Loan Think

HUD released its much anticipated audit of the FHA's "reserve fund" this morning and the central message seemed to be: "Everything's okay, folks. You can all go home now." To their credit, HUD secretary and assistant secretary -- Shaun Donovan and David Stevens, respectively -- spent almost two hours with the media (and the public at large) explaining that FHA's reserves are under extreme pressure but they believe the fund will stay in the black. As for lenders that are abusing the program, Mr. Stevens had a clear message: the agency has "suspended or eliminated" eight firms from the program over the past few months and is watching closely...

Last week we spoke about the importance of using targeted direct mail and I outlined the four important components you must think about. This week let's tackle issue No. 1: Getting it delivered.

So, is the FHA's reserve fund in the red or not? We understand it hasn't gone negative yet but we'll know for sure by tomorrow morning. That's when HUD secretary Shaun Donovan and FHA chief David Stevens will provide what they call an "in-depth review" of the actuarial study they ordered on the reserve and "financing" funds. (Claims on delinquent loans are paid out of the financing fund. Money flows from the reserve fund -- which is housed at Treasury -- into the reserve fund. Confused? I'm not even sure I have that right.) Stay tuned. Meanwhile, former criminal defendants Ralph Cioffi and Matt Tannin -- they of the Bear Stearns subprime hedge fund species -- were all smiles outside the federal court house in Brooklyn yesterday when a jury acquitted them of fraud and insider trading charges. The trial lasted three weeks. I didn't attend the proceedings but I've read both the civil and criminal complaints against the two men and interviewed mortgage bankers that worked with them and did business with Bear. (Both men were minor characters in the book I co-authored 'Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis.') A few observations here: even though they beat the criminal charges, they still have civil culpability in a handful of cases tied to the funds' collapse; White collar crime cases (or alleged white collar crime, I should say) can be a hard sell to juries especially when prosecutors have to prove "who knew what when" and how their actions violated the law. I have to admit, the insider trading charges against Cioffi looked strong -- but the jury has spoken. In a criminal case the jury's decision must be unanimous. In a civil case the plaintiff needs a majority. The jury's acquittal also means that prosecutors may be loathe to bring criminal charges against other alleged mortgage/Wall Street wrongdoers, leaving such matters to the civil division of the Securities and Exchange Commission. This also cements my belief that the Department of Justice will in no way bring criminal charges against Angelo Mozilo, the founder and former CEO of Countrywide Financial...

Editor's note: Today we are rerunning one of our favorite Sue Haviland columns. We hope you enjoy it.One of the best ways to reach out to seniors and educate them about the benefits of reverse mortgages (or any products) is often overlooked even by the most experienced reverse mortgage originators. It is something you can do at practically any time since the means to accomplish this is in front of you every day. It is passing on to your potential clients what's in the news. Using current events and news is an effective way to link (match the message) reverse mortgage benefits to the audience.

There appears to be anecdotal evidence that things might be looking up for loan brokers -- ever so slightly, that is. One positive sign comes from Total Mortgage Services of Milford, Conn. Come January TMS is launching a national wholesale platform. It has already hired a manager to run the thing, we're told. Details coming shortly. Also, it appears that Chaseis cranking up its hiring. See Bonnie Sinnock's story on the National Mortgage News website early this afternoon. Meanwhile: Not only did the White House and Congress extend the homebuyer tax credit through the spring but they are giving an added break to "qualified" officials who are on "extended duty" overseas. Presumably, this means homebuyers who are serving in the armed forces overseas but also could mean federal officials in the diplomatic corps. For these individuals, the tax credit extension is for an additional year -- in addition to the extension...

Marketing expert and author Maribeth Kuzmeski notes creating clients for life is all about building relationships based on real human connections. And one of the best times to help build or deepen those connections is when a client calls you after having a problem, she said.

HUD MORTGAGEE REVIEW BOARD DISCIPLINES FHA MORTGAGEES

In today’s marketplace for corporate innovation initiatives to produce results, it is critical that they are aligned with corporate strategy. For this to happen, senior management needs to takes a leadership role in implementing innovation initiatives. In order to align innovation with strategy, companies need to review and analyze how well the company is meeting its strategic objectives.

The world's biggest drug maker --that would be Pfizer -- is closing six of its 20 research facilities, reorganizing others, and cutting the jobs of roughly 15% of its scientists and related staff. What does this piece of news have to do with the mortgage industry? Everything, when you think about it. It's unclear how many people will lose employment -- and hopefully some of these workers will be snatched up by other drug firms. But wherever these six research facilities are located, there likely are "support" businesses, and retailers, and restaurants -- oh, and homes to buy and sell. Some of these laid off Pfizer scientists likely are middle-class or upper middle class workers and have nice homes -- and a mortgage on that home. And maybe that scientist has a spouse who stays at home with the kids. Well, that one-earner family is now a no-earner family income. And maybe that laid off scientist has plenty of savings and a nice severance package to hold him over until a new job comes along. Maybe. Pfizer, of course, isn't the only company that is still laying off workers in this "recovering" economy. We see drips and drabs of the layoff notices. The federal government tell us that the job situation is getting better. Let's hope so -- for the sake of the families of those getting laid off and all the servicers and investors that are on the hook for losses. And Fannie Mae and Freddie Mac, and GNMA that own or guarantee their loans...

With the abysmal jobs number for October finally unveiled, there is some good news for mortgage bankers: the Federal Reserve isn't likely to raise short term rates any time soon. Moreover, some analysts are saying it won't be until 2011, maybe 2012 before we see a rate hike on the short end. This also means that mortgage origination profit margins should remain strong for at least the next year. Servicing revenues, though, could come under pressure as refinancings continue to cause a runoff in receivables and delinquencies gallop along. Of course, if the jobs situation improves rapidly by midyear (which some Pollyanna analysts think) then all bets are off. In other words: it's all a crap shoot. Meanwhile, the new employment figures offered no relief for the mortgage brokerage sector. Broker-related employment fell to 66,900 positions, a 1,100 loss from the previous month. For the full story see National Mortgage News Online later today...