| By Paul Muolo pmuolo@imfpubs.com The more bankers like JPMorgan’s Jamie Dimon whine about the regulatory hassles of the mortgage business, the more certain nonbanks relish it. It’s not that they don’t respect Dimon, but many see a major opportunity to steal significant market share away from the megabanks. Over the past two years, Inside Mortgage Finance and its affiliates have detailed the ever-increasing shift in business over to the nonbanks. Does Dimon really care about the mortgage business? When’s the last time he uttered something positive about the business? His comment this past summer about JPM contemplating an exit from the FHA market was one of the most widely read stories of the past few months on IMFnews. After Dimon uttered his remarks, the bank’s PR department scrambled to tell the press, “No, we’re not leaving the FHA market.” Late this week, Kroll Bond Rating Agency issued a report, noting that commercial banks have placed residential finance at or near the bottom of their strategy lists. “Heavy capital and compliance loads, significant market discounts from investors and low yields are making 1-4 family mortgages unattractive assets for commercial banks,” wrote KBRA analysts. Indeed. But there’s a great irony here. When legislators and regulators looked at the smoldering ashes of the mortgage business in 2008, they purposely constructed a new regulatory regime and system that would put much of residential lending in the hands of depositories. The thinking was that depositories are federally insured and regulated and that agencies such as the FDIC would keep close tabs on them, preventing “wild hairs” from creating another Countrywide Financial. But guess what? The complete opposite happened. Industry control is shifting over to fast-growing nonbanks the likes of Freedom Mortgage, Ocwen Financial, Nationstar Mortgage, Quicken Loans, Prospect Mortgage and others… In case you didn’t know it, in the second quarter, Quicken Loans funded $1.84 billion of FHA mortgages, ranking first and dethroning Wells Fargo from its usual perch at the top of the heap. (The ranking excludes correspondent purchases.) In case you’re keeping tabs, Quicken’s FHA volume is now four-times that of JPMorgan’s. So, who knows, maybe Jamie will eventually toss the business overboard… Just how aggressive is Quicken Loans in the mortgage market? Here’s a little story: 18 months ago when I found out that Ocwen had bought the servicing rights to my loan from GMAC, I looked to refinance. I went to the Quicken website, punched in my loan needs and within two minutes – yes two minutes – I received a telephone call from a Quicken loan officer. Are the staffs at Bank of America, JPMorgan and Wells Fargo that aggressive? Something to think about… One last thought on Quicken: the nonbank is controlled by Midwestern businessman Dan Gilbert. You might say that Gilbert is on a roll these days. Not only has Quicken been stealing market share away from the megabanks, but he has been buying up office space in downtown Detroit the past few years, relocating Quicken workers there. If Detroit does indeed “come back,” his investments will look prescient. Of course, Gilbert’s biggest investment of late has been the signing of Miami Heat superstar LeBron James. Gilbert is the majority owner of the NBA’s Cleveland Cavaliers, where James started his career, Might we see LeBron on TV soon, pitching loans for Quicken? Just a thought… And now for a word in favor of the banks: Years ago I used to talk to an M&A specialist on Wall Street whose mission in life was to buy and sell mortgage companies. When many a nonbank subprime lender went public last decade, she always reminded me that in time these newly launched public firms would need a “take out.” In other words, just because they were going public, eventually they would need a bigger parent with lots of money. That bigger parent would be a commercial bank. But this time around, will any megabanks step up to buy Nationstar Mortgage, Ocwen or Walter? At this point in time, such a scenario looks highly unlikely… MORTGAGE JOB NEWS: The Bureau of Labor Statistics released its new employment figures Friday morning. Mortgage bankers added some jobs while brokers cut staff. Ocwen Financial and Nationstar Mortgage are well known for outsourcing U.S. mortgage jobs to India and other countries. But Carrington Mortgage does not fall into that category. The privately held lender said it will spend $3.17 million to renovate a 77,000 square-foot facility in Westfield, IN. It hopes to create 360 “high wage” jobs in the area. Carrington is headquartered in Southern California. MORTGAGE PEOPLE: The National Association of Mortgage Brokers said its President Don Frommeyer will step into a new position as the organization’s chief executive officer. As CEO, Frommeyer will act as the spokesperson for internal and external NAMB communications. The broker trade group no longer has any office space in the D.C. area, and all of its top officers work from the space at their “other jobs.” MORTGAGE FIRMS THAT LIKE TO KEEP A LOW PROFILE: Dovenmuehle Mortgage of Illinois is arguably the nation’s largest “subservicer,” but rarely discloses any financial information about itself. We estimate that it services roughly $80 billion in loans for others. Most of its receivables are owned by others, but not all. The company is privately held, and according to its website, was founded in 1844. Yes, 1844. FOLLOW US ON TWITTER: Inside Mortgage Finance and some of our staffers post daily on Twitter, providing updates to readers. Our Twitter crew includes: Guy Cecala, Paul Muolo, and Thomas Ressler. And of course, Inside Mortgage Finance.
Risk Will Determine What Parts of Your Business CFPB Examines—and How Often The Consumer Financial Protection Bureau has a different take on exams than the prudential regulators. Rather than a stem-to-stern exploration of an institution on a regular cycle, the CFPB says it will be looking at which parts of the company’s business are more likely to cause consumer harm, and doing a quicker, but still thorough, look into those. Learn more about the CFPB’s supervision and examinations – and how you should prepare for and respond to them – in IMF’s Guide to CFPB Mortgage Exams and Enforcement. Other areas of interest: Originations, Servicing, Personnel, Regulatory, Data/Rankings, Mergers & Acquisitions, Nonconforming, Fannie, Freddie, Ginnie Mae/FHA |
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