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» VISIT US ONLINE @ DSNEWS.COM 11 POSITIVE JOB REPORT INDICATES GROWTH AND RATE INCREASES e New Year is off to a strong start—at least as far as the labor market is concerned. According to the latest Employment Situation Summary released by the U.S. Bureau of Labor Statistics on February 3, jobs are on the increase, particularly in the construction, retail trade, and financial services industries. U.S. nonfarm jobs increased by a total of 227,000 in January alone. e unemployment rate remained fairly unchanged, increasing from 4.7 to 4.8 percent since December. A total of 7.6 million Americans were unemployed in January. e numbers were largely better than expected, according to economists. "January's employment report showed stronger than expected job creation—stronger than last year, and much stronger than the fourth quarter gains," said Jonathan Smoke, Chief Economist for Realtor.com. "We have now seen a record 76 months of job growth." e gains should give the Federal Reserve something to consider when its next rate hike is on the agenda later this year. "e fastest pace of job creation in four months should be enough to buoy market optimism and put the Fed on notice," said Lindsey Piegza, Chief Economist at Stifel Fixed Income. "But from a monetary policy standpoint, Fed officials are increasingly focused on wage growth as opposed to the headline payroll number as an indication of the health of the U.S. labor market." ough only in office a few weeks, the numbers are positive for President Trump, who in his campaign promised job growth, improved infrastructure, fewer business regulations, and better trade deals for the country. In a September 2016 speech at the New York Economic Club, Trump said, "If we lower our taxes, remove destructive regulations, unleash the vast treasure of American energy, and negotiate trade deals that put America First, then there is no limit to the number of jobs we can create and the amount of prosperity we can unleash." ough Trump has had little time to enact policy change as of yet, his win in November likely plays a large role in the recent growth. "We view the strength in hiring as consistent with increased optimism from the private sector following the presidential election, with businesses saying they expect to expand and plan to hire more workers," said Doug Duncan, Fannie Mae's Chief Economist. "More people joining the labor force suggests that there is more slack in the labor market than implied by the low unemployment rate." e construction industry saw the second- highest jump in employment in January, gaining 46,000 jobs for the month and 229,000 over the last year. According to experts, these gains should have a big impact on housing in 2017, improving construction efforts and supply. "We are also encouraged by another solid increase in residential construction employment of more than 20,000 for the month," Duncan said, "which marks a third consecutive gain of at least 15,000. More housing supply amid a gradual rise in mortgage rates should help the continuation of the housing expansion." THE BENEFITS RISING INTEREST RATES WILL OFFER MSR HOLDERS Non mortgage banking companies in the U.S. that hold interest-rate-sensitive mortgage servicing rights (MSR) will soon get a "generous increase" in their capital positions thanks to a recent rise in interest rates, according to a report released last month by Moody's Investors Service. e report said the rise in the 10- year Treasury yield, which increased to approximately 2.55 percent to year-end from 1.65 percent as of Q 3, will result in mortgage companies reporting significant write-ups in their fair value MSRs for the fourth quarter of 2016. Fourth quarter earnings of U.S. banks indicate a significant reversal of MSR fair value declines observed during the first nine months of 2016. Moody's expects significant MSR write-ups for some of the six public non bank mortgage companies Moody's rates, reversing the declines in equity they incurred because of the MSR deterioration. "e prolonged low interest rate environment has led to significant declines in MSRs, eroding the capital and profitability of U.S. non-bank mortgage companies that hold MSRs, but relief is on the way," Gene Berman, Moody's AVP-Analyst, said. Of the six public mortgage companies Moody's rates, Nationstar Mortgage Holdings, Inc. (B2 stable) and Walter Investment Management Corp. (Caa1 negative) should benefit the most from interest rate increases. Both Nationstar and Walter experienced large material reductions of MSRs at 10 percent and 23 percent of fair value of their MSRs during the first nine months of 2016 owing to the significant decline in interest rates. Assuming the MSR reductions are reversed, the capital levels of Nationstar would both increase by 1.7 percent (TCE to TMA), or a respective increase of 20 percent and 170 percent in percentage terms. Approximately 750,000 borrowers chose to refinance their home loans through Fannie Mae and Freddie Mac during Q4 of last year, according to the Federal Housing Finance Agency Refinance Report for Q4 2016. KNOW THIS

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