Blowing the Lid Off the Mortgage Industry
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Well, I had a draft posted about National City dying this year. It wasn’t crisp or sharp, but it would have made me a prophet. A couple of hours ago, they announced that they would be shuttering their wholesale lending department. This is after they shuttered second mortgages.
And the beat goes on…
I’ve talked before about how 2011 might not even be the end. And with Bank Of America publicly predicting that increased awareness will lead to a further decline in prices, things should be interesting–especially the question: do we pray for ignorance?
I’ll start by saying that both Countrywide the brand, and Countrywide the business will close the year in existence. I’m not saying that BOA won’t buy them, but I’ll say that they’ll continue to exist. However, National City will be in grave danger, and it’s death will be imminent by the end of the year. I’d guess that US BANK is in some trouble too, because they seem to have an appetite for risk that nobody currently enjoys.
The Industry–as we know it–will survive, but Brokers will no longer have more product availability than banks–they will generally be restricted to Fannie/Freddie stuff and commercial stuff.
The most troubling thing that I can see going on right now is seeing the "used car" brokers "Get into the Game" with people like Interbay. Having main street businesses on the same lunatic 2/28 and 1/29 cycles that other folks are on is unsustainable, restrictive, and it will lead to Interbay holding a lot of commercial real estate, and another year of German cars for brokers. This will come to a head in 2012, and the heretofore unregulated commercial world will come under the radar of Mr. Frank, causing more new problems.
Now, as far as resolutions go: Fannie and Freddie must stop adding bad loans to the pile, and must have some sort of First time Home Buyer financial commitment that exceeds a security deposit and first months rent, or else the problem will get worse. With FHA still originating insane risks, it’s probably going to get bad anyway.
I’ll probably resume posting in a week or so. Have been pretty much media free for 2 weeks. I highly, highly recommend tuning out for a week or more. You can do it with some easy assumptions: Iraq sucks, we haven’t caught Osama, the mortgage crisis is getting worse, but Lawrence Yun is lying about it. Congress is trying to do something, but will get it wrong. That’s your news for the next 6 months, more or less.
Chris Johnson runs the Ten Day Team, which bails out Realtors that bit off on a crappy preapproval issued by a worthless mortgage broker.
The Mortgage Lender Implode-O-Meter announced today the settlement of the lawsuit filed against them by the Loan Center of California. This is great news for all bloggers who have sought to tell the truth while covering the mortgage industry implosion. When the lawsuit was first announced many bloggers (including myself) wondered aloud about the stability of blogging about real issues in a litigious environment. And while I always thought the suit was frivolous; this settlement is welcome news to all of us who have covered the mortgage morass.
Aaron over at the site makes a good point that it is still frightening that the suit was not thrown out under Anti-SLAPP legislation; but nonetheless the settlement brings to an end the tenuous stand-off between LCC and the leading site covering the mortgage implosion.
As is made clear by the costs we faced in the suit, providing a forum for whistleblowing and debate on critical contemporary issues remains a risky and expensive proposition. It is virtually “death upon challenge” for any individual or small-scale operation. It is thus unclear to us why anyone would ever get involved in such an enterprise if they truly understood the peril they were placing themselves in. We certainly would not have, if we knew then what we know now.
Congrats Aaron for settling without litigation and may you (and all of the other bloggers) continue to be protected in the coverage of the mortgage meltdown.
Yeah, I’ve got the typical New Year’s Resolutions - like eat less chocolate, exercise more etc., but I thought I’d share what I’m calling my “Mortgage Resolutions.”
I hope you had a wonderful Christmas and a great time with family. I think I could describe my Christmas as too noisy, too busy, and too fast, but very good. It’s times like Christmas which help reinforce the things that are really important in life.
I thought I’d take a little bit of a different approach this week and rather than talk about what’s been happening this week, I thought I’d share some “New Year’s Resolutions” about 2008 and the real estate and mortgage markets:
1. Since the real estate and finance worlds are in a state of turmoil, I resolve to take the time to remain educated on what’s going on so as to be a valuable resource for customers, Realtors, builders, blownmortgage.com readers and other referral sources who are navigating their way through real estate transactions.
2. As there are a lot of adjustable rate mortgages still “out there” and, as I believe rates could very well drop this year, I resolve to be organized and proactive to help people take advantage of making sure they have the right mortgage for their situation.
3. I resolve to be a “realistic optimist” this year. I’m not going to be one who is a “cheerleader” for the real estate industry or one who says that all is well and nothing is changing in the mortgage world, but I am going to attempt to focus on the opportunities that today’s market does present.
4. In a market with constantly changing rules and regulations, I resolve to remain on top of the changes so that I can provide honest and accurate assessments of what can be done and then stay on top of the details so that the deals get done the way we plan them. This year’s market calls for early and realistic understanding of what can and can’t be done, and I resolve to be able to provide that.
2008 is going to be an interesting year. There will be a a lot of changes and a lot of challenges, but I’m looking forward to it. Have a Happy New Year!
Tom
In today’s (December 28, 2007) Los Angeles Times, Christopher Thornberg made the above statement.
Mr. Thornberg used to be a Senior Economist with the UCLA Anderson Forecast. He’s now with the Beacon Economics Group, a research and consulting firm specializing in analyses of real estate markets.
Mr. Thornberg is not a paid mouthpiece for any special interest group. In other words, he’s a pretty sharp guy. I’ve followed his research for years and it’s never popular because it’s unbiased and honest.
And he is predicting a 25-30% decline in real estate prices due to one simple fact – prices have outpaced income.
This isn’t rocket science folks. How many of you could qualify (on paper) using standard Fannie/Freddie full doc underwriting to purchase your own home today? That’s what I thought.
The worst part of his forecast is the self-fulfilling prophecy of real estate prices. Who would buy a home today that will probably be worth 10% less next year? How about 20% less two years from now?
Add this together with the weekly tightening of underwriting guidelines we are all experiencing, lenders moving towards larger down payments and fully documented loans, increased inventories, and the avalanche of REOs right around the corner and what do you get?
It’s Econ 101 all over again. Increased supply of homes (inventories) coupled with less demand from home buyers equals a decline in real estate prices. Guaranteed. You can argue all you want, but I’m not making this story up. The market is telling us what will happen.
You can see the writing on the wall and deal with it. Or you can stick your head in the sand and pray your LA/OC/Bay Area home doesn’t drop in value.
There will always be people buying and selling homes. There will always be people needing to refinance their homes. There will always be people needing home equity loans.
The question is — what are you doing to position yourself as the lender to those people in 2008?
Or are you going to sit and stare at the phone, waiting for it to ring?
Seth Godin is one of my favorite authors, unknowing mentor and personal hero. He has a great post from a couple of years ago that he quoted for his last post of 2007. His question is “Why not be great?“ To all of us that have tracked the implosion of this market, the epic shifts in business and the everchanging tides of finance, regulation, legislation and more - now is the time to embrace Seth’s advice.
This isn’t my last post of 2007; but it surely is important. Here’s Seth on something we should all do (read his whole post - it’s worth the time):
Are these crazy times? You bet they are. But so were the days when we were doing duck-and-cover air-raid drills in school, or going through the scares of Three Mile Island and Love Canal. There will always be crazy times.
So stop thinking about how crazy the times are, and start thinking about what the crazy times demand. There has never been a worse time for business as usual. Business as usual is sure to fail, sure to disappoint, sure to numb our dreams. That’s why there has never been a better time for the new. Your competitors are too afraid to spend money on new productivity tools. Your bankers have no idea where they can safely invest. Your potential employees are desperately looking for something exciting, something they feel passionate about, something they can genuinely engage in and engage with.
You get to make a choice. You can remake that choice every day, in fact. It’s never too late to choose optimism, to choose action, to choose excellence. The best thing is that it only takes a moment — just one second — to decide.
Before you finish this paragraph, you have the power to change everything that’s to come. And you can do that by asking yourself (and your colleagues) the one question that every organization and every individual needs to ask today: Why not be great?
In fact, it’s a great message for whatever you do. Why not?
I think Benjamin Franklin was the one who said that the definition of insanity is doing the same thing over and over again and expecting a different result. As we wrap up 2007, a year that ended, I would dare say, significantly different than most people expected, and move into 2008, how does that saying apply to each of our businesses? What am I going to do differently as a mortgage lender for a “super regional bank” in the Midwest? What is Morgan going to do differently as the owner of a mortgage company in California?
So I want to raise this question - whether you are a Realtor, Builder, Banker, Broker, Home seller, prospective home buyer or whatever role you play in the real estate world…..
What are you going to do differently in 2008 than you did in the first half of 2007? And why?
I’ll do another post later on this week with my thoughts, but first, I want to hear what our readers have to say.
I was just catching up on some “in between holiday” mortgage reading and I happened to stumble on an article that lead to another, and low and behold, I discovered that Morgan won the Odysseus Medal for his brilliant expose’ on how the government is struggling in quicksand. Congrats to Morgan! If you haven’t read what he wrote, you should!
I just got this e-mailed to me. I wish I could be as confident as they are. What do you think?
Also, what do you think the “incorporating critical policy assumptions” means?
| “NAHB’s housing forecast (incorporating critical policy assumptions) shows systematic improvements in home sales by the second quarter of 2008, improvement in housing starts by the third quarter, maintenance of low levels of manufactured home shipments throughout 2008, and modest declines in the real value of residential remodeling next year. In this forecast, Residential Fixed Investment continues to contract through the first half of 2008 but posts modest growth in the second half of the year.”This is an excerpt of The Seiders’ Report -December 21, 2007- which has been published at HousingEconomics.com. Please make sure you are logged-on when you access this report.Also, look in this report for the Executive-Level Forecast.Not yet a subscriber? Free samples are now available.Subscribe Now!
Sincerely, Editor HousingEconomics.com -News and Alerts |
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I just got the following e-mailed to me from one of the local title companies…..
Governor Granholm Signs Bipartisan Professionalism Package
Without any fanfare, Governor Granholm has signed the bipartisan Professionalism package (also know as “the bad builders bills) into law. Senate bills 450, 451, 452, and 453 (now Public Acts 155, 156, 157 and 158 of 2007) were sponsored by State Senators Nancy Cassis (R-Novi) and Ray Basham (D-Taylor). A similar package passed at the end of the 2006-2007 session was vetoed by the governor last year because of technical problems.
While most of the changes found in this package will not take effect until June 1, 2008 unlicensed individuals acting in the capacity of a residential builder or a residential maintenance and alteration contractor will immediately face stronger penalties.
A first offense will be a misdemeanor punishable by a fine of not less than $5,000.00 or more than $25,000.00, or imprisonment for not more than 1 year, or both. A second or subsequent offense will be a misdemeanor punishable by a fine of not less than $5,000.00 or more than $25,000.00, or imprisonment for not more than 2 years, or both. An offense that causes death or serious injury, a felony punishable by a fine of not less than $5,000.00 or more than $25,000.00, or imprisonment for not more than 4 years, or both.
Here are the major changes in the Occupational Code made by Public Acts 155-158 of 2007. These changes take effect June 1, 2008.
Requires the successful completion of a 60-hour prelicensure course of study by applicants for an initial residential builder or contractor license prior to licensing.
Establishes continuing competency requirements for licensed builders and
contractors.
Requires all licensees to have a current copy of the Michigan Residential Code.
Allows a licensed builder or contractor to apply for inactive status.
Allows a prosecuting attorney and the attorney general to bring a civil action
against a person not licensed under Article 24 for practicing without a license; and
require the court to order a fine payable to the prosecuting attorney or the attorney
general.
Requires the Department of Labor and Economic Growth (DLEG) to issue three year residential builder and contractor licenses.
Requires a licensed residential builder, as part of a contract, to provide information
relating to his or her individual license and any qualifying officer license.
Prohibits a person not licensed under Article 24 from imposing a lien on real
property.
Increases the per-year license fee for a builder or contractor from $40 to $60 for
one license cycle, and prescribes a $50 fee for subsequent years.
Creates the “Builder Enforcement Fund” and requires it to be used for the
enforcement of Article 24 of the Occupation Code regarding unlicensed activity,
and the prosecution of unlicensed practice.
What do you think it’s going to mean to the industry?
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Morgan Brown writes Blown Mortgage tracking the latest news on the mortgage mess. The goal - to keep you informed so you don't get a blown mortgage. Friend Me:          |
