pcf / topdot

Dud? Joined: 28 Jan 2010 Posts: 11

Do The Math: "We closed our small office around 2008 because the industry and FHA TOTAL Scorecards in a declining market practically guaranteed higher defaults"

You didn't stop doing mortgages because of TOTAL Scorecard. You could of stop selling FHA mortgages. If they kicked you off just say it. If they didn't kick you off what was you company name?

You may have or may not have been kicked from the list. You may or may not have been kicked off for no reason. But, it sounds like you have a bone to pick with them. A bone that, unless you were effected wouldn't need to be picked.

I'm sure some companies have had been booted with out just cause. I am from the area of Topdot and Lend America. Everyone knows what happens at these chop shops. Everyone knows what kind of LO's and the LendingTree list that come out of these places.

The market regulated itself by raising the min credit scores it would take in. They would still take in a 540 while everyone else was at 620. They now have to pay the piper.

Putting yourself in the same boat as Topdot and Lend America does not shed a bright light on yourself.

Posted: Wed Feb 03, 2010 6:01 pm

Neocon- we did stop doing loans specifically because of AUS and TOTAL Scorecard and the lack of quality assurance, RESPA compliance, and lender's inability to recognize that CA Mortgage Brokers have a fiduciary duty.

Loan officers were originating garbage that would be approved via TOTAL Scorecard. VA approvals were just as loose, and agency loans were completely unconscionable. When people make bad financial decisions, the first ones they turn on are originators and lenders. The last straw was when I discovered that a loan officer had violated RESPA and California fiduciary duty laws, and a VOD in the file with the borrower's fax stamp. The lender would not accept my direct instruction, as a corporate officer and broker of record, not to deal with my loan officer and to deal with me directly. I also found a loan from a non-approved broker on a loan officer's desk. Note: as a CA broker, I am responsible for repayment of any undisclosed YSP or risk forfeiting my license whether I knew about it or not.

After loan officers had been so spoiled making high earnings and had financial obligations that were not sustainable, it wasn't worth the risk or liability. On a personal note, myself and the owner had no interest in putting people in over-priced homes or refinancing borrowers into government loans thereby transferring the liability of bad loans to FHA. We decided it was better not to play in a dirty sandbox.

I did have to face a suspense years ago before many of the members in this forum even got into the business, but that was reversed after an informal hearing at HUD's offices. That was over one loan, and I had not been accused of participating in the borrower's fraud- only that the borrower said I might have known. This experience, along with dealing with repurchase and make-whole appeals after the last crash taught me that when mortgages fail, the blame game starts.

I've been in this business for quite a while and am well aware what happens after mortgage bust, and being familiar with the FHA Credit Watch Initiative, did not want to engage in FHA originations that could ultimately result in termination and possible disbarment. Make no mistake, I could be hired at any firm as an originator, and am allowed to originate FHA loans or work as an underwriter, manager, or loan officer for any company. At this point, however, my highest and best use would be to handle repurchase and make whole disputes which should be coming en masse. During the last crash, FNMA and FHLMC would send boxes of requests to companies, and I was the one that had to respond to all them for the company I worked for.

What HUD is doing right now is no different than what agency did in the early 90's. They are casting a broad net that is going to include some originators and underwriters. Its a cycle that repeats itself and you play at your own risk.

Again, you need to go back to my posting history and see how many issues I have spoken out since I joined ML and the Ticker Forums, and some blog stories I have written. Those who know my posting history and what I've written about FHA, know that I have warned the readers of this forum a long time ago that FHA would go after originators. I am by no means, just arriving at the party. HUD's actions were predictable.

In regard to FHA, the program management is irresponsible and the only reason not to limit DTI to sustainable levels is because it would impact market prices. That my friend, is a mathematical fact. HUD states they don't want to make bad loans, yet they still do via FHA TOTAL Scorecard. They also loosened a number of guidelines over the years which they have failed to tighten despite economic retraction that demanded they do so. Instead, HUD deregulated further. The only real tightening that I've seen is the elimination of 95% refinances (with unlimited CLTV) which HUD never should have allowed- let alone in a declining market.

At this point, it appears to me that HUD is bean counting, and using lenders to shift the blame from HUD's own mismanagement. HUD can't even give straight information on their actual default rate or the lack of loss mitigation among servicers. And yes, I have read the testimony of HUD officials, and do not believe HUD has been straight with lawmakers or taxpayers.

While I chose to refrain from participating in what I can only view as fraud via proxy, I don't hold it against those that participated in the FHA program in good faith. FHA TOTAL Scorecard was and still is spitting out approval recommendations with excessive debt ratios, documentation waivers, and marginal credit. Yet, lenders are being held accountable for the results without any type of reform. This is just more of the same BS that was dealt out by the big banks and now emulated by HUD. The loans aren't being underwritten for sustainability, but moreover, servicing curve.

AUS and credit scores undermined the credit quality of the industry. The big banks were the same ones that created fraudulent programs like stated income, option ARMs, and 80/20's. Yet they got bailouts and consolidation. You don't see HUD looking under the skirts of the big banks or launching an investigation into why FHA servicing stinks so bad.

I don't have a problem with HUD cleaning up the sand box, but there are regulations and procedures they must follow under the USC, CFR, and their own handbooks. HUD is required to allow due process. Until companies have the opportunity to respond to allegations and present facts, the companies and individuals should not be tar'd and feathered.

As an industry stake holder who has been calling BS on the industry, I have every right to speak out on this subject. While you may not like it, there are certainly people out there that appreciate my contributions to the topic and the statistics I am tracking. I don't blindly accept HUD's statements or actions, and I hope the industry will get a grip before it escalates into the modern equivalent of the Inquisition. Once due process is thrown out the window, all (including the innocent) are susceptible to losing their rights.

In regard to doing loans with low credit scores, I remind you that HUD did not place a limit on credit scores, and spoke against the practice of limiting credit scores. If you chose to judge credit based on the color of a person's score as opposed to the content of the credit report, you really don't understand credit underwriting or the FHA program. On the other hand, I have numerous examples of FHA TOTAL Scorecard findings that clearly evidence that FHA TOTAL Scorecard cannot be relied upon to produce investment quality recommendations.

Posted: Wed Feb 03, 2010 8:00 pm

i suppose the actions are aimed at getting the pendulum to stop in the middle.

the danger is the equal opposite reaction "what's his name" refers to...

but you know the golden rule.

looks like a force beyond physics will ensure the full swing of said pendulum.

small fish in little ponds are going down. rhyme nor reason need apply, hedge yourself accordingly...

Dud? Joined: 19 Jul 2008 Posts: 13

Neocon Slayer wrote:

Putting yourself in the same boat as Topdot and Lend America does not shed a bright light on yourself.

She is quite attractive though...

At any rate, I'm actually glad LA is done with. At my new job (in a very major bank), everyone who hears that I worked at Lend America shudders.

I know the reputation, I was there for many years, and to be honest much of what's said about them is very true. It's just embarassing to be associated at this point, I'm glad I'm out of there for better or for worse as I can finally legitimize my resume.

Posted: Mon Feb 08, 2010 10:29 pm

its official, until further notice.

what are the odds of a comeback?

Posted: Tue Feb 09, 2010 5:32 am

ML needs to track the FHA induced lender implosions. Take the list of imploded lenders, subtract the ones that were initiated by FHA, and at the end of the year we can compare the implosions from the lending bust to the implosions caused by FHA.

I expect FHA to hit at least 25-50% of current accrued implodes in 2010. Any takers?

Thank you Belz for the compliment. Embarassed

Dud? Joined: 18 Mar 2009 Posts: 1

It appears that another lender on the FHA subpoena list may have closed up - Pine State Mortgage. They were a large mortgage banking firm in the Atlanta market and I beleive that they had offices in FL, NC, and SC also. Their website is gone and phone numbers for their branches appear to be disconnected. May want to check and see if they belong in the Implode list.

Posted: Tue Feb 09, 2010 5:53 pm

In looking at Pine State's statistics, it appears the company made the mistake of too much lending in high default counties and MSA's combined with too little dilution to offset the older originations hitting their default peak.

Their originations were concentrated in Georgia, and just over 60% of their loans were in underserved tracts. The default rate for Georgia is already significantly higher than the US, and the Atlanta MSA, where Pine State did a high percentage of loans, is currently at 15.46%. They needed to increase their endorsements by approximately 80% in low default areas in late 2008/2009 to offset the rising default curve. A decline in endorsements during the last two compare quarters was a sure fire way to blow their compare ratio.

Someone should have had a chat with the CEO a few years ago not to concentrate originations in high default MSA's and underserved areas and to expand production into low default areas. If they would have got into wholesale during the second half of 2008 and offered special concessions for low risk loans while stepping up QC, they probably wouldn't have ended up in this position. But, it looks like they have been winding down for the last few quarters and expected the inevitable.

Anyone have any information or insight on Pine State? I don't know the story behind this lender, but it appears that HUD should have put the company on probation a long time ago based on quarterly performance.