Newsletter - March 2016
Christopher Whalen said recently, in a thought-provoking article on National Mortgage News, two things that really got us thinking. The first is what he spends most of the article discussing:
Over the next several years, Kroll Bond Rating Agency expects that the top four commercial banks will downsize or exit entirely from the business of originating and servicing residential mortgages.
The next was the final line of the article, and it caught us off-guard:
It is very possible, however, that some of the Dodd-Frank law will eventually be modified when demands for economic growth again outweigh the voices of caution.
Let’s talk about the first one first. In the well-reasoned piece, he explains why more and more non-banks are getting into the servicing and origination game, while the big banks are getting out. The long and short of it is that the Dodd-Frank regulations are pushing big banks to only consider the highest quality loans, but due to the regulations, the profit margins on these loans are not what the banks are used to, and really not something they are interested in pursuing.
Enter non-bank entities like Quicken Loans. These non-banks are eating up the share of the market abandoned by the banks at a decent profit margin thanks to lighter regulations. This in itself is big news and critical to understand for anyone in or orbiting the mortgage industry, because it increases the importance of getting your documentation correct and in order. When you are no longer dealing with big banks (and their own brand of headaches) you will be faced with the potential unknown in non-banks, and you need to be ready to protect yourself and your portfolio.
But that’s where the second quote comes in. There is a lot of adjusting coming our way as non-banks eat up more and more of the mortgage market, but it could take little more than a stiff political headwind to loosen Dodd-Frank’s proverbial belt – and then it’s easy to see the banks jumping right back in with a vengeance.
So the moral of the story is: Be Prepared. You need to have clean, clear documentation for every move you make, because -- no matter what type of institution you’re dealing with – it’s your only protection when push comes to shove. And on this front, Blue Streak Docs can help you out. Plus, if you haven’t worked with us yet, you can try us out and get your 5th order FREE!
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