meJoe.com

Like anyone, my life is marked by phases. There is a lot of overlap in types of phases. Some people have a healthy phase, family phase, watch certain show/director/actor phase, etc. During those phases, every ounce of your free energy is dedicated to the egoistic focal point of the phase. I love these, but lately mine have been far to pragmatic.

I realized today that I need a learning phase that has no end in sight. I need the chance to read and explore without expecting an outcome

Enter SXSW. Tony Hsieh from Zappos shared his inquiry into the scientific research available about Happiness. Obviously there is a reason he was interested in it, but I doubt he expects to deliver something specific.

If he has the time to do it, I should be able too.

In case you don’t follow me on Twitter (@mejoe), I can’t seem to finance a home purchase. With good credit and cash on hand, I was denied a loan. I was told the problems were caused by the private mortgage insurance companies — they do not want new loans. I think there was more to the story.

I’ve been speaking to my new loan officer and done some research. He mentioned that the big shops simply don’t have the funds they did previously because they can not find investors to buy their loans. Banks like Countrywide have 100s of millions of dollars used to originate loans. When the loan is funded, they turn around and look for an investor to purchase it.  When a buyer is found and the loan is sold, they take the funds and move on to the next home buyer.

The big banks are middle men in a fat supply chain of mortgage debt.

I found the following quote on Bankrate.com to support this notion:

Rates will go largely where the Fed drives them, but there are some structural problems with the mortgage business that are making it difficult to fund loans quickly. One is the enormous decrease in the size of total warehouse lines. Mortgage banks and operations such as ours — which is a “net branch” model (a mortgage bank which only takes business from its branches and not brokers) — depend on warehouse lines of credit from commercial banks to fund the loans which we then sell. According to the MBA (Mortgage Bankers Association), total warehouse capacity has decreased from $200-$250 billion to $20-$25 billion. The problem here is that refis occur in spikes when rates dip and there is not enough gross capacity to meet the demand created by dips in rates. Perhaps it is time for the Fed or Treasury to guarantee warehouse lines in the same manner in which it backed Commercial Paper.

- Dick Lepre, senior loan officer, Residential Pacific Mortgage, San Francisco

Warehouse lines? Sounds like a basic inventory problem to me. There is simply not enough used mortgage buyers visiting the lots. The Fed should have a talk with Crazy Dave’s Used Car Lot down the street.

Check out The Credit Crisis Explained in Simple English. It is a good source for understanding how we got into this mess.