Lenders in the Courts

In yet again another lesson about not putting all your retirement money in one basket (think WAMU, Countrywide, Nat City...), Walter Investment Management Corp. filed a Chapter 11 bankruptcy plan designed to reduce its corporate debt by $800 million over time. It has become a penny stock: Friday it was trading around 35 cents a share. In early 2013 its common stock was at nearly $46 per share. According to the filing with the SEC, Walter's largest operating subsidiaries - mortgage banker Ditech Financial and reverse lender Reverse Mortgage Solutions - are not expected to file for Chapter 11 protection.

But being cautious is the name of the game. For example, KBW Research announced, "We are dropping coverage of Walter Investment Management Corp. (WAC) as the company goes through a restructuring in which we think the equity is likely to have little value. Our final rating and 12-month target price were Underperform and $0.00, respectively."

Chicago's Guaranteed Rate alleges that while still employed at the company, one of its "most highly compensated executives" planned and participated in an exodus of more than 20 employees to a newly formed rival, according to a lawsuit. Joseph Caltabiano, the former SVP of mortgage lending at G-Rate who supposedly had made $1.75 million at G-Rate through mid-November, is named. The employees who left Guaranteed Rate allegedly joined the staff of Bemortgage, a recently launched mortgage lender that operates as a division of Bridgeview Bank Group, according to the lawsuit.

Taxes - What you Need to Know

Were there really handwritten amendments from Mitch McConnell's grandkids in the Senate bill?

There were handwritten notes, but probably not from grandkids. Some would say that's kind of embarrassing, and don't give it much chance of passage. Yet the United States Senate secured the 50 votes needed to pass its tax bill, tax reform legislation that the National Association of Realtors believes puts home values at risk and dramatically undercuts the incentive to own a home. "The tax incentives to own a home are baked into the overall value of homes in every state and territory across the country. When those incentives are nullified in the way this bill provides, our estimates show that home values stand to fall by an average of more than 10 percent, and even greater in high-cost areas.

"Realtors support tax cuts when done in a fiscally responsible way; while there are some winners in this legislation, millions of middle-class homeowners would see very limited benefits, and many will even see a tax increase. In exchange for that, they'll also see much or all of their home equity evaporate as $1.5 trillion is added to the national debt and piled onto the backs of their children and grandchildren."

Sure enough, the Congressional Budget Office estimated the bill would cost $1.47 trillion over a decade. Many Republicans continue to say the bill will pay for itself through greater economic growth, despite all analyses to the contrary.

The final Senate bill differs from the tax bill passed by the House in mid-November. Those differences now must be reconciled, and a final piece of legislation voted on by both chambers. The Senate's version has some items that are of particular interest to lenders, and employees of lenders. The Senate version has seven brackets, matching today's individual tax code, but tweaks the rates on taxable income. The House bill, by contrast, only calls for four brackets. The House and Senate bills nearly double the standard deduction, drastically reducing the number of people who opt to itemize their deductions, since the only reason to do so is if your individual deductions combined exceed the standard deduction amount.

Today you're allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Both the Senate and House bills eliminate that option. What is at play is killing the state and local income tax deduction, and a limit on the property tax break. Today itemizers may deduct their property taxes as well as their state and local income or sales taxes.

The original Senate bill called for a full repeal of the SALT deduction. But it was amended to preserve an itemized deduction for property taxes but only up to $10,000, which is identical to the House measure.

Regarding the mortgage interest deduction, the Senate bill would still let one claim a deduction for the interest you pay on mortgage debt up to $1 million. The House wants to cap the loan limit at $500,000 for new mortgages. Since the House and Senate bills sharply increase the standard deduction, the percent of filers who claim the mortgage deduction would drop sharply. The Senate bill that was approved does make two changes on home-related financing. It disallows interest deductions for home equity loans. And it lengthens the time one must live in a home to get the full tax-free exclusion on one's gains when the house is sold.

Other impacted components are the child tax credit, the AMT (Alternative Minimum Tax), the estate tax, teacher deductions, medical expense deduction, the individual mandate to buy health insurance, corporate tax rates, pass-through business income, taxes on multi-national corporations, and overseas profits.

We can all watch for lots of fun in December as politicians and their aids try to reconcile the versions to send it to President Trump.

Capital Markets

If it moves, you can place a wager on it. Nasdaq plans to launch bitcoin futures on its NFX market in the second quarter of 2018, following the much larger CME Group and Cboe Global Markets' move into cryptocurrencies, according to sources. And Jeremy Potter points out that a house in Dallas was sold for the sales price in bitcoin. "And it's for real. Doesn't mean it's properly valued; it just means people are buying real things with it."

The Financial Industry Regulatory Authority has put broker-dealers on notice that they must comply with Anti-Money Laundering Compliance Program Rule 3310 no later than May 11. FINRA said a rule on customer due diligence for financial institutions from the Financial Crimes Enforcement Network "does not change the requirements of FINRA Rule 3310, and member firms must continue to comply with its requirements." 

The yield on the 10-year Treasury note rose to 2.417% Thursday, the highest level since Oct. 27, as bonds priced in doubt about passage of the Republican tax bill after voting was delayed to Friday. "Obviously, a lot of people hadn't factored in passage of the tax plan," said Thomas Roth of MUFG Securities Americas, who said the shift in bonds could affect Federal Reserve monetary policy. But U.S. Treasuries, and with them agency MBS prices, ended last week on a higher note, reclaiming a large portion of losses from earlier in the week. Treasuries climbed in overnight action, responding to concerns about the viability of the Senate tax bill, which included a provision that would raise taxes if economic growth were to undershoot expectations.

Yield curve watchers noticed that pressure on the yield curve resumed Friday with the 2s10s spread compressing to 59 bps from Thursday's 63 bps. The 2s30s spread contracted to 99 bps from 105 bps on Thursday. For the week, the 2s10s spread narrowed by a basis point while the 2s30s spread decreased three basis points. St. Louis Fed President James Bullard warned that the Fed risks inverting the yield curve if it remains on the rate-hike path. The 10-year note closed Friday yielding 2.36%.

But that was last week. What about this week? In terms of scheduled economic news, we have quite a bit, but little of it expected to move rates much. This morning we'll have October Factory Orders and the November ISM-New York Business Conditions Index. Tomorrow you can look forward to the October Trade Balance & November ISM Services. Wednesday is the usual weekly application data from last week, but also the November ADP Employment Change, revised Q3 Productivity, and Q3 Unit Labor Costs.

On tap for Thursday is the November Challenger Job Cuts and weekly Initial Claims. Friday is all the November employment data - not that any of it will do much to dissuade the Fed from another rate increase at the next meeting on December 13th. We begin the week with rates a shade higher than Friday afternoon: the risk-free 10-year is yielding 2.39% and agency MBS prices are worse .125.

Webinars, Events, and Training

Join me at the upcoming CalyxVision 18 user conference to fast track your mortgage business. Conference offerings include everything from LO marketing and sales training to hands-on, advanced Calyx training classes to help you take full advantage of your software's capabilities and integrated service providers. I will be the keynote speaker in one of the impactful general sessions and a moderator for The Future of Industry Regulations panel session. The conference, from Calyx Software, will be held February 11-14, 2018, in San Francisco. It is designed to equip you and your mortgage staff with strategies and best practices to significantly improve your business through actionable steps. Act now and take advantage of the Early Bird rate which is available until December 1. Register today at CalyxVision.com. See you in San Francisco!

Join Silicon Valley CAMP for its Jingle and Mingle holiday luncheon on Thursday, 12/7/17. Enjoy the 3-course meal and be updated the most recent housing and mortgage deduction update by Assembly Member, Ash Kalra.

Alan Fowler, CMB, a former president of NMMLA and current MBA Ambassador for the state of New Mexico and members of the Mortgage Bankers Association of America are inviting members to meet Damon Martinez, a candidate for the 1stCongressional District in the 2018 election. on December 7th, 5:30-6:30 at the Savoy Restaurant. If you would like to attend, RSVP: Kate Roesler (505.350.8526).

Franklin American Mortgage Company's December customer training calendar is available for viewing and registration. Topics such blueprints for taking a quality application on December 6th, the low down on HomeReady on December 12thand managing mortgage fraud on December 14th are a few of the informative training sessions available.

If you've missed Plaza's webinar on how to present a reverse mortgage, another webinar opportunity is slated for December 7th at 11:00 PST.

Have you checked the Fannie Mae self-paced eLearning series designed to help new servicers get up to speed quickly? Here are two more reasons: Required Forms and Access to Information and Introduction to Fannie Mae Systems are now both available on the Servicing Training page. Additional courses coming soon.

Employment and Promotions

Genworth Mortgage Insurance is currently seeking an experienced sales leader for the Austin, TX and San Antonio, TX territory. Candidates should have exceptional customer interaction skills as well as a proven track record of sales execution and leadership. 4+ years sales experience and a valid driver's license are needed in this role. Please apply by visiting the Genworth careers page and/or sending your resume to Quincy Amekuedi, USMI Recruiting Lead. Come join us!

The Money Source (TMS) is looking for an experienced leader to fill the role of Senior Controller. The candidate will oversee the growth of the accounting department and should have experience with all aspects of loan origination including securitization and servicing. The position is in the Melville, NY area (Long Island). Relocation packages available for the right candidate. Questions and resumes should be directed to Jillian Nagela.

Congratulations to Jason P. Bohrer, CMB, the new EVP of Secondary and Capital Markets for Wintrust Mortgage. Jason has been with Newbold Advisors, SunTrust Mortgage, GMAC Mortgage, American Home Mortgage and AIG United Guaranty. "In this new role at Wintrust Mortgage, Jason will manage all capital markets efforts including lock desk operations, trading, investor relations, pipeline hedging, MSR strategy, pricing strategy, product development, final document management and related risk management."