Is the Gain on Sale Boom over?
Earlier this week my portfolio was rolling along nicely, having closed at an all-time high on Wednesday night with me looking forward to further gains ahead.
And then Flagstar reported their fourth quarter results.
I don’t own Flagstar. I don’t even follow Flagstar. They are a Michigan based bank that has had some problems in their past and, most importantly for this discussion, run a reasonably large sized mortgage operation. In the fourth quarter Flagstar reported a big decline in their gain on sale margin, from 244 basis points to 153, and the Street took it to mean that the mortgage origination boom was over. In addition to the carnage of Flagstar (down about $2.50 to $15.57 on Thursday), PHH Corp, Impact Mortgage and Nationstar all took it on the chin.
But while the headline decline was steep, there is more to the story. During the conference call Flagstar provided some clarity. The following exchange between Matthew Kerin, the president of the Mortgage banking division, and Paul Miller of FBR is instructive (via SeekingAlpha). Read more
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