From Bloomberg:
US Mortgage Lenders Are Starting to Go Broke
The US mortgage industry is seeing its first lenders go out of business after a sudden spike in lending rates, and the wave of failures that’s coming could be the worst since the housing bubble burst about 15 years ago.
There’s no systemic meltdown coming this time around, because there hasn’t been the same level of lending excesses and because many of the biggest banks pulled back from mortgages after the financial crisis. But market watchers nonetheless expect a string of bankruptcies broad enough to trigger a spike in layoffs in an industry that employs hundreds of thousands of workers, and potentially an increase in some lending rates. More of the business is now controlled by independent lenders, and with mortgage volumes plunging this year, many are struggling to stay afloat.
“The nonbanks are poorly capitalized,” said Nancy Wallace, chair of the real estate group at Berkeley Haas, the business school at University of California, Berkeley. “When the mortgage market tanks they are in trouble.”
In 2004, only about a third of the top 20 lenders for refinancings were independent firms. Last year, two-thirds of the top 20 were non-bank lenders, according to LendingPatterns.com, which analyzes the industry for mortgage lenders. Since 2016, banks have seen their share of the market shrink to about a third from about half, according to news and data provider Inside Mortgage Finance.
Many of the so-called shadow lenders will emerge from this slowdown relatively unscathed. But some lenders have already stopped operating or scaled down dramatically, including and Sprout Mortgage and First Guaranty Mortgage Corp. Both specialized in riskier lending that isn’t eligible for government backing.
First Guaranty, a company that according to court papers is majority owned by fixed-income giant Pacific Investment Management Co., filed for bankruptcy, saying it failed after it made loans earlier this year that dropped in value. It was holding onto those loans until it had enough to bundle into bonds and sell to investors, and it had been temporarily funding them with a line of credit.
Once interest rates started to climb, lending volume shrank across the industry, according to court papers. That meant the company could no longer find enough new loans to bundle, or get enough financing to keep operating, said First Guaranty’s chief executive officer, Aaron Samples. Firms included Flagstar Bank and Customers Bank are owed about $418 million, according to court documents.
First Guaranty employed 600 people before it filed bankruptcy in June and made $10.6 billion in loans last year, according to court records. Days before seeking court protection, the company fired 471 workers because it couldn’t get enough financing to overcome a cash crunch.
First.
joyce says:
August 20, 2022 at 12:42 pm
“I thought it was an athletic conference?”
https://en.wikipedia.org/wiki/Big_Ten_Academic_Alliance
Okay, thanks. I did not know about that (https://en.wikipedia.org/wiki/Big_Ten_Academic_Alliance)
Is it the same or different than the athletic conference?
https://en.wikipedia.org/wiki/Big_Ten_Conference
How many water rescues tomorrow?
Happy Monday folks!
https://tinyurl.com/2p8w79f8
Liking my 3.79 gas this morning.
Citi economist says inflation in the UK could hit 19 percent next year.
joyce says:
August 21, 2022 at 12:11 pm
“Is it the same or different than the athletic conference?”
The Big 10 is first and foremost, an athletic conference. Athletics (primarily football) drive revenue, and the B1G, along with the SEC, are by far the most valuable collegiate athletic conferences. Last week, the B1G signed a new media rights deal that will pay the conference over a billion dollars a year, resulting in each school receiving ~70million dollars per year. I’m not sure whether other conferences do this, but the B1G also collaborates academically, in the areas noted in the wiki that I linked. One of the best examples is the B1G Cancer Research Consortium, where schools collaborate on clinical trials and in other research areas. All in all, the invite to the B1G is literally the most important event in Rutgers history, and NJ residents should be very happy that their state university is a member.
https://www.bigtencrc.org/
Liking my 3.79 gas this morning.
How about that Inflation Reproduction Act!
Gas is $3.35 in my area. Was down to $3.21 2 weeks ago then went up to $3.49.
the invite to the B1G?
Sounds to me like they bought their way in.
Just sayin’
Why is the Clifton Costco $3.95 while Wayne Costco $3.79?
1987
It’s the pumpkin discount
Parts of DFW have gotten 12” of rain since the storm hit last night. Water rescues are being performed on major highways. Some areas got 3” of rain in one hour this morning.
Wow, 3 inches if rain in one hour.
Hurricane Henri set a record for one hour of rainfall in Central Park in 2021 at about 2 inches in one hour.
Hurricane Ida promptly beat the record shortly thereafter at 3 inches per hour.
Crushed
It is still pouring. I keep getting flash flood warnings on my phone. Glad I live on a hill.
Stupid Polacks don’t know any better.
1987 Condo says:
August 22, 2022 at 9:41 am
Why is the Clifton Costco $3.95 while Wayne Costco $3.79?
10 went north of 300.
Worth paying attention as Jackson Hole looms.
I’d like to get ahead of the curve and address the $1.4 trillion car loan issue that is looming. I propose we forgive auto loans. The economic impact of having to pay $48,000 for the average car and $730 average monthly payment will have similar impact as the current $1.7 trillion student debt burden.
Glad for my hedge chi, and that I rolled it up to the 420s last week…getting good momentum on delta as SPY accelerates under the strike…
Was keeping an eye on it after our prior discussion…last week was saving/costing me about 25% directionally. Today I’d be down 2x what I am without it…50% coverage…
Last week went to drop jr off at VT paid $3.49. You would never think there was a trucking shortage driving on 81. They rule the road, defensive driving 7 straight hours.
Nice thunderstorm rolling through the area. Wish it was accompanied by some rain.
There’s the downpour.
Trick, it is slow but more mellow, you can take 95 to 66 to 29 for bulk of way prior to crossing over. When we visit Charlotte, I let my wife take the 29 segment. 2 lanes, rolling hills, some lights, no trucks to speak off.
Have to try it, plan on going back down for a few football games this year.
Condo,
At least the car assets have utility, more than I can say for some liberal arts degrees.
Chi — The derogatory language aimed at Polish immigrants is in poor taste.
Also, what misguided guinea inserted the letter c into Polak? There’s no right way to read as written.
Lighten up, Francis
500 luxury apartments to be built as part of the Garden State Mall makeover in Paramus. Scheduled to start in 2024.
Those liberal arts degrees get you into the NFL in a Big Ten school. In fact, its the number one choice. Guess it has some value after all:
1. Arts and sciences
Arts and sciences, or liberal arts, can mean a lot of things. It can be for those who try their hand at writing, anthropology, or literature. Because of this, it makes sense that many college football players gravitate toward these fields.
https://www.sportscasting.com/these-are-the-most-popular-majors-for-college-football-players/
Just got a text from Water is awesome, that’s a site that sends out texts on how much to water your lawn. Says “your watering advice this week is O inches”. Ya think? Lol
“500 luxury apartments to be built as part of the Garden State Mall makeover in Paramus. Scheduled to start in 2024.”
Parking there is already a Sh1tShow at the holidays. Adding residential will be horrendous. No-one is living there without a car and most of its closed on Sundays.
Is this the same crew that were trying to do this at the Sheraton on Rt17 where it meets the Thruway?
and my handle is Chicago………
Boomer Remover says:
August 22, 2022 at 4:26 pm
Chi — The derogatory language aimed at Polish immigrants is in poor taste.