Loan Think

A hedge fund whose identity we know is having subprime-related problems similar to Bear Stearns, oneveteran investment banking source told us. We are not releasing the name of the fund until we can confirm moreinformation about the fund and its problems. Stay tuned. Meanwhile, several sources tell us that the CDO (collateralizeddebt obligations) market is in serious trouble. CDOs that invested in subprime assets are being hammered. "Mostof these are held by insurance companies and foreign accounts," said one banker, requesting anonymity...

While the dream of having one system that does it all is just that, a dream, combining like processes under one tool does have some immediate benefits. Synergies can equal less rekeying and greater accuracy in some cases, when the vendor chooses their offshoot services well to ensure that they're complimentary to their core system and not just a distraction with an added price tag.

Looking for the right product for that special borrower? Ellie Mae launched a new service dubbed Dynamic Loan Screening that matches originators' loan applications with the products and services of lenders, investors and settlement service providers.

Is the Bear Stearns hedge fund debacle the subprime Chernobyl we all feared or are carrot-juice-swiggingfinancial journalists blowing the whole thing out of proportion? This is what we don't know: how large exactlyare these two Bear-managed funds? What type of subprime assets are in them? And how leveraged are the funds? Byusing a hedge fund structure to invest in subprime assets, Bear has created a Dick Cheney-like "coneof silence" to prevent the outside world from knowing what exactly is going on at the two hedge funds. Note:Bear has not filed any type of SEC statement regarding these funds, has it? Bear is a public company. Thehedge funds are not. We know this: Merrill Lynch -- which does not screw around with deadbeat borrowers-- told Bear on Wednesday enough is enough: you either post more collateral or we're seizing the assets collateralizingour loan. Guess what? Bear said go ahead. Merrill said fine. We will. Good for Merrill. Merrill -- as we all know,thanks to a groundbreaking story published by National Mortgage News in February -- has zero tolerancefor subprime lenders that have no capital. This is what I propose: Since Bear won't tell us what's going on therespective chairmen of the House Financial Services Committee and Senate Banking Committee shouldhold a joint public hearing on what exactly Bear is up to. We need to learn what's in these hedge funds and howcome Bear can get away with not disclosing. What did Merrill know that caused it to call in its loan? And whilewe're at it, maybe our elected officials can do an investigation into Wall Street's margin calls on Ownit Mortgage,Mortgage Lenders Network and ReseMAE. (To name a few.) And maybe our elected officials can ask thisbasic question: who's to blame for our nation's subprime crisis, one in which the delinquency rate is 17% (accordingto the Quarterly Data Report). Who, really, is to blame? Wall Street? Wholesalers? Loan Brokers? The consumer?I would venture all are to blame...

Weekend Update readers: We're still putting the finishing touches on our annual data directory/analytical book-- The Mortgage Industry Directory -- so this column will be brief. Once again I've chosen some marketcommentary from an industry insider, Ross M. Strickland who once worked for mortgage lender Webster Bank.Before we get to Ross' comments, keep in mind that the 1Q edition of the National Mortgage News'Quarterly Data Report has just been released. According to the QDR, subprime production fell to just $88billion in the first quarter, a stunning 50% decline from the same quarter last year. Of course, the plunge wasnot unexpected given the current subprime crisis. Among the top 10 subprime funders, the biggest decline was atHSBC Finance of Prospect Heights, Ill., which is restructuring its B&C business. HSBC's parent bankhas bad debt reserves of more than $10 billion, in part, because of its U.S. subprime business. The bank, though,refuses to tell the public how much of the $10 billion is attributable to subprime. That's the British for you...

Weekend update readers: I've been busy crunching to get our annual data directory/analytical book out -- theMortgage Industry Directory. There will be no "regular" update this weekend. However, insteadI would like to share some market intelligence with you. This comes from a loan broker contact who plies his tradeon Long Island, east of New York City. I grew up in Nassau County in a little hamlet called Wantagh. I spent mysummers at Jones Beach on the south shore. Over the past five years the Long Island housing (and mortgage) markethas been red hot. But like many areas in the nation, it is now "adjusting."

THIS JUST IN: Two more managers for All Fund Mortgage have stepped forward and told NationalMortgage News that they have not been paid in several weeks. (Typically, All Fund used to pay within 48hours.) One manager, requesting anonymity, said she has not been paid since April and is owed close to $8,000."They are not returning my phone calls or e-mails," said the manager who is based in the South. NMNhas published two stories on All Fund's woes and is working on a third one. Stay tuned…

We got us an industry catfight! As President Bush once said: Bring it on! This tiff started early last week at the Mortgage Bankers Association's National Secondary Market Conference in New York where -- according to reporting by National Mortgage News' Ted Cornwell -- trade group officials made a number of veiled public comments blaming the foreclosure crisis on, well, loan brokers. Some mortgage bankers believe that brokers work for incentives (commission, yield spread premiums) and could care less about a loan's long-term performance. National Association of Mortgage Brokers president Harry Dinham fired off a statement saying, "It is truly unfortunate that the president of the Mortgage Bankers Association has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders and underwriters for the subprime situation we find ourselves in today." NAMB is calling for the creation of a national registry "so that consumers can be protected by the bad actions of all originators whether they work in a bank, state-chartered lender, credit union or mortgage brokerage." MBA doesn't want a national registry because that means every single LO working for a mortgage bank will have to sign up. In short, that's a lot of paper work and compliance (read: money). In years past these two trade groups have talked about merging. I would advise that before they walk down the aisle they seek marriage counseling -- or at least a chat with Dr. Phil...

Are non-depository subprime funders beginning to see some relief in the secondary market? Prices are tickingup every so slightly, one executive told us, but nothing to write home about. "If we get 101 for a loan weconsider ourselves fortunate," said the president of one West Coast-based B&C shop. "If we get 101.5we consider that a fortune"…

Fannie Mae plans to tighten its underwriting guidelines on certain loans especially where risk layeringis involved. A spokesman confirmed to National Mortgage News that changes are coming in regard tohigh loan-to-value ratio mortgages and "very low" downpayment loans. He noted the idea is to preventconsumers from getting into trouble…