Loan Think

Its official: first quarter residential production totaled a startling $913 billion. Amazingly, it wasn't a recordquarter. That distinction belongs to Q4, a period in which $964 billion in loans were funded. But if the firstquarter 2003 volume is extrapolated out, residential lenders could wind up financing a record $3.7 trillion inproduct this year. (All this data is courtesy of National Mortgage News and its affiliate, the QuarterlyData Report). The key to what happens the rest of the year rests in interest rates and employment&

Don't look back Washington Mutual and Wells Fargo, Countrywide is gaining on you. Accordingto the new first-quarter edition of the Quarterly Data Report, Countrywide funded $102.4 billion worth ofhome mortgages in the first quarter, a hair behind market leaders WaMu ($109.3 billion) and Wells Fargo ($103 billion).Look for final quarterly rankings soon in National Mortgage News and the new QDR...

Mark Tuesday May 6, 2003 on your calendars. It may very well be called "MortgageDay" -- the day it became apparent (thanks to Alan Greenspan and the Federal Reserve) that the go-go origination market of the past 24 months could go on for, well, maybe another 24months. The key to falling bond yields last week was a Fed statement that declared: "The probability of anunwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already lowlevel." Translated into English: The Fed is scared silly that deflation could hammer an already weak economy,which means it may cut rates again. Will homebuyers see a 4% conventional FRM one of these days? If so, look forservicing runoff to escalate and tons of portfolio turnover for portfolio lenders, as well as Fannie Mae and FreddieMac. However, there is one wildcard, which could send rates upward, namelythe federal deficit. If the dollar keeps sinking against the euro, and the Bushadministration and Congress can't get their act together on government spending, the U.S. may have to increase theyield on new Treasuries...

Is consolidation about to sweep the subprime mortgage sector? Who knows but that didn't stop a group of panelistsat an MBA conference from voicing their opinions. Saxon Mortgage chief Mike Sawyer believes thatthe key to consolidation is "access to capital." Without naming names, he noted that "several largeplatforms" are on the auction block. "Some are public and some are not," he said. Some panelistsnoted that wholesalers are once again paying high prices for subprime product. "When the yield curve changes,"cautioned Mr. Sawyer, "you will see a lot of bleeding." According to the Mortgage Industry Directory,here's a list of the top five subprime lenders seven years ago: Ford Consumer Finance; The Money Store;Beneficial Finance; United Companies; TransAmerica Financial Services. None are stillaround, either having been sold or having went BK...

A group of lawyers are considering buying a "mortgage - company - in - a - box" system from HomebuildersFinancial Network. So is an apartment building owner because he thinks his tenants would make great referralsto mortgage lenders. (The thinking here is that the tenants one day will want to become homeowners.) Based in Florida,HFN creates turnkey mortgage banking firms for mostly homebuilders. Its majority owner is Fidelity National,the bundled-services giant. But the question begs: lawyers want to become mortgage bankers? Could this be the signof a market top? It's hard to say, but if mortgage bankers are worried about the origination juggernaut slowingdown, based on Friday's news, funders can rest easy. It was on Friday that the Commerce Department announcedthat GDP was an anemic 1.6% in the first quarter, a measure that sparked a rally in the bond market and causedstocks to nosedive. In other words, the residential finance industry should rock 'n' roll through December. (Fidelity,by the way, is contemplating relocating from Irvine, Calif., to Jacksonville, Fla.)...

It hasn't been a pleasant spring for subprime servicing giant Fairbanks Capital. The company is underinvestigation by the Department of Housing and Urban Development for its servicing practices. The agencyis now interviewing former top officers of the company, we're told. Moreover, Fairbanks, which was founded in 1989by California businessman Thomas Bamajian, didn't have a compliance department until the first quarter of2001. A spokeswoman for the company clarified that prior to last year, Fairbanks had employees working on complianceissues, but not under a dedicated department. Two weeks ago, Fairbanks finally hired a chief compliance officerto head the department. The company also recently hired a Washington-based PR firm, Powell Tate, to assistit. A source familiar with the company said, "Fairbanks problems are not over." See the Monday editionof National Mortgage News for more details...

Those in attendance at the legislative conference of the NAMB this past week heard a clear message asto which party has its interests at heart: the Republicans. When the name of Sen. Paul Sarbanes, D-Md.,(ranking Democrat on the Senate Banking Committee) was mentioned during one panel, hisses were heard in the audience.National Association of Mortgage Brokers favors current Senate Banking chairman Richard Shelby of Alabamawho has gone to bat for brokers on RESPA reforms. But NAMB isn't stupid. One speaker at the conference gave a clearmessage to the Republican party: if RESPA reforms don't go NAMB's way, there's 35,000 Florida brokers who won'tbe voting for Mel Martinez (current HUD secretary) should he leave the housing agency and run for the Senatein Florida...

I hear that Felix Beck (who sold Margaretten & Co. to Chase several years ago) is gettingback into the business. Actually, that's an early April Fool's Day joke, but the way things have been going lately,if someone had told me that this well-respected elder statesman (he continues on as chairman emeritus of Chase)was getting back in, well, it wouldn't surprise me. As National Mortgage News has already reported,Jack Mayesh (ex-Long Beach), Bill Starkey Sr. (ex-AccuBanc) and a few others who soldtheir firms at what they thought was the top of the market (three years ago) are starting new mortgage bankingfirms. The latest ex-mortgage banker to jump back in is Peter Paul, who a few years back sold Headlandsto Greenpoint. One mortgage vet joked that rumor has it that Lewis Ranieri is thinking of reformingthe Salomon Brothers trading desk circa 1982 "to trade all the (mortgage) bonds" that are beingcreated...

When it was first learned that Fannie Mae would make a $70 million "floor bid" to buy the servicingplatform of the bankrupt Conseco Finance, all the mortgage world gasped. Truth be told, Fannie didn't reallywant to enter the servicing niche. The firm claimed that it was trying to protect its interest in $10 billion worthof bonds backed by manufactured housing loans, bonds that Conseco was servicing. Last week, it was revealed thatFannie wanted a partnership called Berkadia to get control of the servicing platform. Why? Because Berkadia"accepted" Fannie's "servicing protocols." According to one source familiar with the matter,if the contractual servicing fee on the securities is changed (as well it could be), the bond issuer (the firmprotecting Fannie's investment) might "be off the hook" on guaranteeing the securities. In other words,if Fannie feels protected in regard to Conseco because it has bond insurance coverage, that coverage -- at leaston some Conseco MH bonds -- could disappear. This means that Fannie could take a sizeable writedown on the $10billion in MH bonds it owns. How sizeable? Maybe as high as $200 million, says our source. As this weekend columnwent to press on Friday, a Fannie spokeswoman said she couldn't comment on the situation (though the firm may commentnext week)...

Bill Starkey Sr. of AccuBanc fame is back. Sources say Mr. Starkey -- with assistance from GMAC-RFC-- is the buyer of Matrix Bancorp's wholesale division. (In a recent press release, Matrix said it had abuyer for the unit, but declined to name the firm.) A few years back, Mr. Starkey sold AccuBanc to NationalCity and "retired." Sources say the money he made on AccuBanc was burning a hole in his pocket andhe couldn't sit still. (See National Mortgage News on Monday for full details)...