Archive for August, 2007
Greenpoint Mortgage: the Latest Casualty
More sad news. Today Capitol One Financial Group announced that effective immediately it is shutting down Greenpoint Mortgage, it’s wholesale lending group. I did a lot of business with Greenpoint over the years. They’ve been a great niche lender, but their eggs were predominately in the Alt-A basket which this market has riddled with holes. Here’s another link to the story.
read comments (5)Words of Wisdom from a Mortgage Veteran
These words of wisdom came in the form of a Monday morning email from fellow loan officer and mortgage broker Dave Ryland. Dave was already a seasoned professional when I got into the business 18 years ago. Through good and bad markets, Dave has lived and demonstrated the kind of integrity & professionalism that defines us at our best.
Through the current mortgage industry shake up, positive changes are evolving. Here are a couple of Dave’s thoughts:
I have realized why the contraction in our industry has me encouraged rather than worried. For many years, I took pride in the fact that it took effort and intelligence to pilot a loan through the system. I built my reputation and career by wowing Realtors with smooth execution and knew there was a dollar value to my skills.
In recent years, the amount of effort needed to complete a loan has declined. In a sense, the standards have been “dumbed down”. An originator could bring about a successful closing with little pride in their work. That, I believe, is changing. I welcome it. It will elevate our sense of worth. It will elevate our compensation. It will re-elevate the reputations of competent and ethical loan officers who have been competing with realtors who did their own loans, thinking that origination is a piece of cake.
Those people are going to discontinue their activities also, don’t you think? Is that a bad thing? Hardly! When the Realtor who stopped sending you business in 2003 calls you up to pre-qual their next buyer, be grateful. I will be.
Sincerely, David Ryland
Thanks Dave! What a great way to start the week.
Got a comment? Join the discussion below
Surprise Fed Move Cuts Discount Rate by a Half Point
In a surprise move, the FOMC cut the Discount rate from 6.25% to 5.75%.
The largely symbolic move signals the Fed’s willingness to take action on the recent collapse in the market for commercial paper, but it may have been enough to pull Countrywide and Washington Mutual out of the fire.
The Discount rate is the rate banks pay to borrow from the Federal Reserve. Cutting the discount rate provides funds to banks but doesn’t change consumer or commercial rates. Banks use this Discount window less, borrowing less than $100 million each day.
The Fed Funds rate, presently 5.25%, is the rate banks pay each other on over night loans and more widely used. Expectations are that the Fed will also lower the Fed Funds rate when they meet in September.
Money now is flowing out of bonds (bad for mortgage rates) and fueling a rally in stocks that has pushed the Dow back through 13,000 at the moment.
Meanwhile, this morning’s Michigan Consumer sentiment fell to 83.8 from 90.4 in July. The expected number was 88, but consumers are sensitive to the headlines and often “feel” bad about things while continuing to spend.
More later…..
First Magnus Folds
This morning’s sad news included a notice from First Magnus that it is no longer funding any mortgage loans.
Moody’s Cuts Countrywide Credit Rating
…update from Reuters this morning. More bad news for CW. Watch your loans and have a backup plan.
NEW YORK, Aug 16 (Reuters) - Moody’s Investors Service on Thursday cut its debt rating for Countrywide Financial Corp. to the lowest rung of investment-grade and said it may cut again.
The ratings agency cited the U.S. mortgage lender’s decision to draw down an entire $11.5 billion credit facility to bolster liquidity.
Moody’s cut Countrywide’s rating three notches to “Baa3″ from “A3.”
Is Countrywide the Next to Crash and Burn?
From Reuters today…
Countrywide Financial Corp. could face bankruptcy if liquidity worsens, according to a Merrill Lynch & Co. analyst who downgraded the largest U.S. mortgage lender to “sell” from “buy”.
The downgrade suggests deepening problems at Countrywide, which has several times in the last month tried to assure investors it will thrive once the credit crunch afflicting the U.S. mortgage industry passes.
Wednesday’s downgrade by analyst Kenneth Bruce came a day after Calabasas, California-based Countrywide said foreclosures and mortgage delinquencies in July had risen to their highest levels since at least early 2002.
“If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly then the model can break, leading to an effective insolvency,” Bruce wrote. “If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt.”
Don’t put your eggs in that basket right now. Wouldn’t that be amazing if the country’s largest home mortgage lender were to fall? If American Home Mortgage left $800 million worth of approved loans hanging, how much damage would a Countrywide bankruptcy do? Maybe that’s what the TV commercial means by “No one can do what Countrywide can.”
What’s my point here? Realtors and borrowers are much better off working with a reputable mortgage broker today than with a mortgage banker. In addition to having to fully disclose our fees (Countrywide doesn’t), mortgage brokers can guide clients away from unstable lenders and toward those who will still be around on closing day.
Got a question? Shoot me an email, or leave a comment below.
Sacramento Mortgage Rate Update: Repricing Risk
While the sub prime mess spreads into the international arena and investors reevaluate risk and pricing on many of today’s loan programs, there is a silver lining.
The rates on traditional 30 and 15 year fixed rate mortgages have been gradually falling. We ended the week just a smidge over 6.5% with a half a point on the 30 year; a little lower on the 15 year. If you’re someone who doesn’t need “creative” financing, this is good news.
This decline resulted from a flight to quality as money fled stocks for the safe haven of bonds and because the Fed Funds futures market is now pricing in a 100% expectation of a Fed rate cut in September.
Even if the Fed cuts short term rates, the 30 year may not drop further. Yield spreads–the difference in rate between short and long-term bonds–is widening as demand for the high-yield junk type bonds and MBSs wanes.