Loan Think

THIS JUST IN: A top 10 lender that hasn't been all that active in wholesale lending the past two years is ready to roll out some new programs—and not just in jumbo. The exclusive details will be in the Monday paper version of National Mortgage News. To subscribe call 800-221-1809...

Is the Las Vegas housing market back? Are builders once again constructing new homes? Well, not exactly. One lender filed this report with me this morning: "Yes, there is a small resurgence and in April the increase in median sales price for single family dwellings went up $6,900! That was the largest increase by far in the past 12-14 months, by almost triple the amount of increase! Builders are advertising more but building in much smaller numbers. It appears they are trying to eat up their small acreage parcels. We are not seeing the large development growth any longer that we had been seeing for a long time. There is no demand." Meanwhile, the U.S. job market got a dose of bad news this morning with the number of people filing new claims for unemployment benefits unexpectedly rising last week by the largest amount in three months. Applications for jobless benefits rose to 471,000 last week, up by 25,000 from the previous week. Also, the stock market is sinking and the yield on the 10-year Treasury is falling...

With the "fog-a-mirror" loans gone, with loan officers chasing the few deals that are out there, with consumers not being able to tell one mortgage company from the other, with everyone offering fixed-rate mortgages, how do you market yourself as unique and different?

It's been an ugly week and it's only Wednesday afternoon. But first, let's pick out some good news and shove aside, for now, the depressing thoughts about record new loan delinquencies, falling application volumes, and the sell off in stocks. According to calculations we did using National Mortgage News' Quarterly Data Report spreadsheet product, we now have $1 trillion in mortgages that are officially in arrears. Now, most of you might be thinking this is horrible. But wait, maybe it's really a great opportunity for investors and specialty servicers that play in the nonperforming loan (NPL) market. A $1 trillion market and plenty of desperate sellers? What more could an investor want? That's the best I can come up with today, but I firmly believe (sadly) that home prices, in general, will slide further before recovering in five years. I'm not predicting a 20% decline but a slow, continual, mild decline. Even if employment improves I don't see much change. Now let's put our hands together and be thankful for low interest rates...

IRS FOCUSING ON 6,000 COMPANIES AT RANDOM OVER NEXT THREE YEARS FOR PROPER PAYMENT OF EMPLOYMENT TAXES

Recently I wrote a post about the difficulties our industry is experiencing with borrowers who have trouble paying their taxes and insurance after closing on a reverse mortgage. It's anticipated that this challenge may increase in the coming years as many seniors have recently opted for the fixed rate reverse mortgage product, and all the available funds are taken at once. In addition, many seniors are paying off sizable existing mortgages, which increases cash flow, but they may be accustomed to having those taxes and insurance payments made through the escrow account in the mortgage. We always talk about educating our clients throughout the process of obtaining a reverse. Shouldn't we continue that education after closing and beyond?

Some of you may be asking this very basic question: why does the Treasury Department keep pumping money into Fannie Mae and Freddie Mac to keep their net worth positions above zero? The answer (as I may have pointed out before) has to do with their bond offerings. Would you buy debt in a company that has a negative net worth position? Okay, you might, but the rate on the bonds would be in the "junk" territory. So, that's why Uncle Sam keeps the cash flowing to the GSEs -- and because Fannie and Freddie are the linchpins to the housing market. (If they had to pay 'junk' rates of say 10% that means mortgage rates would be...feel free to bill in the blank.) Interestingly, even though the GSEs still do not have the "explicit" backing of the U.S. government, they really do. (Nod, nod, wink, wink.) Uncle just won't admit it because that means their liabilities (holdings plus guarantees) would probably wind up on the balance sheet of the Treasury. When it comes to restructuring the GSEs, one basic question elected officials and financial service professionals need to answer is this: if Fannie and Freddie go away who will provide the $5 trillion in guarantees and balance sheet capacity that they currently provide? This is what we call a conundrum...

To be a success in a referral-based business, one must have a strong personal brand. You need to be able to differentiate yourself from the competition.

There are unconfirmed reports the certain USDA offices are running out of commitment funds to continue approving Rural Housing Service single-family loans. One poster on National Mortgage News' Grapevine website reported that he had a loan rejected Friday "for lack of funds." He said the local USDA office is waiting for direction from the national office. Meanwhile, the public relations department of USDA refuses to comment and rarely returns telephone calls and emails sent to them by NMN. Later today on the NMN website we will publish an update on the situation. (Don't expect a quote from USDA.) Meanwhile, in one unrelated note: the Indiana Department of Financial Institutions and Oregon Division of Finance & Corporate Securities have begun accepting new mortgage loan originator applications through the Nationwide Mortgage Licensing System or NMLS...

There's talk in the market (and in Gucci Gulch) that one Senator might be introducing an amendment to the massive regulatory overhaul bill that would drive a stake right through the heart of a regulation known as the Home Valuation Code of Conduct or HVCC. Fannie Mae and Freddie Mac had HVCC jammed down their throat by New York Attorney General Andrew Cuomo in March 2008. Loan brokers hate it because it takes them out of the appraiser picking process. Will the amendment go anywhere? Stay tuned. Meanwhile, there's talk that a New Jersey based nonbank lender could be in trouble. I know the identity of the firm but I'm waiting on confirmation. The company's main telephone switchboard defaults to an operator who never picks up. Its website appears to be malfunctioning when you click certain buttons but not all. I called an account executive there but have yet to hear from this person. It could be a false lead but we'll see...