Do Homebuyers Need Mortgage Brokers Or Are Bankers Sufficient? More On Foreclosure Crisis.

Mortgage Banker vs. Broker Debate After BofA Exits Broker Biz
Does one business channel take valuable resources away from other channels of origination? You bet it does – just ask Bank of America, who exited wholesale yesterday. And by “resources” I mean much more than the head of correspondent complaining about the head of wholesale not replacing the spent toner cartridge in the copier. About 1,000 employees will be affected, with some jobs lost but many offered other jobs (correspondent, warehouse, retail, etc.). It seems that in 2009 BofA captured 22% of the retail mortgage market, compared with 8% of the wholesale channel which came from Countrywide. Note that BofA will continue to buy broker loans (TPO) from correspondents – remember economies of scale, and who keeps the reps and warrants.

Mortgage News Daily wrote, “BofA still buys loans through the correspondent conduit, as underwriting delegation is important. The wholesale lending market is competitive with or without BofA in it. Were they offering any niche underwriting agency products (or exceptions/variances)? Nope. Is anyone offering credit exceptions? Nope.”

I was in Los Angeles giving a speech to mortgage originators when the news came out yesterday, and most of them greeted it with a shrug – “BofA is just not that much of a force in wholesale”. The BofA news was quickly followed by a release by the Wall Street Journal about whether or not home buyers even need brokers.

This leaves Wells as the only major bank still offering this channel. Often, like we have seen in the MI arena, no one wants to be the last one offering something. But Wells Fargo’s wholesale group quickly followed the news with a bulletin. “In a rapidly changing regulatory and business environment, we want to let you know that we remain steadfastly committed to you, your borrowers and the Wholesale business. For more than 15 consecutive years, we’ve worked with brokers, and we remain committed to this origination channel. We believe that the broker community plays an important role in the lending industry. You bring competition to the marketplace and offer choices to borrowers.”

More Notes On Foreclosure Crisis
Consumer crusader Gretchen Morgenson wrote a good article on the foreclosure mess.

Are lawyers and “defaulters” really the ones who will most benefit from the foreclosure & robo-signer issue? Probably – there are huge legal proceedings in the offing, and anyone who is not paying their mortgage can stay in their houses that much longer. As someone wrote, “The one true loser, is the law-abiding, conscientious, tax and mortgage paying middle class American, who is now preparing for TARP 2 as the banks will all almost definitely need to run to the bailout through because of this catastrophe.”

Yesterday’s comment about a plan to help stabilize the real estate markets (by allowing certain qualified borrowers who lost their homes to foreclosure in the beginning of the crisis to get back into the market sooner by reducing the time they have to wait to get an agency loan after foreclosure. I would add they should be well qualified buyers with good reserves, jobs, credit histories -other than the foreclosure, etc.”) received some other views. “This is the most ridiculous suggestion I have heard yet (on how to solve the housing crisis and stimulate the economy). I speak with borrowers daily who want my advice about if they should walk from a property. These are mostly folks with great credit and no financial hardship. The threat of not being able to purchase another home for years to come is clearly what is stopping this segment of the population from causing our foreclosure numbers to go even higher. I wonder if the person who made this suggestion is one of those loan agents who made a living on pay option arms and subprime loans a few years back?”

Another wrote, “We need a national law that if the borrower passes 180 days of delinquency without a concerted effort to repay, they lose all rights to the property. None of this ‘different procedures in every state’.”

Market Roundup: ADP shows 39k Jobs Lost, Weaker Than Expected
Monday was a light news day, but mortgages are doing pretty well as supply can’t quite seem to meet the demand. Yesterday the supply picked up a little, hitting $2.5 billion, so originator activity has picked up this. Mortgage security prices finished the day roughly unchanged – a good performance given the headline-grabbing stock market rally. The 10-yr closed at 2.48%, and one might expect to see these levels (or better) for awhile since most believe that the economy is recovering somewhat, inflationary pressures are low, the unemployment rate is high, housing is slow – so what would make rates go higher?

The only news out this morning was the MBAA index, showing a decline of .2%, and some ADP private payroll numbers which showed a decline of 39k – weaker than expected. The weak ADP number has pushed stocks down slightly (and why not, given yesterday’s rally), the yield on the 10-yr down to 2.41%, and mortgage prices better by roughly .250.