Mortgage Mess!

Monday afternoon around 1:30 CST another lender (National City Mortgage a division of National City Bank) closed its wholesale lending division effective immediately! In a late afternoon e-mail they advised they would honor their current pipeline but were not accepting any new submissions. This comes after 209 other lenders have closed their doors since late 2006'.

Most if not all of these companies credit their exit to CDO's / Mortgage backed securities "pull-out", rising foreclosure rates, and lack of capital to operate through these troubled times. Most of these lenders sold their mortgages to investors on Wall Street. These investors have taken HUGE losses and therefore have stopped purchasing mortgage backed securities, which were the "life line" of many of these wholesale lenders.

National City Mortgage did state it would continue to produce mortgages through either its banking locations or its retail mortgage centers. However, this is another blow to the already battered industry that finds itself among the targeted areas surrounding new legislation, a scape goat to many investors, political figures, and lenders and a large if not significant factor surrounding the housing slump and credit crunch.

In my eyes the negative media publicity, political outrage and these closings are a direct result of the housing downturn. The market has really over corrected itself and in a big way. Not so much with these lenders closing their doors but more in line with the pull back in lending parameters. The majority of these "bad loans" are either sub prime or "hybrid" ARM loans the Fannie Mae / Freddie Mac products for the most part have been performing well in light of this crisis. However, I have seen wholesale changes to key product lines across the board in most lenders. Why? My opinion is simply overreacting to the mortgage meltdown.

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