Fannie & Freddie are pushing more loans back to lenders

According to WSJ, Fannie and Freddie are making banks buy back poorly underwritten loans that have soured.

No wonder we have pre-closing audits, pre-funding audits, post-closing audits, post-post closing audits and so on and so forth. The documentation that borrowers must provide almost never ends at this point. Properly prepare borrowers for the onslaught of documentation requests. Banks don't want loans on their books when they could have sold it to Fan/ Fred.

We Reward The Risk Takers...

I guess the feeling is that we have to. I just finished an article on Forbes about D. Andrew Beal and Beal Bank. He stayed out of the fray during the go-go years from 2004 until 2008, originating no real estate loans. Now his bank is solvent, capitalized and ready to buy loans from other banks who need the $. And of course, there is no TARP money for him, no Fed assistance of any kind. The ratings people thought his model was unsustainable while greenlighting such winners as Lehman, and Bear.

It boils down to who has the most power.

Mortgage Market Craziness

The feds are trying to provide some liquidity to the mortgage market (maybe even accepting those pesky mortgage backed securities as collateral) while the market has priced a 55% change of a rate cut into it. Meanwhile, Homebanc files for bankruptcy, Washington Mutual and Countrywide are on the ropes, and all bank stocks are dropping on fears of everything from mortgage market illiquidity to dwindling investment banking fees.

It's an interesting time to be a loan officer out there looking to build his book of business. I think this is an excellent time to establish myself and someone who is still in the game, who works for a lender who can close and fund (very important) the loan. It's a time to gear up and make those calls to possible referral sources that I've been putting off. To work with developers whose preferred mortgage broker may not be able to close the jumbo loan.

I think I'll be able to increase my book of business during this shake out.

NAR Against Banks Owning Real Estate Brokerages

On one level it's no surprise that the National Association of Realtors is against banks owning real estate brokerages, and on the other hand what does the organization itself stand to lose?

Their bullet points are:

1. The same large-scale consolidation that has taken place in the banking industry itself would likely occur in the real estate business.
Fewer entities conducting real estate brokerage would mean less competition. The result: fewer choices and higher costs for consumers.
2. An additional effect of the proposed regulations would be pressure on bank-affiliated real estate brokers and agents to market and sell other financial products such as insurance, securities and credit cards.
3. Banks could share private consumer data obtained in real estate transactions with their affiliates and other third parties business entities.
4. Banking conglomerates would have unfair competitive advantages. These financial institutions that could operate real estate brokerages under the proposed regulations would benefit from access to capital at lower rates – thanks to federally insured deposits. That benefit is not available to local real estate companies.
5. According to a J.D. Power survey, 28 percent of home buyers had problems with their lenders. Those problems included errors in closing documents, miscommunication of loan terms and unavailable or unresponsive loan consultants or mortgage brokers. That means almost one in three home buyers did not get adequate customer service just during the loan process. How will they be better served by banks during the much more complex process of buying or selling a home?

Of course, it piques me to read #5 on their list. I'm not saying it's not correct, it just always bothers me that lenders aren't doing their jobs to the best of their capabilities.

As a Mortgage Broker who doesn't work for a huge company and works hard to compete in the marketplace, I agree that banks owning real estate companies is a mess. However, there has been an erosion of the seperation of banking institutions and commercial activity for some time (thanks to Sandy Weill & Citigroup when they purchased Traveler's Insurance) and it looks like it's going to continue.

I love the independents. And thankfully here in New York's wacky real estate market there seems to be some room for them...for now.

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