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Seven More Banks Fail, 2009 Tally At 140
Wanna buy a bank? Now is a good time to give that someone special a little something special – like a failed bank. Seven U.S. banks were taken over on Friday, and the FDIC could not find buyers for three of them. It brings the total to 140 for the year, the most since ’92. Heck, even ex-IndyMac (now OneWest Bank) picked up the assets and 39 branches of First Federal Bank after it was closed Friday. OneWest was formed by a group of private equity and hedge fund investors to take over IndyMac’s assets earlier this year. Added to the list of banks this year who have experienced deteriorating loan portfolios and related liquidity and capital issues are Imperial Capital Bank of La Jolla CA, Peoples First Community Bank of Panama City FL, New South Federal Savings Bank of Irondale AL, Independent Bankers’ Bank of Springfield IL, RockBridge Commercial Bank of Atlanta GA, and Citizens State Bank in New Baltimore MI. City National Bank bought assets of Imperial Capital, Beal Bank bought the assets of New South, and Hancock Bank bought the assets of Peoples First Community Bank. The other three: zip.

Loan Modifications Not Going Well
Modifications aren’t going so well. Why not? Well, getting to the essence of things, from someone in the trenches, most people do not qualify income-wise on paper. Self-employed borrowers write off a lot on taxes, and many wonder if the government should help a tax cheater. Others experience the loss of spouse’s income (divorce, death, joining the circus, etc.), loss of job, overtime hours, or second job. Folks dealing with borrowers in this sector report that most borrowers are angry with their servicer because they cannot pay their mortgage, and that this “feud” prevents an open dialogue especially when there is huge amount of paperwork to be filled out. Lastly, sometimes servicers do not have rights to the loans when the MBS holders own the rights – often the servicer is just the administrator of the pools. more…

Mortgage Banker Average Pay
Is your company making more or less than $902 on each loan? The MBAA reports that independent mortgage bankers made about 50 basis points, or $902, on average, during the third quarter. This is down from the $1,358 profit during the second quarter. The lenders which make up the MBAA’s study also report that their volumes dropped 33%, so not only did they make less money per loan, but they were doing fewer of them. Of special note to secondary marketing staff was the average pull-through: 72% (basically unchanged from the second quarter’s 73%). The net cost to originate (which includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread) rose to $1,950 per loan in the third quarter 2009, from $1,295 per loan in the second quarter. For more tidbits to throw at your staff, go to this site.

Rates Down Yesterday On Economic News, Up Today
Rates had a good day yesterday, as volatility continues to increase and Lock Desks get whipsawed. Jobless Claims were moved rates one way, but then Leading Economic Indicators rose .9% in November (more than forecast pushed them another way. Lastly, the Philly Fed survey rose to its highest level since April of 2005! The Fed purchased their now-weekly allotment of $16 billion in agency mortgage-backed securities over the past week, and now stands at $1.087 trillion dollars. If the supply of new mortgages is down, and the Fed continues this pace, the logical conclusion is that they’re buying older production. From a technical trading aspect, traders were pleased that the 3.62% level has “held” for the yield on the 10-yr Treasury note. Speaking of which, in the absence of any economic news today, the 10-yr yield currently stands at 3.47% and mortgage prices are roughly unchanged. more…

Here we are on the 68th anniversary of Pearl Harbor Day, with the mortgage banking business facing unprecedented new regulatory reforms, and what are the folks in the trenches saying?

“Does anyone get the feeling mortgage banking is a ghost ship, to sail the seas endlessly, with a crew of the damned? Didn’t Disney make a movie with that plot, or am I once again in front of the curve?”

“Things are going really well for us. Right now we run a best effort shop and thinking about making a slow transition into hedging. We’ve been hiring on many new brokers and new loan offers so we’re expanding and hiring like crazy!” more…

I usually try to keep my opinions out the daily commentary. But I am really becoming irked by the press. One day they complain about our industry having foreclosure problems and the credit crisis here in the US and in the world. And then the next day they complain about the declining rate of mortgage approvals and fewer people qualifying for home loans in the US. And then on the third day they will have some story about how it makes sense for a borrower to walk away from their home loan obligation. Geez! (I’d read on the web that one guy, who was forcefully complaining about his parking ticket in front of his dad, got this response from the father: ” Just pay the parking ticket. Don’t be so outraged. You’re not a freedom fighter in the civil rights movement. You double parked.”)

FHA Hits LendAmerica
Besides worrying about capital reserves and RESPA, the FHA has not been idle. The FHA imposed $512,000 in penalties on Lend America for allegedly violating FHA requirements, including failing to document borrowers’ income and creditworthiness, and for submitting false certifications. The move prohibits the company, owned by Ideal Mortgage Bankers, from making new mortgages insured by the Federal Housing Administration or issuing mortgage-backed securities insured by Ginnie Mae. No word yet on a counter action by Lend America, based in Long Island. more…

Ah, inflation – at all levels. During the life of a 30-yr fixed-rate mortgage, there are bound to be periods of inflation. It is debatable, in the market of mortgages, whether or not borrowers and lenders take inflation into account. Certainly ARM loans do to some extent. But bond prices (aside from TIP securities, some of which are being auctioned today) are not indexed to inflation. Yes, a bond holder who owns $1 million in bonds earning 4% earns $40,000 per year, but at the end of 30 years, that bond holder still has $1 million in bonds, which might be worth $500-600k in today’s buying power.

Economic Preview For Week
How is the week looking for economic news? Today at 10:00AM EST we have the ISM Services number for June. Thursday we’ll see our friend Jobless Claims. And on Friday we have Import and Export Prices, along with the Trade Balance figures and the preliminary University of Michigan Consumer Sentiment Survey. Currently Treasury securities and mortgage prices are worse by about .125 in price from Thursday afternoon’s levels (the 10-yr yield is around 3.54%). more…

Market Roundup
Before we launch into the plethora of investor updates, let’s take a look at the market. With the absence of any bond-market news, the focus continues to be on stocks. Asian stocks rallied last night back to levels last seen in October. To many, in spite of the poor earnings results by many companies, it would appear that investors don’t want to miss out on a rally, and seem to be putting cash to work in the stock market. From last week, the Michigan Consumer Sentiment Index rose for the second straight gain, from 57.3 in March. Today we have Construction Spending and Pending Home Sales. Tomorrow the ISM Services number, Thursday our old friend Jobless Claims, and then on Friday we can get fired up about all of the Unemployment data. Hourly Earnings are expected to be up .2%, Nonfarm Payrolls -663,000, and the Unemployment Rate expected around 8.5%. The results of the government’s stress tests for 19 large financial institutions will be released on Thursday. We also have the Treasury selling over $70 billion in securities Tuesday-Thursday, which is weighing on the bond market. 10-yr is at 3.14% and mortgage prices are a shade better than Friday afternoon.

Mortgage Lender News Roundup
OK, here we go. Alphabetically: more…

Last Friday was the first day of spring. Congratulations, you made it through winter – now if only your savings had…

Conforming To $729k?
What is the word on when the conventional $729,250 will be rolled out? Hah! Call me “out of the loop”, but I have none. There are reports that big banks’ retail operations are already advertising the new limits, but I have seen no information from any other business channels and the reps are probably tired of answering the question with, “When Fannie and Freddie let us know.” As is becoming standard, the big banks are (and many would argue wisely) supporting their own branch network. For example, as recently as 5-6 years ago, Chase had only 500 branches where they might be able to originate some get retail loans. Now, they have over 5,000 branches – do they and other large banks need a huge broker base to help them with their mortgage volume?

Fourth Largest Lending Year On Record
The good news is that the Mortgage Bankers Association boosted its forecast for 2009 home-loan originations to $2.8 trillion due to low rates and a wave of refinancing. They estimate refinancing will total almost $2 trillion this year and purchase originations will increase to $821 billion, which would put 2009 originations in the top 4 years of all-time. The bad news, if you could call it that, is that the costs to the borrower are higher than ever – especially if they want to buy down the rate. Mortgage origination fees are the costliest in eight years, and the positive spread that banks are earning (i.e., the difference between their cost of funds – what they pay depositors – and where they are loaning it out at) is huge. Most mortgage companies are already collecting the Fannie & Freddie “adverse market fee” that they will charge officially beginning April 1. Not only are originators collecting added fee income to their bottom lines, but also increased spread income (unless, in the case of mortgage banks, their warehouse banks are charging high rates). more…

The economy is not good. I’ll tell you how bad the economy is. I was in Beverly Hills yesterday, and I saw a guy driving an American car!

All CA Lenders Must Have License # On Card
If you’re located in California, be prepared to order new business cards for everyone. Starting on July 1st of this year, all originators in CA have to start displaying their D.R.E. license number on letterheads and business cards.

More Warehouse News
With Nat City exiting, smaller mortgage banks are once again reviewing their warehouse facilities. Woe to anyone who was not doing this months ago, as they have had fundings held up or canceled. Warehouse relation managers are searching their rolodexes for warehouse contacts at companies like GMAC, Comerica, Viewpoint, Colonial, Countrywide, and small regional institutions such as Gateway here in the Bay Area. Certainly buying a bank would help a funding issue, but buying a bank typically takes upwards of a year or more, and many mortgage banks find that they don’t have the capital, the time, or the discipline to go through the process. more…

Rates Set By Markets, Not The Fed
I love it when folks think that the US Government sets our mortgage rates, and not the supply & demand in the markets. It would sure make life easier for everyone in the business, especially secondary marketing & pricing folks.

Market Cliche Storm
I was standing in the unemployment line earlier this week, and overheard one guy tell his friend, “I need to stay in front of the curve right now, and figure out where the puck is going, not where’s its been. Heck, if I get hit by a bus….we don’t even know what we don’t know yet.” Obvious mortgage banker. more…

AmTrust Bank In Trouble
The Office of Thrift Supervision issued simultaneous cease and desist orders against AmTrust Financial Corp. and unit AmTrust Bank. The orders require the holding company and its nondepository subsidiaries to:

Seek prior approval from the OTS before incurring, issuing, renewing or rolling over any debt, increasing any lines of credit or guaranteeing the debt of any entity. The parent company cannot pay dividends or repurchase or redeem stock without the regulator’s consent. AmTrust Financial also is ordered to enact a plan to boost AmTrust Bank’s capital ratios to at least 7% of Tier 1 capital and 12% of total risk-based capital by no later than Dec. 31. In addition, the bank cannot make any new loans or issue lines of credit for land acquisition or development or for speculative residential construction. The bank also is barred from granting any new reduced- or no-documentation mortgage loans. more…