Weekly Market Update from Mike Smalley of Waterstone Mortgage Crop.
Colonial Bank and Taylor Bean & Whitaker
This week brings news of FBI raids on Colonial Bank's downtown Orlando office and Taylor Bean's corporate headquarters in Ocala. Colonial Bank is the #1 source of warehouse credit lines for mortgage companies like TB&W, and TB&W was the #3 FHA lender in the country. Yesterday, TB&W announced they are shutting their doors and going out of business. Colonial Bank could follow within 45 days if they do not raise significant amounts of cash, something they are unlikely to do. If Colonial Bank fails and they are not able to provide credit to mortgage companies, you can expect many more mortgage companies to fail because they will lack the funding to continue operations. Most mortgage companies borrow money from banks like Colonial in order to have the cash available to fund loans. Without access to this cash, they have no money to lend.
Here are some links to read more about these stories:
Trouble for Colonial Bank
FBI Raids Taylor Bean
HUD Suspends Taylor Bean from FHA lending
Taylor Bean Closes
These two major news stories are exactly why I partnered with Waterstone in April 2008. Mortgage brokers are being run out of business because of competitive disadvantages and legislation. Imagine if your client's loan was with a broker who was brokering the loan to Taylor Bean. When Taylor Bean went under your client's loan did too. I have heard of one mortgage brokerage that had 17 loans with Taylor Bean when they closed their doors yesterday. If Taylor Bean can fail, many others can too, so anywhere a broker is sending their loans could close with no advance notice.
Small correspondent lenders are in a very unstable position too, because they depend on credit lines from banks like Colonial to fund their loans. If their bank credit line goes away, their ability to fund loans goes away.
Waterstone is in a unique position of having a bank as a parent company (Waterstone Bank, SSB - NASDAQ:WSBF), so funding loans is not dependent on borrowing money from someone else, and underwriting is done in house so we are not relying on an outside bank that can close their doors with no advance warning. Stability is critical in these uncertain times and I have found that at Waterstone.
Waterstone Mortgage is now an FHA Full Eagle lender, which allows us to underwrite FHA loans in house. No more waiting weeks for a loan approval. In fact, we closed a client last Friday, 7 business days after taking his application!
We are hearing many complaints from Realtors about the Home Value Code of Conduct. This terrible regulation is making it very difficult to obtain accurate appraisals for conventional loans. While this regulation does not impact FHA financing, some banks are choosing to use 3rd party appraisal management companies for FHA appraisals. This Monday, Waterstone implemented our internal appraisal management system. While we still cannot choose a specific appraiser, nor can we communicate with them directly, we were given the ability to choose which appraisers are on our approved list. We chose the five best appraisers we know and our conventional appraisals will rotate amongst them. This month we have two of our appraisers speaking at our seminar to answer your appraisal and HVCC questions. Knowing our appraisals are being done by competent appraisers is a significant boost to our team. See below for more information regarding the upcoming seminar.
Mortgage bonds continue to trade up and down, rates are within a range of 5.125% - 5.625% depending upon the day. Keep an eye on the stock market, if the Dow and S&P 500 continue on their current hot streak, it will cause an increase in mortgage rates. Also, continued goernment spending has the potential to create significant inflation, which will lead mortgage rates higher.
Our next seminar
As mentioned above, our next seminar on August 20th will feature a lot of great information about the HVCC. We have invited Tim Burns of Burns Appraisal, Inc. and Billy Neal of Market Value Appraisals, Inc. to be our guest speakers to answer your questions. We will also be discussing the new mortgage compliance guidelines that are effective August 1st. These have the potential to delay many of your closings so make sure you are up to speed on the changes. To RSVP, e-mail Melanie Pischke at firstname.lastname@example.org
Have a great week!