My Perspective

Many of you are aware "… the House Financial Service Committee has approved an amendment to a mortgage reform and anti-predatory lending bill that would give federal regulators the discretion to make exceptions to a 5% credit risk retention requirement. The bill requires lenders to retain 5% of the credit risk on non-prime mortgages that are sold or securitized. The amendment would allow  …."  We all know Committee chairman Barney Frank, D-Mass., and his love for our industry; this quote is from a news story today about securitizing subprime in the newly regulated secondary … do ya see the NON-PRIME reference there? You know why that’s there? Because Barney and the dudes in his committee know (like me),  it’s just a matter of time – right around the corner is how that translates – says ME.
 

PS: IF your read about anybody else telling you brokers are toast, and/or that subprime is dead – I want you to Laugh Out Loud at  them – ’cause you’re paying attention!

We’ve got a booming re-fi mania running right now, with interest rates lower than you’ve seen at any time in your entire career (or mine). I mention rates because you’re now deeply entrenched into originating ‘conforming’ transactions, so that’s where you and the applicants focus; borrowers are falling out of the sky like ‘manna from heaven’.

You shouldn’t be doing business as usual, like you did before this current industry correction began amost 2 years ago, you should evolve and grow your company for the long run.

Time to get rid of the Big Commissioned Loan Officers who drain off company income into their own pockets – like I discussed his past Wednesday, and to finally join the 21st Century and learn about Website & Internet Originations more, since your website sucks.

Operating a credible mortgage company with ethical salaried well training employees, attracting qualifiable applicants to your organization via proven advertising methods, will improve your bottom line income and change the tone and climate of your company and your entire life. We can show you how to develop these things.

Sprinkled throughout our main website, we have highlighted more than a dozen key word/phrases where we rank highly within Search Engine Results. For example right on our front/main index page we point out that we rank rather well for mortgage industry education and training in a Google search. I added these various links on several pages to demonstrate to potential Website & Internet Origination class students, that yes indeed we do know what we’re talking about! Sort of a credibility thingy is what I had in mind with that, since strong/high ranking in search results is one of the keys to doing well now days on the Internet – I figured showing those might generate more class interest!  We’ll show YOU how!!

(PS: I expanded this piece and it’s also now the lead article in The MortgageLand Journal’s May 2009 issue – you can see all of it  HERE ).

"New Report: Non-prime MBS Showing Improvement? In March the credit performance of securitized subprime and alt-A loans improved for the first time since December 2007, but the bonds are far from being out of the woods, according to a new research report by Five Bridges Advisors. Five Bridges chief Michael Youngblood warns that although there is improvement, March does not "represent a turning point in credit performance" but reflects the ability of some troubled borrowers to refinance their GSE loans or successfully use loan modification programs. Five Bridges also notes that the default rate on securitized prime loans fell to 6.33% in March from 7.07% in February. The alt-A default rate fell to 19.2% from 20.56% and the subprime rate declined to 33.15% from 34.4%. "The declines in payroll employment, increases in household unemployment rates, and declines in existing house prices that have occurred through April 2009 will fuel higher default rates in" most metropolitan areas throughout the year."

I think this news piece today hits it squarely on the head

Two different news pieces caught my eye this morning; the first one was yesterday’s news that first quarter 2009 foreclosures "is the highest quarterly total of completed foreclosures" since the crisis began. The number of pre-foreclosure filings also reached a new high: 600,000." Let’s think about that for a moment and remember, it’s also been widely reported the vast majority of them have been to PRIME borrowers, while the much smaller segment have been on those nasty toxic, NON-PRIME sub-human borrowers who got those filthy Subprime loans.

The other headline: "Residential Lending at ‘TARP Banks’ Rising" and it speaks to the Wells production numbers and others (I need to remind all of you that Well Home Mortgage was once Dial Finance out of Des Moines, a subprime lender for 8 decades!)  who have improved balance sheets geting back into buying mortgages. Soon they’ll see what is so glaring to me, and that is PRIME ain’t so darn PRIME, nor are NON-PRIME customers all that toxic (IF underwritten properly).

Sitting on the sidlines are tens of millions of people who are not PRIME that need to be served, they won’t be ignored for too much longer!

Now that we’re beginning to recover from the darkest days in the residential mortgage industry in memory, and with customers coming out from under their rocks stunned at the economy they face, finally they’re applying for loans again.

One point we all need to remember from Econ 101 (even though the media forgets this fact frequently) is that Employment Numbers are a seriously lagging indicator to economic health, so even as we move more and more deeply into recovery during these next several monhs, unemployment figures will remain high for so time – therefore applicants may come forward more slowing then we would hope. But, what if previous economic models don’t hold true, what if your telephone starts to ring off the hook? This is NOT the time to revert back to Business as Usual - with you hiring Big Commissioned LO’s to siphon off all your company’s money for themselves!

Our latest lesson is all about a reversal of that former foolish method of operating your business. You need to properly advertise and market your business to attract customers; as they come to you via phone, walk in your office or visit your website due to your advertising investment dollars spent, you’ll no longer need a ‘Loan Officer’ -salesman (and the big commissions that go hand in hand with them) to handle them – so … hire yourself a brand new inexperienced green-pea ‘processor’ and show her this training CD we now offer!  It’s immediately available at the bottom of THIS page.

And, given the ethical and supervision issues that have to do with so many commissioned LOs; in addition to saving yourself many tens of thousands of dollars a year, that’s why it’s smart to get rid of your Big Commissioned LO’s – this lesson trains your utlity people to take their place!  Utilizing this biz plan, you get to upgrade your company furniture, fixtures, equipmenmt, computers, software, employee benefits and keep increased profits for YOU!

Concerns that bad actors may be originating or brokering FHA-isured loans, FHA has reactivated its Special Work Assessment Teams (SWAT) to conduct single-focus on-site reviews of lenders whose originations are exhibiting signs of distress. SURPRISE! Unannounced, these teams come on site to check up on abuses.

The HUD Secretary finally has admitted early payment defaults on FHA-insured loan have significantly increased, but he’s still not figured out a lot of the percentages he’s looking at, are being distored by the rising overall growth. At first glance inexperienced people don’t spot the ‘dollars in jeopardy’ are being divided by an ever growing outstanding in portfolio size, so it looks like you’re out-running your delinqnency (for now), but he’ll get surprised later, once the production slows back to the historically low levels FHA’s played in our industry, but the dollars defaulting will continue to rise.

Once you’ve seen this happen, right as it’s hapening (like now), it’s obvious to those long experienced people who have been there done that, as I have. Thankfully they’re at least trying to start and get out front on this coming mess at FHA. 

Yesterday, Wells Fargo & Company announced plans to expand its presence in warehouse lending … Wells who? You’ll recall they’re the largest subprime (Bank)lender in America!

Wouldn’ this be an easy way get a leg-up on capturing all the new production for it’’s own account this time around … DUH? 

From the shower (with the TV on in the background) 5 hours ago on Fox Business News I heard one of the Banks that received TARP money, has told the Treasury it wants to buy up some of those TOXIC assets!

Do ya think it’s magic that today (one day after a reassessment of their own TOXIC assets on their own biooks – courtesy of ‘MARK TO MARKET’) - they are one of the first to Jump Up and say ‘we’ll buy that junk!’ – remember I’ve been telling you for more than 8 months, the secondary mortgage market will re-appear soon as those TOXIC assets are dealt with.

This is anorther sign subprime is on it’s way – I think this time though, for appearance sake, they’ll call it "non-prime" – just sounds softer

Today FASB approves more "Mark-to-Market" flexibility, this singular event will have a super-nova magnitude blast effect in helping to remove those TOXIC assets from financial institution’s balance sheets – NOW they’re no longer TOXIC since we’re back to S&L-crisis ‘illusion accounting!’ Magically they will all of a sudden, have Value.

TARP handled properly by Hank Paulson former Treasury Secretary, or even Secretary Timmy’s (foolish) Private Public Partnership (Son of TARP) would have accomplished the same thing (but with much less long term negative consequences) - TOXIC assets POOF … gone!

Too bad the FASB kids and the lawmakes that pushed for this change to MARK-TO-MARKET weren’t around our industry in the mid-1980’s. Without this ‘MARK’ concept in place there will be terrible catastrophic consequences in the long run!

You can mark down in your diary that today’s action by FASB was the single driving force that hurtled the return of subprime back into our industry … a secondary market is now about to emerge … how long from now? I predict not more than 90 days from today. HOORAY !