Everyone needs some learnin’, and LOs and underwriters are very interested in income, education, and trends. The US Census Bureau tells us that since the mid-1900s, postsecondary enrollment has increased during recessionary periods when the state of the labor market declines. Like during the Great Recession as college enrollment increased from 17.2 million in 2006 to 20.4 million by the end of 2011 and subsequently decreased. The increase was seen at both 2- and 4-year colleges and at both the graduate and undergraduate levels as people sought to acquire new skills as well as upgrade existing skills. The percentage of students who left college saw greater unemployment rates in 2012 to 2015 versus 2000 to 2007. The increase in the percentage of unemployment was seen across all degrees (associate’s, bachelor’s, or advanced) as the labor market was slow to absorb the increase in degree holders.

State-level Legal and Investor Changes

When I was a kid growing up in the San Francisco Bay Area, a new family moving in next door was a big deal in the neighborhood. They were usually moving in from a neighboring town, or from across the bay, or one time, from a far-away distant land called “Southern California.” Today, I can walk down my street, not-too-far from where I grew up, and hear many people speaking on their phones is a dozen or so languages. Of course, immigration is very state-specific. Wyoming doesn’t see the same influx as Florida. So it was with interest that I read the National Association of Realtor’s Profile of International Activity in U.S. Residential Real Estate. There are many factors which make purchasing a home in the U.S. either affordable or expensive for foreign nationals.

Bill Hultman let me know that the California ballot initiative on privacy was withdrawn on 6/28/18 after a bill was enacted earlier that day (CA AB 375) that has similar privacy requirements.

Plaza’s Closed-End Second Lien program guidelines have been updated to reflect that rate and term refinance transactions are eligible in the state of Texas. As a reminder, cash out refinances are not eligible.

Plaza will be updating the fees in California and Indiana for appraisal orders placed on or after June 15, 2018.  Click here for the fee schedule.

Plaza will be increasing the fees in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, South Carolina and Vermont for appraisal orders placed on or after April 16, 2018.

AmeriHome Mortgage posted the following information is a recent bulletin: On March 29, 2018, the official Interpretation of requirement changes implemented with Texas SJR 60 became effective. The changes made in the Interpretation provide for two main clarifications regarding a new home equity to “rate and term” refinance, also known as an (f)(2) refinance: Lenders must provide the refinance disclosure under Section 50(f)(2)(D), the (f)(2) Disclosure, to the owners at least three business days after the owners submit an application specifically for the refinance of a home equity loan to a rate and- term refinance loan; and the refinance disclosure must be delivered or placed in the mail no later than three business days after the loan application is submitted.

The state of Michigan has recently enacted Senate Bill No. 737, regarding the requirements for recording with the register of deeds and lays out the requirements for instruments that may be accepted by the register of deeds. The name of each person executing the instrument must be legibly printed, typewritten, or stamped beneath the original signature or mark of the person, and the signature must be in black or dark blue ink. The bill also specifies the page and font size based on when an instrument was executed. Further requirements include that if an instrument or any part of it is in a language other than English, a written English translation must be attached to the instrument. Also, if the instrument is executed after January 1, 1964, the instrument must contain the name and business address of the person who drafted the instrument. Another requirement is that for instruments recorded on or after September 12, 2007, the first 5 digits of any social security number appearing in or on the instrument must be obscured or removed.

The State of Minnesota enacted provisions relating to its Revised Uniform Law on Notarial Acts effective on January 1, 2019. Determination requirements provides that a notarial officer who takes an acknowledgment of record, verifies statements on oath, witnesses or attests signatures. A notarial officer who certifies a copy of a record or an item that was copied must determine that the copy is a full, true, and accurate transcription or reproduction of the record or item. The provisions require an individual to appear personally before a notarial officer whenever the officer performs a notarial act regarding a record signed or a statement. A notarial officer may identify an individual through personal knowledge or with satisfactory evidence of the individual’s identity. A notarial act must be evidenced by a certificate of notarial act and sets out the requirements of that certificate. The mandatory contents of the official stamp, grounds for denying, refusing to renew, revoking, suspending, or condition commission of notary public have also been updated.

Minnesota modified its provisions relating to mortgage loan originator continuing education requirements effective on August 1, 2018. The amendment provides that to meet the written test requirement, an individual shall pass a qualified written test developed by the Nationwide Multistate Licensing System and Registry (NMLSR), designated as the NMLSR’s National Test Component with Uniform State Content for Mortgage Loan Originator Licensing, and administered by a test provider approved by NMLSR based upon reasonable standards. To meet the annual continuing education requirements, a licensed mortgage loan originator shall complete at least eight hours of education that includes one hour of Minnesota state law and rules.

Through House Bill 595, Maine enacted the Revised Uniform Fiduciary Access to Digital Assets Act provisions effective on July 1, 2018. The Act ensures users retain control of their digital property and can plan for its ultimate disposition after their death. These provisions also address the expectation of privacy under federal law. These provisions also cover: disclosure of digital assets to conservator of protected person, fiduciary duty and authority, custodian compliance and immunity. The definition of property is also amended to include digital assets.

Capital Markets

And as the Federal Reserve carries out its intention to shrink its $4.5 trillion (that’s a lot) portfolio of bonds, it is heading for challenges of timing and priorities. It embarked on a strategy last year of letting bonds mature without reinvesting the dividends, which so far has proved successful, but questions are arising about how long this strategy should be maintained.

Housing and jobs drive the U.S. economy, and what has housing been telling us? New home sales surged 6.47 percent in May to a seasonally adjusted annual rate of 689,000 led by a 17.9 percent jump in sales in the South. New home sales in the South were the highest since 2007 and their annual rate of 409,000 represents roughly 60 percent of all new home sales nationwide. For historical perspective, new home sales have averaged 650,830 since 1963 with an all-time high of 1,389,000 in July of 2005 and an all-time low of 270,000 in February 2011. Demand for homes continues to outpace supply and prices continue to rise. The most recent S&P Case-Shiller National Home Price Index shows home prices are up 6.4 percent year-over-year nationwide.

“May pending sales of existing houses declined 0.5%, are at a 4-month low, and have declined Y-o-Y for 5 straight months. Similarly, existing home sales in May declined slightly and through 5/18 are down 1.4% compared to January-May 2017. They are down Y-o-Y for three straight months. Lastly, first time mortgage applications for the week ending 6/29 are down 1% Y-o-Y. Is it rising rates, higher prices, or tax changes?” So asked noted economist Elliot Eisenberg.

Are you more confident? Consumer confidence remained high in May despite a 2.4 point drop in the index. The dip has been attributed to consumer expectations surrounding trade issues and gasoline prices, however more than twice as many consumers expect business conditions to improve over the remainder of the year versus those who expect conditions to worsen. Payrolls continue to grow; however, growth may soften as current openings become more difficult to fill given current labor market tightness.

Strong demand for long-dated debt has made the spread between five- and 30-year US Treasury securities the flattest yield curve since August 2007. The spread contracted more than 4 basis points June 28, the sharpest narrowing since February.

The yield curve (in this case, the difference in rates between the 2-year and 10-year) continues to flatten. Does it matter? Yesterday’s post-holiday session saw no change to the 10-year but did see the 2s10s spread narrow 3bps with focus on trade as Chinese officials warned that tariffs on imports from the United States will be implemented if the U.S. follows through with the midnight implementation of duties on $34 billion of imports from China.

Of more interest to me was the discussion of the yield curve in yesterday’s release of June FOMC Minutes, but the flattening trend has not elicited calls for a slower rate hike pace while acknowledging increased uncertainty from trade policy. We are still on pace for two more rate hikes this year. There was little market reaction to the minutes as the discussion around inflation and the jobs environment still pointed to two more rate hikes this year. But there was some dovishness indicated by the comments: "Most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending. The claims report showed claims continue to be low, while an uptick in the ISM Manufacturing Index for June, suggesting there was an acceleration in both manufacturing and non-manufacturing activity, helping raise Q2 GDP estimates. Finally, we had some hawkish headlines on the ECB and BoE with the former suggesting the first rate hike will be in September 2019 versus market expectations of December 2019.

This morning the Bureau of Labor Statistics tells us that the June unemployment rate was 4%, worse from last month’s 3.8%, nonfarm payrolls were +213k, better than the 195k expectations, and hourly earnings were +.2%, +2.7% year over year, expected +2.8% from a year ago. In the frenzy of employment data, the May international trade balance was announced ($43.1 billion). Friday starts with the 10-year yielding 2.82% and agency MBS prices a few ticks (32nds) better than Thursday’s close.