To Our Clients, Colleagues and Friends:   

· We’ve never done much business in Texas , so we were kind of curious as to who the big banks are there.  We sure didn’t see any Texas-based banks among the top ones, but here’s a nifty little chart we drew up for you on the three biggest.

· If you haven’t started doing FHA loans yet, here are a few things to consider:  (1) the FHA program has no declining-value adjustments, (2) it has loan-to-values as high as 97%,  (3) it allows cash out refinances to 85% and rate-and-term refinances to 97%, and (4) there are no credit score requirements, no income limits and seller concessions may be as high as 6%.  Friends, FHA was the original sub-prime product. You can get HUD approval pretty easily on your own, but if you’re feeling lazy or just too busy, we’ll do it for you.  We have someone on staff who does it all for a flat $1,500.

· General Motors just announced a $38 billion loss for the year, one helluva big number. Ever curious, we looked up the biggest losses ever incurred by American corporations.  Here, in all their glory, are the top ten, or bottom ten, a veritable Hall of Shame of bad decisions.

The interesting thing to us is that all these losses came from bad decisions of some sort – but didn’t all of them seem like good decisions at the time?  Or was there lots of dissent in the Board room and within senior management?  Hindsight is so easy.

· A few weeks ago the FBI Organized Crime strike Force arrested a big piece of the Gambino crime family.  The paper had the names (and nicknames) of some of the mobsters. The ones we liked most were Thomas “ Tom my Sneakers” Cacciopoli, John “Jackie the Nose” D’Amico, Vincent “Vinnie Hot” Deconcilio, Joseph “Joe Gags” Gaggi, John “Johnny Red Nose” Pisano, and Richard “Fat Richie” Ranieri. If you like movies about the Mafia, you can’t help wondering if life imitates art or – or if art imitates life.

· At your next corporate retreat or senior management meeting, a necessary topic on the agenda is Lessons We Learned in 2007. This must be talked about, and there’s probably more to the discussion, once it gets going, than you might have guessed.  Ask yourself: Have you really had a formal meeting in which you’ve discussed this? If not, you need to.

· We’ve been assisting a lot of companies lately with their Strategic Plans.   It’s an interesting process for our clients and they tell us it adds great value. The quick version is that we have a round table on the company’s current business model, trying to see what works and what doesn’t, which parts have the best returns and which have lower returns and too much risk.  We then lead a discussion on other options, those activities that management can consider adding. Sometimes it’s as basic as “Does it make sense to add a small wholesale operation?”, and often tines, it’s much more strategic as in “Can our capital be best deployed by buying or starting an FDIC-insured bank, or affiliating with one?” The entire process is usually one day, including a written draft of a proposed plan for everyone to discuss, debate and then adopt as amended. Our clients seem to enjoy getting away from the daily grind, to look into the future a few years and have a serious discussion on how to truly create long-term value. And the final product, the written document, is really the roadmap for the next several years. It lays out what is to be done, when it will be done, and  who will do it.

· One topic we cover in every one of our Strategic Planning Session is technology. The discussion is focused on how the company can use technology to be more efficient, provide better service to its customers, and drive down costs.  Mortgage banking is very much a commodity business, and in all commodity businesses, it’s the low-cost producer who’s the winner. Every company needs to have an I.T. Plan, and it can be as simple as having a three year plan to off-shore X% of all back-office functions and drive costs down by, say, 25%. The plan needs specific goals, action items, time-frames and responsible persons.  Unless you commit to it, and do so in writing, it will probably never happen. A written I.T. Plan is a must.

· We just read that about 500,000 copies of The Great Gatsby are sold every year, and that it’s assigned in fully half the high schools in America .  This inspires us to run a poll among our readers for their favorite American novels.  We’ll kick it off by nominating Gatsby, An American Tragedy, Huck Finn, What Makes Sammy Run, Martin Eden, and although it’s a play, Death of A Salesman.  We’re accepting nominations, so send ‘em in. Also, let us know if you see any theme that holds these books together, if you have any theories on why we chose them. We’re very curious as to your thoughts.

Now, get going on reviewing your current business model and starting your Strategic Planning process. You need to plan where you want to take your company the next 3-5 years, and how can you successfully get there unless you have a roadmap?

Joe Garrett and Corky Watts -     Garrett, Watts & Co.