Loan Think

Paul Muolo is on vacation this week. We're running this story in place of his usual column.

A friend forwarded me an article in Financial Times magazine that struck a chord with me. I have to reflect on it here because there’s an important message to get out. The article talked about how recent rate cuts have resulted in increased volume, but lenders can’t handle it so some are staffing up again. Do they ever learn?

Rising foreclosure rates threaten to overwhelm the U.S. real estate market; a record one in 10 loans were delinquent or in foreclosure at the end of September 2008, and a total of 2.2 million homes are expected to have entered the foreclosure process by the end of 2008 with the foreclosure outlook for 2009 to be significantly worse, according to data compiled by the Mortgage Bankers Association. Will these market conditions finally bring true innovation to servicing or will current technology just be applied to deal with the problem at hand?

Do you have one, two, five referral sources sending you business? A level of business that you were comfortable with a few months ago, but that now is producing less and less? But, still, a business of business that has kept you from putting on your boots, taking out the machete, the bug spray and the pith helmet and wading back into the underbrush to find more referral sources?

If it weren't for the dire financial straits of the big three automakers, would the nation be on its way to a financial recovery? Christmas is less than a week away and why not look for a glimmer of hope in the dark tunnel of our nation's economy? This past week the Federal Reserve cut short-term rates to just 25 basis points, which means money is dirt cheap right now. Heck, it's so cheap that even the subprime industry might stage a comeback. Actually, I'm kidding on that last point. The subprime industry of the past few years is gone and never coming back. The only hope for truly credit impaired Americans rests with hard-money lenders, which offer mortgages at sky right rates - and only if there's equity in a home. But back to the recovery. Yes, we're seeing mortgage applications spike. And why shouldn't we? Some lenders are offering 5% loans. NAMB chief Marc Savitt who runs a brokerage in West Virginia told us applications are up threefold at his shop compared to November. Consumers are opting out of ARMs (no surprise there) but also are switching from 30-year loans to 15s. But the key to any true recovery will be the job market. I've said it before and I'll say it again: we need real job creation before seeing a boost in home buying activity. It boils down to this: people without jobs, and consumers who fear layoffs will NOT buy a home no matter how low rates go. Stay tuned...

On December 1, 2008, the National Bureau of Economic Research announced that the United States had officially entered a recession beginning in December 2007. A variety of factors have contributed to this situation, including rising unemployment, a general downturn in economic growth, the subprime mortgage crisis and the precarious state of major financial institutions. During recessionary times in the past, companies have made mistakes in dealing with a slowing economy.

Some people think they know it all, but none of us do. There’s value in gathering as a community and discussing problems and solutions with peers. And let’s face it, these days the mortgage industry has its share of problems. So, let’s get together and solve these problems. You and me.

THIS JUST IN: The Mortgage Bankers Association has formed a new task force to address concerns about a possible bust in the warehouse lending arena. (In case you're wondering, there are still plenty of non-banks left that need financing for their pipelines, 90% of which include loans backed by Fannie Mae, Freddie Mac and the FHA.) The trade group wants a pow-wow with the Treasury Department on the issue, especially with a refi boom on the horizon. For the full story, complete with details, see the Monday edition of National Mortgage News. Don't subscribe? Call (800) 221-1809...

Since the end of May 2008, Mark Dangelo has been gracing this website with his insight and candor. It’s been a treat for me personally to read his blog each week and post it for all our readers to enjoy. However, you know what they say about all good things. Yes, Mr. Dangelo is leaving us, but this blog won’t go away, it’ll just be carried on by a new voice.

If you had fallen asleep last Thanksgiving, only to wake up for this Thanksgiving, boy, would there have been some changes? This has without a doubt, at least for the mortgage business, been a year marked only by change. But one thing remains the same: Real estate agents sell 70% of all homes sold and the borrower uses the originator nearly 70% of the time the agent makes a recommendation. I can tell you, Agents recommend the originator that they like, believe will do a great job, and communicate with them effectively.