Genworth U.S. Mortgage Insurance recently released its survey that was conducted at the MBA conference in Las Vegas in October of over 300 industry executives. About 61% of executives believe lenders have underwriting standards that are too rigid, whereas 25% believe standards are not overly restrictive and 14% believe the standards are fitting. More than half (53%) believed if guarantee fees increased, it would result in fewer loans being closed and an additional 23% believe it would increase the demand for FHA loans. Almost two-thirds of respondents (64%) believe that low-income borrowers with strong credit do not have appropriate access to credit markets when purchasing a home and 38% of respondents are labeling the potential return of piggyback lending as a threat to the stability of the housing industry.

The role of the LO is changing. One of the sessions yesterday at the MBA conference covered how top producers and veterans are now struggling to maintain their success due to a suffocating regulatory environment and business development hurdles. In order to be successful in this industry today, you must be comfortable with compliance and operations. Along with having to mold to emerging industry standards, success for any company will also be driven by recruiting the right talent. Yesterday at the MBA's IMB conference, during the session on recruiting, the panelists raised the importance of retaining employees and hiring synergistic talent. As it is becoming increasingly more difficult to predict an employee's success, the panelists encouraged companies to look for employees who are excited about the industry, eager to learn and have excellent interpersonal skills. Companies should also be open to the idea of taking risks on current employees and training them in order to proliferate their career. The panelists also raised the issue of hiring bank employees, as they tend to be more acquainted to a structured working environment, a deviation from the level most IMBs provide. Companies should also engage in employee-building relationships such as monthly meetings with top producers to understand how they are being successful, providing an office lounge, and building a testimonial book that can be used as a tool for recruiting.

Turning to product news, Tom Davis from PMAC writes, "On December 1, 2014 the USDA's new guidelines (CFR) Part 3555, "Single Family Housing Guaranteed Loan Program" (SFHGLP) became effective, replacing 7 CFR 1980 Subpart D.  The new regulations, technical handbook, and respective forms can be found at the USDA Rural Development's Regulation and Guidance page. The new guidelines address the requirements of Section 502(h) of the Housing Act of 1949, as amended, and include policies regarding the origination, servicing, holding and liquidation of SFHGLP loans.  All loan applications that do not have a conditional commitment issued by USDA prior to December 1, 2014 are subject to the new guidelines.  For guideline updates, program information, potential map changes, lender contacts, recorded origination and servicing training sessions visit USDA Guaranteed Rural Housing LinkedIn Group." Thanks Tom!

And USMI released a statement indicating that the final version of PMIERs is not expected to be published until at least late in the first quarter of 2015. The final version was originally planned to be released this month - maybe the FHFA is taking into consideration the comments it received? You might recall that last month Mel Watt, the Director of FHFA, was asked about potential changes to draft PMIERs at a Senate Banking Committee hearing. Specifically, he was asked about counting unearned premiums towards capital (it is not counted towards capital in the draft PMIERs). He answered that this was something the FHFA was looking at very carefully because a number of people had said that this should be changed. He also noted that internally at FHFA, there were different views on this issue.

"Average company production volume was up in the third quarter, which resulted in a nominal decrease in per-loan production expenses," said MBA Vice President of Industry Analysis Marina Walsh. "At the same time, the average loan balance for first mortgages reached its highest level since inception of the Quarterly Mortgage Bankers Performance Report in 2008. Nonetheless, production profits were slightly down because of a decrease in secondary marketing income." So stated the MBA's study of independent mortgage banker profits.

On the bank merger side of things it was pretty quiet over the last week: I only saw a note that First Foundation Bank ($1.3B, CA) will acquire Pacific Rim Bank ($121mm, HI) for about $12mm in stock. But the FDIC has released a report on branching that finds that not only since 2008 the number of branches has declined 4.5%, but that the number of tellers working in bank branches has declined 45% since 1992.

Maybe that is helping the bottom line. FDIC insured institutions earned $38.7 billion in the third quarter of 2014 - the largest increase in earnings since the fourth quarter of 2009. Almost two-thirds of the institutions had a YoY growth in quarterly earnings and only 6.4% reported being unprofitable. Community banks saw the most improvement from a year earlier and the main contributor to income growth in the third quarter was due to revenue growth instead of lower loan-loss provisions. Some highlights of the report include total loan and lease balances rose to $8.2 trillion and have increased by 4.6% over the past 12 months, noninterest income was $5.4 billion, up 9.2% from a year earlier and net interest income was $2.4 billion, up 2.3% from a year before. Banks set aside $7.2 billion for loans losses, the first time in 5 years that the industry reported a YoY increase in loss provisions. The third quarter demonstrated positive results for the banking industry but impending challenges remain a concern, such as low interest rates, extending asset maturities and increasing higher-risk loans. Read the press release here.

The American Bankers Association responded positively to FDIC's third quarter bank earnings, stating the industry had another strong quarter with capital reaching a record high. Consumer and business lending indicates a broad-based growth as the improved lending environment has increased confidence among households and businesses, better enabling them to meet their financial obligations. Although the earnings indicate positive growth, the entire housing industry is experiencing ramifications from excessive regulation, where lending to first-time homebuyers and low-credit borrowers have become increasingly difficult. Even though the level of non-performing loans is down more than 58% since 2010 and capital is at record levels, banks should be mindful that increasing loan loss provisions will protect them against any economic distress that could arise.

While we're on underwriting, tongues are wagging about the article Dodgy Home Appraisals Are Making a Comeback.  Home appraisers are inflating the value of some properties they assess, often at the behest of loan officers and real-estate agents, in what industry executives say is a return to practices seen before the financial crisis. In response Mike Perry writes, "Statement 514, available on my blog, notes, 'If one in seven appraisals are currently inflating home values by 20% or more, why aren't Fannie, Freddie, FHA, and VA stepping up lender buybacks and instead recently announced policies that act to reduce them? And why aren't the banking regulators doing more than "reviewing the issue'? I will tell you why..."

Fannie Mae has announced its new appraisal quality tool, Collateral Underwriter. (You can obtain it from clicking on the link for free.) Many lenders and AMCs are worried about what it means for them and how it will change their pre-funding quality assurance strategies. There's a new white paper out with an overview of Fannie Mae's plan, what lenders and AMCs need to do to be prepared for the January 26th rollout, and a full list of regulatory issues relevant to appraisal quality control.  The paper also has solution strategies and a list of industry resources on effective QC. 

Turning to the markets there is just not much going on that has moved rates. In fact the 10-yr T-note closed Tuesday and Wednesday at the same yield: 2.29%. We did, however, have some news yesterday. First, the ADP National Employment Report shows 208,000 jobs were added in November. The MBA Weekly Mortgage Applications Survey for the week ending November 28 dropped over 7% with refis dropping 13% (hitting 60% of all applications) but purchases increasing 3%. Further slicing and dicing showed the ARM share decreased to 6.7%, the FHA share decreased to 9.3%, and the VA share decreased to 9.4%. Nonfarm labor productivity increased at a 2.3% annual rate in 3Q2014, Unit labor costs in the nonfarm business sector fell 1.0%.  Lastly, the Institute for Supply Management's non-manufacturing index rose to 59.3, the second-highest level since August 2005, from 57.1 in October. After the dust settled there were some small inter-coupon moves along with some differences between Fannie, Freddie, and Ginnie bonds, but nothing earth-shattering.

Today we had Jobless Claims (+313k last) which came out -17k from a revised 314k to 297k. Soon after the news we find the 10-yr at 2.28% and agency MBS prices better ever-so-slightly.

Jobs

On the jobs front, Mortgage Solutions Financial is actively seeking aggressive account executives and Area Sales Managers who can help the company "continue its spectacular growth in CA, the Pacific NW, and the Midwest. MSF was recently recognized as a 2014 Five Star Lender by the 56,000 readers of Mortgage Professional America.  During the past year, MSF has grown into one of the major players in the market and plans to continue to expand their impact on the industry throughout 2015. As a direct Fannie/Freddie/Ginnie and FarmerMac lender, their no-overlay and limited overlay products now include LP, in addition to DU, FHA and VA offerings - across both wholesale and correspondent channels."  Contact Greg Grandchamp for more information.

The First Community Mortgage Delegated Correspondent lending channels continues adding Best Efforts Sellers and loan volume at a record pace. "We continue to partner with Sellers who are looking for an investor who makes a difference in their business," says Dennis Patchett, Nationals Sales Manager. "Our pricing is consistent and our communication and speed separates us from competition.  We've built a 'best of breed' delegated platform, but we've been selective in choosing who gets the benefit of the platform.  This selective methodology allows our true partners to experience something completely unique and beneficial," he adds.  For additional details on FCM's Delegated Correspondent Channel, please contact Dennis Patchett.

And in Denver MegaStar Financial, a retail mortgage banker, is seeking a Corporate Operations Executive Officer. "We are a fifteen year old mid-sized retail mortgage banking firm that sells directly to FNMA and GNMA and have a solid foundation of success. The position will oversee product development, underwriting, processing, and closing and will be responsible for developing and maintaining departmental goals, setting employee and company expectations, development and management of policies and procedures, maintaining and developing new business strategies, and recruiting. The right person for the position will have a minimum of seven years of experience at a senior executive or higher level and proven success in managing a team of 100+ people. Interested parties can submit a resume in confidence or ask for a complete job description by contacting mpieper@megastarfinacial.com.