this kind of environment no one expects it to cease.

"M&A slowed its pace in 2016 because mortgage volume was strong Q1 (remember Q1 of 2014?) and remains steady", says Dr. Rick Roque (413.297.6895). "This year is expected to be a relatively flat year as compared to 2015, but remember, 2015 ended up higher than every analyst predicted due to the micro-boom in rates in the first quarter of 2015 driving many refinance pipelines and maintaining rates for purchase transactions. But as the summer volume transpires, M&A activity will increase substantially because the multiples are there for the right buyers and sellers."

A leading Mergers & Acquisitions (M&A) firm is seeking mortgage banks in the Midwest or Mid-Atlantic markets to be purchased either by selling their stock or assets: "applicable mortgage companies would have closed between $300M-$1.2B in 2015, or on pace to doing so in 2016, either consumer direct or referral partner (Realtor) based originations. No Agency approvals are necessary since they are already in place. If you would like to have your firm acquired, possibly receive a 2-4x after tax multiple, maintain your leadership and control, but rapidly accelerate your growth with significant access to capital, a broad array of new/innovative and non QM products," please send me a note of interest to pass along for a confidential discussion. (Please specify opportunity.)

Speaking of M&A, it isn't the first and won't be the last as owners of lenders decide to "explore other opportunities and agree to be acquired for a variety of reasons. Caliber Home Loans has agreed to acquire First Priority Financial, a residential mortgage lender with branches and originators serving California, Oregon, Washington, Idaho and Iowa. "The transaction will expand Caliber's geographic footprint in the Western United States, originally established through its acquisition of Cobalt Mortgage in 2014. We welcome the talented First Priority Financial team to the Caliber family and look forward to working together to better meet the unique financing needs of homeowners across the country." STRATMOR represented the seller First Priority in this transaction.  If you wish to discuss this deal and the underlying M&A market conditions, reach out to Jeff Babcock or Jim Cameron.

During the conference this week in New York news broke that Black Knight, its name coming from its West Point connection, is purchasing the electronic document firm elynx. elynx is/was one of hundreds of companies owned by American Capital. This may be more of a title company story than a mortgage or real estate, but it certainly indicates a trend toward larger companies becoming larger.

On the banking side this trend isn't stopping either. Just in the last week the industry learned of a new bevy of planned bank M&A. In South Carolina Coastal Carolina National Bank ($176mm) will acquire VistaBank ($110mm) for about $12.2mm in cash (25%) and stock (75%) or roughly 1.01x tangible book. Bar Harbor Bank & Trust ($1.6B, ME) went across state lines and will acquire Lake Sunapee Bank ($1.5B, NH) for about $143mm in stock. In Louisiana the Bank of Montgomery ($285mm) will acquire Tri-State Bank and Trust ($32mm). The Farmers National Bank of Canfield ($1.9B, OH) will acquire Bowers Insurance Agency for an undisclosed sum. (Bowers has annual revenues of about $2 million.) But last Friday the FDIC closed First CornerStone Bank ($107mm, PA) and sold it to First-Citizens Bank & Trust Co ($31.3B, NC) under a purchase and assumption agreement.

Events and training

If you're near San Jose tomorrow come say hello at the Silicon Valley Chapter CAMP Spring Mini-Fair. The event is 10AM-3PM and will be held at the Campbell Community Center (1 West Campbell Avenue). It is free to members but $25 for non-members. Visit http://www.siliconvalleycamp. com/ or call TJ Roberts at (408) 802-8522 for registration.

The California Association of Mortgage Professionals announced that the 2016 Summer Convention is taking place in Napa this August 8^th-10^th This exclusive event, which will take place at Napa's finest resort, The Westin Verasa, provides attendees the opportunity to meet exclusive vendors and learn from the best in the business. Registration opens on-site on Sunday August 7. The Expo Courtyard opens Monday, August 8 and closes Tuesday August 9. This convention is yours to customize with a variety of break-out sessions and off-site excursions. On Wednesday August 10, registered attendees have the opportunity to participate in a FREE 8-hour accredited NMLS course ($129 value) presented by David Luna.

MBA Education is continuing to crank out tons of education opportunities. Its next Multifamily Property Inspection Workshop is headed to Chicago.

CRE Basics 2016 schedule is now available. Make sure you've got what you need for the road ahead by enrolling today. Learn more. Also, stay tuned for details on the Commercial Future Leaders Class of 2017. The application period will open in late June. There are a variety of other topics and opportunities available. Click here to view MBA's additional training schedules.

On Thursday, June 16^th, join South Carolinas Clean Energy Business Alliance for its 2016 Summit.

While we're on events, last week I had the opportunity to listen to John Williams speak, in part sponsored by Sacramento's Catalyst Mortgage. Mr. Williams has been the Federal Reserve Bank of San Francisco's President and CEO for five years, serving on the Federal Open Market Committee and bringing the Fed's Twelfth District's perspective to monetary policy discussions in Washington.

It was a good speech, and he used terms such as "talking our foot off the gas" when it came to discussing reinvesting early payoffs from the Fed's mortgage holdings. Certainly holding $4 trillion of debt is not the Fed's long-term goal - that 5% unemployment and 2% inflation are good things to shoot for. He continually stressed that the Fed cannot fix structural problems using interest rates - and that it can't build human capital. The return on a college education is far greater than what one earns on stocks & bonds.