High-level Production Jobs; Wholesaler Rankings; Countrywide Bankruptcy?

Welcome to Talk Like a Pirate Day. Of course, 3.14159...% of sailors are Pi Rates.

Yesterday through next Sunday is "National Singles Week", started by the Buckeye Singles Council in Ohio in the 1980s to celebrate single life and recognize singles and their contributions to society. The week is now widely observed during the third full week of September (Sept. 18-24 in 2011) as "Unmarried and Single Americans Week." Per the Census Bureau, there are roughly 100 million unmarried people in America 18 and older in 2010, which is about 44% of all U.S. residents 18 and older. Realtors and LO's are keenly interested in this stuff, as single renters and home owners have an impact on markets.

An expanding mortgage bank with a nationwide footprint is searching for Regional Production Vice Presidents. The lender was founded in the 1990's, is licensed in over twenty states around the nation, and has a multi-state branch network. Areas include the Midwest, East and West Coast, and qualified, experienced, candidates will have demonstrated a history of building production, and have strong knowledge of product, underwriting, financials, and marketing.  The banker has a very good reputation among investors and originators - if you know of anyone out looking, let them know about this opportunity. Resumes can be sent to me at rchrisman@robchrisman.com. (I will acknowledge receipt tonight, as I am traveling today to Rhode Island.)

Maybe it is my imagination, but there seems to be a pick-up in companies merging, buying, selling, and looking to buy other companies, and so on. For example, Sophia Partners wrote to me - it is an entrepreneurial investment firm seeking to acquire and operate one business with sales of at least $5 million. Its capital is provided by private investors who have been or currently are entrepreneurs, and Sophia Partners is looking within the world of financial services for a recurring revenue business to purchase. "For example, we like businesses that involve verifications (income, credit assets, flood, valuation, etc.), mortgage servicing, outsourced functions (underwriting, origination software, data hosting), and any other tools that assist in the loan decision making process. Our ideal seller is a CEO who is looking to retire or to step-back from the day to day management of the firm." If you're interested, contact Charles Anderson at Charles@SophiaPartners.com.

For existing companies, in California AltaPacific Bancorp will acquire Stellar Business Bank. And over in Pennsylvania S & T Bancorp will acquire Mainline Bancorp. And Citigroup spread the word that it will limit hiring to only "critical" positions, amid ongoing economic weakness and weak revenue.

Late last week, those hoping for an extension of the temporary loan limits were given some bad news. http://www.marketwatch.com/story/effort-to-extend-loan-guarantees-to-fail-staffer-2011-09-15. The elevated conforming loan limit for mortgages guaranteed or insured by the government will expire on Oct. 1 (in some expensive MSA's heading back to $625,500 after sitting at $729,750 since 2008). According to Standard & Poor's, there are around 110,000 nonconforming mortgages in the nation between $625,000 and $729,000 - about 2% of total jumbos - not enough to have much political clout at this time.  Two bills to extend the limits, one introduced in the House and another in the Senate, were never voted on. Seven months ago the Obama administration said in its white paper that the first step toward winding down Fannie Mae and Freddie Mac would be to allow the loan limits to expire in October, allowing private capital to move back in.

Have we reached the conclusion that every 2nd mortgage and home equity loan on the books has no value whatsoever? Probably not, but any financial institution with these loans on its books is about to have their value checked: http://www.bloomberg.com/news/2011-09-15/bank-values-for-home-equity-loans-said-to-face-u-s-scrutiny.html.

Here's a surprise: Wells Fargo was not the #1 wholesaler during the 2nd quarter. Here are the wholesale rankings, in terms of volume: Provident Funding, Wells Fargo, U.S. Bank Home Mortgage, CBC National Bank, ING Bank, Flagstar Bank, MetLife Home Loans, Union Bank, Fifth Third Mortgage, CitiMortgage, Stearns Lending, Sierra Pacific Mortgage, NYCB/AmTrust Bank, Franklin American, Carnegie Mortgage, EverBank  Mortgage, SunTrust Mortgage, Cardinal Financial, Guild Mortgage, and M & T Mortgage, per  National Mortgage News.

The residential mortgage servicing business is not the only one looking in their mailboxes and seeing nothing but catalogs. The Education Dept. reports borrowers of federal student loans defaulted at an 8.8% rate for 2009 (the latest reported period), up from 7% a year earlier. The 2009 rate tied 1997, but was below the peak of 22.4% reached in 1990. Overall, borrowers attending for-profit colleges defaulted at more than twice the 7.2% rate for those at public colleges and triple the 4.6% rate at private nonprofit institutions.

Sometimes when I run my dog by a certain fenced yard, the two dogs that live there run to the fence and bark and snarl. When we keep going, and they don't have another dog to pick on, they turn upon each other, making lots of noise and sniping at each other. In, what I am sure is a totally different unrelated matter,  JPMorgan Chase was sued by Wells Fargo, which seeks to force it to buy back more than 800 soured mortgage loans that it oversees as trustee: http://www.reuters.com/article/2011/09/15/jpmorgan-wellsfargo-mortgages-idUSS1E78E1HF20110915.

Did you know that Bank of America kept the Countrywide name, and that "it would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent"? The transaction was completed July 1, 2008 with Countrywide Financial Corporation merging into Red Oak Merger Corporation, a wholly owned merger subsidiary of Bank of America Corporation. The merged company retained the "Countrywide Financial Corporation" name and became a direct subsidiary of BAC. Countrywide's primary operating subsidiaries travelled with the CFC holding company during the merger, namely: Countrywide Home Loans, Inc. (CHL),
Countrywide Securities Corporation (CSC), Countrywide Home Loans Servicing, LP, and
Countrywide Bank, FSB. Bank of America generally opted to have its subsidiaries purchase assets from the legacy CFC units and only selectively merge with non-securitization related Countrywide entities, although CHL was the primary mortgage originator in the Countrywide group of companies.

This is important to know, since the structure of the relationship with Countrywide should ultimately limit the risk to Bank of America from continuing legacy mortgage legal claims. Analysts believe that the small size of Countrywide's balance sheet, its limited continuing value, and its ongoing legal separateness suggest that Bank of America's risk related to Countrywide is contained. CHL constitutes 74% of Bank of America's non-agency origination from 2004-2008, 77% of defaulted and delinquent balances, and 78% of defaults and delinquencies that occurred within two years of origination. Analysts expect most of the liability to reside in the still-separate Countrywide entities, including CFC, CHL, and CSC: http://www.bloomberg.com/news/2011-09-16/bofa-said-to-keep-bankruptcy-as-option-for-countrywide-unit.html.

Reader input on compensation continues. "I have been with a large lender for several years, initially as an LO but most recently in a role in Operations. The comment in the first paragraph of your commentary last week about LO compensation got me thinking and I wanted to add my own insight. I left my role as an originator in March, before the new comp changes.  Before I changed roles, however, I did an analysis of how much my pay would have been under the new comp plan versus our old one.  What I came up with is this: if you were and LO who frequently 'over-charged' people and gave them above-market costs or fees then the new comp plan means you'll be making less money.  If you were an LO who charged regular market rates and fees, limited your profit margin, and 'stayed within the lines' then you should make the same or more under the new comp plan". Old habits die hard and I do think the new comp plan will protect consumers."

"We are paying for the sins of 6 years ago. Can you provide a model for how comp in our industry could be applied to other areas, such as car salesmen, insurance sales ladies, travel agents, government workers, rural farmers who supply consumers with food, house builders, and others? Maybe that's why the mortgage industry is now known as BROKE  cause we are the only jerks yanked around like this, determining how we earn, compensate, pay, make, spend, thankfully we can still decide what color shoes to wear."

A look at the markets shows...not much. Last week we received economic data insight into three aspects of the domestic economy: the consumer picture, inflation measures and the manufacturing sector. We discovered that consumer retail spending remained flat in August; inflation, particularly core inflation, continued to trend higher; and the manufacturing sector posted a moderate increase in activity counter to what some of the regional Fed surveys reported.

This week is pretty light on scheduled releases, and although the pundits in the press will be focused on the Fed meeting much of the news this week is housing related. Today we have another housing price index, tomorrow is Housing Starts and Building Permits, Wednesday is Existing Home Sales along with the FOMC rate decision, Thursday is Jobless Claims, and then Friday is another housing price index. Continued European problems, which will be with us for a very long time, are pushing stocks down and rates lower: the 10-yr Treasury, which ended Friday around 2.08%, is around 1.95% today, and MBS prices are better.

A pirate walks into a bar with a steering wheel sticking out of his pants.
After he orders a drink, the bartender, who cannot hold in his curiosity asks, "What's that steering wheel in your pants for?"
To which the pirate replies, "Arrrgh, it's driving me nuts".


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com . The current blog takes a look at the recent news concerning REIT's, and the possible tax implications. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.