To Our Clients, Colleagues and Friends:   

· As of yesterday, the Bank of America has not confirmed that it will stand behind the Countrywide bonds. We’re dying of curiosity to see how this plays out.  What’s going on there? 

· It’s still not too late to register for the Western Secondary Marking Conference next week in San Francisco .  Go to www.cmnba.com for details.

· This is probably being way too simplistic, but the BofA appears to most observers to be overpaying for Countrywide.  That is, they haven’t renegotiated the price to reflect deterioration in the value of the company or the mortgage industry.  So wouldn’t this imply that at some point after closing, the BofA might have to write down the value of their acquisition?  Isn’t that basic accounting?  Does this mean a massive write-down for the Bank of America sometime within the first year after the deal closes?    

· Today is actress and model Pamela Anderson’s 51^st birthday.  Has anyone else noticed that she’s prettier at 51 than she was at 21?  Has anyone noticed how true that is with lots of women? 

· So far this year, Keefe, Bruyette estimates that $181 billion in capital has been raised for financial companies.  In total, 54 banks & thrifts have conducted 73 capital raises, accounting for nearly $110 billion or 61% of the $181 billion in capital raised for financials in 2008. The rest?  The other $71 billion was raised by specialty finance companies, and yes, that term includes mortgage companies.  In some ways, it’s never been  easier to raise capital, also never so expensive.

· During the dot.com boom, polls showed that people assumed that stocks went up 25-30% a year.  More recently, people are assuming stocks are a good way to lose money. The real answer is that since the end of WWII, stocks have increased 9.1% a year, or 13% when you include dividends.  Now you know.

· We wrote last week about consolidating all passwords into a single one.  Boy, did that get a response.  A few wrote that this was a bad idea from a security standpoint, but many wrote in about various tools that let you manage multiple passwords. 

· Oscar Wilde was, along with everything else, quite an optimist. One of his lesser known lines was his statement, after being released from prison, that “Two men look out the same prison bars, but one sees mud and the other sees the stars.”  His most famous line was probably when he came to visit the United States .  When he was asked by the Customs officer if he had anything to declare he responded, “Only my genius.”  Funny guy.

· Ronald Reagan used to say of the Soviets “Trust, but verify.”    The Romans used to say Nil credam et omnia cavebo, which translates into Believe nothing and guard against everything. Both would look good on a big sign back in your internal audit or quality control department.

· The Western Secondary Marketing  Conference in San Francisco is only a week away.  We have a few openings in our schedule if you’d like to get together.  Let us know.   

· And here’s bit of useless trivia about the Conference. It was  once put on by the California Savings & Loan League, and when all the S&Ls disappeared  in the late 80’s and early 90’s, so did their trade association.  We don’t know any of the details, but apparently they sold the rights to the name of the conference to the California Mortgage Bankers Association.   

· Speaking of the demise of the California S&L industry, do you remember these names:  Great Western (Probably the best-run one), Home Savings (Ahmanson), American Savings, Imperial, Gibraltar), Nationwide, Citizens, Home Fed, Great American, Lincoln Savings (John McCain: uh, oh), Homestead , Cal Fed, Glen Fed, and finally, State Savings (perhaps the worst of the bunch).  If you’re under a certain age, you’ve never heard of them.  But over a certain age, you remember these institutions as having dominated mortgage lending and single family construction lending for decades.   

· National Mortgage News had a table showing market share for the first quarter of 2008.  The top 25 originators had 84% of the total market.   Remember when the mortgage industry was considered highly fragmented?  Times have changed.  A lot.

· Okay, here’s something we still don’t fully understand.  When “they” calculate stuff like market share and volume, who  gets credit for the origination on a 3^rd (or 4^th) party loan?  Take a loan that is originated by a broker (1) who places it with a wholesaler (2) who closes the loan and sells it to a larger correspondent entity (3)?   

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

My Mother liked to say, “No man has ever been shot while doing the dishes.” I can’t tie that in to RESPA news, but thought it was pretty witty. Speaking of matters related to doing dishes, any single guys looking for houses in Florida might be interested in this at MSNBC.

Now that June is over with, with many companies reporting a good funding month, what does July look like? Not as good, according to many. Rates do not seem to be helping, unless an agent has a qualified borrower with equity in the property and an ARM rate that is shooting up. Nor are the mortgage credit markets making things much easier, and locks are slowing somewhat. A slowing economy will help rates eventually, but there are obvious costs associated with that – like increased unemployment. It is already helping rates, with the 10-yr down to 3.89% and mortgage prices better by another .125 this morning.

FAMC finally, unless I am missing something, “In response to the Economic Stimulus Act of 2008”, announced the availability of the Conforming Jumbo Fixed Rate Program.

CIT Group Inc., the business lender that’s lost money for four straight quarters, is exiting consumer lending and agreed to sell its manufactured housing and home-loan businesses for $1.8 billion to Lone Star Funds. Vanderbilt Mortgage and Finance Inc. agreed to buy CIT’s manufactured housing portfolio for $300 million.

RMIC put in some further restrictions beginning July 14th, which include “Investor properties will require a minimum FICO of 720, and Rate & Term Refinances for Investor properties will no longer be eligible (Cash-outs were previously retired from eligibility),

Wachoiva eliminated their “pick-a-pay” loan program.  Wachovia also discontinued any mortgage product offerings with payment options that would allow a customer to go into negative amortization.

Wells Fargo announced a change to their guidelines, and will now require a full appraisal and one of the following for any transaction with a Wells Fargo loan amount greater than $1M up to $2M: One Desk Review with data verification; or one Enhanced Desk Review with data verification; or Fannie Mae Field Review Form 2000.

The Review appraisal will be replaced with the Collateral Consultation Review (CCR) for loan amounts greater than $1M, and the Desk Review will no longer be an option for loan amounts greater than $1M up to $2M. (The CCR is a Uniform Standards of Professional Appraisal Practice (USPAP) compliant review product which provides a full review of the appraisal, a market analysis with two additional sales, and two additional listings that support the review conclusion.)

The National Association of Purchasing Management-Chicago said yesterday its business index increased to 49.6 this month from 49.1 last month, signaling a slower pace of contraction. (“You’re still bleeding, but not as badly…”) The consumer is getting squeezed more and more with little, no, or negative equity in their homes to tap into, and will either have to rely on credit cards or cut spending. Any questions class? Economists believe that consumers will add to their debt by use of credit cards rather than deprive themselves of anything, thus leading some to think that credit card debt will be the next debacle. They will have to continue to buy fuel and food, but will be forced to spend less on discretionary items. “Do I really need that new suit?” This will definitely slow the economy further, which may help rates eventually. We still have to grapple with oil and food prices that make one nauseous every time they fill up their tank or go through the check out line.

A senior loan officer was standing by the desk of a junior loan officer when the telephone rang.
The junior officer answered, saying, “No…no…no…no…yes…no,” and hung up.

The senior officer questioned him immediately. What had he said “yes” to?
“Don’t worry,” said the junior officer reassuringly. “I said ‘yes’ only when he asked me if I was still listening.”

Rob Chrisman

This chart says it all - from Econbrowser - Peter Hooper on the economic outlook - thanks to Victor Hong for pointing this out 

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Apartment Landlords Offering Significant Incentives in Manhattan - CalculatedRisk 

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Saudis press United States to put an end to rate cuts - Saudis press United States to put an end to rate cuts - … So Paulson decided to go to Riyadh late last month to soothe some ruffled royal feathers. Reliable sources say that the Saudis “hinted, as is their style” that if America wants more oil, it should do something to shore up the dollar. Not unreasonable: the falling dollar reduces the purchasing power of the bits of paper the world uses to pay for oil. -  Irwin Stelzer  - Times Online 

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As Bill Evolves, Mortgage Debt Is Snowballing - VIKAS BAJAJ -  NY Times 

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Fed Board Nominee Duke Gets Confirmed by U.S. Senate -  Scott Lanman -  Bloomberg

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Well, what do you expect? - Despite rising inflation expectations the Fed keeps rates on hold - Economist print edition

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Connecticut: Even Richer Areas Feel the Pinch - LISA PREVOST - NY Times

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A housing-rescue bubble - Congress risks the same mistake – giving home loans assuming prices are going up. - CS Monitor

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Economics Professor Says Bank Of America Cuts Won’t Be In Charlotte -

WSOCtv.com  

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Three Million US Mortgages Headed for Default, NYT Reports - Dan Hart - Bloomberg 

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Financial Freedom Issues Three Reverse Mortgage Securities Under New Ginnie Mae Program - Government National Mortgage Association (Ginnie Mae) announced last Friday that Financial Freedom, issued two fixed rate reverse mortgage transactions and one LIBOR transaction under Ginnie Mae’s Home Equity Conversion Mortgage (HECM) Mortgage-Backed Securities (HMBS) program.  - Reverse Mortgage Daily 

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US Credit Card Asset Quality Deterioration Hasn’t Peaked - Meghan Crowe - … In this Fitch Special Report released last week: ‘Credit Cards: Asset Quality Review’, Fitch discusses current asset quality trends in the credit card market and provides updated growth and asset quality statistics for some of the largest credit card issuers.  … - riskcenter.com 

posted by Bill Coppedge

Parent’s like to think that their son or daughter might go into the same profession in which they work. I got my son’s report card in the mail on Saturday, and three teachers had written comments about him. They were, “Since my last report, your child has reached rock bottom and has started to dig.” “Your son sets low personal standards and then consistently fails to achieve them.” And, “If your son were any slower, he’d have to be watered twice a week.” Yep – destined for mortgage banking!

For any agent, or anyone in the business for that matter, who would like to know where the Fed thinks mortgage origination is heading, along with a brief history, they must visit this page at St. Louis Fed website.  The gist of it is the quote, “There is no realistic prospect that the private-label MBS model will return to life in the near future. The most likely future for the U.S. mortgage market is a return to its past—namely, the bulk of mortgage funds will be provided by insured depository institutions and the GSEs. What is still unclear is whether, and to what extent, the federal government will intervene to create entirely new regulations and institutions that could usher in another era in the evolution of the mortgage market.”

Although the business channels will continue on “as is”, is today the last official day of “Countrywide”? Love them or hate them, one must admit that in 1969 up sprang an innovative and entrepreneurial mortgage banking firm – arguably one of the most entrepreneurial in our business in history. They, and their chairman, have “taken it on their chin” in the last few years, but the headlines don’t remind us of the millions of home loans that were good. In a related story, Bank of America on Thursday said it expects to eliminate about 7,500 jobs over the next two years after it completes its acquisition of Countrywide, or about 3 percent of the combined companies’ work forces. Bank of America said it ended March with about 209,100 employees while Countrywide said it employed about 50,400 at the time. The cuts will occur nationwide and mostly in areas where the companies have significant overlap, such as staff support, affected employees will be notified in the third quarter and will offer severance packages to eligible workers.

Fortes Financial finalized their deal with the former wholesale division previously belonging to National City Mortgage. Fortes, who does both retail and wholesale, has production offices in Atlanta, Chicago, Dallas, San Diego and Frederick, Maryland, and the former National City staff became Fortes employees on April of this year.

We had a nice little improvement in rates at the end of last week, and again this morning with the 10-yr at 3.99% and mortgage prices better by .125. We ended the economic news week with the University of Michigan Consumer Sentiment Index, which fell to 56.4 in June, the lowest level in 28 years. The measure averaged 85.6 in 2007 – of course gas & food prices were lower, the credit crisis was not as bad as it is now, and house prices hadn’t fallen as dramatically. Of course, at this point anyone with any money in the stock market knows that equities fell last week, as did expectations of the Fed increasing rates. In their post-meeting statement, the Fed did not indicate any intention in the near term to raise the overnight rate, and the market is now only giving a 26% chance of a Fed increase at their next meeting August 2nd.

Speaking of the economy & rates in this short week, today’s June Chicago Purchasing Manager report is expected to fall -1.1 points to 48.0, leaving the index below the key level of 50 for the 4th consecutive month.  (A level below 50 signals recessionary conditions in the Chicago area.) Due out tomorrow is the June ISM manufacturing index and it is expected to drop -1.0 points to 48.6.  The national ISM has also been under the boom/bust level of 50 for 4 months. The Institute of Supply Management (ISM)’s index measures manufacturer sentiment by surveying trade executives on current business conditions. The Commerce Department post May’s Factory Orders data Wednesday, which is similar to the Durable Goods Orders report that was released last week except this week’s report covers both durable and non-durable goods. Thursday will be an interesting day, as the bond market is closing early due to the holiday, and we have the Labor Department’s June unemployment rate, number of new payrolls added, and average hourly earnings. Analysts are expecting to see the unemployment rate to slip 0.1% to 5.4%, while 50,000 jobs were lost and a 0.3% rise in earnings.

A man walks into a bar with a slab of asphalt under his arm.
He says, “A beer please. And one for the road.”

Rob C.

Speed of price correction is ‘almost unprecedented’ - USC economists present some bad news, some better news - Glenn Roberts Jr. - Inman News 

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Martin T. Sosnoff - The credit and housing crises need to get worse before the economy can get better. - Forbes 

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Is Countrywide’s Angelo Mozilo Hall of Fame material? - Richard Bitner - I don’t know if Angelo Mozilo knows the difference between a curve ball and a split-finger, but given that his 40-year reign as the head of Countrywide Financial is coming to an end, it seems appropriate to reflect on his career as well as his legacy.  - housingwire

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Foreclosure fishing? Read this first - Make sure your eyes are wide open, be prepared to do plenty of legwork and realize that the hard work is still ahead- MARY ELLEN PODMOLIK - “Every call we get is for a 203k,” said Stephanie Sowell, a renovation specialist at Wells Fargo Bank in Chicago. “Since the depression in the real estate … - Chicago Tribune 

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HAS VIDEO TOO - The Housing Abyss - Why the worst may be yet to come as forces battering the market gain strength. And the remedy coming from Congress? It’s likely to fall short of the mark - Peter Coy and Mara Der Hovanesian - BusinessWeek

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Homes Less Affordable as Prices Fall, Rates Rise, Zillow Says - Sharon L. Lynch - Bloomberg 

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Analyst sees 10 million fewer cars by 2012 - John Wilen - ASSOCIATED PRESS - San Diego UT

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CAROLINE BAUM - Fed Should Run Policy, Outsource Communications - Wouldn’t it be nice to read the headline, “Fed Does Nothing, Says Same Old Thing”? - Bloomberg

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The Fed’s Dilemma  - By John H. Makin -  ECONOMIC OUTLOOK - AEI Online 

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Current Growth in Money and Credit Aggregates Not Fueling Inflation - Paul Kasriel -   Northern Trust

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Fed Lays Groundwork to Increase Rates, If Needed: John M. Berry - Bloomberg

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Delinquencies Rise at Fannie Mae, Freddie Mac - David S. Hilzenrath -  … Neither company’s figures fully captured the problems borrowers have had making payments, because they excluded loans for which payment terms had been relaxed.  … - Washington Post

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At Countrywide’s End, an Emotional CEO - During the last shareholder meeting, Angelo Mozilo emphasizes past accomplishments but doesn’t sugarcoat the sale to BofA - Christopher Palmeri - BusinessWeek

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Demand for bigger jumbo mortgages is slow to materialize - … But the Chicago area didn’t make the list of almost 100 places designated by the Department of Housing and Urban Development as high cost.  As of June 26, the average rate on a 30-year fixed jumbo rate in Chicago was 7.36 percent, according to Bankrate.com. That’s about 1 percent above conforming loan rates. … - Chicago Tribune 

posted by Bill Coppedge

Bad To Own (Bad to the Bone- George Thorogood)  -  as re-written by Russ Middleton at JPMorgan Securtities

On the day I got long, all the Managers gathered ’round.
They gazed at my blunder, and not one made a sound.
The Head Trader spoke up, he said “It’s dropping like a stone!”
They all backed away full knowing, that it was Bad to Own.

Bad,  Bad to own.  Bad,  Bad to own!

My house in the Hamptons, bought it for two point two.
I put in a few hundred more baby, and now I’m through.
My neighbor just got thrown out, it’s now …Real Estate Owned.
Bank offer is one point two honey, It’s just Bad To Own.

Bad,  Bad to own.    Bad,  Bad to own!

My stock options are worthless, I’ve had my last chemical peel.
The bill collectors are in a rush, Repo man took my wheels.
I’m gonna be out on the street, cold and all alone
Just throw a bid on that bond honey, cause - It’s Bad To Own!

(Thanks to Brian Youll for pointing this out.)

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 VIDEO:  Hamptons Foreclosure from WSJ  - $19.5 Million Hamptons Mansion In Foreclosure 

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has slideshow - Used Cars Make A Comeback - Jacqueline Mitchell - Demand for used, fuel-efficient cars is on the rise, driving the prices of these cars up significantly in the past six months. - Forbes 

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Fannie, Freddie commit to buy $50.7 billion in mortgage bonds in May - In May, Fannie Mae’s net commitments were $24.5 billion, down from the $30.7 billion in April, while Freddie’s commitments were at $26.2 billion, … - MarketWatch

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The Case for Commodity Futures - Joëlle Miffre, PhD - … If we look at the observed rally in commodity prices from a purely financial perspective, one can trace it down to six commonly accepted benefits of commodity investing. … has list -  EDHEC-Risk 

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Gross prefers swaps to Tsys under “do-nothing fed” - “Two-year swaps yield 3.73 percent versus 2.83 percent for Treasuries,” Gross told Reuters via e-mail. “With ‘rolldown,’ two-year swaps should return 4-percent-plus under a ‘do-nothing Fed,” he added. - Reuters

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As Freddie Pushes Pedal to the Metal, Fannie Taps the Brakes on Mortgage Investments - Recent data from both mortgage finance giants shows Freddie Mac and Fannie Mae heading in surprisingly different directions, as one ramps up its mortgage investments to a historic level in May…  - Paul Jackson -   housingwire

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More Trouble with Auction Rate Securities (ARS) - has 5 anecdotes - David Kotok - Cumberland Advisors
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FASB Agenda Takes on Global Spin - The American accounting standards setter adjusts its plans in preparation for U.S. switch to international standards. - Tim Reason - CFO.com 
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IndyMac Shares Drop Below $1.00, Time To Unload Financial Freedom? - Reverse Mortgage Daily

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Fed loan to finance Bear Stearns deal goes through - New York Fed lends $28.82 billion, J.P. Morgan comes up with $1.15 billion - Alistair Barr -  The Federal Reserve Bank of New York said Thursday that it has lent almost $29 billion to finance the acquisition of Bear Stearns by J.P. Morgan Chase & Co. ..   - MarketWatch

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Subprime crisis presents M&A opportunities for Canadian banks - Maria Woehr - thanks Carolyn Coppedge -  Dealscape

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IRA ARTMAN SECTION - thanks Ira:

Worksheet - Mortgage toolkit - Use these work sheets, calculators and money-saving tips to guide your mortgage decisions.-  10 questions to ask mortgage lender - BankRate.com 

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42 pages: Subprime Mortgages: What, Where, and to Whom? - Chris Mayer and Karen Pence - We explore the types of data used to characterize risky subprime lending and consider the geographic dispersion of subprime lending.  - Columbia.edu

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The Economy Still Is Inching Forward Despite Strong Headwinds -  Annualized growth of real gross domestic product (GDP) has been running well below trend since late last year, not in typical recession territory but slow enough to result in systematic deterioration of the labor market. This pattern will qualify as an unofficial “growth recession” if it persists for much longer. - NAHB 

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Eveillard expects more bad news - Sue Asci  - While many investors thought the equity market hit bottom in March, the impact of the credit crisis and Federal Reserve interest rate cuts are just beginning to be felt, Jean-Marie Eveillard said … - Investment News 

posted by Bill Coppedge