It's no secret that loan repurchase requests have been hammering the mortgage earnings statements of the nation's megalenders. From Bank of America to Wells Fargo and JPMorgan Chase, all have suffered to varying degrees.
But what about small- to medium-sized lenders, firms that fund less than $5 billion in product? There's a growing school of thought that the "little guy" has weathered the repurchase storm just fine.
Larry Charbonneau, managing director of Charbonneau & Associates, said very few of the mortgage banking firms he has reviewed since January are suffering from the repurchase plague.
"Since January I have reviewed 41 mortgage companies from coast to coast and not one has had buyback exposure of more than five or so loans," he said in a recent interview. "These are firms doing $300 million to $3 billion a year in originations."
Charbonneau gets up front and personal with many mortgage firms each year, advising them on capital and warehouse issues, as well as M&A activity. (He said his experience applies not only to this year, but 2009 as well.)
Some of the lenders I interviewed over the past week seemed to think Charbonneau's conclusion is right on the money. Joe Adamaitis, who closes loans for Academy Mortgage of Sarasota, Fla., said buyback woes are not something his company has experienced.
"No, not at all," he said. "We have a pretty tight operation. LOs here are taught that if we suffer buybacks, the whole company does." He said Academy does about $3 billion a year in business.
Richard Tachine, who works for Directors Mortgage of California, said his company originates about $150 million a quarter in product. Directors Mortgage, he reported, has suffered "no buyback issues."
Tachine, a veteran loan officer, noted that he has been underwriting "A" paper mortgages "for a long time," avoiding such fads as "liar loans."
But even though it appears small- to medium-sized firms have survived the storm (for now), one due diligence executive points out that all "the worst perps are gone." In other words, most of the mortgage bankers originating what turned out to be problem loans, have gone out of business, leaving "the good guys" standing.
This executive warns that just because buybacks are not being jammed down their throats today, "that doesn't mean they won't get hit with a sucker punch."
Chuck Klein, managing partner of Mortgage Banking Solutions, Woodland, Texas, is actually banking on buybacks causing trouble in the months ahead. His consulting firm recently launched a new service to help mortgage bankers fight repurchase requests from Fannie and Freddie and to work out coverage battles with mortgage insurance firms.
"I've heard there's been a little bit of a slowdown in requests," he said, "but that's only the case with some firms. While others have seen a reprieve, buybacks accelerated for some."
He noted that one large national correspondent buyer of mortgages—which he declined to identify at this time—is gaining a fast reputation for "jamming loans back to its lenders."
He said his company is ready to help seller/servicers win those battles. "I think it's safe to say the easiest requests have come and filtered through the system. I think now we're about to see more fights."
He cited one example where a client was asked to repurchase a mortgage funded back in 2004. "The original LTV on that thing was 50% and the GSE found the homeowner couldn't validate his income.
"The thing is, the loan is performing. Now, that's just not fair."
