What is up with ewarehouseone? I know next to nothing about it, and have no opinion, but am asked repeatedly about its validity. Michele Perrin, however, of Perrin & Associates (http://www.perrinassoc.com/), does have an opinion and writes, “In the last few months, ewarehouse has hired at least 15 reps across the country, mostly former wholesale AE’s who know nothing about the warehouse business, and they are collecting hundreds of applications from unsuspecting mortgage companies. The fee they collect with the application is only $1,000-$3,500, so I couldn't see how that would warrant creating an apparently artificial warehouse company, but I know now that they are requesting large sums as pledged accounts.

“Here is a quote I sent to Paul Muolo to use in an article he is working on about ewarehouseone. He has been unable to find any more about them than I have: ‘If it sounds too good to be true, it probably is. I have been called by a number of my clients asking me about ewarehouseone, so I researched them online and by contacting warehouse lenders across the country. Although their salespeople are telling potential clients that they have been in the warehouse business for 14 years and have $3 billion in outstandings, no one I spoke to had ever heard of them before a few months ago. Nor could I find a single mortgage banker with a line from ewarehouseone, even on the East Coast. $3 billion in lines would make them one of the top five warehouse lenders in the nation and would indicate that they have hundreds of customers, since they seem to seek smaller lines, so I would think we should all know someone with one of their facilities. I was also unable to find any address for their headquarters or to discover where they handle collateral or what bank handles their cash. I would caution mortgage companies to get more information before they write an application fee check to any warehouse lender they have not heard of before. Warehouse lenders should be able to provide their headquarters' address and the names of existing customers to whom the mortgage company could talk for references.’”

Ms. Perrin goes on: “A former client of mine sent me the legal documents he had been sent by ewarehouseone last week. I found that in the documents they are using "48 Wall Street NY, NY 10005" as their address, which is a ‘Virtual Office’ where you pay $50 a month to use the address. I found in the instructions letter that ewarehouseone wants the client to deposit $178,000 in pledged accounts for them!  This makes it all make sense as to why they would go to such lengths to create a fake warehouse lending company!  I am so glad this client contacted me before giving them that money.  Please get the news out that any warehouse lender who can't answer basic questions should not get any of your money!  Beware!”

That all being said, and hopefully to clear up any confusion because we could use another solid warehouse lender, there is a worthwhile representative: Jerry Walters. To contact Mr. Walters with questions, write to jwalters@amortgagewarehouse.com.

In a totally unrelated matter, and once again we are reminded how mortgage lending spans states, Colorado and federal prosecutors say they have closed down a national foreclosure rescue scheme and the operators of a Georgia-based foreclosure and mortgage scam have been permanently barred from mortgage and real estate activity. “Bella Homes was accused of persuading homeowners in danger of foreclosure to hand over their home titles and then lease back their homes from the company”:
http://www.therepublic.com/view/story/e36138e7c8284e96b6201c27e147d32d/CO--Foreclosure-Lawsuit-Agreement/.

Freddie & Fannie just can't catch a break. Three evaluation reports were released by the FHFA’s Office of Inspector General (OIG) regarding the oversight of activities of Fannie & Freddie (“Frannie”). One honed in on Frannie’s participation in the 2011 MBA Convention and Exposition in Chicago caught the FHFA’s attention. The GSE’s together spent over $600,000 to participate in the convention and 90 GSE employees were registered to attend, 48 for Fannie Mae and 42 for Freddie Mac. OIG states that, while the expense of the convention was small in relation to all GSE expenses, the money expended did occasion comment and prompt the office to investigate.  OIG found that the GSE's per-capita expenditures for registration, travel, and lodging were comparable to allowable expenses for federal employees however it questioned the $140,000 spent to sponsor the convention and $140,415 for business meals and hosted dinners.

Audits have also recently focused on the extent of FHFA's oversight of Fannie Mae's single-family mortgage underwriting standards.  Specifically, OIG reviewed FHFA's written policies for oversight of these standards and oversight of Fannie Mae's internal controls over its implementation of the standards.  OIG also plans to contract for additional audit coverage related to the effectiveness of quality controls used by the GSEs to determine compliance with underwriting standards. It is not a simple job: during the first 10 months of 2011, Fannie Mae purchased nearly 2.1 million loans valued at $427 billion, for example.  To be eligible for purchase, a mortgage must satisfy the GSEs' underwriting standards or have their approval to vary from them.  Fannie Mae's underwriting standards, which it refers to as eligibility requirements, derive from a combination of Congressional charter-based and traditional risk-based criteria.  Charter-based criteria would include original principal balance limits and loan-to-value ratios while risk based criteria focus on collateral, capacity, and creditworthiness. Notwithstanding the housing boom and subsequent housing collapse, Fannie Mae's basic underwriting standards for purchase-money loans secured by single-family, principal residences have not changed materially, most believe, since 2006 – and many argue that they don’t have to.

Fannie Mae, however, has authorized a number of variances that have impacted those underwriting standards and the numbers of these have fluctuated substantially over time.  In 2005 when standards were loose, Fannie Mae authorized over 11,000 variances.  Between January 2005 and August 2007, Fannie Mae began rescinding variances, which tightened underwriting standards.  Fannie Mae had over 600 variances as of September 2011. These variances from underwriting standards effectively relax those standards and this contributed to the credit losses and credit-related expenses suffered by Fannie Mae in recent years. But hey, if Fannie & Freddie are overseeing the aggregators, and the OIG is overseeing them, who is overseeing the OIG?

Banking news marches on. Last Friday Illinois’ Premier Bank was closed and its deposits assumed by International Bank of Chicago. Up in Massachusetts Commerce Bancshares announced it will purchase Mercantile B&T for $26.5 million in cash, or about 1.3x tangible book. And in Wisconsin PSB Holdings will buy Marathon State Bank for $5.6 million in cash or 1x book. Marathon will pay $14.3 million to shareholders before the sale in the form of a special dividend. (Since PSB doesn’t need the capital, the move is a way to return shareholder value under the lower capital gains tax – nice!)

The Financial Times reports a potentially rocky road ahead of Ally’s planned bankruptcy of ResCap. “Plans to recoup the $17.2 billion of taxpayer money that was pumped into the company have stalled because of crushing liabilities attached to Residential Capital, Ally’s mortgage unit, which the board is now considering trying to shed through bankruptcy…Some officials are worried that such a bankruptcy could damage creditor confidence in other banking subsidiaries. Meanwhile, some investors are worried that even if Ally can overcome regulators’ concerns it will face a long and damaging fight in the courts.” As an update, Ally and Rescap’s boards are exploring a bankruptcy filing for the subsidiary and a subsequent sale of some assets to Fortress Investment Group.

At least the markets are relatively quiet. Yesterday’s 10-yr T-note closed at 2.24% - still pretty low. Mortgage supply was relatively low, and with the demand from the Fed and others still strong, mortgage prices had a decent day relative to Treasury prices – not a bad thing. Today we’ll have the January Case-Shiller home price index, which is thought to have been less negative at +-0.3 percent (vs. -0.5 prior). Later we’ll have March’s Consumer Confidence number, expected a shade lower, and the 1PM EST 2-yr note auction of $35 billion. In the early going the debt markets are unchanged from Monday’s close, so don’t look for much rate sheet change.

For today’s humor, here is a video. The first 90 seconds are very good – ask the person in the cubicle next to you to try it – and the trick is even better:
http://biggeekdaddy.com/humorpages/Humor/BestCardTrick.html.