Merrill Lynch's actions in regard to margin calls on its mortgage banking clients had many executivestalking this past week. Merrill's latest victim of buyback requests is California wholesaler ResMAE, a companyfounded six years ago by former Long Beach Mortgage chief Jack Mayesh. Does Merrill have the rightto ask mortgage bankers to repurchase loans if they go bad in the first 90 days? Of course it does. But in itsbankruptcy filing ResMAE claims that $308 million in buybacks that Merrill forced upon the company were not evendelinquent! That's what the document says. ResMAE charges the loans "were current despite" being whatit calls "technical" early payment defaults. ResMAE also says that Merrill thinks it has the right toput loans back to the company for an "unlimited" period of time. Merrill would not comment. For the fullstory read Monday's National Mortgage News. Don't subscribe? Call: (800) 221-1809...
The Merrill-ResMAE dispute raises another issue. For months we've been hearing about what a poor job some WallStreet firms do as "interim" servicers. Nonprime mortgage executives say that after the loan is fundedand delivered certain Street firms screw up the paperwork. Is this just excusing making? Merrill, by the way, ownsa "scratch and dent" servicer called Wilshire. How large is Wilshire's portfolio? No one knowsbecause Merrill, after it bought Wilshire, stopped disclosing those figures to NMN and its data-collectingcompetitors. Merrill also owns a mortgage banking unit in Florida. How much does that operation fund? We don'tknow because Merrill doesn't disclose those numbers. Meanwhile, talk is continuing that Merrill's very own subprimearm, First Franklin, will only benefit from all its competition going out of business...
As the subprime carnage continued last week another concern was raised. One non-depository mortgage executivetold us that warehouse providers (Merrill, others) have a provision in their contracts, stipulating that a lendermust be profitable at least every other quarter. In other words, if a mortgage banker loses money two quartersin a row, they could potentially lose their lines. Stay tuned...
Back in the fall Bear Stearns said it would buy the wholesale subprime production arm of ECC Capitalfor $26 million. All well and good, right? But when the deal closed last week, ECC wound up paying Bear $7 million.Why? Apparently ECC -- the parent of Encore Credit, the unit bought by Bear -- owed the investment bankersome money tied to its warehouse borrowings and other matters. Last year the two parties had -- you guess it --loan buyback disputes...
In the fall NMN broke the news that Countrywide Financial was in the hunt for a broker-dealer.Last week CFC inked a deal to buy Chicago-based CCM Futures LLC...
The new 4Q edition of the Quarterly Data Report is almost ready. If you need rankings on the top 100mortgage funders and servicers with breakouts on subprime e-mail
WASHINGTON NEWS: The principles outlined in the federal government's nontraditional mortgage guidanceshould apply to subprime hybrid ARMs, Federal Reserve chairman Ben Bernanke told Congress this pastweek. NMN's Brian Collins reports that regulators are still working on the guidance and have notdetermined whether 2/28 ARMs should be underwritten to the fully indexed rate. (See Monday's NMN.)
SURVEY NOTICE #1: Loan brokers take note. NMN is conducting its annual survey of mortgage brokeragefirms. To participate send an e-mail to
SURVEY NOTICE #2: Loan officers take note -- NMN's annual survey of LOs is now ready.
DATA NEWS: NMN has raised prices on its popular Quarterly Data Report and AlternativeProducts Quarterly Data Report. The QDR tracks the nation's top lenders with breakouts on subprime and servicing.The AP-QDR focuses on second-lien funders, alt-A lenders, payment-option funders and more. For more info contact
