Blog Talk Radio Show Summary July 11, 2011: Future of Mortgage Banking (Part II)

2017-12-20T17:34:15+00:00 July 12th, 2011|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , |

Lykken on Lending is hosting a series of blog talk radio shows about the future of mortgage banking.   This week’s show was focused on the future of the secondary mortgage market.  Will it be different?  Will the mortgage-backed security structure survive?  Will the 30 year fixed rate mortgage remain an option for borrowers?  Dr. Michael Lea, of the Center for Real Estate at San Diego State University, joined the show today to give his opinions on the US secondary mortgage market and compared the US market to what works in overseas mortgage markets.  According to Dr. Lea, among his other comments and opinions, the 30 year fixed rate mortgage is at risk (at least it will not be the predominant instrument), the industry needs a better balance of outlets (90% government guaranteed MBS is too much of one thing), the mortgage-backed security as a vehicle will survive but needs some tweaking (like skin in the game), and covered bonds have significant hurdles to overcome before they will be widely available in the US.  He also thought borrowing rates will rise as the secondary market prices in the full cost of the risk, but he thinks the increased yields on private [...]

Blog Talk Radio Show Summary January 24, 2011: Increasing Net Worth Requirements

2017-12-20T17:34:15+00:00 January 31st, 2011|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , |

You are an investor and you have money to invest.  Do you invest it in the mortgage industry?  Those of us who have been here and who have been beat up over the last few years would probably think twice about doing so.  We might think about all the rule changes and all the regulations and all the buy backs.  We might convince ourselves this is not the right place to invest our money.  But there is a lot of money out there that thinks the mortgage industry is a good place to be invested.  Let's consider some of the positives that they see.  Margins are high, competition is shrinking, good service is rewarded, loan quality has never been better, and collateral values will unlikely fall further.  Increasing net worth requirements over the coming months will drive even more competitors from the industry.  Those who are left in the industry will be worthy competitors, but they will be honest competitors.  As many independent mortgage bankers realize the need to raise new capital they will begin to talk to the investment and will consider giving away substantial percentages of their company to raise the capital.  Before they do so, they might [...]

Blog Talk Radio Show Summary January 7, 2011: Keep Your Flow Servicing

2017-12-20T17:34:15+00:00 January 11th, 2011|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , |

Michael Lau, EVP of Phoenix Capital, a specialist in evaluating and brokering mortgage servicing rights, joined the LykkenonLending blog-talk-radio show this week to provide his opinions on the status of the mortgage servicing market.  According to Michael, the market for servicer-to-servicer bulk transfers is just about non-existent.  The only portfolios changing hands are done to move servicing of delinquent or distressed loans to special servicers.  Fortunately, the market for servicing on newly originated loans is still active.  There are a number of servicers buying this servicing, but they are paying very little for it.  Michael sees the price paid for flow serving as being between two and four times the service fee.  I remember being paid six to seven times the servicing fee on 2003 and 2004 originations.  How can servicing on loans that may never pay off (4% note rates) be worth only two to four times?  Servicing on today’s loans is worth more.  Now is a good time to consider keeping servicing on new production, if you can.  Hold on to it for three or four years and then sell it.  You need to have cash reserves, experienced people, and quality systems to be a servicer.  If you [...]

Blog Talk Radio Show Summary November 29, 2010: Loan Officer Compensation

2017-12-20T17:34:15+00:00 December 3rd, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , |

Loan officer compensation rules will change fairly significantly beginning April 1st of next year, a mere four months away, and very few companies have released their new originator compensation plans.  On the Lykken on Lending show today there was a round table discussion about what is known to date and what are we hearing companies are considering.  The plans being discussed range from very complicated to very simple.  One recommendation coming from the show hosts is to “keep your plans simple.  Change is always difficult and the less complicated the change, the easier it will be for originators to understand how it will affect them.  Another recommendation is to back test the plans as though they were in place over the last quarter or so.  The benefits of this will be to ensure the plan is not too expensive for the company and will this help the company show that the consequences of the plan will not significantly impact the originators’ overall compensation.  A third recommendation is to approach the changes with the right attitude.  The changes are coming.  They do not have to be life altering changes. Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lendingwith [...]

Blog Talk Radio Show Summary November 15, 2010: What has Gone Wrong?

2017-12-20T17:34:15+00:00 November 18th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , , , , |

Mortgage rates have moved higher (mortgage security prices have moved lower) and strangely enough QE2 deserves much of the blame.  The Fed intended for the opposite to happen.  As they purchase their $600 billion in long-term Treasury securities, the Fed expected the added demand would drive prices higher and rates lower, not only for Treasury securities, but for mortgage backed securities as well.  Things have not happened as planned.  The Fed began their Treasury purchases on Friday and  MBS prices fell 27/32nds.  The Fed continued their Treasury purchases today and MBS prices are down another 16/32nds.  So what has gone wrong? Some of the issue is that MBS prices rose considerably in the weeks preceding the Fed’s announcement that they were going to buy $600 billion of Treasury securities.  The much anticipated announcement had already accomplished much of the expected end result before it even started.  After the announcement, sentiment toward the benefits from the plan shifted.  Investors worldwide began to doubt the Fed’s ability to control rising inflation when it begins.  Foreign investors recalculated their required returns after seeing the value of the dollar fall to recent lows.  Political power in the US shifted from the Democrats to the [...]

Blog Talk Radio Show Summary November 8, 2010: Election’s Effect on Mortgage Industry

2017-12-20T17:34:15+00:00 November 9th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , |

Glen Corso, Managing Director of The Community Mortgage Banking Project, joined the show today and offered his “inside the beltway insights on the effects the change of control in the U.S. House of Representatives may have on the mortgage industry.  According to Glen, the single biggest effect will come from Barney Frank no longer being the Chairman of the House Financial Services Committee.  Barney has been such a significant influence over mortgage related legislation that without him in the Chairman position, future legislation will likely be less hands-on.  Glen said to expect some technical corrections to the Dodd-Frank Bill.  The corrections may be a little more than technical corrections, but far short of wholesale changes the Republicans would like.  He expects little to be done about Fannie Mae and Freddie Mac now that the Republicans control the House.  The two parties are very far apart in their belief about the proper course of action for Fannie and Freddie and without Democratic control of both the House and the Senate neither party is likely to succeed in pushing their plan.  Glen reminded everyone that funds have already been committed to Fannie and Freddie to replenish their capital as losses continue to [...]

Blog Talk Radio Show Summary October 25, 2010: How Much Quantitative Easing (QE II)

2017-12-20T17:34:15+00:00 October 27th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , , |

  Have you noticed an extra bit of volatility in MBS prices lately?  Do you know the cause?  Last week we saw mid-day price changes four out of the five days.  Three were favorable, fortunately, and one was unfavorable.  We saw unfavorable price changes Monday afternoon, this week.  There are always several factors weighing in on investors as they decide what they will pay for mortgage-backed securities.   The primary factor right now seems to be the Fed’s plan for more quantitative easing (QE II).  QE II will have the Fed buying Treasury securities, adding liquidity to the market to stimulate lending, to promote economic growth, to reduce the value of the dollar,  to make exported goods cheaper to foreign buyers and to make imported goods cost more, to create higher inflation.  New demand for Treasury securities should improve demand for MBS as well, driving up prices.  Too much QE II could add too much liquidity and reduce the value of the dollar too far, increasing inflation too much and driving up the yield required on MBS, reducing prices. No longer is there a question of whether the Fed will buy more Treasury securities, but the question is how much and [...]

Blog Talk Radio Show Summary October 4, 2010: ALTA Views on Foreclosure Issues

2017-12-20T17:34:15+00:00 October 12th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , |

Kurt Pfotenhauer, CEO of the American Land Title Association (ALTA), was the special guest today and his appearance could not have been more timely.  Just last week news of process issues in the foreclosure departments of several of the very largest servicers was brought to light.  Foreclosures in twenty three states have been put on hold by these servicers because the employees processing the foreclosure paperwork and legal documents were not doing so in accordance with required diligence.  This brought up several issues for ALTA members, like can they issue title insurance on foreclosed homes being sold by the foreclosing entity.  Old Republic has already said they will not write title insurance on such purchases until the foreclosure documents on these properties are corrected.  Kurt affirmed the difficulty of writing insurance on these transactions.  He expects much litigation will commence on prior sales of foreclosed homes, but that in the end the procedural issues discussed above will be overcome. Even more timely than the foreclosure issue was that Kurt was able to report that on October 1st a major class action lawsuit against MERS (Mortgage Electronics Registration Systems) was resolved.  The lawsuit alleged that MERS was not a legitimate holder [...]

Blog Talk Radio Show Summary September 27, 2010: Loan Officer Compensation

2017-12-20T17:34:15+00:00 September 28th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , |

The new rules which beginning April 1, 2011 will govern how loan originators (LO or LOs) are to be paid have been the topic of much discussion lately.  There seems to be as many opinions as there are people and there are as many unanswered questions as there are answers.  To try to help bring clarity to the situation and to try to address what is known, Tony Musgrave, mortgage industry veteran and practicing lawyer, joined the show today.  Tony’s general advice on this issue is to accept that change is coming and to begin to prepare for it.  He said that when considering the new rules, first consider where they came from.  The new rules are a result of political and public perception that the old compensation rules incented LOs to take advantage of borrowers and to put them in loan products and at loan rates which were advantageous for the originator, but not necessarily for the borrower.  Tony’s advice is to interpret the new rules with this perception as the basis for your new policies. What is known is that a loan originator cannot be paid an amount that differs based on the terms of the loans he [...]

Blog Talk Radio Show Summary September 13, 2010: Business Strategies through the New Year

2017-12-20T19:52:06+00:00 September 28th, 2010|Categories: BlogTalkRadio Podcasts|Tags: , , , , , , , , , , , , , , , |

Having a strategy and a plan to implement that strategy is always important.  For the mortgage industry, it is  even more important now as the consequences from regulatory changes are likely to change the origination landscape significantly.  Implementing the regulatory changes will take considerable effort in retooling systems, training staff, and monitoring for compliance.  All this will come with a price tag.  Some companies will choose to get out before the changes are to be implemented.  Others will choose to join firms that have the resources to implement the changes.  Some firms will implement policies and controls based on the strictest, most conservative interpretation of the new regulations, and others will take a more common sense approach.  All this is said to support the argument that over the next year or so we will see considerable movement within the industry.  Firms with capital, systems and support in place will be well-positioned to benefit from the movement. So if your strategy is to profitably grow your origination business in a compliant manner, you should have a tremendous opportunity in the coming months.  Your plan should include building capital to pay for the cost of change and to support larger volumes, employing systems [...]

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