Eighth Edition - Covering 2006 Through 2008
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Eighth Edition - Covering 2006 Through 2008 |
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This is the demo version of the eMID. Information contained here is only a sampling of the full array of data available in the paid version. The profiles shown here are samples, showing data of randomly selected companies. Some features, such as file download, have been disabled. What does the paid version offer? Valuable contact information, profiles, and program details of individual companies are only accessible on the paid eMID. To take advantage of the full range of powerful data and features, order the eMID today! If you have further questions or would like to order the product, please call (888) 501-8850. You can also order the eMID online. |
Let's face it: 2007 was a lousy year for mortgage lenders everywhere unless you happen to work for a company that lends in a town or city left unscathed by the nation's housing and credit crisis. Then again, how many firms can live off the volume they generate in just one metropolitan statistical area? The nation's mortgage meltdown affected every single lender in the nation because the perception - and not always the reality -was that housing was in the tank. (Okay, in most markets it was in the tank.)
Thanks to intense media coverage of the crisis the consumer was spooked. Even the news divisions of the nation's four television networks latched onto the story. Usually TV news producers stay away from financial stories because they can't shoot any good pictures to show the public. But in this crisis a house is a great picture, as is a foreclosed family standing at the curb, the children crying, all their possessions in plastic bags. That sounds horrible, I know, but these are not wonderful times. And that's not to blame the media either. We at National Mortgage News are the media. There's no nice way to sugarcoat the situation that lenders face.
Residential lending hit the wall in 2007. The reasons: near record delinquencies which were caused by over zealous subprime (and prime) mortgage bankers extending credit to thousands upon thousands of home owners who should not have received a loan in the first place. Wall Street threw fuel on the fire by warehousing the perpetrators and securitizing their loans. (See chapter 8 for our analysis of the credit crisis.)
If anything good comes out of this crisis it may be that mortgage bankers (those left standing) learned some valuable lessons in 2007, which include: good old fashioned underwriting counts; FICO scores aren't always reliable; home values can decline; know your loan brokers; the larger the down payment a home buyer makes, the less likely they are to default on their mortgage; and my personal favorite: the payment option ARM (POA) is probably the worst loan ever invented. As to the latter: why would you give a consumer, even a rich one, a negative amortization option? What were POA lenders like Countrywide, Wachovia, and Washington Mutual thinking?
First, the good news (and there is some good news.) Mortgage lenders of all stripes originated $2.65 trillion in residential loans last year, a 19% decline from 2006. According to exclusive survey figures compiled by National Mortgage News for this book, 2007 was a tale of two halves. During the first six-months of the year lenders originated $1.58 trillion in home loans, including both prime and subprime credits. Then the A- to D market began to crack. During the second-half total loan production declined to $1.07 trillion. (The figures are rounded.)
For the full-year, subprime originations crumbled to $182 billion, from a near record $674 billion in 2006. In the fourth quarter of 2007 mortgage shops originated just $6 billion in A- to D loans. In the first quarter of 2008 that number fell to just $4 billion. If that's not a total collapse, then nothing is. Conclusion: subprime lending, as we once knew it, is dead. The business of non-prime lenders using warehouse lines from Wall Street to fund A- to D loans is over. And you can bet that most Wall Street firms will not be re-entering this market. Most have left, their tail between their pin-stripped legs.
The two final straws that broke the back of non-prime in 2007 - and which led to more than 300 firms closing their doors or shutting production channels - was Bear Stearns, in late July, throwing its two subprime-related hedge funds into bankruptcy and Countywide Financial Corporation being hammered by bankruptcy rumors in August. CFC is now the property of Bank of America. Bear Stearns is no more. In the summer of 2007 loan delinquencies began to soar - especially on subprime. When BoA bought Countrywide, CFC had a 33% delinquency rate on its subprime servicing portfolio. That speaks volumes to the state of the non-prime sector.
As far as the final origination rankings for 2007 are concerned, CFC finished first, originating $408.2 billion in 2007, an 11% decline from the prior year. Wells Fargo Home Mortgage, San Francisco, ranked second ($271.9 billion/down 32%), followed by Chase Home Finance, Iselin, N.J. ($210.2 billion/up 22%); CitiMortgage, O'Fallon, Mo. ($198 billion/up 17%); and Bank of America, Charlotte ($187.4 billion/up 12%).
Note: now that BoA owns CFC that makes Bank of America both the nation's largest residential lender and servicer. BoA has vowed to keep part of Countrywide's wholesale division open but that could change in the year ahead. In the fall of 2007 BoA ceased table funding all types of loans. This decision - made prior to its announcement on buying CFC - has fueled rumors that the bank will eventually close CFC's broker network. But BoA officials have said the rumor mill is wrong. (One thing is for certain: CFC co-founder Angelo Mozilo, a trail blazer in table funding, has left the building. He is now retired, dealing with lawsuits associated with his former company.)
Among the nation's top 30 lenders last year, 16 managed to grow originations. The rest shrank. (See the one line rankings on the top 400 funders for 2007.) The biggest gainer was ING Bank, FSB, Wilmington, Del., which ranked 26th. ING grew its production by 124% to $12 billion. The two firms with the largest declines were Saxon/Morgan Stanley (down 51%), and EMC Mortgage, Lewisville, Texas (down 53%). Both are owned by Wall Street firms. (EMC was owned by Bear Stearns but became the property of JPMorgan Chase when the Federal Reserve orchestrated Bear's rescue.)
It's not easy predicting where the market is headed but we'll take a crack at it anyway. The industry is (obviously) going through a major transformation, one where credit quality is now in the driver's seat. Lenders will be forced to focus on the credit-worthiness of the borrower. This is a good thing. When many of us look back on what transpired over the past five years, we scratch our heads and wonder: why were lenders making these crazy payment option ARM (POA) and subprime loans? Why were they making zero-down mortgages to gardeners and dishwashers who were trying to buy a $500,000 house? That's not to knock gardeners and dishwashers. I'm sure they're hard working people (I used to cut lawns in my youth) but people in those jobs usually cannot afford $500,000 houses.
Tighter underwriting standards will lead to less home buyers. That's a given. Consumers will have to come up with downpayment money if they want to be part of the "American Dream of Home Ownership." Again, all this is good for the industry. What sense is there in someone owning a home for 12 months only to default?
Will subprime once again rise from the ashes? The answer is yes but when it does the business of lending to homebuyers with bad credit will be a much, much smaller business. "Hard money" lending likely will go back to its roots of being dominated by small consumer finance firms that closely review the borrower's creditworthiness. If a house owner wants a "home equity" loan he/she will need to take out a loan with an LTV of 60% to 70%. And such loans will not be cheap. The rates will be 400 to 500 basis points above the Fannie Mae/Freddie Mac rate. That's the new reality.
As for industry consolidation, the purchase of CFC by BoA changes everything. In 2007 CFC had a production market share of 14.75%. Even when combined with BoA's retail division, market share numbers will come under pressure. Yes, together they have a share of 21.52% but that number will not hold. Count on it. You can expect that many top producers at CFC (retail and wholesale alike) will be heavily recruited by competitors. CFC's absence from the market will allow mid-sized funders to move up in the rankings and new entrants to thrive. That's our prediction.
A few other loose-ends to tie up: Up until 2008, the industry's five giants - without exception - relied heavily on wholesale and correspondent production to bolster their originations. As we've noted elsewhere in this book, there's a fear that wholesale lending could become a thing of the past, which would endanger the lives of loan brokers. There has definitely been a movement toward retail lending with BoA (pre-CFC), Washington Mutual and National City exiting wholesale entirely. But is this a knee jerk reaction to the credit crisis or a long-term trend? We think it's a knee jerk reaction.
Also, historically, the mortgage industry has been one that rises and falls on two key factors: interest rates and the job picture. Interest rates are still fairly benign. At press time 30-year FRMs could be had for 6.5%. Then again, the housing market is still correcting. If energy costs (oil) do not fall, it could prolong the recovery especially in such once red hot markets as California, Florida and New York. Oil is the wild card when it comes to a recovery.
In this chapter we rank the nation's top 400 residential lenders for 2007. (For 1Q 2008 rankings see preceding chapter). In the pages that follow we provide "profiles" on these mortgage banking firms, including detailed information on their top officers, production channels, and other key data points. (Detailed information on more funders is available by purchasing the eMID, the electronic version of this book.)
The origination volumes in this chapter were culled from surveys sent to more than 3,000 active residential lenders (depositories and non-depositories alike) in a database built by NMN. Mortgage lenders (mortgage bankers, banks, thrifts, credit unions and others) were asked to fill out a three-page survey and return it to us within 45 days. At least two follow-up telephone calls or faxes were sent as well. In some instances residential lenders either refused to send in a survey or filled out a questionnaire but did not answer all the questions.
If you analyze the profiles and rankings in this chapter you might notice that some companies are missing. If so, it's because they would not cooperate. (We included some failed firms in the rankings - the higher ranked ones, mostly - but not all.) In certain cases we estimated a firm's loan volume based on previously reported originations. Estimates are derived from two sources: Home Mortgage Disclosure Act (HMDA) data collected by the Federal Reserve, and Government National Mortgage Association issuance data. If you happen to work for a firm that is missing from these rankings and you would like to provide us with numbers please call (202) 434-0322. Our goal, as always, is to provide accurate results on as many lenders as possible.
- Paul.Muolo@SourceMedia.com
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With comments or questions about the data contact Paul Muolo, paul.muolo@sourcemedia.com For technical support, e-mail Andras Malatinszky, andras.malatinszky@sourcemedia.com For customer service, call (800) 221-1809 © 2008 SourceMedia, Inc. and National Mortgage News. All rights reserved. |
