Loan Think

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It looks as though the loan "buy back" scourge has apparently taken down another nonbank. (For the full story see the National Mortgage News website later today.) Who's responsible for buy backs? Fannie Mae and Freddie Mac get much of the blame, but so do the "mega" banks that act as aggregators. As for investors that might serve as white knights for some of these struggling nonbank shops, private equity firms are worried about how deep buy backs might run. "When you have loans that are three and four years old getting called back, that's a problem," said one investment banker. "On every buyback, a nonbank loses money," he said...

A few weeks ago I mentioned a couple of points that bear repeating. I got a lot of feedback on these points, so please indulge me while I expand on them.

Recently, I was involved in a roundtable with mortgage industry leaders discussing technology in all phases of the mortgage process. There were a number of great discussions and insight into technology and its role in the mortgage industry. The one question that triggered numerous discussions and resulted in a lack of consensus among the participants was defining innovation.

If the TV show '60 Minutes' finally gets around to doing a story on "strategic" (mortgage) defaults then it must be a fading issue. Don't get me wrong, 60 Minutes is one of the best news shows on television, bar none, but it's usually behind the curve when it comes to financial stories. And I admit that I only caught a few minutes of its piece this past Sunday but one message should hit home to the mortgage industry: Defaulting on your home mortgage is not a "face losing" event like it was during The Depression of the 1930s. Heck, I fully expect that some mortgagors might be having "strategic default" parties in the homes they are about to abandon, especially in party towns like Las Vegas. I mean, why not? Of course, it appears the delinquency picture is looking brighter. But rest assured, loan defaults are driven (mostly) by one thing and one thing only: employment. And on that front the news appears to be improving. According to Barclays Capital, the 'Job Openings and Labor Turnover Survey' (JOLTS) showed increased hiring in March, with the hiring rate rising to 3.3% of total employment from 3.1% in February, the highest since October 2008. The job opening rate (openings divided by the sum of openings and employment) held at 2.0%, but Barclays says, "the details were more encouraging, with increases in all industry categories except accommodation and food services"...

Before going into any dangerous situation, a police department's special weapons and tactics (better known as SWAT) team takes the time to assess what is happening and plan for the right way to remedy the issue. Many of us of a certain age became familiar with this concept because of a 70s television show.

Are you an optimist or a pessimist? For now, all eyes are on Europe and the bailout of Greece and those other teetering 'PIIGS' nations. Mortgage bankers should be closely following the story because what happens overseas will affect mortgage rates at home. (That's what happens when you have a 'global economy.') Banking analyst Karen Shaw Petrou wrote this morning that the initial signs from the European Union's $1 trillion-plus aid package are "encouraging, but far from dispositive: to know for sure that panic has been allayed, we want to see inter-bank funding markets thaw and rates return to reasonable ranges. But, even if that happens – as we devoutly hope – it won't take the global banking system back to a semblance of normalcy because of the exposures at giant banks to sovereign debt." In other words, keep those helmets and seat buckles on...

The debate over regulatory reform is moving the Senate toward legislating mortgage underwriting standards as part of its massive financial services bill.

Residential servicers, especially the 'HAMP' kind, should be dancing in the streets today. The U.S. economy added 290,000 new jobs -- the most in four years -- and for lender/servicers that means one very important thing: 290,000 consumers (figure 65% of them, at least have a mortgage) now have a paycheck that can help them make a monthly payment. (At least, that's how it looks on paper.) "Clearly companies have a newfound confidence in the future of the economic recovery and on the part of their own business prospects," said Joel Naroff, president of Naroff Economic Advisors. He added that the job gains are a clear sign that businesses are feeling more comfortable about expanding their work forces. If his prediction proves tree, the delinquency picture should improve dramatically the next 12 months -- and along with it the home buying picture. Keep your fingers crossed...

The concept/law of Continuous Process Improvement begins with the concept that a plan-a process-is needed in most areas of your business and your life. Process simply is defined as the way, the best way, to accomplish a business plan and even a basic task.