GA has a new law that makes high cost, equity lending illegal. It has run off all of the secondary market lenders, since they can no longer charge whooping fees or high interest rates. But it also has had some un-intended consequences, like killing many FHA deals.
Wait a bit, I'll go look for the past thread on this new law.
I think this is going to change the work distribution for those of us down here in GA, but I haven't determined yet whether it will be the good or bad lenders that are pulling out.. I'm figuring that the vast majority of the workload for refis under those who remain will be sent in one direction... either to the ethical appraisers or the number hitters -- whoever can grab the workload from those who remain.. only question now is which lenders are still here, the predators or the good clients???
P.S. - Excuse my ignorance on this if I am off-base.. I haven't read up on this much at all yet.
Ohhh, I got it now. Watching the news this evening and S&P is Standard & Poor. They issued a statement that they would no longer rate mortgages in GA due to the new predatory laws, and extreme liability. S&P said that the legislature just went too far. Well, some of the lenders went bizerk and said if they are not going to rate GA, then they ain't gonna lend in GA.
But I'm not really sure if it will hurt too much, I never did much for equity lenders anyway.
Big name lenders who dont hold their own paper are pulling out in disturbing numbers over the past week.
As you are probably aware fannie and freddie are gone.
Problem is the liability extends beyond the point of origination. Why buy paper here with legal strings attached when you can go next store with out the headaches?
The legislature WILL get its act together ASAP or they will have a large problem on their hands. You want to move here? Better have cash because you cant borrow the money.
One of my best clients and probably the best run and most ethical people i deal with have until Friday to close loans. Bigger fish to fry without the liability in neighboring states. They will be back though. I think part of this is a huge chess match the lemmons under the gold dome. Lot of pressure last year from King Roy to pass this bill. I think that influenced the reps and senators the most. Afraid not to pass it or get their pork barrel projects killed.
We havent felt it YET. but if something doesnt happen quick (and buzz is that something will happen quick possibly a nullification of the passed house bill that brought on this mess that was passed last year) then things will have to get slow.
I'm not sweating, yet.
Hopefully this will scare alot of people, then when things change (sooner than later) they drop anchor back in state in a month or so, we feel another huge re-fi boom. Wishful thinking? We'll see.
Either way this isnt fun.
Cross your fingers bretheren, hopefully everyone here has the staying power to ride this one out.
Funny thing about politics. As slow as they can be, if its in their best interest things can change overnite......
An ongoing accounting of this situation can be found at www.boortz.com/nealznuz.htm (a radio guy out of Atlanta). Today’s installment is “UNINTENDED CONSEQUENCES? “ You will have to pan down through the other topics of the day.
There is a list of companies that have pulled out of Georgia.
You should all read Neals Nuze daily but for simplicity here is a copy of his program notes Alan has linked above.
Time for an update.
Yesterday I told you that the home mortgage industry in Georgia was in a crisis. A bunch of do-good legislators, urged on by our then-governor Roy Barnes (a lawyer, who should have known better) passed a bill last year that was supposed to curb the abuses of so-called “predatory lenders.”
There were a few – very few – real estate lenders in Georgia who were seeking out the elderly and the stupid. They would loan them money at high rates and would sometimes end up taking the home in a foreclosure action. More often than not what was described as a “predatory loan” was a loan made to some deadbeat with pathetic credit. This is commonly what awaits those who abuse lenders and fail to pay their bills.
Yesterday you learned that mortgage lenders were pulling out of Georgia as a result of this law. Standard & Poor’s was refusing to rate mortgage-backed securities containing Georgia loans. Lenders were laying-off employees. Some were predicting a complete shut-down of Georgia’s mortgage lending industry
Here are some things I’ve learned since yesterday:
Some mortgage lenders are calling their largest builder clients and telling them that they aren’t in a position to make any loans right now, let alone quote interest rates. This is leading some builders to slow down their plans for further construction.
Home mortgage interest rates in Georgia are inching upward. Interest rates in some cases (when you can actually get a loan) are as much as one percent higher than they would be, save for the predatory lending act.
Isn’t this just sweet? Many Georgia lawmakers are referring to this crisis as an “unintended consequence.” Give me a break. It may be “unintended,” but it was damned sure foreseeable. Georgia mortgage bankers and real estate professionals told Roy Barnes and the bills chief backer, Senator Vincent Fort (Democrat, naturally) what was going to happen. And it happened. So don’t give me this “unintended consequences” nonsense.
This, my friends, is what happens when people with marginal intelligence and common sense are handed the immense power that goes with elective office.
So … what are these people saying today? Well, you heard Vincent Fort (history professor at Morris Brown College) on my show yesterday. He says that everybody is overreacting and must misreading his bill. It’s all a plot against the poor and the elderly. Today Senator Fort is saying that this is nothing but an industry attempt to “weaken or gut the bill.” It’s all “part of a campaign of disinformation orchestrated by the (mortgage) industry.
Vincent Fort has a problem here. He has his ego invested in this hideous legislation. He can’t bring himself to admit that he and his fellow legislators screwed up, and that their screw-up threatens to throw Georgia into economic crisis. Fort even challenged me to name the lenders who were pulling out. That challenge is met below.
Oh .. and now you should know that this has become a “Republican” thing. The Atlanta Journal-Constitution, which doesn’t have the sense to be embarrassed by its strong support of this legislation last year, is suggesting that this is all about Republicans trying to protect their mortgage company pals. A headline in this morning’s paper reads “Lenders pose new threat to lending law.” Isn’t that just incredible? S&P won’t rate Georgia loans anymore. Lenders are pulling out. The U.S. Office of Thrift Supervision views the Georgia predatory lending law as such a threat to lenders that it is exempting the institutions it regulates and controls from much of the law. And the Atlanta Journal-Constitution says that this is all the fault of the lenders? It’s the lenders who pose the threat to the law, and not the other way around? INCREDIBLE!
This morning the Atlanta Journal-Constitution also reports “Supporters believe the state Senate, now controlled by Republicans, will be a more receptive forum for the mortgage industry than it was last year under Democratic control.” The writer didn’t name any particular “supporters,” so, who knows? Anyway, see what we got from last year’s Democratic Senate? A mortgage loan crisis.
I’ve said it before. Vast numbers of people who serve in local elected offices, and this includes state general assemblies around the country, are functional fools. They have no real understanding of the consequences of their actions. When votes are at stake they won’t listen to the advice of experts. Getting votes and staying in office is always number one … paying attention to the consequences of their legislative efforts is somewhere down the list.
OK, Senator Fort, So you want a list?
My thanks to Jeffery Dickerson from Dickerson Communications for this list of companies and organizations who have pulled out or are limiting the business they do in Georgia. Have a good read, Senator Fort … and maybe you can call and tell us how all of these companies, all of their lawyers, the Office of Thrift Supervision and many others are all “misreading” your law.
COMPANIES THAT HAVE OPTED OUT OR LIMITED BUSINESS IN GEORGIA
As of 1/15/03
The Veterans Administration now estimates that 14.9% ofGeorgia Veterans will be unable to use their VA eligibility for a home loan and will be forced to seek other sourcing of financing.
Freddie Mac, the 2nd largest investor in the U.S., has announced that they will not purchase any mortgages dated on or after October 1, 2002 that are classified as high cost loans under GA’s new law.
Wachovia Bank, with wholesale and retail mortgage operations, has announced that they will not purchase any covered loans or high cost loans in GA.
Citi-Financial, one of the top 10 U.S. wholesale sub-prime lenders, has announced that they will not buy Adjustable Rate Mortgages in GA.
Bear Stearns, an investment bank that securitizes alt A and sub-prime loans, has announced that they will do no cash out refunds in GA.
Decision One, one of the top 10 U.S. wholesale sub-prime lenders, will no longer participate in any debt -consolidation refunds.
Aegis, a national wholesale lender which specializes in sub-prime loans, and Ameriquest, one of the largest sub-prime retailer in the U.S., have chosen to pull out of the state entirely.
Solomon Brothers, an investment bank that securitizes alt A and sub-prime loans, will not participate in any interest only loans (e.g., loans in which no principle is included in the payments).
Impac Funding Corporation, a national wholesale lender, will not handle any loans in the state of GA at all.
Regions Funding, a large bank with wholesale and retail mortgage operations, will do no warehousing for loans made through government-guaranteed home financing programs (FHA and VA).
EMC Pricing, an investment bank that securitizes alt A and sub-prime loans, has announced that they are temporarily suspending all purchase of cash out refinance loans in GA.
Linx Funding has temporarily suspended lending in the State of GA.
Delta Funding Corporation, due to the lack of a secondary market for covered and “high cost” loans, is no longer lending in the state of GA, is closing its Atlanta Office, and laying off 15
UBS Securities will no longer accept any GA loans unless they are non-owner occupied and/or jumbo loans.
Flagstar Bank has discontinued making stated income/low documentation loans – these are made to only the highest credit grade borrowers – in GA.
Hibernia National Bank will no longer accept interest rate locks for properties located in GA.
First Nationwide Mortgage will no longer allow mortgages will prepayment penalty language that otherwise would have allowed a borrower in GA to choose for a lower interest rate.
Virtual Bank effective November 1, 2002, will no longer offer financing on properties located in GA.
Thornburg Mortgage, a large correspondent investment bank (Sante Fe, NM) purchasing "A" paper / interest only loans, will no longer purchase covered home loans in GA.
Franklin American Mortgage Company, a TN Bank lending in the "A" paper - prime credit market, issued a memo on Oct. 4th, 2002, imposing temporary moratorium on the GA Wholesale Lending market. They are currently still out of the GA market.
National City Mortgage, a national wholesale lender, will no longer purchase “high cost” loans in GA, but will purchase covered GA loans with certain restrictions (no ARM's).
Gateway Funding, a national investment bank, purchaser of "A" paper - prime credit market - will no longer accept GA properties until further notice (dated Oct. 7th). As of this printing, they are still out of the GA market.
Unity Mortgage, rated # 19 by the Atlanta Business Chronicle - Atlanta's Top 20 Retail Residential Mortgage Lenders, will not make a covered or “high cost” loan in GA.
Primary Capital, a GA based wholesale lender, discontinued making “high cost” and covered loans in GA.
Taylor, Bean and Whitaker, a FL based wholesale lender, will no longer make “high cost” loans in GA and they have placed restrictions on covered loans made.
Entrust Mortgage, a Colorado lender of "A" – prime credit paper - will no longer lend in GA.
Option One, a division of H&R Block Financial, will no longer purchase a GA loan requiring a reasonable net tangible benefit (covered loan).
The top four lenders in the U.S. by volume (retail and wholesale) -- Chase Manhattan Corporation, Wells Fargo, Washington Mutual and Countrywide -- have announced that they will not purchase any loans classified as “high cost” in GA.
The following companies have announced that they will not purchase any loans classified as “high cost” in GA:
New Century Financial Corporation, one of the top 10 U.S. wholesale sub-prime lenders;
GMAC, one of the top 10 U.S. wholesale sub-prime lenders;
SouthStar Funding, an Atlanta-based wholesale lender in sub-prime alt A and conventional mortgages;
HomeBanc Mortgage, Atlanta’s number 1 retail lender by volume;
Option One, one of the top 10 U.S. wholesale sub-prime lenders;
Crescent Mortgage, an Atlanta-based wholesale lender in sub-prime alt A and conventional mortgages;
In a related story: During the Xmas holidays I was having dinner with a bank CEO and the retired former CEO of the bank. The CEO stated that he had a very strange thing happen to him that day. One of his correspondent banks is Bank of America and he received a notice giving him 30 days to remove his banks multi-million dollar account because they no longer wanted his deposits. This CEO couldn’t believe it. He called the bank headquarters and got a lady on the line that told him that Bank of America was closing a lot of domestic deposit counts because they were not generating any service fee income. Bank of America is moving into the global banking arena where the service fee environment is much better for them. Sounds strange doesn’t it? Bank of America doesn’t want to do business with American customers and only wants to deal with foreign customers?
About the same time this happened, someone on this forum posted a story about the State of New Jersey passing a law to regulate lenders fees charged to customers that would impact appraisers. Then this story about Georgia. As they say: “What goes around comes around.” This hysterical political demagoging of every emotional issue that comes down the pike has about reached the saturation point, or as someone else put it: “Unintended Consequences.” In recent weeks I have been asked by banks to do things like performing updated appraisals that are not longer legal and do appraisals in other states where I am not licensed. I tell these people this stuff is against the law and they basically are saying: “Screw the law, just ignore the law and do it anyway.” I think that is another “Unintended Consequence” of not enforcing the laws that are already on the books. Another Unintended Consequence is going to be that in a very short time there is going to be a lot less appraisers because of all this BPO, evaluation, AVM, etc., crap.