THIS JUST IN: It's too early to tell what changes the incoming Obama administration will make to the government's $700 billion Troubled Asset Relief Program. At a press conference Friday afternoon President-elect Barack Obama gave few details though he alluded to TARP on a few occasions. I'm reading in between the lines but his message seemed to indicate that he wants more government money used to help prevent foreclosures and not solely to bailout Wall Street and the banking industry. He also wants Treasury to work closely with the FDIC and other agencies in that regard. Meanwhile, many in the mortgage industry are starting to wonder if Treasury will ever buy any "troubled" mortgages or just use the money to prop up banks and insurance companies. One analyst estimated to me that if TARP's mortgage purchase program ever gets off the ground $1.5 billion in fee income could be earned by industry vendors. That's nothing to sneeze at...
We have a new Democratic president for one central reason: the economy is in the tank and the mess squarely rests on the shoulders of President Bush. But it wasn't just the White House and its policies. The Federal Reserve and Alan Greenspan share some of the blame. And, of course, Wall Street, which seemed not to care much about the quality of the mortgages it was buying. From the book "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis":Each and every Wall Street firm playing in the subprime arena from 2002 to early 2007 - the largest gold rush in mortgages since the inception of the mortgage-backed security two decades earlier - had a three-pronged approach to sucking as many subprime loans as they could out of non-depositories like Ameriquest, New Century, Ownit Mortgage (Bill Dallas's last company), Aegis (Cerberus-owned), or any other B&C, alt-A, or stated-income lender, most of which were headquartered in Orange County, Calif. The approach started with salespeople.
"The sales guys from the Street would come talk to you and hype you up," said one subprime executive from Irvine. "They would try to get you to do something. From Monday to Thursday you would make the loans, put all the data in a spreadsheet, and send it to the Street, and they'd call you back with their bids. By Friday your mistake would be in the marketplace."Also, my co-author Matt Padilla of The Orange County Register was invited to Google headquarters in California to give a speech about the credit/mortgage crisis and talk about the book. Information about "Chain of Blame" and Matt's speech can be viewed at
Former Bear Stearns and Countrywide mortgage honcho Jess Lederman is back. (Jess is also mentioned in "Chain of Blame.") Jeff's new chosen profession? Answer: working for a credit union. (No word yet on whether the CU will make him wear striped shirts and plaid pants.) See the story on the National Mortgage News website
One advisor to the new president-elect is Richard Parsons, the former CEO of Dime Savings Bank of New York. Dime, as you may recall, was eventually bought by Washington Mutual, which went bust and then was sold to JPMorgan Chase...
Can the government use TARP money to bail out General Motors? From what I've read of the bill (all 451 pages) that answer should be yes but I'm not a legislative attorney. GM - which owns 49% of GMAC/ResCap - is burning cash. The burn numbers don't look so good because less revenue is coming in because of weak auto sales...
The key to auto and home sales is (drum roll please) employment. The new job numbers came out Friday and as Royal Bank of Scotland economist Danny Charles put it: "The October employment report is an easy one to analyze. It was a disaster." U.S. businesses can turn those numbers around by promising not to fire anyone over the next half-year but that's not likely going to happen...
E*Trade Financial is bellying up to the TARP bar. The bank/e-finance company confirmed Friday that it filed an application to receive $800 million of Treasury funding. The app is being reviewed by the Office of Thrift Supervision, the thrift's primary regulator...
Mortgage servicers that process the monthly paperwork on California loans brace yourself: Gov. Arnold Schwarzenegger has proposed a 90-day ban on home foreclosures - but only if someone is living in the house. Investors that bought properties are out of luck...
THE READERS SPEAK BACK:
This week - in our post election world - I'm featuring some of the more interesting e-mails/letters I received from readers in regard to the election and our mortgage/credit crisis. Some have been edited by me for brevity:
"If you're going to make an assertion like 'It needs to regulated ... and heavily,' at least give us some solid logic to back up your assertion.' Because there are too many crooks and fast-buck artists out there' is hardly solid logic. Using your criterion, we need to regulate pretty much every market in our economy." - G. Steven Bray
"I built and ran Countrywide's Loan Servicing division from 1982 to 2005 when I retired. Please help me understand why our leaders don't simply combine Fannie and Freddie into one company, change their charter to allow them to make loans direct? They have the best underwriting systems in the world and could easily print loan docs. They could refi delinquent loans at current value and secure the rest of the debt to the property with no monthly payment. Payback would come when the property is sold or refinanced in the future. This would keep people in the homes and create competition for our greedy banks." - Richard Deleo
"Just a comment: although Bush has gotten very wimpy, both houses of Congress are Democratic controlled. We are heading further towards socialism." - David Hyde
"I wonder, with Congressional approval ratings so low with the public, why no one is talking about term limits for Congress. Are they so entrenched we can't get them out? Voters continue to re-elect the same powerful senators so they can get 'pork' for their states." - Don Spongberg
"Your editorial sounded like a 'non-endorsement endorsement' to me. Honestly, as a 24-year veteran of our industry and a student of politics, we can blame the politicians, regulators, Wall Street schmucks, lobbyists and Santa himself for the mess we're in, but the fact is we brought it on ourselves. Yes, Wall Street created the environment, but we all drank the Kool-Aid, knowing that it was wrong." - Daniel Martinelli
DATA NOTICE #1: 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 e-mail to
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