Before we get to the main event, I should point out that the coming week is the beginning of "earnings season" which means all the big boys—Bank of America, Wells Fargo and Citigroup—will be reporting. The second quarter was decent in terms of residential loan production thanks to the expiring federal tax credit for first-time and move-up buyers. But it will be especially interesting to see what type of "new" mortgage hits these megabanks take and how their overall profits were hurt by a horrible quarter for the stock market. All three (and many other "investment banking" related firms) have enjoyed strong trading profits (stocks, bonds) during the stock market boom but the bloom (as we all well know by looking at our 401k statements) is off the rose. Stocks stink, this past week being an exception. Also, all three of these banks hold or service billions of delinquent mortgages thanks to "legacy" acquisitions. And yet, we hear little about the big boys unloading their problem loans in the secondary market...
And in case you missed it, Wells Fargo is shutting its consumer finance unit. The news came midweek. The unit, Wells Fargo Financial, wasn't really funding "subprime" loans any more. In fact, as one official there told me, its product of choice was the FHA loan. I wonder how many of the 3,800 full timers who will lose their jobs because of the shuttering of WFF have mortgages with the company...
THE MAIN EVENT: Subprime is back with a bullet! Actually, it's not. In fact, it might be more accurate to say the obvious: the phrase subprime lending might disappear from the mortgage banking lexicon in the next few years. In Monday's edition of National Mortgage News we present an analysis of the "hard money" lending market. Hard or "private money" lending was a small but very profitable sector until Wall Street put its ugly mitts on the business and took the "A" paper MBS invention of Lew Ranieri (and others) and turned it into the Frankenstein monster which created a financial hell on earth. (It's all in the book "Chain of Blame" but you're sick of hearing about that. By the way, I'm thinking of writing a vampire/financial story related to all of this.) As for hard money, let's just say there's growing interest in this very small niche. Most of the LTVs are in the range of 50% to 70% and the underwriting is fierce. One player in the business is Mark Mozilo who's using money raised by what he calls "family and friends" to make loans that no one else will touch. "The LTVs are 50% to 60% and the FICOs are above 600," he told me. Another player in the business is Elan Awerbach who runs UniTrust Funding of San Diego. His money comes from what he calls "high net worth individuals and investment funds." In case you're wondering, the business is dominated by nonbanks that do not have access to warehouse lines of credit. The potential for this very small sector sounds promising. As one executive pointed out to me: thanks to the subprime crash there are now more subprime borrowers than ever before. And they need loans. But don't use the word subprime. The full story will be in the Monday paper edition of NMN. Don't subscribe? Call 800-221-1809...
While we're on the subject of subprime, there are still plenty of subprime servicers and subservicers out there. A complete ranking is available in the Quarterly Data Report. To order, drop an e-mail to
Also, former Beneficial Finance manager Peter Cugno still hopes to launch a subprime lending firm some time soon. But he told me recently that although interest is high, investors keep chickening out at the last minute...
IN CASE YOU MISSED IT: The International Monetary Fund is calling for the United States to make a stronger effort to curb its budget deficits. The IMF said Thursday that in addition to cutting government spending, the Obama administration will have to consider raising taxes to get the U.S. deficit down to a manageable level. Of course, if 4 million Americans find jobs the next month, all this economic pain might be avoided. Yeah, right...
QUESTION OF THE WEEK: Do you think we're headed for a double-dip recession? Or will the double dip be confined to housing prices only? Or is housing on its way back? Post your comments at the end of this column.
DATA STUFF: As I noted recently, the 1Q edition of the Quarterly Data Report is now out. (We are now busy working on the 2Q edition.) The QDR provides industrywide composite data on loan production and servicing and specific figures on the top 100, including delinquencies. A new feature for the QDR is our ranking of the nation's top FHA lenders. If you're looking for jumbo production numbers try the Alternative Products Quarterly Data Report. For more info on both drop an e-mail to
OUR RESEARCH REVEALS: Correspondent loan production fell 27% in the first quarter. Among the top five loan buyers, Residential Capital Corp. fared the best with a decline of just 6%. It's all in the Quarterly Data Report.
FINAL SURVEY NOTICE: We are wrapping up our annual lending and servicing survey. NMN is still looking for information on active lenders and servicers, regardless of size or charter. If you would like to complete a simple one-page survey drop a line to
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THE LAST WORD: Go Spain! Also, congratulations to Hillary Strachan, the daughter of the late great NMN founder Stan Strachan. The young lady is getting married this weekend.
