Page 2

CEO departures, M&A and a ‘super office’: The top wealth management stories of 2017

Investment Week rounds up the key movements, mergers and acquisitions and launches within the wealth management sector in 2017.

Monday Morning Cup of Coffee: LinkedIn invests $10m in Silicon Valley affordable housing

Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

Breaking news! It’s crazy expensive to live in San Francisco.

Hang on…I’m receiving some late-breaking news in my imaginary earpiece. Oh, right, everyone knows that. It’s only something we’ve covered here at HousingWire a million times (not actually a million, but you get the idea).

Every week, it seems like there’s another example of people (or companies) going to extremes to secure housing in the Bay Area. And last week was no different.

This particular headline caught my eye: “San Francisco rent is so expensive that a law firm bought a $3 million plane to fly its people in from Texas instead of having them live there”

The article, from Business Insider, details how one Houston law firm found that it was cheaper to buy a plane and fly its employees back and forth to the Bay Area than it would have been to hire lawyers in the area.

From the article:

Though the jet cost $3 million, the Houston Chronicle’s L.M. Sixel reports, it’s cheaper than hiring local lawyers, and even less expensive than relocating the Texas lawyers with business in Silicon Valley to the area.

“The young people that we want to hire out there have high expectations that are hard to meet,” Bruce Patterson, a partner at the firm, told The New York Times. “Rent is so high they can’t even afford a car.”

And it’s not just law firms that seem to be having a hard time finding housing for their employees in the Bay Area. Some of the world’s largest tech companies are also struggling to find affordable housing for their workers.

Earlier this year, Facebook and Google both announced plans to build new, affordable housing in Silicon Valley.

Facebook’s plan, for example, would bring 1,500 new housing units to the area. Of those, 15% are slated to be “affordable,” meaning priced below the market rate. Facebook’s project will be available to employees and non-employees, alike.

But Facebook and Google aren’t the only tech giants that are investing in affordable housing in Silicon Valley.

LinkedIn is joining in too.

LinkedIn recently invested $10 million into an initiative started by Housing Trust Silicon Valley, a nonprofit community loan fund based that works to increase affordable housing options in Silicon Valley.

LinkedIn’s money went to the TECH Fund, a program started by Housing Trust Silicon Valley that aims to get more high-tech organizations, large employers and philanthropists involved with creating affordable housing in the Bay Area.

According to details provided by Housing Trust Silicon Valley, TECH Fund was created to “help developers with short-term capital needs to compete more effectively with market-rate developers and purchase property faster.”

The nonprofit also said LinkedIn is the first company to “use their investment in the TECH Fund to make additional voluntary contributions to benefit their community.”

With LinkedIn’s $10 million, the total investment in the TECH Fund is now $30 million, the nonprofit said.

“We see TECH Fund and LinkedIn’s investment as new way to lead change in the affordable housing landscape,” said Kevin Zwick, CEO of Housing Trust Silicon Valley. “We’re happy to create a way for affordable housing developers to access land acquisitions funds quickly, and we thank LinkedIn for being a committed ally to do so.”

And it appears that some of LinkedIn’s money is already being put to good use.

According to Housing Trust Silicon Valley, a portion of LinkedIn’s investment was used to purchase a site in Mountain View, California that is to be used to build 70 new affordable apartments, with 20 homes dedicated to permanent supportive housing.

“We must all take ownership of the affordable housing crisis in the Bay Area, and invest in compassionate solutions,” said Katie Ferrick, head of community affairs at LinkedIn. “This partnership with Housing Trust through the TECH Fund is a creative way to make community impact investing a viable way for companies to address the need for housing.”

Meanwhile, over in vastly different section of the finance industry, there’s controversy at the Federal Agricultural Mortgage Corporation, otherwise known as Farmer Mac.

The company, which functions as a secondary market for agricultural credit, abruptly fired its president and CEO, Timothy Buzby, late last week.

According to an announcement from the company, Buzby was terminated by the company’s board “solely on the basis of violations of company policies.” But, the company did not provide any more information on what those violations actually were.

The company also said that Buzby’s termination was not due to the company’s financial or business performance.

Taking over on an interim basis is Lowell Junkins, who becomes acting president and chief executive officer.

Junkins has served as Farmer Mac’s chairman of the board since late 2010 and has been a board member since 1996.

“My job, as acting CEO, is to make sure nothing gets in the way of this organization’s stellar leadership team and staff and the excellent work they do every single day,” Junkins said. “As our third quarter results demonstrate, we have been performing extraordinarily well and look forward to that continuing without a hitch.”

The company said that its board will launch an “immediate and thorough” search to find a new president and CEO and will consider both internal and external candidates.

And finally, some news from ACES Risk Management, also known as ARMCO.

The company, which provides financial quality control and compliance software, announced Monday morning that it is releasing a new technology for mortgage lenders and servicers that improves data validation in the quality control process. 

The new data validation tool adds advanced process automation functionality to the company’s ACES Audit Technology, which enables the software to automatically identify missing data within the loan file.

“We created this feature to help our clients relieve a critical pain point of validating system data. Data integrity issues compromise loan quality, create extra work, and most importantly, increase lenders’ risk when they’re not caught and corrected,” Phil McCall, president of ARMCO, said.

“Manually searching for data related errors can be extremely difficult given the amount of data contained in a loan file,” McCall added. “That’s why automation stands to make a major difference in lenders’ success in identifying and correcting one of the most frequent causes of critical defects.”

According to the company, the upgrade became available over the weekend.

And with that, have a great week everyone!

Monday Morning Cup of Coffee: LinkedIn invests $10m in Silicon Valley affordable housing

Every week, it seems like there’s another example of people (or companies) going to extremes to secure housing in the Bay Area. Earlier this year, Facebook and Google both announced plans to help build new, affordable housing in Silicon Valley. And now, LinkedIn is joining in too. All that, and more, in your Monday Morning Cup of Coffee.

Houston fights to insure low-income residents aren’t forgotten in hurricane recovery efforts

As Houston continues its recovery efforts from Hurricane Harvey, which swept through South Texas in September this year, one organization said it is important to ensure those who are in most need of help, receive it. Even before the storm hit, some Houston residents were one paycheck away from real trouble.

HUD Secretary Carson launches centers to drive households to self-efficiency

U.S. Department of Housing and Urban Development Secretary Ben Carson announced a new initiative to help HUD-assisted families achieve self-efficiency. HUD explained these centers will be hubs for what it calls the four key pillars of self-sufficiency: character and leadership, educational advancement, economic empowerment and health and wellness.

Ginnie Mae steps up oversight on refinances

Ginnie Mae is the only secondary mortgage market player to offer an explicit government guarantee to its mortgage-backed securities.

And now, the full faith of the Federal Government is coming with an uptick in issuer oversight, according to a Ginnie Mae release from today.

Ginnie Mae is getting the word out that it is actively monitoring the pooling activity of issuers to identify behavior that violates the latest changes to issuer policies.

Any issuer that does not comply with the program requirements will be subject to sanctions, Ginnie Mae said.

Earlier this year, Ginnie Mae announced that it was launching an investigation into mortgage lenders that were aggressively targeting service members and military veterans for quick and potentially risky refinances of their mortgages.

The investigation came on the heels of a letter from Sen. Elizabeth Warren, D-Massachusetts, who cited a report from the Consumer Financial Protection Bureau, which covered complaints received from veterans about Department of Veterans Affairsmortgage refinancing.

Later, SIFMA, a prominent secondary market trade group voiced its concerns in a letter it sent to the company. In the letter, SIFMA President and CEO Kenneth Bentsen said that the group and its members support the Ginnie Mae and VA efforts to address the issue because investors have already seen the down-the-line impact on mortgage-backed securities.

Ginnie Mae is also now increasing the tracking and analysis of prepayment rates. 

“Any issuer with pool performance that appears out of step with market peers will receive increased attention and engagement from Ginnie Mae,” the statement said. “Furthermore, prepayment information will now be included in Ginnie Mae’s Issuer Operational Performance Profile (IOPP) scorecard, which is used to evaluate issuers against their peers.”

This is all part of a continuing effort to address the detrimental loan churning and high prepayment speeds Ginnie Mae found recently in its securities. 

“These changes, along with additional measures under consideration, are being made to ensure the continued strength and liquidity of the Ginnie Mae MBS Program,” said Michael Bright, Ginnie Mae CEO. 

Late last year, Ginnie Mae imposed seasoning requirements for streamline refinance loans to address rapid prepayments, which were negatively impacting the performance of certain Ginnie Mae securities. 

Today’s announcement expands pooling restrictions to cash out refinance loans, and outlines additional measures taken to protect the Ginnie Mae security. 

Here are the full details:

Effective April 1, 2018, streamline and cash out refinance loans can only be pooled into Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools if six monthly payments have been made on the underlying loan and the refinance occurs no earlier than 210 days after the first monthly payment is made on the initial loan. Any covered loans that do not meet these requirements are prohibited from being pooled into Ginnie Mae standard MBS pools. 

The announcement also provides details regarding the refinanced loans that are not restricted for inclusion in Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools. To be eligible for Ginnie Mae pools, loans must meet the requirements for a fully underwritten rate term refinance loan under rules set forth by the respective federal housing program or benefit administrator.

Ginnie Mae steps up issuer oversight

Ginnie Mae is the only secondary mortgage market player to offer an explicit government guarantee to its mortgage-backed securities.

And now, the full faith of the Federal Government is coming with an uptick in issuer oversight according to a Ginnie Mae release from today.

Ginnie Mae is getting the word out that it is actively monitoring the pooling activity of issuers to identify behavior that violates the latest changes to issuer policies.

Any issuer that does not comply with the program requirements will be subject to sanctions, Ginnie Mae said. 

Ginnie Mae is also now increasing the tracking and analysis of prepayment rates. 

“Any issuer with pool performance that appears out of step with market peers will receive increased attention and engagement from Ginnie Mae,” the statement said. “Furthermore, prepayment information will now be included in Ginnie Mae’s Issuer Operational Performance Profile (IOPP) scorecard, which is used to evaluate issuers against their peers.”

This is all part of a continuing effort to address the detrimental loan churning and high prepayment speeds Ginnie Mae found recently in its securities. 

“These changes, along with additional measures under consideration, are being made to ensure the continued strength and liquidity of the Ginnie Mae MBS Program,” said Michael Bright, Ginnie Mae CEO. 

Late last year, Ginnie Mae imposed seasoning requirements for streamline refinance loans to address rapid prepayments, which were negatively impacting the performance of certain Ginnie Mae securities. 

Today’s announcement expands pooling restrictions to cash out refinance loans, and outlines additional measures taken to protect the Ginnie Mae security. 

Here are the full details:

Effective April 1, 2018, streamline and cash out refinance loans can only be pooled into Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools if six monthly payments have been made on the underlying loan and the refinance occurs no earlier than 210 days after the first monthly payment is made on the initial loan. Any covered loans that do not meet these requirements are prohibited from being pooled into Ginnie Mae standard MBS pools. 

The announcement also provides details regarding the refinanced loans that are not restricted for inclusion in Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools. To be eligible for Ginnie Mae pools, loans must meet the requirements for a fully underwritten rate term refinance loan under rules set forth by the respective federal housing program or benefit administrator.

This week’s Growth and Income Stocks are Cisco Systems (CSCO) and Rayonier Inc. (RYN).

[embedded content]

Cisco Systems (CSCO Free Report) has been shifting away from its legacy switching and routing business, and has been more focused on areas of high growth within the technology realm.  This includes the cloud, the internet of things (IoT), cybersecurity, and enterprise collaboration.  While they have not abandoned their legacy items, as they still have a solid revenue stream coming in from this segment, management has found that these new growth areas have begun to help its reoccurring revenues.  

The success of this new focus was evident in their last quarter’s earnings announcement where these reoccurring revenues, in the form of subscription products and software sales accounted for almost 1/3 of total revenues.  Specifically, subscription product revenues increased to 12% of sales which was an over +100% increase from just two years ago.  Currently, management’s goal is to have reoccurring revenues to account for +37% of total sales, and for subscriptions to reach 20% of product sales by 2020.  This goal seems very obtainable given their current course, and recent success.  

The company is also branching out into cybersecurity, another high growth tech area, and they recently announced a partnership with INTERPOL share threat intelligence.  This is the initial stage for both of these organizations to fight cybercrime.  Further, Cisco recently relaunched its smart city platform. According to Larry Payne, SVP of Cisco, “It’s a solution that provides connectivity as well as analytics and security to multiple devices, such as sensors, streetlights, and video cameras.”  This platform is currently being used by 34 cities, including Las Vegas Nevada.  

One of the newest, and more interesting ways Cisco is moving into the internet of things (IoT) has been their recent collaboration with IOTA, “an open-source distributed ledger (cryptocurrency) focused on providing secure communications and payments between machines on the Internet of Things.”  This new system is expected to be more efficient and easier to use than the common blockchain technology.  

This overall shift by the company has not gone unnoticed by analysts, as they have increased price targets, and revenue expectations since the last earnings announcement.  As you can see below, the stock price and future earnings estimates have jumped since management’s shift to more high growth technology areas.

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. Price and Consensus | Cisco Systems, Inc. Quote

Lastly, the company pays a very nice +3.09% annual dividend.  Moreover, the recent corporate tax cut is expected to result in more share repurchases and dividend hikes in 2018.  While this is not confirmed, many are expecting management to return these savings to its shareholders.  

Rayonier Inc (RYN Free Report)

The sustained housing market, the necessary rebuilds after the hurricanes, and the potential infrastructure bill in early 2018 are the main drivers behind Rayonier’s recent uptick, and bolstered future expectations.  Rayonier is a timberland real estate investment trust with assets located in some of the most productive timber growing regions in both the U.S. and New Zealand. Rayonier owns, leases or manages acres of timberlands located in the U.S. South, U.S. Pacific Northwest and New Zealand.

In mid-November, the Commerce Department reported that housing starts rose by +13.7% to a seasonally adjusted annual rate of 1.29 million units.  This marked the highest level since October of 2016.  The areas impacted by the hurricanes were up even higher, +17.2%, with single family construction improving by +16.6%, the highest level since 2007.  Moreover, building permits increased by +5.9% to an annual rate of 1.297 million units in October.  Specifically, single family permits rose by +1.9% while multi-family homes jumped up +13.9%.  

During this time, Rayonier saw significant increases in their harvesting volumes in all three of their timberlands; U.S. South +24%, U.S. Pacific Northwest +5%, and New Zealand +40%.  This equated in improved sales in all three areas; U.S. South +15%, U.S. Pacific Northwest +16%, and New Zealand +66% when compared to the year ago quarter.  While sales and harvesting volumes increased, management was able to decrease both corporate and operating expenses.

Another area of growth for the company is in the form of exports.  China has seen its timber supply deficit increase as of late, and Rayonier’s exports from the U.S. South to both China and India have grown by 8 times since 2012, and are expected to continue to grow through 2018.  

Moreover, Rayonier continues to prudently acquire more timberland, and has average 8 transactions annually adding about 105,000 acres each year to their portfolio.  This process is expected to continue through 2018. Lastly, the company pays out a nice 3.25% annual dividend with the next record date payment on 12-14.

Today’s Stocks from Zacks’ Hottest Strategies

It’s hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 – Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 – Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we’re willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Email: An incubator for the untapped business network

There’s something called the “Hollywood handshake.” It’s when someone shakes your hand, but instead of looking you in the eye, they scan the room to see if there’s anyone more important to speak to. (We don’t like those people.)

The way we decide not to like Hollywood handshakers is rooted in the 7/38/55 Rule, introduced by nonverbal communication pioneer Professor Albert Mehrabian. According to the 7/38/55 Rule, our decision to like or not we like a person is weighted only 7% on that person’s words. Tone of voice accounts for 38% of our decision and nonverbal communication weighs in at a whopping 55%.

In business, liking someone often results from feelings like trust and respect. Want higher quality business relationships? Then get out of the virtual world and meet people in person. It’s one of the main reasons people go to industry conferences – because people get a better idea of who they want to do business with (i.e. who they trust and respect) after meeting people face to face.

I’d known my NEXT business partner Molly Dowdy via email and phone years before we’d actually spent time together in person. And while I liked the virtual Molly well enough, it wasn’t until we met face to face and spent time together that, long story short, we created and launched the first women’s mortgage technology conference. No coincidence there. 

It was nonverbal — not verbal — communication that prompted us to launch into conversations that rarely happen in email- and business call-only relationships. By getting face to face, I got to see Molly as a person, and vice versa.

We parted that in-person meeting as business friends, so when she returned to home to Edmond, Oklahoma and I returned to Paris, France, it was seamless and easy to have the frank discussions that led to our partnership to create NEXT.

We voiced complaints about some of our personal experiences in the industry, our passion for the causes we found important, and our goals for the legacies we want to leave behind—all topics that would have been too personal or not professionally relevant enough to breach had our communication been limited to email and phone calls.

Industry conferences offer a great opportunity to meet face to face. But not all conferences are created equal. Are the networking events designed to allow you to really get to know someone, or are you simply handing out business cards after a handshake and a nice to meet you? If you’re not connecting, you’re missing an opportunity.

Find a conference with events that bring people together and cultivate clear, direct conversations. The typical loud conference bar will preclude 38% of the 7/38/55 Rule simply because you can’t hear anyone’s tone of voice.

I don’t think NEXT would exist if Molly’s and my in-person contact was limited to exchanging business cards in a crowded conference bar. It most certainly wouldn’t had we never met in person. We would have missed the opportunity to co-create an event whose mission is to make a huge improvement in our industry’s workplace equality going forward.

While I see benefit from virtual connections, there’s no substitution for meeting face to face. In person meetings can spark all sorts of opportunities that wouldn’t materialize through strictly email and phone communication. If you’re building relationships without meeting in person, you’re not just missing loads of valuable input, you’re probably missing out on some once in a lifetime opportunities, as well.  

Bank analysts: Democrats unable to slow down Republican tax reform

Economic analysts at both Goldman Sachs and Nomura are leaning toward successful tax reform legislation from the Republican Party.

At this point, all signs point to tax reform passing as “very likely,” they say. Nomura is an Asia-headquartered global investment bank that monitors United States economic and political landscapes closely.

As for tax reform, they say it’s not Democratic anchor dropping that may interfere with the process. Indeed it’s the slim margin of voting victory that could derail the process, according to an email sent out today.

“The 51-49 Senate vote, arguably the highest hurdle in the tax reform process, had only one Republican detractor, Senator Corker (R-TN). The next step in the process is a “conference committee” where members of the House and Senate will work on a compromise between their respective bills.”

Both bill do vary but each version will significantly impacts everyone reading this article in one way or another. For those of us who would seek tax reform to fail, your chances of success are fading with each passing day, it seems.

As of now, House Speaker Ryan is loading up on party members to push a unified package through the committee.

He already assigned nine House Republicans to the committee, with House Ways & Means Chairman Brady (R-TX) as the Conference Chair.

“We expect that the committee will largely be comprised of Republicans from the Senate Finance Committee, with Senate Finance Committee Chairman Hatch (R-UT) playing a large role,” Nomura analysts write.

“Democrats will also take part, but as the minority party they will have little chance to slow the tax reform process,” they concluded.

Analysts at Goldman Sachs said earlier this week, the tax reform is expected to pass by year’s end.

“Some differences between the two versions still need to be ironed out,” the Goldman experts said. 

“We expect the final structure of the bill to reflect more of the Senate bill than the House bill, including a 20% corporate tax rate effective in 2019, the Senate’s more restrictive limit on net interest deductibility, and the Senate’s treatment of pass-through income,” they added. “Both proposals now include a $10k cap on state and local property tax deductibility, rather than full repeal, eliminating the most important political difference between the bills before the conference negotiations start.”