August 27th, 2012

Super-Sized Loans, Part III: Explaining Debt Ratio

Posted by at 12:53 pm

A common problem for both jumbo loan borrowers and investors is the debt ratio. The wealthy (aided by their financial advisors) are extremely crafty at not showing income. When they attempt to qualify for their loan, it is common for this demographic to not understand why showing $500,000 in gross income is not enough to get a $1 million loan with 30 percent down. It takes a savvy, experienced–and equally crafty–loan officer to tactfully explain that $468,000 in expenses and deductions means they have a bottom ratio of 248 percent. After explaining this, one would be wise to duck for cover or move the phone six inches away from the ear, since the seemingly entitled borrower will be frustrated to the point of finger pointing, epithet hurling and raising the volume several decibel levels. The typical wealthy patron will blame...
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August 6th, 2012

Ask Our President: Brett Morgan on Bay Equity’s Greatest Accomplishment

Posted by at 7:00 pm

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We have weathered the storm so far, from starting Bay Equity as the market was deteriorating in 2007, to overcoming the challenges of getting a mortgage company started with no track record. We have been able to get our company from a balance sheet perspective through retained earnings to where we are now considered a quality counterparty, and eligible for key industry programs that will help us get to the next level. In 2011, Bay Equity was named to the San Francisco Business Times list of the “Top 100 Fastest-Growing Private Companies” in the Bay Area. The list ranks the fastest growing independent and privately-held organizations in San Francisco and the surrounding Bay Area by revenue growth from 2008 through 2010 as identified by PricewaterhouseCoopers. Bay Equity revenues grew more than 1,500 percent in that time frame and the company expects its...
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July 30th, 2012

Super-Sized Loans, Part II: Dealing with a void in the secondary

Posted by at 9:54 am

A void clearly exists in markets like California’s esteemed Santa Barbara region and for homes perched precariously atop the seaside cliffs of Malibu, Laguna Niguel and La Jolla. Bankers struggle to offer jumbo products directly, and at a time when so many loan originators wish they could increase their volume, a rebounding jumbo market is out of reach to them. Limited secondary outlets, balance-sheet management and the dread of owning unsellable paper repel most mortgage lenders from offering non-agency jumbo loans like a cross drives away a vampire. As a result, most lenders have expanded their offerings through indirect means, including correspondent and wholesale lender relationships. Brokering jumbo loans to wholesale lenders is easier than banking and selling them to a secondary investor. Banking big, non-agency loans requires that the mortgage lender have warehouse approval, investor approval and balance-sheet net...
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July 2nd, 2012

Ask Our President: Who Are Your Mentors?

Posted by at 8:10 am

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You have mentioned Jim Corbett as your mentor. Do you have any other mentors who may have guided your professional career? At Bay Equity, we have a pretty strong team that collaborates and navigates through a variety of issues on a daily basis. Jim Corbett is definitely a mentor of mine in a bigger sense of providing me with the entrepreneurial spirit to seize the opportunity and start Bay Equity. He showed me that if you do things in a sound, ethical and transparent way, success will follow. Charles Hine also was an important mentor for me as I grew up in the business world in commercial real estate. Charles was instrumental in teaching me valuable life lessons, including how to treat people, how to handle yourself with honesty and integrity, the value of a strong work ethic, and how...
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June 25th, 2012

Super-Sized Loans, Part I: The Fall

Posted by at 12:56 pm

The Greek philosopher Aristotle is generally credited with saying, “Nature abhors a vacuum.” Well, I’ve got news for Ari: So does the mortgage industry. That horror vacui was the seed of the mortgage and housing meltdown we have been dealing with for the past five years. The precipitous decline of the mortgage market resulted in the demise of more than 400 major banks and lenders between 2007 and 2009. The fallout fouled many areas of the surviving mortgage industry, not the least of which was the appetite of retail and secondary investors for non-agency loan programs. Case in point: The jumbo loan or any mortgage loan securitized by institutions other than Fannie Mae, Freddie Mac or Ginnie Mae, because the amount of the loan exceeds the conforming loan limit set by Federal Housing Finance Agency (FHFA). Such loans are not eligible to...
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June 4th, 2012

Ask Our President: Near Term Forecast for the Industry

Posted by at 10:56 am

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Over the next two years, what do you think will be the greatest opportunities in the field of mortgage origination? I think we will see continued consolidation in the industry. It’s getting tougher to operate as a mortgage business, due in large part to the regulatory environment that has been created. And while it has been tough, it has increased the professionalism of the mortgage loan originator. There aren’t many part-time originators left, as now, loan originators have to be licensed through the Nationwide Mortgage Licensing System (NMLS), obtain education credits, etc. What is left is a population of MLOs who are good at what they do and can increase their market share. There are a number of different ways to originate loans. We are focused on the purchase market. We want to be known as a dependable and reliable...
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May 9th, 2012

How Bay Equity Got Its Start

Posted by at 2:50 am

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Well we’ve started a mortgage bank . . . “Are you serious?” “You’ve got to be kidding.” “Why Now?” These are just a few of the reactions we got when we told people about our plans back in June of 2007. Bay Equity was founded at a time when the recession was forcing hundreds of lenders, burdened by legacy loans, to exit the industry. But I saw an opportunity with the landscape of the mortgage industry changing, so I decided to start a new mortgage bank. With no legacy issues, we could start fresh on a firm foundation of the highest professional standards. I called Jim Corbett, a long-time entrepreneur and successful real estate investor, who agreed to serve as the firm’s chairman. We developed the business plan for Bay Equity and my brothers, Managing Directors Jon and Casey McGovern,...
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