The next shoe to drop in the war against mortgage brokers has fallen. After the induction of HVCC and on 8/1 HERA/MDIA TILA rules, I thought we were already frustrated. I have seen many brokers throwing their hands up in exasperation wondering what else could possibly happen. The proposed Jan 1 2010 rules for elimination of YSP are looming out there as the fatal blow. But instead came the round house hook that caught everyone by surprise -- sort of.
The sordid tale of TBW and Colonial bank came to a nasty, fiery end this week. The two of them have been propping each other like two drunks at last call slurring "No I'LL drive! I'm in better shape than you!" Those who know TBW have been expecting this for years. They have done deals that others have turned down for years. They have priced through the market when others have blasted away. Colonial kept providing TBW the moonshine that allowed them to behave that way. The issue is that Colonial was on the other side of the table funding 10-20% of the remaining correspondents out there. That unwinding of credit has yet to begin. TBW also filled the hole with small bankers and credit unions on the correspondent side which will make those institutions less fixed rate competitive and take away a key govie source.
Bottom line TBW ran financially suspect, riddled with risk issues that HUD and FHLMC put an end to. Brokers and small correspondents have lost an arm at a key time. The rest of the industry can't fill the hole due to the credit line restraints if rates go into the 4%s. Margins should improve if we have any balls or brains.
But if you are a broker... as stubbornly independent and entrepreneurial as you may be; do you want to be known as the last of the great buggy whip makers? Crunch the numbers under a wide variety of scenarios; be careful of the assumptions you make. Anything is possible. The second V of the W recession is coming with Deutche Bank predicting today that close to 50% of Americans being underwater by 2011. Who are you going to refi?
I'd love to hear your feedback on this....on line or off line...
I'm happy my company had no lines with either of these companies!!
Posted by: Frank Mancino | August 06, 2009 at 01:43 PM