The Special Election Column
By now you're sick of all the presidential polls, the shouting and yelling on the cable networks, and the endorsementsof your local newspaper (which you probably don't agree with). So, let's get down to brass mortgage tactics. Whatkind of mortgage banker would George Bush, John Kerry, and, yes, Ralph Nader be?
First up: The president. If the incumbent were running a mortgage shop, chances are it would be a non-depository.Why? Because he wouldn't want to deal with all those pesky regulators. Bush Mortgage would use warehouselines of credit and commercial paper to fund loans. Since Mr. Bush is a go-getter, he also would want to be No.1, but with Countrywide, Wells Fargo, Chase and Bank of America in his way, he'd haveto settle for No. 5. Chances are he would be a wholesale/correspondent lender because he knows the overhead thatgoes along with retail would be cost prohibitive. Bush Mortgage would not want to pay benefits to its rank andfile workers unless it has to. (The company would prefer to use temps.) Servicing? Bush Mortgage would outsourceit, of course. His board of directors? Stacked with business partners and friends. (Everyone does it.) Mr. Bushalso strikes us as someone who knows the value of high-margin products which means his MB would be a nonprime lender,but also would play in the conventional and government space. Bush Mortgage would be a major securitizer of productand would use gain-on-sale accounting techniques to book tomorrow's profits today. And that's a concern. The presidentand his allies in Congress like to think of themselves as fiscal conservatives but, let's face it, the federalgovernment is running a huge deficit. A mortgage banker that runs a huge deficit will not last long in this world.Bottom line: Bush Mortgage in its early years would appear successful, but in time as the accounting gimmickryis unwound, the company will face challenging times.
Second up: Would John Kerry own a mortgage company? Chances are he'd own a community bank or thrift,maybe even a super regional. Why? Because he comes across as a community kind of guy, even though he's probablynot. Kerry Thrift & Mortgage would be a conventional and government lender, and chances are it wouldsell most of its product to Fannie Mae. (Former Fannie Mae chairman James Johnson is a Kerry advisor.)KT&M would probably stay out of subprime but would dip its toe into A- and alt-A lending. Why? Well, that'sthe trend. It would service its own loans, probably at a loss. As a whole, the company would be profitable, eschewingphony baloney accounting. Why? Because Kerry is a lawyer and former prosecutor and he's smart enough to stay outof legal trouble. But KT&M would have an underwriting manual that's at least 12 inches thick. (Bush Mortgagewould have a 10-page manual.) KT&M would also probably employ more attorneys than loan officers. As for profitability,KT&M would probably earn an OK profit for years, marred by a few quarters of servicing impairment charges.Bottom line: The company would never be a top 20 ranked lender, maybe not even top 30. It would plod along, doingthe same thing every year, spinning in its tracks. Maybe. Maybe not.
Third up: Ralph Nader owning a mortgage shop is probably the most realistic scenario of the three. Why?He's a consumer advocate and the mortgage is the most important consumer product there is. Yes, but could he runa mortgage banking operation? Chances are he wouldn't have the money for a depository so he'd go the mortgage bankerroute. Nader Mortgage would be headquartered in Berkeley, Calif., and would pay a "living wage"to all its workers which means the office secretary would earn $60,000 a year. (The cost of housing in the BayArea is insane.) Chances are Nader Mortgage would cater to its base of liberals, "greens" and minorities. Nothing wrong with that. But would it earn a profit? Come on, this is Ralph Nader. The company would barely makepayroll every month, and instead would depend on the kindness of its board for a bailout every year. Bottom line:there is no bottom line. (But Nader Mortgage would have the lowest rates in town and that's commendable, that is,if you're a borrower.)
-- I'm Paul Muolo and I've approved this message. (My apologies to ThomsonMedia CEO Jim Malkinfor stealing this style device.)
AND NOW FOR SOME REAL NEWS: Washington Mutual, according to an advertisement in NationalMortgage News is offering an adjustable-rate mortgage with a teaser rate of 1%. That's right 1%. The adis geared toward correspondent lenders and brokers...
Meanwhile, there is growing concern at some mortgage firms (in particular Fannie Mae) about the growing useof interest-only and zero-downpayment loans. Are speculators using these products to make a quick killing in certainhousing markets? See Brian Collins' story in Monday's National Mortgage News...
As we went to press, the yield on the 10-year Treasury was at 4.05%. China has raised its one-year lending rateto 5.58%, up 27 basis points. Does the market smell inflation?
Sandler O'Neill has initiated coverage on ARM lender Golden West Financial, calling it a "hold."It has a 12-month price target of $123 per share on the company...
GO SOUTHEAST YOUNG MAN: GE Consumer Finance has agreed to buy Australia's largest wholesale mortgagefunder, Australian Financial Investments Group. "One area where we have long wanted to increase ourpresence is in mortgages," said Tom Gentile, president and chief executive officer of GE Money Australia& New Zealand. "The acquisition of AFIG gives us one of the premier mortgage platforms in Australia,with assets of approximately $14 billion"...
The struggling American Business Financial Services reported a net loss of $30.9 million ($8.81 per fullydiluted share) in its fourth fiscal quarter...
Friedman Billings Ramsey has downgraded jumbo ARM lender Thornburg Mortgage to "market perform"from "outperform"...
Countrywide's Angelo Mozilo recently attended the National Italian-American Foundation gala inWashington. The dinner honored country singer Tim McGraw, son of the late Mets' pitcher Tug "YouGotta Believe" McGraw. The younger McGraw is part Italian...
MORTGAGE PEOPLE: Hanover Capital Mortgage Holdings has named Irma N. Tavares chief operatingofficer. NCB FSB, a subsidiary of National Cooperative Bank, has named Michael G. Nassy assistantvice president of mortgage underwriting for its national real estate division.
UPCOMING CONFERENCE: On Dec. 6 and 7 ThomsonMedia will hold its sixth annual "MortgageEC" conference. The meeting be held at the Mandalay Resort & Casino in Las Vegas.
WASHINGTON NEWS: Is former HUD secretary Mel Martinez -- the man who brought us (or should I saytried) RESPA reform -- on his way back to Washington? Mr. Martinez -- appointed by the president to head HUD --is running for the Senate seat being vacated by the retiring Bob Graham, a Democrat. According to AmericanBanker, Martinez has received more than $100,000 in donations from bankers and bank-related PACs. But hisRESPA proposal went over like a lead zeppelin in mortgage banking circles. (One of his opponents in the GOP primarywas mortgage software chief Doug Gallagher.) The Florida race is said to be as tight as the Bush-Kerry contest.Stay tuned.
MORTGAGE DATA/RESEARCH NOTICE: NMN has just released a brand new white paper, "20 (Mostly)Private Mortgage Firms to Keep an Eye on in 2005." The new white paper includes analysis, contact information,loan volumes and much more on the 20. For more information contact:
@ThomsonMedia.com
@ThomsonMedia.com
NMN's other new white paper, "Doc Prep on the Net." (Contact Ms. Washington about this product.)
Happy Halloween
