Archive for December, 2010
More banks failed in the United States this year than in any year since 1992, during the savings-and-loan crisis, according to the Federal Deposit Insurance Corp.
Amid high unemployment, a struggling economy and a still-devastated real estate market, the nation is closing out the year with 157 bank failures, up from 140 in 2009. As recently as 2006, before the bubble burst, there were none.
Now, there are more on the horizon.
The FDIC's list of "problem" banks – those whose weaknesses "threaten their continued financial viability"- stood at 860 as of Sept. 30, the highest since 1993. Historically, about a fifth of banks on the watch list end up failing.
A settlement between Ally Financial Inc. and Fannie Mae over soured mortgage loans could shed light on how banks will resolve repurchase demands with Fannie Mae and its sibling, Freddie Mac.
Ally’s mortgage-lending unit, GMAC Mortgage Inc., on Monday agreed to pay $462 million to Fannie to cover potential repurchases on $292 billion in mortgages sold to Fannie.
Over the past two years, Fannie and Freddie have stepped up demands that lenders buy back defaulted loans when they find that the mortgages didn’t adhere to their loan-purchase guidelines. Fannie and Freddie collected more than $9 billion from banks during the first three quarters of the year. At the end of September, another $13 billion in requests hadn’t been paid, including more than $4 billion that have been outstanding for more than four months.
It has been my pleasure to write this column for the last year. It was my mission to use this space to explore what would come next for the mortgage lending industry, with an eye toward the technology that would power the space. Looking back over the work I've submitted, I have to admit to getting a bit distracted.
There was just too much incredible, ridiculous or otherwise distracting stuff to write about in 2010. I approached my computer with the best of intentions, with visions of near-future technology and questions about next steps firmly in mind. In many cases, the headlines of the day pulled me off topic and into a rant. I thank you all for your indulgence.
But it also makes me wonder how many other professionals working in our industry were also distracted by the mainstream media, which tried to make sense of our business at the same time they struggled to put as much spin as possible on the headlines they hoped would sell more papers. It was incredible to watch, a train wreck in slow motion that took all year to crash.
Of course, the bad news is that the crash isn't over. We may be seeing the light at the end of the long tunnel, but there are still plenty of sensational headlines ahead of us. Can we afford to allow ourselves to be distracted from the real work that has yet to be done to guarantee our industry's recovery?
That's not a simple question. On the one hand, I've long been an advocate of getting back to the basic blocking and tackling that gets the work done here: Effective consumer marketing, partnership building, loan underwriting and customer service-focused loan closings. But it's not like the industry's best executives can stand idly by while brand new government agencies get set up, go through the rule-making process and then begin regulating an industry in which they may have no direct experience. Someone is going to have to give these bureaucrats our side of the story.
Likewise, while I might be content to kick back with the mortgage technologists and dream about where the next innovation will come from, I cannot help but weigh in on some of the regulatory matters that will undoubtedly impact the way lenders buy and deploy new technologies. Fortunately for me, I have understanding editors who don't seem to mind all that much if I climb up on a box, ranting and shaking my fist at the sky. I am a lucky man.
I wonder if many of HousingWire's readers are that lucky. Every minute the industry's top executives are focused on trying to rein in an out-of-control government back to reality is a minute they're not focused on improving their own businesses. That opens these leaders up to competitive risk from others who aren't as willing to fight the battles in Washington. Our largest trade groups have seen their membership numbers decimated, leaving them with fewer resources with which to lobby our legislators — not that it would do much good now that the Dodd-Frank Act is already on the books and the CFPB is under construction.
This is not the time to throw up our hands and give the business completely over to the bureaucrats. There will be a real need for leadership next year. I expect the industry's best and brightest to respond to that call, regardless of the costs.
There will be plenty of distractions for me in 2011 as well. I have a feeling that, try as I might to stay focused on the technology that keeps our industry working, a topic I am truly interested in, I may not be able to ignore the other stories that will make news next year. I'll try to deal with them in a manner that doesn't try your patience.
You can always resort to providing direction for my work by sending your suggestions for column topics to my editors at HousingWire.
Best wishes to all of our readers for continued success in 2011.
Rick Grant is veteran journalist covering mortgage technology and the financial industry.
Follow him on Twitter: @NYRickGrant
Think your house is a money pit?
You've got nothing on rapper 50 Cent and his sprawling, 17-acre estate in Farmington, Conn., which has been on the market for three years with no takers.
Keeping up the property costs about $450,000 a year, covering everything from taxes and insurance right down to winterizing the sprinkler system and replacing burned out exterior light bulbs, according to estimates from area real estate brokers.
Add in the cost of occasional big-ticket items like roofs, furnace and painting and annual costs would easily top a half-million dollars.
Allstate Corp has sued Bank of America Corp and 18 other defendants over losses it said it suffered on more than $700 million of mortgage debt it bought from Countrywide Financial Corp.
In a complaint filed Monday in Manhattan federal court, Allstate, the largest publicly traded U.S. home and auto insurer, alleged that Countrywide misled it into believing the securities it bought were safe, and that the quality of residential home loans backing them was high.
Wall Street’s biggest banks, whose missteps caused a global financial crisis and economic slowdown two years ago, were more agile when it came to countering the political and regulatory response.
The U.S. government, promising to make the system safer, buckled under many of the financial industry’s protests. Lawmakers spurned changes that would wall off deposit-taking banks from riskier trading. They declined to limit the size of lenders or ban any form of derivatives. Higher capital and liquidity requirements agreed to by regulators worldwide have been delayed for years to aid economic recovery.
“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup, who estimated only 25% of needed changes have been enacted.
