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Small banks may be crippled by construction loans

Morgan — Wed, 25 Jun 2008 15:45:28 +0000

Small banks may be exposed to nearly $300 billion in bad construction loans granted to local builders and developers according to a new report by the Wall Street Journal. The report estimates that more than 150 local banks could fail under the weight of the defaults.

Construction loans are dicey propositions in the crashing housing market as builders who bet on repaying loans with sold properties may be unable to repay the debt obligations on the existing projects. Some projects are probably already abandoned and others will sell for pennies on the dollar leaving developers insolvent.

Further, because banks often allow developers to hold off on interest payments during construction the true ability of the developer to repay is often not known until it is too late.

More on the small bank crisis from Market Watch:

Small banks have some $280 billion of outstanding construction loans and analysts have predicted that as many as 150 smaller banks could fail in coming years after betting heavily on construction loans, The Wall Street Journal reported.

The practice of allowing real estate developers to delay paying construction-loan interest has raised alarms with regulators concerned that smaller banks are masking potential problem loans, the paper said.

Increasingly popular during the building boom of the last decade, many of these loans allowed banks to calculate the interest that would be paid on the loan overall and then set aside that amount in “interest reserves,” essentially allowing the banks to pay themselves until the property becomes profitable or the loan is paid off.

The loan can then be marked as a performing loan even if the project if it is financing is failing, a practice that concerns regulators, the report said.

But the tanking housing market means many of these projects may not be built — or even financed — leaving banks, and their investors, holding the bag.

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What Will Sales Monkeys Do?

phillenbrand — Thu, 06 Dec 2007 16:11:26 +0000

An average loan officer from 2000-2006 got a pile of leads on their chair every week. These were generated by telemarketing leads, Internet leads and even those “win a Car” displays in the malls of the Midwest. The loan officer would call the people up, and try to “slam dunk,” the customers into various loans of different and dubious suitability.

These people had/have no care or need for relationships–if an average fee was $8500 a loan, and they could do 5 a month, the average split being something around 47% paid these 20 something modern Matchstick Men could make $240,000 for stripping equity as a “multi state lender’s representative.” These folks had closing ability, and had good communication skills, to a point, but they were clearly overcompensated, and the market is rejecting the idea that a bunch of 20 somethings, fresh from the used car lot can be in charge of the financial fortune of good people in America. But where will they go?

None of these failures had a need for prolonged relationships with the same Realtors, Customers, CPAs, Attorneys. It was a series of quick, one night stands with their customers–that they’d hope to never see again. What happens to the guy that brings home a new woman each night do when he hits 40 and is more like Herb Tarlek than Brad Pitt? Where are all of you exiting lenders going?

What industries are currently paying so much to so many for so little? My guesses are Pharm Sales, Insurance, and maybe even Energy if they can dumb the job down enough.

What are your guesses?

Chris Johnson runs The Ten Day Team at First Ohio Home Finance in Westerville, OH. He is happy to put pithy guest posts on your blog if you email chris@tendayteam.com

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How to Get a Job Outside of the Mortgage Industry

Morgan — Wed, 10 Oct 2007 04:21:34 +0000

Update: If you’re interested in having your resume reviewed check out my new service: Resume Donkey.

I get a lot of resumes. People who read Blown Mortgage send me their resume and inquire about employment at my company. I’m always flattered when someone sends me their resume; it means they have an interest in my organization and, in a roundabout way, me personally. But, of course, my company is not hiring. We’re not immune to the effects of the market slow down. We went through layoffs and downsizing back in May, and I blogged about the agony in which I had to let friends and relatives go.

But that experience, and the continuing influx of resumes gave me pause. There are too many good people out there; those that worked hard, did their job well, who are now looking at a complete shift in career. The jobs are just not in the mortgage industry any more. Whether you have 6 months or 6 years of experience there is little in the way of gainful employment. Save for the booming loss mitigation/REO/servicing side (which is an important option to consider, btw) there isn’t much out there; and certainly not enough to pick up everyone. With that in mind I have come up with a new service for Blown Mortgage readers who happen to be in the mortgage industry.

What’s the idea?

Blown Mortgage Resume Review

In order to help those that have lost their job due to a layoff or company closure, I am offering a full resume review to help those out of a job find employment in other sectors of the job market. I will do this completely free of charge.

Where do I send my resume?

Send it to resumes@blownmortgage.com. You can send it as a word document or inline in the email. I can’t do anything with JPG, PDF or any other funky file format; and I probably won’t have time to respond and ask you to send it in a format I can work with, so please try to help me help you.

Be sure to include the following information:

Are you planning on looking for another mortgage job?
Are you planning on a new field? If it’s a new field be sure to specify what job position(s) you are exploring and/or what field(s); it will help tremendously with my review.

Why should I send you my resume?

You should send me your resume for a handful of reasons:

1. My family has been in the job placement industry for nearly 40 years; I was the black sheep who didn’t take on the mantle. I had the opportunity to live side-by-side with people who make their living putting people in jobs for the majority of my formative years; as well as hands on experience via internships for my mom’s company. Learning from my mom and grandparents has given me a keen sense of what people are looking for when reviewing a resume and what are red flags to HR folks.

2. As chief operating officer of my company I was responsible for the hiring of administrative, operations and hourly staff. I also was heavily involved in sales team hiring. I have reviewed thousands of resumes. I have seen some terrible ones and some great ones (mostly terrible). I will provide you with some insight from what I would think of your resume if it landed on my desk.

3. I came from outside of the mortgage industry. I was in marketing and advertising. Before that my background was in technology. I have a wide understanding of the business world that exists outside the mortgage and lending universe. The mortgage resumes I saw show a lack or care, attention to detail or any type of substance whatsoever. This got people by in the mortgage boom as companies scrambled to fill seats and ops positions. In today’s competitive job market outside of our world those resumes will land in the recycle pile – quickly. I can give you the critical eye of an outsider’s perspective on your resume.

4. I’ve taken many classes in hiring and interviewing and know what people are looking for and what questions they’ll be asking; this insider knowledge can benefit you and help you be more prepared.

What’s the catch?

There are two catches. Come on, this is the mortgage industry, there’s always fine print!

I get to use the recommendations I give to you to other people, and I reserve the right to publish or post those ideas on the blog (removing personal data, and specifics of course).
If you like my suggestions you send me a PayPal donation of $5-$10 for my time. If you don’t like them, you don’t pay – simple as that.

Anything else?

Yes. Patience is a virtue. I only have so many hours in the day; and while I’d love to spend my life on this blog, I need to make real money, and so my job will interfere with the amount of time I am able to commit to this project.

Further, I reserve the right to cease this project at any time, with or with out notice. Please also note that I am not a registered or certified HR consultant; I am merely a person who has pored over resumes and learned a great deal about hiring candidates from my environment. If that isn’t enough for you, fair enough, but that’s what I’m offering.

Consider it a small token of appreciation for the people who read Blown Mortgage every day who are out of work or are trying to hedge against the specter of future unemployment. We try to give out a lot of consumer advice here; and this is our way of giving back to the industry.

What’s Else Can You Expect?

I will be doing a series of posts on best-practice ways to go about finding a job outside the industry; focusing on some tried and true methods for job searchers to find a job that meets their requirements and hopes for the future. Those will start later this week.

I am also considering adding a job board, but see my opening reservations about the limited jobs in our field at the moment.

Thoughts? Feedback?

I’d love to hear your thoughts on the idea, even if you think it is a terrible one. It’s just one guy trying to help some people out, so if it flops it’s fine by me – I just wanted to put the offer out there.

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