Loan Think

This week we are pleased to share with you one of our favorite columns from Sue.

FTC AGAIN DELAYS ENFORCEMENT OF THE "RED FLAGS" IDENTITY THEFT MANUAL UNTIL DEC. 31, 2010

We're still trying to figure out what's going on with BB&T and its correspondent/wholesale plans but the bank, for now, has pulled down the "cone of silence." (For you non Baby Boomers, go rent a DVD of the 1960s comedy 'Get Smart' to understand the reference.) The short story is this: wholesale is out, correspondent is in, but that's all we really know. Meanwhile, it appears that BB&T is the largest warehouse lender in the nation, according to a new tally by National Mortgage News. Then again, the tally excludes Bank of America's warehouse unit. For some reason BoA won't disclose commitment figures, which I don't get. As I've noted before: what's the big secret? B of A is a publicly traded bank regulated by the FDIC. Meanwhile, if you're trying to figure out where the employment market is headed, you'd better buy a neck brace to protect yourself from whiplash. The following two headlines offer a hint at the mixed signals. From MarketWatch: "Jobs news even worse than it appears." And from the Associated Press: "Job openings rise to highest level in 16 months." Go figure…

Imagine you are selling a product that is one of the biggest and most emotional purchases that your buyer is going to make. Now imagine having to use your sales skills to have to overcome second thoughts, doubts and other issues your buyer has, while at same time your buyer is surrounded by a cadre of relatives and friends who are giving them conflicting, misleading and possibly erroneous advice.

Is China's housing bubble (that is, if it really is a bubble) about to pop? Here's some new intel from Barclays Capital about the situation: "In our view, a combination of structural forces and distortions make China prone to a housing bubble, if policy is not carefully managed. Factors that have boosted housing demand – including demographics, urbanization, income disparity and high savings – are likely to reverse or decline in intensity over the next 10 years. The government's recent measures to cool the housing market focus on limiting investment demand and increasing the supply of public and low-cost housing. In our view, this represents a regime shift in housing policy, and more measures – related to taxes, regulations and the public housing framework – will likely be rolled out." Meanwhile, I wonder if Goldman Sachs has found a way to short China's housing market?...

First off, let's look at one of the key positives of today's jobs numbers. Drum roll please: with the employment picture looking bleak (is there really any other way to view it?) it's highly doubtful that the Federal Reserve will hike interest rates any time soon. And that's good news for both mortgage bankers and homebuyers. Yes, I know that late Thursday reports were circulating that three top Federal Reserve officials said it may soon be time to begin raising rates as the economic recovery in the U.S. gathers steam, but I'm telling you it won't happen until the job picture brightens in the private sector. End of story. When it comes to new mortgage applications, it's all about jobs. When it comes to predicting home delinquencies, it's all about jobs. Meanwhile, one research firm said today that when you count the "shadow inventory" the supply of homes for sale is really 20 months, not the 9.6 months number. If mortgage rates climb you will see that supply number spike...

What were you doing in 1999? Do you remember?

THE MAIN EVENT: When it comes to mortgage banking, it's all about jobs folks. I know I might sound like a broken record on this topic but Friday was another one of those "this can't be happening" days in the stock market. By the time the gate closed, the Dow had plunged 323 points, sending the yield on the 10-year near its 52-week low. There's no point in rehashing the reasons for the carnage. You know what they are. But a few thoughts for you: We are in uncharted territory here. The good news for lenders (and I guess, servicers) is that mortgage rates are going nowhere any time soon. That's a given, but how do you, as a mortgage banker, profit from this? Loan applicants should be beating down your doors, hoping to refi. Is anyone funding a 4% 30-year FRM yet? (If so, drop me a line at Paul.Muolo@SourceMedia.com.) But wait, before you can refi or buy a home, you need a job and if Uncle Sam is the only one doing any significant hiring, then we're all in trouble. You can blame the poor job picture on technology, perhaps. Computers, cell phones, and all those gadgets we love make us more productive. Why hire another worker bee when one reporter (for example) can do the work of two? You get the picture. I wonder if the Republicans were in change whether the jobs picture would be any better. We'll never know, really. Come fall if angry voters pull the lever to "throw the bums out" most of the bums getting the boot (regardless of party affiliation) will be the Democrats. But what if the GOP captures the House and Senate? Will they prove to be the deficit hawks they now claim to be? The GOP certainly wasn't worried about spending money when George W. Bush was in the White House. Anyway, it's a mess. Then again, maybe the jobs picture is really better than the numbers show. Maybe, as one stock analyst said Friday morning, there really are a lot of "semi-retired" people out there, collecting unemployment because, well, they can, and these people are really just sucking the blood out of unemployment insurance funds and skewing the numbers upward. It appears the U.S. auto industry is actually on the mend, and hiring. But as we all know, homebuilding (traditionally) is a huge creator of jobs and right now that sector is flat on its back...

The GOP is trying to keep the heat on the White House regarding the future of Fannie Mae and Freddie Mac. In short, the party wants something done this year. Rep. Spencer Bachus, Republican of Alabama, said the other day that 45% of respondents to a recent GOP poll voted to have the GSEs cut from the budget. The statement that Bachus released was poorly written, but the message translates into this: voters say no more taxpayer money should go to Fannie and Freddie. To date, the two have cost the Treasury at least $145 billion and I would guess another $50 billion might be shelled out over the next eight quarters. (It's all guesswork on my part.) In short, no one knows how deep the hole is there. (And it doesn't help that the two are paying out dividends to Uncle Sam every quarter. It's sort of like moving government money from one pocket to the other.) But there is one academic question legislators need to ask: if you liquidate the GSEs today, selling all their assets at "market value" would you break even, lose money, or come out ahead? It's an unanswerable question. You can't liquidate Fannie and Freddie. How many buyers are there for $1.6 trillion in MBS and related assets? China, perhaps?..

The other day, a loan officer asked me "what's the first thing you recommend that I do if I were to reinvent myself?"