What is going on in the mortgage business??



I am sure by now everyone has heard about the suspension by FHA and subsequent closing of Taylor Bean & Whitaker (TBW).  The question everyone is asking is “what does this mean to me?”  Aside from the train-wreck this has and will create with anyone dealing with any transaction involved with Taylor Bean & Whitaker, the implications will be even bigger than thousands of delayed closings.  This is a MAJOR event.  This is not a case of “another sub-prime mortgage company closing their doors.”  Taylor, Bean and Whitaker is (was) the 3rd largest FHA loan originator in the country.  The only two bigger originators of FHA mortgages are Bank of America and Wells Fargo.  TBW underwrote and closed loans for small banks, correspondent lenders, and brokers across the country and now these companies must find a new place to send their business.  Simple supply and demand economics will tell us this will mostly likely cause rates to move up in the short term, independent of the bond market.  We would all agree that competition is a good thing; so when a large competitor is removed from the market, the result of less competition has never been good for the consumer in the marketplace.  (Not to mention the short-term implications and cost to consumers in terms of TBW refinances that won’t fund, closings that won’t be taking place, interest rate lock-in’s presumably lost, HVCC appraisals that will need to be re-ordered and closings that will need to be postponed and rescheduled).  

In addition, Colonial Bank — one of the largest warehouse lenders in the country — was a major source of financing for TB&W.  The ramifications of this relationship in light of the collapse of TB&W, if any, have yet to be determined.  However, it is important to note that any negative impact on Colonial Bank would likely exacerbate this situation.

Everyone will agree we are in very uncertain times.  For those of you on the fence on whether or not to refinance or buy a home, rates are still good and home values have dropped significantly over the last year.  As a consumer, it would be great if a bell went off to indicated when we were at the bottom of the market, but unfortunately that is not the way it works.  If we look at interest rates over the last 15 years we are pretty close to the bottom on this chart, so anytime you can get an interest rate under 6% for your mortgage in the big picture it is pretty good.   If you don’t believe me, ask the people who bought homes in the late 70’s and early 80’s when rates were 12-15%. 



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