In its Monday edition, National Mortgage News is publishing its exclusive ranking of the nation'stop subprime lenders in 2Q -- and the news isn't pretty. Mortgage bankers originated a paltry $53.4 billion insubprime loans during the second quarter, the industry's worst showing in five years. Here's just one of many startlingfacts in the story: subprime accounted for just 6.3% of all home mortgages originated in the quarter, comparedto 20.4% for all of 2006. The complete rankings are available in NMN's Quarterly Data Report. (Formore information on the QDR e-mail
As we all know, the secondary market for most subprime and alt-A loans is closed (more or less) which meansif a mortgage company is funding these products it has either a balance sheet to put them on or a ton of cash somewhere.If Wall Street doesn't open up its “buying window” soon it's safe to say there is no future for subprime, at leastnot the subprime industry we've known the past five years. Even back in 1998 when the subprime market cratered(thanks to the Russian debt crisis and Wall Street-influenced abuses on gain-on-sale accounting) someone was buyingloans in the secondary. But with this debacle I have yet to see a financial institution step up to the plate. Ifthings do not change, Wall Street should close all their trading desks and shutdown their conduits. I mean, what'sthe point? That said, we're also starting to hear reports that firms bottom-fishing in the scratch-and-dent loanmarket also are having trouble obtaining financing -- and so are non-banks that play in the low-balance commercialmarket
Meanwhile, First Horizon mortgage chief Jerry Baker recently sent out an e-mail to his employeestrying to explain the liquidity crisis. He wrote, "This situation quickly evolved to a complete investor pullbackfrom purchasing any form of loan or credit product or pool of products extended by banks and other financial institutionsfor virtually any purpose. So what does that mean? Over the last several weeks the result has been that there havebeen almost no buyers for credit or debt products at any price. Keep in mind that many institutions borrow moneyto produce credit products and rely on selling them to pay back loans against the collateral. If there are no buyers,then many companies can be between the proverbial rock and a hard place"
Even though many non-depository mortgage banking firms are cutting heads, Citizens Home Loans of Charlotte,N.C., says it is hiring. "We're looking to add people on the Eastern Seaboard and in California," companyCEO Patrick Sutherland told NMN. CHL is a privately held company. Mr. Sutherland said his companyis "staying away from Wall Street," adding, "They are unreasonable in their terms and are forcinglenders to go out of business"
The Mortgage Bankers Association this past week confirmed what we've been hearing for the past threeyears -- that speculators in the housing market not only helped bid up prices to unreasonable levels but are nowdefaulting on the loans because they can no longer "flip" the properties. MBA says that at the end ofJune 32% of prime mortgage defaults in Nevada were on non-owner-occupied properties, along with 24% of subprimeloans. In Florida, the non-owner-occupied shares were 25% for prime loans and 14% for subprime loans. Nevada andFlorida are facing the fastest increases in delinquent loans in the country
Friedman Billings Ramsey on the mortgage insurance industry: the outlook "over the next six to 12months continues to be challenging. The most significant near-term issues facing the space, in our opinion, are(1) the chance of more-onerous capital standards from the rating agencies, (2) the potential for earlier-than-expectedloss development eclipsing near-term revenue and (3) worsening home price depreciation impacting loss severity"
The California Association of Mortgage Brokers recently held its annual convention. The exhibit hallhad 110 booths. About 15 of them were empty because of no-shows
First American LoanPerformance said its mortgage securities database now contains loan-level informationon more than $2 trillion worth of active non-agency securitized mortgages representing 85% of all non-agency mortgagesecurities
WASHINGTON NEWS: The Independent Community Bankers Association likes the White House's proposalsto help homeowners avoid foreclosure and stay in their homes. The trade group said it "supports the president'scall for changes to the tax code that would make it easier for community banks to restructure loans for homeownershoping to avoid foreclosure and keep communities across America economically sound."
MORTGAGE PEOPLE: Mission Capital Advisors, New York, has hired Howard Freedman and ArvindRadhakrishna as sales and trading analysts. Mission Capital specializes in structuring the sale of performing,subperforming, nonperforming, commercial and other loan types. The American Land Title Association saysits top executive, James Maher, is retiring after 23 years.
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
