RSS Feed
Twitter
Facebook
Email
Home“The Giant Elephant in The Room”
Posted by Larry Doyle on September 21st, 2010 12:02 PM |
What is holding back our economy? Why isn’t there more credit available in our banking system?
I have answered these questions numerous times over the last two years BUT many in Washington pretend not to know the answer and pander to their constituencies in the process. Regular readers of Sense on Cents are well aware that the books of our banks–especially our largest money center banks–remain chock-filled with loans that are being valued far in excess of what they are truly worth. Let’s navigate.
I first addressed issues within the second mortgage and HELOC (home equity line of credit) space in Fall of 2008 (Sense on Cents/Second Mortgages). Here we are a full two years later and America still has not received a straight answer and a full accounting by the banks or their regulators as to this “sinkhole” on their books and in our economy.
Let’s dive into this hole, get a little dirty, and again expose the issues within this sector. (more…)
Fair and Fraudulent Mortgage Lending
Posted by Larry Doyle on August 5th, 2009 2:07 PM |
To think that fraudulent mortgage lending practices will simply go away because regulators want them to would be the height of naivete. In fact, given the challenging economic times, I think one could make a case that fraudulent mortgage practices may actually increase on a relative basis. How so? Desperate people will always do desperate things, including fraudulent and criminal acts.
Where can one go to receive a fair deal in the process of getting mortgage financing? What parts of the mortgage market may represent the next wave of fraud? Which firms may currently be involved in these frauds?
Major “high five” to KD and our friends at 12th Street Capital for providing tremendous perspectives on these topics this morning. KD writes:
From the Fair Mortgage Collaborative website . . .
The Fair Mortgage Collaborative is a nonprofit membership organization whose members are individually and collectively committed to providing low and moderate income and minority homeowners and homebuyers access to mortgages with the consumers’ best interests at its core, at a fair rate of compensation. Our approaches and standards work for all homeowners and homebuyers.
KD’s comment: While I certainly applaud their effort, I would make the friendly suggestion they should be looking at FHA lenders and Reverse Mortgage lenders in particular..for those are the bastions of future (and current) abuses.”
Sense on Cents will also not unilaterally bless this organization, but it may be a decent place to start in hopes of finding fair lending practices. Speaking of which, an organization you may care to avoid is Taylor, Bean, and Whitaker Mortgage as the following story from Bloomberg highlights. Obviously TBW, as with any individual or organization, is entitled to due process but until this case is adjudicated, consumers may fare better going elsewhere. KD highlights the Bloomberg story as follows:
Aug. 4 (Bloomberg) — Taylor, Bean and Whitaker Mortgage Corp., the Florida home lender that offered $300 million to save Colonial BancGroup Inc., was barred from making new loans guaranteed by the Federal Housing Administration.
The FHA, citing concern about possible fraud, plans to sanction two top officials at Ocala-based Taylor Bean for providing “false” information to the agency, according to an FHA statement today.
Agents bearing federal warrants searched Colonial’s Orlando offices yesterday, and the Ocala, Florida Star-Banner reported a similar search at closely held Taylor Bean. The firm ranked 12th among U.S. mortgage originators (KD’s comment: I think they were 3rd in FHA lending behind B of A and Wells) in the first half of this year with $17 billion of loans, according to industry newsletter Inside Mortgage Finance.
Taylor failed to submit a required annual financial report and “misrepresented that there were no unresolved issues with its independent auditor,” the FHA said. The auditor discovered “irregular transactions that raised concerns of fraud,” according to the FHA statement.”
KD’s comment: Here is the official HUD News Release on this topic. It is probably even more painful that TBW will be losing their $25bln FHA servicing portfolio and the word on the street is that it will be moved to Bank of America.
Thank you KD and 12th St. Capital for providing these awesome insights and helping us collectively navigate the economic landscape.
LD
Sense on Cents update @ 2:30pm: The Wall Street Journal reports Taylor, Bean to Cease Operations.
Bank Stress Tests: Vigorous or Sham? Let’s Review HELOC Losses
Posted by Larry Doyle on May 20th, 2009 9:26 AM |
If you want to know just how inaccurate government loss assumptions were in the recently released Bank Stress Tests, let’s enter the world of HELOCs (Home Equity Lines of Credit).
Before we address loss statistics on HELOCs, let’s go to the Federal Reserve for a clearcut definition of the product. What is a Home Equity Line of Credit?
A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because a home often is a consumer’s most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.
With a home equity line, you will be approved for a specific amount of credit. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75%) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage.
This mortgage product, often a second mortgage, developed as an enormously popular vehicle for homeowners to tap the equity in their home, especially during the period of significant home price appreciation earlier this decade. Make no mistake, though, it is just another form of leverage. (more…)
Wall Street Plays Washington
Posted by Larry Doyle on July 7th, 2009 5:15 PM |
Politicians and bankers work the stage while the media maitre’d pretends to care how you really feel. Ultimately, the curtain goes down, the lights go on and you’re stuck with a bill that leaves you aghast.
Welcome to the Brave New World of the Uncle Sam economy 2009.
Today Bloomberg releases news that Delinquencies on U.S. Home-Equity Loans Reach Record:
The ABA is not exactly timely with this news in regard to home equity lines of credit; Sense on Cents shared similar color on May 20th in “Bank Stress Tests: Vigorous or Sham? Let’s Review HELOC Losses”:
This brings us to the topic of losses within the banking system and the integrity of the Bank Stress Tests. The Wall Street banks were more than happy to “put on a show” with Secretary Geithner leading the orchestra and the FASB in a supporting role given their relaxation of the mark-to-market. Now we get to revisit the fact that banks are still sitting on hundreds of billions in embedded losses. (more…)
Tags: ABA report on loan delinquencies, American Bankers Association report on loan delinquencies, assumed HELOC losses in Bank Stress Tests, Bank Stress Tests Major Sham, banks need $300 billion, banks will lose more money, Brave New World of Uncle Sam Economy, charade on Wall Street and Washington, Delinquencies on U.S. Home Equity Loans Reach Record, Deutsche Bank report on bank losses, FASB relaxation of mark to market, FDIC comment on Bank Stress Tests, HELOC losses, how much more money do banks need, Kevin Doyle of 12th Street Capital, managed earnings for banks, normalized profits for banks, politicians and bankers are showmen, relationship Wall Street and Washington, U.S. Lenders May Have to Raise $300 Billion, Wall Street Washington show, what are normalized profits
Posted in Bank Stress Test, Banking Institutions, Economy, General, markets, Wall Street, Washington D.C. | 3 Comments »