How MetLife's Exit Impacts the Industry - Will Others Follow?

Some would say it is grim out there, and no, I am not talking about Hostess Brands, the manufacturer of Twinkies, Ho Hos, and Ding Dongs cake snacks, filing for Chapter 11 bankruptcy. Is it right that 4,300 of our brethren were notified of losing their jobs, after a potential sale fell through, in a letter to clients with a dancing Snoopy in the letterhead?

"To Our Valued Customers...We have made the decision to wind‐down all MetLife Home Loans' (MLHL) forward origination business, including the Institutional Lending Group (ILG)... We will continue to honor all of our loan commitments and will maintain the necessary staff in place to ensure each of your loan transactions closes (subject to the loans meeting all investor and MLHL guidelines). Our sales and support teams will work with each of you to ensure this transition is as transparent to your customers and referral partners as possible. In return, we ask that you keep your commitment by delivering your locked pipeline in accordance with our agreements..."

The top five wholesale lenders for the 3rd quarter, volume-wise, were in order: Provident Funding, U.S. Bank Home Mortgage, Wells Fargo, Flagstar, and MetLife Home Loans. The top twelve correspondent lenders for the 3rd quarter, volume-wise, were in order: Wells Fargo, BofA, Chase, GMAC, Citi, Flagstar, PHH, U.S. Bank, BB&T, Franklin American, SunTrust, and MetLife. And when one adds in retail originations to the other two channels, for the 3rd quarter MetLife clocked in at #10 (per National Mortgage News).

I received this note: "If Fannie and Freddie don't wake up and expedite their approval process the industry will be gone. Private investors such as Wells are bogged down in operations. Companies aren't long for this world when they don't have agency approval - we saw what happened last month to O 2 Funding. Every lender out there is grabbing onto the apron strings of the agencies; the same agencies that many in the government want to shut down! Where will that leave things?"

On top of this, investors in Residential Capital Corp., which does business as GMAC Mortgage, have organized out of concern that the residential lender and loan servicer could be headed toward bankruptcy. Parent Ally Financial had hoped to take ResCap/GMAC public in 2011 but ultimately scrapped those plans; it has since cited "risk factors" with the unit but has not specifically discussed a possible bankruptcy filing. And another top investor, PHH, was downgraded by S&P and raised its doubts over continuing as a "going concern" if it failed to improve its liquidity. PHH is also being investigated by the CFPB regarding its mortgage insurance practices. 

One can just hear large lenders talking in their boardrooms. "Do we really want to be in this business, given the regulatory, legal, financial, and public relations issues? Where the value of servicing has dropped dramatically in the market, and could drop further depending on Basel III? Where the mortgage insurance tax deductibility has gone away? Where every week brings a new lawsuit - when will we have more attorneys on staff than originators?"

The shutdown will cost insurer MetLife about $100 million. "We continue to move forward with our plans to cease being a bank holding company," the CEO said last month. Servicing and reverse mortgage origination will continue, at least at this time. John Calagna, as spokesman for MetLife, noted that most of the 4,300 employees at the unit will lose their jobs, 20% of whom are in Irving, Texas. (Add this to Bank of America's announced 30,000 job cuts, and Citi's 4,500, and one really starts to make a dent in financial services.)

Perhaps some will contact Mason-McDuffie Mortgage Corporation, headquartered in Northern California. The company has been around since 1887, is a mortgage banker and broker, and is licensed in 28 states. MMCD is seeking branch managers, LO's and all operations positions to join its expanding workforce. "MMCD enjoys branch operations throughout the US with fulfillment centers in the Bay Area, the Northeast and adding new centers in Southwest, Midwest and East. Mason McDuffie Mortgage is a privately held mortgage banking company funding jumbo, conventional, government, and rehab loans, and has its Fannie, Freddie, and Ginnie approvals. Contact Brian Moggan at bmoggan@mmcdcorp.com with a resume.

That was one ray of good news. The news is not much better elsewhere. JPMorgan Chase's mortgage originations in 2011 were the lowest in 10 years. A video of Jamie Dimon discussing his housing forecasts can be seen on CNBC, and mentions that the bank is originating $10 billion in mortgages per month. HousingWire calculates that when the production numbers are put together, JPMorgan Chase is likely originating its least amount of mortgages in the last 10 years.

Lastly, Michael Williams announced his intention to step down as CEO of Fannie Mae after 21 years with the agency. He's had that post since April 2009, and is viewed as the leader in guiding Fannie Mae through the transition into conservatorship and in "directing Fannie Mae's efforts to enhance loss mitigation strategies, including loan modification and refinance options to help struggling homeowners." FHFA will work with the Fannie Mae board of directors in searching for a new CEO.

Folks out and about looking for work might be interested in hiring trends, especially in the mortgage industry in 2012. Here are some presented by Drew Waterhouse, Managing Director of Hammerhouse.

Amid declinations to comment, Goldman Sachs and Citigroup are planning to market about $1 billion of bonds backed by commercial property loans as soon as next week as demand for the debt recovers amid optimism the U.S. economy can withstand Europe's fiscal crisis. The deal will probably be the first of its kind for 2012.

When I was at Cal grappling with the MBA requirements, taking accounting classes was never a high priority. It should have been, and in the mortgage banking biz, the MBA is here to help you remember if debits are on the left and credits on the right (yes) or whether you can allocate a pair off loss to individual loans (not really). "Taking place on Thursday, January 19, 2PM EST, CampusMBA and Mortgage Banking Solutions will present Mortgage Accounting Part I: Drilling into Mortgage Accounting. The following topics will be covered: Essence of Accounting, Measurement, Risks and Results, The Mortgage Road -- How it Works, Mortgage Banking Process Flow -- Who Does What, Performance Metrics -- KPIs, Internal Controls, History of Accounting, Financial Reporting Complexity vs. Simple & Easy, Accounting Methods & Accounting Systems, GAAP -- Rules of the Road, The Audit and your CPA. Check it out. Parts II and III are the following weeks.

This morning we had the weekly MBA application stats. Sometimes folks ask, "What constitutes an application?" The MBA notes that, "We ask our participants to follow the HMDA definition of an app, the key portion of which is a credit pull. As you know, the HMDA definition and the RESPA GFE requirements are not quite aligned." Maybe someone with time on their hands should align the two! This morning the MBA released last week's application numbers which showed an increase of 4.5%. Refinancing was up over 3%, and purchases were up over 8% - nice to see - although refinancing still accounts for almost 81% of application activity.

At least the markets continue to be quiet: like Monday, Tuesday we were virtually unchanged with the 10-yr closing at 1.97% although MBS prices were worse by about .125. The focus on Tuesday was on the Treasury auction supply, announced last week so there is no surprise, and continued rumblings out of Europe that will be with us for years. Generally speaking, Reuters reports that, "Supply and demand appear very favorable in aggregate for 2012 with projected demand from the Fed, banks, REITS, and money managers well above estimated net supply. Still, there will likely be times when there will be temporary imbalances with higher supply."

Today we'll have the second leg in the latest round of Treasury auctions with $21 billion 10-year notes at 11AM CST. So far rates are slightly better with the 10-yr at 1.94% and agency mortgage prices better by about .125.

(Warning: parental discretion advised.)
Last week, she checked into a motel on her 60th birthday and she was a bit lonely. She thought, "I'll call one of those men you see advertised in phone books for escorts and sensual massages."
She looked through the phone book, found a full page ad for a guy calling himself Tender Tony - a very handsome man with assorted physical skills flexing in the photo. He had all the right muscles in all the right places, thick wavy hair, long powerful legs, dazzling smile, six pack abs and she felt quite certain she could bounce a quarter off his well-oiled rump.
She figured, "What the heck, nobody will ever know. I'll give him a call."
"Good evening, ma'am, how may I help you?" Oh my, he sounded sooo sexy!
Afraid she would lose her nerve if she hesitated, she rushed right in, "Hi, I hear you give a great massage. I'd like you to come to my motel room and give me one. No, wait, I should be straight with you. I'm in town all alone and what I really want is passion. I want it hot, and I want it now. Bring implements, toys, rubber, leather, and whips - everything you've got in your bag of tricks. We'll go hot and heavy all night - tie me up, cover me in chocolate syrup and whipped cream, anything and everything, I' m ready!! Now how does that sound?"
He said, "That sounds absolutely fantastic, but you need to press 9 for an outside line."


If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at www.stratmorgroup.com. The current blog discusses the time frames for borrowers returning to A-paper status after a short sale or foreclosure. 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.