THIS JUST IN: Merrill Lynch’s attempt to sell its Pittsburgh-based subprime servicing platform has all come to naught. Servicing brokers told National Mortgage News that Merrill didn’t like the bids. “There was a first round and some people were invited in for due diligence,” noted one investment banker. “Investors like the platform,” he added. “It’s better than most.” Translation: bidders wanted to take over the platform for a song and Merrill balked, which means the firm can’t be all that desperate...
Meanwhile, one rumor making the rounds is that Merrill is talking to former Bear Stearns trader Mike Nierenberg about coming over to revamp what’s left of Merrill’s trading desk. Mike was at Bear during its heyday in subprime. He and Jeff Verschleiser were the top dogs on Bear’s desk. Mike recently left JPMorgan Chase. See Monday’s NMN for the full story on Nierenberg. Don’t subscribe? Call (800) 221-1809...
Once again Fannie Mae and Freddie Mac were the story of the week in mortgageland. There’s no sense rehashing all the news of the past week but let’s clear the air on a few things. The White House and Congress are not going to let these two go down. I said it before and it’s worth repeating. The question is: Do they need help and if so how much? Question No. 2: Do the common shareholders get wiped out? No one knows the answer, at least not right now. There is one thing Fannie and Freddie’s new regulator can do to save them: lower their capital standards. You heard it right. Reduce their regulatory capital requirements. If the two think they can weather the foreclosure crisis — which is what they’ve been telling us repeatedly for months — then in time they will recover and the shareholders will be saved. (Once the two stabilize then, and only then, we can start talking about breaking them up into smaller pieces, which is one plan being discussed. Of course, we already have that model. It’s called the Federal Home Loan Bank System) For the GSEs it all boils down to accounting: how much do they have to mark down their ailing subprime and alt-A holdings and will these reserves be recaptured at a later time which is what they’ve been telling us all along? Keep in mind this one thought: there is a new definition of “liquid” and it reads like this: a company is liquid as long as investors are willing to lend money to them. Who made up this new definition? I did. Any thoughts? Drop me an e-mail at
The book is finally out. It’s the new Mortgage Industry Directory and it has rankings and profiles on the nation’s top lenders, servicers, commercial mortgage bankers and loan brokers, including contact names phone numbers, delinquency information and much more. The Web version of the book — the eMID — is also ready. For more information e-mail
And now for the other book, “Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis,” which I co-authored with Matt Padilla of The Orange County Register. Bear and Merrill are a key part of the book. Messrs. Nierenberg and Verschleiser make a brief appearance. The excerpt below deals with Angelo Mozilo, Countrywide, James Johnson and Fannie Mae. Mozilo is a central character in the book and Countrywide and Fannie were linked at the hip:One thing that Jim Johnson was known for — besides his political talents — was his personal radar. A Fannie executive who worked under him for many years described him this way: “He knows how to pick the right person who’s on the ascendancy. It’s a rare talent.” Or maybe not that rare. The new CEO and the bean counters who tracked the millions in loans it bought each year spotted the fact that Countrywide had been growing quite rapidly over the years and was about to achieve the one milestone that any good mortgage executive could dream of: becoming the largest residential lender in the U.S. And Countrywide wasn’t even an S&L.
With savings and loans continuing to fail at a record rate, Fannie executives knew the mortgages they’d be buying in future years wouldn’t be coming so much from S&Ls but non-bank mortgage companies like Countrywide and a growing number of large commercial money center banks — like Norwest (later to merge with Wells Fargo) — that after years of ceding the business to the S&L industry finally realized that home lending, if done properly, wasn’t so bad after all. And what a business it was becoming. In 1991, in the post-Reaganomic era, interest rates began to fall, which sparked both home building and mortgage lending. It didn’t take long for Jim Johnson to realize that Mozilo “was the guy,” said one of Johnson’s aides. “Jim knew that he had to do everything he could to make Angelo think, I’m his best friend.’ If Jim was traveling to the West Coast, he’d say, We need to call Angelo and set up a golf game.’ He became a student of Angelo. He knew his routine — that he’d be up at four in the morning, head to the gym and start watching FNN.”
Johnson wasn’t looking for friendship alone, he wanted Countrywide to sell all, or at least most, of its billions in loan originations to Fannie Mae — and not to its cross-town competitor Freddie Mac. Fannie’s executive team — Johnson included — knew that with the S&L industry shrinking and loan securitizations through Wall Street becoming a reality, they could benefit greatly, placing mortgage and mortgage-backed securities on their balance sheet. They needed volume and Mozilo was the man who could deliver it. Johnson’s goal was to cement the relationship between Countrywide and Fannie Mae for years to come. “When Jim realized how much volume Countrywide was taking down, especially in California, he made it his mission to get to know Angelo,” said the Johnson aide.
Being who he was — a fierce competitor not to mention a tough from the Bronx — Mozilo could smell a snow job a mile away. He knew exactly why Johnson was warming up to him... (For more information on the book visit:
The evidence continues to pile up that the Federal Housing Administration market is on fire. According to new rankings that will be appear soon in the Quarterly Data Report, many of the nation’s top issuers of GNMA securities are seeing 200% increases in their issuance volumes. To order the QDR e-mail
The nation is in a recession — so says UBS analyst Laurie Goodman. She writes, “We still view the U.S. economy as being in recession. We are maintaining our annualized real GDP growth forecast of -1.0% for Q308 but are reducing our Q4 (08) forecast from 1.0% to -0.5%. For calendar 2009, we are cutting our prior 1.9% growth forecast to 1.1%, with weakness front-loaded”...
MORTGAGE PEOPLE: First Reverse Financial Services, a national reverse mortgage wholesaler, is gearing up. It recently hired Jack McGovern to be its Southwestern regional director of correspondent lending. It also named Jamie Longe Northeastern regional director.
MUST ATTEND CONFERENCES: National Mortgage News and American Banker will hold their third annual Mortgage Fraud Conference on Nov. 13-14 in Las Vegas. It will feature leading experts in the field to teach attendees how to spot two types of mortgage fraud: consumer and insider misbehavior, including scams by loan officers, title officers, appraisers and loan brokers. For more information call Tiffany Patrick at (212) 803-8699.
DATA NOTICE No. 1: Need a list of wholesalers that have recently departed the sector? Visit
DATA NOTICE No. 2: With the mortgage industry in the throes of a historical correction you need up-to-date data on which firms are left standing. You need hard numbers on their servicing and production volumes, including executive names and telephone numbers. Again, all of this info is in the new eMID, which we mentioned above. E-mail
