THIS JUST IN: A (somewhat) large investor in scratch and dent and nonperforming loans is about to close down. At press time details were still sketchy. The company, backed by private equity money (what other kind is there?) is based in the Western U.S. Any unused money will be returned to investors. Its holdings will be liquidated. Interestingly enough, sources told me this past week that some investors are now paying upwards of 85 to 90 cents on the dollar for performing loans that have been sent back to the originator because-for one reason or another-they violated Fannie Mae or Freddie Mac underwriting standards. Have any information about all this? Drop me a line at
Meanwhile, in Monday's National Mortgage News, we report on a handful of nonbank mortgage lenders that hope to buy depositories some day. To subscribe call 800-221-1809. Also in Monday's paper is Brian Collins' update on whether or not the 5% risk retention language on MBS will survive in Sen. Dodd's massive regulatory overhaul bill...
As for nonbanks buying banks, consultants at the Garrett Watts Group in California said in a recent note to clients that two mortgage banking firms were turned down by regulators on their applications to buy depositories. Garrett Watts writes that the mortgage firms got the thumbs down for "having overly aggressive growth plans." In others words maybe being a meek "wallflower" would've been a better strategy...
As for Garrett Watts, one of its senior managers is Mike McAuley, who, if memory serves me, used to work in warehouse finance at Washington Mutual. This past week wasn't a good one for WaMu with legislators beating the crap out of the company for funding billions of dollars in crummy loans while regulators had a skirmish over turf battles. During the hearings, the "F" word came up as well. (Fraud, that is.) Meanwhile, in an e-mail to clients, analyst Karen Shaw said the hearings were, basically, politically motivated. Shaw views the hearings as "part of a push not only to pass the reform legislation in as tough a form as Democrats can get, but also to rewrite a lot of the rules under current law." Politically motivated hearings in Congress? I can't believe it! Shaw says she has seen Sen. Carl Levin (the guy chairing the hearing) do this before. Another shock!...
Keefe Bruyette & Woods this past week initiated coverage on PennyMac, calling it an "outperform." Its share price has been rising in recent weeks. An investor in nonperforming loans, the company's lending conduit is beginning to gather product, we're told...
COMMENTARY: While, we're on the subject of shocks, the new civil fraud lawsuit filed by the Securities and Exchange Commission against Goldman Sachs regarding its construction of a subprime CDO with the help of John Paulson & Co. and then peddling the thing to investors wasn't all that surprising. The "hitch" in all this (of course) was that Paulson was supposedly helping Goldman put the thing together and then shorting the bond at the same time. (Nice work if you can get it.) Investors supposedly lost $1 billion on the deal while Paulson-who is not a defendant in the case-cleaned up. But the case worries me for this central reason: The Justice Department couldn't make the charges stick when it indicted Ralph Cioffi, a former Bear Stearns managing director, for insider trading when he was peddling a subprime hedge fund to investors while dumping his holdings out the back door. What makes the SEC think it can win a CDO case that will be difficult to explain to jurors? I'm not optimistic on this one. Next...
ECONOMIC STUFF: In a new report Barclays declares that "the consumer is back," citing a "decidedly strong" retail report, showing a 1.6% gain in total sales in March and a 0.5% increase in core sales (ex-auto, building materials and gasoline). As for the consumer buying more homes, that won't happen until employment picks up more dramatically. As we noted this past week, higher mortgage insurance premiums being charged to FHA borrowers are hammering the origination market.
Readers of National Mortgage News know that we've been covering the loan buyback crisis extensively. Most of the mega-lenders that have been on the receiving end of buyback requests from Fannie Mae and Freddie Mac have not been saying much about the issue but they've been kind enough (sometimes) to disclose the dollar volume of their buybacks. One executive at a top-ranked lender recently told me that mortgage insurance companies, to some degree, are driving buybacks. He explained the situation like this: "MIs aren't paying nearly all they insured and instead are finding any creative way to back out." He explained that this suddenly leaves a GSE loan without MI which is a charter violation for both Fannie and Freddie. He noted that this instantly turns a loan into a buyback...
MORTGAGE PEOPLE: Freddie Mac has hired former GMAC servicing chief Tony Renzi to look over its massive portfolio. Among other things, he will be in charge of REO and servicing. Departing from GMAC/Residential Capital Corp. this past week was John Vella. Mr. Vella is now chief operating officer at Equator LLC, a privately held infotech/services company that caters to the mortgage and financial services industries.
DATA STUFF: The brand-new edition of NMN's Annual Data Report is out. In the ADR you can find rankings on the top 100 lenders and servicers in 2009 with complete breakdowns on production channels and subservicing and subprime servicing. To order the ADR drop a line to
SURVEY NOTICE No. 1: Our annual "Top Producer Survey" (a k a LO survey) is at
SURVEY NOTICE No. 2: It's survey time once again for sellers and servicers. Look for our annual survey in your computer mailbox.
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THE LAST WORD: The curse of CitiField continues for the Mets. If they continue to swoon there's even talk that Bobby Valentine may return as manager.
