THIS JUST IN: It could be a busy Sunday again at the Treasury Department in Washington. Lehman Brothers (and Aurora Loan Services) may be sold in a deal brokered by the government. The rumor mill was working overtime dishing out speculation on Merrill Lynch, whose share price was sinking to a new 52-week low. There was also talk the Federal Deposit Insurance Corp. was contemplating the takeover of two depositories. Stay tuned...
Is Angelo Mozilo itching to get back in the game? One never knows. I last spoke with Mr. Mozilo back in January. We exchanged e-mails in May, right before the book "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis" came out. (Mr. Mozilo is a central character in the book which reads like Michael Lewis' "Liar's Poker." Along with "Chain," the Lewis book is a must read for understanding this crisis.) Back to Mr. Mozilo. We all know that he sold $400 million worth of Countrywide stock three years prior to his "retirement" from CFC. So what could he buy with all that money based on the current market "caps" of severely publicly traded mortgage-related firms? Let's take a look: First up, Freddie Mac whose stock is now worth $300 million. That's not a typo. Of course, Mr. Mozilo would have to deal with the regulators a bit. Fannie's stock is worth $760 million, so he'd have to borrow to take control of that one. PMI, the mortgage insurer, can be had for $257 million. But the big kahuna of MI firms, MGIC, looks a bit expensive for Mr. Mozilo at $846 million...
The 2Q rankings for top lenders and servicers (including alt-A, second liens and jumbo) are out in the new edition of the Quarterly Data Report. According to this exclusive National Mortgage News product, the nation's top wholesale lender is now Chase Home Finance. The top jumbo lender is Wachovia Mortgage. To see the QDR and its sister product, the Alternative Products Quarterly Data Report, e-mail
Is there an accountant in the house? Let's go over some numbers. (If you have a weak stomach you may want to stop reading right here.) Fannie Mae and Freddie Mac's $5.2 trillion in obligations are now the obligations of the federal government, which brings Uncle's total bill to $14.4 trillion. The Federal Reserve is on the hook for $30 billion or so in Bear Stearns assets. They also might be the "steward" of Lehman Brothers and Merrill assets should it come to that. You would figure that all this debt would concern our lenders (foreign governments that buy our Treasuries). I guess they don't care, which means Ronald Reagan was right: deficits don't matter. Spend, spend, spend. Ah, if only America were owned by a hedge fund where they have a board of investors to answer to...
Our sister publication American Banker was the first to report that Washington Mutual could be sold to JPMorgan Chase shortly. But how did WaMu hit the skids? Answer: Subprime. The long and not so convoluted story of WaMu's foray into B&C has to do with Roland Arnall and Long Beach Mortgage and a whole host of executives who worked for him and went on to start subprime firms of their own. Roland's story is told in the chapter "The Beach Boys of B&C, How Roland Arnall Became the Johnny Appleseed of Subprime." This week's excerpt from "Chain of Blame":
Arnall also believed in rewarding his top performers with junkets. It was a sales culture where the company's top AEs (the ones who brought the most loans in through brokers) were treated like royalty, being wined and dined at four-star hotels. Those who didn't perform either quit under pressure or were fired. Long Beach Mortgage, Ameriquest and Argent employees were treated to weeklong cruises in the Caribbean. "It was nonstop drinking, gambling and partying," remembered one former executive. Loan volumes (and profits) were so good during those years, he said, that Arnall threw a huge bash in Las Vegas for the company's top salespeople, giving away $1 million in cars, motorcycles and cash.
Tim Hughes, an account executive at one of Arnall's shops, remembers what he calls "lavish three-day sales meetings" where once a quarter the top AEs dined on shrimp and filet mignon "with all the alcohol that one could possibly want to drink." He remembers a sales meeting where the company flew in 700 AEs "and we weren't exactly staying at a Motel 6. My boss told me that each sales meeting would cost well over $2 million." When it came time to give out the sales awards, salaries weren't mentioned but the loan volumes that the AEs had brought in using loan brokers were openly displayed on a large scorecard for all to see. "I did the simple math. A few of the AEs were earning a couple of million dollars a year."
For Ameriquest's retail loan officers, the event of the year was a party at the Atlantis in Las Vegas called "The Big Spin." Arnall would start the event off with a short, 15-minute speech and then leave the honors to his top lieutenants, including Lang, the head of retail. At one "Big Spin" party, an Arizona sales manager witnessed the company giving away 10 cars, including Porsches, and $10,000 in prizes. Depending on the year, the entertainment included a cross section of singers and actors, including LL Cool J, Penn & Teller, and comedian Jay Mohr. The motivational speakers - designed to prime the sales pump - included former New York mayor (and eventual presidential candidate) Rudolph Giuliani... (For info about the book visit
Just how in control is the new Federal Housing Finance Agency? When it comes to public relations, if you ask a question of a Fannie/Freddie PR person they first have to clear any answers with FHFA. I tried to get clarification of this issue from an FHFA spokeswoman who said she did not know but had to go ask her boss. I'm still waiting on an answer...
WASHINGTON NEWS: The Senate Banking Committee will hold a hearing next Tuesday, quizzing Treasury secretary Henry Paulson and Federal Housing Finance Agency director James Lockhart about their decision to seize control of mortgage giants Fannie and Freddie. According to the committee, chairman Chris Dodd, D-Conn., will ask about the eventual cost of the takeover, whether the move will stabilize financial markets, and what it means for mortgage affordability.
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 Nov. 13 and 14 in Las Vegas. For more info call Tiffany Patrick at (212) 803-8699.
DATA NOTICE: 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 e-book provide 1Q 2008 information plus full-year 2007 stats. For more information e-mail
