After the most painful year of my 24 year mortgage banking career, I can now report that I am officially an employee of the Federal Government. As everyone knows, last Friday the Office of Thrif Supervision put Indymac Bank into receivership and tranfered most of the assets to a new company, Indymac Federal Bank, operating under a conservatorship directed by the FDIC. Monday came around and all of a sudden we were closing loans! over $10 million closed on Monday over $14 million closed on Tuesday. The FDIC was able to unwind the mess that Indymac had created in the funding pipeline in one weekend. I never had any intention of working for the Feds and my tenure with them will be short as the retail lending group has been sold to Prospect Mortgage. But for my customers and my sanity, this is a godsend. I only wish this action would have taken place sooner. I feel terrible about those depositors that have over the insured limit with Indymac...they will likely loose that money. But for the thousands of loan customers and the hundreds of employees of the residential lending group (indy retail), this is the best thing that could happen. The only thing worse, in my opinion, than the bank failing would be a slow death with day upon day of unfullfilled promises and week upon week of disfunctional operation. As you might expect in times like this, my phone has not stopped ringing with inquires from customers, referal partners, recruiters, and friends. Often I hear comments similiar to this, "That senator from New York is to blame for this whole mess. His letter leaking the information about Indymac brought the bank down". When I hear these comments I have to respectully disagree. In fact I salute Senator Schumer for being honest in a time when honesty in government is so rare. The administration and the regulators have been sweeping our problems under the rug for way too long. If the Senator's letter allowed some uninsured deposits to be withdrawn before they were lost than I say not only was it reasonable to make the information pubulic, it was his responsibility. I want to publically thank the Senator for accelarating what was going to be the inevitable death of Indymac. Thank you Senator Schumer for helping the customers and employees of Indymac Bank avoid a painful and protracted slow death. Art Marine Sales Manager Retail Lending Group West Indymac Bank 10220 SW Greenburg Road, Suite 245 Portland, OR 97223 (503)764-4005 (866)451-4365 fax (503)853-3959 cell Arthur.Marine@imb.com www.amarine.imbhomelending.com

This weekend I took a roadtrip from Portland to Northern Idaho as a chaparone a choral competition for my daughters school.  As I drove for hour upon hour through the Columbia Gorge and Palouse hills of Washington, it occurred to me that there were probabally millions of acres of land that had very little purpose other than as a sanctuary to the wildlife and eco-system the mother nature put there. 

I have been a real estate lender for nearly 24 years and not one bank or mortgage company I have ever worked for would be willing to lend on about 95% of the land I passed on my trip.  That begs the question, where does rural America go for a home loan?  Is this an income opportunity I am missing or is the need so small that it isn't worth exploring?

I don't know the answer yet, but stay tuned because I intend to find out.  Your professional input is definately welcome!

 

www.amarine.imbhomelending.com

arthur.marine@imb.com

 

 

 

 

 

  

  

I just got a call from a Loan Officer in another state asking for help.  He was looking for the answer to the age old question; How do I become a top producing Mortgage Loan Originator.  I don't think he liked the answer I gave because it wasn't a recipe but a philosophy.  Here are the five steps I believe it takes any sales person to be successful.  It doesn't matter how good or bad the market is, it is your attitude that determines your results:

1. Network, network, and network some more.  Join every committee, every club, every leads group and every organization you can find.  Once you have joined a group, be active.  Volunteer for committee assignments and take a high profile.  The more people you know and the better you know them, the more success you will have in network marketing.  I even went so far as to become the first male president in the history of our elementary school PTA.
2. Always provide value in your service or with your product.  If your service is overpriced and there is no value, you won't get continued referals.  Customers must leave their experience with you under the opinion they received value.  Perception is more important than reality...if they believe they got value, they did.
3. Always ask past clients for a referal!  In the mortgage industry, ther are multiple parties involved in every transaction.  Every buy has and agent, every transaction has a listing agent, every borrower has professional advisors.  Reach out and offer the value of your service to everyone involved.  You will never get their business if you don't ask.
4. Spend time each day marketing.  Set asisde a specific time each day and dedicate it to outgoing sales calls.  This is the time to call your leads or in the absence of leads make cold calls.  If you spend 1 hour every day doing proactive marketing, you will have more business than you can handle within a year.  Don't cheat yourself or your prospective clients; share your time with them every day.
5. Remember the "Law of Attraction".  Be thankful for what you have and cognicent of what you want.  Put your desires on paper every day and you will attaract what you seek.  If you leave your random thoughts loose, you will attract the things that do not help you attain your goals.  Write it down...you won't be sorry!

This is the question circling the mortgage lending community lately.  No question they are in serious trouble.  With the secondary market for mortgage loans in total dysfunction, Countrywide finds itself in a dilemma.  If they stop making loans, they could slow the rate of loss from defaults but where do they generate cash flow for operations.  If They pick up production, they can feed the giant corporate structure they have built and hang on a while longer, but the losses are mounting fast and there is no sign that a secondary market for mortgage loans is going to reemerge soon enough for CW to sell their assets and maintain operations.  In the long run, there is no safe answer for this behemoth lender.

Unfortunately, the problem is deeper than just CW retail and wholesale lending.  There are plenty of competitors to fill the void if those channels disappear.  These are just the tip of the iceberg; the real danger lies with elimination of the giant Countrywide Financial correspondent division.  There are over 2100 banks, credit unions, and mortgage bankers that rely on the Countrywide system to fund their mortgage operations.  These are institutions that fund loans using their own money or a warehouse line of credit then sell the loan post closing to Countrywide.  With an already dysfunctional secondary market, many of these lenders will find themselves unable to sell loans and consequently out of the mortgage business.  Last year, CW funded $178,000,000,000 through their correspondent channel, imagine if that much money was pulled from the market! The famed implode-o-meter website (www.ml-implode.com) would suddenly find a flurry of activity.  The implode-o-meter currently stands at 212 imploded lenders; if Countrywide goes down, that number could easily balloon by a factor of 10.

As a retail branch manager for Indymac Bank, I do not like Countrywide.  I don't like them because they are a significant competitor and I like to win every time.  I am also watching their financial troubles the same way I would a horrific train wreck...I don't need or want to watch, but I cannot help myself.  That being said, I really hope that a white knight comes to the rescue for them.  Our industry has felt enough pain and the disruption caused by the financial failure of Countrywide would be catastrophic for the real estate industry!

 

A good friend of mine moved to Iowa about 9 months ago.  He still owns a mortgage company in Oregon so we speak often.  But for some reason which is still a mystery to me, he picked up his family and moved from the great pacific northwest to a small town in Iowa. 

Joe and I are polar opposites of the political spectrum, but I listened with great interest as he described in detail his first experience in an Iowa caucus.  He attended the caucus with the contractor that had been working on his house...this gentlemen had lived in Iowa his entire life and never attended a caucus.  His contractor buddy said that his favorite part was seeing which of the neighbors were republicans.  Knowing my friend, I am sure his motives were considerably more political.  Joe described the election of a secretary and a chairman, his chance to speak to the group, and the process of counting the vote.  He said that his 13 year old daughter had learned about the system in social studies class and the experience was exactly as she described it to him.  A great chance to meet friends and neighbors and steer the direction of the political process nationally. 

I have got to say that I envy the people of Iowa a little bit.  They have the chance to set the direction for every presidential election.  With that honor comes the opportunity to get up close and personal with the candidates.  A much better look than the rest of us get.  I have heard that the campaigns spent nearly $500 per voter in Iowa...an incredible number.  It clearly demonstrates the strategic importance of this small little Midwestern state in guiding our political process.

With great power comes great responsibility.  From my perspective, Iowans have handled their responsibility well this election season.

 

 

 

I have a simple technique that will help anyone attract those things they desire and avoid attraction of those they don't.  Simply write down 10 things you are grateful for and 10 things you want to attract each day.  Let the "Law of Attraction" do the rest.  Sounds simple and it is but the positive visulization and reiforcement will do wonders.  Give it a try...you won't be sorry!

The following are ten keys that we in the indymac managment team are going to do to survive the market of 2008: 

1. Preserve Capital
2. Maintain maximum liquidity
3. If not profitable cut expenses down to where you break even
4. be prepared to fire friends
5. Credit quality matters more than ever
6. Stop paying outrageous prices
7. Commit to be3tter financial reporting: if you can't measure it, you can't manage it
8. Only hire people from companies that have been successful
9. Have a written plan.  Figue out what you need to be profitable, and stick to the plan
10. Focus only on the things you can control

 These are really basic princeples but in the growth of the last few years, many have lost their way.

 

Almost daily I get updates from our corporate office modifying programs, reducing documentation options, lowering LTV's or DTI's, raising FICO scores or eliminating programs all together.  The pool of available qualified borrowers has shrunk dramatically this year.  It is a real chicken or egg question...have lenders tightened because the RE market is declining or is the RE market declining because lenders have their lending standards? 

I saw this market shift coming about a year ago.  An analyst told me at that time that 80% of the borrowers who purchased homes in California in 06 would not qualify in January of 07.  At this point, home prices were still on the incline and our lending business seemed strong.  But what a revelation!  No market can withstand the loss of 80% of its buyers...it doesn't matter if you are selling homes or widgets; that much loss of demand is going to cause a drop in prices! 

While The California market is unique in a lot of ways, the same problem has bled to many other markets.  Florida, Nevada, Arizona, Texas, Ohio, and Michigan are a few good examples where loss of demand is absolutely destroying the RE market.  I don't expect these markets to recover fully in 08 or even 09!  What I do expect is a major consolidation of Real Estate lenders and Agents leaving a stronger more professional group for consumers to choose in the coming years.  Just as nature purges crops and animal herds with disease and wheather the market place is going to purge our industry of the incompetent and the weak...for better or for worse, America will be left with fewer but better options for financing or finding their next home.

 

The actual speech is long, but worth the read....as it not only addresses the current mortgage and financial market crisis ,but provides a good summary of the history of USA mortgage finance.  Here is a summary:

Bernanke clearly and unambiguously acknowledges that there has been a financial panic that has gone way beyond the underlying (deteriorating mortgage credit) fundamentals when he said, "Although this episode appears to have been triggered largely by heightened concerns about subprime mortgages, global financial losses have far exceeded even the most pessimistic projections of credit losses in those loans."

 

I thought the "history of mortgage finance" section is a very worthwhile read. It clearly shows that mortgage finance...albeit with a lot of "fits, failures, and starts" has become significantly better for consumers and the economy over time.

 

In particular the section entitled: "The Emergence of Capital Markets as a Source of Housing Finance"....describes the circumstances that allowed entities like Indymac Bank to become successful. Here are a few important excerpts:

 

"The manifest problems associated with relying on short-term deposits to fund long-term mortgage lending set in train major changes in financial markets and financial instruments, which collectively served to link mortgage lending more closely with the broader capital markets. The shift from reliance on specialized portfolio lenders financed by deposits to a greater use of capital markets represented the second great sea change in mortgage finance, equaled in importance only by the events of the New Deal."

 

"Critically, the savings and loan crisis of the late 1980s ended the dominance of deposit-taking portfolio lenders in the mortgage market. By the 1990s, increased reliance on securitization led to a greater separation between mortgage lending and mortgage investing even as the mortgage and capital markets became more closely integrated. About 56 percent of the home mortgage market is now securitized, compared with only 10% in 1980 and less than 1% in 1970."

 

"In some ways, the new mortgage market came to look more like a textbook financial market, with fewer institutional "frictions" to impede trading and pricing of event-contingent securities. Securitization and the development of deep and liquid derivatives markets eased the spreading and trading of risk. New types of mortgage products were created. Recent developments notwithstanding, mortgages became more liquid instruments, for both lenders and borrowers."

 

"The traditional model of mortgage markets, based on portfolio lending, solved these problems in a straightforward way: Because banks and thrifts kept the loans they made on their own books, they had a strong incentive to underwrite carefully and to invest in gathering information about borrowers and communities. In contrast, when most loans are securitized and originators have little financial or reputational capital at risk, the danger exists that originators of loans will be less diligent."

 

"In securitization markets, therefore, monitoring the originators and ensuring that they have incentives to make good loans is critical. I have argued elsewhere that, in some cases, the failure of investors to provide adequate oversight of originators and to ensure that originators' incentives were properly aligned was a major cause of the problems that we see today in the subprime mortgage market."

 

"We will not return to the days in which all mortgage lending was portfolio lending, but clearly the originate-to-distribute model will be modified---is already being modified---to provide stronger protection for investors and better incentives for originators to underwrite prudently."

 

NOTE: The above comments from the Fed Chairman align perfectly to my quote in our last IR presentation that "investors are the control point, not the lenders in a securitization marketplace" and to my memo to the senior management team on August 21st,  entitled "Breaking away from Wall Street"....where I describe going directly to investors with underwriting guidelines and "aligning interests better"...by guaranteeing we will retain the non-investment grade and residual securities for a year or more.

 

Lastly, two other comments I though deserve highlighting:

 

There has been a lot of negativity of late associated with home equity lending...here is what the Fed Chairman said about home equity lending:

 

"Economic theory suggests that the greater liquidity of home equity should allow households to better smooth consumption over time. This smoothing in turn should reduce dependence of their spending on current income, which, by limiting the power of conventional multiplier effects, should tend to increase macroeconomic stability..."

 

So, home equity lending not only allows someone to send their daughter to college...but also helps stabilize the economy.

 

I am sure that as a result of well over a decade of strong and stable housing....many believed that housing had become much less cyclical....clearly it has not. I will end with a quote from the Fed Chairman on this topic:

 

"That said, the current episode demonstrates that pronounced housing cycles are not a thing of the past."

April 10, 2007

I am asked almost daily the future of Real Estate values in our ares.  I often shine up the crystal ball to help find the answer.  Seldom is it there!

I do know this much...the two closest major metropolitan markets to ours, Seattle and San Francisco, are significantly more expensive that ours.  Are salaries in Portland that much less? No...  Are the qualities of life in Portland that much lower? No...  Are the schools worse? No...  Are the recreation opportunities less? No

This leads me to two possibilities:

1. Prices continue to climb in Portland
2. Prices delcline in San Francisco, Sacramento, Seattle, and Vancouver BC

I know that our market is a little different, but I would contend as long as our neighbors to the North and South have property values higher than ours, Portland will be a poplar destination for imigration from California and Washington.  My crystal ball says "Invest in Portland"!