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Inside Nonconforming Markets

September 15, 2006

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Correspondent Channel Takes Huge Step Forward in First Half of 2006

Sweeping changes are reshaping the subprime market and correspondent relationships are taking on more prominence than ever before as the origination landscape shifts, a new analysis of the subprime market mix reveals. Of course, mortgage brokers remained the main production engine for subprime lenders during the first half of 2006. Inside B&C Lending estimates that brokers originated 54.9 percent of the total $333 billion in new loans. While that left the broker segment as the single largest... [Includes one data chart.] Read More

Retail Falters, But Wholesale Lenders See Growth Gains

When it came to growth, wholesale lenders were the clear winner in the first half of 2006 – a period that saw the retail share of originations shrink dramatically. According to data compiled by Inside B&C Lending, wholesale lenders produced $275.00 billion in new subprime mortgage through the end of June, or 82.6 percent of the period’s total production. Overall, wholesale volume jumped by a solid 27.3 percent from last year’s midway mark, when lenders used their broker and correspondent muscle... [Includes two data charts.] Read More

HMDA Data Show Increased Disparities, Fed Report Finds

A larger share of borrowers paid high prices for their mortgage credit last year, a new Federal Reserve Board analysis of recently-released Home Mortgage Disclosure Act data reveals. At issue are “rate-spread” mortgages, or first-lien loans with annual percentage rates that exceed the yield on comparable Treasuries by 3 percent or more. For second mortgages, the APR threshold is 5 percent above comparable Treasuries. The Fed added the pricing data... Read More

HOEPA Volume Jumps Significantly – But Stays a Small Part of the Market

Origination of loans covered by the federal Home Ownership and Equity Protection Act increased in 2005, but high-cost loans still account for only a sliver of overall mortgage production. According to a Federal Reserve Board analysis of Home Mortgage Disclosure Act Data, 35,984 HOEPA loans were originated last year, a 53 percent increase from the prior year. Despite that growth, HOEPA loans accounted for less than one-half of one percent of the mortgages originated in 2005. Enacted in 1994, HOEPA requires enhanced... Read More

Patriot Aims to Help B&C Davids Take on Goliaths

Small and mid-sized lenders seeking to compete with the deep-pocketed mortgage banks that dominate the subprime industry are finding solace in an old schoolyard approach: when dealing with a bully, there is safety in numbers. That’s part of the thinking behind Patriot Lenders, a co-operative that aims to help level the playing field through negotiated pricing from vendors and investors. “If people aren’t prepared to do things like join co-ops, they have to ask themselves how they are going to compete,” said Michael Peretz... Read More

Court Decision Could Tilt the Balance on Pre-Screen Credit

Two federal courts are weighing thorny class action lawsuits that, if the industry loses, could potentially make it harder to pitch loan offers to potential borrowers. At issue are lawsuits filed against People’s Choice Home Loans in California and Illinois, in which plaintiffs attorneys accuse the lender of violating the Fair Credit Reporting Act by improperly using pre-screened credit reports to solicit new business through direct mail advertising. The two cases highlight one of a number of issues related to the Fair Credit... Read More

First Franklin Sale Continues Wall Street Foray into Market

One of the subprime market’s best established platforms, First Franklin Financial, has been sold – a transaction that continues a trend of consolidation that is reshaping the industry and leaving more origination capacity in the hands of Wall Street investment banks. “The sale of First Franklin is a clear win-win for all parties,” said David Daberko, chairman and CEO of National City, commenting on the decision to sell the origination shop to Merrill Lynch for $1.3 billion – a deal that is expected to close later... Read More

Ohio Proposes New Rules to Implement Anti-Abuse Bill

Ohio’s attorney general has proposed new administrative rules that would define unconscionable mortgage lending practices and set the table for enforcement of an anti-predatory lending law that is slated to kick in on Jan 1. “We are cracking down on predatory lending practices that have gone unregulated for years,” said AG Jim Petro in a statement announcing the release of the 15-page proposal, developed in consultation with mortgage bankers, consumer advocates and state and local agencies. Petro said the proposal, which is open... Read More

B&C News Briefs

NovaStar Mortgage is expanding its retail origination unit with the purchase of 21 branches from Oak Street Mortgage. In a statement, NovaStar said that the branches will form the backbone of a new retail origination unit that will take the company beyond its current focus on customer retention programs. Overall, the move into retail is expected to boost production by $75 million to $100 million a month... Read More

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