Archive for the 'Subprime Meltdown' Category
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)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.
If common sense and research studies hadn’t already convinced you that you should use a mortgage broker (vs. a mortgage banker or direct lender), then chew on this:
Countrywide and Washington Mutual, two of the nation’s largest mortgage banks, stated this week that they are facing “unprecedented disruptions” in the secondary market for mortgages that could adversely impact earnings and financial condition. Unprecedented disruptions. Hmmmm… that’s a vague and scary phrase, but what does it mean?
It means that if you arrange your home loan through a mortgage bank and they experience an unprecedented disruption of the we-can’t-fund-your-loan kind, you may be sleeping in the U-Haul at the close of escrow.
Think I’m exaggerating? Everyone’s heard about the demise of American Home Mortgage (AHM)—one of the nation’s 10 largest mortgage bankers—who one week ago had exactly that type of unprecedented disruption. The were about 7000 people suddenly without jobs, but more to the point there were $800 million in approved loans that didn’t close. U-Haul must have had a great weekend. Those borrowers and AHM employees did not.
How is a mortgage broker different?
Subprime Troubles Spread to Europe
From CBS Market Watch this morning…
LONDON (MarketWatch) — BNP Paribas, one of the largest banks in France, said Thursday that it will stop valuing three of its funds and is suspending investor withdrawals after U.S. sub-prime-mortgage woes led to the “complete evaporation of liquidity,” the latest sign of housing market troubles in the world’s biggest economy rippling across the globe.
So the mess has now spread beyond the sub-prime, beyond the prime mortgage arena, beyond the U.S. economy, and into the international economy, causing a complete evaporation of liquidity.
BNP Paribas was joined by Germany’s Union Investment who suspended redemption on one of it’s funds, U.S.-German JV WestLB Mellon Asset Management who suspended redemptions on an ABS fund Tuesday, and Dutch bank NIBC who wrote of a $137m loss on its U.S. ABS fund. All of this from exposure to the U.S. sub-prime mortgage defaults.
What does it mean to you as an agent or borrower?
Virtually all loans other than government loans or the conforming loans that are sold to Fannie Mae and Freddie Mac have been frozen or the rates raised to ridiculous levels. The markets are repricing risk. Until investors can quantify risk in this new environment and make sense of the complex credit derivatives created by Wall Street, they have headed for the sidelines. Mom and dad have confiscated the mortgage industries credit card.
What to Do?
For now, be careful about removing your loan contingency until the loan funds. Lenders who belly-up because they run out of money to lend don’t care that you or clients will be sleeping in the Bekins van while you try to find another loan.
Got a question? Send me an email.
Got a Comment? Please chime in below.
The Mortgage Carnage Continues
Monday Update
American Home Mortgage called it quits on Friday, filing for bankruptcy protection.
Today, both Aegis Mortgage Corp. and National City Mortgage’s home equity division stopped accepting new applications. Aegis indicated that it would NOT be able to meet its present funding obligations.
AltA loan programs, home equity loans, and pay-option arms remain frozen until further notice, and Wells Fargo’s jumbo rates were priced all the way up at 8% this morning.
I’ve never seen anything like this in 18 years.
Stay tuned. It’s going to be a wild ride.