Political: Has the broker channel turned into the dumping ground for mortgage bankers?
I was visiting with a mortgage banker who said they are doing over $100 million a month and all the Harp2 regardless of LTV is being brokered. Why won't they bank this paper? So tell me, who gives brokers a bad name?
When did the broker channel turn into the bankers dumping ground for eliminating banker's risk?
by the voice of reason November 21, 2012 11:51 AM
The answer is really very simple. Their warehouse lenders won't let them do the LTV needed to do the Harp 2 loans unless it is one that they currently service.
Digging through your own portfolio and doing Harp 2 loans makes great sense, You already are responsible for the asset and doing the Harp 2 loans lessons your reps and warrants. If you take on a Harp 2 loan from another investor, all you are doing is adding another underwater loan to your books.
by YATI November 21, 2012 12:14 PM
I disagree Yati....you are missing the obvious point that it is a giant conspiracy to take down the broker market....
I mean what you said is technically correct, but lacks the subversive element that gives you an out when your business model fails...
by Donktard Borker November 21, 2012 12:22 PM
Why can't they fund these loans on their warehouse line YATI? Please explain!
Are you saying since the mortgage banker already did the loan the first time, they get to rewrite the loan through HARP2, make more money AND mitigate their risk? How does that work?
The mortgage banker I was speaking with sells their loans to the big banks, so if they are the ones originating and brokering these loans, why can't they bank them?
My understanding is mortgage bankers can't broker FHA loans, so why are they allowed to broker HARP2 loans?
by the voice of reason November 21, 2012 1:30 PM
HARP 1 didn't releave any of the liability from the loan that is being refinanced. That's why it failed. Harp 2 does.
Warehouse lenders loan based on the value of a property, They go to unheard of leverage ratios in commercial lending because every advance they make is 100% covered by a piece of property. Why in God's name would they be willing to go to 150% LTV and be unsecured on 1/3rd of the loan if there were no benefit for them?
And before you go off on the investors, you need to know what happens in todays world. Fannie can come back at the investor to make whole on a foreclosure on a loan that was made years ago.
Let me give you a very recent example of what I am talking about. A loan was closed in 2006. It quit paying in 2011 and went to forclosure. The original loan amount was for $113k on a property that at the time appraised for $140k. Keep in mind that the loan paid for 5 years as agreed, and there was no fraud involved. Our beloved Government is now forcing us to pay them $108k for their loss after Foreclosure, because they feel the appraisal from 6 years ago was inflated by 11%.
You explain to me how they can foreclose and have a $108k loss on a $113k loan, or why we should be on the hook for anything more that that supposed 11% over valuation. The fucking loan performed for 5 years!!
That's the kind of shit that can be avoided by refinancing a loan under Harp 2.
Warehouse lenders have to look at every loan they allow a customer to fund as one they may own. Why would they ever consider a loan at 150% LTV unless there was some benefit to lower their risk on a loan they are already on the hook for?
I could explain this much better in person.
by YATI November 21, 2012 3:31 PM
Guess the best answer is ... where have you been?
I've always seen Bankers send what they feel are questionable deals via a Wholesale outlet ..... their attitude is simply to Broker any crap that comes across their desk. They get paid and less chance of a buy back.
by PA-MA Lender November 23, 2012 9:21 AM
If that is the case, why should bankers be allowed to broker loans? Why do wholesale companies allow bankers to broker loans?
And as YATI said: "Warehouse lenders loan based on the value of the property."
When is the mortgage business going to get back to lending on value?
by the voice of reason November 23, 2012 11:25 AM