If Fannie Mae and Freddie Mac keep raising their g-fees’ they might just tick lenders off, sendingthem into the warm and loving arms of Wall Street firms that are sitting around like Maytag repairmen, waitingfor non-prime loans to come wafting through to their trading desks. That's the opinion of Office of FederalHousing Enterprise Oversight director James Lockhart. Okay, that's not exactly what he said this pastweek at the American Enterprise Institute but it was in the ballpark. Mr. Lockhart noted that if agencyg-fees “get out of line” loans instead might find their way to the Wall Street conduits. Of course, if these loans’are non-prime in nature and Merrill Lynch, for example, wants to securitize them, they will need to createBBB’ pieces for credit enhancement, which I'm sure they will have no trouble selling to foreign investors or shovinginto CDOs...
Bear Stearns, we're told, has a new mortgage-related project cooking. We're not sure what it is but onemortgage manager recently got a call about it. Then again, Bear just recently trimmed 650-plus jobs, 100 or soat its mortgage unit, including positions at its Irvine office...
Has anyone noticed that Goldman Sachs is quietly bulking up its presence in the non-prime space? Notonly did it recently buy subprime specialty’ servicer Litton Loan Servicing from C-BASS, but itowns Senderra Funding and a small prime servicing shop called Avelo. During the go-go’ subprimeyears of 2004 2006 Goldman was a buyer of loans but unlike some Wall Street firms, did not go hog wild. It carefullylooked at buying a subprime lender but either didn't like the asking price or had the foresight to see the trainwreck that began in earnest this summer. Smart move on Goldman's part. Does its investment in Litton mean the non-primemarket has hit a bottom?
As we all know, subprime volumes plunged by 75% or so in the third quarter, according to National MortgageNews and the Quarterly Data Report. According to the newly published Alternative ProductsQDR, alt-A production fell by 50% in the quarter. To see the rankings see the Monday edition of NMNor order the AP-QDR by emailing
CDOs, CDOs, CDOs. That's all we hear about these days in regard to the subprime crisis. The media can't writeabout failing subprime lenders anymore because most of them have failed or merged out of existence. That leavesCDOs or collateralized debt obligations. What's a CDO? Well, it's a bond that includes other bonds or as one formermanaging director put it: "It's a securitization of a securitization." The MD also told us that C-BASSwas an early innovator of mortgage CDOs. One basic question being asked is this: did the end investors in theseCDOs have any clue to what they were buying in regard to subprime-related CDOs? I've heard it both ways. You tellme. Send an email to:
Bank of America said recently that its CDO/subprime writedowns will exceed the $3 billion figure thatit estimated on November 13. BoA, of course, was not a subprime lender. (It tossed its subprime unit overboardseven, eight years ago.) But it was a CDO issuer and investor...
A few important anniversaries: It was a year ago that Bill Dallas closed Ownit Mortgage afterit could not come to terms with Merrill Lynch over loan buybacks. Ownit was a subprime wholesaler. Bill still ownsa mortgage brokerage firm in California. And it was over a year ago that Amy Brandt left WMC Mortgage,General Electric's subprime shop. GE recently closed WMC. Even though GE got its head handed to it in subprime,it continues to fund such loans overseas...
Here's a question that nobody has asked the government (and Housing Secretary Alphonso Jackson) lately:whatever happened to efforts to reform the Real Estate Settlement and Procedures Act (RESPA)? I would guess, HUD'srole in trying to help the White House understand the mortgage subprime ARM 'reset crisis' has swamped allthe attorneys, wonks and bean counters down on 7th Street S.W....
Alan Greenspan, the former Federal Reserve chairman, has found the roots of the current liquidity’crisis (which is really the subprime crisis but with a different name). In an recent op-ed piece Mr. Greenspan once a big fan of ARMs wrote: “The root of the current crisis, as I see it, lies back in the aftermath of theCold War, when the economic ruin of the Soviet Bloc was exposed with the fall of the Berlin Wall.” Huh?
Friedman Billings Ramsey, in a new research report, questions whether Washington Mutual will needto tap even more equity than the $2.5 billion it plans to raise through a preferred offering. FBR writes: "GivenWM's exposure to $58B of pay-option ARMs, $62B of HELOCs, $20B of subprime mortgages and $40B of managed creditcard receivables, we believe the current capital raise will be insufficient to get through the next few quarters,and we expect further capital raises in coming months." (B = billions.) WaMu is forecasting just $1.5 trillionin residential production next year. In 2007 the industry likely will wind up funding about $2.5 trillion, accordingto the Quarterly Data Report...
QUESTION: If Ameriquest were still alive and thriving (which it's not, obviously), would it havebeen the sole sponsor of Led Zeppelin's reunion concert in London this past week? In years past RolandArnall's Ameriquest sponsored concerts by the Rolling Stones and (Sir) Paul McCartney. I nevercould figure out why they didn't back a Monkees reunion...
MORTGAGE PEOPLE: The Mortgage Bankers Association promoted Steve O'Connor to senior vicepresident of government affairs. He will assume the responsibilities of Kurt Pfotenhauer who is leavingMBA to join the American Land Title Association. Metrocities Mortgage said its CEO and founder PaulWylie has decided to step down. Dick Loeffler, COO of Prospect Mortgage Company, will serve asinterim CEO. Metrocities and Prospect recently merged operations.
WASHINGTON NEWS: The Senate on Thursday passed legislation to reform and modernize the Federal HousingAdministration. The House passed its version of the bill in September. The Senate bill allows downpaymentsof 1.5% and for FHA to insure loans up to $417,000, which is the Fannie/Freddie limit. Stay tuned for news abouta House/Senate conference on the bill.
DATA INFORMATION: Try the eMortgage Industry Directory, an online book that tracks thenation's top 400 lenders, 300 servicers, top 85 subprime and much, much more. The ebook also provides news updateson all firms listed plus a special analysis on America's subprime crisis. To order email:
