To Our Clients, Colleagues and Friends, 

Why is the regulator of national banks called the Comptroller of the Currency?  First of all, they have almost nothing to do with currency, and second, what exactly is a comptroller as opposed to a controller?  Curious minds want to know.

Remember sub-prime lender Novastar?  They have re-invented themselves as an appraisal management firm, but they’re not using the name Novastar.  What a surprise.

We recently checked out a yard-sale and saw an Erector Set as well as a set of Lincoln Logs.  If you’re under, say, fifty, do you even know what these were?

·         Heavyweight boxer Mike Tyson once said that “Everybody has a plan until they get hit.”  This is a good segue into reminding people that their business plans all need to have a contingency plan, a Plan B.  Think of the worst thing that can happen to your business and address it now, not when it happens.

·         When we both were getting started in the business, the largest mortgage servicer was Lomas & Nettleton with about a $10 billion servicing portfolio.  Now, the Bank of America services $2.1 trillion and Wells Fargo services $1.7 trillion.  Also, it’s became very difficult for the small player to compete: The top five servicers now control 67% of all servicing.

·         The OTS has released Cost-of-Funds data as of this month, and for all OTS regulated institutions, the average cost of funds came in at 2.86%.  We looked back 25 years, and the highest was in December, 1981.  Then, the industry’s cost-of-funds was 11.58%.

·         We have always thought highly of Merrill Lynch and the people we know there, so we’re not picking on them.  But it’s interesting to read that 700 of their people got at least $1 million bonuses in 2008.  Maybe that’s not so many people relative to how many people work there, but it’s still a lot.

·         Allied Irish Bank and the Bank of Ireland have both accepted government assistance.  In return, the government forced a 33% reduction in salaries for senior executives and no bonuses for 2009.  It also looks like there will be a 25% cut in salaries for all those who are not senior executives.

·         Elgin Baylor was one of the greatest NBA players of all time, a Michael Jordan before Michael was born, but that was before Baylor started a disastrous 22 year career as General Manager for the L.A. Clippers.  In any case, Elgin was recently fired, whereupon he countered with a lawsuit for age and racial discrimination?  Is he kidding??  Do you think maybe he was fired because for 22 years, the Clippers were consistently the worst team in the NBA, that they failed to make the playoffs for 20 of his 22 years running the show?  C’mon, Elgin, this is downright embarrassing.

·         GMAC just came out with a number of restrictions on third party (wholesale) loans.  They didn’t make it impossible to sell them third party loans, but they definitely made it more difficult.

·         If you were a young man of high school or college age in the late 60’s or 70’s, you probably read Playboy and looked at it as the epitome of masculine coolness.  (And naked women.)  In 1971, its circulation topped out at 7 million copies.  Today, Playboy has a circulation of 2.6 million.  Someday we’ll expound on how Hugh Hefner has screwed the Playboy shareholders for years.

·         We think Calyx Point is a great front-end system, but we see a few too many lenders doing big volume just with Point and no back-end system.   It can work for awhile, but at some point, especially if you’re selling mandatory, you’ll have problems.  Back-end systems aren’t expensive.  If you need one, get one!

·         For our clients in the Northeast, a line from H.L. Mencken: “The most serious charge that can be brought against New England is not Puritanism, but February.”   We checked the weather recently in Hanover, New Hampshire and it was 12 degrees.

·         When the famous writer Aldous Huxley (Brave New World) died, hardly anyone knew about it.  He had the misfortune to die on November 22, 1963, the day President Kennedy was assassinated.  Huxley’s death might have made the front page on a normal day, but instead, the story was given almost no space and was buried way, way back in the papers.

·         Maybe we’re looking for patterns where none exist, but doesn’t it look like the FDIC closes down a fairly steady 3-4 banks week? Always on Friday, of course.

·         And it looks like PMI Mortgage Insurance will no longer insure loans that come from third party brokers.  We’ll try to get more details.

·         We see some unusual compensation plans, but what drives us crazy are the loan officers who think they don’t get enough.  We were expert witnesses in a lawsuit awhile ago in which the loan officer sued the mortgage company for not paying him the entire Service Release Premium.  He not only got an 80-20 split, but he wanted all 100-150 bps of the servicing released premium!  We know loan officers are an essential part of any mortgage shop, but they sure can be difficult at times. 

After only doing one of these a week, this is our first time in a few months getting out two of them.  It feels good. Have a good weekend, and a good last-week-of-the month.  Now if we can just get past March, the weather will improve dramatically and we can take off all this bulky winter clothing.

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Joe Garrett and Corky Watts   -  Garrett, Watts & Co.  -  510-469-8633