Here's the definition of the word "conundrum": A paradoxical, insoluble, or difficult problem; a dilemma. As I work on the paperback updates for "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis," I've been pondering what to tell the reader in regard to solving/preventing another financial calamity the likes of which our nation is still working through. We indeed have a financial system with so many giants (AIG, Lehman, Bear Stearns, Citigroup, Bank of America) that if one of these go under it can cause damaging ripples in the fabric of our economy. These institutions are "too big too fail," or TBTF. So, then, is it better to have thousands upon thousands of smaller financial institutions, each with specified and distinct product lines to serve our nation's consumers and B2B customers? During his grilling on Capitol Hill this past week Federal Reserve chairman Ben Bernanke was asked about TBTF and whether our nation might better be served by having thousands upon thousands of small banks - just like we had in the old days (pre-1990). His response: "I don't think we can go back to a world of having [many] smaller banks." But we, as a nation, can't live with TBTF either. Right? A conundrum it is. Feel free to respond to this column on the message section at the end...
As for Bernanke's grilling on the Hill, it was great theatre. On Thursday I intermittently watched the proceedings. The central question (in my mind) boiled down to this: Did Bernanke (and then-Treasury chief Hank Paulson) threaten to remove Bank of America CEO/chairman Ken Lewis if he didn't move forward with its purchase of Merrill Lynch? And if they did bully poor Mr. Lewis was there anything wrong with it? I mean, the thought of mean old Uncle Sam pushing around a nice and benign company like BoA makes all those talking heads on CNBC sick to their stomachs. I'm just glad there were plenty of GOP congressmen at that hearing sticking up for our nation's bankers. (I'm sure BoA's PAC will treat them nicely in the next election cycle.) But let's not forget the details of the deal: the sale of Merrill cost the bank $50 billion, the Feds coughed up an additional $20 billion in Treasury support, $118 billion of government backstops, a $15 billion loss at Merrill that came after repeated assurances from both sides that due diligence was solid, the massacre in Bank of America shares. Here's another question: Did Lewis go to Bernanke and Paulson, faking to pull out so he could get that additional $20 billion in government support? And if Merrill was in such horrible shape why did BoA agree to buy them in the first place? And wasn't Lewis recently seen bragging about what a great acquisition Merrill was - how it added to the bank's bottom line? I have a suggestion for our elected officials: they should hold another hearing on the sale/bullying issue and instead of having Lewis and Bernanke testify separately, several weeks apart, they should have them testify together, at the same time. That, folks, would make good theatre...
Not so quick on calling the death knell of refinancings. At press time the yield on the 10-year Treasury was at 3.5%. Last week it was at 4%. Now, if only the nation's non-banks had some warehouse lenders we'd see some competition out there...
We're hearing that JPMorgan Chase might be growing its warehouse business after all - instead of just focusing on its existing customers. This past week National Mortgage News Online wrote a story about it. Don't subscribe? Call (800) 221-1809...
The "Annual Alternative Products Quarterly Data Report" is now available. It has complete rankings on the nation's top alt-A, jumbo, and second lien funders and servicers. To order a copy drop an e-mail to
For years financial analysts have been wringing their hands over the low U.S. savings rate. Well guess what? According to the Commerce Department the personal savings rate soared to 6.9% in May - a 15-year high...
Colonial Savings FA of Texas says that thanks to low interest rates and the $8,000 federal tax credit for first-time homebuyers loan production is booming at its shop. Well, sort of. The company published a press release saying that during the first five months of the year residential fundings spiked 83% to 7,217 units. The comparison is to the same period in 2008 and includes loans funded by two of its units, Colonial National Mortgage and CU Members Mortgage. However, in terms of dollars, loan production actually fell in the 2009 period by 24%: $1.29 billion vs. $1.67 billion, which means the company is originating lower-balance loans. One big question for all lenders is this: What will happen to the market when the $8,000 tax credit expires in December. Will Congress and the White House extend it? Lobbyists start your engines...
Still in a capital pinch: AmTrust Financial of Cleveland, one of the nation's largest wholesale mortgage lenders. The bank is selling more of its Ohio branches. First Place Financial of Warren, Ohio, said this past week that it has agreed to buy AmTrust's three branches in Lake County, along with $225 million of deposits and $160 million of mortgages. First Place will pay a 3% deposit premium, or $6.75 million. This is the second branch deal this year for the $14.4-billion-asset AmTrust, which has 65 branches in three states. AmTrust would not say how much closer it is to satisfying the elevated capital requirements imposed by regulators. But after a while will it run out of branches to sell?
So, you've been reading in some publications and blogs that perhaps very few sales of nonperforming loans are occurring. We understand some deals are indeed getting done but the buyers and sellers have purposely not publicized the sales. Also, a handful of large NPL portfolios are now out for bid, one that includes loans that belonged to recently bankrupted subprime lender Accredited Home Lenders of San Diego. For the full story see the print edition of NMN. The story will not be available online...
WASHINGTON NEWS: Two congressmen have introduced legislation that would place an 18-month moratorium on the Home Mortgage Valuation Code of Conduct, a Fannie Mae/Freddie Mac edict that - among other things - bans loan brokers and loan officers from directly ordering appraisals. The bill specifically directs the Federal Housing Finance Agency to suspend the HVCC that went into effect May 1 for 18 months.
IN CASE YOU MISSED IT: Windsor Capital Mortgage Corp., the San Diego-based company that was once the nation's second largest mortgage broker according to Broker magazine, is not filing for bankruptcy or closing down, said its chief executive Ron Temko. Instead, the company is becoming a "boutique-type" mortgage originator and shedding "a lot" of its branches, he explained. Reports that the company is filing for bankruptcy are "not accurate."
MUST ATTEND CONFERENCES: Our Mortgage Servicing Conference recently held in Dallas was such a success that we're holding another one: July 20-21 in Dallas. For more information e-mail
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SURVEY NOTICE No. 2: Responses are pouring in for the annual National Mortgage News/American Banker residential lending and servicing survey ritual. Results will wind up in the eMortgage Industry Directory as well as the two newspapers. There is still time to give us your numbers. If you're a mortgage lender/servicer send an e-mail to
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