|
May 18, 2011: Why haven't you moved your checking account? News on Flagstar, Quicken's comp case, Impac's earnings; interesting NAR stats
Rob Chrisman
A hockey
coach once said, “Last year we couldn¹t win at home and we were
losing on the road. My failure as a coach was that I couldn¹t
think of anyplace else to play.” Where else are
people going to bank? Before the financial crisis, the
banking industry was too concentrated and clubby. Now, many
argue that it is even more so, especially since not only are
many banks going out of business, but Chase, Citi, BofA, and
Wells are actually becoming larger. And it is not as if the big
banks are trying to boost their customer service with lower fees
and paying higher rates on checking accounts!
So why aren't
significant numbers of customers and clients moving on to other
banks? For you and me, "switching costs" are a real hassle.
Shutting down a bank account, with its credit card or utility
bill-paying links, transferring the account, and setting up all
the links isn't anyone's idea of a good time. The same goes for
refinancing - it is often easier for a borrower to do it with
the same company that already holds your loan. And no matter how
much one gripes about their bank, more often than not a big-name
bank's name is reassuring. Most developed nations have a more
concentrated banking system than ours. But too much
concentration of the financial industry increases risk, since a
handful of dominant players are more likely to make the same
kind of mistakes. But unless consumers rise up to move their
money to credit unions or smaller banks, the market isn't going
to deal with the problem - and that means Washington might have
to.
On the lending side,
banks are continuing to adjust their personnel, reducing staff
in some areas but hiring in others. For example, Flagstar
Bank, the nation’s 12th ranked lender by volume, is
expanding its Home Lending Business Channel. “Flagstar
enjoys national recognition as a top originator in the
Broker/Correspondent Community and aspires to achieve similar
success with Home Lending. Flagstar remains committed to its
lending partners across the nation, and can lend in all 50
states.” I am not an LO, but the suite of products &
technology it gives its reps seems pretty impressive, including
Agency/FHA/VA/Portfolio & Rural Product(s),
EOrginate/EProcess/EUW/EDocs/EClose, Personal Loan Officer
Websites, Co-Branded Servicing Statements, Database Campaign
Management Tools and more. If you’re interested, or know anyone
who is, e-mail homelendingsupport@flagstar.com
or visit https://careers.flagstar.com/.
Yesterday the
commentary mentioned the Quicken Loan comp
issues possibly being heard by the Supreme Court. Quicken Loans
said in a statement, "“Quicken Loans has never charged unearned
fees and never will. We won this case on summary judgment at
the trial court level on undisputed evidence that the fees that
Quicken Loans collected were, in fact, earned. The ruling in
favor of Quicken Loans was also upheld on appeal by the U.S.
Court of Appeals for the Fifth Circuit. It is unfortunate that
once again our legal system is being used to extort money from
job producing companies by plaintiff attorneys who attempt to
manipulate and distort reason, logic and the law with the hope
that companies will capitulate and settle rather than embark on
a lengthy and expensive defense of right versus wrong. Quicken
Loans will never give in to these unscrupulous operators who
only exist because companies and courts allow them to continue
their immoral gamesmanship. Quicken Loans has and always will
conduct itself in accordance with state and federal law."
Out in California, Impac Mortgage Holdings reported a 1st
quarter loss of nearly $1 million versus income of almost $6
million a year ago. The company is dealing with the same issues
as everyone else: liquidity risks, falling home prices,
regulatory uncertainty, and litigation risks related to the
securitization of mortgage loans. “The ongoing economic stress
or further deterioration of general economic conditions could
prolong or increase borrower defaults leading to deteriorating
performance of our long-term mortgage portfolio." Impac said its
investment in securitized non-conforming loans continues to be
adversely affected by housing market conditions, leading to more
defaults and higher loss severities.
NAR released some
interesting Realtor profile information. Their median income
(half above, half below) declined 4.5% to $34,100 last year,
which followed a 3 percent decline in 2009. Members licensed as
brokers earned a median of $48,700 in 2010, while sales agents
earned $24,900. Per NAR, 16% earned a six-figure income, 14%
work less than 20 hours per week, 57% are women. The typical NAR
member is 56 years old with only 3% of members being under the
age of 30 (22% are 65 or older). NAR had less than 1.1 million
members in 2010, a 21.3% decline from the peak in 2006. For all
the stats visit http://www.realtor.org/press_room/news_releases/2011/05/member_profile.
Of course, LO
comments on Realtors continue. "I’ve been in the business 20+
years and I work with realtors. Reason #28 why Realtors don’t
play fair – 98% of them are desperate and ‘this deal’ is their
only deal. As a result, they will do everything possible,
including steering, to try and get ‘this deal’ closed as well as
parlay ‘this deal’ into future deals. Also, I’m seeing agents
convince owners to short sale their home. The agent then
arranges a buyer at a much discounted price. The agent will help
that buyer flip the home for a $50k to $200k profit that the
agent and the buyer then split. I see it over and over again.
(These agents call me looking for FHA or Fannie financing that
they have every intention of paying off in 3 to 6 months. Of
course I tell them ‘it doesn’t work like that, find another
lender’.) People should remember that LO's are only paid on the
portion of the transaction that is financed so more often than
not our commissions are even less by comparison. If you care to
use this scenario in a future email, feel free but do not use my
name as I’ll be hung out to dry with my agents."
"Everyone is upset their compensation has been capped and
realtors still have 3-6% income possibilities and we have zero
possibilities outside what we decide upfront with different
lenders. Welcome to our reality, there is no real stigma
attached to realtors with regards to the housing meltdown, they
weren’t complicit at all, just us brokers, we still shoulder the
major part of the blame burden for the mess, of course the
lenders were completely not to blame, those 103% combined CLTV
neg-am’s from one lender or the 100% jumbo stated/stated at a
580 credit score from another with only .50 hit to the pricing
had absolutely nothing to do with the whole scenario. Everybody
wake up already!!!"
What kind of loans
are folks obtaining when they refi? Freddie Mac
reported that in the first quarter of 2011 fixed-rate loans
accounted for more than 95% of refinance loans, regardless
of whether the original loan was an ARM or a fixed-rate loan. An
increasing share of refinancing borrowers chose to shorten their
loan terms during the first quarter. Of borrowers who paid off a
30-year fixed-rate loan, 34 percent chose a 15- or 20-year loan,
the highest such share since the first quarter of 2004. We had
the MBA's weekly Mortgage Application Survey this morning. Apps jumped 8% last week, up for the third week
in a row. Refinancing was up over 13%, although purchases
dropped 3%. Both the overall index and the refinance index
reached their highest levels since early December, with refi’s
accounting for almost 67% of total apps.
"Rob, do you really think that the Founding Fathers intended a
nation of 300 million to be ruled by a Federal Government of
about 536? Of course the debt problem in the US
continues to be a great concern - now, if only they’d do
something about it! We cannot sustain the current combination of
low interest rates, low inflation, and the dollar’s foreign
exchange value versus other currencies given the existing
patterns of federal government spending and expected future
budget deficits. The failure to control spending will result in
some combination of higher inflation, higher interest rates, a
weaker dollar, weaker economic growth and, hence, a lower
standard of living in the United States relative to the rest of
the world going forward. This is what the debt ceiling debate is
all about.”
Regardless of debt
worries, yesterday the fixed-income market did
quite well, and the trend is continuing today. The yield
on the 10-yr T-note broke down below 3.15%, making new lows for
2011, and mortgage pricing is going along for the ride. Their
prices don’t always move in opposite directions, but once
equities slipped into negative territory Treasuries rebounded
off the lows on very light activity. The weaker-than-expected
housing and Industrial Production data only increased the bid
for Treasuries. By the end of the day the 10-yr was down to
3.12% and current coupon mortgage pricing was better by
.125-.250 on average mortgage banker selling of MBS’s.
With rates dropping
investors sense a short run pickup in refi activity, but also
believe that it will be weaker compared to 2010 based on equity
issues, LLPA hurdles, and the usual underwriting issues. There's
a sizeable amount of distressed property on the market, credit
conditions remain very tight for borrowers, home values keep
slipping, existing home owners are having a difficult time
selling their homes, and the economy and jobs market aren't
exactly confidence boosters at the moment. All of this puts a
damper on lending, as well as homebuilders' sentiment.
There isn’t much
pushing the market today. We had the MBA's weekly Mortgage
Application Survey, noted above. Later we’ll have the release of
the FOMC Minutes from the late April meeting at 2PM EST. In the
early going here the 10-yr got down to 3.10% (but
is now unchanged) and MBS prices are roughly unchanged.
Two men driving to a friend’s house became lost, and they
stopped to ask for directions.
(Yes, that's it.)
If you’re interested, visit my twice-a-month blog at the
STRATMOR Group web site located at www.stratmorgroup.com . The current blog
considers the near and longer-term outlook for jumbo lending.
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.
|
