To Our Clients, Colleagues and Friends:  

· A few weeks ago we quoted Ronald Reagan on taxes.  One attentive reader sent us these lines from the John Lennon song called The Taxman:  “If you drive a car, I’ll tax the street; If you try to sit, I’ll tax your seat; If you get too cold, I’ll tax the heat; If you take a walk, I’ll tax your feet.”  Thank you, Fred.

· When did the Mortgage Crisis of 2007 start?  If you’re looking for a set date to mark as an anniversary, December 28, 2006 is probably a good one. This Christmas surprise was the bankruptcy filing of Ownit Mortgage.  But if you missed that, there’s another one coming up.  You could set April 2, 2007 as Ground Zero and celebrate that date as when it all started.  That’s when New Century filed for bankruptcy.

· In our FOCIS Audits for warehouse lenders (and the occasional mortgage banker who wants to know his own weaknesses and areas to improve), we’ve noticed much less leverage than in the past.  Some of its due to reduced volume, but a lot of it is intentional. Less leverage = a higher FOCIS score.  Whereas everyone seemed to be at 15:1 a year ago, we see plenty in the single digits, as in 8:1 or 9:1.

· Today is the birthday (March 26, 1911) of one of America ’s greatest playwrights, Tennessee Williams. If you want to know what he was like as a kid, go watch To Kill A Mockingbird again.  The funny little boy, Dill, who lives next door to Scout, Jem and Atticus Finch was patterned after him. Mockingbird author Harper Lee grew up with Williams, and they were best friends as children, so she used his personality to describe the little boy in her book. 

How embarrassing.  It wasn’t Tennessee Williams who was the role model for the strange little kid in To Kill a Mockingbird.  It was Truman Capote.  We knew that, as we every so often see something from a group of fanatics who believe that Capote ghost wrote Mockingbird for his dear friend Harper Lee. Part of what fuels this theory is that she never wrote another book after publishing Mockingbird.

· Last week Gov. Arnold Schwarzenegger dumped Clint Eastwood from the California Parks Commission.  This is one of those occasions you wish you were the guy who comes up with the headlines. It’s not that clever, but Dirty Harry Gets Terminated did come to mind.  For those of you under, say, 35, do you even know who Dirty Harry was?  

· Best name we’ve seen so far in the NCAA Tournament: Dionte Christmas of Temple University !  What a great name.

· Speaking of names, here are some famous people, as you know them, and their movie names:

Just kidding on the last one. But in the past, was there any chance at all that a movie star named Arnold Schwarzenegger would be allowed to keep his name?  No way!  If this were 1950, he’d probably be named Bobby Grant or something equally silly, given his accent.

· In his first five years of playing, did you know that Joe DiMaggio had 691 RBI’s for an average of 138 per season? That’s the best ever; the 2^nd best ever is current St. Louis star Albert Pujols who has averaged 124 a season for his first five seasons. The best RBI total for any five year period?  From 1930-1935 Lou Gehrig hit 813 for an amazing average of 162 runs batted in per season.

· We’re always reading about Hollywood movies that cost $100 million to make, and which died after drawing in only $6-7 million of ticket sales.  Well, here’s what keeps hope alive for the movie industry:  Juno cost only $7.5 million and has already pulled in $135 million in the U.S. alone.  That number will climb when it’s released abroad.  By the way, if you hated Rocky Horror Picture Show, you might like Juno.  There’s a sweetness and innocence to it that is very appealing.

· Wells Fargo update: A full 25% of their customers now have eight or more products.  The average is 5.5 products per customer.  No wonder this is one of America ’s best 3-4 banks!

· We get asked a lot if you can have 1099 independent contractors working as loan officers if they do FHA loans.  The answer is no.  Here’s a direct quote from the HUD manual (we added the underlining): Loan officers (also known as loan originators) of FHA insured loans must be employees of the FHA approved lender. They may not be independent contractors or contract employees.  We also get asked if there are some clever ways to get around this, and the answer is still no.

· Rules on lobbying:  (1) Never talk when a tape recorder is on.  (2) Never write anything down. (3) Never talk on the telephone if you can talk face to face. (4) And never talk if you can wink.  Funny.

· Interestingly, we’re seeing a real increase in Strategic Planning projects. These are unusually one-day engagements that help the company figure out “What do we want to and need to do over the next several years to survive and make a good return.”  A typical assignment involves 4-5 hours going over all possibilities with senior management.  Everything is on the table, and no sacred cows are allowed. After narrowing down the options into a plan, we return for another half day unusually within a week, to go over the document. 
Everyone debates it again, finally deciding to adopt it.  It’s a pretty amazing process to see people truly discuss the future of the company. And it’s truly amazing to see people cling to ways of doing things that just haven’t worked in these last 4-5 years.  But when the process is done, the company has a very clear idea of what it’s trying to do, what it needs to get it done, and good tools and benchmarks to see if they’re on track. 

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