Not a week goes by that someone doesn't send me a script for a Hollywood movie based on mortgage banking. Usually it is either a) zany comedy starring Ben Stiller as a loan agent who doesn't know that the jumbo market has gone away, with Samuel L. Jackson as an irate borrower, b) an intense drama starring Harrison Ford as an embattled CEO of a mortgage company with Samuel L. Jackson as an irate borrower, or c) a plot that begins with a guy going in to the men's locker room shower only to discover that it is coed, or some guy who is doing his laundry late at night and finds out that he doesn't have quite enough change to run the dryer... (OK, never mind those last two.) Unfortunately for many the business has become a scene out of "Glengarry Glen Ross".
Does anyone really believe that credit guidelines are going to loosen up in the near future? Really? A Wall Street Journal blog asks the question, “Does America Really Need 8,000 Mortgage Lenders?” http://blogs.wsj.com/developments/2009/10/07/does-america-need-8000-mortgage-lenders/
As the plot thickens, CitiMortgage made an interesting move in lending by announcing to their clients that they would begin publishing “a list of brokers, correspondents, or other loan originators whose loan originations (or who have any role in the origination) are not acceptable to CitiMortgage for purchase ("Ineligible Originator").” Starting 10/15, Citi will refuse to purchase any loan, and return it to the lender, originated by any entity on their Ineligible List. The decision is final, and the list can change without notice. Woe to any lender who ends up there by mistake! And even more woe to any lender who ends up there with good reason - word tends to get around. Nicknames already include “the blacklist” and “being in the sin bin”.
SunTrust informed clients that “Due to increased risks associated with the TLTV/HTLTV calculation and underwriting of loans with subordinate financing, Delegated Underwriting Authority (Delegated Level II and Expanded) has been temporarily suspended for loans where subordinate financing exists. All loans with subordinate financing (Non-SunTrust secondary) must be submitted to a SunTrust Underwriter for review and approval.” Close any other loans by this Friday!
For good news, the Wall Street Journal reports that Freddie Mac and Fannie Mae plan to provide forward commitments to purchase acceptable home mortgages. Although forwards are not in any way new to the business, the announcement is viewed as helping independent mortgage banks acquire the warehouse lines they need to make home loans. The article mentions a previous program that Freddie has with Provident Funding and with NattyMac, a Florida warehouse lender. “Freddie makes commitments to purchase loans made by Provident Funding that are financed by NattyMac. NattyMac is responsible for ensuring that the loans meet certain quality standards set by Freddie. The commitments from Freddie reduce the risk that NattyMac or Provident will be stuck with loans that are rejected by Freddie or Fannie and can be sold to other investors only at a huge discount.”
Way back when, First Magnus went out of business. This year the remnants sprang up as StoneWater Mortgage, also based in Arizona. And now StoneWater has gone away, being enveloped by Caliber Funding. “Caliber Funding LLC has completed the purchase of StoneWater Mortgage Corporation's assets” and apparently has begun accepting applications.
Any time an investor buys a loan for a price above par (100), they are, in effect, gambling that the loan will be on their books for a certain period of time. That is one of the primary reasons that one doesn’t see a rebate above a few points anymore – the chances of that loan being serviced for any length of time are low. Therefore, “prepayment speeds” are monitored with great interest by investors, and yesterday some numbers came out that showed “speeds” that puzzled analysts (i.e., fewer loans are paying off than one would expect given coupon, age, FICO, etc.). This helps investors to want to buy more securities backed by mortgages. It seems that fewer high FICO borrowers with low LTV’s are refinancing. Speeds for GNMA securities (backed by FHA & VA loans) for September show that there was a sharp pickup in prepayment speeds of 2005-2007 origination, attributed to servicer buyouts of delinquent loans – especially buydown loans and/or loans somehow related to Taylor Bean’s demise.
This morning we had our usual Thursday Jobless Claims, and later we have a 30-yr auction to get through. As a side note to keep in mind about unemployment, most figure that it will hit double digits soon. And for every person who shows up as unemployed in the report from the Bureau of Labor Statistics, there’s another person who does not appear because they are either too discouraged to look for work, or working part-time and earning less. This shadow will have ramifications on consumer spending! That being said, new claims for jobless insurance fell more than expected, hitting a nine-month low last week. Jobless Claims dropped 33,000 to 521,000. The four-week moving average for new claims fell 9,000 to 539,750 last week, declining for a fifth straight week. And the number of people collecting long-term unemployment benefits fell 72,000 to 6.04 million, the lowest level since March. Maybe they’ve run out of benefits! After the 5:30AM news we find the new 10-yr at 3.20% and mortgage prices a shade worse.
Dave and his buddies were hanging out and planning an upcoming fishing trip. Unfortunately, he had to tell them that he couldn't go this time because his wife wouldn't let him.
After a lot of teasing and name calling, Dave headed home frustrated
The following week when Dave's buddies arrived at the lake to set up camp, they were shocked to see Dave. He was already sitting at the campground with a cold beer, swag rolled out, fishing rod in hand, and a camp fire glowing.
"How did you talk your missus into letting you go, Dave?"
"I didn't have to," Dave replied."Yesterday, when I left work, I went home and slumped down in my chair with a beer to drown my sorrows because I couldn't go fishing. Then the lil' lady snuck up behind me and covered my eyes and said, 'Surprise!”
"When I peeled her hands back, she was standing there in a beautiful see through negligee and she said, ' Carry me into the bedroom, tie me to the bed and you can do whatever you want'.....
So, Here I am!"