October 15th, 2012

Supersized Loans Part V: Then there’s portfolio lending

Posted by at 4:49 pm

Bay Equity Home Loans is finding it helps to be creative when originating jumbo loans today. When agency jumbo programs just do not fit, an originator needs to convey non-agency options fast. Portfolio asset-based loans are a good place to start. Scroll down your wholesale lender list and seek out a portfolio lender that offers an asset-depletion loan. This is one of the only creative ways for a lender like Bank of Internet Federal Bank and Kinecta Federal Credit Union to lower debt ratio. Some lender guidelines (including Fannie Mae agency jumbo) trust that a percentage of the asset can be counted on to supplement a borrower’s income at a steady 360-month pace. Not much is taken into account for what the borrower or the account’s custodian does with the semi-liquid assets later. But underwriting to the asset value at...
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October 1st, 2012

Ask Our President: Biggest Threat to Mortgage Bankers

Posted by at 8:03 am

Are there any industry-related issues that keep you up at night? What do you see as the biggest threats to your business as a multi-channel mortgage banker? The uncertainty of the regulatory environment is a big concern, along with the uncertainty of the Consumer Financial Protection Bureau (CFPB). The CFPB is an unknown for a lot of us who are working hard to maintain a compliant business and simply do business the right way. Will new laws be passed that will further impact the way we do business? At what point will all of this ease up? While the laws passed have weeded out a lot of the part-timers in the industry, uncertainty about the state of the regulatory environment remains. The landscape of the industry is also changing. Big banks like GMAC and Bank of America are getting out...
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September 24th, 2012

Super-Sized Loans, Part IV: The FHA/VA lending opportunity

Posted by at 4:52 pm

Being a Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) lender helps mortgage lenders accommodate about 30 percent more pre-approval requests. With so many high-balance home sales in California, lenders have found FHA and VA loans to complement their offering of agency jumbo loans. With the expiration of the temporary high balance conventional loan limits, borrowers are looking to FHA and VA as an alternative. Today the maximum conventional loan is $625,500 for the highest median home markets. However, FHA still insures loans for 1 unit homes to $729,750 in the highest median home priced markets (more for 2-4 units). VA is allows borrowers to qualify on a completely different schedule. They will insure 25% of the difference between the VA Loan limit by County and the lesser of the value or purchase price. The max VA will...
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September 3rd, 2012

Ask Our President: Business Models for Mortgage Brokers Versus Mortgage Bankers

Posted by at 12:02 pm

Could you define which business models are best for the mortgage broker and which are best for the mortgage banking branch? There is just such a mixed bag out there that I don’t think you can pin it down to saying that a certain model works best. I think it’s more in each individual circumstance and how professionally run the mortgage brokerage operation is. Bay Equity has a diverse group of retail offices that drum up business in all different ways, from a call center model to purchase business-driven realtor relationships, to long time LOs who have their own book of business. We also have a new branch in San Francisco that fits the last category. Manny Kagan’s office is the longest-running mortgage brokerage in San Francisco, having opened its doors in 1984. Manny has loan officers who have been...
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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

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

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

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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