PS – Be sure to read the G-W report on the bailout.

To Our Clients, Colleagues and Friends

· Eleven banks have failed in 2008.  As you know, the biggest was Indy Mac Bank. What you probably didn’t know was that it had almost four times the assets as the next ten combined.  By the way, in January of 1932, a whopping 342 banks failed in that one month alone, dropping to 122 failures in February. When “only” 45 banks failed in M arch, the Federal Reserve issued a self-congratulatory press release..

· We have a lot of clients in the Northwest, so we think they’ll find this pretty interesting.  It’s the cost of funds at selected Washington and Oregon banks:

For our mortgage banker, non-bank clients, can you imagine having warehouse costs like some of these banks?  Can you imagine what your profits would look like if you were funded at something under 2-3%?

· We read a book recently on baseball during the Great Depression.  The attachment is some things we found of interest. If you don’t like baseball, don’t even open it.

· Sad to see ResCap/GMAC cut back so dramatically.  They closed $291 billion in the last two and a half years.  Production by year is as follows:

· As we’ve written before for our unemployed or newly laid off friends, look to the regulatory bodies as potential places to apply.  This includes state regulators as well as the OTS, OCC, and FDIC.  We periodically read articles about all the new people the FDIC has been hiring to handle the expected wave of bank failures.

· Eric Rice of MGIC wrote that we left Amerin our of the list of former M I companies.  He noted that Amerin was founded on the “wholesale M I” concept, with very few reps and mostly a National Account-type of marketing.  They became part of Radian, along with C M AC.  Eric is one of the class acts of our industry, and remarkably, has spent all 32 years his career with one company, MGIC!

· For years we have all talked about how the Northwest economy was largely immune from many of the problems in other regions. That’s over.  July foreclosures are up 56% year-over-year in Washington State .

· August 27 was the 100^th anniversary of Lyndon Baines Johnson’s birth.  For those of us who were around in the 60’s, we’ll probably never again see a President who was so much larger- than-life. 

· It’s been exactly two years since Steve “The Crocodile Hunter” Irwin died.  What a guy!

• When things were crazy in Mortgage Land , Bank of Internet stopped making mortgage loans.  They thought that underwriting standards had simply gotten too loose and loan programs too risky.  Now that housing values have dropped as much as 35-40%, they decided to get back in.  As an example, with borrowers having such a hard time getting HELOCs, they’re making them and buying them – but with an average FICO Score of 770.  Smart guys. Smart to get out when they did.  And probably smart to get back in when they did.
• Ever wonder which M .I. companies had the most business, in terms of insurance outstanding?

· Wow. Dartmouth College just appointed Jeffrey Immelt to their Board of Trustees.  Immelt is the Chairman and CEO of GE.  Wah hoo wah!  By the way, we’d say 95% of all mortgage banking companies we do work for don’t have formal Board meetings.  Worse, less than a handful have outside Directors.  Why is that?  The few that have formal Board meeting with good outside Directors all seem to outperform.   We got a fair number of calls or letters about the San Francisco mortgage banker we mentioned here last week that’s only three months old but is doing $17 million a month and is making a profit?  Guess what?  They have formal Board meetings and two excellent outside Directors.  We’ve attended some of their Board meetings, and their outside Directors are absolutely a part of their success.

A great line from John Maynard Keynes, the famous English economist, when he was very old:  My only regret in life is that I wish I had drunk more champagne.   People, we know it’s hard out there, but let’s all try to still enjoy life. 

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