Loan Think

The annual convention of the National Association of Mortgage Brokers opens in SaltLake City this weekend. Ellie Mae is hosting a dinner with National Mortgage News to congratulatethe top 50 loan brokers in 2003. The exclusive rankings were compiled by NMN...

Remember this quote from Layne Sapp, the founder and chief executive of subprime lenderMILA: "When rates go up, we get busier." Mr. Sapp wasn't kidding. He and other subprime firmswere busier than ever in the first quarter. According to National Mortgage News' just released QuarterlyData Report, subprime production reached a new quarterly high in the first quarter as funders originated $114billion in A- to D credits. Compared to the same quarter a year ago, subprime production rose by a stunning 54%.For complete individual company rankings contact: Deartra.Todd@ThomsonMedia.com...

In February, Jeffrey Todd Hood applied for an AE job with Amerifunding, a Westminster,Colo.-based loan broker. According to a classified ad in the Denver Post, the job paid between $100,000and $120,000 a year. Sounds good, right? Not really. When Mr. Hood applied for the position, Amerifunding requestedthat he allow the firm to copy his driver's license and W-2 forms. Shortly after that he received a telephone callfrom a Flagstar employee asking about his purchase of a $529,000 home in Aurora. (Flagstar was table-fundingAmerifunding.) There was just one problem though -- Mr. Hood didn't purchase a home in Aurora or apply for a mortgage.According to court documents, it appears that Amerifunding was using his personal financial information as partof an elaborate "no-doc" loan scam still under investigation by the FBI in Denver. Indictments have alreadybeen handed up in the case. For the full story see Monday's National Mortgage News. Moral of thislesson: AEs should be careful about what type of financial information they give to prospective employers...

The cross-selling of mortgages and insurance is dead! It shouldn't be though, right? It seemslogical that home loans and life policies would be a perfect cross-sell. But apparently not. Insurer PrincipalFinancial Group is exiting the residential business by selling its mortgage subsidiary to Citigroup.It would seem logical that insurance firms would love to own mortgage firms. Why? Because of the cross-sellingopportunities. If you have a mortgage, chances are you need life insurance, annuities -- take your pick. But, Iguess that argument doesn't hold water anymore -- otherwise Principal wouldn't be bolting the business. Keep inmind that 14 years ago Travelers sold its mortgage subsidiary to General Electric, and Prudentialleft mortgage town back in 1996. But there's one catch to all this -- Citigroup now owns Travelers Insurance. WillCiti ramp up the cross-selling of mortgages to its insurance customers and vice-a-versa? Stay tuned...

Usually, when your regulator tells you to do something most financial service firms listen.But if you read between the lines of Fannie Mae's response to the Office of Federal Housing EnterpriseOversight regarding its request that Fannie write down the value of its $8 billion manufactured housing portfolio,you might get the impression the company is getting its back up. In the statement, Fannie does not say it willcomply with OFHEO's order, and instead states that it is in compliance with GAAP. It also says that its auditor,KPMG, as well as its "outside legal counsel" (that would be former Whitewater prosecutor KenStarr) as well as accountants advising Mr. Starr's law firm all believe that Fannie is in compliance with GAAPin regard to the MH loans. Translation: Fannie and its legal/accounting brain trust think OFHEO is dead wrong.Who will blink first? This week should be interesting, to say the least. Keep in mind that MH loans sunk insurancegiant Conseco. Fannie continues to argue that its portfolio is OK because it's highly rated. Right? Meanwhile,politics and mortgage finance continue to make strange bedfellows. Keep in mind that Mr. Starr went after PresidentClinton (a friend of Fannie chairman Franklin Raines) for lying to a grand jury. Republicans are theones pushing hardest to put Fannie under a new tough (though OFHEO has been looking pretty tough lately) regulatoryregime. Sen. Robert Bennett, R-Utah, has been carrying political water for Fannie (remember the Bennettamendment?). The senator's son, Rob Bennett, is deputy director of Fannie's Utah "partnership"office...

General Electric Mortgage Insurance has always been one of the bright spots in GE'sinsurance empire. Soon GE will spin off the unit (along with other insurance business) in an IPO called GenworthFinancial. Based on the recent share price of other publicly traded MI firms (MGIC and PMI cometo mind), it would appear GE's timing couldn't be better. The MI business is a bit like the servicing business.When rates rise, the "book of business" sticks around longer. It's no secret that MI firms have beenhurt by the emergence of "80-10-10" loans but if a bill that makes MI payments tax deductible becomeslaw prospects for the sector could brighten even more. In other words, GE's timing couldn't be better. Genworth'sstock symbol will be GNW and the company plans to sell 145 million shares in the range of $21 to $23 a share. TheIPO is expected to hit the market by the end of June...

As everyone in the industry knows, mortgage rates have risen noticeably the past month butsome lenders are eating the increase, purposely trying to keep rates low in order to gain market share. One WestCoast-based lender said subprime rates have risen 60 basis points, but top-ranked nonconforming lenders have onlyhiked rates by 30 basis points, some even less. He noted that a "full-scale price war" could break out.Meanwhile, Wall Street trading desks have been gobbling up product like there's no tomorrow. How will it all end?Does anyone smell 1998 all over again? Stay tuned...

Hail the yield on the 10-year Treasury. Mortgages are pegged to it and lending professionalswatch it carefully. This past week there was a ton of speculation that the Federal Reserve would hike theovernight Fed funds rate by August instead of December. Some economists are now even predicting June. Of course,the Fed doesn't control the yield on the 10-year. The market determines that. But if short-term rates rise, thatmeans lenders (to maintain current profit margins) likely will hike mortgage rates as well. As the industry wellknows, mortgage rates have been on the rise. As this weekend column went to press, mortgage and financial servicestocks had rebounded somewhat from the selling carnage of the past two weeks. It all started with that better-than-expectedjob report in early April. In a research note, Sandler O'Neill analyst Mike McMahon writes that thesell-off in financial service equities "specifically mortgage finance stocks" is overdone. But keep inmind that mortgage insiders (directors and officers) have been dumping shares like crazy the past six months. Majorselling by insiders has been going on at Countrywide, Fannie Mae, Washington Mutual and othershops. See Monday's National Mortgage News for more details...

Come year-end, will Franklin Raines be Fannie Mae's chairman and CEO? No oneis suggesting that Mr. Raines' departure from the mortgage giant is imminent, but there is talk in some politicaland industry circles that if there is a Kerry White House, Mr. Raines would be at the top of the list forthe Treasury secretary job which would be an interesting move since Fannie has a line of credit with theagency. This past fall Mr. Raines, in an interview with National Mortgage News, said he was donewith public service, which usually means no government job. But business partners of Fannie Mae who say they knowMr. Raines, believe that he wants to be a public servant again. (Mr. Raines was director of the Office of Managementand Budget in the Clinton White House and played a key role in that administration balancing the budget.)Keep in mind that Mr. Raines' predecessor at Fannie, Jim Johnson, has been hired by the Kerry camp to helpfind a VP candidate for the Massachusetts Democrat. If there is a Kerry White House, Mr. Johnson likely will playa role in picking other Kerry administration officials. (Mr. Johnson handpicked Mr. Raines to succeed him at Fannie.)But will Fannie Mae's board be sorry to see Mr. Raines go? One seller/servicer suggested the answer to that questionmight be no. The executive, requesting anonymity, pointed out that Fannie's stock has appreciated little the pastfive years. Indeed, back in late 1999, Fannie's stock was trading at about $70 a share. He suggested that "boardsdon't like to see the stock go nowhere"...

The sale of Cendant Mortgage to a top ranked mortgage banker fell apart last weekend. To find out which mortgage banker had been hunkered down in acquisition talks with Cendant read the Monday March 29 issue of National Mortgage News. If you don't subscribe to NMN please call (800) 221-1809...