THE BASIS POINT

Former Dallas Cowboy In Fraud Scheme, Nobody Wants Taylor Bean Loans After Failure

I am not smart enough to be involved in a mortgage fraud scheme. And I guess the smartest schemers are not caught, unlike the latest “well-known” figure to be apprehended. Eugene Lockhart, who was a Dallas Cowboys football player, and 8 other defendants are accused of running a scheme in which they located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence.

I thought that leprosy was a thing of the past, relegated to movies like “Ben-Hur” or “Papillon” or the island of Molokai. But any loan that was related to Taylor Bean & Whitaker seems to have it, and BofA has 180,000 of them. US Bank Home Mortgage is the latest investor to say, “Mortgage loans that have been closed and were to be delivered to TBW are not eligible for purchase by U.S. Bank Home Mortgage. Conventional loans where the file had been registered, locked, underwritten or contained any TBW information must be underwritten or re underwritten by USBHM to determine eligibility and must be accompanied by an Indemnification Agreement executed by a Senior Officer of your Company. Delegated Underwriting Authority will not be allowed on these loans. A new loan application supported by all new documentation including a new appraisal and a new LP or DU will be required for underwriting. For Government loans, that have not been closed or case number has not been assigned to TBW, where TBW was involved and the Lender is Direct Endorsed and or VA LAPP approved are eligible only if the loan meets USBHM product guidelines and must be accompanied by an Indemnification Agreement executed by a Senior Officer of your Company.”

Fed MBS Update
The Fed was in last week buying another $25 billion or so of mortgage-backed securities last week, bringing their total to almost $820 billion. For those playing along at home, this leaves them about $400 billion left until the $1.25 trillion mark which was their initial target. It is generally believed at this point that the Fed will either gradually scale back purchases as the secondary market improves (i.e., investors step in) or continue buying past the $1.25 trillion level.

Jobs Report
In general economic news ahead of this 3-day weekend here in the US, overnight it was relatively quiet in rate-land. This morning, however, the jobs data (which typically comes out on the first Friday of every month) was stronger than expected. Nonfarm Payroll was “only” down 216,000 jobs in August, although the headline Unemployment Rate hit a 26-year high at 9.7%. June and July were revised to show 49,000 more jobs lost. An interesting side note is that the labor force increased by 73,000 in August, indicating the return of some jobless workers who had given up looking for work accounting for part of the rise in the unemployment rate. The August numbers, although bad, indicated that perhaps the pace of layoffs was easing from early this year. After the news we find 30-yr mortgage security prices worse by about .125 and the yield on the 10-yr at 3.35%. There is no early close for the bond market, but really, who wants to be at work on a Friday afternoon ahead of a holiday?

Daily Humor
Jake was dying. His wife sat at the bedside.

He looked up and said weakly, “I have something I must confess.”

“There’s no need to,” his wife sweetly replied.

“No,” he insisted, “I want to die in peace. I slept with your sister, your best friend, her best friend, and your mother!”

“I know,” she replied. “Now just rest and let the poison work.”