Recently seen bumper sticker: “Honk if you are paying my mortgage”.
One by one, lenders are announcing their ability to fund loans under the new Fannie Mae program DU Refi Plus. This program is designed to assist borrowers that have demonstrated good pay histories on their mortgages but have been unable to refinance due to a decline in home values. Financing properties with a new first mortgage of up to 105%, the big question is what will happen to existing second loans recorded against the property. Under this new program, a lender in second position could be forced to subordinate to negative equity in the property (150% CLTV???).
After an unfortunate last couple of years in the lending world, Thornburg Mortgage, long thought of as a “make sense” lender of money to people who don’t really need to borrow, is likely going to file for Chapter 11 bankruptcy protection. Assets will be sold off to reduce their outstanding debt and the highly prized servicing rights to their pristine mortgage pool of Jumbo ARMS with one of the lowest rates of default in the industry will be transferred. Once these sales and liquidations are completed, the company will likely discontinue operations. For a market like San Francisco, this represents a massive blow to finance options for multi-million dollar properties. Once hailed as the best financing available for Jumbo loans and TIC transactions, the collapse of the secondary mortgage market has left this institution with no place to securitize their financing. They almost made it…
Speaking of mortgage companies filing for bankruptcy, does anyone remember New Century? Based in Irvine, California, New Century disclosed accounting errors some two years ago marking the beginning of the mortgage banking collapse. The stock promptly plunged 90%, and they immediately went bankrupt. Now we have a new lawsuit to follow: The trustee for New Century sued accounting giant KPMG last Wednesday, blaming it for its demise and accusing KPMG of failing its public watchdog role by helping the subprime mortgage lender make misstatements about its finances and by filing "grossly negligent audits." Good luck with that one!
As mortgage banks try to offer better pricing for their agents and brokers, one solution is to move from a best-efforts platform to a mandatory platform. Since loan “pull through” is at the top of every executive’s watch list for maintaining profitability, one idea is to pass the cost of breaking a loan lock to the consumer in exchange for lower rates. Of course, there are inherent risks in doing so, but it is something to be considered as lenders are looking to squeeze every possible dollar of profit out of their fundings. Overall the spread is now around 1 point in price. In another example of cost cutting and subsequently going “green”, Franklin American, has given their clients an imaged file delivery option. After June 1 if they transmit closed loan files for review and purchase by FAMC via hard copy paper files, FAMC will charge an additional $25. Loans submitted via imaged delivery will not incur the additional expense.
In other news, mortgage applications in the U.S. rose last week to the highest level in three months: +4.7%. The Mortgage Bankers Association’s index of applications to purchase a home was +11% and the refinance index was +3.2%. Mortgage bankers who were selling about $1-2 billion a day in mortgage securities, now average about $4-5 billion per day thanks to the Fed who is buying the bulk of the debt and keeping rates low (roughly $6.5 billion per day).
Is anyone else sick of walking into your local bank branch and being assaulted by the staff? You can’t walk through the door without having a “greeter” ask you about your day and offer you a cookie (As if they actually care… And the cookies totally suck!). As service standards have fallen drastically since the invention of the ATM, the fierce competition for deposits these days has forced many institutions to redefine their customer service experience. Work harder guys, I expect to see more creativity especially since it’s my tax dollars that are keeping the lights on. I’m still counting the days until I can walk in and get back all the money I lost on the market.
Ryan Ogata
Senior Mortgage Consultant
Tuesday, April 14, 2009
Wednesday, April 1, 2009
Former Treasury secretary, Henry Paulson, is writing a book about his role within the US economy. To my surprise, the book starts on Chapter 11.
It was the last day of the month and lending professionals everywhere were scrambling to fund loans. Lock volume continues to be strong and successful companies have made it clear that limiting fall out is critical to survival. I guess the old days of hedging your locks with one investor and floating with another are over, but as the industry continues to evolve, I expect to see more lenders charging upfront lock fees and employing other client retention strategies to keep their clients from straying.
After a seemingly long wait, Fannie Mae has announced that it will begin purchasing the new high balance loans of $729,750.00 for loan closings of May 1st and later. While the pricing of this long awaited "Jumbo Conforming" product is still TBD, the entire industry has our fingers crossed hopping for the best. My guess is that investors will figure out what to charge over the next month or so, but if recent changes to the overall lending system are of any indication, I would expect these loans to fall relatively in line with current $625K pricing. Fannie has revised loan-to-value ratios for certain loan types, implemented new minimum credit score requirements, and added additional appraisal requirements. (And no, I don’t know what they are, but hope for the best and expect the worst) More on this as information becomes available…
With all of the wonderful economic news circulating out there, it is hard to believe that rates could go up much in the near future. The Stock Market remains volatile to say the least and inflation threats are virtually nonexistent (at least for now). The Mortgage Bankers Association's applications index rose by 3% in the week ending March 27th. The purchase applications index was basically unchanged, and refinance index gained about 3.7 percent.
Ryan Ogata
Senior Mortgage Consultant
It was the last day of the month and lending professionals everywhere were scrambling to fund loans. Lock volume continues to be strong and successful companies have made it clear that limiting fall out is critical to survival. I guess the old days of hedging your locks with one investor and floating with another are over, but as the industry continues to evolve, I expect to see more lenders charging upfront lock fees and employing other client retention strategies to keep their clients from straying.
After a seemingly long wait, Fannie Mae has announced that it will begin purchasing the new high balance loans of $729,750.00 for loan closings of May 1st and later. While the pricing of this long awaited "Jumbo Conforming" product is still TBD, the entire industry has our fingers crossed hopping for the best. My guess is that investors will figure out what to charge over the next month or so, but if recent changes to the overall lending system are of any indication, I would expect these loans to fall relatively in line with current $625K pricing. Fannie has revised loan-to-value ratios for certain loan types, implemented new minimum credit score requirements, and added additional appraisal requirements. (And no, I don’t know what they are, but hope for the best and expect the worst) More on this as information becomes available…
With all of the wonderful economic news circulating out there, it is hard to believe that rates could go up much in the near future. The Stock Market remains volatile to say the least and inflation threats are virtually nonexistent (at least for now). The Mortgage Bankers Association's applications index rose by 3% in the week ending March 27th. The purchase applications index was basically unchanged, and refinance index gained about 3.7 percent.
Ryan Ogata
Senior Mortgage Consultant
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