THE MAIN EVENT: I'm going to start out this week's column asking you, the industry, some terribly dumb questions about something that's been bugging me a great deal lately. Bear me with me because it's going to get a bit complicated (I think). It has to do with Fannie Mae, Freddie Mac, and all the loan buybacks they are jamming down the throat of the industry. It also has to do with all those AAA-related bonds they bought from those charlatans on Wall Street. (Author Michael Lewis painted this picture 25 years ago but don't get me started on the Street again.) And it has to do with the mortgage insurance industry which insures most high LTV products sold to the two GSEs. If you saw the
And in a related note, I've been meaning to write another story about the nation's due diligence firms. I still plan on doing another story (one of these days) about the W-2/1099 mess, but from what I'm hearing the due diligence firms are working for both the GSEs and the lenders. As a GSE vendor their goal is to find underwriting problems that trigger buyback clauses. But the lenders (who are being hit with buybacks) also are hiring due diligence (DD) firms as a defense. When a DD is working for a lender the goal is to say, "No, that loan was properly underwritten. You have no case, Fannie Mae." It's called "playing both sides against the middle." Stay tuned...
CORRECTION: I don't like being wrong. It's the worst thing that can happen to a writer/editor/columnist. In most cases, being wrong is the result of listening to the wrong sources or misunderstanding something and not doing enough homework. In this case, I did the homework but my sources misunderstood something. Needless to say, I was wrong in reporting on the NMN website recently that Sovereign Bank was getting out of the warehouse lending business. For the record: they are not. But the story is complicated. The Spanish owned bank refused to discuss its warehouse strategy with me -- even after four telephone calls where I stated exactly what I was working on. I gave them ample opportunity but they declined. What I know is this: Sovereign would like to grow its warehouse business, at least a little bit. Company warehouse chief Cliff Schultz was at the MBA show in Atlantic City this past week, trying to drum up business. But there is a back story to all this. Sovereign's warehouse business has been in decline since 2007 when it had roughly $1 billion in outstandings. Today it has about $300 million. Those figures come to me from a former officer of the bank. Sovereign, of course, would not verify them. Also, Sovereign has been trimming its roster of nonbank lenders for low usage. (This happens all the time, I am told.) I wrote about one of these nonbank lenders and after I did, the shop, Advantage Financial of South New Jersey, got its warehouse line extended by Sovereign. So, some good came of it. But I get the sense that the story of Sovereign and its warehouse business is not settled. And one last note: the bank did not lose money on a warehouse line made to Taylor Bean & Whitaker. It lost money on a loan backed by TBW servicing rights...
DATA STUFF: The brand new 4Q issue of the Quarterly Data Report is out. In it you can find information on a few fast growing wholesalers based in California including: Provident Funding, Sierra Pacific Mortgage, and Stearns Lending. To order the QDR drop a line to:
WASHINGTON NEWS: As you all know there's a big old bank re-regulation bill out there from Sen. Chris Dodd which is going to get marked up next week. Dodd's "partner" on the Banking Committee, Richard Shelby of the GOP, isn't too fond of it. NMN's own Brian Collins was at the American Bankers Association conference in Washington last week and heard Shelby's little "pep talk" to banking lobbyists. It went down like this: A banker in the audience stood up and said he appreciated Shelby's record on the banking committee. This banker noted that his state (Missouri) is trying to elect another Republican -- Roy Blunt -- to the Senate. Blunt is currently in his seventh term as a congressman. Shelby told the bankers, "We all support him financially and praying for him too." The Alabaman told the audience that everyone at the meeting should ship the candidate $10,000. The audience laughed.
The Federal Housing Administration wants to raise the minimum net worth requirement for its lenders to $2.5 million within three years, an idea that doesn't warm the hearts of small correspondent lenders. However, we're told that at least one large wholesale/correspondent lender thinks the minimum should be hiked to $3 million (for the first year) and $4.5 million by 2012. If this happens a correspondent that is light on capital would be forced to find another source of funding, merge, or close their doors...
Media notes: I am
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THE LAST WORD: Alex Chilton passed away this week. From the Box Tops to Big Star, he was the man.
