I'll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don't have a deep-pocketedparent or hedge fund as a sugar daddy you're likely to be out of business by year-end, probably sooner. In the20-plus years that I've been covering residential finance I haven't seen a financial meltdown this swift sincethe S&L crisis of the mid-to-late 1980s. One subprime executive who closed his shop a few months ago told me,"This is a liquidity crunch the likes I have never seen." Meanwhile, the mudslide is rolling downhillfrom Wall Street to mortgage bankers, to loan brokers, and then the consumer. Nomura Securities is windingdown its mortgage conduit and three major Wall Street firms are preparing to slash their mortgage desks and orconduits
And consider this: On Friday, Wells Fargo had hiked its jumbo loan rate to 8%. (This is the same WellsFargo that up until a few months ago was overstating its subprime correspondent purchases so it could garner braggingrights to being No. 1 in subprime.) Meanwhile, Countrywide Financial Corp., considered a bedrock of theindustry, is tightening up requirements on warehouse credit doled out to its correspondents. (For the full storysee the Monday edition of National Mortgage News. Don't subscribe? Call: 800 221-1809)
In a short interview this past week, Countrywide CEO Angelo Mozilo told NMN that there will bejust five "major" lenders left by the end of 2009
It's also safe to say that 80/20 combos, stated-income loans and subprime payment-option ARMs are toast. Asone lender put it: "There's no bid out there"
Loan brokers in search of nonconforming financing are running scared. Visit the Grapevine at NMN'sBrokerUniverse website to read the panic and anxiety. (If you want to escape the bad news check out GeorgianaLee's “Quality Time” column. It's the only “good news” that we have for you.) As one broker posted: "Lookingfor more lenders. We are a small brokerage in Vermont looking for lenders. From conforming, alt-A to subprime.If you are out there please contact me." BrokerUniverse's Grapevine can be found at
On Thursday afternoon NMNOnline (MortgageWire) was the second news organization to report thatAmerican Home Mortgage would close. (Newsday posted the story on its website first.) We would'vebeat Newsday except that the internal e-mail sent by CEO Michael Strauss to employees began with"Dear Colleges." We saw the typo and just assumed it was phony. A source inside the company later explainedto us that it was indeed a typo by Mr. Strauss
How full blown is the subprime crisis now? Not only is the story on the network nightly news (a big deal) butComedy Central's “The Daily Show” did an amusing piece on the subprime industry and how it caters to minorities.See last Wednesday's show on YouTube
Another thing spooking the industry is the second-quarter loss posted by service provider/title insurance giantFirst American Corp. FA took a $342 million provision for losses in its title insurance division duringthe second quarter. The provision includes a boost to reserves, which reflects a change in the estimate for expectedfuture losses from policy years 2004 through 2006. Some observers wonder why FA's loss is so large -- and the lossesat some lenders (the ones still standing) have been so small
More bad news: mortgage companies have cut their payrolls by nearly 46,000 employees since October, including7,400 full-time positions in June, as the slowdown in mortgage originations, particularly subprime loans, is forcinga retrenchment
Clayton Holdings, a mortgage analytics/consulting firm, earned just $500,000 on revenue of $43 millionin the second quarter, noting that the industry's subprime securitization volumes fell by 42% during that time.However, it experienced strong growth in its “surveillance” business. Meanwhile, Clayton has been subpoenaed bythe New York State attorney general as part of its investigation into subprime lending
If you're a baby boomer working for Fannie Mae take note: On Aug. 10, Fannie employees 50 years or olderwho have been with the company for five years will have the option of staying with the GSE or taking a buyout package.Employees choosing the buyout will receive 26 weeks severance pay plus three weeks pay for every year of service
Whole loan prices for payment-option ARMs -- not surprisingly -- have yet to rebound, according to BankUnitedof Florida. In its recent earnings statement the depository said that during the second quarter it electedto hold POAs in portfolio rather than sell them into the secondary market. The lender said it deemed "thesegain-on-sale margins" as insufficient. BU is a large originator of POAs
Coming up: subprime lender Delta Financial Corp. will report its second-quarter financial results beforethe market opens on Wednesday
California is on top again -- in home foreclosures, that is. According to RealtyTrac Inc., foreclosuresin California jumped by 170% in the first-half to 104,572 units. Nationwide, lenders sent notices of default, scheduledauctions or repossessions on more than 574,000 properties during that time
MORTGAGE PEOPLE: The PNC Financial Services Group named Diana Reid executive vice presidentand head of PNC Real Estate Finance. Ms. Reid will be responsible for units that specialize in portfolioand securitized lending, agency finance and other areas. NCB named Denise Urban assistant vice residentand assistant loan review manager for its risk management team.
DATA NOTICE: If you're trying to figure out where the mortgage market is headed and what the businesswill look like for the rest of the year you're in luck. NMN has just published the brand new MortgageIndustry Directory, which ranks the nation's top 400 lenders, 300 servicers, top 85 subprime and much,much more. The book also provides a special analysis on America's subprime crisis. To order, e-mail
