To Our Clients, Colleagues and Friends, 

• In 1995, the Dodgers gave away thousands of baseballs to fans coming to the game.  When Tommy Lasorda was thrown out for arguing with the umpire in the first inning, Dodger fans began throwing thousands of baseballs at the opposing players on the field. Things calmed down and the baseballs were removed from the field, but the moment play resumed, thousands more were thrown, some with scary accuracy.  The Umpires declared a forfeit, game over, a loss for the Dodgers.
• As for avoiding tight underwriting by selling to the Agencies, we should note the false reality that mortgage companies will be under for the first six months or so of selling to them.  Everything will be fine at first, but then the Agencies’ Q.A. review will kick in, and recently, those reviews have been heavily weighted toward risk and actual losses.  So once your underwriting warts start to show up, they can quite likely become repurchases.  There are many good reasons to sell to the Agencies, but avoiding scrutiny of your loans is not one of them.
• Here are the results of your nominations for favorite musicals, with The Sound of Music surprisingly getting the most votes. And did you know that during the Civil War, Victor Hugo’s novel Les Miserables (#14) was the most commonly read book by soldiers on both sides?

There were two wise-guys who wrote in that there should be a movie about the mortgage meltdown.  One suggested the title Sub-Prime, the Musical, and the other suggested the short and snappy title Mozilo.   Generally, our clients tended to like the classics, but people, the Sound of Music? 

• Have you noticed how, when one bank fails and another bank takes over its deposits, the premium they pay the FDIC has been unbelievably small?  We saw one deal last week that went for 100 bps, another for only 50.  It’s almost worth buying a bank just to access these deals!
• Unemployment looks horrible in some areas, and good in others.  Here are the best and the worst.

• For those of you who don’t follow the reverse mortgage market, the loan limit is currently $625,000.  But you already knew that, right?  Hey, we’re just trying to fill some space here.
• We wrote last week about how tough Washington State regulators are. One of our old clients wrote us “To your point regarding Washington State ’s tough policy, we were recently audited by them, and they found 17 loans originated by non-licensed agents.  The fine is $97,000.”  Be careful.
• We asked last week about Danny Wall, and someone wrote us that he is now head of Loss Mitigation at Southwest Securities.  Wasn’t he head of the FHLB when it regulated the thrifts?
• And Umpqua Bank, besides having a great name, writes us that 55% of their mortgage loans these days are purchases.  As we’ve written before, we really worry about clients where purchases are less than 10% of their business.  Or were.
• We made some snide remarks about Beowulf last week, and interestingly, only one person came to its defense. Is there any real reason to read it?  After all, when was the last time you had to stand in front of 25 inattentive teenagers and compare and contrast Beowulf to other medieval classics likeCatcher in the Rye ?  It’s like learning the Quadratic Equation or how to calculate the co-sine.  Really, when’s the last time you used either?  11^th grade, right?
• Remember a few months ago when people thought the big banks would go broke and be nationalized.  Now, they’re raising private capital and, in most cases, paying back their TARP money. Here are a few banks and the capital they’ve raised in May and June already, with June not even over.

$15.0 billion   Bank of America	$2.4   billion   U.S. Bancorp
$ 8.6 billion   Wells Fargo	$1.9   billion   State Street
$ 5.0 billion   J.P. Morgan Chase	$1.7   billion   BB&T

 

• We wrote last week that we bought a thrift in late 1989, just prior to FIRREA, and we had some letters asking about that.   We paid almost nothing for it ($32,000) but that may have been too much given that it was a CAMEL Five with a big, fat C&D as well. Can you imagine?  What were we thinking?  At the time, we wondered if this were a Profile in Courage or a Profile in Stupidity.
• Too many of you have not yet gone paperless. DataTrac can help you do so, as can DocVelocity, two systems we like.  Squeezing that last bit of inefficiency out of your operation simply cannot happen till you get rid of all the paper.  What are you paying for your docs?  About $20-25?  We’ve been at one company that shipped an electronic file to India and had the docs printed on their computer here in California , all for something like $0.82.  But first, you have to be paperless.
• We were looking at our daughter’s high school chemistry book today, and we came across the Periodic Table.  It had been years, maybe decades.  But there was good old #97 Berkelium and #98 Californium.  We looked and we looked, but we couldn’t find a Stanfordium, nor, for that matter, a Harvardium. How cool is that when your school has two elements on the Periodic Table?
• We just finished all 700 pages of Ronald Reagan’s diary, an interesting view into how the late president viewed the world.  He made entries on just about everything, including every time he “upchucked”, on his distaste for Golightly, and noting just about every haircut he had in those eight years.  But what struck us was that he never once said a mean thing about anyone.  In fact, a typical comment would be something like “I met with Senator XYZ in my office today, and he told me he’d support our budget plan.  But later that day he held a press conference to attack my budget, call me a racist and say that I was out to destroy the environment.  That’s just plain wrong.”  Then a few days later, he’d invite that same senator and his wife over to the White House for dinner.  “He and his wife are wonderful people and we had a great time.  I think I made a new friend.”  The man was incapable of holding a grudge.
  The other thing seems to dispute the common view that he was uncurious, intellectually lazy, and indifferent to the issues of the day.  He seemed every bit as hyper-active as Clinton or Obama, and he seemed to be constantly meeting with members of Congress and other leaders, making calls to foreign dignitaries non-stop, being briefed on key issues, and, when he was pushing his tax cuts, calling 10-15 Congressman every single day. He’d hop in his limo to go to Capitol Hill to get one vote, and he worked extraordinarily hard to push his program through.  And it seems that there was no issue so obscure that he didn’t weigh in on. 

Garrett, Watts & Co. -  Joe Garrett    (510-469-8633)  -   Corky Watts    (408-497-3135)“Helping mortgage lenders increase revenues, control costs, and better manage risk.”