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The Great Loan Blog
A spirited discussion of real estate, the mortgage business and the economy.

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Articles

Countrywide Seeks Cash.
2007-08-22 04:39:00
As a source of mortgage funds most lenders such as Countrywide , Ditech and all the hundreds of mortgage bankers repackaged the debt to get fresh funds to lend with the help of the big Wall St investment banks. These debt securities were sold to mutual funds, hedge funds, foreign banks, etc. The appetite for CDOs as they are known has dried up for all but the most stellar loan scenarios. The investors that bought these instruments have been burned and are demanding higher rates or are completely done with mortgages altogether. So where do the lenders get more money to lend? Going back to the old school banking playbook, Countrywide is taking the lead on this one and soliciting the highest CD deposit rates in the country. Check for yourself by looking at your local paper or checking bankrate.com under the CD tab.They need to raise funds ASAP to fund the 40 billion dollar monthly pipeline. You will notice that many large lenders are on the CD tables with very attractive rates for the C...
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Interesting Info from Countrywide.
2007-08-21 06:58:00
Given the daily rush of news, I think a lot of careful analysis gets lost. Thinking about Countrywide 's conference call almost a month ago, these slides are very valuable in thinking about where housing and the mortgage industry could be heading. Countrywide services about 20%+ of all mortgage paper in this country. So they have a remarkable opportunity to analyze the specific loan performance of various types of credit and mortgages from conventional to jumbo and the exotics that we may never see again(i.e. option arms and 2/28 ARMs.) Please post your insightful comments. Enjoy this info and give it some thought: Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Interesting , Info , Eres

Lenders and Brokers:Only focus on conforming!
2007-08-21 01:58:00
I received this just now from INDYMAC. They are a large thrift based lender that does retail and wholesale."Time to shift our focus…The mortgage industry is changing rapidly and oftentimes without warning. In order for you to continue to succeed in this industry, you must embrace change. Today, another one of our lending competitors, GreenPoint Mortgage, closed their wholesale operations. It is definitely a time to focus on what we can do rather than what we no longer can.Income Documentation: Embrace Full Doc.Stated, No Doc, NINA, etc. are still being offered by IndyMac Bank for conforming loan limits. However, the shift in our industry has definitely gone to Full Documentation. Don’t be afraid of W2s, Pay Stubs, and 1040’s. We even allow you to document income via a fully executed VOE for your wage-earning borrowers. We also allow Non-Occupant Co-Borrowers to be on the loan if you need more income. Also, Fannie Mae MyCommunity loans are designed to help your lower income bor...
More About: Brokers , Focus , Lend , Ming , Lenders

Excellent Jumbo Mortgage Summary
2007-08-18 04:26:00
Here is an excellent piece from http://paper-money.blogspot.com/"I hate to belabor this point but I really think that the vanishing of the affordable prime Jumbo loan is easily the most significant development for home prices that I have heard all year.Remember, the Jumbos have dried up for PRIME borrowers.But what does it mean to say “dried up”… again, as I noted before, it simply means borrowers will need to put 20% down (or have 20% equity for refinance), provide full disclosures of income (tax returns, stubs, etc.) and then pay over 7.5%.This appears to have happened merely because Wall Street, who inevitably supplied the liquidity behind these loans, are now obviously more risk averse and are effectively unwilling to cheaply underwrite large home loans.And the cheap Jumbos are not coming back anytime soon.Why?These loans are for the most qualified borrowers at the higher end of the income spectrum so you have to ask yourself… what is wrong with affluent borrowers being ...
More About: Mortgage , Summary , Lent , Excellent

Jumbo Mortgage Meltdown Freezes Luxury Housing
2007-08-17 08:58:00
The media has done a very poor job of relaying the collapse in the jumbo mortgage market. The term jumbo mortgage loan refers to any loan that is higher than the maximum dollar amount established in Fannie Mae and Freddie Mac's guidelines. At this time, any loan for a single family property greater than $417,000 is considered a jumbo loan. The limits increase to $533,850 for two-unit properties, $645,300 for triplexes and $801,950 for 4-unit homes. There are also some areas of the Country where the limits are higher including Alaska and Hawaii. But, what does that mean for housing in high cost areas like CA, NY, FL, etc? The guidelines for doing a jumbo mortgage have tightened dramatically in the last few days. Lenders such as Indymac, Countrywide and WAMU have increased reserve requirements and stopped taking stated income for loans with less than 20% down. The interest rates for full doc jumbo loans in CA have risen by .50-.75% for the most prime credit worthy borrowers. A client...
More About: Luxury , Mortgage , Housing , Jumbo , Mort

Musical Mortgage Chairs!
2007-08-17 05:41:00
In speaking to investors, clients and realtors; I came away with the idea that the mortgage freeze is like a game of musical chairs. Some of us can remember the feeling of scrambling for that last chair as the music stopped. Many property investors that have a large number of single family home rentals(10-15 in some cases) are trying to grab at financing that doesn't exist in today's mortgage market. They will be forced to sell. Many investors are barely holding onto rentals that only made sense for the property appreciation that happened between 2001-2006. The negative cashflow was big to the tune of 1-2k a month with the taxes and insurance per house. Many of these folks took interest only mortgages or negative amortization loans because they were really betting that housing would rise in the next few years and they could sell with huge gains. Now that housing prices are falling; the music has stopped, but so many people just don't realize it yet. Did you know the music stopped...
More About: Musical , Mortgage , Chairs , Mort

Countrywide Mortgage in Liquidity Crisis.
2007-08-16 19:39:00
Forbes 8-6-7:"Countrywide Financial offered hope Monday that it might avoid the fate of other troubled lenders. The mortgage company revealed that it has cash access that could help it survive brutal industry conditions. In Monday filings with the Securities and Exchange Commission Countrywide revealed it has $186.5 billion in available liquidity. It also said it has access to $46.2 billion in highly reliable short-term funding. "Fast forward ten long days. Today we were greeted by another bad sign that mortgage markets have stopped working. Countrywide is the largest lender in the country. They originate through retail and broker channels roughly 20% of all mortgage loans. They funded $40 billion last month. This is not subprime, or ALT A, the majority of these loans are very prime mortgage loans to folks fully documenting their income. They were forced to tap a line of credit they have to the tune of $11.9 billion. They did this because they couldn't use their traditional financi...
More About: Mortgage , Crisis , Cris , Mort

Signed mortgage. Conditions meet. Sorry can't fund!
2007-08-16 01:57:00
I received this item just now. Really points to a mortgage market meltdown. This is from a large national mortgage wholesaler that only does prime and a small amount of alt-a paper. This implies that a borrower could meet all conditions, sign the loan, it moves past rescission(client cancelation period) and is ready to close/fund; then suddenly a Wall St bank like Bear Streans or Goldman Sachs would inform the mortgage banker that the loan was unsaleable in the current market. The loan would be turned down. This points to very bad conditions in the secondary mortgage market where everything is packaged and resold to investors. Lending depends on confidence in both parties to deliver on their promises, should loans get turned down in funding; realtors/lenders/borrowers will move from mild concern to panic. Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Signed , Meet , Fund , Conditions

The new word of the day is NO!
2007-08-15 06:09:00
The mortgage market is undergoing a rapid change that the public at large is only coming around to slowly. People believed that money would flow to anyone with a pulse at terms that were increasingly better than their previous mortgage loan. The game was going fine till people took on more debt than they could pay. The mortgage defaults started and picked up speed at the start of 2007. Then, the investors started to slowly tighten guidelines and then it was a race to the bottom. Small lenders in order to compete and keep volume flowing keep very loose lending guidelines. They then began having trouble selling these to Wall St, who packages the prime and subprime mortgage loans and sells them to investors.The mortgage interest rates couldn't rise much because people couldn't qualify even with an interest only or a 40Y fixed mortgage. The investors weren't being compensated for the added risk but there was an instatiable appetite for yield or a rate of return better than safe gover...
More About: Word , Word of the Day , The D

Time Heals all Wounds.
2007-08-14 07:10:00
It has been a few months since I last posted. I find hundreds of other authors doing a good job covering various elements of the housing and lending collapse. Although, I would add that most bloggers are outside observers and a few have very biased views. Of course, I have my bias as I am a mortgage broker here in CA. An unstable housing market isn't good for anyone. Sure it was easy to find a mortgage loan for a client as long as they could fog a mirror. But, all the competition for housing priced out the rational client's that didn't want to take on risky financing.I didn't hear of pick a payment or negam loan until 2003. After reading through the paperwork, I really thought that the product was being sold to less than savy clients. Wall St created these products because it allowed the investors of these mortgages to make very large returns. Estentially, the balance is compounding at a rate somewhere between 7-10%+. The borrower is only paying 1-3% and the rest of the interest...
More About: Time , Heals , Heal

They get you coming and going.
2007-05-08 20:55:00
For homeowners seriously delinquent on their mortgages & hoping for some relief, the IRS has bad news: If your lender agrees to modify your loan & forgive any part of your debt, you could owe federal income taxes on the amount forgiven.This is especially bad news for the growing numbers of credit-impaired sub-prime borrowers who find themselves "upside down" in the current market: They owe more on their mortgages than the value of their houses, thanks to noxious combinations of zero down payments, declining property values & hefty payment increases they can't afford.Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Ming , Going , Goin

Good Credit Client's Defaulting.
2007-04-27 22:18:00
Now that sub-prime is heading toward the light, the focus shifts to the ominous Alt-A loans. You know, the grey matter between prime and sub-prime. Take a look at this chart.As you can see defaults are rising sharply partly because rates are resetting and housing prices have become stagnate. Countrywide and WaMu are some heavy hitters in this group but all eyes will be on IndyMac to see whether they follow the path of big brother sub-prime. This free flowing money again is because of loose monetary policy that encouraged credit creation and the populations incessant fascination with all things real estate. Just look at the sharp rise of 30 day lates; this will parabolically explode because we are resetting at approximately $100 billion per month and housing is going the opposite way. Otherwise we are in a perfect time bomb with no remedy. All the adjustable rates are resetting at least 2% higher than their current rate and people can't make the payments. They need to refinance befo...
More About: Credit , Good , Client

It's spreading:Target and GM Site Mortgage Meltdown for Decreased Sales.
2007-04-24 06:36:00
April 23 2007: 4:28 PM EDTLOUISVILLE, Ky. (Reuters) -- The crisis in the U.S. mortgage market has hurt U.S. auto sales this month, General Motors Corp. Vice Chairman Bob Lutz said Monday.Lutz, who was in Louisville, Kentucky to attend an automotive industry conference, said he did not know how GM's (Charts, Fortune 500) own sales had performed in April to date, but said he expected the whole sector would feel the impact of the stress on the housing finance market."The market as a whole has been a little weakish. That has come as a result of the housing market problems and the mortgage industry meltdown," Lutz told Reuters. "A lot of people are finding themselves in a position of reduced affordability and that has had an impact, not just on us, but across the industry."GM and other automakers will report April U.S. sales results on May 1.Regarding Target from CNNFN.com:"It's pretty surprising," Morningstar analyst Joseph Beaulieu said of Target's lowered forecast. "I don't think ...
More About: Sales , Site , Mortgage , Spread

Builder Cites Subprime as Slowing Sales
2007-04-20 18:31:00
From National Mortgage News:The crisis in the subprime mortgage sector is shaking the very foundation of the housing market, according to one of the nation's largest homebuilders. Ara Hovnanian of Hovnanian Enterprises said the subprime debacle is causing problems up and down the housing food chain. For one thing, fewer people can qualify for starter homes, Mr. Hovnanian said at the National Association of Home Builder s' Multifamily Pillars of the Industry conference in Hollywood, Fla. For another, repeat buyers are finding fewer prospects for their houses, which they must sell before they can move, he said. But perhaps most important, the situation is having a dampening effect on the market in general. "The biggest impact is psychological," Mr. Hovnanian told the meeting. "Homebuyers were just beginning to feel good about getting back into the market" when the subprime meltdown became fodder for the media, he said. "Now they have lost their confidence." Hovnanian Enterprises is t...
More About: Sales , Subprime , Prime , Rime

It's only in subprime it won't impact us!
2007-04-20 06:33:00
Really? Rewind to basic Econ 101. Remember supply and demand. We know that when supply overwhelms demand that prices fall. With all this supple on the market where is the demand going to magically come from to prevent prices from dropping. One hundred percent financing for most credit levels is gone entirely. Average credit level buyers are being required to put at least 5-10% down with most lenders. Six months ago if you had a pulse you could get 100% financing. Millions of potential home buyers(greater fools in some markets) are completely out of the game. My honest take is that we will see prices in some hot markets drop 20-30% from their peak over the next 2-3 years. Realise it is a slow inefficient market that takes time to adjust back to reality. With all this gloom and doom comes a ray of hope for the future buyers that can finally get a home at a reasonable price again. Just wait till 2010 to buy that condo in Vegas, OK? Mortgage Insider dishes it straight on housing and the...
More About: Subprime , Prime , Rime , Prim

Ticking Time Bombs?
2007-04-20 06:27:00
As you can see the last part of the real estate boom was fueled by the riskiest credits. They were late to the party and many of these folks are already upside down on their houses. It won't take much to make them think about turning in the keys. Their payments are adjusting higher, their income is stagnant and their dream of homeownership is becoming a nightmare. Many will walk away.Mortgage Insider dishes it straight on housing and the mortgage market.
More About: Time , Time Bomb , Tick , Bombs

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