Loan Think

There's at least one detail about BB&T staying in the warehouse lending business that readers might want to know: for new nonbank customers the bank is limiting its lines to mortgage lenders that are located in its "footprint." That would be the mid-Atlantic and selected other states, which means if you're a nonbank based in California you might be out of luck. As you might recall, this past summer BB&T took over the warehouse platform of Colonial Bank when that institution failed. The North Carolina-based BB&T was already in the warehouse space. In other warehouse news, we continue to hear scattered reports that the "credit crunch" facing nonbanks is beginning to thaw somewhat but the industry is hardly popping champagne. Meanwhile, in other news, Lend America executive Michael Ashley told Newsday last night that his firm's problems with the FHA stem from an employee in the Inspector General's office at the Department of Housing and Urban Development having a "vendetta" against him. He declined to name the employee. Lend America is a nonbank that depends on warehouse lines of credit. It ranks 18th nationwide in terms of GNMA issuance, according to the Quarterly Data Report...

Wow, what a week. I just completed a nine-day trip to see business partners and to participate in the second Credit Repair Boot Camp sponsored by my friend Mike Citron at Dispute Suite.

What is it with Long Island, any way? It's the home of Joey Buttafuoco and Amy Fisher. (Remember them?) You ever hear of the Good Rats? The parking lot that is called the Long Island Expressway? And don't get me started on the real estate taxes! Twenty-five years ago I remember visiting with my mom's boss (a Sears manager) at his house on the water. Back then his taxes were $10,000 a year. I grew up in Nassau County, the South Shore where all the working class folks lived. (Billy Joel and all the rich folks live on the North Shore.) I was raised in a Levitt house that cost my parents about $9,000. My dad was a GI returning from the war. He would regale me with tales of his 3% FHA loan. OK, he didn't regale me but I do remember that my parents had an FHA mortgage and the rate was about 3%. (This was back in the 1950s.) Where am I going with all this? FHA and Long Island? Lend America, that's where. The nonbank from Melville was in the news this past week after it beat back a court injunction from HUD that would've prevented the lender from continuing to fund FHA loans. (FHA is its only product so you can imagine how important it is to them.) For now, Lend America is still open and operating and that's good news for its 700 employees. Is this just a case of a misunderstood businessman (Michael Ashley) and an overzealous HUD looking to make an example of someone (Ashley) over $14 million in loans? (Ashley, by the way, has a bit of a "history" but that was almost 20 years ago.) The matter is far from over. The judge wants to see more evidence from the government. As part of its case, Lend America filed an affidavit from Scott Rasmussen, its chief performance officer. He's worked at the company for less than two years and says (in the filing) that since early 2009 its product process is entirely paperless which results in "significantly increased control and accountability." He adds that the company can tell "exactly when any document or records have been altered." (Its software vendor in this regard is Interthinx.) This, I assume, speaks to loan quality at the firm. The Lend America case is going to be one to watch. For the full story see the Monday (paper) edition of National Mortgage News. Don't subscribe? Call 800-221-1809...

In attendance today at the New Jersey Association of Mortgage Brokers show in Atlantic City is a representative of LendAmerica who is probably getting a lot of questions about yesterday's events. He's manning a booth in the trade show. (See the National Mortgage News website for an update on the LendAmerica saga.) Anyway, we're talking to all types of sources in the industry about the company, its history and current reputation. Needless to say, it's certainly turning out to be an interesting story. One fact: its corporate headquarters is out in Melville, Long Island. The building once served as HQ for American Home Mortgage, a now-defunct alt-A and prime lender. We understand former AmHome chief Michael Strauss is looking to get back into the business. Hey, but isn't everyone these days?..

The two most recent articles have been all about how to control your prospects experience so you can close more loans. Let's continue that idea here with what happens when a customer tries to contact you.

Who exactly are the firms bidding on delinquent second liens these days? Answer: it's not exactly your traditional players in mortgage finance. Brokers who work the market note that it's what they call "collection agency types," firms that do not care -- in the least -- about the consumer. These firms have a mission in life: pay as little as they can for a debt and collect as much as humanly possible. "These are different animals entirely," said one investment banker. Most delinquent second lien portfolios sell for pennies on the dollar -- some for less than a penny on the dollar...

Well friends, it's nearly the end of October. The leaves are falling; the weather has begun to change. This signals an important time of the year for me, planning for 2010.

DELIBERATELY ALLOWING THE HOME TO GO INTO FORECLOSURE AND WHY SOME PEOPLE DO IT

Some say the mortgage industry lost its way. Greed and the need for short-term profit was too much to pass up. Lenders took on too much risk. But why? And more importantly, how can these practices be changed so they don’t occur again? It comes down to standards.

We understand there are plenty of willing sellers of mortgage servicing rights these days but mortgage bankers will not unload their receivables because the "bid/ask" is too wide. In other words: the prices being offered are so underwhelming that mortgage bankers would rather hold onto what they have rather than sell at a possible loss. However, now that we're in the fourth quarter some deals could get done. Meanwhile former Treasury Department Assistant Secretary Neel Kashkari was on CNBC this morning discussing TARP and the $700 billion bailout of our credit markets. He hinted that without the money, the U.S. unemployment rate would be much worse than today's 9.8% figure but declined to speculate on whether it might be close to the Depression-era rate of 25%. He admitted that the government "underestimated" the length and depth of the crisis but one of Treasury's biggest problems was explaining this "complicated" mess to members of Congress. In other words, our federally elected officials are intellectually challenged...