Housing Bill verbiage, Provident cuts brokers with low pull through, WaMu losing deposits, and Can the 83-yr old founder of Downey really quit?

July 25th, 2008 · No Comments

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“Do not corner something that you know is meaner than you.” And is there anything meaner than me when I feel I was on the bad side of a trade? Last week I bought some Krispy Kreme stock for my daughter. This week it was lower! So I called Charles Schwab to complain, and ask that they use this week’s price instead of last week’s. I couldn’t believe that they wouldn’t do it! The clerk told me that I needed to explain to my daughter, “That wasn’t how it worked”. So I told the clerk that loan agents want to do that all the time when they lock a loan and then rates go down: they tell us that the borrower wants the lower rate. He didn’t buy it.

Along the lines of fallout, to control costs Provident Funding stated that, “When we commit a fixed price to you for a specific time period, we must honor that price. We take interest rate risk to guarantee to you a price we may not be able to secure in the market when we sell your loan. Managing that risk can be costly if an account fails to keep their commitment to close the loan with us. Logically then, Provident Funding places a great deal of importance on closing every locked loan within the agreed upon time period so we monitor our accounts locked fallout. Fallout = loans that an account locks and subsequently does not fund with us.” Provident proceeded to notify brokers who had poor pull through that they were terminating their relationship. Makes sense!

Anyone interested in the fundamentals of the housing bill should read this  DETAILED SUMMARY at house.gov 

Downey Financial saw their fourth straight quarterly loss, and the stock fell 34% yesterday, meaning that it is down 94% this year. Chief Executive Officer Daniel Rosenthal stepped down, as did founder, chairman, and largest shareholder Maurice McAlister, 83. Chief Operating Officer Thomas Prince, 61, is the interim CEO. As every originator knows, Downey was one of the biggest players in option-ARMs.

Washington Mutual’s stock took a hit on Thursday (-13% to $4/share) on concerns that the nation’s largest thrift is losing access to important sources of funding. Many of WaMu’s unsecured creditors are “quietly” reducing their exposure to the troubled bank, according to a report