Jottings - May 18, 2012
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I am going to start out today by striking a little fear. I believe that the days of the small independent mortgage banker may be doomed unless we start doing something today. I have heard from a reliable source that by the end of 2013, the government (through the GSE's) will require a net worth of $10,000,000. Now whether this is true or not, I do not know. But up here in the northwoods we have a saying: Where there is smoke, there is fire. This article does not provide details, but it does give detail on tightening approval standards.
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Access to the TBA market is also getting much tighter. If you get a line from a dealer with no margin required, that dealer still must post $$ to the Fixed Income Clearing Corp. From what I gather, the FICC will be charging an initial margin of 2%, effective June 1. Many dealers are passing that down or will be passing that down to you for you to gain access to the TBA market. My answer to this problem is through your warehouse lender. I believe that the warehouse lender should provide, as part of your financing arrangement with them, a working capital line to support your revenue management hedging position. I have brought this up to a few people, including one warehouse lender, who could not dispute the fact that it seems to be a good idea. I'd be willing to do a conference call on this issue right after Memorial Day if anyone is interested in this theory, send me a message. To understand more of the margin requirements and the TBA market and it’s interworking, take a look at this and this. Bottom line is, this market which was designed specifically for you mortgage bankers to hedge your position is now being dictated on how it is used by the New York Fed, the SEC, and others. You have any contacts with these groups? Thought so...
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How do you gain access to these groups if you are an independent mortgage banker? You have a voice in the Community Mortgage Banking Project. I encourage all independent mortgage companies to, if not join, at least check them out. Up above in the "Thought for the Week!" section is the CMBP link. Let me know if you checked them out as a result of this jottings.
You know, I have been in this business for 20+ years. It should be soooo easy. Want a house, get a mortgage. Just promise to pay the money back. If you do not, we take the house. Now, LO's can only make so much. Instead of hiring LO's, we need compliance officers and attorneys. What went wrong? Time to self police the bad apples that got into this business and screwed it up for all the good guys.
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