There’s always something to howl about.

Category: Lending (page 38 of 56)

The Wannabe Cosmopolite

I choose to live in a big American city because frankly, I stick out like a sore sport in most rural settings and my accountant says we can’t afford London. One of my earliest pre-school memories was a Trenton to New York City train ride with my mother on a blustery Saturday morning.  How much of  that early 1960s day trip I accurately recall and how much is anecdotal family filler (pulled, kneaded and peppered over the redolent decades around my parents’ kitchen table) I’m not quite sure.  Still, certain sepia frames have been imprinted in my mind for life— gazing up at the sky scrapers whose dizzying heights give me vertigo to this day; creeping like a mouse through the bowels of  The Museum of Natural History, terrified of the mummies and the smell of all that marble; seeing  a man get his arm tore off by a taxi cab while standing at a busy Broadway corner…I’m pretty sure; sitting on a New York City phone book for a child’s eternity at  Mamma Leone’s, waiting for the dessert course to arrive.  Feeding the ducks in Central Park.  Observing  the landscape artists with easels and tams, their turpentined pigments slathered on thumb-holed palettes, probably all long dead by now but  full of  abstract perspective on that day.  Not peeing my pants for the entire afternoon.

A similar ferment churned in my gut when I first strolled the arrondissements of Paris; same thing along the canals of Rome; and Gaudi’s Barcelona.  And while I can easily inhale the woodsy fragrance of say, a Walden Pond (or even Dyer, Tennessee) without much complaint, I am clearly no Thoreau.  Once you think you see a guy get his arm torn off in Times Square, you can never really go back to the suburbs.  Not entirely.

As each year strikes like lightning, I find myself  being both drawn to, and repelled from, the urban twist of what once was Sandburg’s Chicago with its animal sense of outcome and yellow inner eye… ‘ hog butcher for the world.’  Liebling’s Second City.  On a calm evening the whispers can Read more

BloodhoundBlog Radio: VA Home Loan Tutorial For California REALTORS

I recorded this webinar on March 11, 2009. The AUDIO IS HERE and will open in a new window.  Listen along and click through the links as I discuss them:

Kicking the CAMELS Habit: Is Your Bank “Safe and Sound”?

The FDIC developed an acroynm for the composite ratios it runs to “rate” the financial health of its member banking concerns.   An index, ranging from one to five is calculated and the FDIC premium charged to the institution is commensurate with its CAMELS rating.  “CAMELS” stands for:

  • Capital Adequacy
  • Asset Quality
  • Management
  • Earnings
  • Liquidity
  • Sensitivity

The Federal Reserve Bank of San Francisco explains the CAMELS ratings and the highly-sensitive nature of the findings:

All exam materials are highly confidential, including the CAMELS. A bank’s CAMELS rating is directly known only by the bank’s senior management and the appropriate supervisory staff. CAMELS ratings are never released by supervisory agencies, even on a lagged basis. While exam results are confidential, the public may infer such supervisory information on bank conditions based on subsequent bank actions or specific disclosures. Overall, the private supervisory information gathered during a bank exam is not disclosed to the public by supervisors, although studies show that it does filter into the financial markets.

The average depositor might freak out if he discovered her bank had a 4 or 5 CAMELS rating and withdraw her deposits. How can a depositor do her homework if  the  bank can’t tell you its CAMELS rating ?   The good folks at BankRate.com have developed a similar system, loosely based on the CAMELS litmus test.  Here is how they describe their “Safe and Sound” ratings system:

Bankrate’s Safe & Sound ratings are comparisons to both industry peer norms and standards. In a very small number of instances, operating strategies that differ from industry norms lead to ratings that are not truly reflective of an institution’s financial condition. A Safe & Sound rating of one or two stars does not suggest that Read more

I want my…I want my…I want my TA-R-P

This is getting too easy.  Financial Times interviewed Bank of America CEO Ken Lewis. His answers reveal why the quasi-government agency that BAC has become is destined to fail.  Read the whole article.  You’ll swear your reading Orwell’s Animal Farm.

FT: Do you regret your acquisition of Merrill Lynch?

Lewis:  I’d be less than honest to say that I haven’t had my moments, but I always try to step back and say don’t judge it by this time and look forward. I still think it’s a compelling, strategic acquisition and we’re going to be awfully happy to have done it over time.

BRADY (commentary):  Ken Lewis gleefully overpaid for the world’s largest securities’ firm out of  pride and ego.  The prospect of commanding the largest mortgage originator and securities firm appealed to Mr. Lewis’ ego.  His feckless behavior showed contempt for his shareholders and will be an expense to the people of the United States but why should he care?

FT: Was there a moment when you would have preferred to pull out of the deal?

Lewis:  We did in fact think about doing that . . . and consulted with the government about filling the hole [in Merrill’s balance sheet] if we didn’t get out. We were strongly advised that the best thing to do was to go forward with the deal on time. While we made the final decision, we relied heavily on that advice because we respected the opinions of the various agencies.

BRADY:  Ken ain’t calling the shots at BofA; he’s an overpaid government employee now.  Wanna know how I know?  Read the next question.

FT: Have you been surprised by the strings attached to the Tarp money?

Lewis: I’ve been surprised at the reaction of the public for those that have taken the Tarp money when we were doing what we thought was in the best interest of the country.

BRADY:  Read the last five words.  Ken Lewis’ responsibility is to do what is in the best interest of the BAC shareholders not the country.

The answer is, of course, to break up the banks and stop the government from competing with the healthy banking institutions. Read more

Why FHA Loans won’t be getting cheaper or easier…..

When the subprime market imploded and people starting rushing to FHA, the “chant” was that FHA is the new “subprime.”   FHA originations skyrocketed and anyone who didn’t have a 700 credit score and a downpayment of 5 to 10% was quickly led into FHA.   I remember reading statistics of different banks seeing a 150% jump in FHA loans.

At that point, I had a sneaking feeling that we’d start seeing some of the losses that hit subprime translating over into FHA.   Well,guess what, we are.

The article cited below is about the fact that FHA is experiencing a substantial rise in what are called “Early Payment Defaults.”   What does that mean?   Substantially more of the newly originated FHA loans are having default issues than is typical.

What does that mean going forward?

  • Increased losses for FHA
  • Tightening underwriting guidelines for FHA loans.
  • Higher fees and rates for FHA loans

Fannie and Freddie are already in trouble and now we’re looking at the first signs that FHA is heading for trouble too.

Interesting times….

Tom Vanderwell

The Next Hit: Quick Defaults – washingtonpost.com

The last time the housing market was this bad, Congress set up the Federal Housing Administration to insure Depression-era mortgages that lenders wouldn’t otherwise make.

This decade’s housing boom rendered the agency irrelevant. Americans raced to aggressive lenders, seduced by easy credit and loans with no upfront costs. But the subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency’s historic role in backing mortgages is more crucial now than at any time since its founding.

With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency’s overall growth in new loans, according to a Washington Post analysis of federal data.

Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, Read more

“If I never make a single payment on my super-cheap FHA loan, do I still get my $8,000 tax credit?”

WAPO:

The last time the housing market was this bad, Congress set up the Federal Housing Administration to insure Depression-era mortgages that lenders wouldn’t otherwise make.

This decade’s housing boom rendered the agency irrelevant. Americans raced to aggressive lenders, seduced by easy credit and loans with no upfront costs. But the subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency’s historic role in backing mortgages is more crucial now than at any time since its founding.

With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency’s overall growth in new loans, according to a Washington Post analysis of federal data.

Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.

If a loan “is going into default immediately, it clearly suggests impropriety and fraudulent activity,” said Kenneth Donohue, the inspector general of the Department of Housing and Urban Development, which includes the FHA.

The spike in quick defaults follows the pattern that preceded the collapse of the subprime market as some of the same flawed lending practices that contributed to the mortgage crisis are now eroding one of the main federal agencies charged with addressing it. During the subprime lending boom, many mortgage brokers and small lenders milked the market for commissions and fees by making as many loans as possible with little regard for whether they could be repaid.

Once again, thousands of borrowers are getting loans they do not stand a chance of repaying. Only now, unlike in the subprime meltdown, Congress would have to bail out the lenders if the FHA cannot make good on guarantees from its existing reserves. And those once-robust reserves Read more

I’ve taken the liberty of posting my “Mortgage Market Week in Review” here…..

The Week We Woke Up

I’m going to deviate from the normal format this week, because I believe that this week has deviated from the normal that we’ve been experiencing lately.   I’m calling it the Week We Woke Up.

What did we wake up to?  A couple of things:

  • The fact that the debate on whether we’re going to have to nationalize some of the banks/financial institutions is pretty much a debate over semantics.   The announcement that the government now owns 36% of Citibank and that we had to spend some additional billions (how many has yet to be determined) to save AIG for the third time effectively said that we are now in a situation where the government does own some of the banking industry and the debate should now be about the how and not the whether or not.   This mess sent shock waves through the financial markets and virtually every bank saw their stock prices get “adjusted” accordingly.  There was a time this week that Citibank was trading for less than the cost of a Jr. Bacon Cheeseburger at Wendys.
  • The reality of GM’s scenario became a lot clearer and not in a way that was going to make the economy any healthier.  There’s a phrase in business accounting called, “A Going Concern.”   What does that mean?  Essentially it means that a business is generating enough income and has enough cash to continue in business.  Well, GM not only had some bad news in terms of sales, but they admitted that their auditors don’t believe that they can remain in business. That’s a pretty strong indication that GM’s condition is a lot worse than what we thought a couple of months ago.  What does the prospect of a GM bankruptcy mean?  Best case scenario – renegotiated contracts with the UAW and bond holders, substantial job losses and dealership closures.   Worst case scenario – total liquidation of GM and absolutely staggering job losses that will make Read more

The Subprime Bank of America

Remember those impetuous, ne’er do well subprime borrowers and those greedy subprime lenders?  Writing about them is sooo… 2007 but I’m happy to report that both greed and reckless abandon are alive and well today….

…at Bank of America.

Remember Ken Lewis?  He’s that sober-faced, bespectacled CEO of the Charlotte-based behemoth that started out as North Carolina National Bank and the Bank of Italy in San Francisco.  Ken has presided over Bank of America since 2001.  Since then, he’s been binging on banks like a subprime borrower stripped equity out of the old ranch:  He bought Fleet Bank in 2004, MBNA in 2005, and ABN-AMRO, LaSalle Bank, and US Trust Company in 2007.

That wasn’t enough.  Like a subprime borrower addicted to Vegas, strippers, and shiny new Hummers,  he was having too much fun to see the market turn.  What did Ken do while the house of cards was a-tumblin’?

He bought Countrywide Financial, America’s largest mortgage originator.

Still, that wasn’t enough.  Like a crack-addict jonesin’ for a last hit on the pipe, Ken absorbed America’s largest securities brokerage, Merrill Lynch.  Just like the crack addict who spent his welfare check on that last hit, Ken took money from the government to cure his fix for power.

Wall Street doesn’t like what Ken’s done.  Since the bailout binge, BAC has dropped from $37 to about three bucks as it became America’s largest subprime lender/servicer (Countrywide originated a boatload of subprime, option ARMs, and Alt-A paper while Merrill’s First Franklin was in the top three of subprime lenders).  A guy that eschewed the whole “subprime” lending market jumped into the deep end, drunk with power.

Now, it’s not just Wall Street that’s calling for Ken’s head.  It seems that the unions’ pension fund managers are pissed off, too:

CtW Investment Group, which said its affiliated funds own 116 million Bank of America shares, faulted Lewis for not backing out of the merger or revealing Merrill’s losses in a timely manner, and letting Merrill pay $3.6 billion in executive bonuses just before the merger closed.

It said Lewis’ actions have contributed to a 90 percent drop in Bank of America’s share price Read more

The New 105% Refi Plan – What I know and What I don’t…..

Okay, here’s the latest on what I know and what I don’t on the 105% refi plan.  I’m going to attempt to summarize a 10 page document, so I’m only going to hit the “highlights” of it:

The things that I know about the plan:

  • The loan to value is indeed max’d out at 105% but with a second mortgage, it can go higher than that (frankly unlimited) if the second mortgage holder will agree to it and if the second mortgage was already in place.   You can’t put a new second mortgage in place right now.
  • There are three “levels” of potential appraisals:  What Freddie Mac calls the “Home Value Explorer.”  or a new appraisal or the existing appraisal.   There’s some verbiage in the Freddie Mac docs about certifications that the lender has to make about the existing appraisal, so I don’t know what that involves yet.
  • The borrower’s mortgage payment history can have no 30 day late payments in the last 12 months.
  • The only loan that can be paid off is the existing first mortgage plus up to $2500 toward closing costs and escrows.
  • The new mortgage has to be done with the same servicer as the existing mortgage.  So, unfortunately for borrowers, you can’t shop around on this type of loan. Update on 3/9/2009 – per my conversation with Rhonda Porter, it appears that Freddie is saying they have to use the same servicer, but if the loan is currently owned by Fannie, then they can use anyone who sells to Fannie.   I was just on a conference call (internal) that said we expect to have more details from Fannie by week’s end.
  • There are some “kind of” confusing guidelines about mortgage insurance and my initial read of it says that there might be some questions on mortgage insurance.  If there was mortgage insurance, it sounds like there would need to be mortgage insurance again, but we don’t know that the mortgage insurance companies will “reissue” the insurance.
  • Primary residence loans that were sold to Fannie Mae or Freddie Mac are eligible.   There are other restrictions too.

The things that I don’t know (about the plan):

Putting the charm back into CRM: Introducing Top of Mind Networks’ Mark Green

Joining us today is Mark Green of Top of Mind Networks, a lender-focused CRM system with automated follow-ups.

Mark is a database marketing expert, permission Marketing disciple and overall CRM junkie. He’ll bring a dry wit, along with practical execution strategies that’ll help you evolve beyond sending meatloaf recipe cards to your client database.

Mark lives with his wife Abby and 5-year old daughter in Atlanta, Georgia.

As a matter of disclosure, Mark’s product is used by Brian Brady and possibly other BloodhoundBlog contributors. Like the rest of us, he’s not here to sell product, but he won’t kick you out of bed if you approach him with the right proposition.

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The federal government’s housing casino will never play fair as long as there are votes to be bought by cheating

This is my column for this week from the Arizona Republic (permanent link). Since I wrote this on Tuesday, events have overtaken some details, but it remains that few if any borrowers in the Phoenix area will be able to renegotiate or modify their loans under the Obama plan. Everyone who used to have home equity will still get to bear their losses unassisted, however.

 
The federal government’s housing casino will never play fair as long as there are votes to be bought by cheating

To qualify for a renegotiated mortgage under the plan President Obama announced last week, your new loan can be as much as 105% of your old loan — which sounds to me like curing alcoholism with a good stiff drink.

But the people who are in the worst trouble on their loans bought with 100% financing. Even if there had been no decline in values, they probably could not refinance at 105%, not without bringing cash to cover the closing costs.

But, of course, the typical home in the West Valley is down 50% from its peak value in December of 2005.

Suppose you bought a new home for Christmas 2005, paying $275,000. If you get everything just right, you might be able to sell it today for $135,000. You still owe $275,000, but you can refinance your note at only $141,750 under the Obama plan.

Something’s going to have to give.

But what about the people who were move-up buyers in 2005? They may have put 50% down, which means they’ve lost all their equity, but they probably can’t lay claim on a hardship refinancing. What about the people who paid all-cash? Now we’re talking about people who have actually lost real money — their own money.

Meanwhile, many of the people who end up qualifying for restructuring could easily continue to pay on their notes. We all of us pay on our car loans, even though a car loses half its value when you drive it off the lot.

But we don’t think of our cars, clothing, furniture or appliances as investments. By mucking around in the real estate market, the federal government Read more

Do Loan Originators “See” The Opportunity?

If you thought REALTORs were behind the learning curve in Web 2.0, you should see the lenders

If you’re a loan originator, reading this article, congratulations.  There are some 300,000 working loan originators today and I’m guessing that about 1% of us are actively using social media.  Certainly, the REALTORs are way ahead of us but even they have room for growth.  If the participatory web is the future of commercial communication, this gives loan originators a tremendous opportunity to “stop buying donuts” and start teaching the close to 900,000 real estate agents, who don’t get it, how to succeed.

Remember when you started in the business?  The most successful loan originator told you to “beat the streets and talk to agents”.  Today, beating the streets requires nimble fingers rather than worn-out shoe leather because…

YOU CAN BRING VALUE TO THE AGENTS FROM YOUR COMPUTER

Here’s the idea; teach the unwired agents how to get connected.  They’ll love you for it.  In the past four months, I’ve:

If I market to 100 real estate agents, consistently, I close 100 purchase loans annually.  In California, that’s a pretty good living (even after I pay out my team members).  See where I’m going with this?

TEACH THE UNWIRED AGENTS HOW TO GET CONNECTED– They’ll love you for it.

What’s the matter?  You don’t feel confident enough to instruct the unwired agents about how to use social media?  Forget the folks here; they get it.  Certainly you’ll want to establish and nourish relationships here but the REAL opportunity lies in the other 90%- the unwired agents.  You already know more than they do…BUT…

I’ll tell you how to learn even MORE so that you’re potent; an expert of sorts.

Come to the BloodhoundBlog Unchained University of Online Marketing, in Phoenix, at the end of April:

Who should come to BloodhoundBlog Unchained in Phoenix? If it’s part of your job Read more

Sorry Europe. Our President Might Just “Cowboy Up”

Bank of America is getting slaughtered by short sellers.  The stock has plummeted to under 10% of its March, 2008 value.  Of course, a few things happened on the way to the slaughterhouse:

  • The bought Countrywide, America’s largest mortgage originator.
  • They bought Merrill Lynch, America’s largest retail securities firm.

Ken Lewis took on a lot of crap on the road to ubiquity.  2009 promises to be more bad news for the financial supermarket as  Countrywide option ARMs and  subprime loans, originated in 2007 by Merrill Lynch unit First Franklin, become wallpaper.

Comrades Obama and Geithner will surely nationalize the Company, to better reflect its name, right?

“Not so fast” says Jason Schwartz of Seeking Alpha.  Just because Obama admitted to sharing his toys in Kindergarten, that doesn’t necessarily make him a died-in-the-wool Marxist.  Schwartz chalks the whole thing up to wishful thinking by our European cousins:

The market is running wild on some hyped up article written in the Financial Times that claims Obama is considering nationalizing the banks. If you actually read the article you’ll notice the anti-American sentiment at the very beginning when they say that ‘nationalization has long been regarded in the U.S. as a folly of Europeans…’ Ok, I get it, Europe has been right all along. Whatever. Obama’s true feelings on nationalization came out in his ABC interview after Geither’s banking speech when he laughed out loud and said, “Sweden had like five banks. We’ve got thousands of banks…managing and overseeing anything of that scale…wouldn’t make sense. And we also have different traditions in this country.”

Source documents suggest that Schwartz might be as credible as our resident “tin foil hat” theorist:

Long regarded in the US as a folly of Europeans, nationalisation is gaining rapid acceptance among Washington opinion-formers – and not just with Alan Greenspan, former Federal Reserve chairman. Perhaps stranger still, many of those talking about nationalising banks are Republicans.

Lindsey Graham, the Republican senator for South Carolina, says that many of his colleagues, including John McCain, the defeated presidential candidate, agree with his view that nationalisation of some banks should be “on the table”.

“Nationalisation” sounds a whole lot more “civilized” than Read more