Is the Bear Stearns hedge fund debacle the subprime Chernobyl we all feared or are carrot-juice-swiggingfinancial journalists blowing the whole thing out of proportion? This is what we don't know: how large exactlyare these two Bear-managed funds? What type of subprime assets are in them? And how leveraged are the funds? Byusing a hedge fund structure to invest in subprime assets, Bear has created a Dick Cheney-like "coneof silence" to prevent the outside world from knowing what exactly is going on at the two hedge funds. Note:Bear has not filed any type of SEC statement regarding these funds, has it? Bear is a public company. Thehedge funds are not. We know this: Merrill Lynch -- which does not screw around with deadbeat borrowers-- told Bear on Wednesday enough is enough: you either post more collateral or we're seizing the assets collateralizingour loan. Guess what? Bear said go ahead. Merrill said fine. We will. Good for Merrill. Merrill -- as we all know,thanks to a groundbreaking story published by National Mortgage News in February -- has zero tolerancefor subprime lenders that have no capital. This is what I propose: Since Bear won't tell us what's going on therespective chairmen of the House Financial Services Committee and Senate Banking Committee shouldhold a joint public hearing on what exactly Bear is up to. We need to learn what's in these hedge funds and howcome Bear can get away with not disclosing. What did Merrill know that caused it to call in its loan? And whilewe're at it, maybe our elected officials can do an investigation into Wall Street's margin calls on Ownit Mortgage,Mortgage Lenders Network and ReseMAE. (To name a few.) And maybe our elected officials can ask thisbasic question: who's to blame for our nation's subprime crisis, one in which the delinquency rate is 17% (accordingto the Quarterly Data Report). Who, really, is to blame? Wall Street? Wholesalers? Loan Brokers? The consumer?I would venture all are to blame...
By the way, here's the first few sentences from our February story on Merrill's margin calls: Merrill Lynch-- which has been stung by three high-profile subprime bankruptcies in six weeks -- is conducting margin callson certain B&C originators that receive financing through the firm's warehouse group. One secondary marketofficial, requesting anonymity, said Merrill is the "main culprit" in the current buyback plague sweepingthe subprime industry. He added, "Merrill is making originators pay dearly."
The margin calls, which require that these lenders post additional capital, were confirmed by two mortgage bankersand a spokesman for Merrill...
On Thursday, six "scratch and dent" deals hit the secondary market, one trader told NMN. Hesaid the offerings of delinquent residential mortgages range from $2.8 million to $34 million. "It's prettymuch your standard day," he added...
In case you missed it, the yield on the 10-year rose to 5.18% on Friday afternoon. The yield's 52-week low is4.4%...
Fannie Mae investors are entitled to about $10 billion in compensation for (stock) losses stemming fromaccounting manipulation at the secondary market giant, Ohio attorney general Marc Dann said this past week.The AG is suing Fannie on behalf of the state's pension fund...
Super-jumbo lenders take note: Famed wrestler Hulk Hogan is selling his palatial French Country-inspiredestate in Bellair, Fla. The house boasts 17,000-plus square feet...
Most of the nation’s largest mortgage lenders and both GSEs will be in the audience on June 25 when NeighborWorksAmerica and the Ad Council unveil their long awaited public service campaign to address residentialdelinquencies. The ads are designed to spur delinquent and financially strapped homeowners to call a toll-freehotline: (888) 995-HOPE...
You can take the boy out of Fannie Mae (the Raines era) but you can't take the Fannie Mae outof the boy: former GSE president Larry Small is portrayed as a free-spending "I'm in charge and I'lldo whatever I want" kind of guy (my words) in a scathing new report that focuses on his stewardship of theSmithsonian. "It appears that the board reported to him rather than the secretary reporting to theboard," the report says. (Sounds a lot like Frank Raines' management of Fannie.) Mr. Small took over managementof the Smithsonian in 2000 shortly after he left Fannie. The report notes that from 2000 to 2006 he took 70 weeksof vacation (nice work, Larry) and spent 64 business days serving on corporate boards that paid him $5.4 million...
MORTGAGE PEOPLE: The National Association of Mortgage Brokers has named Nikita M. Pastorvice president and counsel in its government affairs division. Prior to joining NAMB, Ms. Pastor was an associatefor Goodwin Procter LLP. National Cooperative Bank has named John Donahue vice president andbusiness development officer for national real estate/CMBS capital markets. He joins NCB from Genworth Financial.
DATA NOTICE: The first-quarter edition of NMN's Quarterly Data Report is now available-- as is the 1Q issue of the Alternative Products Quarterly Data Report. Find out which three subprime shopsmanaged to grow production in the first quarter. Exclusive research conducted by NMN for the QDR revealsthat lenders funded just $88 billion in subprime mortgages in the first quarter. For more information onthe QDR and AP-QDR e-mail
