Loan Think

Now that Bank of America has repaid the Treasury Department its $45 billion in TARP aid, does that mean it won't be lopping off any large chunks of nonperforming loans in the coming year? It stands to reason that BoA can ill-afford to take any significant "hits" on its huge holdings of non-performing mortgages and MBS. After all, accounting rules allow the bank to treat its NPL holding benignly as long as they are placed in a "held for investment" account. Translation: it's better to keep than to sell. According to figures compiled by National Mortgage News and its Managing REO newsletter, BoA has roughly $34 billion in non-performers on its books, most of which are mortgage-related. Meanwhile, we're still waiting to hear what, exactly, BoA's plans are for its Merrill Lynch mortgage affiliate in Jacksonville, Florida...

We continue to hear reports that Federal Deposit Insurance Corp. may peel off a large chunk of residential whole loans at its receiverships and issue a security backed by the notes. At press time the agency had not returned telephone calls about the matter. Investment bankers familiar with the agency's plans say the situation is still somewhat fluid. Meanwhile, in a few weeks Joe Falk's term as a member of the Federal Reserve's Consumer Advisory Council will be up. He was the only loan broker on the CAC and a new broker rep has not been named. Is the Fed trying to send a signal to the broker community? As one loan broker told me: "Interesting how they seek to limit our compensation, but don't believe we deserve a seat at the table"...

Over the years, I have given advice to a number of friends and associates who have gone through some trying times. Everyone always asks, "When will this change?"

Before we get to the main event, there's plenty of undecided issues surrounding New York Community Bank's recent federally assisted takeover of AmTrust Bank. First and foremost is what will happen to AmTrust's wholesale division? But another huge issue is AmTrust's servicing portfolio. Will NYCB sell it? The New York area thrift has never been a player in residential finance/servicing. Its forte is multifamily. Or is all of that about to change?...

Sources tell us that a large package of bulk mortgage servicing rights could hit the market in the next month or so. This pool of receivables is not the Thornburg Mortgage deal. (See the National Mortgage News website later today for an update on that package.) The Federal Deposit Insurance Corp., which is keen to liquefy some of its receivership assets (whole loans and servicing rights), is involved. Meanwhile, we're told there's a growing small army of "broker aggregators" out there, snapping up existing loan brokerage firms on the cheap. Stay tuned for more information...

I am often asked what I am reading. Guess we are all kind of nosy, huh? But really it's a good question. If you study successful people you will see that they continuously educate themselves.

One GSE watcher tells us that the White House is taking a keen interest in the depleted reserve fund that covers losses at the Federal Housing Administration. (The thought here is that FHA may need taxpayer money, TARP, or otherwise.) And (of course) the Obama Administration is still trying to figure out what to do with Fannie Mae and Freddie Mac -- and how much more money these two mortgage giants ($1.6 trillion in on-balance sheet assets) will need. A major concern for the White House is how much a new FASB accounting rule that goes into effect January 1 will cost the GSEs in terms of new capital. Meanwhile, it appears that our elected leaders have finally come to their senses on Glass-Steagall -- a law that a Republican Congress and the Clinton White House shredded late last decade. Senators John McCain and Maria Cantwell on Wednesday unveiled legislation to reinstate the Depression-era Glass-Steagall Act -- a law that once separated commercial banks and investment banking firms. "Under our proposal, too big to fail banks would be forced to return to the business of conventional banking, leaving the task of risk-taking or management to others," said Sen. McCain...

I've seen conflicting articles in the last few days referring to the predictions of reverse mortgage volume for 2010. Some say volume will be down, others say the opposite. I of course prefer to look at the "glass half full" position. Let me outline a couple of reasons why I think the reverse mortgage business will do just fine in 2010.

It would seem that certain loan brokers and retail LOs need to hit the books. According to an exclusive story that will appear on the National Mortgage News website early this afternoon, three out of every 10 loan originators who have taken the national mortgage licensing test required under the SAFE Act have failed it. If I do my math correctly that's 30%. Meanwhile, today's economic news suggests that inflation is now a concern (again) and there's fears that the Federal Reserve may hike interest rates sooner rather than later. And -- yikes -- some economists are even talking about a 'V-shaped' recovery but I wouldn't hold my breath on that one, especially with the jobless rate at 10%. The yield on the 10-year is now at 3.6%. If the Fed begins hiking rates in the spring, and the central bank stops buying GSE bonds, you can bet that mortgage rates will be at 6% by April. (The mother of one of our employees just got a 30-year FRM at 4%. I would assume she bought down the rate.) But think of what a 6% FRM will do to the home buying market -- and home prices. Then again, all you industry veterans out there know that historically speaking, a 6% FRM is by no means a disaster. It's all about context...

There have been a number of commentators that have warned people not to put up anything on their social media site they don't want a perspective employer to see. But now an attorney who specializes in advising companies on labor and employment issues relating to social networking said there might be some legal issues for employers looking to scout potential hires by checking their social media postings.