As one reader pointed out, it's starting to feel a bit like the movie "Groundhog Day." Each day we are presented with a new financial disaster. By day's end the disaster is cleaned up (so to speak), only for a new (but similar) disaster to start the next morning. If you have not seen the classic Bill Murray movie, rent it. It's a comedy. What we've been going through is not...
This is a true story. Two weeks ago a parent volunteered to referee my daughter's soccer game. The parent was a player himself. He wore a soccer jersey that bore the words "Northern Rock," the now-defunct British mortgage lender. Last week, the same parent/ref showed up wearing a soccer jersey that said AIG on it. I went up to the parent and informed him of the infamy of these soccer sponsors. He was somewhat uninformed on the financial news front but was a nice fellow -- and a good referee. This week I'm wondering which firm might be on his jersey. Fannie Mae? Freddie Mac? Washington Mutual? Lehman Brothers? Merrill Lynch? All are gone, gone, gone -- or under federal control. As I write this, Sunday is two days away. Then again, Treasury secretary Henry Paulson could use a weekend off. And (of course) there's the pending $700 billion bailout bill to deal with...
Let's talk about the bailout. OK, so the government steps in with their cash and buys, say a $100 billion ABS bond from Merrill Lynch (soon to be the property of Bank of America). Let's say the government's TARP (troubled asset recovery program) agency pays 70 cents on the dollar for the bond, setting a "mark" on these assets. Does that mean another investment bank (or bank) holding a similar bond can now "mark up" the value of assets on its balance sheet even though they already wrote it down to 50 cents? Ya got me. Keep in mind that $2.5 trillion in subprime, alt-A and payment-option ARMs were funded from 2003 to 2007. Not all the collateral is alike. Hardly. Nothing has been finalized yet on the government's "Let's Buy $700 Billion in Crummy Mortgage Assets" program but let's ask a question that any smart mortgage executive would ask: Who will be in charge of setting the bid price and what type of analytics will they use? Here's another good question: How tough will the government be in negotiating with desperate sellers? We assume better prices will be paid for "senior" securities than subordinated pieces. Here's a major opportunity for the government to hire a hotshot trader who can make a lot of money for Uncle Sam. The only problem is that most of the hotshot traders worked on Wall Street for firms that were part of the problem. That's what we call a conundrum...
Washington Mutual is now the property of JPMorgan Chase. The deal happened late Thursday night. For JPM the grand prize is (hands down) WaMu's California branch network. The thrift's mortgage business has been sliding for years. On Thursday, The Wall Street Journal reported that a handful of hedge funds were considering making a bid on WaMu but nothing ever came of. The Journal wasn't the only newspaper that bit at the story. So did we. The rumor was true but the result didn't match the rumor. Keep in mind that regulators, traditionally, have not been thrilled with hedge funds owning depositories...
It's a political season and as a rule I stay clear of political commentary because (a) I'm not very good at it and (b) talking about politics is like discussing religion: no matter what you say someone will get offended. That said, I was at the Senate hearing on Tuesday when "Libby" Dole (R-N.C.) blew a gasket, blaming the whole mortgage crisis on Fannie Mae and Freddie Mac. Anyone with a brain in their head (Ms. Dole definitely has a brain) knows FanFred did not create subprime mortgages, ABS, credit default swaps, CDOs, mortgage trading desks, or Wall Street greed. She blamed the GSEs because that's the only "out" the GOP has. Traditionally, the GOP aligns itself with big business -- that would be Wall Street. Wall Street did it plain and simple. If you want to be informed on Street greed read Michael Lewis' book "Liar's Poker," which was published some 20 years ago. In his book Mr. Lewis nailed it. His premise: bond traders don't care about the crap they sell to investors. I could peddle my own book here but I'm too busy working on the screenplay. Dennis Farina is penciled in to play Angelo Mozilo. Henry Paulson will be played by Woody Harrelson. And then I woke up...
NOTE FROM CLOSING ATTORNEY JOHN McDERMOTT: People in foreclosure can still live there until they gets thrown out by the sheriff. In fact they could get thrown out and move back in and squat the next day and it would take another legal process to throw them out all over again.
WASHINGTON NEWS: This just in: late Friday afternoon Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee said he was "confident" that there would be a bipartisan agreement on the $700 billion bailout plan by Sunday afternoon. Stay tuned.
MORTGAGE PEOPLE: Andrew Gissinger, a top production executive at Countrywide Home Loans (Bank of America) has resigned. National Mortgage News Online broke the story earlier this week. Mr. Gissinger was in charge of retail, wholesale and correspondent lending. BoA named Craig Buffie the top executive in charge of sales and fulfillment. See Monday's edition of NMN for the full story. Don't subscribe? Call (800) 221-1809.
DATA NOTICE #1: 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 Deartra.Todd@SourceMedia.com. Ask Dee about the "Alt-QDR" which has complete second lien and jumbo information...
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 #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 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 e-mail Rebecca.Keen@SourceMedia or Delores.Stokes@SourceMedia.com.
