Loan Think

Successful originators have a number of common characteristics.

THIS JUST IN: We're starting to hear unconfirmed reports that Aurora Loan Services of Colorado is toying with the idea of originating loans again -- either through a conduit or the wholesale channel. Presumably, these would be Fannie/Freddie/FHA credits. In the old days ALS was the king of alt-A but that was a world ago when it was owned by the now defunct Lehman Brothers, a major player in subprime and alt-A. ALS and its bank affiliate were not part of the Lehman bankruptcy. The company -- which stopped funding mortgages in 2008 but still services/subservices -- had no comment whatsoever. If you have any information drop me a line at: Paul.Muolo@SourceMedia.com...

I had an interesting conversation with Jeff Freud of LoanMarket.net the other day. LM offers individual investors (via the magic of the Internet) an opportunity to buy delinquent mortgages -- one a at time. Buyers must pay cash. Mr. Freud insists that banks are indeed selling nonperforming loans and a handful of Wall Street firms are running trading desks geared toward the product. I asked him how come no banks are publicizing their sales? His response: "If they admit they're selling it will drive down prices." It's a wild and whacky world out there. I know this: based on the brand new delinquency figures released by the Mortgage Bankers Association (which I married to data collected by National Mortgage News for its Quarterly Data Report) there has to be at least a $1 trillion in delinquent loans out there that need curing. Loan modifications aren't going to do much good unless Americans get back to work...

This is the latest article in my series about the importance of using targeted direct mail. In the first, I outlined the four important components you MUST think about. Last week we covered getting your mail delivered and an important tip that will allow you to always know it was delivered.

Now that FHA is tightening up its ship in regard to loan standards, some wholesalers are tweaking their government menus as well. Bank of America account executives sent out notices to their brokers noting that FHA has made "significant changes" on streamline refinances including a hike in minimum FICO scores. One of the nation's largest wholesalers, BoA is telling brokers that a 640 FICO is "now required on all FHA Streamline transactions." The bank says lenders must also perform a "net tangible benefit test" for the consumer"...

As I write this article I am on a plane bound for San Diego and the annual conference of the National Reverse Mortgage Lenders Association. I can't help but wonder what my colleagues and peers will be saying this year. Some may say it was an "off" year despite another record in volume. What about you? Have you met your production goals? If so, did you find it more difficult than last year? What plans have you put in place now for 2010?

We continue to hear unconfirmed reports about selected firms starting up either a wholesale unit or a correspondent division. As we noted recently, PennyMac, which started out as a vulture fund, has formed a mortgage conduit and is toying with the idea of table funding. The firms that are looking into correspondent and wholesaling tend to be midsized lenders with growth in mind. These firms likely see a lack of competition out there in these TPO channels and feel that despite all the recent (and coming) regulation of mortgage brokers and bankers that there will be plenty of opportunities. Of course, all these new entrants will be concentrating on the same loan types: Fannie Mae, Freddie Mac and FHA. What the market truly needs is a jumbo wholesaler. But don't hold your breath...

I believe that one of the drivers of the subprime crisis is that everyone in the mortgage industry got too complacent. As more and more loans were originator, as home prices kept rising, as automated underwriting systems said what was being produced was OK for sale on the secondary market, various points in the origination cycle that used to ask questions stopped asking those questions.

HUD/RESPA SAYS WE WILL EXERCISE RESTRAINT IN ENFORCING THE NEW RULE FOR THE FIRST 120 DAYS BUT -- AND I DO MEAN BUT--IT IS STILL THE LAW

The big picture: the Dow is at 10,400 which means we need to recover just another 3,600 points and the economic meltdown of 2008 will be just a distant memory, a blip on the financial radar screen, so to speak. Not exactly. Unemployment is still sky high and home prices aren't about to "snap back" any time soon. Think of it this way: the home price appreciation we saw from 2002 to 2007 is something that we might "normally" see over a 20-year period, not a five-year period. That's just my opinion, of course. Meanwhile, we hear that plenty of former mortgage traders and MBS analysts who work on Wall Street are still hunting for jobs. Also, the price of higher-rated subprime MBS tranches have risen to the point that they are no longer considered bargains. And one last note: former NAMB chief Marc Savitt is working on a website that (so, we are told) won't exactly be backing Andrew Cuomo for governor. A former HUD secretary, Mr. Cuomo is the New York state attorney general and the man behind HVCC...