 | | | | By John Bancroft jbancroft@imfpubs.com A new Inside Mortgage Trends analysis of bank call-report data confirms that mortgage banking profits strengthened significantly during the second quarter of 2014. Banks reported a combined $4.910 billion in mortgage banking income for the second quarter of this year, a 45.5 percent increase over the first three months of the year. Earnings releases from 21 publicly traded banks and thrifts showed a 31.5 percent increase in mortgage banking income during the second quarter. With originations and secondary-market sales down sharply, 2014 is not generating the lofty mortgage banking profits of 2012 and early 2013 – an 18-month period when banks reported a quarterly average of $7.946 billion in mortgage banking income. For the first six months of this year, the industry reported a combined $8.285 billion in mortgage banking profits, down 47.8 percent from the same period in 2013. The second-quarter rebound in profits was linked to an increase in new lending and loan sales. For complete details and exclusive earnings tables, see the new edition of Inside Mortgage Trends, available online Friday. Other areas of interest: Originations, Servicing, Regulatory, Data/Rankings, Trends & Profitability | | By Paul Muolo pmuolo@imfpubs.com Mortgage lenders with less than $8 million of net worth may need to sell their companies over the next year unless than can find a strong capital partner, according to interviews conducted by IMFnews. A chief concern of worried (smaller) lenders is compliance costs, which are rapidly escalating under new regulations ushered in under the Dodd-Frank Act. Although there has been plenty of talk about mergers and acquisitions this year, many of the transactions that have occurred were asset sales involving branches and/or mortgage servicing portfolios. One of the largest deals of the year – that of PHH Mortgage – fell apart because the parent company didn’t like the bids that were offered, investment bankers told IMFnews. But “franchise” deals – where stock and licenses change hands – could dominate the M&A market for the remainder of the year. “Activity is picking up,” said Larry Charbonneau of Charbonneau & Associates. “I have a couple of deals in the works.” Chuck Klein, managing partner of Mortgage Banking Solutions, said his firm has been engaged in 12 transactions this year so far. For more details, see the new edition of Inside Mortgage Trends, available online Friday afternoon. Other areas of interest: Originations, Servicing, Mergers & Acquisitions, Trends & Profitability | | By Brandon Ivey bivey@imfpubs.com The first-time homebuyer market share in July hit its highest level since January 2011, according to results from the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. First-time homebuyers accounted for 37.2 percent of residential purchases in July, based on a three-month moving average, up from a 36.8 percent share the previous month and a 36.2 percent share in July 2013. The previous peak in first-time homebuyer activity came in June 2012 with a 37.1 percent share. The increased market share for first-time homebuyers is part of a seasonal trend that has occurred in each of the past three years. However, the share has stayed elevated for longer this year due to a sharp decline in home purchases by investors. In 2013, the first-time homebuyer share peaked in May. The decline in home purchases by investors also has helped increase the mortgage market’s share of home purchase financing, as most acquisitions by investors are paid with cash. Some 26.7 percent of home purchases in July were all-cash transactions, down from the 12-month high of 30.5 percent in February. Other areas of interest: Originations, Data/Rankings, Trends & Profitability | | By Paul Muolo pmuolo@imfpubs.com The market for “legacy” mortgage servicing rights has been on ice since earlier this year because of regulatory scrutiny, but there’s a new school of thought that suggests the halcyon days of mega transactions might be over for good. Servicing advisors who work in the MSR space note that the “Lawsky effect” is still being felt by Ocwen Financial and some of its peers, but as time goes on it will be less of a factor. “There’s still ‘high-touch’ servicing out there,” said Mark Garland, president of MountainView Servicing Group, “but it’s being dramatically reduced as time goes on.” According to Garland, megabanks such as Bank of America, Citigroup and JPMorgan Chase are no longer actively selling large packages of legacy or high-touch product, or they have already disposed of their biggest headaches. The exception to that rule is Wells Fargo, which still hopes to complete the sale of $39 billion in highly delinquent non-agency MSRs to Ocwen. That transaction – which has been widely publicized – has been on hold since earlier in the year, when Benjamin Lawsky, superintendent of the New York Department of Financial Services, began asking questions about Ocwen’s fast growth, its servicing practices and some of its business relationships with companies it spun off over the past few years. For more on the story, see Inside Mortgage Finance. Other areas of interest: Servicing, Secondary/MBS, Mergers & Acquisitions, Trends & Profitability | | By Paul Muolo pmuolo@imfpubs.com Bank of America Thursday morning unveiled a record $16.65 billion global MBS settlement with the Department of Justice, which resolves both actual and potential negligence claims that might be brought by a host of federal and state regulators. Combined with a $9.3 billion MBS settlement with the Federal Housing Finance Agency struck back in March, the bank’s past mortgage activities – which are tied to two key acquisitions: Countrywide and Merrill Lynch – have cost the company almost $26 billion in the time span of six months. In its statement announcing the settlement, BofA stressed, “The claims relate primarily to conduct that occurred at Countrywide and Merrill Lynch prior to Bank of America's acquisition of those entities.” BofA, which is the nation’s third largest residential originator, will pay $9.65 billion in cash and provide $7.0 billion of consumer relief. The cash portion consists of a $5.02 billion civil monetary penalty and $4.63 billion in compensatory remediation payments. “The settlement includes releases on the securitization, origination, sale and other specified conduct relating to residential mortgage-backed securities and collateralized debt obligations and an origination release on residential mortgage loans sold to government-sponsored enterprises and private-label RMBS trusts, or guaranteed by the FHA,” the company said in a statement. Parties to the settlement include: the Department of Justice; Securities and Exchange Commission; and state attorneys general from California, Delaware, Illinois, Kentucky, Maryland and New York, which are members of the Residential Mortgage Backed Securities Working Group of the Financial Fraud Enforcement Task Force. Countrywide and Merrill Lynch were key players in the non-prime MBS market, originating and securitizing loans during the subprime boom of 2004 to 2007. According to figures compiled by Inside MBS & ABS, during the subprime boom years Countrywide issued $325 billion of non-agency MBS, Merrill Lynch $52 billion. In time, delinquencies on the securities soared and investors in the paper – including the GSEs – lost billions of dollars. Other areas of interest: Originations, Secondary/MBS, Regulatory, Nonconforming, Ginnie Mae/FHA | | By Paul Muolo pmuolo@imfpubs.com EJF Capital has amassed a 6.4 percent stake in PennyMac Mortgage Investment Trust, according to a recent filing with the Securities and Exchange Commission. If EJF Capital’s name sounds familiar, it should. The company also owns a 7.6 stake in PHH Corp., the parent of the nation’s sixth largest residential originator. And one other thing: EJF was founded back in September 2005 by Emanuel “Manny” Friedman, a co-founder and former co-chairman and co-CEO of Friedman, Billings, Ramsey Group. Last decade, FBR was a pioneer in mortgage lending REITs. PennyMac, of course, is a REIT… Standard & Poor’s this week revised its outlook on Ocwen Financial to “negative” from stable, citing “increasing regulatory scrutiny over its related party dealings, management and governance and servicing practices.” Readers may recall that on Monday Ocwen said it had received a subpoena from the SEC tied to its business dealings with several companies that it spun off to the public. The spin-offs – including Altisource and Home Loan Servicing Solutions – continue to do business with Ocwen. The megaservicer has pointed out that all the business dealings between Ocwen and the spin-offs have been disclosed. Okay, but one obvious question is this: If Ocwen continues to do so much business with these spin-offs why did they spin them off in the first place? Just a thought... The average loan officer makes a $4,000 commission on each reverse mortgage he or she originates. So says ReverseVision, a vendor that provides loan origination software to lenders… Cole Taylor Mortgage is now part of MB Financial Bank. More than a year ago, MB Financial announced its intention to buy Taylor Capital Group, another bank which owned CTM. The transaction dragged on, but recently was completed. Cole Taylor Mortgage was created by mortgage industry veteran Willie Newman, who left the lender/servicer this spring. Newman teamed up with a hedge fund and is now in the hunt to buy – you guessed it – a mortgage company… MORTGAGE PEOPLE: LenderLive Network named Kevin Cooke as senior vice president of business development in its loan servicing division. He joins LenderLive from AMS Servicing, a special servicer.
Your Mortgage Disclosure Planning Needs to be in Full Swing Now While there’s a year left before the Consumer Financial Protection Bureau’s integrated mortgage disclosure final rule takes effect, mortgage compliance experts are warning that lenders need to prepare NOW for major changes in the whole mortgage origination process that must be made to accommodate the new disclosures. Find out what you need to know – and do – at Inside Mortgage Finance’s September 11, 2014, 2:30 pm webinar: “Planning for New Disclosures: The Time Is Now.” Our team of experts will examine the changes required under the new rules – and, most importantly, take you through what you should be doing now to ensure the smoothest transition to the new requirements. Register now…early bird discount ends Thursday, Aug. 21. Other areas of interest: Originations, Servicing, Personnel, Regulatory, Data/Rankings, Mergers & Acquisitions | | | |
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