In a week or so mortgage professionals and those who make their living from residential lending/servicing will begin making their way to San Francisco for the industry's annual convention. If anything, this will be the most important get together held by the Mortgage Bankers Association, bar none. The industry is grappling with not only the mortgage crisis, but plunging stock markets worldwide and the disappearance of huge swaths of household wealth. Two years ago the nation's housing stock was worth $16 trillion. If you apply a 20% haircut to that (my guess), that means consumers have lost $3.2 trillion in home equity, and counting. But let's look at the stock market losses over the past year: $8.4 trillion in wealth is gone. These are grim times for the industry and the nation at large. There's no way to whitewash the situation. Every time you think we've hit bottom, another shoe drops somewhere else - whether it's overseas or domestically. The word stock traders like to use is "capitulation." Are we there yet? Stay tuned. For updates read National Mortgage News or visit our website at
The $700 billion bailout of the credit markets (mortgage markets, Wall Street, take your pick) is the brainchild of Treasury secretary Henry Paulson, the former head of Goldman Sachs. The "Troubled Asset Relief Program" or TARP, will be run out of Treasury by Neel Kashkari, also a Goldman alum. According to one source, Paulson, Kashkari and former Treasury official Bob Steel first began putting the plan together back in January as an "RTC-like" entity. (The RTC was the S&L bailout agency that sold mostly commercial real estate and junk bonds.) And of course, Treasury is hiring Wall Street firms to do the buying and selling of MBS and ABS. How much Treasury pays for product will be closely watched and according to my reading of the bill there will be plenty of scrutiny. The idea should work but "should" is a fuzzy word when stock markets are plunging worldwide. As for Mr. Paulson, the jury is still out on his performance. Keep in mind he has made wrong calls before. This excerpt is from the book "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis":
Mortgage lenders were beginning to close their doors at a rate that hadn't been seen since the nation's savings and loan crisis of the late 1980s. But administration officials from the Bush White House, including Treasury secretary Henry Paulson, were explaining away the nation's housing woes and the emerging subprime crisis as something that was "contained" - that it wouldn't "affect America's healthy economy," in Paulson's words. It wouldn't spread to the global markets. And Paulson was a smart guy. Handpicked by President George W. Bush the year before, he had been the chairman of Goldman Sachs, the bluest of Wall Street's blue bloods. He was an Ivy Leaguer, a man who knew what the hell he was talking about.
Yet, cracks were starting to show - not just in the mortgage market but on Wall Street, Paulson's home turf. Several months earlier, two hedge funds that had been created by Bear Stearns, a firm whose history was built on risk analysis - that is, knowing a good investment from a bad one - had begun to lose money. There was talk on the Street and in the financial press that the Bear Stearns hedge funds - once valued at $40 billion - might even collapse.
- For more information about "Chain of Blame" visit
Loan brokers are still reeling from Citigroup's announcement that it will slash its wholesale/broker division by 90%. Firms that have exited the TPO channel this year include National City, IndyMac (now a ward of the government), Wachovia (soon to be the property of Wells Fargo), Washington Mutual (now part of JPMorgan Chase), and the list goes on. Besides a few of the big boys, there are some wholesalers that are still committed to the business, including AmTrust Bank, Flagstar, Provident Funding Associates and more. For a ranking of the top wholesalers in the second quarter see the Quarterly Data Report. For a copy of the QDR, e-mail
Meanwhile, Joe Falk, former president of the National Association of Mortgage Brokers, believes that despite all the firms leaving the wholesale arena, the channel will survive and eventually come back. Meanwhile, Mr. Falk, a resident of Florida, believes that his home state will not see a recovery in the condominium market for up to five years. He's a bit more sanguine about the single-family market, believing that a recovery could take one or two years...
Presidential candidate John McCain's plan to spend $300 billion in taxpayer money to purchase delinquent mortgages - but not at a discount - looks like a non-starter. First off, if you read the $700 billion bailout bill that became law a week ago, Treasury now has the power to do just that, but there's no stipulation that the government has to pay 100 cents on the dollar. Candidate McCain's plan - on the surface - seems like a bailout for depositories and investment banking firms stuck with subprime waste. But here's something else to ponder: There are roughly $1 trillion in outstanding subprime loans in America. Banks, investment banks and others have already taken $500 billion in losses and writedowns on these assets. Consumers also owe about $318 billion on their alt-A loans and another $700 billion on their seconds, which include piggybacks. These three loan types are the most at risk. The dollar amount owed on subprime, alt-A and seconds is roughly $2 trillion, according to the Quarterly Data Report. If we assume that 40% of these go totally bad (as in wiped out) that comes out to $800 billion. Of course, we haven't even talked about credit default swaps - those "side bets" against this pool of mortgages...
Herb and Marion Sandler continue to be dragged through the media mud for selling Golden West/World Savings and all its risky payment option ARMs to Wachovia. The latest dust up was a skit on "Saturday Night Live" that portrayed the Sandlers in - shall we say - a not so favorable light. If you missed the skit visit
But my favorite Herb Sandler story of all time was written by our sister publication, American Banker. About five or so years ago (I could be wrong on the date), a reporter asked Mr. Sandler about efforts to modernize World's branches and the installation of ATMs. Mr. Sandler told the newspaper that he wasn't so sure it was a good idea to put ATMs in World's branches. Not a good idea? It's a good thing he's retired. And I'm sure Angelo Mozilo of Countrywide (a key figure in "Chain of Blame") is thankful that the media has found a new "poster child" for the crisis - the Sandlers...
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
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 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
