Monday Morning Cup of Coffee: Goldman's $1B FHFA settlement?

Monday Morning Cup of Coffee: Goldman's $1B FHFA settlement?

America’s lost decade; FHA fees drag; Mortgage lending, RMBS slow to a crawl

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Commentary: Mortgage Job Losses Mounting

Editor's note: After publishing this commentary, I've since been contacted by a spokesperson at Fifth Third Bancorp., who said it would be inaccurate to characterize the move at Home Equity of America as "exiting the business," as I did in my commentary below. The spokesperson noted that the company "will no longer be able to provide products and services to some of its brokers," and said that the memoradum refers only to the company's decision to eliminate it's outside sales function. The spokesperson further clarified that an inside sales team at Fifth Third Bank's Residential Wholesale Mortgage group will continue to originate loans through the HEA brand. Lastly, the company representive said I didn't cite an additional memo sent to brokers that discussed expanded offerings through Fifth Third. None of this information was contained (or even implied) in the original memo I cited as the source of my speculation, so I think I can be reasonably forgiven for taking statements such as "Home Equity of America is no longer able to provide you with products and services" to be synonymous with an exit. Prime lenders start feeling heat: We're now starting to see prime lenders exit due to market conditions. (Yes, you read that correctly: prime lenders). Case in point: Home Equity of America, a mortage lender specializing in prime seconds and operating in 23 states, sent a letter to its brokers this week notifying them that it will exit the business some of them that it would no longer fund their loans. HEA is a subsidiary of Cincinnati-based Fifth Third Bank. In the letter (update: now available online at the Mortgage Lender Implode-o-Meter) senior vice president Linda Maples cited a "challenging economic environment" as the core driver behind the company's decision engage in what the company called a "streamlining effort." April 30th will be the last day pipeline loans will be funded, with this past Tuesday being the final day the company accepted new loan submissions, according to the letter. We're told that while the prime market in general isn't likely to see much upheaval, that same logic doesn't apply to second liens, which have fallen out of favor with Wall Street at nearly every credit level. This would seem to be the first item of evidence backing that sort of logic up. It seems pretty clear to me at this point that the credit crunch that has bitten subprime lenders is quickly becoming an Alt-A issue, too -- that begs the question of whether prime is next, and to what extent both Alt-A and prime could be affected by a loss of investor appetite for certain loan products.
Larger than expected?: Rumors are surfacing today that GE Money's confirmation yesterday that it had laid off somewhere around 770 employees at its WMC mortgage unit is only part of the story. Anonymous sources informed Housing Wire today that an additional 250 or so employees, rather than being terminated on the spot, were given 30-day notices on Thursday -- bringing the current number of layoffs at the Burbank-based lender to more than 1,500 of the company's original 2,000 or so employees. Most of the alleged 30-day pink-slips were delivered to senior team members, sources suggested. If true -- and we've not be able to obtain any confirmation of the rumors from official sources -- no wonder the PR folks at GE aren't talking to the press. GE may be "committed to the business," as we heard in a recent earnings call, but at this point it appears that commitment will extend only to a shell of what the subprime lender once was. HSBC's Decision One, out?: We're also hearing that Decision One Mortgage, HSBC's U.S.-based subprime lending arm, is taking even more steps to stop the bleeding in its mortgage operations. Sources suggested to Housing Wire today that the company has decided to close 13 of its 15 offices nationwide, leaving only its Phoenix and Charlotte, N.C. offices behind. Calls to company officials and spokespersons went unreturned, leaving at least some doubt in our minds. But if this week's experience with GE is any indication (we'd heard about the pending WMC layoffs on Tuesday), it seems likely at this point there is some truth to the buzz. We've been paying attention to HSBC's plans for Decision One for some time now, having published commentary nearly one month ago speculating on the lender's hazy future prospects after HSBC announced its exit from correspondent lending on March 23. (After all, a reported $10 billion in loan impairment charges will usually lead to a healthy amount of skepticism.) Cramer, the mortgage M&A expert: Overly-caffeinated CNBC stock commentator Jim Cramer went on a limb this week on his show, stating that Merrill Lynch could be looking to purchase Calabasas-based Countrywide Financial. The mind of the Blogos: In the interest of staying on the bleeding edge of industry trends, I'll finish up with some blog posts that caught my eye this past week: If you've got insight on happenings in the mortgage finance industry, send an email to pjackson@housingwire.com. What you know could help out a fellow industry professional just trying to do their job (or, as this week proved, give them a head start on looking for a new one). As always, I'll roll out the plain-English legal disclaimer and remind readers that the information addressed in our weekly commentary here at HW is highly speculative in nature and deals with rumors and unconfirmed reports. I'll also note for readers that I own no securities in any of the companies discussed in this commentary, although I do have short positions outstanding on fellow subprime/Alt-A lenders IndyMac (NYSE:NDE) and Accredited (NASDAQ:LEND).
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