The Wall Street Journal ran a fascinating front page story last Thursday on the implosion of Taylor, Bean & Whitaker Mortgage Corp, the nation’s 12th largest mortgage lender: “With a Quick Rise, Hard Fall, Home Lender Marked an Era”, The Wall Street Journal, September 17, A1.
Taylor Bean, headquartered in Ocala, Fla., made $35 billion in mortgages in the fiscal year ended April 30, 2008. But what’s particularly interesting to me is the 117% increase in FHA loans from fiscal 2007 to fiscal 2008. Fannie stopped doing business with Taylor Bean in April 2002 though Freddie Mac continued to buy their mortgages. In fact, last year Taylor Bean accounted for about 5% of the single family mortgages bought or guaranteed by Freddie.
The real growth in fiscal 2008, however, appears to be in FHA loans which amounted to $8.7 billion of the $35 billion in mortgages the company did in fiscal 2008 – about a quarter of all their mortgages. Among originators of FHA loans, Taylor Bean was 3rd with a 3.3% market share in June 2009, after B of A and Wells Fargo, according to The Wall Street Journal.
As I wrote about earlier this week, the FHA and Ginnie Mae have been playing an increasing role in the housing and mortgage markets as their debt is more attractive to banks for technical accounting reasons. According to that earlier WSJ article, Ginnie Mae has guaranteed about $300 billion in MBS through August, about 20% of all mortgages in this country so far this year.
Well, here we have one of the biggest originators of FHA loans, Taylor Bean, doing $8.7 billion in fiscal 2008, going under for fraud and irregularities. Is it any wonder some are calling Ginnie Mae the next Fannie Mae? See, for example:
“How The Government Is Setting Us Up For A Second Subprime Crisis”, Shah Gilani, Money Morning, September 23
“The Next Fannie Mae: Ginnie Mae and FHA Are Becoming $1 Trillion Subprime Guarantors”, The Wall Street Journal, August 11