THIS JUST IN: Merrill Lynch this week confirmed that it is keeping its subprime servicing platform. For the full story see Monday's edition of National Mortgage News. Don't subscribe? Call: (800) 221-1809...
I wish the HOPE NOW Alliance the best of luck but just because it tells us it has helped 2 million consumers avoid foreclosure we still can't put that into dollars and cents or measure its true effectiveness. This past week I asked HNA executive director Faith Schwartz if she could give me a dollar volume on the principal amount of mortgage debt that had been forgiven in these workouts. She could not. HNA can't yet track that, she said. Does HNA know how many loans have been refinanced into FHA products? They don't know that either. It also has no idea how many of the 2 million loans may have fallen back into delinquency. Hopefully, in the coming months HNA can provide these answers. Sooner or later someone in Congress is going to start asking hard questions...
During the S&L crisis, ailing thrifts were taken over by the Federal Savings and Loan Insurance Corp. (FSLIC) which promptly sold millions (or is it billions?) of dollars in junk bonds at steep losses. Some of the bonds went belly up while others recovered their original value and then some. The same thing is going on right now in the subprime ABS and CDO market. Wall Street firms like Merrill Lynch are unloading their holdings at extreme fire sale prices (22 cents on the dollar in Merrill's case). Will the bottom fishers clean up? It stands to reason they will. It's just a matter of when. Even if 50% of all subprime loans go bad (which is doubtful) a bond bought on 22 cents already has a huge profit potential. Meanwhile, more on Merrill's role in the mortgage mess from the book 'Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis': According to [Bill] Dallas and others, [Stan] O'Neal's message to Merrill's mortgage department was clear: Go after the subprime business. Be number one. By 2004 Merrill began to move up in the ABS league table rankings. It was in that year that Countrywide's capital markets group, Countrywide Securities Corporation, blew away the competition, securitizing $72 billion in subprime and nonprime loans. Mozilo, who at first had resisted the subprime business, was now the chairman and CEO of not only the largest prime lender, but the fastest growing subprime originator-plus the top securitizer of non-Fannie/Freddie loans.
O'Neal grew anxious about the business. He felt he was missing the boat. "Stan didn't want to get left behind," said Mozilo. According to Bill Dallas, O'Neal shoved aside the senior manager in charge of the mortgage department, replacing him with Michael Blum, who carried the title of managing director in charge of global asset-based finance. It was the job of Blum and his team to take pools of receivables (loans or similar debt instruments), including mortgages, credit cards, car loans, and even loans made to movie studios, and turn them into "investments for sophisticated investors." Sophisticated investors meant institutional investors-pension funds, insurance companies, and overseas banks and governments. Investments meant bonds. The message Dallas heard from O'Neal and the traders he was beginning to work with at Merrill was that the nation's number-one seller of retail stocks not only wanted to be number one in residential ABSs, but wanted to be number one worldwide. "Stan was the one driving it," said Dallas...
With Blum now in charge of Merrill's mortgage effort, things began to change. In April 2004 Merrill hired a trader named George Davies to help ramp up the volume of loans coming through the firm's trading desk...Times like these I wonder, what the heck Herb and Marion Sandler are up to these days. As you might recall, the Sandlers were the ones who sold Golden West/World Savings to Wachovia which is now stuck with $112 billion or so in payment option ARMs, a majority of which came from that institution. The Sandlers personally reaped $2.4 billion from the sale of GW and then started a private foundation to give away most of their money. One idea the Sandlers latched onto was a journalism project called ProPublica which is supposed to hire investigative reporters to sniff out great stories. Of course, one of the greatest stories out there right now is the mortgage mess. Will ProPublica -- which is now being managed by retired Wall Street Journal managing editor Paul Steiger -- investigate the Sandlers' sale of GW to Wachovia? Herb, Marion, buy my book, co-authored with Matt Padilla of The Orange County Register...
Impac Mortgage Holdings of California is still alive. You might even say this former alt-A lending giant is on the comeback trail. (Then again, you might not.) Recently, its shares hit 93 cents compared to a 52-week low of 20 cents. (Its 52-week high is $1.98). Impac is a real estate investment trust (REIT) living off its investment portfolio which includes alt-A loans, nonconforming, and some multifamily assets. It no longer funds new loans. However, the New York Stock Exchange doesn't like to see companies on its exchange trading for under $1 for too long and has placed Impac under review. And in case you're wondering Joe Tomkinson and William Ashmore are still in charge at Impac. Stay tuned...
It appears that short sellers are backing off (ever so slightly) their bets against Fannie Mae and Freddie Mac. According to the website, ShortSqueeze.com, 141,371,000 shares of Fannie currently are being shorted, a recent decline of 3.47%. Speculators are shorting 118,608,500 shares of Freddie's stock, down 0.65%. The website, however, does not say over what time frame the decline has occurred. Over the past two days the stocks of the GSEs have rallied somewhat...
According to NMN's Grapevine website, loan brokers that need HELOC financing can visit these two websites:
THE MEDIA IS THE MESSAGE: National Association of Mortgage Brokers president Marc Savitt says the brokerage industry needs to take its message right to consumers about the state of the market to counteract the news media's focus. Speaking on a panel with regional leaders at the NAMB/Southeast conference in New Orleans, Mr. Savitt said the mainstream media are concentrating on "gloom and doom" and are not hearing that housing affordability is back and rates are still low.
MORTGAGE PEOPLE: Wells Fargo's mortgage chief Mark Oman is retiring in late 2009. Former House Banking Committee chairman, James Leach of Iowa spoke at the Democratic convention in Denver this past week. The thing is, Jim's a Republican and he's backing Obama. (Wait until his former staffer Joe Pinder finds out.) Greenwich Capital this past week announced an expansion of its mortgage business via the addition of 16 professionals to its mortgage-backed securities team, 15 of them from Bear, Stearns & Co. Leading the new hires is Scott Eichel, who will co-head asset-backed and mortgage trading with RBS veteran David Cannon. A management shakeup at Fannie Mae has put Peter Niculescu in charge of the single-family business as the new chief business manager and named David Hisey the new chief financial officer and Michael Shaw the new credit risk manager. NetMore America, Inc. has named Lisa Schreiber to its executive management team.
MUST ATTEND CONFERENCES: Don't become another fraud statistic. National Mortgage News, Mortgage Technology and American Banker invite you to attend the 3rd Annual Mortgage Fraud Conference on November 13 and 14 in Las Vegas. For more info call: Tiffany Patrick at (212) 803-8699. Best rates expire September 4, 2008.
DATA NOTICE #1: Need a list of wholesalers that have recently departed the sector? Visit:
DATA NOTICE # 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. All of this is contained in the brand new Mortgage Industry Directory and the web version of the production, the eMID. The book and ebook provide 1Q 2008 information plus full-year 2007 stats. For more information email:
