Loan Think

I received a very good question recently via e-mail and I thought I'd share it with you. You may have heard me comment on this topic before but it bears repeating. The question went something like this: "Sue, I'm an experienced loan officer thinking about getting into the reverse mortgage business, but I'm only 31 years old. I am concerned that my senior clients will not want to work with me because I am so much younger than they are. Should I even try?"

HUD NEIGHBORHOOD WATCH AND HOW IT CAN BE MISLEADING

"Full nationalization is not an option," said Treasury secretary Timothy Geithner this morning. He was talking, of course, about Fannie Mae and Freddie Mac. As I've pointed out before, if the federal government nationalizes the two, an argument can be made that their obligations ($5.2 trillion in holdings/guarantees on MBS) now become obligations of Uncle Sam, and thus the taxpayers, which is (sort of) like a consumer with a first lien of $200,000 suddenly taking out a HELOC for $100,000 even though the first is already underwater. It would appear that both Democrats and Republicans alike are going to look at restructuring the entire housing finance system which means FHA, VA, GNMA and the FHLBs are in harm's way too. Who knows, when all is said in done, maybe good olde fashioned 'building and loans' will re-emerge. George Bailey phone home...

Making the sale is very important for your financial well-being. It is not so important that you should risk your life and the lives of innocent people while you are chasing that next lead or referral.While talking on your cell phone while driving is dangerous (and there are studies that show even using hands-free devices doesn't eliminate the distraction factor), texting while driving is much more dangerous.A recent survey conducted by Harris for CareerBuilder.com found that more than half of those who use a smart phone or similar device admit to checking it while they drive. But by profession, sales people come in even worse, with nearly two-thirds responding they use their smart phone when they are behind the wheel.Some feel they are pressure by their employers to risk their safety in order to check their phones the second it rings, vibrates or beeps; nearly one-in-five admit this is the case, with 18% saying they are required by their jobs to be accessible after office hours. The survey also found 14% of respondents felt the need to stay in touch with their workplace because of the economy.But as the survey results found, it is more than just the texting while driving issue that the always-connected worker has with being tethered to the device. It impacts their work/life balance.The survey asked in what places do you check in with your office. During a meal garnered a 62% response, followed by on vacation with 60%; while in the bathroom, 57%; in bed at night, 50%; at a play or movie, 25%; on a date, 18%; in the gym, 17%; at your child's event or function, 17%; and at religious services, 11%."It is challenging for workers to maintain a good work/life balance when they are constantly connected to the office, so turning their devices off is important for their health and safety," said Rosemary Haefner, vice president of human resources for CareerBuilder. "The lines between work and life can be very blurry these days - 17 percent of workers said they feel like their work day never ends because of technology connecting them to the office. To reduce burnout and avoid potentially risky behavior, workers should allot technology-free time when away from work."As for using the smart phone while driving, she suggested if an urgent matter or conference call comes up, pull over to the side of the road to safely handle the situation.

So, how is the buyback plague playing at smaller firms? One Florida lender wrote to me over the weekend, noting that her shop is getting hit with buyback requests almost daily. "It appears that the MI companies are kicking back to the investors and the investors are just giving up and not even going to bat for us," she writes that, "I feel that the banks are losing so much money that they are looking for anything to get us to repurchase these loans. I am looking at loans as old as 2005. Something is wrong with that." On Friday National Mortgage News reported that the nation's mega banks and other depositories repurchased roughly $30 billion in residential mortgages from Fannie Mae and Freddie Mac in the second-half of 2009 and will suffer losses of up to 40% on the loans. That bit of market intelligence came from Credit Suisse...

As we all know, Taylor Bean & Whitaker of Ocala, Fla., is kaput, having succumbed to bankruptcy this past fall. From what we understand its warehouse lenders made out okay, but a consortium of banks that had extended loans backed by TBW's servicing portfolio suffered losses, or at least writedowns. A court case is pending regarding the bank loans which are collateralized by TBW's MSRs, one banker familiar with the matter told us. And what of those MSRs which total just shy of $60 billion? We understand at some point the bankruptcy trustee will want to liquefy these assets which currently are controlled by the Government National Mortgage Association, and Freddie Mac. Both sets of MSRs are being subserviced...

I recently overheard a business associate make the statement: "Goals suck!" "Why," I had to ask, "do goals suck?"

THE MAIN EVENT: I'm going to start out this week's column asking you, the industry, some terribly dumb questions about something that's been bugging me a great deal lately. Bear me with me because it's going to get a bit complicated (I think). It has to do with Fannie Mae, Freddie Mac, and all the loan buybacks they are jamming down the throat of the industry. It also has to do with all those AAA-related bonds they bought from those charlatans on Wall Street. (Author Michael Lewis painted this picture 25 years ago but don't get me started on the Street again.) And it has to do with the mortgage insurance industry which insures most high LTV products sold to the two GSEs. If you saw the National Mortgage News website on Friday afternoon you know that Fannie and Freddie forced the nation's mega banks and others to repurchase roughly $30 billion in product during the second half. And that's just 2H09. The way I see it, we have all of 2010 and next year. It's going to be a loan buyback 's-storm' from here on out. I assume that when FanFred asks Bank of America, Wells Fargo, Chase, or Citigroup to repurchase something, they say, "Yes, right away sir." Then there's the MI industry. From what I've heard, the MIs have paid out somewhere in the range of $30 billion to $50 billion in claims. Didn't most of that go to the GSEs? And what about bond insurance? All that subprime and alt-A crap the two bought -- isn't that guaranteed by someone? And then there are the legal rights of the GSEs. If they were sold crap by the Street (subprime ABS being at the top of the list) can't the GSEs sue the Street? Shakespeare had it wrong. It's not "First, we kill all the lawyers." It should be: "First, we hire all the lawyers." Anyway, what I'm getting at is this: FanFred have lost $130 billion or so the past two years. With all these buybacks, with all these MI policies, with all the bond insurance they have, shouldn't their losses really be minimal? I know this sounds crazy. But someone has to pay, right? And it would appear the government owned GSEs are trying to make everyone pay. So why shouldn't their losses eventually be compensated? What am I missing? I told you I had some dumb questions to ask. Feel free to comment at the end of this column or drop me a line at: Paul.Muolo@SourceMedia.com...

The nonperforming loan auction market is a tricky wicket. Just when you thought activity was picking up, new reports emerge suggesting that even though some large portfolios are hitting the market that sellers are once again getting picky on pricing. (You would figure that beggars can't be choosey.) Any way, Wells Fargo has a new offering out there as does GMAC. (See the upcoming edition of National Mortgage News for an update.) Meanwhile, some bidders have been complaining to us about how much it costs to conduct due diligence on a nonperforming loan package and how little some sellers will reimburse them for the money spent...

Like most government legislation, the Nov 6, 2009 homebuyer tax credit extension created more questions than answers. However, according to Doug Geissler, a certified public accountant, the Internal Revenue Service is literally writing the "refund rules" as they go along.