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I
frequently read a handful of industry
discussion boards, and post on some of
them from time to time, as some of you
know. I see this particular question
being asked and discussed often, so I
thought I would take a stab at it this
morning for you.
Based upon what I read, the conventional
wisdom seems to be that it will 'come
back' (like it was the last several
years) and that it will probably take a
dozen years or so to do that. That
'conventional wisdom' I speak about,
looks like it's coming from people who
joined our industry during the last
industry cycle Aug '98 to late Dec '05,
so in my view they lack a clear picture
in the broader context of the business.
I want to give you some of it's history,
so you'll have a well-rounded view of
the horizon. Subprime, formerly called
B/C paper and/or 'non-conforming,' began
in 1914 (with my initial industry
employer and others). As an eye-witness,
I know it was a around in 1966 when I
started as a twenty-something LO. Fannie
Mae and her snot-nosed step half-brother
Freddie Mac (labeled 'conforming') began
in 1972 and BTW, I went to their baby
showers, etc. and drank a lot of beer!
Since then, Fannie (FNMA) & Freddie
(FHLMC) - let's call them by the
initials they like to use these days
"GSE's" - during their history
have stumbled badly a couple of times
and ONLY because they are Government
Sponsored Enterprises,
they haven't exploded all over everybody
like 'non-conforming' has a couple of
times (but been real close).
The way in which 'non-conforming' was
done - 'originate to distribute'
- during the last 20 years (not before
that), and especially the reckless way
it was handled the last decade, is at
the core of what it's going through, and
what you all have seen recently.
The last full year of originations
before the Aug.’98 to Dec.’05 cycle
when rates plunged and home values
soared to the heavens, give us a
production volume of $65.693 Billion for
Subprime’s 1998 annual total. While
the 2007 annual total for Subprime was
nearly three (3) times that at $181.289
Billion, and as has been reported just 2
weeks ago on the front page of the NMN,
"B&C Vanishes as Volumes Fall
to 7-Year Low."
News reports from December ’03, were
reporting that a Mortgage Broker shift
to Subprime had started, 'conforming'
was off by 1/3. Therefore, for the 5
year period 1998 through 2003, mortgage
brokers (60+% of the market) were
concentrating on 'conforming' loans;
then subprime took off like a rocketship,
only to slide backwards significantly as
we moved into the current industry
correction.
 I
sware, I'm not trying to make your head
explode. Actual number of individual
loan transactions closed/funded in 1998
was 1,021,676 – 2007 it was 933,480.
So, back in 1998 (we worked harder not
smarter), we closed more individual
transactions, and made a whole lot less
money for our troubles!
It is my observation Subprime it will
not be back like it was during the
'98-'05 period (ever again), but IS back
(if you thought it left) right now ...
only YOU don't know who the players are,
and who the big-shot players are going
to be (nor do I) ... because they are
starting/building/growing/ developing,
etc. right as we speak. It's my sense
going forward they will operate nearly
as they did during the period
immediately prior to the start of the
last cycle in August '98 with annual
production totals for the next several
years (about 1/3 of today’s numbers),
and similar to that period. Register
then tell us what you think on our
Discussion Board
Freddie Seeks Appraisal
Comments
Freddie Mac is seeking public comments
until April 30 on the appraisal policies
it agreed to implement as part of a
settlement with New York Attorney
General Andrew Cuomo. Freddie Mac and
Fannie Mae are slated to implement the
new appraisal code by Jan. 1 under the
March 3 settlement with Mr. Cuomo.
"To implement the Code with minimum
disruption to the market and, as
required under the agreement, Freddie
Mac is requesting comments on
operational and implementation issues,
as well as unintended consequences or
risks you identify in connection with
the requirements of the Code,"
Freddie said. The agreement bars Freddie
and Fannie from purchasing mortgages
[Nationwide] from lenders that use
in-house appraisers or subsidiary
appraisal firms. On brokered loans,
lenders must certify that the mortgage
broker did not select the appraiser
... I WONDER WHO ORDERED THIS ONE?
Register
then tell us what you think on our
Discussion Board
Revised RESPA Proposal Out!
On March 14th, HUD revealed it's long
awaited RESPA makeover after six years,
seven roundtables and thousands of
industry comments since HUD first
proposed RESPA reform in 2002, the
agency has at last formally released the
entire contents of its extensive new
proposal for revamping RESPA and
fundamentally altering the closing
process. Mortgage brokers face
critical changes; there's a 60 day
comment period. Be sure to thoroughly
and carefully read the new 131 page
anticipated law changes right HERE
and send in your comments to HUD.
For our mortgage brokerage friends,
don't hold your breath waiting for NAMB!
Register
then tell us what you think on our
Discussion Board and see an Analysis
Got Some Tips You Want To
Share?
If you do, or have a grinding irritation
you wanna scream about, or whatever's on
your mind - we would like you to submit
a short industry relevant article
(approximately 500 words) for next
month's newsletter. We'll publish it
right here! Our readers want some lively
opinions, so why not yours?
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