Loan Think

It's too bad subcommittee chairman Rep. Richard Baker has his hands full with the GSE bill and the FannieMae accounting scandal because 3,000 miles to the west there's a nice little GSE time bomb ticking at the FederalHome Loan Bank of Seattle. For the full details read the Monday edition of National Mortgage News,but here's just a taste: the bank has $260 million in unrealized losses on its books; as a way to increase earningsit bought the consolidated debt obligations of other FHLBs but screwed up the hedges big time; it now has placedlimits on stock repurchases, affecting its member banks and thrifts. (To boot, its president Norm Rice,a former Seattle mayor, was forced out.) Meanwhile, industry officials say there is growing talk that the bankwill be consolidated into another FHLB. One researcher told us that the last time this occurred was back in 1945when the Federal Home Loan Bank of Los Angeles was merged away...

The negative publicity machine regarding subprime loan pricing (thanks to new HMDA disclosures) is crankingup -- and the data has not even been released yet. Here's just a tease of what lenders (and reporters) are goingto have to deal with, courtesy of a Good Friday press release from the Neighborhood Reinvestment Corporation:"New data on home mortgage lending practices to be made public March 31 are expected to shed light in darkcorners, revealing a disturbing increase in loans with very high interest rates being sold to low-income and minorityconsumers." Will the new pricing info (which we all must first request from lenders) contain FICO scores,LTVs or the wealth of the borrower? Answer: No. Are there dirt-bag lenders and brokers out there, taking advantageof minorities, the elderly, and folks who are just plain old ignorant? You bet...

Loan brokers take note: Alan Fishbein of the Consumer Federation of America believes that newpricing disclosures on subprime loans will have a "cleansing effect" on the mortgage industry. He alsosaid the release of the pricing information (coming in a few weeks) will force wholesalers to police their mortgagebrokers. He made his comments at a gathering of state attorney generals last week. At the meeting two AGs, RoyCooper of North Carolina and Patricia Madrid of New Mexico, told National Mortgage Newsthat their respective predatory lending laws have not affected, one bit, the availability of non-conforming creditin their states. Mr. Cooper said a few lenders exited N.C., but he added, "We were glad to see them go." He also said a few exited then returned...

Is the idea of legislating a flat guarantee fee (g-fee) for all Fannie Mae/Freddie Mac seller/servicersgaining traction on Capitol Hill? Former Colorado Sen. William L. Armstrong, chairman of Cherry CreekMortgage, has been talking up the idea in Washington. Mr. Armstrong told us that he has discussed the flatg-fee idea with half-a-dozen or so senators. "The worst reception I've gotten is that, 'This is interesting.'"He told us. "The best is that I thought they were ready to stand up and cheer." For the full story readthe Monday March 14 edition of National Mortgage News. Don't subscribe or you let your subscriptionlapse? Call (800) 221-1809...

Who was the top jumbo lender in the fourth quarter? If you said Washington Mutual go to the head of the class.For a top 20 ranking or the complete fourth-quarter list see Monday's National Mortgage News or NMN'snew Alternative Products Quarterly Data Report. For more info on the AP-QDR, which has rankings on secondlien and interest-only lenders, contact Deartra.Todd@SourceMedia.com...

It looks as though our friends to the north at Royal Bank of Canada want out of the U.S. mortgage business.The bank has hired an investment banking firm to advise it on its options, industry sources have told NationalMortgage News. However, a spokeswoman for the bank in Toronto declined to comment. See Monday's NMNfor the full story...

Before we contemplate Alan Greenspan's recent GSE comments, let's ask a basic question. Just how profitableis subprime lending, a business that Fannie Mae and Freddie Mac, as yet, don't play a huge role in?One executive -- requesting his name not be used -- told us that a "leading consultant" has surveyeda select group of nonconforming lenders and come up with the following: On a $125,000 loan the total income perloan is $9,295 and the total expenses are $6,435. That leaves average pretax income of $2,860 per loan. However,these figures are averages and more importantly, the research was done in the first half of 2004 when the yieldcurve was much, much steeper...

The Mortgage Bankers Association called to let us know that Wells Fargo Home Mortgage wasn't theonly attendee at its recent GSE servicing fee powwow that opposes Fannie Mae and Freddie Mac slashingthe minimum to 12.5 basis points. As one MBA official put it: "A number of people support the cut, a numberof people want to maintain the status quo, and a number are undecided." MBA declined to identify Wells byname or discuss that mega-lender/servicer's position on the issue. Wells, so far, has been mum on the topic. However,this is what we do know: that among large seller/servicers, Countrywide and Washington Mutual wantthe fee cut to 12.5 basis points. How do the rest of you feel? If you're a seller/servicer and you have an opinionon the issue drop me an e-mail at Paul.Muolo

It appears that Wells Fargo Home Mortgage was the skunk at the MBA garden party where 30 or soheavy hitters met to discuss Fannie Mae and Freddie Mac possibly slashing their minimum servicingfee to 12.5 basis points. One participant told National Mortgage News that Wells made a presentationat the Thursday meeting showing that it is "significantly opposed to a cut." The participant, requestinghis name not be used, added that he felt "a lot of Wells' arguments were pretty contrived." As one mortgageexecutive put it: "It's all about capital. Wells has more of it than everyone else." A cut in the servicingfee would help servicers because they could sell more of the servicing "strip," lessening the need tohedge the asset and hold cash against it. For the full story see Monday's edition of NMN. Don't subscribeto NMN? Call (800) 221-1809...

Critics of Fannie Mae and Freddie Mac have long argued that the two have an unfair lock on theautomated underwriting market, but legislation introduced last week (S. 190) could break that hold. The bill wouldrequire a new GSE regulator to review their AU systems and to set parameters on their secondary market activitiesso that Fannie and Freddie cannot participate directly or indirectly in the underwriting of a mortgage...