Loan Think

The mortgage industry continues to be front and center. Congress and the current administration have made regulatory compliance and enforcement a top priority. There are constantly changing rules and risks from the FTC, Federal Reserve and HUD, which is focused on flexing their authority over marketing, origination and servicing.

The new White House plan is out to stem the foreclosure crisis and skeptics are probably scratching their heads, saying "Why bother?" (You can count me among those skeptics.) Maybe some 'A' paper borrowers who lost their jobs and are facing long term unemployment will be saved. And that's a good thing. But let's look at the hard numbers. At year-end, consumers owed $777 billion on their A- to D loans and you can anticipate that at least half these mortgages are toast -- dead and done for. That amounts to $389 billion (rounded). You can figure at least 15% of the 'A' paper market will wind up in foreclosure, amounting to $780 billion in dead paper. Add the two together and we get: $1.169 trillion in foreclosure trouble. (Figures courtesy of National Mortgage News' Quarterly Data Report.) The Obama plan entails spending $50 billion. If the White House really wants to stem the foreclosure crisis I have one suggestion: concentrate on getting more Americans back to work and stop wasting everyone's time...

Goals suck, right? Well, only if you have failed to develop a process of improvement as a way to develop goals appropriately. This article was supposed to be phase two of goals suck and how to develop a "Process of Improvement" that is reliable. I will return to that subject next week.

THIS JUST IN: The National Credit Union Administration plans to unload $50 billion of troubled MBS belonging to now-defunct "corporate" CUs. It's just a matter of how and when. Keep in mind that $50 billion is the "face value" of the bonds. How much these problem assets will fetch in the secondary market is unclear. For more details see the Monday edition of National Mortgage News. Don't subscribe? Call 800-221-1809...

Is it really any surprise that Bank of America will attempt to cut the principal amount on 45,000 troubled mortgages it inherited courtesy of Countrywide Financial? (Should we call this project, "Angelo's Ashes"?) Ten days ago BoA spokesman Rick Simon told National Mortgage News' Brian Collins that principal reductions were a done deal -- especially on payment option ARMs. Of course, the bank is dealing with some nasty mortgage abuse lawsuits brought against Countrywide by the states so this makes the bank look like a good corporate citizen for at least trying principal reductions. But the big question is this: will other mega servicers with legacy POA loans follow suit? Stay tuned. Meanwhile, it appears mortgage bankers are on the hook for overtime pay for inhouse loan officers. This new development is now on the NMN website...

Admit it. You've purchased a system or a marketing program that you thought was going to revolutionize your business-only to find that it was so complicated that you simply gave up and never looked at it again.

CitiFinancial, the nonbank arm of Citigroup, today agreed to pay a record $1.25 million fine for not correctly reporting its origination data to the Federal Reserve via the Home Mortgage Disclosure Act for the years 2004 to 2007. But what's so fascinating about all this is that CitiFinancial -- formerly known as Commercial Credit of Baltimore -- is still alive at all. Commercial Credit was the subprime residential arm of the old Travelers -- Sandy Weill's Travelers. (Remember when Glass-Steagall was ripped down in the late 1990s? Immediately thereafter, Citigroup and Travelers merged.) Any way, CitiFinancial, a nonbank, is still around though its not making subprime mortgages anymore. And it's not using loan brokers either. So, what type of loans is CitiFinancial making? Answer: home equity, personal loans, and even firsts. Go figure...

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...