WHERE DO WE GO FROM HERE: Welcome to the new, socialized mortgage banking system of the United States of America. If you're left leaning, you're probably thinking, finally, the government controls everything! Let's take a tally: Uncle now owns most of Fannie Mae and Freddie Mac and their $5.2 trillion in guarantees/portfolios. Uncle owns 80% of American International Group's $70 billion or so in "credit default swap" contracts on subprime bonds. (This is not a good thing to own.) Uncle also owns 80% of AIG outright (a $1 trillion company) including a once-top-ranked mortgage insurer, United Guaranty. Uncle owns AIG's two mortgage banking subs, which were shrinking anyway, so this isn't a big deal, in the scheme of things. Uncle owns $30 billion in Bear Stearns' risky bonds. According to reporting done by National Mortgage News' Brian Collins, Treasury soon will buy $10 billion in MBS to add liquidity to the market - plus Fannie and Freddie are actively buying. Meanwhile, Congress, Treasury and the Fed's Ben Bernanke are going to write legislation to create a "Mortgage RTC." This strain of the RTC will buy (you got it) mortgages and bonds no one else wants. Now that Uncle owns Fannie and Freddie, they can call the shots on foreclosures. You might say Uncle Sam is "the buyer of last resort" for all things mortgage. Sounds crazy doesn't it? Well, it's here. What does the stock market think of all this? They love it! On Thursday and Friday the Dow Jones shot up almost 800 points! Of course, the ban on short selling probably helped a bit. Where do we go from here? It's the Wild (socialized) West. Strap yourselves in and continue reading National Mortgage News and our daily website (
Commentary on this mess from Richard Wilkes, a long-time source, who used to run First Nationwide Mortgage and other shops. I asked Richard about the government's plan. His response: "Sure it will work. With unlimited cash and absolute control of the three largest insurance and mortgage firms in the world you can make anything work. Suppose I posed this problem to you: a patient has a brain cancer that is inoperable - not because we don't have the ability to remove it, but because the surgery is so incredibly expensive and intrusive that not only would it cost tens of millions to perform the surgery, but the patient would die as a result of it. Now, if the only consideration were to be removing the cancer, you sure could succeed in that mission. Along the way, however, the brain would be destroyed and the patient would die. But the surgeon's skill would be applauded. The U.S. now has lost any moral high ground in its 200-year-old cry for free market capitalism. Gone are the days when we can sneer at 'managed economies' around the globe"...
Meanwhile, if you need fresh data on who the top players in residential lending and servicing are (the deck chairs have changed), read the new 2Q edition of the Quarterly Data Report. The QDR has complete delinquency and loan numbers - plus info on 23 firms that are still servicing subprime loans. To order the QDR shoot an e-mail to
THIS JUST IN: The Federal Deposit Insurance Corp. had established Monday, Sept. 15 as the deadline for the first round of bids on IndyMac Bancorp, but according to one investment banking source, the agency scrapped the auction because of the carnage caused by the takeover of American International Group and one other event: the bankruptcy of Lehman Brothers. Guess who was advising FDIC on the IndyMac sale: Lehman. Oh well. The FDIC would not comment on the new bid date or anything. Stay tuned...
Can you spell MWOB? And what exactly is an MWOB? It stands for "minority or woman-owned business." During the S&L crisis the Resolution Trust Corp. gave (some) preference to MWOB contractors who wanted to sell assets on the government's behalf. MWOBs received "points" toward winning a bid for a service rendered. We understand the Federal Deposit Insurance Corp. may soon start accepting MWOB applicants (or already has). Before you can be considered as an MWOB the agency will want to make sure you are, in fact, a minority or woman...
In an attempt to bring some "good" news to our readers here's a tidbit to ponder: Franklin American Mortgage had a huge jump in its wholesale/broker fundings in 2Q. Franklin table-funded $1.77 billion in loans, a handsome 83% increase from the same quarter last year. Figures are courtesy of NMN's Quarterly Data Report. For more info e-mail
Lehman Brothers, as noted above, is in Chapter 11, which means as its employees and assets get whittled down the company will need less office space. According to one analyst, Lehman has taken its office leases, packaged them into bonds and securitized them - which means some poor investor owns these assets. If, those leases go bad, that means someone is going to get hurt. Stay tuned...
HOW DID WE GET HERE AND WHERE ARE WE GOING? This week's excerpt from the chapter "Ten Bad Years for Housing in America" from the book "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis," published recently by John Wiley & Sons:
Just before Angelo Mozilo stopped talking to [Paul] Muolo at National Mortgage News he had given a few interviews on various topics. Time and time again he touched on how best to stem the rising tide of delinquencies. "You have to stop home prices from sliding," he said. "You need to get prices going in the other direction." But that wasn't likely to happen anytime soon. All those payment-option ARMs that his company and countless others had originated - $500 billion worth in 2006-2007 - had given home buyers the ability to buy more house with less money now. These POAs, which technically weren't even subprime loans, had played a central role in driving up home prices. The loans also fueled speculators who used these mortgages to keep their monthly payments low while renting out homes in the hope of flipping them for a quick profit.
During the housing boom so many families in once red-hot markets like Orange County, San Francisco, Boston, Long Island, Las Vegas and others turned to POAs because they could keep their monthly payments low and worry about paying the piper later. What came first: high housing prices or the POA? It can be argued that prices boomed artificially in those markets because POA loans created more bidders for homes. It was a simple case of supply and demand: The more buyers for a house, the more the price goes up. Take away the POA and no-downpayment loans and suddenly the pool of buyers is reduced significantly. (For more information visit
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 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
