Housing discrimination can come in many forms - but based on who your friends are? Thank you to Thomas Michel who sent along this story about how Facebook patented technology to help lenders discriminate against borrowers based on social connections. Huh?

"Is it time to take a look at ARMs again? Find out why the country's top originators have been incorporating ARMs in their business in today's crazy rate environment. We've got Mat Ishbia, United Wholesale Mortgage's president and CEO ready to 'spill the beans' on the ins and outs of ARMs today (Thursday, August 8) at 2PM EDT. In this webinar, Mat with show you how to attain the tools you need to teach your borrowers why ARMs are a savvy option. It's an important topic and Mat never fails to impress with his ability to present his materials. You can attend this free webinar hosted by National Mortgage Professional Magazine and sponsored and presented by United Wholesale Mortgage TODAY, Thursday, August 6 at 2PM EDT. Discover why ARMs are the missing tool in your arsenal and learn how to use ARMs to grow your business."

Banks know a thing or two about adjustable rate mortgages. Bank mergers and acquisitions continue unabated, but are tending to be of the smaller variety: SNL Financial reports the median asset base of targets so far in 2015 has been $134.4mm through July 29 vs. $156.9mm in 2014 and $163.0mm in 2013. Just in the last week we've learned that in Arkansas The Farmers & Merchants Bank ($670mm) will acquire The Bank of Fayetteville ($348mm) In Pennsylvania ESSA Bank & Trust ($1.6B) will acquire Eagle National Bank ($182mm) for $25.3mm in cash or about 1.09x tangible book and First National Bank of Pennsylvania ($16.1B) will acquire Metro Bank ($3.0B) for about $474mm in stock. In Kansas Equity Bank ($1.2B) will acquire First Federal Savings and Loan Association of Independence ($138mm) Portage County Bank ($87mm, WI) will acquire Bancroft State Bank ($70mm, WI).

We're not done yet! Glacier Bank ($8.5B, MT) will acquire Canon National Bank ($251mm, CO) for $31.8mm in cash and stock. Regions Bank (AL) will acquire employee benefits and insurance company A.I. Group (GA). In "Joisey" Lakeland Bank ($3.6B) will acquire Pascack Community Bank ($394mm) for about $43.8mm in cash and stock and Valley National Bank ($19.0B, NJ) will close and consolidate 13 branches in NJ and NY (about 6% of total network), as it seeks to improve performance. In Indiana MutualBank ($1.4B) will acquire the trust business of First Bank of Berne ($551mm).

In company-specific news, the U.S. Court of Appeals for the District Columbia issued a stay against a $109.2 million fine levied against PHH Corp. by the Consumer Financial Protection Bureau. Remember that the CFPB initiated an administrative proceeding against PHH accusing it of harming consumers through a mortgage insurance kickback scheme tied to a captive MI. A judge agreed and recommended a penalty of just $6.4 million, which Richard Cordray and the CFPB ignored and increased to $109.2 million. (The CFPB argued that the $109 million represented all the MI premiums received after July 2008.)

And lots of us are watching Ocwen. Recently its stock price took a beating after seeing its income from operations in the second quarter fall nearly $100 million from last year. Just before Ocwen released its second-quarter financial results its stock closed the day at $11.76, its highest closing price since Jan. 12. But in the wake of those second-quarter results, Ocwen's stock plummeted in Friday's trading, closing down 28.32% for the day. Compass Point dropped its price target from $6.50 to $6.00 and reiterated its position that Ocwen is a "sell", expecting Ocwen to report operating losses for the "next several quarters," basing that prediction on Ocwen taking an estimated $200 million in regulatory and litigation charges in the near-term.

And going back to a story from earlier this year, Bloomberg's Jody Shenn discussed how, "Ocwen Financial Corp. may turn over contracts to oversee soured Fannie Mae and Freddie Mac loans to the government-backed mortgage guarantors as it pares its portfolio after coming under regulatory scrutiny. The potential deals relate 'to non- performing agency loans where the company expects to close transactions directly with' Fannie Mae and Freddie Mac, John Lovallo, a spokesman for Ocwen at Levick LLC, said in an e-mail. The cash received, which Ocwen said may total more than $100 million, will come 'largely' from reimbursements of advances to cover expenses such as foreclosure attorney fees, he said.

M&T Bank Corp. announced that it is in talks to settle a probe by U.S. federal authorities on its mortgage lending operations. The bank said the U.S. Department of Housing and Urban Development Office of Inspector General and the U.S. Department of Justice are investigating whether the bank complied with underwriting guidelines for Federal Housing Administration-insured loans and the mortgages sold to Freddie Mac and Fannie Mae.

What are those rascally agencies up to?

Well, Freddie Mac will send the U.S. Treasury $3.9 billion in September after posting a sharp increase in second-quarter profits. Nice! Although the industry wishes that they could retain some earnings rather than help fund the rest of the government.

A while back the Community Home Lenders Association (CHLA) sent a letter to Treasury Secretary Jack Lew asking for the Treasury Department to place a portion of Fannie and Freddie's profits into a reserve account. This would allow for small lenders to have continual access through a Cash Window under future housing finance reform. This proposal is different from other recent proposals because the CHLA is asking the Treasury Department to not sweep away part of the GSEs profits. CHLA's main priority is to ensure funds for cash window capitalization reserve and the CHLA proposes that the Treasury reserve these funds, instead of the GSEs.

Speaking of Freddie Mac, the secondary markets are abuzz about it expanding its risk-sharing efforts (meant to protect taxpayers and potentially prepare the $9.4 trillion U.S. home-loan market for its future). In a planned $300 million offering of mortgage-backed securities being managed by Credit Suisse Group AG, the government-backed company will sell $22.5 million of junior- ranking bonds without its guarantees.

It is the wave of the future. The bonds reflect directions that Freddie & Fannie have received from their overseer, the Federal Housing Finance Agency, to experiment with different ways of pushing their losses from homeowner defaults to bond buyers and insurers. The FHFA has also pushed them to increase the amount of the risk-sharing. Tax-payers shoulder less of the potential losses, whereas an investor that wants the higher return can pay for them. Since starting sales of their risk-transfer debt in 2013, Fannie Mae and Freddie Mac have issued more than $20 billion of the securities, along with entering into similar insurance deals.

The security issued in late July gives us a good sense of how this works. In this transaction, Freddie Mac deposited certain mortgage loans that it previously acquired into Freddie Mac Whole Loan Securities Trust, Series 2015-SC01 (the "Trust"). The Trust will issue Senior and Subordinate classes of certificates and such classes represent interests in the assets of the Trust. Freddie Mac will guarantee the timely payment of interest on the Senior Certificates and the ultimate payment of principal on the Class 1-A and Class 2-A Certificates. As the Subordinate Certificates will not be guaranteed by Freddie Mac, these classes will be the first to absorb any losses incurred on the mortgage loans. Accordingly, to the extent that there are realized losses on the mortgage loans, the outstanding Class Principal Amount of the certificates will be reduced by the amount of these losses, starting with the most subordinate class that has an outstanding Class Principal Amount. Freddie Mac will retain approximately five percent (5%) of the initial Class Principal Amount of each class of Subordinate Certificates issued.

During the week of August 17 the Federal Reserve Bank of New York Open Market Trading Desk will begin a process to streamline the administration of the agency mortgage-backed securities (MBS) held in the System Open Market Account (SOMA) by consolidating some of these securities through a service offered by Fannie Mae and Freddie Mac called CUSIP aggregation. "Through this process, aggregated CUSIPs are formed by consolidating existing agency MBS with similar characteristics into larger pass-through securities.  This process is commonly used by market participants, although the scale of aggregation in this case will be large by market standards.  Because all of the payments on the underlying agency MBS flow through to the aggregated CUSIPs, the aggregation process will not otherwise affect the size or characteristics of the SOMA portfolio.  No inference should be drawn from CUSIP aggregation about the timing or nature of any future monetary policy actions.

"The aggregation process will significantly reduce the number of individual agency MBS CUSIPs held by the Federal Reserve, thereby reducing the administrative costs and operational complexity associated with managing the MBS portfolio.  The SOMA currently holds approximately 80,000 individual agency MBS CUSIPs.  The aggregation process will reduce the number of CUSIPs to about 20,000. In 2011, the Desk conducted a CUSIP aggregation program that consolidated the roughly 44,000 CUSIPs in the SOMA at that time to fewer than 10,000. The public will continue to have access to listings of all the MBS CUSIPs that are included in this aggregation effort.

Bopping over to interest rates for a bit, fixed-income securities declined Wednesday despite weaker-than-expected ADP data for July. I don't know exactly why, other than it is going to be tough to move rates out of the range they've been in for a few weeks now without an impactful employment number tomorrow (one way or the other). Today we've had July Challenger Job Cuts (shooting up to 106k!), and will have Initial Jobless Claims for the week ending 8/1 and Continuing Jobless Claims for the week ending 7/25 (08:30 ET). We closed the 10-year at 2.27% Wednesday and in the very early going today we're roughly unchanged price-wise.

Jobs and Announcements

Private Mortgage Insurance company Genworth Financial is seeking several Account Representatives/Executives covering the Jacksonville, Cincinnati, and Austin territories. Candidates should have exceptional customer interaction, sales execution, and leadership skills and be able to provide the highest level of internal and external customer service, manage customer relationships, and develop growth strategies for assigned accounts. The successful candidate will be responsible for developing calling plans to cover all assigned accounts, monitor branch volume and calling activity, and take necessary actions to achieve account volume goals. They will execute and lead implementation of Genworth products and initiatives, and identify and communicate new opportunities to provide solutions to customer needs. The ideal candidate will have 2+ years of experience in a sales role, have a college degree or equivalent industry/sales experience, strong presentation and communication skills, and have the ability to work flexible hours with occasional overnight travel. Interested candidates should send their resume to Kristin Miller.

In Hawai'i Honolulu HomeLoans continues to grow and is searching for loan officers in that state. "As Hawaii's largest, locally-owned mortgage banker, Honolulu HomeLoans (HHL) provides competitive pricing and product offerings, advanced mortgage technology, and the highest quality customer service. The company was a 'Top 100 Mortgage Companies in America by Mortgage Executive magazine (2014, 2013 and 2012), 'Hawaii's Best' Mortgage Lender in the Honolulu Star-Advertiser's People's Choice Awards (2013), and won the 'Best Places to Work in Hawaii Award' by Hawaii Business Magazine (2015, 2014, 2013 and 2012)." For more information on opportunities, contact Jessica Rocho (808.372.0415).

A quick congratulations to Tom Bird, the new president of Georgia's State Bank Mortgage. Tom had previously served as EVP of First Bank Mortgage, and will now lead the new State Bank Mortgage, which recently combined the operations of State Bank's existing mortgage operation with First Bank Mortgage, formerly a division of First Bank of Georgia. And also congrats to Kirk Willison. Kirk joins Altisource as Senior Vice President, Government and Industry Relations and will be focused on strengthening Altisource's profile with all relevant federal, state and local government, regulatory, and administrative agencies.