Loan Think

During the housing boom the 'Pending Home Sales Index' from the National Association of Realtors was a big ho-hum to me. I mean, who really cared? Back then home sales were booming -- pending or not. Today, the PHSI is a closely watched barometer on housing trends. Times change. The new PHSI came out this morning and the news is this: the number of buyers who agreed to purchase a home fell sharply in January. Does that mean the sky is falling? Not exactly. Don't forget Eastern states had a ton of snow. For me, the best indicator of where housing (and mortgages) is headed is the unemployment number -- which comes out Friday. Already, economists are saying it could be a bad number because of that crummy weather in the east. We shall see...

Did you know that 78% of all first time buyers rented an apartment (condo or home) prior to buying their first home? This is according to the National Association of Realtors 2009 Survey of Home Buyers and Home Sellers.

As we reported a few months back, the Federal Deposit Insurance Corp. is working on a plan to securitize up to $20 billion in single-family loans, most of which are "covered" assets or loans with loss sharing agreements that were bought by buyers failed banks. (The details are still being worked out.) Meanwhile, the agency is tapping the capital markets with some smaller residential and commercial deals. (See the National Mortgage News website later today.) As for the loan delinquency market, perhaps some relief is on the way -- that is, if you believe a better employment picture will result in less mortgages going bad. The number of planned layoffs at U.S. companies fell in February to the lowest level since 2006...

DO NOT FILE YOUR FHA/HUD AUDIT TOO SOON OR IT MAY BE WRONG

For the last few weeks, it seems that here in Baltimore where we've had a lollapalooza of a winter, everyone's in a funk. Yes it's been tough to get outside and the snow is finally almost gone. I've taken this time to look at a few projects I've been considering and also trying to figure out how to make the best of this time of the year. By the way, spring is only a couple of weeks away.

Here's a little piece of research I heard this morning -- and I don't know if it's true -- but it is interesting: there are more nonbank mortgages lenders out there with net worth positions above $10 million than there are firms in the $5 million to $10 million category. Of course, these nonbanks live and die on warehouse credit. Late last year the Federal Housing Administration issued a proposal requiring its lenders to have a minimum net worth requirement of $2.5 million within three years. In other matters, Bloomberg reported that GMAC CEO Michael Carpenter earned $1.2 million for the 45 days he worked for the company in late 2009. Mr. Carpenter, of course, is still on board, trying to assess GMAC's future. Based on the 2009 run-rate, Carpenter's annual salary would have been $9.5 million, putting him in the same compensation category as Lloyd Blankfein, CEO of Goldman Sachs...

Remember, your mortgage shop is still a business and it needs to be operating on the same principles other businesses do. And there are many resources that will provide ideas for surviving and thriving that come from those in a similar situation in all sorts of business operations, not just mortgages.

PHH Corp. unveiled its 4Q earnings this morning, revealing that it had to reduce the asset value of its mortgage servicing rights by $57 million during the period "due to prepayments and recurring cash flows and $10 million of credit-related charges, which was comprised of foreclosure-related charges of $11 million partially offset by a reduction of reinsurance-related charges of $1 million." The writedown isn't all that surprising given the nature of interest rates these days, but as we pointed out a month ago, many of the 'mega banks' are writing up the value of their MSRs. Under new CEO Jerry Selitto, PHH is in the midst of reengineering how it conducts business in an effort to save up to $120 million annually...

With limited loan options and similar pricing among competitors, service is how an originator stands out.

So, what kind of 'rich folk' would commit money to a private equity fund to buy into the mortgage industry? The type of investment I'm talking about involves purchasing an existing nonbank residential lender ('A' paper only) or a top flight loan brokerage firm. (Yes, there's still some of those left.) One hedge fund officer told me: "I have two types of conversations, one where I get the phone hung up in my face and another where the guy says, 'Tell me more.'" This manager, who did not want his name publicized -- at least not yet -- said some of the investors are former mortgage bankers and even mortgage backed securities traders. He is working on a deal and hopes to have an announcement within the next two months...