The Mortgage Market is Now Dominated by Non-Bank Lenders

The Washington Post | February 23, 2017         Most borrowers, whether they are purchasing property or refinancing their home, focus on their mortgage rate and loan terms rather than the type of lender they choose. 

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks — financial institutions that only make loans and do not offer deposit accounts such as a savings account or checking account. 

“For consumers, it doesn’t really matter whether you get your loan through a bank or a non-bank, although in some ways non-banks are a little more nimble and can offer more loan products,” says Paul Noring, a managing director of the financial-risk-management practice of Navigant Consulting in Washington. “The impact is bigger on the housing market overall, because without the non-banks we would be even further behind where we should be in terms of the number of transactions.”  Read full story here.

Deutsche Bank to Fight $14 Billion Demand From U.S. Authorities

Deutsche Bank shares tumble on U.S. fine

Reuters | September 16, 2016         Deutsche Bank (DBKGn.DE) said it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold mortgage-backed securities, a shock bill that raises questions about the future of Germany's largest lender.

The claim against Deutsche, which is likely to trigger several months of talks, far exceeds the bank's expectations that the DoJ would be looking for a figure of only up to 3 billion euros ($3.4 billion).

The demand adds to the problems facing Deutsche Bank's Chief Executive John Cryan, a Briton who has been in the job for a year.

The bank only scraped through European stress tests in July and has warned it may need deeper cost cuts to turn itself around after revenue fell sharply in the second quarter due to challenging markets and low interest rates.

Deutsche Bank shares, which have lost around half their value this year, tumbled 7.6 percent to 12.10 euros in Frankfurt on Friday, with analysts saying the bank may need to raise fresh funds from investors or sell assets to shore up its capital ratios.

The cost of insuring Deutsche Bank debt against default rose by around eight percent.

The bank, which employs around 100,000 people, said it regarded the DoJ demand as an opening shot.

"Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited," it said in a statement.

"The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts."  Read more here.

Rule on Arbitration Would Restore Right to Sue Banks

The New York Times | May 5, 2016      The nation’s consumer watchdog is unveiling a proposed rule on Thursday that would restore customers’ rights to bring class-action lawsuits against financial firms, giving Americans major new protections and delivering a serious blow to Wall Street that could cost the industry billions of dollars.

The proposed rule, which would apply to bank accounts, credit cards and other types of consumer loans, seems almost certain to take effect, since it does not require congressional approval.

In effect, the move by the Consumer Financial Protection Bureau — the biggest that the agency has made since its inception in 2010 — will unravel a set of audacious legal maneuvers by corporate America that has prevented customers from using the court system to challenge potentially deceitful banking practices.

Honing their plan over decades, credit card companies, banks and other lenders devised a way to use the fine print of their contracts to push consumers out of court and into arbitration, where borrowers must battle powerful companies on their own. Without the ability to pool resources, most people abandon their claims and never make it to arbitration.

The new rules would mean that lenders could not force people to agree to mandatory arbitration clauses that bar class actions when those customers sign up for financial products. The changes would not apply to existing accounts, though consumers would be free to pay off their old loans and open new accounts that are covered.

And while those rules are not final yet — there will be a 90-day public comment period — financial industry lawyers say they are tough to derail.   Read more here.

When the Kids Help Mom and Dad With the Mortgage

Some lenders—but not all—will allow adult children to co-sign for their parents on jumbo loans. It might help keep grandma and grandpa closer to the grandkids.

The Wall Street Journal | February 24, 2016     After years of getting help from mom and dad, some adult children are returning the favor and buying their parents a house.

Mortgage specialist Ray Rodriguez cites a recent example in which a couple living in Manhattan cosigned on a jumbo mortgage for the wife’s parents to purchase an approximately $1.5 million condo in Queens.

The parents worked in the restaurant business and could not document a regular income, says Mr. Rodriguez, mortgage sales manager for Cherry Hill, N.J.-based TD Bank. Their daughter and her husband had sufficient income from their professional jobs to qualify for the mortgage. So they got a loan with the home classified as an investment property, and the parents now pay monthly rent.

When permitted, all co-borrowers must meet minimum credit score guidelines, but the incomes and assets of all borrowers can be pooled. Lenders typically still require that the occupying owner qualify to make the payments based on his or her own income, so the down payment should be sufficient to reduce the loan amount to a qualifying level, Mr. Walsh says.  Read more here

New Trouble Knocks Flint as Mortgage Firms Require Proof of Safe Water

Lenders say they won’t give mortgages unless buyers offer proof of safe water

The Wall Street Journal | February 3, 2016   Flint, Mich., residents have a new concern on top of lead in their drinking water: Some mortgage lenders say home buyers must prove there is no contamination at a property or they won’t make a loan for its purchase.

Local real-estate agents and lenders worry the new restriction could be another punch in the gut to the city’s housing market, which has long suffered from economic distress after the departure of major auto industry employers.

“The tragedy is an already depressed community is now likely to see housing values plummet not only because of the hazardous water, but because folks cannot obtain financing,” said Daniel Jacobs, an executive with Michigan Mutual, which recently issued a notice to its employees requiring that homes pass a water test before it will make a loan.

Similar notices have been sent out by other lenders, while some major banks, including Wells Fargo & Co. and Bank of America Corp., said obtaining a loan could be difficult if a home doesn’t have potable water. Read more here.

Big Banks Continue Retreat From Mortgages

Wall Street banks are backing away from mortgages as nonbank lenders emerge.

The Washington Post | January 19, 2016    Big banks are lending less to homebuyers, or they're making less on loans — and sometimes, it's a combination of both.

Some are making less on home loans, in part owed to the Fed and its yearslong zero interest rate policy. But the trend also coincides with a rise in nonbank lenders, like Quicken Loans, that have been gobbling up market share in mortgages in recent years.

"The mortgage market is coming off the highs it realized in 2012," said Erik Oja, S&P Capital IQ banking analyst. "A lot of it is expected, in terms of origination."

JPMorgan Chase reported net income of $266 million in its mortgage banking division, a 21 percent drop when it announced fourth-quarter earnings last week. The bank also posted a quarterly drop of 25 percent in mortgage originations, which were down 2 percent year over year as well.  Read more here

Lenders Ask Court to Toss Foreclosure Verdict Favoring Homeowners

Houston Chronicle | December 24, 2015    Wells Fargo Bank and its mortgage servicer are asking a state district judge in Houston to throw out a jury verdict in favor of a West University couple facing foreclosure and to order a sheriff's sale of their house.  Read more here.

Texas Mortgage Settlement Millions Misspent, Critics Say

News 8 WFAA ABC |  November 9, 2015     Texas homeowners who fell behind and lost their homes during the mortgage crisis were given hope three years ago.

It came in the form of a $25 billion national settlement with five lenders – Ally, Bank of America, Citi, JPMorgan Chase and Wells Fargo – all accused of wrongly forcing people out of their homes.

But how much relief did the State of Texas provide to its citizens?  Read and watch video investigation here.