Loan Think

Investment banking firms increasingly are buying notable stakes (4% or more) in publicly traded subprime firms.For instance, Deutsche Bank, until recently owned 7.2% in Accredited Home Lenders. It no longer ownsall that stock in Accredited, though. What happened? Good question. For the full details read the Monday editionof National Mortgage News. (Don't subscribe? Call: 800 221-1809.) Anyway, Deutsche isn't alone.Friedman, Billings, Ramsey owns 4.8% of Saxon Capital (as of this past fall.) Some of these investmentsare just that -- investments. But one nonprime executive suggested to us that the Street is buying these stakesas a way to curry favor with the lenders. Why? Perhaps the lender will need a warehouse or repo line, or maybesell their loans to the investment banker's trading desk. Interesting concept...

This just in: fourth - quarter production volumes were decent, but all lenders (prime and B&C alike) sufferedfrom the profit margin blues. According to upcoming 4Q edition of the Quarterly Data Report, residentialfunders originated between $750 billion and $850 billion in the quarter. To preorder the QDR, e-mail Deartra.Todd@SourceMedia.com...

Here's how the big layoff went down at Aurora Loan Services last Wednesday: the "suits" atLehman Brothers arrived from New York that morning and the top brass at ALS were all dressed in suits andties. (Normally it's a casual atmosphere at the Denver company.) A source familiar with the matter said 200 workerswere let go. The alt-A giant also plans to wind down its Irvine, Calif., office over the next 90 days, resultingin another 100 or so job losses. Lehman would not comment for the record but a source familiar with the matterconfirmed there were layoffs, blaming the cuts on reduced production volumes in the industry and the "downwardside of the mortgage cycle." (Cuts were also made at Lehman's BNC Mortgage division.) If you need tofind out who the top alt-A lenders are in the U.S. check out the Alternative Products Quarterly Data Report.For subprime lenders, check out the Quarterly Data Report. For more information e-mail Deartra.Todd@SourceMedia.com...

In what might be a sign of the times subprime giant Aegis Mortgage has tossed its correspondent divisionoverboard. The privately held lender apparently bought its last loan in December, one official told us. Aegis isstill active in wholesale and retail but what, exactly, is going on at the firm is unknown. Aegis spokeswoman KarenBowers did not return telephone calls last week and loan brokers were churning out rumor after rumor on BrokerUniverse,a wholesale/broker portal owned by National Mortgage News. For the full story see the Monday editionof NMN...

It certainly is starting to get interesting in mortgage land. Here's just a taste: Waterfield Mortgageof Indiana -- which has been around for as long as many folks can remember -- is getting out of the industry whilethe getting is good. The company is selling its production assets to American Home Mortgage of Long Island(which just announced that 4Q earnings are going to be, well, a bit light). And what about Waterfield's $19 billionservicing portfolio? That's going too -- but not to AHM. GMAC Residential is still on the auction blockand it now appears that one leading bidder might be mega-bank Wachovia of Charlotte. (Only a mega-bank canafford GMAC, which by the way, has one of the best franchises in the business.) What other interesting things areafoot? Boston Portfolio Advisors just lost four top managers who are starting their own firm, and just aboutevery nonconforming lender we've talked to is suffering from the flat yield curve and margin compression. Whenwill it all end and will it end ugly or pretty? Good question. For some of these stories read the upcoming issuesof National Mortgage News or Mortgage Servicing News. Don't subscribe?Call: (800) 221-1809...

The "back story" to ABN Amro's $41 million settlement with the government may be the FederalHousing Administration itself, or its "parent" agency, the Department of Housing and Urban Development.ABN's mortgage affiliate agreed to pay the money to settle allegations that the lender falsified FHA underwritingcertifications. But one government official suggested to National Mortgage News that the agency issuffering from both a lack of field agents (employees) and experienced veterans to conduct spot (random samples)for FHA. In the "old days" HUD had 54 field offices and 13,000 employees keeping an eye on the program.Today, it has just six "homeownership" centers, 9,000 employees, and no field offices. "There wasa real expertise there that's gone," he said. "We need the gray haired guy with the bean soup spilledon his tie." In other words there are other ABN Amros out there waiting to be discovered. For the full storysee the Monday edition of NMN. Don't subscribe? Call: (800) 221-1809...

First the good news: it appears the multifamily market could be poised for modest growth in 2006. At a recentforecast press conference, Fannie Mae economist David Berson said that "echo boomers" (thekids of the baby boomers) are now forming new households and will flood the rental market. That's encouraging newsfor multifamily, which has been relatively weak in recent years. (The New York rental market doesn't count, folks.)The other good news is that purchase money lending should be strong in 2006. Now for the bad news: Fannie thinksresidential loan production could decline to just $2.1 trillion in the new year, a 30% decline from the $3 trillionor so that National Mortgage News is forecasting. The biggest question mark for the industry is when,oh when, will the Federal Reserve stop hiking rates -- and when, oh when, will the yield curve get fixed...

Chase Home Finance has ended its experiment of having two co-CEOs of mortgage finance, naming TomWind the lone CEO of residential mortgages, and Scott Powell CEO of home equity, auto finance, and studentloans. (The two men had shared the title co-CEO.) There has been some other reorganizing as well. For the fullstory see the Monday, December 19 issue of National Mortgage News. Don't subscribe? Call: (800)221-1809...

This just in: investment banking sources say both Bank of America and Wells Fargo are out of therunning for GMAC. (GMAC's assets include GMAC Residential, GMAC-RFC, Homecomings, theauto finance business and other units.) A GMAC spokeswoman told National Mortgage News that justbecause the company is exploring a sale, that doesn't necessarily mean one will happen. For the complete storysee Monday's NMN. Don't subscribe? Call: (800) 221-1809...

Reading the tealeaves of mortgage banking is never easy. I remember back in 2000 when the industry was struggling.That summer I asked Countrywide chief executive Angelo Mozilo how business was. His answer was bluntand to the point: "It stinks." Then in 2001 production doubled to $2 trillion and in 2003 the industryfunded an eye popping $3.9 trillion. (Figures courtesy of the Mortgage Industry Directory.) So, what dothe tealeaves say right now about the coming year? The good news is that lenders aren't complaining about volumes.(In 2005 the industry will fund close to $3 trillion.) The gripe is about the flat yield curve and profit margins.One non-conforming lender told us that whole loan buyers (Wall Street, among others) aren't paying up for productanymore. This executive, requesting his name not be used, said that through November investors had bought so manyloans that their balance sheets are "full up." He added that some funders are having what he called "aninteresting" fourth quarter. A small California lender we know said that until November his shop was earningmoney, but now investors aren't paying up and his firm is in the red. If the market doesn't turn by February he'sprepared to trim staff drastically. Meanwhile, subprime giant Ameriquest laid off 800 in November, and Countrywideis trimming staff by 300. On the other hand, government figures show strong industry employment -- but those numberslag by 60 days…