SBMC was not a large lender, funding perhaps $4 Billion in 2007, nor were they an aggressive lender. To the contrary- they were the epitome of a lender who funded strong loans to individuals with excellent credit.
True, about 97% of their business was originated in California, and perhaps more than anything, that was their undoing.
I had worked with Steve Meyer and Mike Luong in their secondary department last year when I was working with ICAP's mortgage capital markets desk. They had established relationships with all the major investors, and generated steady pools that were cleanly broken up nicely into jumbo, a, alt a arms, fixed.
We're talking about loans where the P&I perhaps averaged $2000 per month- not at all extreme loans. I doubt it was buy backs that did in SBMC. More than likely, it was an inability to operate in a rapidly degrading California real estate market, a complete lack of investor interest in CA loans and perhaps a strategic realization that its going to be some time before the market improves.
The sudden closing of SBMC isn't merely the closing of another very good, mid size lender. It is a sign that the days of the independent mortgage banker, no matter how well run or conservative are over. I don't think it is up for debate. Any mortgage banker in todays market, if they are able, is going to take his capital, close up shop, and wait on the sidelines, perhaps 18-24 months, for things to improve.
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