Richard Cordray spoke here in San Diego yesterday. You weren't in the audience? Well, the CFPB publishes every word uttered by CFPB's management, so here is the transcript from his speech. While leaving the event I overheard a variety of comments including, "He's so loved and popular they named a type of fabric after him," and "He sure reminds me of '30 Rock' intern Kenneth Parcell. In all seriousness, the CFPB believes it is very clear in its directives such as, "Any agreement that entails exchanging a thing of value for referrals of settlement service business likely violates federal law, regardless of whether a marketing services agreement is part of the transaction."

For some research news since many lenders are concerned about online leads...

Research has shown that 32% of consumers expect a company to respond to an online inquiry within 30 minutes. Another 42% expect contact within one hour. Josh Friend wrote to say that, "'Speed to contact' is critical if companies want to optimize sales opportunity. To evaluate how quickly companies respond to online leads, InSellerate, a comprehensive Sales Automation System designed specifically for the mortgage industry, sent digital inquiries through online forms or by email to 1,188 companies scheduled to attend the 2015 MBA Expo. The research found, as a whole, the companies did not meet consumers' expectations when it comes to inquiry response time. In fact, almost half (44.11%) did not respond to the online or email inquiry at all. Of those companies that did respond, the average response time exceeded 12 hours and the primary response vehicle was email, which is a passive, non-engaging, relatively non-effective method of contact. To see the entire research results click here, or if you are attending the MBA Expo and want to see your company's response time visit booth #223."

Turning to legal news...

British bank Barclays Plc and U.S. bank Wachovia, now part of Wells Fargo & Co, will pay a combined $378 million to resolve claims over toxic mortgage-backed securities sold to now-failed credit unions.

Do they have it to pay? Yes. We've seen plenty of earnings from banks in the last several days. Net income for the five largest U.S. dealers, including JPMorgan and Citigroup, has been much higher and less volatile since the financial crisis than before, with a Sharpe ratio of net income for these top dealers coming in nearly twice as high now since the crisis, according to a NYFED report. Since the financial crisis, major U.S. banking institutions have increased their capital ratios in response to tighter capital requirements. Are the higher capital and liquidity requirements driving up the costs of market making and reducing market volatility? Time will tell.

The bank earnings are providing an encouraging outlook on domestic US economic trends. The two big "macro" indicators (loan growth and credit) both looked very healthy. Credit in particular was being watched closely amid the mild softening in economic momentum but most metrics on this front remain extremely strong. The days of large reserve releases are clearly over. For example, Wells Fargo didn't release anything this quarter. But anyone owning stock in banks knows that earnings face some problems: the rate environment is not expected to change soon, reserve releases can't help any more, and a lot of the big operating expense cuts have taken place already.

JPMorgan will reportedly tell employees they have to begin paying for their smartphones in a move to cut expenses at the company. JPMorgan reported Q3 net income of $6.8 billion. Bank of America reported Q3 net income of $4.5 billion.

Citigroup reported about $4.2 billion in third-quarter profit, up 36% from the same period last year. It was the third straight quarter the bank's profits exceeded the expectations of analysts. Goldman Sachs Group said quarterly income fell from $2.24 billion in the third quarter of 2014 to $1.43 billion in the past three months. The investment bank reported $6.86 billion in revenue. "We experienced lower levels of activity and declining asset prices during the quarter, reflecting renewed concerns about global economic growth," CEO Lloyd Blankfein said.

For something more related to residential lending, Wells Fargo & Co. said its third-quarter profit and revenue rose despite low interest rates pressuring its lending margins. "The Coach" reported a profit of $5.8 billion, or $1.05 a share. That represents a 1.2% increase from the $5.73 billion, from last year's quarter. Revenue beat analysts' expectations, rising to $21.88 billion from $21.21 billion. Wells Fargo's loan activity picked up during the quarter. Total loans at the end of the quarter were $903.23 billion, a 7.7% increase from $838.88 billion in the same period a year ago. Commercial and industrial loans, which make up one of the largest parts of the bank's total portfolio, were $292.23 billion, up 15% from $254.2 billion in the same period last year. (Wells is going to acquire GE's global commercial distribution finance platforms, picking up about $32B in assets and 3,000 employees.)

Bank mergers and acquisitions continue. (Looking back, SNL Financial reports that in the third quarter there were 61 whole bank deals announced with an average price-to-tangible book of about 1.38x vs. 73 deals announced in Q2 with an average price-to-tangible book of about 1.36x.) In the last week or so it was announced that Yadkin Bank ($4.3B, NC) will acquire NewBridge Bank ($2.8B, NC) for about $456mm in stock. TowneBank ($6.1B, VA) will acquire three insurance agencies (Invincia Insurance Solutions, Total Insurance Planning and B.H. Baird Insurance). In Kentucky Citizens National Bank of Paintsville ($567mm) will acquire Alliance Bank ($56mm). Republic Bank & Trust Co ($4.1B, KY) will acquire Cornerstone Community Bank ($243mm, FL) for about $32.3mm in cash.

Over in Texas Community National Bank & Trust of Texas ($52mm) will acquire Star Bank of Texas ($140mm). In Maryland Hamilton Bank ($358mm) will acquire Fraternity Federal Savings and Loan Association ($142mm) for about $27mm in cash. In California Citizens Business Bank ($7.7B) will acquire County Commerce Bank ($253mm) for about $41.3mm in cash (50%) and stock (50%). Over in Arkansas Citizens Bank ($563mm) will acquire Parkway Bank ($132mm). Seacoast National Bank ($3.2B, FL) will acquire the Orlando FL banking operations of BMO Harris Bank for a 3.0% deposit premium.

Not unlike marriages things don't always work out. We learned that Alliance Bank ($166mm, MO) and Capaha Bank, SB ($186mm, IL) have terminated their proposed merger citing the impact of regulatory delays on merger terms. And in Washington Coastal Community Bank ($589mm) and Prime Pacific Bank ($121mm) have terminated their proposed merger after Prime Pacific shareholders voted against the agreement.

I may be dating myself here, but how many people remember Nick Leeson bringing down Barings Bank amid a wash of illegal and fraudulent trading? His actions cost England's oldest bank 862 million pounds, and sent a lot of financial institutions into "compliance mode" after it was revealed his bad trades were hidden from internal auditors for years. How can such an event happen? Part of the problem is that financial institutions concentrate on a few certain risk variables (such as credit and operational risk), and pay marginal attention to the more subtle risks embedded into firms; one such subtle risk is conduct risk. However, conduct risk is capable of impacting credit and operational risk as well - just ask Promontory Financial Group who was recently suspended by the New York State Department of Financial Services. The details of the suspension are mildly interesting, but the underlying lessons are important: conduct and actions by employees impact risk.  Michael Shari writes, "All of this underscores the regulatory pressure that experts in the field say is forcing an evolution in risk management culture. Companies in a wide range of industries - not just finance - are looking to mitigate conduct risk, which pertains to behavior by individual employees, in interactions with clients, counterparties or regulators, that can interpreted as a violation of an internal rule, a law or a regulation....a challenge that companies face in managing conduct risk is that many of its manifestations are not nearly as easy to identify or prevent as are anti-money-laundering or sanctions violations."

Bopping over to interest rates, Fannie's trading desk reports that "the range on the posted 30-yr primary rate continues to be from 3.875-4.0%. With the recent rally, however, many originators were compelled to start posting toward the lower end of the range and some outliers were posting as low as 3.75%. Using 3.875% as the prevailing rate, the primary/secondary spread is currently 112 basis points which still within the context the market has seen over the past weeks. Look for this spread to tighten if the market stays at these levels and volatility subsides a bit. Despite lower rates, lenders mostly reported that lock volumes were flat or only modestly higher last week as seasonal effects start to take hold."

Not much happened in the markets yesterday. That's exactly the pithy market reporting you're used to, right? We closed the 10-year risk-free T-Note at a yield of 2.03% and this morning, after the September Housing Starts and Building Permits numbers (+6.5% - mostly apartments, -5.0% respectively), we're at 2.06% with agency MBS prices worse .125.


Jobs and Announcements

In jobs news, "Every ship needs a captain, and right now Flagstar Bank is in search of someone to join the servicing leadership team who can help steer Escrow Operations. The Director of Escrow Operations will oversee and manage the daily mortgage servicing functions of the department including PMI, insurance, taxes, escrow administration, and escrow analysis-all in support of the strategic direction of the Performing Servicing team as well as the bank's overall initiatives. You'll also be asked to coach, mentor, and develop your team members in order to maximize performance and hit growth targets. With assets of over $12 billion, Flagstar Bank is the largest bank headquartered in Michigan, a top 10 mortgage originator,1 a top 20 mortgage servicer,1 and one of the top 10 largest savings banks in the country. (Source: Inside Mortgage Finance, Q2 2015.) Are you ready to take charge and command a winning team? Candidates should visit www.flagstar. com/landhere to apply or email their resume to careers@flagstar. com." Flagstar is an Equal Opportunity/Affirmative Action/Disabled/Veteran Employer. Equal housing lender. Member FDIC.

And if you're interested in operations management in Hawai'i, HomeStreet Bank, a top 20 lender with nearly 90 years of single family lending expertise, is recruiting a Branch Operations Manager for its fulfillment center in Honolulu. HomeStreet has been rapidly gaining market share in Hawaii and this role is considered critical to support next steps. While local candidates are encouraged, the hiring managers are open to assisting relocation of an outstanding leader from the mainland with a proven track record. The successful applicant will possess strong competencies in pipeline management, processing oversight and a passionate production affinity. The company is headquartered in Seattle with regional branches throughout the western United States. HomeStreet Bank is an Equal Opportunity/Affirmative Action Employer; minorities, females, protected veterans and individuals with disabilities are encouraged to apply. Please send your resume and a cover letter for confidential consideration to Senior Recruiter Holly Wirth.

In correspondent news, Banc of California's Portfolio Lending Division recently added Correspondent Lending channel to its existing Wholesale Lending channel. "BANC OF CALIFORNIA continues to find More Ways To Say Yes! Banc of California is the industry leading Non-QM Portfolio residential lender featuring Hybrid Fixed Rate ARM's with Interest Only payment options, including; QM Programs, Non-QM Programs, Alternative Documentation Programs, an Expanded Criteria Program for borrowers with impaired credit, and more. With manual underwriting, these flexible portfolio lending options provide solutions for the often complicated self-employed, high net-worth, investor and non-traditional borrower needs." Visit BANC OF CALIFORNIA at this year's MBA Annual Convention & Expo in San Diego, Booth #130, and learn more about these innovative programs. For more information and to become an approved lender, please contact PCLDclientservices@bancofcal. com.

Lastly, yesterday the commentary had a wholesale ad (1st Alliance Lending LLC; a national leader in FHA lending to the underserved borrower, has announced it has expanded its wholesale presence in the Southern California region...). Although her e-mail address was correct, the Business Development Manager in Orange County should have been spelled Victoria Arguello.