Loan Think

ARIZONA REQUIRES LOAN MODIFICATION BROKERS TO BE LICENSED AS WELL AS THE LOAN OFFICERS IN 2010

Vulture fund managers and ‘scratch and dent’ servicing specialists are still talking about American General Finance Corporation’s planned sale of $1.6 billion in non-prime whole loans to Credit Suisse which will issue securities backed by the liens. One investor noted that over the years AGFC had a reputation of paying cash for the whole loans it bought in the secondary market. (Some of the loans came from AGFC’s affiliate, Wilmington Finance.) Back in 2008 AGFC bought a $1 billion pool of non-prime loans from Banco Popular, noted one source, and overpaid for the product. The Banco Popular pool, as might be expected, hasn’t performed all that well...

The state of New Jersey has amended its Mortgage Stabilization and Relief Act, adding a provision allowing a delinquent borrower to pay nothing during his/her forbearance period. The forbearance period can last up to six months but only becomes effective after a foreclosure action is filed. The law firm of K&L Gates said the amendment is “looking like a smart economic move” in New Jersey...

This week, BrokerUniverse is rerunning one of Joel Pate’s more popular columns. We think you will enjoy it again.

The biggest news of the past week? That would be the disclosure by National Mortgage News that American International Group is (more or less) in the process of liquidating its consumer finance affiliate, American General Finance Corp., which has been around (so its website says) for 85 years. Of course, AIG isn't talking about what exactly it's up to but we know this: Credit Suisse is buying $1.6 billion in AFGC nonprime whole loans. It then plans to turn around and issue securities. One executive at CS heralded the deal as a revival in the non-government private label market. My only thought is this: yeah, right. AIG is owned by Uncle Sam, which has committed $180 billion in loans and assistance to AIG. If Uncle didn't own most of AIG do you think CS would've done the deal? As for the liquidation of AGFC, the deal with CS is not being portrayed in the general business press as such but let's face it: AGFC closed 180 branches, isn't making new loans and it's in the nonprime space. And it's owned by AIG. The company has always been secretive about both its lending and servicing numbers, rarely disclosing them publicly. For the full story see Monday's NMN. Don't subscribe? Call 800-221-1809...

Perhaps, I’ve underestimated PennyMac’s ability to get new business. As we reported yesterday Stan Kurland’s firm will be the servicer on $1.6 billion of non-prime loans that American General Financial Services is selling to Credit Suisse. CS plans to issue securities backed by the loans. Of course, the obvious question (for those who work in servicing) is this: why would CS use PennyMac when it already has its own servicing company, Select Portfolio Services? A CS spokesman has yet to answer my question but one observer said it may be a capacity issue. He added that “PennyMac is a ‘combat’ servicer.” We know this about PennyMac: it has plenty of office space in Southern California and now – thanks to the AGFS/CS deal – it can begin putting people in those empty cubicles. I assume this contract will be among the highlights included in PennyMac’s IPO road show...

This weekend I took my wife, son and a friend to the Orioles versus Yankees baseball game. I personally am not a big baseball fan (to me it's like watching paint dry). But this is a big rivalry and we had great seats.

So, things are looking up in the economy, huh? Let’s look at the events of the past 24 hours or so: Chipmaker Intel reported strong earnings and gave a somewhat positive spin on its business going forward; Goldman Sachs knocked the ball out of the park with its earnings (thanks to stock and bond trading profits); and, yikes, a newspaper company (Gannett) reported an unexpected profit of $70 million. That’s right folks, a newspaper company. Meanwhile we keep hearing stories about how the nation’s big five residential lenders – Wells Fargo, Bank of America, Chase, and Citigroup – have a monopoly on the home mortgage business and are making money hand-over-fist. True or not? Who knows for sure but we also keep hearing stories that many lenders continue to tighten underwriting guidelines. This bit of intelligence comes from a reader in the greater New York Metro area. He told me that one savings bank in the New York City area is telling correspondents that it will only fund mortgages on homes where the price is no greater than $700 a square foot. (There are, apparently, exceptions to the rule.) This lender is telling loan officers that it may reduce the loan size and/or add to the interest rate. Reportedly, a few New Jersey lenders won’t even fund mortgages in Manhattan anymore if the LTVs are north of 80%. And I would guess the once red hot Hoboken condo market is suffering too. I used to live there many moons ago. Stay tuned...

Yes, I know those are the words to an old song, but one of the most common questions I hear is, "how to I get the senior to want to use me and not shop around for a reverse mortgage?" Even seasoned reverse mortgage originators sometimes struggle with this. Every once in a while we need to be sure that all of our marketing and outreach is sending a consistent message to our prospects and their children. Do not forget or ignore the children. In fact, I recommend you target them.

It’s unlikely that legislation to create the proposed Consumer Financial Protection Agency will pass this year but that hasn’t stopped the industry from talking about it. (At press time a Congressional hearing was underway on the CFPA.) It’s a foregone conclusion that some type of CFPA will be birthed next year but what will it lead to? Some industry veterans believe the mortgage industry will be commoditized around the 30-year fixed rate loan but a whole new lending segment will be born anew. These lenders will be depositories that keep on their balance sheets non-conforming loans – sort of like the old consumer finance companies used to do -- except instead of borrowing money from Wall Street, these ‘consumer finance’ thrifts will use depositors’ money to fund originations and may even employ nationally certified loan brokers. Wishful thinking or not? Drop me a line...