The Department of Justice is seeking treble damages on every loan guaranteed by FHA that was delivered to HUD by Deutsche Bank‘s subprime mortgage origination unit MortgageIT.

DOJ notes that FHA has already paid out $386 million on defaulted loans that were (more…)

To paraphrase a famous (or infamous) critic of capitalism, “there is a specter haunting” our banks. It is the specter of unrealized losses from properties that our banks have yet to put into foreclosure. For anyone operating without insider knowledge, it is a best guess-scenario to estimate just how many writedowns are yet to come.

The Wall Street Journal says that a 2009 change to accounting rules softened rules on writedowns for bad assets. The (more…)

The more things change, the more they stay the same.

Wells Fargo is moving the customers it inherited from legacy Wachovia over to the full-fledged Wells accounts. Wells has always believed in selling mulitple products to each customer. In this 2010 presentation made to the Sloan School of Business at MIT, Wells claims to have sold an average of 6.47 products to each banking customer.

Still, the speed at which Wells has utilized my new status as a Wells customer is surprising. I got my first sales call this morning. What’s even more surprising is what kinds of products they are offering.

It is easy to confuse subprime for a description of a borrower, when really, the term should describe a product. A loan is subprime. A person is not subprime.

It must be that it also easy to forget what happened in 2008. At least, Wells must have forgotten. Judging from a phone call that I got today, there must be some kind of amnesia spreading throughout San Francisco.

Wells is pushing interest-only adjustable rate home equity loans. (more…)

The time for a decision on ShoreBank may be coming soon.

A few rumors are circulating that the FDIC is ready to make a decision about ShoreBank, the famous Chicago community development lender that helped to define the field of community capitalism.

ShoreBank created a model of making loans in low-and-moderate income neighborhoods in the South Side of Chicago. ShoreBank ignored many of (more…)

The Federal Housing Administration has decided to rethink how it protects itself with a new guidance last month. The new rules have implications not just for borrowers, but also for private mortgage insurance companies.

The new rules, known as the Loan Level Pricing Adjustments (LLPA – pdf here), say that most FHA borrowers will now have to pay an upfront premium of 150 basis points on the amount of their FHA loan. Subsequently, they will be expected to pay another 50 basis points each year. That second charge is paid with the monthly payment.

One analyst at a private mortgage insurance company called me to tell me how much of a difference this will make for his company. He paints a tough picture for the market in the last year: the private firms were being squeezed by the low rates at FHA and the high origination fees built in to (more…)