I received this in my E-mail this morning from my BNC Mortgage Account Executive. I thought I would share this with you all, it looks to me like they are going to be around in this tougher market place.
THIS IS ONE EMAIL YOU SHOULD READ.
Unless you have been working in the LOAN business under a rock the last
year you have noticed a considerable change in the "SUBPRIME" lending
world. This change is continuing and reaching an all time peak. THE DAYS
of 100% financing in the subprime world seem to be coming to an end or
drastically reduced and require GREATER scrutiny when qualifying
borrowers. The industry as a whole is tightening guidelines and raising rates
to reflect the changing market conditions. These changes will not be
easy for all of us to quickly absorb, and will require that we all
continue to remind ourselves we are committed to the mortgage business and
that BNC will be here to fund your loans during these challenging times,
and for years to come.
News: Federal bank regulators signaled a tightening of lending
standards on subprime home mortgages.
"The regulators, including the Federal Reserve and four other agencies,
said lenders should assess whether potential borrowers can cope with
once the higher rate takes effect. They also cautioned lenders against
skimping on verification of borrowers' income, and told them to clearly
spell out risks
to consumers. Lenders and other interested parties have 60 days to
comment before the regulators produce a final version of the guidance."
The secondary market in the non-prime sector took a turn for the worse
this week, and as such we have seen more of our competitors close their
doors, delay releasing their earnings, or make announcements that they
have entered into agreements to be sold to entities with a larger
capital base that can finance their mortgage platforms. In addition, many of
the remaining companies in the sector have made significant changes to
their underwriting guidelines, eliminated entire programs or
significantly raised their rates. All of these actions are a result of the
following market developments:
* The secondary market for whole loan sales has collapsed and there is
a limited market for whole loans. Very few mortgage companies are
showing pools and the bids that are offered are so low very few pools (if
any) are trading, resulting in a liquidity crunch.
* Alternatively, mortgage lenders must either portfolio these loans or
securitize their production, both of which require substantial capital.
* Spreads have significantly widened due to recent poor performance
trends and poor loss rates on certain products, such as HLTV, 80-20â€TMs
and 2nd trust deeds.
All of these developments require mortgage lenders to have more capital
when they securitize their loans. This causes loan buyers to push whole
loan prices to a very low level, and thus many lenders will need to
make significant changes to guidelines and rates.
WHAT DOES ALL THIS MEAN?
* SOME FIXED RATES WILL BE AS ATTRACTIVE AS TRADITIONAL ARM'S.
* BE prepared for considerably higher rates on loan with LTV's greater
* Prepare your clients ahead of time with rates that will not be CLOSE
to PRIME rates.
* Loan Structuring will be EVEN MORE valuable NOW....(this is where
AE's come in)
* GETTING YOUR BORROWER'S LOAN FUNDED IS GOING TO BE MORE VALUABLE THEN
FINDING THE LOWEST RATE AND NOT FUNDING THE LOAN AND HAVING TO GO BACK
TO YOUR CLIENT LATER AND SELLING A HIGHER RATE.
Why is BNC able to stay in business?
BNC Mortgage is owned by Lehman Brothers founded in 1850,
http://www.lehman.com . Lehman - the Company operates in three business
segments, Investment Banking, Capital Markets and Investment
Management. The Company is engaged primarily in providing financial services.
Other businesses in which the Company is engaged represent less than 10
percent of each of consolidated assets, revenues and pre-tax income. The
Company's world headquarters is a 1,000,000 square-foot owned office
tower at New York City. It leases approximately 1,500,000 square feet of
office space in the New York metropolitan area. As of November 30,
2005, the Company employed approximately 22,900 persons.
BNC Mortgage has a competitive advantage of being part of a Firm that
is committed to the mortgage business, we will still have to make
prudent steps to adjust to these new market conditions. If you have loans
with other companies that may be closing or has you concerned don't
hesitate to contact me.