Before we get to Fannie Mae, National Mortgage News has learned that a major subprime lender(very major) is once again toying with the idea of going public. To find out which one -- and how much it mightraise -- read the Monday edition of NMN. Don't subscribe to NMN? Dial (800) 221-1809. It makes agreat Christmas/Holiday gift...
By now the world knows that the Securities and Exchange Commission has thrown out Fannie's accountinginterpretations on FAS 133 (derivatives/hedging) and the end is near for company chairman/CEO Franklin Rainesand CFO Tim Howard. Or is it? As this column went to press the company was getting pilloried in the media,but scribes seem to be missing one major consideration: if Fannie takes a $9 billion hit to prior years earnings,that means going forward it won't have any amortization costs on that money. Stated differently: future earningscould be phenomenal. Sanford C. Bernstein analyst Jonathan Gray notes that if $9 billion in lossesare recognized, "offsetting gains will therefore elevate EPS as they are recognized in future periods."The question then becomes over what period of time will Fannie benefit. Immediately or longer term? One veteranmortgage executive told us that "it means Fannie won't have any amortization costs. That means no debt topay on." But all this may not save Messrs. Raines and Howard and many others who might be canned by the board.On Thursday Fannie's board held two executive committee meetings and were set to meet again over the weekend. Sofar, the board is standing by their men, but the pressure is building for the panel to act, to do something toappease its critics in Washington, including elected officials...
If Fannie needs to raise $9 billion, how does it get there? It already has $6 billion in excess capital andcould raise another $3 billion through the sale of perpetual preferred stock. That would get it out of a short-termjam with OFHEO, but the agency still might push the board to make executive changes...
There is one wild card in all this. Even if Fannie raises the $9 billion and escapes its capital "problem"with OFHEO, it still has liability over the $6 million in bonuses paid to its top executives back in 1998. OFHEOhas accused the company of deferring $200 million in expenses to make those bonus goals. If it's proven that management,in fact, did something nefarious to make the bonus goals, it's over for the inhabitants of the GSE's executivesuite...
Move over Jon Kempner and the Mortgage Bankers Association. There's a new trade group in town-- The National Alliance of Independent Mortgage Bankers. Who's heading the group? Former HUD counselHoward Glaser. Is that the former Howard Glaser who once worked at MBA and was up for the position Mr. Kempnernow holds? It is...
Foreclosures.com is warning that falling sales volumes in Northern and Southern California "couldbe a harbinger of a long-awaited price correction in overheated Golden State housing markets." Alexis McGee,president of Foreclosures.com, said declining prices and "nonexistent" real income growth, combined withrising interest rates on adjustable-rate mortgages, will strain many household budgets next year in Californiaand boost mortgage defaults...
Here's something interesting: if you punched in J.P. Morgan's stock symbol on Yahoo Finance onThursday and you clicked the profile page you would've seen an advertisement for Countrywide Home Loans.The ad states: "Credit problems OK." Doesn't JPM own a mortgage company? Doesn't it also operate a subprimeunit? Yes to both...
WASHINGTON NEWS: The Federal Home Loan Bank of Seattle has agreed to limit the growth of it mortgageinvestments to 10% annually due to poor hedging and financial results. Under the supervisory agreement with theFederal Housing Finance Board, the Seattle bank has to submit a three-year business and capital managementplan by Feb. 28. The bank said it did "not efficiently manage the funding and hedging" of its MortgagePurchase Program and its mortgage-backed securities investments.
MORTGAGE PEOPLE: Ronald A. Rosenfeld was recently sworn in as chairman of the Federal HousingFinance Board. A recess appointment, he succeeds Alicia Castaneda who's had the job since April. MarkSievewright, former president and chief executive officer of TowerGroup, has joined Fiserv, assenior vice president of business development.
MORTGAGE DATA/RESEARCH NOTICE: National Mortgage News has a new product out called "TheAlternative Products QDR." It has rankings on the top alt-A and second-lien funders and servicers. Formore information contact
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