Loan Think

THIS JUST IN: Last week's story on "funded indemnifications" sparked e-mails and telephone calls. In case you missed the column, an "FI" occurs when a correspondent buyer requests that a seller set aside money in a reserve account to cover possible future losses. A spokeswoman for Bank of America told me, "In the past, we have in very rare circumstances asked our correspondent partners to set up reserve accounts."

So, is the loan buyback crisis (sort-of) over? Don't bet on it. In a new filing with the Securities and Exchange Commission, Freddie Mac notes that one way it manages credit losses is by forcing seller/servicers to repurchase questionable loans. The GSE, which lost $6.7 billion in the first quarter, has made calculations on "projected recoveries" from buybacks but hasn't yet shared those estimates with the public. Meanwhile, one investor I know said the secondary market for "kickback" loans has exploded over the past five weeks. A "kickback" loan is a performing mortgage that Freddie (or Fannie Mae) sends back to the seller/servicer...

How long have you been saying that you're going to update your image? Just like the "refresh button" on your computer, I'm here to suggest that you refresh your image and your brand at least once a year.

I'm starting to hear plenty of complaints about the SAFE Act and how it treats residential loan officers for banks quite differently than LOs working for nonbanks licensed by the states. As one trade group official told me: "We're looking at this and wondering how the heck did it get passed?" More on this story shortly. Meanwhile, the yield on the 10-year Treasury bond continues to fall. At press time it was 3.56% but our Wall Street editor Bonnie Sinnock informs me that although the Treasury yield is dropping, not necessarily so for MBS rates. Stay tuned...

It's no secret that much of your reverse mortgage outreach and advertising is geared toward education on the program overall and the benefits to the borrower. As promised, I am reporting on some topics of discussion from the National Reverse Mortgage Lenders Association Road Show in Philadelphia in April.

A NEW METHOD OF SHORT SALES GIVING THE SELLER MOVING MONEY

The mortgage business is shrinking. Why that is good news for those who remain.

Do we have an international sovereign debt crisis or what? Bear with me. There are a few mortgage angles here. As I write this, the Dow Jones Industrial Averageis down 225 and all looks ugly. Greece is hemorrhaging with Portugal, Spain, Italy, and Ireland suspect as well. Investors will avoid buying the debt of these firms (in theory) unless they receive certain assurances from the European Union -- which means investors will continue to scarf up U.S. debt because (comparably speaking) it's "safe." The more U.S. bonds they buy, the lower interest rates will go, including mortgage rates. This should only spell good news for lenders. And if employment is really picking up -- we'll know for sure on Friday when the Department of Labor releases the new jobs number -- perhaps so will home buying. Of course, stock market losses suffered by U.S. investors might cause them to be gun shy when buying a new home. Or just maybe they'll figure that, finally, real estate is a better bet than stocks?...

Many in the mortgage industry are blaming the bad economy for why their business is now tanking, but that might not be the only reason. These business owners, said one consultant, need to look in the mirror to help assess where the blame might truly lie.

Stop the presses: Not only did GMAC Financial Services earn a (small) profit in the first quarter, but its residential mortgage unit did as well. But wait: the chief reason, Residential Capital Corp. made money was because it extinguished debt. Don't forget that ResCap is on the auction block -- and there's all sorts of speculation that buyers aren't exactly lining up around the block to make a bid on the thing. (Its investment banker is the trustworthy Goldman Sachs.) Also, its loan production fell 26% in the first quarter compared to the fourth. Compared to 1Q 09, production was relatively flat. And, of course, there's been plenty of job cuts at ResCap as well. Who says you can't cut your way to profitability? As for Uncle Sam getting its $15 billion back, stay tuned. And what about Cerberus' $15 billion?...