An Open Letter to the GSEs: I Love You Guys
Dear Fannie and Freddie,
Hi, it's me, Joe Mortgage Banking Co. I know I've been ignoring you the past four years but have I told you lately that I love you? I know this sounds like a strong come-on but after thinking long and hard about it, I realized, well, how much I miss you guys, how much I need you guys. Really.
Yes, I admit it. I went off on a bender in nonprime land. I was into alt-A, subprime, 80/20 combos, stated-income, and yes, investor loans. Heck, I even dabbled in alt-B but don't ask me about that. (And please, don't ask me to describe, what alt-B is. Some tawdry Wall Street firm said it'd buy the loans so I made them. I didn't feel good about it but I did it. To this day I can't get the grime off me.)
I guess I would just like to say that I'm sorry for ignoring you guys these past few years. While you two were being drawn and quartered for your respective accounting scandals, I was off, well, dating other secondary market investors.
At first it was exciting. How could it not be exciting? Those boys and girls on Wall Street were willing to extend me warehouse lines of credit at almost loss-leader prices. The only thing they asked in return was that I sell most of my production to them. (They took me on trips, called frequently, sent me scotch. You get the picture.)
And let me tell you, back in 2003/2004 the prices paid in the whole loan market were out of this world: 103, 104! Bring it on, baby. So, I moved away from conventional lending, concentrating my efforts in the nonprime world. But I didn't abandon you guys entirely. I still kept originating prime loans and selling them to you. It's just that my conventional volumes (in your eyes) fell off the table. Plink.
Can you blame me? I saw all those nasty stories in National Mortgage News, the American Banker and The Wall Street Journal about you guys overstating (yes, you, Fannie) or understating (Freddie) your income. As that old saying goes: "A billion here, a billion there and pretty soon we're talking about real money."
It wasn't just the money though. The overstating or understating I can deal with. (God, who wouldn't want to have the "Steady Freddie" problem of making so much money that I would be tempted to put some - $5 billion - away for a rainy day. That's a problem anyone of us would like to have!) It was the distraction I couldn't live with. The inattention.
During those accounting scandals you took your eyes off the ball. My phone didn't ring as much. New products during those scandal-plagued years? I don't really remember seeing any new products during those "dark" years. It's like I didn't exist. You paid attention to Countrywide and Wells Fargo still because those two are Fay Wray to your King Kong. Me? I felt like George Reeves, a "B" movie actor at best. (And we all know what happened to George.)
But that was then. (Have I told you that I miss you guys?) I'm willing to forgive and forget. I would love to do business with you two again. A lot of business. Subprime? It's so over it's not funny. Alt-A? I might still dabble in that sector, that is, if it comes back. For the most part, I'm swearing off the nonprime world. Like I said, I will fund a little of that wild and crazy stuff but I've learned my lesson. I'm a conventional kind of guy. Really. So, let's do business together. Are you busy tonight?
P.S. How's your sister Ginnie doing? I hope you don't mind but I sent her a dozen roses the other day.
Paul Muolo is executive editor of bothMortgage Servicing News and National Mortgage News. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.bondbuyer.com/ http://www.sourcemedia.com/