TEAM EMPOWERMENT MORTGAGE CHATTER: August 6, 2009: With TBW’s demise, who is left? Stocks of Citi, AIG, Fannie, Freddie shoot higher; GMAC’s earnings; TIL tips

“Every action of our lives touches on some chord that will vibrate in eternity.”

~Sean O’Casey

I guess this is how some borrowers feel when they lock a loan in a volatile market:

Or maybe that is how any agent who has a lock with TBW feels. Today is the anniversary of the bombing of Hiroshima, and the date that some are finding out yesterday’s news that a large lender is gone. “TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATETLY”. Taylor, Bean & Whitaker Mortgage Corp. (“TBW”) received notification from the U.S Department of Housing and Urban Development, Freddie Mac and Ginnie Mae (the “Agencies”) that it was being terminated and/or suspended as an approved seller and/or servicer for each of those respective federal agencies. “Regrettably, TBW will not be able to close or fund any mortgage loans currently pending in its pipeline. TBW is cooperating with each of the Agencies with respect to its servicing operations and expects to continue to service mortgage loans as it restructures its business in the wake of these events.” Supposedly TBW is returning all original notes to the appropriate warehouse lenders and returning any closed files delivered via hard copy to the lenders/banks.

With the unraveling of Taylor Bean, who are the better-known wholesale lenders out there receiving business from brokers? Wells Fargo is still in the game, as is ING, Flagstar, and Fifth Third. Citi is buying broker loans from their larger clients. United Mortgage, Security Atlantic, Provident, Platinum Mortgage, Luther Burbank, Stearns Lending, First Cal, Union Bank of CA, Assurity, and Bank of Ann Arbor are some of the other players that are still left standing.

Hey, is too late to buy stock in AIG, CIT, Fannie, or Freddie because they’re cheap? Their stocks all shot up yesterday: AIG’s +63% (a new CEO takes the helm Monday), CIT up 38%, Freddie was +31%, and Fannie was +30%. AIG, who owns Radian Group, announced that Radian made a $231.9 million profit. Why did analysts guess that Fannie Mae and Freddie Mac climbed? On a rumor that James Lockhart, the director of the Federal Housing Finance Agency that oversees them, will resign soon. Not to be outdone, Citigroup set a record yesterday of 347 million shares trading in the stock market. Citi’s stock was up over 10% yesterday.

GMAC Financial Service’s mortgage division, which includes Residential Capital, saw its pre-tax loss widen to $2 billion in the second quarter. “The distressed mortgage market led to increased credit costs”. GMAC’s total after-tax loss for the quarter totaled $3.9 billion, down from a loss of $2.5 billion in the year-ago period. Company officials attributed the widening loss to a series of charges: the sale of its international mortgage assets, a goodwill impairment related to its insurance division, etc.

Short sales (where the house is sold for less than the outstanding debt) continue to increase. From the buyers point-of-view, although the time-frame involved is variable, lenders appear to be improving their service and turnaround time in dealing with approving short sales. From the seller’s point of view, a foreclosure impacts their credit rating for much longer than a short sale. At this point, the seller is probably going to be liable for any taxes, taxed at ordinary income levels, on the amount of debt that is forgiven by the original lender.

How are brokers dealing with the new TIL issues? It is another hurdle, and they will survive, but here is one question that has come up: “If MDIA applies to creditors collecting money only after making proper disclosures and a waiting period of 3 days, would a brokers’ collection of money be an issue? Although a broker may not be a creditor, brokers may not collect any fees from the borrower, aside from a reasonable fee to receive a credit report, until the borrower has received the initial TIL disclosures. And does this impact the HVCC rules, where brokers must place any appraisal orders through the lender’s approved HVCC compliant process and enter a credit card & pay upfront? The borrower may not be charged a fee, including an appraisal fee, aside from a reasonable fee to receive a credit report, until the borrower has received the initial TIL disclosures. To expedite the process of ordering the appraisal, if permitted by the HVCC, the broker should be able to give the borrower the option of providing his or her credit card information to the broker (for delivery to the creditor) and tell them that the borrower’s credit card will be not be charged until the borrower has received the early TIL disclosures.

Back to something simple, like interest rates. Yesterday we found out that the Non-Manufacturing ISM survey surprisingly declined, which helped rates, and in addition the Fed continues to buy about $4 billion a day, $20 billion a week, of mortgage originations which is expected to continue into the future. How can that hurt? Of course, on some days the markets think that the recession is over with, and that tends to push stocks and rates higher – until it doesn’t, and then both head the other way. And on other days the market focuses on the supply: the Treasury announced they will auction $75 billion next week, $37 billion of 3-yr notes, $23 billion in 10-yr notes, and $15 billion of 30-yrs. All were about as expected, but that doesn’t mean the market won’t go through its usual gyrations next week during the sales.

This morning the news has pretty much consisted of Jobless Claims. Workers filing claims dropped more sharply than expected last week. Initial Claims were down 38,000 to 550k, lower than the 550k expected. The number of people collecting long-term unemployment benefits, however, rose by 69,000 to 6.31 million in the week ended July 25th. (Continuing claims had dropped for three straight weeks.) And the four-week moving average for new claims fell 4,750 to 555,250 in the week ended August 1, which is the 6th consecutive week of dropping. After the news the yield on the 10-yr is up to 3.77% and mortgages are worse by about .125.

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