Zillow most recently published research indicating that a recession negatively affects the housing industry due to a decrease in employment opportunities and earning potential for young adults. Zillow analyzed the homeownership rate for college graduates who graduated between 1976 and 2013 using statistics from the U.S. Census Bureau's March Current Population Survey. The data shows that the homeownership rate quickly increased during the first few years after college and slowed 10 years after graduation, leveling off after 15 years. During the short-lived recession from July 1990 to March 1991, the homeownership rate for the graduating class of 1992 was greater and increased more rapidly than the homeownership rate among the class of 1990. The good news is that the generation who graduated college in 2008 and 2009, during the economic crisis, will begin to purchase homes and improve the market.

Many of us in the mortgage banking industry are heading to Vegas to spend the week talking and listening to each other about what is going on with the industry. STRATMOR would like to remind attendees that it's also critical to think about what customers say about the mortgage process, not just what the industry says about it. In fact, STRATMOR has a couple ways for attendees to learn more about customer perceptions - you can sign up and attend an information session or you can show up on Wednesday AM to see my colleague Garth Graham try to wake a slumbering crowd and talk about customer feedback including issues with the CFPB's complaint database: click CustomerSayCrazyThings for more details.

If true it isn't the first, and won't be the last lender combo, but there are plenty of jungle drums pounding out chatter about Mortgage Master Inc. being purchased by LoanDepot. Rumors of the buyout have been rampant for past month or so and are becoming too loud to ignore - but it does seem to be a rumor only at this point. Speaking of Mortgage Master, here is a byline by Paul Anastos, President of Mortgage Master, on potential culture clashes in M&A: a different view of M&A in the mortgage space.

(Speaking of purchases, in the vendor galaxy DocMagic has acquired eSignSystems.)

There are hundreds of compliance companies around the nation that, for some reason, still call themselves lenders. Jonathan Foxx was kind enough to send along this White Paper on compliance (first in a four-part series) HERE. As it turns out, community financial institutions saw a 26 percent increase in the number of hours and employees required to meet regulatory compliance demands in the third quarter, according to the latest Banking Compliance Index(SM) (BCI). The index, compiled and analyzed by Continuity Control, found that the average community bank needed to devote 653 additional hours, or the equivalent of 1.86 full-time employees, to manage the 82 new regulatory changes added in the third quarter. To meet those needs, the average institution had to spend an additional $45,264 on compliance last quarter. A chart accompanying this release is available at WhenIsEnoughEnough?

Pam Perdue, EVP of regulatory insight at Continuity Control, observed, "The number of regulatory changes last quarter reached the highest level we've seen since 1995. Even when the changes are minor in scope, they require time to identify, analyze, and implement. Upticks like these historically have forced banks to add headcount and divert time, money and staff from more profitable areas. Those traditional responses are unsustainable in 2014 and beyond. Rising demand for compliance professionals is also a major factor in compliance cost increases," Perdue said. "Regulators are placing greater scrutiny on banks' compliance staffing, and as a result, compliance positions are becoming more expensive and harder to fill."

Before continuing with some agency and lender updates, Wednesday the commentary noted that "Effective with loan deliveries on or after October 20, 2014, PennyMac will now require two years tax transcripts for all borrowers, regardless if income is used to qualify. Any losses reported on the tax transcripts must be considered in the income calculation..."  This is only for jumbo loans! I apologize for any confusion - namely my own.

Anyone playing in the USDA Rural Development field breathed a sigh of relief when it was announced that "Fiscal Year 2015 Funds Now Available!" Funding for Rural Development's Single Family Housing Guaranteed Loan program is now available for fiscal year (FY) 2015.  The funding received is based on a Continuing Appropriations Resolution, 2015 (P.L. 113-164, H.J. RES.124). Loans that were issued Conditional Commitments "subject to" commitment authority will be obligated on the Agency's Guaranteed Loan System (GLS). If the loan has closed, the lender may submit their request for Loan Note Guarantee, together with their closing package.  Ensure the lender certification on Form RD 1980-18 "Conditional Commitment for Single Family Housing Loan Guarantee" is dated on or after the obligation date provided by Rural Development. (Questions regarding this notice may be directed to the Single Family Housing Guaranteed Loan Division, at 202-720-1452.)

Freddie Mac posted the following updates effective October 20th:  New Export "Wire Ready" Flag: For Guarantor and MultiLender contracts, adding a data field - a "Wire Ready" flag - to the Summary Data MISMO 3.0 export dataset to help more easily identify contracts for which wire instructions have not been assigned. See job aid Export Your Loan Data for more information.  A critical edit when "Field Review" is selected as the Property Valuation Method Type (Sort ID 89/90) on conventional loans when a Field Review is used as the valuation method for the subject property will no longer be received. As announced in Guide Bulletin 2014-12, effective January 1, 2015, Freddie will no longer purchase ARMs with Lookback Periods less than 45 days. Any contract for such an ARM must be entered into the selling system before October 20, 2014, and must have a Freddie Mac Settlement Date on or before December 31, 2014.

Fannie Mae's The Appraisal and Property Related FAQs have been updated. The document provides responses to common questions related to Fannie Mae's property eligibility and appraisal policies. Fannie Mae is planning to update the Loan Delivery application to accept the ULDD Phase 2 data points in Q1 2016, with a targeted timeframe to enforce the delivery of the new ULDD Phase 2 data points (for all loans with an application received date on or after March 1, 2014) in late Q2 2016. Additionally, Fannie Mae is publishing an updated ULDD Phase 2 Specification to aid lenders and vendors in preparation for ULDD Phase 2. Review the ULDD Phase 2 Update for additional information on the changes.

For more details about the changes in the UCDP read Freddie Mac's Single-Family News Center article.

Freddie Mac Expands Into Small Apartment Mortgages.  Freddie Mac is building a business to originate small apartment loans, between $1 million and $5 million, as part of its mandate to support affordable housing.

Yesterday the commentary repeated a story from the Wall Street Journal in relation to the MBA's weekly application numbers, and perhaps inappropriately questioned the MBA's numbers. (But are the MBA's numbers accurate? The WSJ wonders with a link to a story titled "Why Mortgage Demand Was Better Than Initially Reported Last Year".) The noted prompted MBA economist Mike Fratantoni to write, "I don't think the WSJ was questioning the accuracy of our numbers at all. The question was whether the other moving parts (TPO share of the market, change in pull-through rates, and change in the share of small lenders) impact how you can estimate total market originations from the apps. That's a question we spend a lot of time on in putting together our forecast, as you know." Thank you Mike.

For the markets, the story for Thursday was that Treasury rates ended about where they began. But there was plenty of intra-day movement between Treasuries and mortgages of various coupons. It was another heavy volume session but 10-year T-notes are back to 2.15% after trading as low as 1.86% Wednesday. As the commentary has noted for a while, it can be said with some confidence that volatility is back and could remain for the foreseeable future - especially without Quantitative Easing to cushion the blows. We can also expect the focus will remain on the global economy and news headlines (ISIS, Ebola etc.).

For lenders, mortgage-backed securities walked into another opening rally that was built late Wednesday and overnight but this time the rally ran out of steam and in fact reverted to full blown sell-off by mid-morning. Those issuing MBS finally unleashed a torrent of billions in pent-up rate locks - I hope that they are not the locks of other companies: rate lock ping pong is a no-win game. By the end of the day agency MBS prices were actually a shade worse than Wednesday's closing levels.

On tap for today will be Housing Starts and its partner Building Permits, and the University of Michigan survey. For those quantitatively inclined, the 10-yr is at 2.17% and agency MBS prices are worse by nearly .125.

 

Jobs and Announcements

On the jobs front, Homeward Residential is recruiting for Wholesale Account Executives across the country. Backed by Ocwen Financial, a top ten servicer, AEs will be responsible for building and managing their customer base selling a variety of products including conventional, FHA, Jumbo,  and proprietary products. Homeward is launching an e-Note pilot, and has a high touch customer centric approach to offer industry best customer experience. "Come join our team and be a part of changing the industry." send your resumes or inquiries to Deanna Linzay.

Carrington Mortgage Services is hosting a job event for folks to "discover the opportunities with the Mortgage Lending Division of our Eastern US Operations Center". It will be held Tuesday, October 21st from 5:30 to 7:30 PM at 80 Lamberton Road Suite 2, Windsor, CT. "Enjoy some refreshments and meet our leadership team." Positions include Mortgage Lending Underwriters (FHA, DE), Funders, Doc Drawers, Wholesale AEs, Wholesale Account Managers, Loan Processors, Loan Set Up, Loan Officers, and Sales Managers. "This open house is invitation only, so be sure to RSVP to John Cervantes.

A leading California jumbo wholesale leader, WESTERN BANCORP, continues to expand its features on their Newport JUMBO product with the addition of an Interest Only 40 year amortization option on the 5/1 ARM program, this feature provides ten percent greater purchasing power for the consumer. Western is committed to providing their broker-partners more choices to meet the unique financial needs of California borrowers with programs ranging from Full Doc JUMBO NO MI, 30 and 15 year fixed, 5, 7 and 10/1 ARMS and the Alternative Income Personal 12 Month Bank Statement program. For any questions regarding products and becoming a client, contact Western Bancorp at ask@westernbancorp.com