THIS JUST IN: April 1 is getting closer and mortgage brokers - and their trade reps -- are getting desperate, urging the Federal Reserve Board to delay the effective date of its LO compensation rule. The common compliant of the National Association of Mortgage Brokers and Mortgage Bankers Association is this: the Fed needs to provide written guidance on key implementation issues. But so far, Fed attorneys have refused (and I do mean refuse) to provide any written guidance. (Reporting by NMN's Brian Collins.) Here comes that lawsuit...
SUBPRIME RISING: I continue to hear more rumblings that some (shall we say entrepreneurs) are looking at the "hard money" space. But I'm not talking about subprime lending of the past decade where funders made loans to anyone with a pulse - I'm talking about mortgage bankers making low LTV loans to good credit worthy borrowers (self employed, that is) but who have plenty of equity. Why would borrowers pay upwards of 10% for credit? The answer is obvious: loan standards are so tight they have no choice, especially if they want to tap equity. The key for some executives now sticking their toe in this pond is creating a business where banking regulators have little or no say. The other key: keeping Wall Street out. If the Street enters (doubtful that they will though) it will only bring in, you guessed it, the regulators...
THE BIG PICTURE: We might as well stop for a moment and smell the mortgage roses. That's right, the mortgages roses. Residential lenders turned in a strong fourth quarter and profit margins were still sweet. Servicers, on the other hand, are trying to figure out whether all this talk of changing the servicing fee structure will alter the face of the business or whether in the end, it's just a big ho-hum. And to make things more interesting we have IBM and its Wilshire Mortgage unit gobbling up servicing rights from JPMorgan Chase. IBM is either going to come out looking like a genius or someone that placed a big bet on MSRs and lost. One investment banker suggested to us that whatever IBM paid for the JPM MSRs, it overpaid. (The deal went down last year.) Of course, we don't know any details because IBM continues to be tight lipped about the relationship. Maybe I can get one of our newly elected GOP officials to open the door with a subcommittee or committee hearing. Let me get out my Rolodex...
As for this being "good times" for mortgage bankers, readers will note the irony: it comes on the heels of the biggest housing downturn in history, including the Great Depression...
But let's put this in perspective: good times never last for too long in any industry, at least not since the 1960s. Business in America (and elsewhere) works like this: find out a good idea and everyone copies what you're doing and screws up your profit margins. So, maybe Big Blue has a strategy with its MSR play...
Meanwhile, some of you are probably wondering how much it actually costs a mortgage firm to service loans. The answer to that and other questions is in the Monday edition of National Mortgage News. Don't subscribe? Call: (800)221-1809. By subscribing you get our premium website content as well...
A ranking of the nation's top 100 servicers can be found in the Quarterly Data Report, an Excel spreadsheet and database product offered by NMN. The QDR also ranks certain firms by their cost to service. Deartra can also tell you about our MortgageStats.com website. MortgageStats features monthly commentary from me on data points affecting the industry.
DEBUNKING THE URBAN LEGEND ON 'OBAMACARE' AND RE TAXES: Some clown (or clowns) in the industry have been passing around an email that says under the new health care bill (a.k.a 'Obamacare') all real estate transactions will be subject to a 3.8% sales tax starting in 2013. One email sent to me notes: "If you sell your $400,000 home, there will be a $15,200 tax." I talked to MBA and others about this and apparently it's a load of crap. I consulted with statistician and mortgage data guru Andras Malatinszky and he had this to say about this new "scare" facing Americans: "If your net profit on the sale of your home is less than $500k, you pay no tax on your profit. If your gain is more than $500k, you currently pay capital gains tax at 15% (used to be 20% before the Bush tax cuts). Come 2013, you'll pay an additional 3.8%. Note that the combined tax rate of 18.9% is still less than the 20% in effect prior to the Bush tax cuts." There you have it...
MORTGAGE PEOPLE: Former SWS Group warehouse official David Frase has a new job: consulting. Also, former MBS guru Jess Lederman is now heading correspondent lending at MetLife Bank.
A MUST ATTEND SERVICING SHOW: The future of the servicing business is up for grabs as the GSEs (or is it their regulator?) mull over what to do with servicing fees. Will banks dominate the sector or will it deconsolidate and move to nonbanks like IBM? To get the answer to this and other questions you may want to attend SourceMedia's fifth annual servicing show in Dallas April 5 - 7. Top servicing and subservicing executives will be there.
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