Loan Think

Recently I got the chance to chair SourceMedia's fourth annual servicing conference (six if you count a couple we did in the 1990s) in Dallas and it was our biggest show ever. Here are the remarks I prepared to start the show.

The jumbo business is back! Okay, maybe it's not back with a capital 'B' but here's an interesting tidbit about the recent Redwood Trust jumbo securitization that came to market his week: The face amount of the offering was $238 million -- but the company had orders from investors totaling $1.2 billion. We understand that Redwood is already working on a second jumbo deal. Meanwhile, next week publicly traded vulture fund PennyMac releases its earnings. The company has been working on launching a conduit but has been tightlipped on details. Perhaps, when its results are released PennyMac will provide more color on the conduit. There has been some speculation that it too is eyeing jumbos. Penny Mac's residential servicing affiliate recently hired Steve Bailey to oversee all facets of servicing. Bailey joins the company from Bank of America, the nation's largest servicer of first and second liens. The ranking figures are courtesy of the Quarterly Data Report...

Continuous process improvement; are you familiar with this term? If not you need to be.

THIS JUST IN: It's called "funded indemnification." And certain nonbanks aren't too happy with it. Apparently, some large correspondent buyers (investors) are telling their nonbank lenders that they will purchase their new originations but the nonbank must set aside money in a reserve account to cover possible future losses. I'm not sure if this is a growing trend, but it sure is interesting. If you have any information about this type of behavior by investors, drop me a line at: Paul.Muolo@SourceMedia.com...

This is strictly in the realm of "talk" and "rumor" but there appears to be increasing interest by some seasoned mortgage professionals in hard money lending again -- as in subprime. But don't for a minute think this is subprime lending of 2000 to 2008. This is old styled 'home equity lending' from the 1960s and 1970s where there is equity in the house and the interest rate being charged is five points or more above the going GSE rate. The paper is held by wealthy private individuals or investment funds. Oh, and I heard that one of Angelo Mozilo's sons is now working in the space...

Your friend calls you and says, "Hey, did you know that somebody said something bad about you online?" And just as you thought you were the best thing since sliced bread!

If you're searching for a clear sign that mortgage rates will indeed stay low the rest of the year look across the ocean to Greece and maybe Portugal. Greece's debt has been downgraded to "junk" status and Portugal is getting wobbly. In these troubled times, institutional investors want security and that means they'll keep gobbling up U.S. Treasuries -- and if that happens rates will remain low. (Of course, the U.S. has its own debt problems but compared to Greece, we look good. I guess.) Meanwhile, I keep hearing anecdotal stories that residential loan volumes were decent in March and most of April, but some firms expect declining applications throughout the rest of the year. Despite a decline in production, profit margins remain strong. In an effort to lower costs, some firms are letting their "temp workers" go as opposed to cutting "permanent" staff...

FORMER MORTGAGE BROKER FROM CALIFORNIA SENTENCED TO PRISON FOR TAX FRAUD AND PAYING KICKBACKS

For the next couple of weeks, I'll be providing updates from the NRMLA Philadelphia Roadshow which I attended last week. For those who are interested, I suggest you consider becoming a member of the National Reverse Mortgage Lenders Association if you are not already.

How is the annual deficit (and national debt) a lot like a payment option ARM? Interesting question, when you think about it. The POA -- which Herb and Marion Sandler promoted heavily years ago at World Savings -- entails a consumer keeping his payment as low as possible each month through negative amortization. (This financial slight of hand only keeps working if home values keep increasing.) With a POA loan 'neg am' allows the borrower "affordability" by adding onto their overall debt -- sort of like borrowing by our federal government keeps adding to the nation's debt. I really like this analogy and I hope some of our more intelligent elected officials (do we have any?) see the similarities and get real about tackling the problem. Meanwhile, as I write this, Goldman Sachs is getting to tell its side of the story in front of Sen. Carl Levin's Permanent Subcommittee on Investigations. Goldman and a top official there, "Fabulous" Fabrice Tourre, were accused of civil fraud by the SEC last week for selling a subprime CDO to investors in early 2007 without telling those investors that one of the firms helping pick the collateral was also shorting parts of the bond. Tourre declared to the committee Tuesday morning that he denies (totally) all charges against him. "I will defend myself in court against these false claims," he said in a stern classic French accent. Jean Valjean (of Victor Hugo's 'Les Miserables') couldn't have said it better. Oh, but poor Cosette...