Once again, things turned grim in mortgage banking. First, Taylor, Bean, & Whitaker went belly up. Not only did this impact their own employees, but its warehouse problems were widespread. In addition to that, it is rumored that hundreds of smaller banks either use/used TBW’s website help in originating mortgages on their website, or sold loans to TBW and can’t get the notes back. Small banks across the nation took advantage of TBW’s “Community Banks Online” and TBW basically acted as an affinity outsourcer for small banks who had no origination capability of their own for the banks’ own clients. Now this has gone away…Now, on Friday, Colonial BancGroup was seized and purchased by BB&T with $25 billion in assets and $20 billion in deposits Colonial is not only the largest seizure this year, but the sixth largest bank failure in US history. For those playing along at home, BB&T is based in North Carolina and owns 1,500 branches in the Southeast. And unfortunately for mortgage companies, Colonial had billions and billions of warehouse lending, so that leaves many independents scrambling for warehouse lines. No warehouse = no lending for a non-depository mortgage bank.
Colonial wasn’t alone on Friday: four other banks failed. Community Bank of Las Vegas went under, with no buyer in sight. Dwelling House Savings and Loan Association in Pittsburgh had PNC Bank assume control of its assets – the first Pennsylvania bank to fail this year. Two banks in Arizona failed: Union Bank and Community Bank both were taken over by MidFirst Bank of Oklahoma City, which are the first in Arizona this year, and brings the nationwide total to 77.
Colonial applied for TARP assistance but had been told it needed to be able raise an additional $300 million in private capital to be eligible for the federal assistance. At that point TBW, and a group of other institutions, stepped up as investors but that deal collapsed. The FDIC’s trust fund, used in covering bank failures, took another hit. Indymac, so far, has been the most expensive with almost an $11 billion hit. Colonial could cost the FDIC another $3-7 billion by some estimates.
Taylor Bean was reported to have few, if any, overlays on FHA product, and had garnered a large market share of manufactured homes. Some folks who watch the FHA/VA & Ginnie volumes skyrocket believe that we are NOT facing another subprime debacle. (Let’s hope so!) Recently the Secretary of HUD spoke and noted that the “recent originations were performing better than expected”. One must remember the source, and also remember that it is recent production, but some believe that this is due to the fact that investors have credit overlays and have raised the FHA underwriting standards. Using basic guidelines to approve government loans would probably result in a much lower credit quality, so most, if not all, investors require substantially higher credit scores than are required, along with lower DTI ratios. A lesson from TBW…
SunTrust Loans To $2m
We did, however, have some very good news from SunTrust Bank for borrowers in Arizona and California: loans from these states are eligible for financing under SunTrust’s “Key Loan Program”, which in some cases can go to $2,000,000 with only one appraisal required for loan amounts up to $1,000,000. SunTrust reminds clients that for all Key Loans a reduction of the maximum LTV/TLTV by 5% may be required if the property is located in a declining market, they clarified the Maximum Loan-to-Value (LTV) table for Second Home Purchase and Rate/Term Refinance transactions by removing the “75%/NA to $650,000” row since the “75%/75% to $1,000,000” row is less restrictive, and removed all references to “interest only.” SunTrust is definitely a “Freddie shop” for this kind of loan: they “recommends and supports the use of the automated underwriting system (AUS) Freddie Mac’s Loan Prospector (LP) to better assess mortgage risk”, and in fact require that “all loan transactions with loan amounts less than or equal to $750,000 must be processed through LP” and that the “Key Loan Program is NOT ELIGIBLE for DU/DO submissions.”
Deutsche Warehouse Lending
National Mortgage News reports that “Deutsche Bank is beginning to make a run at non-bank mortgage lenders, offering them warehouse lines of credit but also requesting that they sell their loans to the bank on a correspondent basis, according to investment banking sources.”
Industrial Production & Capacity Utilization Less Than Expected
Friday morning, after the auctions were wrapped up, we had some economic news. Industrial Production and Capacity Utilization came out less than expected, but still increased for the first time since late last year due in part to “Cash for Clunkers”. We also had the University of Michigan Consumer Confidence number, which dropped from 66 to 63.2 this month instead of increasing as some thought it would. And given that one component of it is one of 10 leading economic indicators, watch out. Regardless, these signs of a weaker economy caused the bond market prices to rally, leading to lower rates.
Preview For Week
This week, as summer vacation season continues, we’ll see the usual rash of economic releases. Today we have the Empire State Manufacturing number, tomorrow New Residential Construction and the Producer Price index, nada on Wednesday, on Thursday the usual Jobless Claims and the Philly Fed, and then on Friday we wrap up with Existing Home Sales. Ahead of that, we find the 10-yr Treasury up .625 in price and yielding 3.48%, and mortgage prices better by .250.
Two nuns are ordered to paint a room in the convent and the last instruction of the Mother Superior is that they must not get even a drop of paint on their habits.
After conferring about this for a while, the two nuns decide to lock the door of the room, strip off their habits, and paint naked.
In the middle of the project, there comes a knock at the door. “Who is it?” calls one of the nuns.
“Blind man,” replies a voice from the other side of the door.
The two nuns look at each other and shrug, both deciding that no harm can come from letting a blind man into the room, they open the door.
“Nice boobs,” says the man, “Where do you want the blinds?”