THE BASIS POINT

Operation Malicious Mortgage, Industry News Roundup

 

MORTGAGE INDUSTRY ROUNDUP
For any loan agents who admit, “I didn’t realize that verified employment wasn’t the same as verified income”, please contact an underwriter. I am waiting for someone to ask something like, “Can I get a stated income second behind my reverse mortgage, and use the income from my reverse mortgage for what I state?”)

  • The Justice Department is investigating 19 companies, including mortgage lenders, investment banks, hedge funds, credit-rating companies and accounting firms, for mortgage fraud. They also stated that roughly 400 individuals have been criminally charged for their roles in home-lending schemes, with 60 arrested last Wednesday alone. Real-estate developers, brokers, agents and appraisers were among those charged, along with lenders, lawyers and so-called straw buyers.
  • In Washington state, SHB 2770 went through yesterday. No more negative amortization or prepayment penalties will be allowed in the state of Washington.
  • Why did I put my entire 401(k) in Thornburg stock a few weeks ago? Last Thursday Thornburg Mortgage shares dropped 63% to 24 cents per share. Last week Thornburg said that it had lost $3.3 billion during the first quarter, and has had to face several billion in margin calls this year. Thornburg is one of those companies in the business that everyone is rooting for, and is truly a victim of the credit crunch rather than poor loans. Thornburg must still complete a tender offer to repurchase at least 90% of outstanding preferred stock as part of the deal to receive the new investment from a group led by Matlin Patterson.
  • Bloomberg reported that Triad will become the first mortgage insurer to stop selling new policies after the collapse of talks with Lightyear Capital LLC to form a new company with Triad employees. The insurer’s shares plunged 40%. The decision to halt sales was prompted in part by Freddie Mac’s suspension of the company as an approved insurer, Triad said. Triad, which traded above $60 a share in 2005 closed at $1.22 per share last week. Triad may now enter “runoff,” continuing to pay claims and book profits or losses from previously sold policies. The company would cease operation when the last of its existing policies expire. Freddie Mac will stop buying loans that have Triad insurance on July 15.
  • Reverse Mortgage lenders? Wells Fargo, Financial Freedom, Countrywide, World Alliance, and Liberty Reverse are the top 5. Interestingly, the Indymac Bank’s total mortgage loan production in May was $2 billion, down 13% from $2.3 billion in April. Financial Freedom, the banks reverse mortgage subsidiary had total production of $315 million in May, down 10% from April. Other interesting notes about Financial Freedom’s production: HECMs = 70% of their reverse mortgage production, “Cash Account” = 30% of their reverse mortgage production, and overall production is down 29.5% vs. May 2007. Industry experts believed that Financial Freedom would suffer tremendously due to the loss of their Jumbos, and also note that UBS pulled their entire Jumbo Reverse product on secondary and many companies are scrambling to seek Wall Street investors for product.
  • Who owns who? MetLife Bank, N.A., a unit of MetLife, Inc. announced that it has completed its acquisition of EverBank Reverse Mortgage LLC from its parent; EverBank Financial Corp. EverBank Reverse Mortgage will be a wholly-owned subsidiary of MetLife Bank. Currently, reverse mortgages will continue to be offered under both the MetLife Bank and EverBank Reverse Mortgage brands. MetLife Bank is a federally chartered bank.
  • Franklin American stated that any loan sold to them, regardless of loan type, product guideline or automated underwriting requirements, which has been originated by a third party entity must include an IRS Form 4506T executed by the borrower(s) on the day of closing.
  • US Bank wholesale sent out an important correction to their 3/1 & 5/1 IO ARM qualifications. Namely they have a 45% Max DTI, a qualifying rate: fully indexed rate 1 year LIBOR + margin, or the start rate, which ever is higher, and…a qualifying payment: 3/1 uses 27 year amortization & the 5/1 uses a 25 year amortization for the qualifying payment.

MARKET ROUNDUP
Economic news? None today, although mortgage prices are worse by .125 in prices and the 10-yr is up to 4.15%. We see the April S&P/CaseSchiller home price index tomorrow, along with June US Consumer Confidence and the beginning of the 2-day FOMC meeting. Wednesday brings May New Home Sales, along with the FOMC meeting’s outcome (expected to leave overnight rates unchanged). Thursday we get unemployment data and final Q1 GDP, and then on Friday we have May’s Personal Income and Consumption. The markets also have to absorb $50 billion in Treasury supply this week, and if the auctions last month were any indication of demand, things could be “choppy”…

JOKE OF THE DAY
Some fascinating things on old tombstones:

Harry Edsel Smith of Albany, New York, born 1903–Died 1942.

“Looked up the elevator shaft to see if the car was on the way down. It was.”

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In a Thurmont, Maryland, cemetery:
“Here lies an Atheist, all dressed up and no place to go.”

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In a Ruidoso, New Mexico, cemetery:
“Here lies Johnny Yeast… Pardon me for not rising.”

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In a Uniontown, Pennsylvania, cemetery:
“Here lies the body of Jonathan Blake.
Stepped on the gas instead of the brake.”

 

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