Overall, this was a calmer week for the mortgage industry. The Fed cut of rates to the discount window which brought heavy borrowing and some liquidity back into the secondary market. Countrywide’s share price stabilized and they took on a 2B (15% investment) from Bank of America. It will not be surprising when they are acquired by Bank of America within six months. Rumored discussions have been going on for months. Lehman cut their BNC operation (subprime) this week but will continue to operate their primary loan origination channel which is Aurora Loan Services. Countrywide’s CEO took some of the wind out of any positive market news by indicating that the US economy may head for a housing led recession.
There is a flight to quality underwriting and a fundamental shift in the business from Alt A, subprime back to Fannie Mae/Freddie Mac underwriting standards. Indy Mac is trying to restore some market leadership in the Jumbo loan market. Fannie Mae announced Wednesday that they are going to purchase ALT A loans and extending programs to less than perfect credit borrowers. MarketWise sees Fannie Mae, Freddie Mac and Ginnie Mae playing their traditional role as Wall Street conduits have essentially shut off their interest in nonconforming ALT A securities for the moment. Bids are slowly coming back to the market with wider credit spreads and FHA will likely provide some relief to borrowers that have less than perfect credit (subprime).
We are seeing Savings Banks, Credit Unions, Community Banks and other smaller depository institutions seizing the opportunity to pick up production personnel from closed operations and loans are flowing to mid to small community and commercial banks into their portfolios.
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