Effective February 8, 2012 Citimortgage will no longer accept new registrations from Broker Mortgage Channel clients.

Some good news related to the U.S. economy as reported by Pallavi Gogoi, for the AP Business Wire today.
“Martin Foil’s company sells yarn that winds up in clothes from the Gap, Ralph Lauren and American Apparel, and business is growing. He’s buying new machines and hopes to hire as many as 200 workers this year.

When he decided to expand into a shuttered yarn factory in North Carolina, he borrowed $11 million recently from Wells Fargo to buy it.

“It was a Hanes factory that was closed for a couple of years and had some good equipment — we knew we could crank up that place,” said Foil, who also used the loan to buy equipment and another factory in South Carolina. “We have the advantage of being stronger at a time when others aren’t.”

Now that demand is up and business is finally improving for many companies, they’re doing what they always do at the beginning of an expansion — calling the bank and asking for a loan.

And in a stark contrast to the depths of the financial crisis, the banks are saying yes.

In the last three months of 2010, U.S. Bancorp wrote $8 billion in new business loans, the most in two years. JPMorgan Chase added 400 midsize companies as clients. And bank loans overall grew for the first time in two years, according to the Federal Reserve.

“Companies are talking about growth in ways they haven’t for three years,” says Perry Pelos, head of Wells Fargo’s commercial banking.

Loans are one of the best gauges of economic growth. Small and midsize businesses that form the backbone of the U.S. economy take them out to pay for business needs — unlike big corporations, which go to the bond markets for low-cost debt.

Borrowing by smaller companies is being watched especially closely because it may indicate those companies are preparing to hire. So far, the economic recovery hasn’t been accompanied by job growth. Small companies created about three of every five new jobs over the past two decades.

Those companies took a pummeling during the recession. Bankruptcies skyrocketed and led to massive job cuts. Firms employing fewer than nine people accounted for more than half the jobs lost in the first quarter of 2010, just after the recession technically ended, according to the Labor Department.

Many small businesses blame banks for making matters worse by pulling back credit dramatically after the financial crisis.

Vu Thai, president of Efficient Lighting of Buena Park, Calif., wanted more space to house his energy-efficient light bulbs and fixtures at the end of 2008. “Nobody would lend to us,” Thai says.

But demand for Thai’s bulbs increased, and he snagged Home Depot as a customer last year, sending sales up 10 percent. In December, Thai secured a $100,000 loan to install racks and other equipment in his new warehouse. He bought the space with another loan of $1.6 million taken jointly from Bank of America and a government program for small businesses.

In another hopeful sign, about 75 percent of the loans taken out in the last three months were to pay for mergers and acquisitions. That shows that companies that can afford it are buying up weaker competitors as they prepare for growth in the months ahead.

“After surviving a brutal recession, companies are starting to look around them for opportunities to get stronger,” says Laura Whitley, an executive at Bank of America’s global commercial banking business.

Still, while many companies have opened up lines of credit, many aren’t using them yet, reflecting their hesitation. About 25 percent of small businesses applied to renew a credit line in 2010, while only 13 percent tried to get a business loan, according to the National Federation of Independent Business.

U.S. Bancorp CEO Richard Davis says he’s watching closely to see how many companies dip into their lines of credit for cash. He said in a recent conference call that nearly half of the bank’s customers, a record, don’t use their lines of credit at all.”

In light of the recent industry turbulence and RESPA changes, lender fee strategies and intelligence has become even more essential. A competitive fee structure is one way to maintain viability and long-term sales projections. The Heitman Analytics’ Lender Based Loan Report offers insight into how your competitors are structuring their fees in light of the current market conditions.  Lender Loan fee reports detail:

Captures lender fees for both conventional and FHA loans
Captures all Loan Fees Including: application, appraisal, credit, processing, underwriting, document  preperation, tax service, and flood certification
Retail, Wholesale, Correspondent, and Telesales reports are available
Loan fee report can be tailored to your specific parameters
Executive Summaries highlight salient trends across all major lenders and markets
Database or spreadsheet formats are available
Reports for all mortgage products in all channels will be delivered on or about March 1st 2011.

For orders, samples and inquiries please call 800-727-7346 or e-mail us at:  info@heitmananalytics.com

Some good news reported today by the New York Times: “Financial analysts say the nation’s largest banks are ready to begin restoring their dividends in the first half of the year, after a three-year pause to repair their damaged balance sheets. The reversal could put billions of dollars in the pockets of pension funds and retirees who had viewed bank shares as dependable sources of income.

Clues to how big a payout is in store could come as early as Friday, when JPMorgan Chase announces its 2010 financial performance, the first of many earnings reports to come over the next week from the likes of Bank of America, Citigroup, Goldman Sachs and Wells Fargo.

If the big banks deliver a second straight year of rising profits, as many analysts expect, the conditions would be in place for regulators to approve dividend increases by as early as March.

As the financial crisis worsened in 2008 and 2009, all but a handful of financial institutions cut their once-lucrative dividends to just pennies a share, hurting ordinary investors who had come to see them as sources of income. JPMorgan, for example, now has a dividend of 20 cents a share annually, down from $1.52 before the crisis.

Over all, the financial sector of the Standard & Poor’s 500-stock index paid out $51 billion in dividends in 2007. By 2010, that figure had shrunk to $19 billion.

“It’s a significant milestone,” said Gerard Cassidy, a veteran bank analyst at RBC Capital Markets. “The return of dividends signals that the banks are back, and the Federal Reserve wants to inspire confidence in the marketplace so that banks lend more.”

The financial industry has returned to health much faster than expected, helped by an alphabet soup of federal aid programs totaling more than $3 trillion, ultralow interest rates and a surging stock market.

Banks are expected to record $70 billion in profits in 2010, according to Foresight Analytics, a financial research firm. That would be up from $12.5 billion in 2009 but remains about half the level reached in 2006, before the housing market collapsed and the financial system almost came undone.

The earnings reports for the fourth quarter of 2010 are also likely to show that corporate and consumer lending is starting to come back while losses on bad loans are continuing to ease.

Wall Street’s trading businesses are expected to turn in a strong performance because of an increase in deal-making activity late in the year.

This week the Federal Reserve began another round of so-called stress tests of the nation’s 19 largest banks, evaluating their ability to remain financially healthy in the face of a still-anemic economic recovery and tough new regulations that will cut deeply into revenues. Unlike the first round of tests, the findings this time will not be made public.

Before approving a dividend increase, regulators must sign off on a bank’s stress test and conclude that the bank can meet the higher capital requirements put in place by new international agreements and the recent overhaul of financial regulations in the United States. They also must have fully repaid any federal bailout funds they accepted at the height of the crisis.

While the return of dividends will be welcomed by ordinary investors, it remains a delicate issue for the banks as well as regulators and politicians in Washington, said Chris Kotowski, a bank analyst with Oppenheimer.

Many voters are still angry about the government-led bailout that rescued banks after the collapse of Lehman Brothers in 2008. More recently, the return of bonuses on Wall Street has stirred outrage.

“It’s purely a matter of making it palatable to the public,” Mr. Kotowski said. “Banks are fully capable of doing it. But everyone’s afraid of headlines that say just two years after the bailout, the fat cats are getting dividends again.”

Partly as a result, he said, dividends will probably be restored in stages, and it could be take until the end of 2012 for them to return to historical norms.

For decades, shares of banks, along with utilities, were the favored choice of retirees and other conservative investors who looked forward to a steady payment each quarter.

That all changed when the financial crisis struck, forcing Citigroup to cut its dividend as it braced for a wave of huge losses tied to loan defaults.

Although the federal bailout program did not require banks to lower their dividends in most cases, regulators all but forced many banks into making cuts by insisting that they hold more capital in reserve to cushion against losses.

By the spring of 2009, several of the largest banks — including JPMorgan, Bank of America and Wells Fargo — cut their dividend to just pennies a share each quarter.

Just as the banks cut their dividends at different rates over the course of months, the timing of dividend increases will probably also vary widely across the industry. The strongest banks, including JPMorgan, State Street, U.S. Bancorp and Wells Fargo, should be in the first wave this spring, several analysts said.

For Bank of America and Citigroup, which continue to suffer steep losses on mortgages and consumer loans, the analysts said higher dividends probably would not come until later this year or early next year.

Several regional lenders, including Fifth Third Bank, KeyCorp, SunTrust and Regions Financial, are barred by regulators from raising their dividends. None of these banks have repaid their bailout money in full.

In particular, analysts and investors are eagerly anticipating what the chief executive of JPMorgan, Jamie Dimon, will say on the company’s earnings call on Friday, looking for any hint of the bank’s dividend plan. JPMorgan emerged from the financial crisis in far better shape than most of its rivals, and Mr. Dimon has been outspoken about his desire to raise his company’s payout.

“We’re going to be building up a lot of excess capital,” he said in a CNBC interview on Tuesday. “So, we would like to restart a dividend.”

Eventually, JPMorgan’s restored dividend could equal $1.50 a share annually, said Michael Scanlon, senior equity analyst with Manulife Asset Management in Boston. That would equal a yield of 3.3 percent based on its closing price of $44.45 on Thursday.

That would be up from 0.5 percent now. More important, it would catapult the yield on JPMorgan shares to far above the 2.26 percent yield on certificates of deposit, a popular vehicle for investors seeking income.

“It won’t come right out of the chute at that level,” Mr. Scanlon said. “But it’s definitely

Positive ecomomic data from both the Labor and Commerce Departments to close out 2010. It has been a difficult few years for the mortgage industry but it looks like we will welcome in a much stronger housing and mortgage market in 2011.
As reported by the WSJ.com:
“The number of U.S. workers filing new claims for jobless benefits continued to fall last week, in another sign that the weak labor market is slowly improving. Separately, home construction in the U.S. rose in November on the strength of the single-family market, a faint sign of hope for the beleaguered industry. Meanwhile, the U.S. current account deficit widened in the third quarter, reflecting rising imports of consumer goods. Initial unemployment claims fell by 3,000 to 420,000 in the week ended Dec. 11, the Labor Department said in its weekly report. The previous week’s figures were revised slightly upward to 423,000 from 421,000. Economists surveyed by Dow Jones Newswires had expected claims would rise by 4,000.The four-week moving average, which aims to smooth out volatility in the data, continued to fall for the sixth consecutive week. The average declined by 5,250 to 422,750 from the prior week’s revised average of 428,000 to its lowest level since Aug. 2, 2008. The gradual decline in initial claims is a welcome sign after the Labor Department released a disappointing November unemployment report.”

Housing starts rose 3.9% to a seasonally adjusted annual rate of 555,000 from an upwardly revised 534,000 a month earlier, the Commerce Department said Thursday. However, building permits, a gauge of future construction, decreased 4.0% to 530,000. Economists surveyed by Dow Jones Newswires expected overall housing starts to rise by 6.0% in November to a rate of 550,000 from the government’s original estimate of 519,000 in October. The results were driven by a 6.9% gain in single-family home construction to a seasonally adjusted annual rate of 465,000. Multifamily construction, a volatile part of the market, fell by 9.1% last month.”
Strong employment is the key to turning around the housing market and the recent data seems to support the fact that our economy is heading in the right direction.

Our best wishes to our clients and friends for a healthy and prosperous 2011!
- Heitman Analytics-

No real suprise here, but this could at the very least boost CSPAN’s cable ratings :
“U.S. regulators will be under pressure to show lawmakers they are better at policing foreclosures amid widespread evidence that lenders used shoddy paperwork to evict delinquent borrowers.”
The Senate Banking Committee is currently holding a hearing on problems in the mortgage servicing industry and whether they pose a broader risk to the economy or amount to an isolated if nettlesome problem. The issues facing the still-struggling housing market have been exacerbated by allegations that banks have used “robo-signers” to sign hundreds of foreclosure documents a day without proper legal review.

Regulators have been criticized for not catching the widespread flaws, which have reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.Federal bank regulators and all 50 state attorneys general are probing Bank of America (BAC.N), JPMorgan (JPM.N), and other major mortgage servicers, many of whom temporarily halted foreclosures to examine their practices, only to then resume them.

These regulators, including Federal Deposit Insurance Corp Chairman Sheila Bair and Federal Reserve Governor Daniel Tarullo, are expected to provide an update on the probe and how big a threat the documentation problems could pose to the banks and housing market recovery. Representatives from mortgages finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) have also been summoned to appear.

For the complete story check out: http://news.yahoo.com/s/nm/20101201/bs_nm/us_usa_foreclosures_hearing
and don’t forget to set your TIVO

As reported by Reuters, “two U.S. Republican lawmakers said  the Federal Reserve should focus solely on inflation and ditch its “dual mandate” so as “to promote both price stability and full employment”.

So the real question is with no inflation in the economy and none to speak of on the horizon; What are the Federal reseve members suppose to do with all their free time?
Perhaps a trip to Alaska where the Tea Party’s official cheerleader can teach them how to shoot straight and just stay out of the belt way for awhile.

“The pressure from Senator Bob Corker and Representative Mike Pence adds to the pile of international criticism over the central bank’s plan to buy an additional $600 billion in government bonds to try to speed up a sluggish economic recovery.

Opponents worry the program will weaken the dollar and sow the seeds of inflation at home and abroad without doing much to lift U.S. economic growth.

Pence said in a statement that the Fed’s dual mandate policy had “failed” and he would introduce legislation on Tuesday to strike that provision from the Federal Reserve Act of 1977.

“With no explicit plan for when or how this quantitative easing will be withdrawn, the Federal Reserve could do more for the American economy by focusing singularly on maintaining the value of the dollar and protecting the purchasing power of Americans,” Pence wrote.

The European Central Bank is among central banks with a single mandate to focus on inflation. The Bank of England must write an explanatory letter when it misses its inflation target by too wide of a margin, and did so earlier on Tuesday.

“Providing our central bank with a clear and explicit focus on keeping inflation low will serve America better than the broader mandate approach we have today,” Corker said in a statement.

Republican lawmakers, fresh off of midterm election victories that gave them control of the House of Representatives, have sharpened their criticism of the Fed in recent weeks. Some members of the Republican-heavy “Tea Party” movement have pushed for abolishing the central bank.

It was not clear whether either the House or Senate would actually move ahead with a bill to do away with the dual mandate. Senate Republican leader Mitch McConnell said voting on the mandate was “just one of many issues we’ll be working with and thinking about in the coming weeks.”

As of today’s date 143 small banks have collapsed, a significant increase from all of the bank failures last year.  A recent AP report published on 10/8/2010 points out the major reasons for the increase in small bank failures sees to be:

“• Small banks made the riskiest commercial real estate loans – those used to develop apartment buildings, malls and industrial sites. Many such loans soured this year. About 13 percent of all bank assets consist of these high-risk loans. But for banks with $10 billion or less in assets, the figure is 28 percent, according to government data.

• Smaller banks didn’t receive the taxpayer aid given to Wall Street banks. The big banks recovered in 2009 with help from federal bailout money and fees on bank services. And unlike small institutions, large banks have profited from their investments in the resurgent financial markets even as they’ve reduced lending in distressed areas.

• The smaller banks haven’t had to bolster their financial health as much as larger banks have. Regulators forced big institutions to boost their capital cushions and write off bad loans early in the financial crisis. Not so for smaller banks. And unlike larger ones, many smaller banks are supervised by state banking departments that lack the resources or expertise to monitor them closely.

• Banks must write off bad loans as more borrowers fail to pay. And they must set aside money for other loans that might sour. That drain can endanger small banks with little extra cash. They hold a smaller proportion of safer loans than larger banks do. In the April-June quarter this year, banks with $10 billion or less in assets gave up on $13.6 billion in real estate loans that went bad. They had to reserve more capital for the next wave of souring loans. That reduced their earnings.”

For additional information read the full story at:

http://news.yahoo.com/s/ap/20101107/ap_on_bi_ge/us_small_bank_failures

It seems clear that if housing prices can stablize over the next year the ever increasing level of defaults will be greatly reduced. The bottom line is even if a home owner is currently under water on their mortage, most of them would rather pay their mortgage off and simply wait the down market out; as long as there is some hope of recovery. The exact point at which the borrower gives up hope is likely to be far below the current market value of the property.

“Market values versus book values:

At what point does it serve a borrower’s rational interest to default? A handy rule of thumb is to use the underwater threshold at which the outstanding loan balance equals the house’s market value as the location of the default point. However, that underwater point is not consistent with rational behavior on the part of the borrower To understand why, consider a homeowner who is at the underwater point, with the house value exactly equal to the outstanding balance of the mortgage. Should this borrower strategically default? We argue that the borrower still has incentive to stay in the house. Going forward, the borrower is in a “heads-I-win, tails you-lose” position vis-à-vis the lender. If house prices fall further, then the borrower can default immediately, so that declines in house prices translate into losses for the lender.
On the other hand, if house prices rise, then the gain accrues to the borrower. With no downside risk, the borrower will not actually be indifferent as to whether to default. Contrary to what many might assume, the borrower will actively prefer not to default. With both upside potential and downside protection against future losses, the borrower rationally should wait before defaulting. The observation that homeowners will not rationally default as soon as they fall underwater on their mortgages has some powerful implications. First, even though the borrower apparently has no equity in the house because house value is equal to the amount owed on the mortgage, the borrower behaves as though equity were positive by not defaulting. The borrower does not default because the decision to do so is not based on the book, or accounting, value of the homeowner equity, which is zero. Instead, it is based on the economic or “market value” of the equity, which remains positive.

Second, the fact that homeowners distinguish between market and book values of their homeowner equity implies that they also distinguish between the market and book values of their mortgages. This is a simple relationship based on household balance sheet identity. The value of a homeowner’s assets (in this case the house) must equal the sum of liabilities (in this case the mortgage) plus the homeowner’s equity.The big difference between the market and book value concepts for mortgage valuation is that the market value depends on house prices while the book value of the mortgage does not. Based on market value, the default point is the house price at which the benefits and costs of staying are exactly matched by the benefits and costs of leaving. Put another way, the homeowner defaults when the market, not the book, value of equity is equal to zero or, equivalently, when the market value of the house is equal to the market value of the mortgage liability. The default point calculated this way is always lower than that based on book value, sometimes by a wide margin.
This analysis makes clear that, for rational borrowers, the default decision depends on the market value of equity. The market value of equity in turn will depend on borrower expectations about whether the price of the house will recover, restoring positive equity in a book value sense. It will also depend on the perceived cost of defaulting. The possibility of price appreciation and the costs of default move the rational default point well below the underwater mark. Moreover, the market value of equity hinges on the value of housing services relative to current mortgage payments.

For example, suppose that current mortgage payments are low but are scheduled to increase sharply in the future, as with an adjustablerate mortgage. Equity value will be low if price recovery of the house prior to the mortgage reset date is only a remote possibility. In such a case, default is a high probability. However, the low current payments mean that the cost of maintaining the option by not defaulting is also low. In such situations,borrowers might rationally decide not to default prior to the reset date. If so, equity value, though low, will be positive. Such an analysis assumes that, when homeowners default, they turn over the keys to the lender with no further obligation or cost. In fact, default brings with it a variety of transaction costs, including moving expenses and the cost of a lower credit rating. Borrowers will factor these costs into their default decisions. Such costs further lower the optimal default point, sometimes by a wide margin. Finally, we are not taking into account life event triggers. If life events impair the ability of borrowers to keep up loan payments, they may have no choice but to default, even though, according to this analysis, it is in their benefit to hold on to their houses.” For more information on this topic see:
FRBSF Econimic Letter 2010-31 10/18/2010 BY JOHN KRAINER AND STEPHEN LEROY

A few thoughts from John Mauldin’s Weekly E-Letter…John is one of our favorite econimic analysts and his most recent articles can be found at: www.frontlinethoughts.com

“I wrote three years ago that it could be well into 2011 before we get to a “bottom.” That may have been optimistic, given what we will cover in this letter. First, existing and new single-family home sales continue to slide, in the wake of the tax rebate that ended earlier this year. We have declined back to the down-sloping trend line. If you are a seller, this is not a pretty picture.  The homebuilding industry, which was the source of so many jobs last decade (aka the good old days), is on its back. This country needs a healthy housing construction market to get back to lower unemployment, and until the overhang in the foreclosure market is cleared out, that is unlikely to happen.  Lending is tighter, as is reasonable. Banks actually expect you to have the ability to pay back the mortgage you take out (solid FICO scores) and want reasonable down payments. Only 47% of applicants have the FICO score to get the best mortgage rates. (Sidebar: Gary writes, “Furthermore, false appraisals rose 50% in 2009 from 2008. The tax credit for first-time homebuyers cost taxpayers about $15 billion, twice the official forecast, in part due to fraud. Over 19,000 tax filers claimed the credit but didn’t buy houses, while 74,000 who claimed $500 million in refunds already owned homes.” Where are the regulators?) Shilling thinks prices are likely to fall another 20%. Given what I am writing about in the next section, that is a possibility. There is certainly no demand pressure to push up housing prices. Finally, two charts on foreclosures. Residential mortgages in foreclosure are near all-time highs, close to 1 in 21 of all mortgages, up from 1 in 100 just four years ago. That’s got to be bad for your profit models.   Anyone who tells you the housing problem is “bottoming” either has an agenda or simply does not pay attention to the data. I really want to see housing bottom and then turn around and the home builders come back; the nation desperately needs the jobs.”

Our recent volume data supports all of the aforementioned comments made my Mr. Mauldin.  Morevoer, it is important to point out that no matter how low rates fall if we don’t add meaningful jobs to this ecomomy a falling dollar and increasing foreclosures  are going to be the very least of our problems. John also has a way of just getting right to his point:

“If you pay your mortgage, you get to have the American Dream. We CANNOT allow this debacle to continue. It will bring the system down. Who will want to buy a mortgage that is in a securitized package with no clear title? Who will get title insurance? Some judge somewhere is going to make a ruling that is going to petrify every title company, and the whole thing grinds to a halt. Let’s be very clear. If we cannot securitize mortgages, there is no mortgage market. We cannot go back to where lenders warehoused the notes. It would take a decade to build that infrastructure. In the meantime, housing prices are devastated. Whatever wealth effect remains from housing gets worse, and the economy rolls over. This is beyond my pay grade, but there have to be some adults who can make everyone play nice in the sandbox. Ideally, someone in authority at the Treasury, with bipartisan support steps in and says everyone follow these rules, whatever these rules need to be. I had a very spirited conversation with good friend Barry Ritholtz today (of The Big Picture). Barry runs money but is also a lawyer and has a somewhat different perspective. He thinks we do not need any legislation and there is a legal cure. He says that real trained people (lawyers and paralegals) need to look at each mortgage and figure it out, and that it can get resolved. It is expensive to the banks; but I agree, if it is just dollars I don’t care. Fix it. But that is a maybe. Other people I talk to disagree. Some think we need some regulatory fixes. Some think we will need a legislative cure. But if we need to, there need be no finger pointing, no partisan BS. This needs to get solved. Someone took out a mortgage. Some entity thinks they are owed money. Fix the damn paper trail so that happens, whether in a legal if time-consuming manner, in a regulatory fix, or with legislation. Now, that is not to say the people who did this stuff did not commit felonies and such. We can sort that out over time. The longer we wait the worse it will get. Fix the problem and then go round up the bad guys.”

Right on John its time we all figure this foreclosure mess out and get this country moving in the right direction…or any direction for that matter.