1-23-09 Story Update – while Citi was the headline my alert on Thursday ( link below), the report was more about the demise of large bank wholesale lending showing how Chase and others are leaving or significantly scaling back leaving a wide open playing field for regional and local mortgage bankers to flourish.
- Citi to Follow Chase out of Wholesale – The ‘Rest’ Are Next (43)
Posted on January 23, 2009 1:00 AM
I got word from my contact on Friday that the wholesale channel will remain open but cut back the numbers of brokers they have approved by 80%+-. Wells Fargo just did the same – word is 90% of brokers will be cut off due to ‘performance’ issues. They will implement strict controls over their brokers closely monitoring locking, pull-through and quality. This is all about getting back in control of their deal flow.
As I outlined in many reports over the past two months — as the sector got busy again, wholesale lending emerged a sloppy, risky mess with a pull through rate of 25-35% across the large name lenders. This scaling back and focusing on the top 10-20% of brokers action will reduce Citi’s wholesale volume significantly but improve margins over time. Because of this they may be able to offer better pricing to their remaining approved ‘special children’ brokers.
In theory this will result in more volume out of each broker mitigating the loss of a large percentage of their brokers today. In a perfect world that is how it is supposed to work — the 80/20 rule…you get 80% of your business from 20% of your brokers so focus on the 20%. The problem with this is that good brokers, those that could become part of the 20% with a little work, and high volume brokers that are sloppy but could change with a little work get cut off.
But in reality lenders do this because they are out of control and losing money. They want to downsize and lay off staff but can’t come out and say that. Once the volume eases up and they are back in control of their flow, what typically happens is the lender just pockets the extra margin, which upsets their loan officers and brokers. Then the loan officers quit and take their brokers with them to their new job. Ultimately the wholesale division shuts down out of frustration going out blaming the loan officers and brokers. I have never seen it happen any other way. – Best, Mr Mortgage
For those of you that did not catch my Chase report and take on where the mortgage industry is headed over the near-term, please see…
- The End of Large-Bank Wholesale Lending – Time For the Mortgage Banker (144)
Posted on January 16, 2009 2:23 PM
What ‘Boom’ is Fannie Gearing up for?
For those of you who think I am crazy with my calls that…the mortgage money is not getting to those who need it; rates really are not that great for most; most can’t qualify due to negative-equity, tightened guidelines and no Jumbo product; ‘funding’ volume is light despite ‘applications’ soaring; pull-through rates are abysmal; and mortgage lending is a mess check out this story that came out last night. Is Fannie Mae gearing up for a refi-boom or foreclosure-boom?
Fannie Mae cutting local jobs
Friday, January 23, 2009, 12:42pm EST | Modified: Friday, January 23, 2009, 1:02pm
Fannie Mae, seized by the government last fall, is cutting hundreds of jobs locally.
“We are realigning the company to focus on our primary objectives,” said Fannie Mae spokesman Brian Faith. “We will actually be increasing on personnel and resources in areas that have to do with preventing foreclosures and loss mitigation.”
The company will likely end the year with the same number of employees it currently has, he said.
Many of the new hires will likely be in the Dallas area, where Fannie Mae’s foreclosure prevention efforts are centralized.
Fannie Mae (NYSE: FNM) has about 6,000 employees companywide, the vast majority of which work at its headquarters in the District and two other Washington-area locations.