Loan Think

Things are starting to rock and roll in mortgage M&A land, or at least that's what a handful of servicing advisors are predicting, including, MIAC's Dan Thomas and CKI's Chuck Klein. Elsewhere, word on the street is that plenty of small- to medium-sized non-depositories want to sell or find a partner that can help them survive in what could turn out to be a tumultuous 2004. Strangely enough, 2004 could be a $2 trillion year, which would still be the fourth best ever for the industry. Then again, compared to the $3.5 trillion funded in 2003, it certainly won't feel that way. It's assumed that firms that cut costs (people, retail overhead, back office and so on) the fastest, will be the ones that fare the best. Then again, if you cut into the bone you could damage your franchise...

A few weeks back, Freddie Mac ousted four more officials as part of its ongoing investigation into its earnings restatement scandal. To date, the four have not commented on their parting of ways with the mortgage giant, that is, until now. One of the four, former vice president of investments Byron Boston told National Mortgage News that the "real story" isn't about "those who got fired -- it's about the people who are still there." In a brief interview, Mr. Boston declined to elaborate, but he said he was not bitter about being let go, adding, "I'm moving on." He said he will likely return to the capital markets arena. Six years back he joined Freddie from Wall Street...

Something to think about: If Federal law prohibits any one bank/thrift from having a deposit market share of more than 10% why are bank/thrifts/others allowed to have a housing receivables (mortgage servicing rights) market share north of 10%? If Bank of America 's acquisition of FleetBoston goes forward as planned, it will have a deposit market share of 9.8% which gives it 0.2% room to grow, which doesn't appear to be much. Among residential servicers, Washington Mutual has a servicing market share (according to National Mortgage News' Quarterly Data Report ) of 10.85%. The WaMu share is based on June 30 figures. Third quarter rankings will be ready shortly. It's very possible that at least two firms have servicing market shares north of 10%...

Late last week Sandler O'Neill raised its price target on Countrywide Financial by $40 a share to $145. Yes, that's right -- $40 a share. Not $4, but $40. Not since the height of the dot-com boom has a Wall Street firm gone so gaga over a publicly-traded company. But then again, in the third quarter, Countrywide hit the ball out of the ballpark and then some. It earned $1.1 billion in the quarter alone, a stunning 187% gain over 2Q and a mind boggling 381% gain from the same quarter a year ago. Mortgage "bears" must be thinking this: Countrywide has peaked and the boom in residential finance industry is over. But calling a top in the market (or at a company) is never easy. .

Even though some mortgage and financial services firms are moving call center jobs to India and elsewhere overseas, Countrywide chief Angelo Mozilo says he won't do it. In a recent interview with National Mortgage News, the industry veteran said, "I feel it is Countrywide's responsibility to create jobs in the U.S. -- not outside the U.S. You need a job to buy a house here. It's a conflict for me to do it." He noted that Countrywide has used some software programmers overseas, but that's the extent of the company's outsourcing labor to cheaper foreign markets. He called the shifting of white-collar jobs to foreign lands a "fad" and "problematic." Now, if only other mortgage firms would listen...

Department of Housing and Urban Development secretary Mel Martinez has cancelled his speech at the upcoming annual convention of the Mortgage Bankers Association . The reason? To attend the Pope John Paul's 25th anniversary. OK, I'll buy that...

It appears (for now at least) that new product and program approval for Fannie Mae and Freddie Mac will wind up at the Department of Housing and Urban Development, much to the pleasure of the two mortgage giants. But the Mortgage Bankers Association and America's Community Bankers want it over at Treasury. Keep in mind that ACB and MBA's rank and file also are the largest sellers of loans to the two secondary market giants, which means there is a clear difference of opinion on where program approval belongs. Fannie chairman and CEO Franklin Raines told National Mortgage News on Friday that HUD has been "fairly restrictive" when it comes to product/program approvals...

Quick, hire back all those laid off "temp" workers that you fired in late August and early September!On Friday the 10-year was yielding 4.02% which means the refi boom is back! OK, maybe not, but things sure couldget interesting the next few weeks, especially if the stock market keeps tanking...

While Hurricane Isabel lashed the nation's capital late this past week, a lobbyinghurricane orchestrated by Fannie Maewas hitting lawmakers, sources said. One mortgage official said Fannie was "spending a ton of money"and time trying to get elected officials to see things its way. Even though Fannie Mae chairman Franklin Raines said his company welcomes theadministration's (Treasury's)approach to regulating the GSEs, he reportedly wants any legislation to include a five-year moratorium on changingits capital requirement, currently at 2.5% of on balance sheet holdings. Treasury secretary John Snow, so far, has said: no moratoriums. Stay tuned...

Maybe the Federal Home Loan Bank of Chicago's "mortgage partnership finance" (MPF) programisn't so great after all. Consider this: second-quarter earnings at the Federal Home Loan Bank of Pittsburghplunged 82% in the second quarter to just $2.4 million. According to Pittsburgh bank president James Roy,the poor earnings reflect "accelerated premium amortization in the mortgage portfolio resulting from unprecedentedrefinancings in the low interest rate environment." At June 30, Pittsburgh held $9.8 billion in MPF assets,a stunning increase of 276% in one year. One source told National Mortgage News that the Chicagobank has had a tough time hedging MPF assets. Perhaps, the White House should also pay close attention tothe FHLBs as well as Fannie Mae and Freddie Mac...