THIS JUST IN: Look for an announcement from Credit Suisse late next week concerning its mortgage business. A spokesman there said it has nothing to do with its warehouse lending group...
No, the mortgage mess is not over but it's partly over. (That's the good news.) To discover just how much more pain is ahead for the subprime industry (and all those CDO holders) let's turn to the Quarterly Data Report. According to the QDR, since the first quarter of 2005 mortgage bankers of all stripes (insured depositories among them) have funded $1.645 trillion in subprime loans. Most of these loans, presumably, have been securitized. To date, Wall Street firms and banks have written down the value of their securities and CDOs by $100 billion or just 6.07% of the loans funded in those years. The big question is how much farther do we have to go? Let's assume the actual losses on the $1.645 trillion are 10%. That's $164.5 billion. So, if to date, the losses are $100 billion that means we have $64 billion to go. The QDR is a National Mortgage News publication. To order a copy, send an e-mail to
In case you're wondering, there is no secondary market for subprime loans, that is, unless they can be sold to Fannie Mae or Freddie Mac. Several Wall Street firms -- Merrill Lynch and Morgan Stanley among others -- are trying to get their account executives to pitch products (to brokers) that are eligible for sale to the GSEs. We're told the process is not going very well. Merrill's First Franklin unit appears to be funding next to nothing. For the full story visit
Bond insurers -- Ambac, FGIC, MBIA and others -- insure bonds, including AAA rated subprime bonds. For institutional holders, bond insurers are the last defense against losses. Bond insurers must maintain an AAA rating. Correct? If a bond insurer (Ambac, for example) loses that AAA rating that might mean the holder of the bonds (it insures) could be on the hook for losses. I'm only supposing here. But keep in mind this: Fannie and Freddie own $180 billion or so in AAA rated subprime bonds. If they are counting on bond insurance, well, there could be some problems. For the full story see the Monday (paper) version of NMN. Also in Monday's issue: will a combined Bank of America/Countrywide stay in wholesale? See Brad Finkelstein's story. Don't subscribe? Call: (800) 221-1809...
If you thought the outsourcing of American manufacturing (and some white collar) jobs to Asian nations was a bad thing, think again. Asian countries, including India (central Asia), produce goods (clothes, furniture, electronics) that American consumers buy on the cheap. The Indian and Chinese economies are booming. These nations (it looks like) are getting richer, as are their institutions. When our Wall Street firms and banks go south (Bear Stearns, Merrill Lynch) they get bailed out by foreign investors in, you got it, Asia. What's there not to like about the global economy? Take that Lou Dobbs...
There's been plenty of blame being thrown around concerning the housing and mortgage bubbles. Here's another: Who were our elected officials in Congress that repealed the Glass-Steagall Act? Here's some history: In 1933, in the wake of the 1929 stock market crash (or should we call it the Stock Market Implosion?), Congress passed the Glass-Steagall Act, separating commercial banking and investment banking activities (Wall Street). A few years ago Republican Rep. Jim Leach of Iowa and his friends on the other side of the aisle pulled it down. Now we have Citigroup/CitiBank/Salomon Smith Barney issuing subprime CDOs and taking huge hits. Citigroup is too big to fail, for sure -- plenty of federally insured deposits there. Merrill and all its brethren on the Street own depositories. The voters of Iowa might want to consider re-electing Mr. Leach so he can fix the mess he made. It's too bad because he was one of the congressional heroes of the S&L crisis, helping to expose a long list of wrongdoers and fix the mess...
According to a report in Politico (one of them inside-the-Beltway political papers), the man driving the subprime debate in Washington is none other than Martin Eakes, who heads the Center for Responsible Lending. Mr. Eakes, a Yale man, is also the head of Self-Help Credit Union and has testified before Congress on the subprime/mortgage/housing mess. We're told he is involved in some type of investigation of the crisis and has hired some folks to do research...
Here's some good more news: the mortgage banking division of JPMorgan Chase had net income of $332 million in the fourth quarter. Its mortgage business was helped, in part, by a $499 million upward adjustment in the value of its mortgage servicing rights...
A MUST SEE CONGRESSIONAL HEARING: The House Oversight & Government Affairs Committee has invited Countrywide chairman and CEO Angelo Mozilo to testify on Feb. 7 on the topic of severance packages for subprime executives. Mr. Mozilo, according to one executive compensation company, stands to earn $112 million in severance benefits if he leaves CFC, which is slated for sale to Bank of America. Also invited: Stanley O'Neal and Charles Prince, the former chiefs, respectively, of Merrill Lynch and Citigroup. Both were ousted after their firms reported large subprime-related losses.
MORTGAGE BOOKS: New from Wiley & Sons: "Mortgage Myths" by Ralph Roberts and Chip Cummings. In the book (according to a Wiley press release), the authors "take aim at the 77 mortgage myths that prevent so many would-be homeowners and real estate investors" from buying homes.
MORTGAGE PEOPLE: Terry Lindsey, a division manager at Chase Home Finance since 2005, has been promoted to national sales manager of correspondent sales. Countrywide has lost its chief information officer, Richard K. Jones -- a 12-year veteran of the lender -- to technology giant Fiserv Inc. Fiserv has hired Mr. Jones to be its chief information officer and executive vice president. RealtyTrac has hired Larry Spencer as a vice president. He will focus on industry relations, with a special emphasis on forging relationships with Multiple Listing Services. Brian McMahon has been named chief executive officer of Thornburg Investment Management Inc.
GO NEW YORK GIANTS!!!!
DATA NOTICE: The Mortgage Industry Directory and the online version of the book are still available. Besides listing detailed information on the top 400 lenders and 300 servicers in the U.S., the MID ranks the nation's top funders of commercial mortgages. There's also information on loan brokers. The book has valuable contact information on the top executives and department heads at each firm. For more information e-mail
