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What We're Hearing
June 27, 2008
By Paul Muolo
AN EDITORIAL:
"Unprecedented," is what one high placed Washington source called a letter sent by Sen. Charles Schumer last week to regulators at the FDIC and OTS concerning the financial viability of IndyMac Bancorp, a thrift that ranks number 11 (according to the Quarterly Data Report) among mortgage funders. In other words, it's not every day that a U.S. Senator potentially panics depositors at a large federally insured depository. What was Senator Schumer thinking? You got me. (It's no secret that IndyMac is having financial difficulties. Its stock is trading for less than $1.)
Sen. Schumer and his staff regularly do not return telephone calls from National Mortgage News. That's okay, our feelings aren't hurt. The Senator apparently cares a great deal about wrongdoing in the mortgage industry but not so much about what's transpired on Wall Street in the past few years. Sen. Schumer's lack of interest in Wall Street's role in the mortgage crisis is touched on briefly in "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis." (I'm one of two co-authors, as I've mentioned before. The book is now available.) Now, why would Sen. Schumer turn a blind eye to Wall Street? Here's a theory: Between 2003 and 2008 the senator received campaign donations of $1.37 million from securities and investment firms or what we call "Wall Street." (Figures courtesy of OpenSecrets.org). He has spent the last six months making Countrywide chairman CEO Angelo Mozilo (who will hold that title until July 1 when Bank of America officially takes over) a whipping boy for the mortgage crisis. (Mr. Mozilo's rise and fall also is a subject in 'Chain.' No excuses for him here either.)
Now that Mr. Mozilo will no longer be involved in the industry, perhaps, the Senator needs a new target. His concern in regard to IndyMac might be better understood if the institution were headquartered in New York State. But it's not. Its HQ is in Southern California. As one analyst told us, "there's bigger and more troubled institutions to worry about than IndyMac." (And they happen to be located south of Canal Street down near the New York Stock Exchange. I think Sen. Schumer knows that neighborhood well.) Perhaps, this is the senator's way of getting back at the Golden State for stealing the Brooklyn Dodgers and New York Giants in the late 1950s. As one New Yorker Ricky Ricardo once quipped, "You have a lot splaining to do"…
Should mortgage brokers and loan officers be fingerprinted and their information kept in a national registry? Some lawmakers in Washington are considering such language in several pending housing-related bills. Some states already require brokers to be fingerprinted, so maybe it's not such a big deal. (Perhaps, going forward, all mortgage traders on Wall Street should be fingerprinted.) As for the fingerprinting language, the American Civil Liberties Union is even against the idea…
According to the Associated Press, Washington Mutual, the nation's largest S&L, spent $270,000 in the first quarter lobbying on banking, mortgage and regulatory issues, according to a recent disclosure form. The Seattle-based thrift lobbied Congress on regulation of federal thrifts, credit card practices, an overhaul of regulation for mortgage giants Fannie Mae/Freddie Mac, and foreclosure prevention legislation. The expenditures were not surprising, really. Last year it spent $980,000 on lobbying…
It wasn't a great year for the thrift and banking industries in 2007 (thanks to the mortgage and housing crisis) but executive compensation at depositories rose by nearly 5%, according to a new report released by SNL Financial. "The data reveals that while total return for banks and thrifts in 2007 was -23.7% (as compared to +16.9% in 2006), the median change in total compensation for all bank and thrift CEOs increased 4.8% during the same period," said Will Retzer, a senior analyst for SNL Financial…
According to figures compiled by the Quarterly Data Report, subprime late payments soared to 28.6% in the first quarter of 2008 which means $294 billion in A- to D loans are 30 days or more late. Meanwhile, according to Bloomberg, former Bear Stearns mortgage trader Jeff Verschleiser has landed on his feet. Mr. Verschleiser has accepted a position at Goldman Sachs. To order the QDR email: Deartra.Todd@SourceMedia.com…
WASHINGTON NEWS: Senate Banking Committee leaders are urging federal banking regulators to "wake up" and revamp their appraisal standards, instead of complaining about the changes Fannie Mae and Freddie Mac have agreed to implement under a settlement with New York Attorney General Andrew Cuomo. For the full update see Brian Collins' story on MortgageWire by visiting: http://www.nationalmortgagenews.com/
MORTGAGE PEOPLE: The Mortgage Bankers Association promoted Jamie Woodwell to vice president of commercial/multifamily research. If you need up-to-date stats on commercial lending and servicing order the new Mortgage Industry Directory or eMID. Email: Rebecca.Keen@SourceMedia.com.
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Comments
Posted: 2008-06-27 18:03:37
by Rex Whaley
Re: David Kittle's testimony before the house. His kind of thinking is what helped wall street create the sub prime crisis. He says there is a big difference between Mortgage Bankers and Mortgage brokers - he says the mortgage bankers "lend money" & brokers just "look for money" & the brokers are thus subject to "steer" the client. Well, duh? - if the client goes straight to the MBanker the banker sure isn't going to "shop" for the best deal somewhere else. Yes, the mortgage bankers lend money- for about 30 seconds - it is pre-sold before it hits the funding stage. And weren't those big players that all went bust Mortgage Bankers?? - and these are the guys we should trust?? Mortgage brokers are the only assurance that there will be true competition. Did some brokers "abuse" the system? A better word would be "used" the system created by the mortgage bankers and wall street. Yes, those brokers that didn't know what a conforming or FHA loan was and sent everything to the sub prime "bankers" were stupid & many borrowers got much worse terms than they qualified for. I for one have always had a policy that every loan got run conforming and/or FHA first, and that policy should probably be in the law. Oh well, will have right my book one of these days, but right now too busy doing FHA loans. Sure glad we are one of the few Mortgage Brokers that has been an FHA lender since 1997. Have a great week-end. Yea, that guy made me mad.
Posted: 2008-06-27 19:47:57
by Bob Armbruster
Suggest sending the Senator from NY(perhaps both)and their major staffers, signed copies of your book... (This is repeat of earlier message which may have gotten caught up in a download while being sent)
Posted: 2008-06-30 12:59:00
by Larry Rubinoff
Problem is Rex, that the "bankers" have been on a campaign to eliminate the broker. It is the Federally chartered BANKS that want us (mortgage brokers) out of the business and they are succeeding. We need a good public awareness campaign to educate the public on who we are and what we do. Where is the National Mortgage Brokers Association? As to some bad loans by mortgage brokers, were not many of the sub prime lenders OWNED by banks? Longbeach owned by WAMU, First Franklin owned by National City then sold to Merril Lynch, Saxon by Lehman and the list goes on. Not only did they create the programs, they trained everyone on how to use them not to mention the ones that had their own retail operations, ie Countrywide. Less mortgage brokers or none at all means more business for them. Just wait until most of us are gone and see how fast they come back with sub prime and their own retail sub prime. Trust a bank? Sure you can trust them up to the FDIC insured limit for deposits but when it comes to mortgages, I don't think so. They make a YSP but the public does not know that, we disclose they don't. The mortgage broker is needed for the good of the public but look around at how many are going away. Good for you for making a living in FHA. I once made my entire living on FHA but not today. Our loan limits are not high enough in my market. Also unfair and a topic of discussion on to itself. Limit should be $729,750 EVERYWHERE not just selected areas for FHA, Fannie and Freddie. The system is broken
Posted: 2008-06-30 13:54:14
by Richimac
Good stuff, Paul. I wanted to add my "two cents" on the eve of Countrywide becoming CountryWHO? When the regulators quit "knee-jerking" for a credit crisis fix (fingerprints? PULLLEEEZE!) and just realize they need to enforce the laws that exist, the origination community will be much better off. Speaking of originators, the brokers may not realize the "squeeze" is on (see Mr. Whaley above). Many of the mortgage bankers that went "bust" were the brokers' lifeline to funding - yes even for FHA loans. The joke will be on us all when the warehouse lenders "turn off the spigot" for TPO business. "Children of the 90's" haven't seen anything yet. Get ready to become a branch of a "Full Eagle" if things continue to tighten.
Posted: 2008-07-01 13:36:10
by Yale
Hey Paul, I have been enjoying your columns and I will be out to buy Chain of Blame soon. Looks like a good read. My subject today is about how MI companies are now writing loan guidelines. It was in the past that when we would originate a loan and it meet all of the Fannie or Freddie guidelines you could close the loan and all would be well with the world. Now even if the loan is within the Fannie and Freddie guidelines the MI company will turn the file down for MI if it doesn't meet there guidelines. Now I think lenders need to look at the MI companies guidelines and not Fannie and Freddie if they want their loans to be funded with MI. It seams like we are back in the day were if you want a home you need to come in with 20%.
Posted: 2008-07-01 15:50:54
by ReverseThinkerMN
Senator Schumer's letter is unfortunate. The $100 million run on IndyMac Bank news of his letter provoked only adds to the current credit crisis.
