The Mortgage Man

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Archive for IndyMac Bank

Wachovia Mortgage Curtain Call

Wachovia Corp announces the closing of its …

Wachovia Corp announced today that not only did it cut shareholder dividends by 87%, but it will cease all wholesale mortgage lending.  This does not mean that they are going the way of IndyMac Bank, but it does mean that they are scaling back on their mortgage operations to include retail mortgage origination only.

Many mortgage lenders are moving to a more localized mortgage lending approach in an effort to shore up liquidity and keep the shareholders from running for the hills.  Wachovia mortgage is one of the largest regional banks in the country, and some say they are ripe for a buyout by a large national bank.  This is yet to be seen, but scaling back their risk in the market would certainly be a way to improve their value to potential buyers.

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Mortgage Rates Going Up With Stocks

Yesterday’s stock recovery could prove troublesome for mortgage bonds.

Stock traders had reason to smile yesterday as the Dow Jones made a huge bounceback.  Most analysts believe that it is not a long term recovery, but rather a temporary testing of the floor.  That being said, what is good for stocks is bad for bonds, and the stock recovery had an equal and opposite effect on bonds.

This morning, mortgage bonds are down sharply as the Dow Jones continues its bullish run upwards.  Because of this, it is highly suggested that you lock any outstanding mortgage rates if you have an active loan in process.

Housing starts came in for June at over 100,000 more than expected.  This is not necessarily a long term recovery, but more likely associated with recent building code changes in New York City that created a recent building boom for multifamily dwellings.

The real news is that after tremendous pressure in the financial sector on the stock market, JP Morgan Chase (the nations 3rd largest bank) reported their earnings higher than expected, even after a more than $1 billion write down for bad debt.  This is significant when most headlines are focused on the downfall of IndyMac rather than any underlying good news for the market.

Are We Looking At Nationwide Financial Collapse?

There are currently 90 banks listed on the FDIC problem list.

There is a lot of information being thrown at you in the media and in the blog-o-sphere about the pending doom in the financial markets and the banking sector.  I thought I would write a quick post for you to help lift the clouds of confusion.

The shut down of IndyMac Bank is a big deal because of the shear size of the company.  But, it is not a flag for the collapse of the entire banking system.  Right now there are approximately 90 banks that are listed with the FDIC as a concern for trouble.  This does not mean that they will fail, it just means that they are being watched because of their weakness for various reasons.  These banks are spread over many different states, and vary in size.  For obvious reasons, this list is a higher guarded secret, and should be.

Facts, Myths and B.S.

Fact – If you have less than $100,000 cash in your bank, you are protected by the FDIC for 100% of your deposit.  If you have more than that, might behoove you to diversify your accounts over a couple of different banks (diversification is a good idea in any market).

Myth – Monies deposited in stocks, bonds, mutual funds, insurance policies and municipal securities are insured by the FDIC as long as they are purchased through an FDIC insured bank.  This is not true!!  The insurance provided by the FDIC covers checking, savings, money market and CD accounts up to $100,000 per depositor, per financial institution.

Complete BS – If a bank fails, the FDIC can take up to 99 years to pay you the insured portion of your account balance.  This is not true.  It has been widely spread as rumor and urban myth, but it is 100% unfounded, and in 2007 it was debunked in writing by the FDIC.  In fact, federal dictates that in the event of bank failure, the FDIC is bound to repay money to the consumer “as soon as possible”.  In the past, it has happened as quickly as the next day.

IndyMac Bank Collapses Under Its Own Weight

IndyMac Bank closes.

IndyMac Bank Collapses Under Its Own Weight

IndyMac bank has long been recognized in the mortgage industry as a pioneer in technology and its applications to wholesale mortgage businesses.  They have specialized in unique loans for Jumbo customers and outside the box underwriting with regard to income and asset verification.

I can say from my own experiences with the company on a wholesale level that the news is not a complete shock.  It is significant in that it is the second largest bank in history to close down like this.  But, their internal customer service and general underwriting skills have been nothing to write home about (again, this is based on my personal experience with Florida based wholesale operations).

I have had 2 different friends and associates that have gone to work for the company based on blue skies and empty promises, only to run back to their previous employers begging for forgiveness in less than 90 days.  Those in California who use the bank as their retail checking and savings holders have less to worry about than may be reported in the news.  Any accounts with less than $100,000 are automatically covered by insurance provided by the FDIC.  For accounts with more than that, you still may be safe, but stay tuned to the latest news to see how you will be affected by this in the long run.

While the headlines may be a little scary, it is not the time to go put all of your cash in a coffee can and bury it in the back yard.  Don’t panic, just keep yourself informed.