In a few weeks our tired, our hungry, our poor mortgage finance firms yearning to be free of their "troubled" assets will saddle up to the Treasury 'TARP Window' and lay down their burdens. I've read the entire bill, all 451 pages. The law says that two days after a bank sells something to Uncle Sam the government has to disclose the price. The bill also has an "anti-flipping" clause where companies cannot sell assets to the Treasury at a price higher than what they bought them. If an investor buys discounted MBS from a seller, it cannot turn around and then unload the bonds to Treasury at higher price. (I know of at least one investor who's itching to do this.) I'm not a lawyer but I believe there is a loophole in the law where if a seller of bad assets took control of mortgage bonds through a merger/acquisition or bought them out of a conservatorship that they are exempt from the Treasury's "unjust enrichment" clause. Which brings me to the case of Bank of America, which owns Countrywide and its scrap heap of payment option ARMs and HELOCs. When BoA bought Countrywide I assume it "marked to market" the lender's assets including the POAs. Let's just say it marked a CFC POA pool down 60 cents on the dollar. Because the bank bought CFC through a merger it can turn around and sell that same POA pool to Treasury at any price it wants even if it's above the "mark." In other words, the bill could allow buyers of ailing institutions to use Treasury to clean up some of the garbage they bought.
Meanwhile, once TARP gets underway, it will be interesting to see what effect the program has on the "scratch n dent" loan and servicing markets. One investor said he has looked at 115 non-performing asset portfolios since getting his business off the ground in April...
In case you haven't noticed, the mortgage/credit crisis/$700 billion bailout is playing out each evening on the national news. Some networks are working on "thought" pieces or even documentaries about how all this came about. And there is -- as might be expected -- a rethinking of former Federal Reserve chairman Alan Greenspan, formerly known as "The Maestro" for his handling of the economy during the Bush and Clinton years. But is Mr. Greenspan really to blame for some of the mess? Here's an excerpt from the book "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis":As the crisis worsened and became an issue in the 2008 presidential race, one central question continually being asked was one of the most obvious: Where were the regulators--that is, the folks in Washington? What about the Federal Reserve? Hadn’t Alan Greenspan seen this coming? Greenspan, who retired from the Fed in early 2006, had made a speech before the National Credit Union Association, the largest credit union trade group in the United States, pontificating that Americans’ preference for long-term fixed-rate mortgages meant many were paying more for their homes than if they had taken out an adjustable-rate mortgage (ARM). ARMs typically had lower start rates, and when those rates adjusted they might still be lower than long-term fixed-rate mortgages, or so went the argument. Greenspan also noted that consumers would benefit if only lenders offered more "alternative" loan products. Time and time again the speech would be cited as an example of how Greenspan had basically become a spokesman for all types of alternative (non-Fannie/Freddie) mortgages, including payment option ARMs, and subprime ARMs that adjusted after their two- and three-year start rates expired. The date of speech: February 2004, just before subprime and alt-A originations exploded along with the securitization market.
Blaming Greenspan alone for the subprime crisis might be a stretch, but there’s a rich irony that both the general public and media missed. According to activist Bob Gnaizda of the Greenlining Institute in Berkeley, California, Greenspan himself had a fixed-rate loan! The group met with the central banker and his staff semiannually to discuss policy issues such as mortgages and inner city development. In July of 2004, a few months after his ARM speech, Greenlining staffers, including director John Gamboa, sat down with Greenspan. The primary topic was ARMs--in particular payment option ARMs, which were just beginning to catch on in a major way with consumers. The group was worried about potential abuses. Gamboa asked Greenspan whether he had an ARM. According to the Greenlining people, the response from The Maestro was: "No. I have a fixed rate." Had he ever had an ARM? Answer: "No. I like the certainty."
--for more information on the book visit:
Apparently, a handful of authors are now working on books about not only the mortgage crisis but the collapse of Wall Street or what's called "the end of capitalism." One New York Times reporter has interviewed a former American Home Mortgage executive about the crisis. (AmHome went bust in the summer of 2007.) But there's one book I cannot get out of my mind -- Jim Glassman's "Dow 36,000: The New Strategy for Profiting from the Coming Rise n the Stock Market," published back in 2000. This is Jim Glassman, the former publisher of Roll Call, not the noted economist of the same name. And, of course, there's David Lereah's infamous book about how home prices would keep going up...MORTGAGE PEOPLE: NCB has named Munevver Yolas senior vice president of capital markets. In this capacity, Ms. Yolas will manage multiple private, agency, SBA and commercial real estate loan sales up to $250 million. SUPER DATA NOTICE: Need to know the loan volumes on more than 7,000 mortgage lenders including what they sold to Fannie Mae and Freddie Mac? An Excel workbook containing the most frequently requested rankings based on the 2007 Home Mortgage Disclosure Act data is now available. If you are interested in having this data please send an email to: Deartra.Todd@SourceMedia.com. DON'T FORGET: This Sunday the Mortgage Bankers Association holds its four-day annual convention in San Francisco. If you can't make in person National Mortgage News Online (MortgageWire) will be covering it on our website. Visit: http://www.nationalmortgagenews.com/Don't subscribe to our premium content? 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 email 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 November 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 email: Rebecca.Keen@SourceMedia or Delores.Stokes@SourceMedia.com
