Before we get to this week's carnage I'm going to offer two pieces of good news. Why? Because the industry needsit. So, here goes: LendAmerica of Melville, N.Y., says it is doing a booming business in FHA lending.The privately held company said it saw the wreckage in subprime coming 18 months ago and re-engineered into FHA.Company VP Mike Ashley says the company is licensed in 30 states. And in one other piece of good news, QuatrroMortgage Solutions has purchased the ePower mortgage technology platform of California lender PreferredFinancial Group. Preferred will be Quatrro's first client. The sale was brokered by Classic Strategies,a New York advisory firm
OK, enough of the nice stuff. National Mortgage News ad salesman Jim Israel was drivingin Pasadena last Thursday. Jim noticed a crowd of about 40 outside a Countrywide Bank branch there. He assumedit was a protest of some sort. As it turns out, it was a run on the bank. In case you're wondering why the FederalReserve cut the discount rate Friday morning there is a one word answer: Countrywide. The Fed -- which subscribesto NMN's Quarterly Data Report (quarterly rankings of the nation's top 100 servicers and lenders)-- realized this: not only does Countrywide Financial Corp. own a large thrift ($60 billion in liabilities)but it services $1.4 trillion in home mortgages, ranking first with a market share of almost 16%. (Figures, courtesyof the QDR). Fed chairman Ben Bernanke had to be thinking this: if something happens to CFC think aboutits 8.9 million residential servicing customers. Yes, think about that. To order the QDR e-mail
The way some subprime executives were talking last week it would appear the business is over. This isn't a mereoverexaggeration. As one California-based executive told us: "Subprime? Alt-A? That business is gone."In short, Wall Street is offering whole loan bids that many seem ridiculous. One industry veteran said he heardbids of 90 and 95 for new production. (100 is par.) "These are performing loans," he laughed. "Newstuff. Yes, it's over." And if it is, indeed, over, the next question begs: when do all those Wall Streetfirms start shutting down their conduits and laying off their workers? If the Street doesn't buy nonprime, thatmeans lenders can't lend (those that are left) and that's it -- ball game over. It would appear the current subprimeindustry is, well, toast. Something eventually will rise in its ashes. But what? If you don't have capital or abalance sheet, you're gone. When the Senate holds hearings on the crisis, I suggest it call executives fromthese Wall Street firms to testify: Bear Stearns, Lehman Brothers, Merrill Lynch. In caseyou're wondering how the Street pulled off its subprime charade of the past few years (pumping and then dumpingthe market), it has to do with CDOs (collateralized debt obligations). Over the past few years, the Street securitizedall this crap. It put the "first loss" positions of these ABS securities in the CDOs and sold them tosuckers (I mean, investors) in Europe and elsewhere. (Remember those Bear Stearns hedge funds that blewup?) When those investors finally woke up, realizing that they had bought worthless junk, the trouble started.(Have I told you how fond I am of Wall Street?) The whole ball of yarn unraveled. In short, a string got pulledat a German hedge fund and a big boulder rolled downhill to Wall Street. The boulder missed the Street (becauseWall Street never gets hurt, really) and it flattened lenders, brokers and the guy looking for his musical chair.(That last guy would be the borrower who can't pay his stated-income subprime payment-option ARM on the overpricedhouse he bought in California. He bought that house because his Realtor told him if he doesn't buy now the housewill be sold in five minutes to another buyer for $50,000 more.) You get the picture? Have a good weekend.
But first, here's a joke: What did the Mortgage Bankers Association say after its five-day drunk? Punchline: We merged with what trade group? (The National Home Equity Mortgage Association.)
NO LONGER WITH US: Former Yankee and baseball broadcaster Phil Rizzuto. Phil starred inthe The Money Store's early commercials on WPIX in New York. The Money Store was an "oldschool" subprime lender, back in the old days when “B&C” lenders asked for pay stubs and actually wantedto know how much equity was in a house.
MORTGAGE PEOPLE: Astoria Financial has named Monte N. Redman president and chief operatingofficer. The Mortgage Bankers Association appointed Jan Sternin as senior vice president of its commercial/multifamilygroup.
DATA NOTICE: If you're trying to figure out where the mortgage market is headed and what the businesswill look like for the rest of the year, you're in luck. NMN has just published the brand-new MortgageIndustry Directory, which ranks the nation's top 400 lenders, 300 servicers, top 85 subprime and much,much more. The book also provides a special analysis on America's subprime crisis. To order e-mail
