THIS JUST IN: A former Bear Stearns mortgage official is on the hunt for a commercial bank and has one in his sights. But will it come off? For the full story see the Monday paper edition of National Mortgage News. Don't subscribe? Call 800-221-1809...
Now that General Motors is back, is it possible that Residential Capital Corp. could actually turn a profit soon? Slap me so I can wake up. OK, probably not-but you never know. Of late, ResCap/GMAC has been throwing experienced executives overboard as though it were the Titanic. Mortgage analyst David Olson told me recently that he thinks ResCap will be shut by yearend if it can't find a buyer, but I have a hard time believing that. Keep in mind that GM still owns part of the mortgage banker-with Uncle Sam owning a majority stake. And there's Cerberus Capital, which no longer has the golden touch. Cerberus paid $14-billion-plus for controlling interest a few years back-but that was precredit crisis. Its investment is now worth, well, less...
Meanwhile, strange things-perhaps good things-are afoot in the mortgage market and overall economy. But the signals are mixed. Late Friday Deutsche Bank issued a forecast saying it's bullish on the 10-year, predicting that its "target" rate is 3.6%. At press time the yield was 3.8%. And what ever happened to all those predictions that rates would spike once the Federal Reserve stopped buying MBS? Many-including me-thought the Fed would keep on gobbling up mortgage bonds but on March 31 it went cold turkey. Have a view on the matter? Post a comment at the end of this column...
And it appears the jumbo MBS market may soon be back on its feet. (See Bonnie Sinnock's "Street Sense" Column in Monday's NMN.) Among the firms looking at jumbo structures (besides Redwood Trust) is PIMCO, Goldman Sachs and Chimera Investment Corp. Who knows, maybe subprime MBS is next? Peter Cugno can only hope...
THE MAIN EVENT: Bravo to Goldman Sachs! That's right: Bravo. The firm and its attorneys have been leaking away to its "friends" in the press including the gang at CNBC, explaining that its Abacus 2007 CDO offering wasn't a "Sting" (see the Paul Newman and Robert Redford movie of the same name) at all but just a mortgage investment that went bad due to natural causes. Here's the key leaks to the media:
The SEC voted 3-2 to file the civil fraud suit which means there were major doubts at the agency regarding the allegations being "provable."
Paulson & Co. official Paolo Pellegrini said he told ACA Management (the firm that lost a bundle on the investment but was also the "collateral manager") that Paulson was indeed short on Abacus. And lastly: Goldman lost money, too, so it couldn't have been a scam. But let's step back here for a minute. The Abacus CDO came to market in April 2007. Yes, the mortgage market was beginning to fray then, but there is no way Paulson could engineer the bonds backing the CDO to tank. (And if he could, boy, he's really good.) Then again, if I were an investor buying such a bond and I knew that Paulson was picking the tranches and that he was short (not long) I would pause to reconsider what I was doing. Goldman argues (through the media) that German bank IKB (the other big loser on the bond) was a "sophisticated" investor and should've known what it was getting into when it bought into Abacus. That's a good point. But let's recall this: Goldman hated the subprime business. The firm wasn't a top book runner of A- to D MBS and it didn't own any subprime lenders. So why did it put together this CDO unless it had a pigeon waiting to be plucked? But then again, neither Goldman or Paulson could make the loans go bad. But heck, Paulson's gut told him the B&C market was about to collapse. And damn if he wasn't right: $15 billion right-which is what he made overall by shorting housing in the Goldman CDO and other deals. One former Goldman manager told me late this past week that he's tired of all the negative press the firm's been getting. "Goldman is not a nonprofit," he said. "This isn't communism. If you're the buyer of this thing why weren't you asking a lot of questions? Why weren't you asking questions about Paulson? I don't think they [Goldman] broke any rules. I think they'll win the case." What do I think? It just shows this wasn't an investment, per se, but a bet. And bets need to be regulated by the Casino Control Commission. Where's Michael Corleone when you need him?
WASHINGTON NEWS: The Senate is moving closer to voting on a financial services regulatory reform bill and industry groups are pressing hard on the risk retention issue to get a qualified mortgage exemption. The current version of the bill requires securitizers to retain up to 5% of the credit risk with some of that risk shared with lenders. Industry groups are urging Senate Banking Committee leaders to give regulators more flexibility in determining risk retention requirements on different mortgage types. See Brian Collins' story on our website.
MORTGAGE PEOPLE: Meridian Capital Group, a commercial mortgage brokerage firm, named Marty Lanigan senior managing director of origination and strategic initiatives. His duties will be national in scope.
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: Go Caps! At least Washington has one decent sports team.
