One of the questions that folks in the mortgage conference hallways were asking was, “With BofA leaving correspondent, is someone like Chase going to be next?”
There is a big difference between hallway chatter and Bloomberg headlines like “MetLife May Sell Mortgage Business.” Here’s the gist:
Chief Executive Officer Steven Kandarian, who took the job in May, is planning to exit a business that expanded in June when it replaced Bank of America Corp. as the preferred lender of builder KB Home…Keeping the mortgage unit could divert “resources away from MetLife’s primary focus on its global insurance and employee benefits businesses,” the New York-based company said in a statement. The company, the largest U.S. life insurer, plans to keep a so-called reverse-mortgage business that issues home equity-backed loans to people age 62 or older and jumped to No. 2 in the U.S. this year…MetLife will continue to originate mortgages as it seeks a buyer for the business, it said. MetLife Bank made about $4.4 billion of residential home loans in the first quarter of 2011, accounting for 1.5 percent of total mortgage originations…Today’s uncertain marketplace and regulatory environment require a tremendous amount of resources.
Given the investor scuttlebutt from the conference and general rumors, possible half-truths, and outright misstatements, here are some key points:
-MetLife is/was a solid competitor for wholesale broker business in many parts of the nation – maybe someone like Fortress will buy the mortgage group.
-Bank of America will soon be strictly retail, and only in some states.
-Chase does not buy third-party originated production, i.e., broker business, from clients.
-GMAC, PHH, and SunTrust have varying degrees of operational hurdles, and only buy loans on a mandatory basis one at a time or not at all, and have varying degrees of tolerance for buying loans from smaller companies offering correspondent relationships. Are they ready for all this volume?
Looking at the top correspondents, volume-wise, so we have Wells Fargo, which is grappling with purchase turn time days into the teens, CitiMortgage, U.S. Bank, Flagstar, Franklin American, and BB&T. Rumors of higher capital requirements for correspondent sellers are rampant. Too much competition is one thing, but does the industry really need fewer players? Besides making things easier for pricing engines, will the borrower be better off?
Let’s ask the protesters about unintended consequences.
Any here’s a conference recap from one top industry executive:
“Recap of 4 days in Chicago: ‘All investors suck because of repurchases and all AMCs suck because they overpromise and under deliver. But isn’t Chicago a great place to have this conference?’” So wrote an attendee to me yesterday. But a fair amount of news came out of it, one piece being that, “Fannie Mae and Freddie Mac are increasingly demanding sellers repurchase mortgages that default years after they were made and buy back recent loans that aren’t even delinquent, according to PHH.” “They’re casting the net wider,” Luke Hayden, head of PHH’s mortgage unit.