Loan Think

Life's too short to work with whiny, negative, abusive and condescending real estate agents. You know who some of them are already! But, how do you reasonably determine if you can create a partnership-like relationship if you don't know them very well?

Higher mortgage insurance premiums being charged to FHA borrowers are hammering the origination market. The Mortgage Bankers Association cited the recent hike in premiums while discussing its just-released application index. In other news, former Washington Mutual CEO Kerry Killinger was on the Congressional hot seat Tuesday and -- as I anticipated -- he blamed everyone but himself for that mega thrift's downfall. His most ludicrous assertion entailed saying WaMu would not have been seized if only the institution had been part of some type of Wall Street/financial services "club." Killinger seems to think club membership would've spared WaMu. JPMorgan Chase CEO Jamie Dimon was asked about Killinger's club comment during the bank's earnings call this morning. He insisted that he is "unaware" of any such club. (JPM bought WaMu in a federally assisted transaction during the fall of 2008.) Memo to Dimon: if Killinger is right, you'd better join that club quick, just in case...

With all the pricing changes that have occurred over the last few weeks, I've had to calm down a good number of reverse mortgage originators. They are saying, "I've never had to deal with this in the reverse space." Yes, I'll admit the current environment is not something we in the "reverse world" are used to, but guess what, it's here.

The rumor mill keeps throwing out names of additional firms that are toying with the idea of coming to market with a new jumbo securitization. Most of the firms working on a jumbo MBS hope to originate recently funded loans. These are not (I'm told) "re-securitizations." Anyway, these firms are said to be toiling in the jumbo lab: Chimera Investment Corp., The Carlyle Group, PIMCO, and Goldman Sachs. (See the National Mortgage News website later today for an update on the jumbo MBS situation.) Keep in mind that any new jumbo loans being originated today are being held on the balance sheet of the funder or sold to a mega bank. But just because many firms are toying with jumbo MBS structures doesn't mean it will happen. The biggest boost to a jumbo deal getting done is this: with the Dow at 11,000 wealthy Americans that invested in Dow 30 stocks a year ago are sitting on phenomenal gains. At some point, certain "rich" investors will cash out and plow that money into their abode. And that means 'high end' homes will move. But will the financing be there to aid in the market's revival? Stay tuned...

NATIONWIDE FORECLOSURES AND DEFAULTS STILL PREDICTED TO GO UP AND HOUSING PRICES STILL PREDICTED TO GO DOWN

Marketing expert Joy Gendusa, the chief executive of PostcardMania, recently posed the following question "Have you started thinking about your 4th of July promotion?"

Readers of National Mortgage News know that we've been covering the loan buyback crisis extensively. Most of the 'mega' lenders that have been on the receiving end of buyback requests from Fannie Mae and Freddie Mac have not been saying much about the issue but they've been kind enough (sometimes) to disclose the dollar volume of their buyback requests. One executive at a top ranked lender recently told me that mortgage insurance companies, to some degree, are driving buybacks. He explained the situation like this: "MIs aren't paying on nearly all they insured and instead are finding any creative way to back out." He explained that this suddenly leaves a GSE-purchased loan without a mortgage insurance policy which is a charter violation for both Fannie and Freddie. He noted that this instantly turns a loan into a buyback candidate...

During the height of the financial crisis it was thought that nonbank mortgage lenders might be looking at a dim future. But over the past month I've been hearing increased reports about nonbanks kicking many tires of ailing commercial banks. Profit margins have been so fat the past 18 months that several highly profitable nonbanks are looking at taking control of depositories that are (shall we say) "capital challenged." The play is this: take over the bank and use it as a source of warehouse funds. Of course, it's not all that simple. The buying nonbank must pass muster with the Federal Deposit Insurance Corp. But the real challenge, I'm told, is this: if a nonbank is successful in purchasing an ailing depository, how will it manage the "real estate" risk on the books of that bank?

Do you live in fear? Stop and think about it for a moment. Are you afraid your business will fail in the next few days, weeks, months? Has fear gripped you and you seem unable to shake it, this time? If that is the case, it is time to do something about it.

THE MAIN EVENT: Traditional M&A activity-where one buyer actually pays cash for a lender-could be returning to the mortgage market. Then again, this "fragile" recovery in mergers and acquisition could blow apart at any time, it seems. The recent hike in rates seems to have abated the past few days but there's no doubt that loan volumes are not where many lenders would like them to be. As we reported on our website Friday, several medium-sized nonbanks are exploring the possibility of buying depository institutions using cash from stellar residential profits enjoyed over the past 18 months. We're not ready to name names yet, but stay tuned. Of course, any recovery in M&A is dependent on housing values. If the housing market gets whacked by a "double-dip" in prices, all bets are off...