Anonymous writes:
1st?
Anonymous | 01.03.08 - 8:18 am | #

RayOnTheFarm writes:
Do the Scrabble rules allow a trademarked name (i.e. PlayStation) as a target word ? Schadenfreude ought to worth a few points tho.
RayOnTheFarm | 01.03.08 - 8:25 am | #

Tanta writes:
I suspect the rules these guys are playing under can be described as "Stated Spelling."

You notice they're not playing "Clue."
Tanta | Homepage | 01.03.08 - 8:31 am | #

Rob Dawg writes:
Not to besmirch the time honored profession of which you speak so highly but just exactly how hard is it to write a loan that meets the standards for bundling and resale? Pardon my being dumber than a loan officer but I'm thinking a shtml web page and a trw and a one page checklist.
Rob Dawg | Homepage | 01.03.08 - 8:31 am | #

RacerX writes:
A guy I knew ran a First Franklin office (which is now closed) and he said that once the 2/28s and 3/27s were cut there were almost no loans coming in at all. To pass the time they would have Texas Hold'em tournaments in the conf room. Which makes me wonder what Merill's response would have been:

Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much
RacerX | 01.03.08 - 8:37 am | #

Matt writes:
It's all easy if you're a creampuff-- but that's a pretty small business, I'd guess. And probably not terrifically profitable.
Matt | 01.03.08 - 8:37 am | #

dc1000 writes:
nice piece thanks.

all this is true and yet somehow locally here in washington, my business partner who is a mortgage broker, did $70MM last year. just goes to show that this area is really odd.
dc1000 | 01.03.08 - 8:41 am | #

Tanta writes:
Pardon my being dumber than a loan officer but I'm thinking a shtml web page and a trw and a one page checklist.

That's exactly the kind of thinking that got us into this.

I have referred occasionally to "soft guidelines." The "soft" doesn't mean they don't count for much; it means they are not a matter of quantifiable measures.

Just about anyone with time to kill and an Excel spreadsheet can build an "eligibility model" for mortgages that deals with maximum LTV, DTI, FICO, occupancy combinations and stuff like that. (Occupancy can be a simple code: 1 = principal residence, 2 = second home, 3 = investor.)

But when does the sales price need to be adjusted for excess seller contributions? What are "excess" seller contributions? How do you calculate them?

How old can the appraisal be? When can an old appraisal be updated, and when do you have to just get a totally new one? What if two of your comps are pending sales? Does the maximum LTV have to be reduced by five points if marketing time over six months is checked off? Or only if supply/demand imbalance is indicated? Or do you need to check OFHEO to measure a "declining market"?

Can you count seasonal income? What about a car allowance? If the property is an owner-occupied 2-unit, can you count rent on the second unit in gross income?

What if the borrower has only been in title for five months? Can you do a cash-out? If so, can you use a new appraisal or the original appraisal? What about improvements? Can they be reimbursed? What documentation do you need?

The borrower's FICO is 700, but there's one 30-day late mortgage payment in the last 12 months. Does the borrower still qualify?

I could do this for well past the Halo comment length limit. "Loan officers" who have no idea how to answer any of these questions--who only know how to plug numbers into a simple eligibility worksheet--are absolutely worthless in an environment like today. They will simply scoop up a bunch of applications that will get processed (expensively) and then denied, because they just don't have a chance with the "soft guidelines."

And the "soft guidelines" are what these people are expecting training on. It's going to take more than an afternoon.
Tanta | Homepage | 01.03.08 - 8:43 am | #

RacerX writes:
I thought this article was a bit absurd when I first read it. Training their staff would be nothing when compared to getting their customers (the brokers) on the same page.
RacerX | 01.03.08 - 8:46 am | #

Tanta writes:
My point is that there are two kinds of subprime originators: those who know what is subprime because they know, in detail, what "prime" is, and those who have no idea what "prime" is because they've never originated it.

The old problem was that it's hard to turn a prime LO into a subprime LO. They've been trained too well; they just can't wrap their minds around blowing off all the old credit rules.

So we hired a bunch of people off the street and started them as subprime LOs. They were very effective during the boom, because they sure as hell weren't too picky.

Now, we have a little problem. These guys who started in subprime don't have the first idea how to do prime.
Tanta | Homepage | 01.03.08 - 8:49 am | #

NoVa writes:
Off topic but interesting (to me at least)

If Tata, an Indian company, buys these brands what happens? They have the experience. They have cheap labor. They gain access to market share. They have their own steel plant.

The Land Rover brand could lead to them branching off into the truck/SUV market. Now they need to buy a company that can help them with alternative fuels/batteries.

Michigan is doomed.

Jan. 3 (Bloomberg) -- Tata Motors Ltd., the Indian maker of $6,500 cars, will enter detailed talks on the purchase of Ford Motor Co.'s U.K.-based Jaguar and Land Rover luxury auto units and said it aims to reach an agreement in coming weeks...

The talks comes less than a year after the 139-year-old Tata group, led by the Harvard-educated Ratan Tata, bought steelmaker Corus Group Plc. for $12.9 billion. That catapulted Tata Steel Ltd. into the world's top ten steel producers.

Tata Motors began making cars only 10 years ago with the Indica hatchback. It was established in 1945 to build locomotives and other engineering products and entered the truck market in 1954 with technology from Daimler Benz AG.

Source: http://www.bloomberg.com/apps/ne...dykY& refer=home
NoVa | 01.03.08 - 8:51 am | #

RacerX writes:
Even on the prime side there's a big gap in understanding of credit risk between those employees hired prior to and after circa 2004. There are thousands of brokers who do not consider themselves as subprime but do not know even know how to run a loan through DU. Elements of the business that used to be considered fundamental concepts were glossed over during the last few years.
RacerX | 01.03.08 - 8:57 am | #

exRMBSlawyer writes:
The damn shame of it all is that the people on the Merrill whole-loan desk are about the nicest, most professional and most experienced guys in the biz. They didn't make the decision to plunge into subprime crap--that came down from on high (driven, no doubt, by the clamoring of the cap markets people who wanted to squeeze out a few more securitizations). The fact that the whole-loan guys--awash in a sea of garbage--at least made the attempt to do some diligence and maintain some standards surely prevented Merrill from taking even more losses than they will. But since no good deed goes unpunished, they'll be the first out the door (if they haven't been canned already).
exRMBSlawyer | 01.03.08 - 8:58 am | #

Rob Dawg writes:
Tanta, thanks for recognizing I was describing the lending practices that got us here rather than the real practices we should have been following.

As to disintermediation it is my hope that municipalities (city/county) use this period of confusion to make more and more of the transaction part of the recording process and pass those savings on to the consumer. I mean really, expensive title insurance for the buyer and seller?
Rob Dawg | Homepage | 01.03.08 - 9:02 am | #

Hoover writes:
Ahhh Tanta - the tried and true agency LOs are basking in your comments (you trained many of the good ones). Their boring, lower balance, lower profit, less efficient loans are the only game out there now and Hey! Guess What? it takes more than a laptop or internet connection to be able to do one! Paperwork? Who, me???

Well, I guess it's back to Retail Menswear for the rest of them..."let's find a tie to go with that suit"...
Hoover | 01.03.08 - 9:03 am | #

jim a writes:
And the "soft guidelines" are what these people are expecting training on. It's going to take more than an afternoon.

ISTM that at its core, the difference is between a salesman and somebody who is watching over your money. And boy, you've been having some extra snark for breakfast this morning, Tanta.
jim a | 01.03.08 - 9:04 am | #

central_scrutinizer writes:
I could do this for well past the Halo comment length limit.

There is a limit? I thought Doc Holliday disproved the existence of such a limit, a groundbreaking research effort in the field of blogology.
central_scrutinizer | 01.03.08 - 9:07 am | #

dashingdwl writes:
DC (comment @ 8:41 am)

Your enthusiasm is nice but Northern VA/DC area is getting creamed. Same story - rising inventories, foreclosures and short sales, falling prices, lack of financing, no bid. NoVA is NoDifferent.
dashingdwl | 01.03.08 - 9:10 am | #

Hazard writes:
Now if you could only talk Citi into selling their mortgage business, I'd be most happy.
Hazard | 01.03.08 - 9:10 am | #

energyecon writes:
Ah, more bracing than a double espresso - Tanta's double barreled blast o' snark - deeeeeeelicious!

That AND Scrabble references...it just doesn't get any better than this!
energyecon | 01.03.08 - 9:15 am | #

Tanta writes:
Ahhh Tanta - the tried and true agency LOs are basking in your comments (you trained many of the good ones).

I woke up this morning snarky because the idea of "Loan Officer Boot Camp" at FFFC at ML popped into my head and won't go away.

"OK, guys, pick up the 1003 in your right hand. No, your other right hand."
Tanta | Homepage | 01.03.08 - 9:17 am | #

Rob Dawg writes:
That's a pencil Kenny. Remember when I said you had to use the smeary one for this part? Those are called pens.

Tanta,
Could you provide some inside baseball box scores as to whether the real loan origination businesses that are surviving have pricing authority or whether they are also being un-re-anti-disintermediated? By that can they charge their cost plus profit or are they just getting by due to lower volumes but still carrying overhead?
Rob Dawg | Homepage | 01.03.08 - 9:21 am | #

ZackAttack writes:
Reminds me of the software industry in '99. Many marginal players were hired.

The difference there is, after the tech crash, not nearly enough capacity was destroyed. They continued to use marginal players, just from different lands.
ZackAttack | 01.03.08 - 9:23 am | #

sprintf("Habib & sons") writes:
They continued to use marginal players, just from different lands.

Care to expound on that, sir? Unless, I shall let you taste my Punjabi fist!
sprintf("Habib & sons") | 01.03.08 - 9:28 am | #

Tanta writes:
Could you provide some inside baseball box scores as to whether the real loan origination businesses that are surviving have pricing authority or whether they are also being un-re-anti-disintermediated? By that can they charge their cost plus profit or are they just getting by due to lower volumes but still carrying overhead?

The problem everyone is having right now is that the GSEs are the only game in town again.

That means "commodity" product and "commodity" pricing.

It's a commodity product because everyone is now following the GSE rules (assuming they train the LOs to understand them). So you get the same deal with any lender you go to.

"Normally" that would give the 800 lb gorillas the only "pricing power" out there; they're the only ones supposed to be big and efficient enough to operate on the razor-thin margins of prime GSE paper.

However. I am not at all convinced that the gorillas can win this one. First, they're "efficient" in terms of the crap they've been originating for the last five years: no docs, no human underwriters, no appraisal desk reviews, no serious anti-fraud pre-closing diligence, etc. If they have to beef up ops enough now, right at the same time that they're having to beef up default servicing ops, they're no more "efficient" than the Medium Dogs.

And National City, just to use today's example, is a classic Medium Dog. I'm not sure a Big Dog like CFC or WFC can continue to compete with them at loan-level pricing.

Second, the way (historically) you compete in a "commodity" market is by offering--put your coffee cup down--"superior service."

We have defined "superior service" as corner-cutting and rule-ignoring and speed for speed's sake for so long, that it's going to take a while to retrain consumers--and relitters and builders and sellers and so on--to recognize it when it sneaks up and bites them on the ankle.

As soon as "We Don't Offer The Best Rate, But With Our Loan You Won't Go To Jail For Fraud" becomes a workable marketing slogan, we'll be on the way up from the trough. I don't think we're quite there yet.
Tanta | Homepage | 01.03.08 - 9:35 am | #

Rob Dawg writes:
Tanta,
The comparison of proper LOs to the code monkeys of 2000 should give you pause. In the tech crash some suits got the bright idea that they could get rid of the techno-nerds writing 5 good lines of code per day and replace them at 1/4th the cost with overseas code-istans who would write 20 lines per day 10 good, 10 not so good. Their math said that was a productivity increase.
Rob Dawg | Homepage | 01.03.08 - 9:37 am | #

Rob Dawg writes:
CFC is a bank and a mortgage maker. Their business model on the mortgage side just plain old doesn't work anymore. Strangely enough their banking side is a model of efficiency and low overhead. If they get in trouble it will be over getting caught trying to hide some of their mortgage crap in their bank mattress.
Rob Dawg | Homepage | 01.03.08 - 9:44 am | #

Tanta writes:
Yeah, Rob, but until you can do a property inspection with Google Maps, or meet your "Know Your Customer" requirements by using videoconferencing tools to match the borrower's face with the documents, there's a real limit to what out-of-hemisphere call centers can do. And even with that fancy technology you can't protect yourself from being scammed.

The reality is the mortgage business already did all that years ago. AUS, AVMs, online apps, backrooms in India and elsewhere; that we've had for some time. Our problem now is that we have to bring it back home because when you try to do "virtual mortgage origination" you get All Fraud, All the Time.
Tanta | Homepage | 01.03.08 - 9:45 am | #

Tanta writes:
CFC is a bank and a mortgage maker. Their business model on the mortgage side just plain old doesn't work anymore.

If memory serves me correctly, CFC has been off-shoring for a long time.
Tanta | Homepage | 01.03.08 - 9:46 am | #

RayOnTheFarm writes:
or meet your "Know Your Customer" requirements by using videoconferencing tools to match the borrower's face with the documents, there's a real limit to what out-of-hemisphere call centers can do

Amen. The local "small dog" bank that will not write anything above 65% LTV... the branch manager lives in the community and knows most of his customers, before they walk in the door and become his customers. I think they stand a better than average chance of being left standing once the pigs have gone to the packing plant.
RayOnTheFarm | 01.03.08 - 9:51 am | #

Rob Dawg writes:
If memory serves me correctly, CFC has been off-shoring for a long time.
Maybe the 6400 employees here locally do nothing but stuff FedEX envelopes? Man is craigslist ever gonna be busy posting all those "take over payments" BMW leases in a few months.
Rob Dawg | Homepage | 01.03.08 - 9:51 am | #

Outsider writes:
OK Tanta - Tell us what kind of coffee you're drinking this morning! Thanks for the laughs. The Depression had Shirley Temple. We have you. :)
Outsider | 01.03.08 - 9:55 am | #

ac writes:
One question some of you might be asking is this: if subprime volumes have screeched to a halt, what are all those traders on Wall Street doing?

Er... they're trading commodities now.

To make it on Wall Street today you have to be able to seamlessly transition between bubbles almost overnight.

ac | 01.03.08 - 9:57 am | #

LawyerL writes:
In Palm Beach County, the supply of unsold homes - called "inventory" in real estate-speak - has risen to astonishing levels as the housing boom continues to go bust.

"Fifty-five months!" McCabe said.

Actually, there's a 57-month supply - nearly five years - of single-family homes in Palm Beach County, based on the current pace of sales


Can this be possible?



http://www.palmbeachpost.com/bus...? cxntlid=inform
LawyerL | Homepage | 01.03.08 - 10:03 am | #

Tanta writes:
Maybe the 6400 employees here locally do nothing but stuff FedEX envelopes?

Not any more, at any rate.

I've forgotten CFC's servicing portfolio loan count, but the Lazy Woman's Calculation is that with 6400 employees that's well over 1000 loans per employee.

Numbers like that work fine when very few of those loans are delinquent. Default servicing as a pasttime is rather more work than a busy shipping department.

Same thing on the front end: you can't just take mailed-in loan applications any longer when you are awash in fraud. Someone will have to see the borrower. The wholesale lenders have been relying on brokers and title companies to fill out the regulatory "Know Your Customer" forms that say there's a real person here and it's the same one as the name on the docs.

If you can't "outsource" that any longer, you are no longer in the land of 1500 loans per FTE.

Retail is expensive and "inefficient." Always has been. It's hard to do it with loads of expensive "production managers" plus loads of cheap, untrained CSRs in the backroom and no local loan officers, appraisers, and underwriters.

One of CFC's strengths has always been that with a giant product line of every sane and insane mortgage offering, once they got hold of a customer it never left without a loan. CFC has cool tech that will match up a borrower with any of a jillion different offerings until it finds a fit.

At least, that was cool when there were a jillion offerings. Again, once everyone has to fit in the GSE bucket or no-getty-no-loany, all that techno-coolness loses its edge. It costs real money to process loan applications that you end up denying. However you do that processing (from India or from Calabasas or in Podunk down the street from the house.)
Tanta | Homepage | 01.03.08 - 10:06 am | #

arbogast writes:
Has anyone besides me noticed that the market is now reacting to economic news by falling...not by rising in anticipation of lower Fed rates.

This means that the role of leverage in the market is diminishing. Which is good, but not good for permabulls.
arbogast | 01.03.08 - 10:06 am | #

arbogast writes:
LawyerL,

I think it's called, "The 30's are going to look like a walk in the park."

Of course, Jeb, when he's not busily ignoring his drug-addicted daughter, will solve these problems. After all, he's an old real estate agent.
arbogast | 01.03.08 - 10:08 am | #

arbogast writes:
ac,

I would give a very great deal to know if commodities are now a bubble.

I believe they are, but we are also reaching peak oil.

It's sort of like real estate on Long Island. The supply is fixed which tends to keep up prices.
arbogast | 01.03.08 - 10:10 am | #

rich writes:
The political catch phrase of 2008 has been found...

"Greedy corporations squeezing the middle-class."

John Edwards

Every time he says it, he gets votes.
rich | 01.03.08 - 10:11 am | #

Lyndal writes:
It's going to take more than an afternoon.
Tanta

Now, THAT made me spit coffee. I should know better than to pick it up while reading comments.

I worked for a prime lender that was bought by a sub-prime lender and towards the beginning of this mess we were approached with a corporate plan to combine a local sub-prime branch into our prime branch and teach them to do prime loans. Once the cussing was over we very politely (as politely as 20 year vets of the mortgage business can be) declined to participate in the plan.

Excellent post as usual!
Lyndal | 01.03.08 - 10:20 am | #

Clyde writes:
For all of you lucky enough not to make your living in the mortgage swamp, this thread is resonating so much my head is going to explode. Tanta, you are en fuego ! If you work at the Fed or OCC & are reading this, do yourself a favor & put this in front of your boss.
Clyde | 01.03.08 - 10:21 am | #

Rob Dawg writes:
"Months of inventory" are now so high that it is no longer a meaningful statistic. Truth is 3/4ths of that inventory has no reasonable expectation of selling as marketed. The remainder are selling at a slow but normal pace. This will only get worse as demographics and economics inexorably put more houses on the market with ever fewer buyers and those few unwilling to jump at any but the best deals.
Rob Dawg | Homepage | 01.03.08 - 10:22 am | #

central_scrutinizer writes:
rich, you have a good catch there.

Edwards on the left and Ron Paul on the right are the two "populists" most likely to see their campaigns get a huge boost should we slip deeper into recession.

Let's face it, their rhetoric resonates deeply with an American middle class sick and tired of watching rising energy prices, jobs outsourced, and the creative financing boom on everything from cheap particle-board furniture to McTarpits that has led us as a nation into debt slavery.

It wouldn't surprise me to see Edwards or Paul get their respective party noms, but if not, they would make a good third-party ticket.
central_scrutinizer | 01.03.08 - 10:22 am | #

ac writes:
ac,

I would give a very great deal to know if commodities are now a bubble.

I believe they are, but we are also reaching peak oil.

I think the basis that some economists (like Gary Shilling) use to argue that we have a commodity bubble is to compare commodity prices to their cost of production and see if these are out of line based on historical norms and use this as an indicator that excessive leverage has found its way into commodity futures (as the out of line house price-to-rent ratios were an indicator of excessive leverage in the housing market).

Again, if this is a peak oil issue, you have to assume then that everybody suddenly became aware of peak oil on the day that the Fed cut rates at the discount window.

To me a surge of leveraged speculative long positions sounds like a more likely explanation.

End the end though if the Fed does start "printing money" this is one bubble that could be justified. But in the short term I think it's just inevitable that the hedge funds are going to artificially gear up any market they can -- that's their job after all.

ac | 01.03.08 - 10:27 am | #

Unsympathetic writes:
The Fed can't print money, ac. If they do, the cost of servicing the federal debt will increase by precisely the amount that was printed.

The Fed has never had any power. They don't set the rate that banks lend to each other - they can only help prime that pump.

All the Fed can do is jawbone.

And regulate. Of course, that would mean impinging on the efficiencies of the free market, but hey - Congress seemed to think it was a worthwhile function at one point.
Unsympathetic | 01.03.08 - 10:32 am | #

lama writes:
This might assist with the attrition. Criminal background checks.
http://biz.yahoo.com/ap/080102/m...?.v=2& printer=1
lama | 01.03.08 - 10:33 am | #

ac writes:
It's sort of like real estate on Long Island. The supply is fixed which tends to keep up prices.

BTW, one only needs to look at Japan for a counter-example to that. 60% decline in home prices. Worse declines in commercial property prices.

Fixed supply can keep up prices to some extent, but it can't make a guy with a $50,000 salary capable of paying off $1,000,000 mortgage.

Again that's the substance of most bubbles -- start with a legitimate argument and then distort it to some unrealistic extent for profit $$$.

ac | 01.03.08 - 10:37 am | #

Tom O writes:
Agency stuff is a commodity business. Except by taking in their own laundry, these subprime clowns will lack pricing as well as competence to compete in a low volume fixed rate "A" paper environment. Unless these guys learn how to prosper at a point over cost, they are dead.
Tom O | 01.03.08 - 10:38 am | #

ac writes:
The Fed can't print money, ac. If they do, the cost of servicing the federal debt will increase by precisely the amount that was printed.

The Fed has never had any power. They don't set the rate that banks lend to each other - they can only help prime that pump.

All the Fed can do is jawbone.

The congress would have to give them legal authority to print, but there's a history of governments doing just that in times of crisis.

The question is whether this is politically possible with the voters we have and are the markets today so fluid that this would backfire because of massive capital flight.

I lean toward the deflationist camp, but I think it's very foolish to think that runaway inflation can't happen.

ac | 01.03.08 - 10:41 am | #

RacerX writes:
Note that CFC doesn't dominate the retail market like they do the wholesale and correspondent markets. Their technology (CWBC portal) and decentralized platform have allowed them to capture these markets. The focus has historically been on growing market share and reducing cost per loan. Unfortunately there is more risk involved in both dealing with 3rd party originators and with having a decentralized platform (some branches have better quality than others). In today's market controlling risk is more important than gaining market share.
RacerX | 01.03.08 - 10:41 am | #

Barley writes:
Re: "Let's face it, their rhetoric resonates deeply with an American middle class sick and tired of watching rising energy prices, jobs outsourced, and the creative financing boom on everything from cheap particle-board furniture to McTarpits that has led us as a nation into debt slavery"

God Bless America. God Bless Free Markets. God Bless Darwin.
Barley | 01.03.08 - 10:42 am | #

Clytemnestra's Sister writes:
I take it the word "irony" will never appear on the scrabble board, as they don't seem to know what it means.
Clytemnestra's Sister | 01.03.08 - 10:42 am | #

albrt writes:
Sure they do. It's, like, ra-ain on your wedding day.
albrt | 01.03.08 - 10:47 am | #

tj & the bear writes:
ac,

If oil prices are tied to Fed cuts, why has the price risen against all currencies?
tj & the bear | 01.03.08 - 10:48 am | #

Yearning to learn writes:
If oil prices are tied to Fed cuts, why has the price risen against all currencies?

Because speculative money is leaving other dollar denominated assets (such as US stocks) and going into Oil (futures, companies, etc). This pushes the price of oil up in all currencies.

FWIW: I'm not saying that all of oil's rise is due to Fed cuts, however some of it is due to that.
Yearning to learn | 01.03.08 - 10:50 am | #

RacerX writes:
Q: War...What is it good for
A: 6pts in Scrabble
RacerX | 01.03.08 - 10:52 am | #

Tom Stone writes:
LO Boot Camp,Instead of Hayfoot,strawfoot...is it cellphone hand,booger hand?
Tom Stone | 01.03.08 - 10:54 am | #

rich writes:
>It wouldn't surprise me to see Edwards or Paul get their respective party noms, but if not, they would make a good third-party ticket.

My call is that Edwards wins Iowa but Hillary sweeps Super Tuesday 2/5 by moving a bit left (toward Edwards). She then names Edwards her VP.

Wether or not you like Hillary, she has done the right stuff so far to keep from imploding and she has by far the best national organization/presence of any candidate in either party. She has set everything up for 1) Super Tuesday; and 2) the national election. Iowa/NH are just hurdles in her way.

Remember one thing about Edwards. He was one of the greatest trial personal injury lawyers of all time. Companies refused to face him in court, so they settled for millions.

Edwards is in his element when he is pleading a case directly to the people on behalf of the disadvantaged.

Now, he's in his element.
rich | 01.03.08 - 10:55 am | #

tj & the bear writes:
YTL,

May be, but seems odd that the so-called speculative & risk premia never quite go away. Everyone keeps expecting oil to drop back dramatically, and all it does is keep climbing.

Also, given the persistent $90+ range, why haven't new supplies kicked in? Where are those now-viable alternatives?? Lastly, why does OPEC now feel they're happy with prices where they are, whereas they used to fear pricing themselves out???
tj & the bear | 01.03.08 - 10:58 am | #

central_scrutinizer writes:
Rich - I actually have a lot of respect for Edwards; personally I like his style but suspect that he is a bit of a silver-tongued charlatan. I agree with your analysis with one exception. I think Hillary will implode - her organization is strong but I think that the electorate wants change and once the dust settles after NH, there will be a realization that her nomination and likely victory in Nov. means at least four more years of the Bush/Clinton status quo.

The problem for Obama and Edwards is that Hillary can execute a divide and conquer strategy. And I would never underestimate the tactical ability of the Clintons, unctuous though they may be.
central_scrutinizer | 01.03.08 - 11:04 am | #

jim a writes:
In today's market controlling risk is more important than gaining market share. That's a big change, the kind that causes mass extinction events in the animal world.

"OK, guys, pick up the 1003 in your right hand. No, your other right hand." "That's your ARROW hand. Hey you in the back, knock off the horseplay."
jim a | 01.03.08 - 11:05 am | #

Tanta writes:
Sure they do. It's, like, ra-ain on your wedding day.

We love you dearly, albrt, but I've banned commenters for putting that song in my head before today. Just so you know.

If I have to fight fire with ABBA, I will.
Tanta | Homepage | 01.03.08 - 11:07 am | #

jim a writes:
So, you're saying Merril has found their Waterloo? Ducks runs away.
jim a | 01.03.08 - 11:10 am | #

ac writes:
ac,

If oil prices are tied to Fed cuts, why has the price risen against all currencies?

A rise in demand is a rise in demand. Why does the currency matter? If a huge number of dollar based speculators buy futures contracts, that represents an increase in demand for oil. This demand is not measured in any specific currency (it's just more people trying to get their hands on the same amount of oil), so prices should go up in all currencies, right?

ac | 01.03.08 - 11:11 am | #

Anonymous writes:
Is there a way to paint a picture of how GDP is impacted by banking activity related to the subprime derivatives era and then the other side of the coin where banks are going red writing off all the bad era?

I think I recall Citi saying they lost more on subprime than they made during the past 4 years or so, thus what % of that casino money pumped up GDP and how much will this impact GDP going forward?

Im sure some clever economist can play with elasticity on this.
Anonymous | 01.03.08 - 11:12 am | #

jm writes:
Since the volume of mortgages to be originated will be so much less in the coming years, is not the existing supply of experienced and competent prime LOs enough to handle it? Why would anyone want to expend money trying to train probably-untrainable people?
jm | 01.03.08 - 11:12 am | #

Tanta writes:
So, you're saying Merril has found their Waterloo?

Actually, this time I was thinking of "Fernando."

Can you hear the drums, First Franklin?

For many years I haven't seen a 1003 in your hand

Are we closer now, First Franklin?

I can still recall the fateful night you moved to Merrill Land . . .
Tanta | Homepage | 01.03.08 - 11:13 am | #

Tanta writes:
Why would anyone want to expend money trying to train probably-untrainable people?

Exactly. They won't. That's why the FFFC people are still "waiting" for their training. What they don't realize is that HR is working on a different process . . .
Tanta | Homepage | 01.03.08 - 11:14 am | #

bacon dreamz writes:
Maybe you'll get a vowel.

is that a pun?
bacon dreamz | 01.03.08 - 11:15 am | #

Rob Dawg writes:
The FFFC people are still "waiting" for their training.

Good afternoon ladies and gentlemen. Welcome aboard "Golgafrincham Ark Fleet, Ship B."
Rob Dawg | Homepage | 01.03.08 - 11:18 am | #

Anonymous writes:
I read that IRS has new software which help screen for income data on mortgages and I also hear that FICO score processing has been adjusted with new software, so training old or new people will be interesting, as will the people that come forward for loans.
Anonymous | 01.03.08 - 11:18 am | #

RacerX writes:
Looks like Taylor Bean & Whitaker bought a bank

http://www.dailyherald.com/story...tory/? id=104826
RacerX | 01.03.08 - 11:19 am | #

Kicker writes:
Also, given the persistent $90+ range, why haven't new supplies kicked in? Where are those now-viable alternatives?? Lastly, why does OPEC now feel they're happy with prices where they are, whereas they used to fear pricing themselves out???

The biggest reason is the nationalization of the oil industry in many OPEC countries (Russia, Venezuela, Mexico, Saudi Arabia, etc)

The national oil producers aren't the most technically adept at recovering oil in aging and more difficult fields. Profits from these fields have been drained for years to support government spending and social programs instead of being reinvested.

US companies have the technology, but aren't willing to do the deals because the nationals are just looking to buy technology instead of sharing profits.

Oh, and add to the mix the "carbon" premimum. Nobody private company is willing to commit to large new projects until they know exactly what the comming "carbon taxes" are going to be.
Kicker | 01.03.08 - 11:19 am | #

Shylock writes:
Spank 'em Tanta, spank 'em. I'm stunned at the thought of requiring experience and good judgement from a loan officer. Isn't that against the new HR paradigm of turning all skill sets into low cost commodities?
Shylock | 01.03.08 - 11:19 am | #

El Goyo writes:
Deja vu all over again... I was working for a hard money lender in the early 80's. They had ridden the gravy train through the go-go bubble of the late 70's but, alas, were losing their shirts on the loss indemnifications inherent with the fractionalized deeds of trust they were servicing. They made the ill-conceived decision to switch to FHA/VA lending. The direct endorsement program had just been implemented so they hired a couple of old timers from FHA to kick start the process.

Result? Bankruptcy. You can't take a "loan officer" whose only prior prequal tool was a mirror (fog=approved) and teach them all the nuances of GSE lending.

I'm sure this scenario is playing itself out the few subprime shops that still have a breath of life.
El Goyo | 01.03.08 - 11:22 am | #

Tanta writes:
Looks like Taylor Bean & Whitaker bought a bank

Oh. Boy.

I didn't just snort coffee through my nose. I shuddered so hard that I spilled it on my lap.
Tanta | Homepage | 01.03.08 - 11:30 am | #

RacerX writes:
So your familiar with their work?

If you were a FHLB Who's collateral would you rather lend against TB&W or Indymac?
RacerX | 01.03.08 - 11:33 am | #

Anonymous writes:
Rob Dawg:
Good afternoon ladies and gentlemen. Welcome aboard "Golgafrincham Ark Fleet, Ship B."

Tanta, you're on your game today, but that has to be the comment of the day.

I haven't laughed out loud (I'm still chuckling) at a comment on any message board in a long time.
Anonymous | 01.03.08 - 11:33 am | #

jim a writes:
Exactly. They won't. That's why the FFFC people are still "waiting" for their training. What they don't realize is that HR is working on a different process . . .
"So they've scheduled us on the great space arc with all the phone sterilzers...."
jim a | 01.03.08 - 11:35 am | #

tj & the bear writes:
A rise in demand is a rise in demand.

Exactly! So, ac, why do you insist that the demand is speculative as opposed to real? Wouldn't the relative lack of volatility dispel your theory that speculation is the dominant driver here?
tj & the bear | 01.03.08 - 11:44 am | #

MTHood writes:
This is my rate sheet

This is my phone

This is for doodles

This to call home
MTHood | 01.03.08 - 11:45 am | #

Tanta writes:
If you were a FHLB Who's collateral would you rather lend against TB&W or Indymac?

It has been several years since I was last presented with a TB&W deal to look over. As I was ready to swear on a stack of bibles that it was a stinking pile of adverse selection that somebody wanted me to play lender of last resort for, it is of course possible that those loans weren't "typical" of TB&W production.

If they were, I'd rather get out and push IndyMac that ride on a TB&W.

I am assuming that TB&W wants a bank just like the First Franklin AEs want a bank.
Tanta | Homepage | 01.03.08 - 11:46 am | #

rich writes:
>The problem for Obama and Edwards is that Hillary can execute a divide and conquer strategy. And I would never underestimate the tactical ability of the Clintons, unctuous though they may be.

Obama is a good man with a great future. He will probably be President some day. But you will see, starting tonight I think, that America in 2008 wants a fist-shaker President.

Obama isn't a fist-shaker.

Edwards is a good fist-shaker.

But Hillary is even better. She can shake her fist while smiling.

When it becomes clear that fist-shaking is in, I think Wall Street will panic. There is only one non-military power greater than Wall Street, and that is a political party on a tear.
rich | 01.03.08 - 11:53 am | #

RacerX writes:
To be fair, I just checked TB&Ws delinquency rate (compare rate for current period and 2yr) on FHA connection and it's not that bad. Suprisingly Wachovia's was much worse than I would have expected
RacerX | 01.03.08 - 11:59 am | #

Pondering the Mess writes:
It is most amusing - gee, verifying income, making sure people can pay back the loan, wondering if all those bad loans = dead company - what a laugh!

The real funny part is that until housing prices return to reality based upon incomes, we won't need many loan officers at all. I think that the sub-prime geniuses will have plenty of time to play Scrabble and Playstation in the near future. But, hey - like they said during the Bubble, incomes vs. prices don't matter, so their new "charge it all to the credit card since I have no job" lifestyle should be fine by them! Argh!
Pondering the Mess | 01.03.08 - 12:11 pm | #

Broker writes:
Dear Tanta, I hear GSE people have strong knowledge of complex analysis. Working with "imaginary numbers" that would make sense. Is that true?
Broker | 01.03.08 - 12:17 pm | #

Kirk Spencer writes:
I'm waiting to see if the Wilder (aka Bradley) effect still applies. We won't know in Iowa - not enough to be sure, anyway. But if it's there, we'll see it in New Hampshire and South Carolina and Nevada.

If it applies, then Edwards will pretty well sweep it up on Feb 5. If it doesn't, then... it's too close to call between HRC and Obama.
Kirk Spencer | 01.03.08 - 12:20 pm | #

RacerX writes:
GSE People?
RacerX | 01.03.08 - 12:26 pm | #

Broker writes:
GSE people- people who couldn`t make it in the 'real' world. They studied too much complex analysis.
Broker | 01.03.08 - 12:37 pm | #

Yalt writes:
"GSE people- people who couldn`t make it in the 'real' world."

Hmm. Back here in what I like to think of as the real world the brokers and nonagency shops are dying en masse and the GSEs seem to be the only survivors.
Yalt | 01.03.08 - 12:44 pm | #

Tanta writes:
GSE People?

Oh, you know who he means.

It all has to do with the fact that Fannie Mae once accounted for its hedges in a way that Broker doesn't understand, instead of doing it the other way that Broker doesn't understand. Broker pipes up in the comments every once in a while to remind us of that, in case we forgot and ever spoke of GSEs in tones of less than utter horror.
Tanta | Homepage | 01.03.08 - 12:44 pm | #

RacerX writes:
The grocery store chain Winn Dixie used to refer to themselves as "The Beef People". I've never heard of anyone refer to themselves as the "GSE People".
RacerX | 01.03.08 - 12:53 pm | #

sdtfs writes:
As I said before, CFC had been clicking along at about 100 REO's a week showing up on the Countrywide foreclosure blog site, now it has leveled off to about 3700, with no rise in the numbers (for December). What are the odds that they are choked with properties? Anybody out there know non-paying CW borrowers still living in their non-recourse homes? How long?
sdtfs | 01.03.08 - 1:10 pm | #

Broker writes:
Dear Tanta, I am realy glad that at least one person understands what`s going on at GSEs. I used to be realy worried.
Broker | 01.03.08 - 1:14 pm | #

Yearning to learn writes:
Also, given the persistent $90+ range, why haven't new supplies kicked in? Where are those now-viable alternatives?? Lastly, why does OPEC now feel they're happy with prices where they are, whereas they used to fear pricing themselves out???"

note in my post that I was only discussing that a move in the Fed Funds rates can/will change the price of oil in ALL currencies, NOT that it is the sole cause of persistently high oil

Clearly, there are structural supply elements to the oil story as well... (for example, Cantarell oil field)

However, don't neglect the influence of speculation (by hedgies, etc) on the current oil price.
Yearning to learn | 01.03.08 - 1:17 pm | #

cactus_pocus writes:
" I take it the word "irony" will never appear on the scrabble board, as they don't seem to know what it means.
Clytemnestra's Sister | 01.03.08 - 10:42 am | #

Sure they do. It's, like, ra-ain on your wedding day.
albrt | 01.03.08 - 10:47 am | "

"ironic" maybe doesn't but the word MORONIC does.
cactus_pocus | 01.03.08 - 1:40 pm | #

Ken writes:

I'm thinking a shtml web page and a trw and a one page checklist.
That's exactly the kind of thinking that got us into this.
...
I have referred occasionally to "soft guidelines." The "soft" doesn't mean they don't count for much; it means they are not a matter of quantifiable measures.


Let me step to the defense of software for a second and say
these are (mostly) quantifiable, and this is one case where I know of what I speak--I actually wrote an automated underwriting system for an OC lender. It was way more complicated than an a single web page or even a monstrous 37 page spreadsheet (it involved some cutting edge AI technology), but it was a solvable problem. In essence it took rules that were written down in notebooks (for the reference of the underwriting staff) and put them in terms the computer could understand. DTI, LTV, appraisal age, 30-day lates, value trends in the neighborhood, all could be accounted for.

I was a bit surprised to learn that the rules themselves weren't born of the lender's judgement, they were guidelines written by investors. Generally speaking this lender wanted to originate and sell loans, not hold them. The goal of the automated system was to find programs that the loan "fit into", i.e. it met all of the published criteria.

Where this automated system breaks down in my opinion is the classic garbage-in-garbage-out conundrum. If the income is fabricated the DTI is meaningless. If the appraisal is gamed the LTV is meaningless. A human being can intuitively say there's no way this guy really makes that much money cutting grass, there's no way that crappy apartment is really worth half a million dollars, etc. I'm sure many underwriters had that intuition, but if the investor is still willing to buy the loan who were they to say no?
Ken | Homepage | 01.03.08 - 3:26 pm | #

jim c writes:
I could spend an afternoon responding to this.

I've originated both conforming and non-conforming paper. There really isn't that big of a difference.

Believe it or not, non-conforming underwriters are more than familiar with the mystical art of reading an appraisal, computing income utilizing high tech forms such as W-2's, paystubs and even the occasional 1040.

To insinuate that the folks at First Franklin aren't capable of understanding prime paper because they had No doc and 100% financing is beyond insulting. (btw, ff hasn't offered No doc in years, and when they did, it made up less than 1% of their total business).

Correct me if I'm wrong, but I'm pretty sure Fannie and Freddie offer 100% financing with 6% seller concessions...that must be infinitely confusing to you, perhaps you can get someone from subprime to come explain it to you.

Also, First Franklin doesn't have loan officers. They have wholesale account executives who deal with loan officers in various banks and broker shops. (FF loan officers work for Nationspoint, the retail division).

Next time you want to throw barbs like the pompous ass that you are, get your facts straight.
jim c | 01.03.08 - 3:29 pm | #

RacerX writes:
One of the best managers I ever worked with was a branch manager for FF. He had several years of success at managing both subprime and prime wholesale branches. He also had a loyal following (for good reason) of employees that had worked with him for years. With that said, I agree with the notion that converting a subprime office to prime would require substantial time and effort.

More than technical skill or ability is the change in customer base (big change since your relationship was built on your ability to get loans done), change in mindset of your sales force (AEs can no longer be focused on a transaction basis but on setting up high volume customers), change in mindset of your ops staff (the credit bar is raised. What was a good loan a few months ago is no longer a good loan). The skill set is similiar but different. It would be cheaper to buy a prime wholesaler than to try and convert a subprime shop.
RacerX | 01.03.08 - 5:04 pm | #

Tanta writes:
Correct me if I'm wrong, but I'm pretty sure Fannie and Freddie offer 100% financing with 6% seller concessions

You're wrong.

Allowable contributions on LTVs over 90% is still 3.00%. Freddie just sent out a new Bulletin announcing that the concession limits specifically apply to CLTV, not just LTV.

Calling someone else a pompous ass whose facts aren't straight can be, you know, bad karma.
Tanta | Homepage | 01.03.08 - 6:09 pm | #

Anonymous writes:
Re: The reality is that they've been doing no-doc no-down no-sweat stuff for so long--some of them have never done anything but--that they're sitting around with the PlayStation waiting for someone to tell them how a 30-year fixed rate loan with a down payment and verified income actually works. Which is to say, their bosses are sitting around in the busier conference rooms trying to figure out if it's possibly worth the time and money to turn these people into mortgage experts instead of corner-cutting order-takers.

I thought I said that?

DH
Anonymous | 01.03.08 - 7:45 pm | #

Anonymous writes:
Hey there Tanta:


FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.

Re: Correct me if I'm wrong, but I'm pretty sure Fannie and Freddie offer 100% financing with 6% seller concessions

You're wrong.

Allowable contributions on LTVs over 90% is still 3.00%. Freddie just sent out a new Bulletin announcing that the concession limits specifically apply to CLTV, not just LTV.

Calling someone else a pompous ass whose facts aren't straight can be, you know, bad karma.
Tanta | Homepage | 01.03.08 - 6:09 pm | #
Anonymous | 01.03.08 - 7:47 pm | #

Tanta writes:
Anonymous@ 7:47 pm, I fail to understand your comment.
Tanta | Homepage | 01.03.08 - 8:32 pm | #

jim c writes:
Right.

Variances to the MyCommunityMortgage Product that includes a number of enhancements not available in the standard (revised) version of MyCommunity. These variances are detailed below:

* Interested Party Contributions up to 6%

For MyCommunityMortgages with LTVs greater than 90%, the maximum allowable amount of interested party contributions may be up to 6% of the lesser of the properties sales price or appraised value. The lender may ignore the following DU/DO message:

Based on the data entered, the total amount of interested-party contributions exceeds the maximum allowable contributions of 3 percent for this CLTV. In order for the loan to be eligible for delivery, the amount paid by interested parties that exceeds the maximum allowable contributions must meet requirements stated in the Selling Guide, Part X, Chapter 6, Section 602

I addition to all applicable special feature codes required, the Lender is required to use Special Feature Code “207” to identify MyCommunityMortgages with LTV’s greater than 90% where the amount of the interested party contributions is greater than 3.00% but less than or equal to 6.00%
jim c | 01.03.08 - 8:45 pm | #

ExMBS Lawyer writes:
karmic!
ExMBS Lawyer | 01.03.08 - 11:01 pm | #

HC writes:
Make them prime loan officers? I'd call that's a generous rehabilitation!

If what these subprime con men have done were popularly understood, they would be surrendering the Playstation controllers and making license plates for the state.

How well and good for them we have such a docile and obedient press!

An uninformed public is like a bright rubber ducky: you can squeeze and it goes BLEEBLE BLEEBLE.
HC | 01.04.08 - 12:27 am | #

BOB writes:
'You notice they're not playing "Clue."'

ROFLMAO
BOB | 01.04.08 - 2:36 am | #