Loan Think

Last week's article dealt with the cornerstone of your customer's credit problems, interest. Well a few readers disagreed with me. They said that consumer's biggest problem is that they purchased a home that they could not afford. Do you agree? If so, please e-mail me. I'd like to know what you think.

THIS JUST IN: There's a sticky little situation brewing involving Sovereign Bancorp, the Government National Mortgage Association and the Federal Deposit Insurance Corp. - or so we're told. It all has to do with a loan Sovereign was involved in made to Taylor Bean & Whitaker (now defunct). As reported in National Mortgage News recently, TBW borrowed heavily against its $80 billion servicing portfolio. It's the loan collateralized by the GNMA servicing that's causing potential woes for the Pennsylvania bank. The FDIC is sort of caught in the middle. For the full story see the Monday edition of NMN. Don't subscribe? Call 800-221-1809. A sub gets you access to the website's premium contact as well as the weekly newspaper...

Some time next week a winning bidder should be picked on the $1 billion servicing portfolio being offered by Interactive Mortgage Advisors on behalf of the Federal Deposit Insurance Corp. The receivables once belonged to Franklin Bank Corp. of Texas which failed 10 months ago. Franklin's demise wasn't subprime, but construction lending to home builders -- an asset class that is in deep trouble and causing many small to mid-sized banks to fail, especially newly chartered depositories that bet big on one or two projects. Meanwhile, we're hearing that Freddie Mac might be looking for a senior communications executive and that Fannie Mae has hired some new marketing people...

Below is a great question I just received from one of my One On One Closed Door Coaching members. I believe this is a very common problem, one that is not only limited to our industry, but happens in all businesses. I have left off my member's name not to protect his privacy but really to avoid embarrassing his co-workers. Here is the question.

You've heard the story before and now you're hearing it again -- that existing payment option ARMs (those that haven't been refinanced or already gone bust) are a ticking time bomb, waiting to explode, wreaking havoc in the housing/foreclosure market. Fitch tells us that $134 billion of POAs will recast over the next two years. But wait: rates are low. Will the 'old' rate 'recast' higher or lower? And just which mega banks are holding these loans? According to National Mortgage News' Quarterly Data Report, no one is making these loans any more. The POA market peaked in late 2007. And which firms were the market leaders then? Answer: Wachovia (now the headache of Wells Fargo); Countrywide (now the headache of Bank of America); EMC Mortgage (now the headache of JPMorgan Chase); MortgageIT (Deutsche Bank's nightmare); and Aurora Loan Services whose parent, Lehman Brothers, went bust a year ago...

I've received a great many calls and e-mails lately from coaching clients regarding seniors who "just won't make a decision right now about the reverse mortgage." Those readers who know me are fully aware of my typical advice in this situation: "Look in the mirror."

A REMINDER ABOUT TRUTH-IN-LENDING LAWS, REG Z, HIGHER COST MORTGAGE LOANS AND ADVERTISING RATES TO AVOID LITIGATION

On Monday National Mortgage News reported in its paper edition that mortgage banker Claude Arnall -- brother of late Ameriquest founder Roland Arnall -- has launched a new mortgage company in Irvine with the help of former senior managers at Deutsche Bank, First NLC, and Washington Mutual. Of course, he isn't the only former mortgage executive stepping back into the ring. (Sort of reminds me of Sylvester Stallone and all those 'Rocky' movies.) Anyway, supposedly Arnall's firm is focusing on FHA loans. Meanwhile M&A advisors tell me that profit margins on lending -- especially FHA -- are the strongest they've been in years...

"Communication is the problem to the answer," is a line from the 10CC song "The Things We Do For Love." Well in the office place, according to a survey by Accountemps, Menlo Park, Calif., communication is a big problem because of the use of jargon.

The anchor/pundits on CNBC (Larry Kudlow I'm calling you out) and other TV business shows have been blathering on all week about how the government needs to wean itself from not only Fannie Mae and Freddie Mac but the mortgage market in general. I got news for you, Larry: the private label MBS market ain't coming back any time soon and when it does it will be for low LTV jumbo mortgages with high FICO scores. Here's a prediction: Wall Street will never again securitize subprime loans unless there is some type of government backing on them or tons of mortgage insurance or something similar. The B&C MBS business is dead, dead, dead. And now for some good news: CMG Mortgage of California has hired 18 account executives that used to work for the now defunct Taylor, Bean & Whitaker...