Let’s say that
you were a
medium-sized wholesale mortgage operation, and in
the middle of last week you
were preparing to sell a $20 million pool of already
funded Alt-A and Jumbo
loans today. Suddenly Thursday and Friday happen.
You
a)
Just lost $450,000 since your loans
lost 2 points (at best, if you
could even find a buyer) and your hedge lost .5
points.
b)
Spend all weekend on the phone with
your warehouse banks, since
they are sharing in the risk on the $20 million.
c)
Wish that you were better capitalized
or even part of a bank,
since you could put the $20 million in your
portfolio.
d)
Dust off that application for Big
Rig School.
e)
All of the above.
Rates dropped
on Friday after the
unemployment data came and the stock market
worsened. A-paper FNMA/FHLMC loan
prices improved nicely – one industry expert said
that “agency
product is the only thing with any liquidity” – and
dozens of
originators closed their lock desks or did not fund
loans. What
happened with large investors on Thursday and
Friday?
RFC changed their Jumbo A,
Expanded Criteria, and
Payment Option pricing adjustments.
WAMU ceased
doing any low-doc
transactions whatsoever with FICO’s less than 680
and LTV’s greater
than 65%.
MortgageIT
discontinued their No Ratio, No
Doc, and SISA loans for several of their products.
Greenpoint stopped
taking locks entirely on
their Alt-A Fixed and ARM products.
Wells Fargo worsened
their Jumbo prices by 1
point and capped them at 100.00 (0 points rebate).
Countrywide changed
their guidelines and
pricing adjustments for their Expanded and Jumbo
product lines.
Deutsche Bank (who
owns MortgageIT), closed their
lock desk entirely.
Indymac closed
their bulk (conduit) desk.
Taylor
Bean and CSFB are no longer doing 2nd
mortgages. Taylor
also scaled back their first
lien,
Alt-A Fixed, Hybrid ARM and Option ARM programs.
Astoria
Bank tightened their guidelines and engaged
in a mid-day price change
on their ARM’s for the worse, in spite of a nice
improvement in A-paper
product.
CitiMortgage changed their pricing adjustments for
non-agency ARM loans, and
also changed the pricing structure for SIVA, NINA,
and several other types of
loans.
Has the market
for Alt-A “melted
down”? Performance on Alt-A loans has started
hitting the same dismal
levels that caused sub-prime to go away, and when
you couple that with almost
zero interest on the part of the MBS bond market,
and the changes that large
mortgage investors are making, some are thinking
that traditional Alt-A
lending will become a thing of the past. What
should an agent do? Partner
with lenders who have the
liquidity and assets to weather this storm, embrace
the traditional methods of
obtaining and closing business that has been the
benchmark for long-term
successful loan officers, and lastly, have the guts
to tell potential borrowers
who don't fit that you can't help them.
We have an incredibly light news
week this week. That
doesn’t mean that volatility for mortgages rates
will go away, since our
market may take its direction from the stock market,
unexpected news, or rumors
of the next originator to take a tumble. Tomorrow’s
FOMC (Fed) meeting
will be very important. Many think that the
Fed will lower overnight Fed
Funds to help stabilize the markets; others think
that they will issue a
statement saying that the Fed is “standing by” to
provide
liquidity.
Week
of August 06 - August 10
