Another mortgage lending shutting down...

16 years ago

Capital One announced after the Bell today that they are closing their Greenpoint Mortgage unit. The unit specialized in non-conforming mortgages (alt-A, jumbos, etc.). They are laying-off 1,900 people. Capital One will be taking an $860M charge-off in 2007 which will reduce earnings $2.15/share.

Conforming loans will continue being made as usual.

Countrywide Financial also announced a lay-off of loan originators today but didn't say how many or exactly which units.

Tricia

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Comments (28)

kec01
16 years ago
Triciae, While all the info you post is interesting, there isn't one article from you that I've seen in the last couple of months that is positive. You've hit general economics which has had plenty of positives lately and then the mortgage sector which is clearly in the pits. Interesting pattern you've developed for yourself on this forum.
patty_cakes
16 years ago
Tricia, you're a very astute and knowledgeable woman, and although i've never met you, would probably like you. That aside, I have to agree that way too many of your posts are 'heavy' and even though you don't sugar coat things and tell it like it is, it would be equally nice to read a few positives from you.

Since you seem to have an inquisitive nature, i'll just bet you could quote statistics that are of a positive nature that most of us would have an interest in also. ;o)
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Hi Saphire, Very easy for you to say without concrete examples. I can try to post case examples for you as available and permission is granted. I have a significant portfolio of such cases... but I do need to get permission, and then put them in a postable format. May take me a bit, but I *WILL* do it... had been on my list anyway. So assuming I am trading up in value and will be financing 80% (because no one will give me the house at 100% and I do not have enough cash to buy it outright) Do you mean no bank will LEND 100% on that house? Be aware, you ARE financing 100% of the purchase. Apparently you'll be taking 80% from the bank at the cost of their interest charges, and 20% from your family at the cost of the safe returns available. There's no free lunch... ALL of the money comes at a cost, including the money you take away from your family's safety reserves and growth investments. if I buy an expensive house (for me) you are right that this affects my portfolio as a whole so how do I get the least expensive rate or product that also is nbot subject to rate increases if the market changes Fortunately for you, right now the expense premium on longterm fixed loans is very small above the more timeframe realistic 5 and 7 year fixed intermediary programs. You can likely get the risks completely bank-carried at just 1/4% or so above the 5 year terms. I'd suggest being a little 'suspicious' of ol' Mr. Market, however... when Mr. Market makes longterm fixed loan costs extremely attractive relative to shorter term periods, the Market knows that the shorter term programs are more likely to become significantly cheaper as they adjust (thus the "market trickery" to entice the consumer into the more expensive programs permanently.) Without concrete examples or references, either as to stradegies that work or references to formulas or analysis it all sounds very ambigious, mysterious and a bit glib. It certainly takes an open mind for numbers, and the ability to visualize offsetting growth or cost curves. The bases of the entire conceptual issue are; Rates are relative; When costs of borrowing increase, yields on savings/investments increase, and vice versa. Cash Is King; The costs of being illiquid in emergency can be catastrophically worse than the costs of staying liquid (in carrying costs on the leverage to do so,) It is very easy to say a FMR is expensive but without providing either alternatives or examples or references as to why that is so, I have to question it Currently the immediate face costs on a 30 FRM versus (as example) a 5 yr ARM are minimal... very financially unusual, which DOES definitely call for suspicion. The more obscure costs on a Fixed are the ongoing higher carry costs incurred when rates shift to the downside on the loan, but you are stuck at the higher rates unless/until you incur another round of transaction costs to reset the financing. Eliminating uncertainty is more efficiently done by matching income yield instruments (savings & investments) to leverage instruments (mortgages.) Properly placed and managed the spread continually works in your favor, and you remain much safer as you are not locked away from your liquidity. CLEARLY explain how this works or various stragies that might work for a trade up house that is intended to be held indefinitely How long you intend to OWN is irrelevant, (what DOES matter is how long you intend to take to reach financial independence,) but I do have a few cases that reflect the same situation. I'll see if I can get them illustrated to present as soon as feasible. Cheers, Dave Donhoff Strategic Equity & Mortgage Planner
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try_99
16 years ago
triciae you are doing just fine. There are enough cheerleaders both on and off of this forum. We need more jedi bears like you to bring the much needed balance to the force.
Gina_W
16 years ago
I'm a bullish gal and I don't understand why Tricia has to "sugar coat" anything. It's just info. Do with it what you like.
patty_cakes
16 years ago
A....Gina. You read wrong. I simply said she doesn't, which shouldn't be interpreted as she SHOULD. Don't take things out of context, Gina. ;o)
quip
16 years ago
If you want positive spin read the NAR's economist's comments. Triciae provides great info, and I often read it here first. I appreciate her posting just as they are.
jy_md
16 years ago
I appreciate Tricia's views and I take them just like that - her views. If she's seeing negative news in the current market I don't understand why she needs to search for a "positive" news. I saw an article about Capital One in today's Washington Post, but I didn't see any good news article counterbalancing it in the business section.
patty_cakes
16 years ago
It's a fact. The media has no problem giving us more negative commentary, than positive. That sucks! ;o)
muddbelly
16 years ago
Keep 'em coming T. Like quip, I usually see it here first...
jojoco
16 years ago
This forum is about buying and selling houses. Anything relevant to that topic should be posted. Tricial's post often comment on the mortgage fiasco. It would be absolutely foolish to assume that either a buyer or a seller is not fairly directly impacted by the events. It will now be harder to get a mortgage and on the flip side, more houses, IN EVERY PART OF THE COUNTRY, will go to foreclosure, impacting the selling market. Read the info from Tricia and understand it. It will make you a more informed buyer or seller. It is extremely relevant.

Jo
triciae
Original Author
16 years ago
Alright folks...is this any better?

Thornburg Mortgage hopes to be able to start looking at jumbo applications again in about a couple weeks but lock-ins are cancelled until further notice. Thornburg's business model is exclusively AA & AAA-rated jumbos.

In order to accomplish this though they've had to sell off at great discount 35% of their AAA-rated portfolio to raise cash needed to meet margin calls. They announced that they believe they have stabilized the company & that there should be no more margin calls. They also said that they are unable to confirm any dividends to shareholders going forward but believe the Q2 dividend which has already been announced (but payment delayed one month) should be paid in September. As a result of the liquidity crisis & the sale of their assets book value of the company has been reduced from $19.38 to $12.40/share. Larry Goldstone, CEO of Thornburg, said that they will NOT file bankruptcy (as of yesterday).

If Thornburg starts writing new loans it will help many people with large downpayments & terrific credit. Thornburg is known as the "lender to the stars". I believe the markets need to see that companies like Thornburg can underwrite healthy & properly risk rated mortgages. It, IMO, will be a great start on rebuilding confidence in the mortgage industry. That Thornburg had to sell AAA-rated assets at huge discount speaks volumes about the instability in the credit markets. The pendalum always swings too far in both directions before reaching equilibrium.

/t
jojoco
16 years ago
Tricia,
Two out of three of the above paragrahps are fluff and are intended for the half full crowd.(Well not quite all of one of the paragraphs). Only one paragraph is important.
It is lipstick on a pig.
Nice attempt though Tricia. Maybe an uplifting article link about rising prices in Greenwich or the Upper East side? :)

Jo
monzamess
16 years ago
I think Tricia's posts have been relevant and at a reasonable frequency. The news wasn't always what I wanted to see as a seller, but it helped explain why my deal was dragging on forever as the buyer struggled with financing. If you think her posts are all gloom and doom, you really need to look here for perspective.
dreamgarden
16 years ago
I appreciate triciae's input, negative or otherwise.

triciae's DH manages a billion dollar real estate portfolio. I think its great that she is willing to share the concerns of those who are in this unique position.

Keep em' coming!

Some "positive" news about Countrywide! :

Buffett could buy parts of Countrywide
Aug 21, 2007

Billionaire investor Warren Buffett may buy parts of beleaguered mortgage lender Countrywide Financial Corp(CFC.N), some investors are speculating, according to The Wall Street Journal.

Countrywide's debt-servicing business and its portfolio of mortgages and mortgage-backed securities may be attractive to Buffett, the Journal reported on its Web site on Monday, citing unnamed investors.

Like many mortgage lenders, Countrywide has struggled with rising delinquencies and foreclosures, and an unwillingness among bankers to extend credit, and among investors to buy the loans it makes.

Countrywide, which is being closely monitored by U.S. regulators, sought to reassure investors earlier on Monday that it is safe to do business with the company.

Buffett has been increasing his stake in financial services companies, including those with significant exposure to the mortgage market.

Earlier this month, Buffett's investment company Berkshire Hathaway Inc (BRKa.N) (BRKb.N) disclosed an investment in Bank of America Corp (BAC.N), one of the six largest U.S. mortgage lenders, in a regulatory filing.

Berkshire is also a long-time shareholder in Wells Fargo & Co (WFC.N), the second largest U.S. mortgage lender after Countrywide.

Wells Fargo has largely been spared the subprime mortgage-related woes afflicting smaller rivals, helped by its conservative underwriting standards.

Buffett told TV network CNBC last week that the worsening credit and housing markets may present some "real" investment opportunities.

Berkshire officials were not immediately available for comment. Buffett does not discuss what Berkshire is presently buying and selling.

(Reporting by Anupreeta Das and Jonathan Stempel; editing by Louise Heavens)
dutch_renter
16 years ago
Hello from the Netherlands,

It's highly unusual for me to post in this forum, but I just wanted to support Tricia. She gives relevant information, especially for future buyers. IÂm primarily interested in the financial aspects of the housing/mortgage boom as we saw in the USA, but also in Europe and some other places. I regularly read this forum (and some others) to gain some insights from the perspective of the "ordinary American" on this subject.

I do almost always agree with the postings I read from Tricia. I think the are knowledgeable and I wouldnÂt be surprised if sheÂs prevented some people from taking potentially disastrous decisions. Optimism is nice but must be kept in check by a dose of healthy realism.

Brgrds,
Dutch renter
jakkom
16 years ago
It should tell you something when Buffett is buying into an unpopular sector at a time when other folks are hunkering down trying to find a "safe" haven....

Money works by going 'round and 'round. It's only worthless when it sits unused, interestingly enough.
mfbenson
16 years ago
"Interesting pattern you've developed for yourself on this forum."

You mean like the pattern of criticizing the messenger instead of the message, Kec?
novahomesick
16 years ago
Kec & Co.

Please post any good news you run across. I read 5 national newspapers a day and I'll be darned if I can find any uplifting news about the housing market. If it's out there, we'd love to hear it. Tricia is one of the most balanced and realistic posters I've read on this or any other board so I'm sure she'd like to read the good news too.
dave_donhoff
16 years ago
Wow gang....
Dunno if you'd consider me a "cheerleader" or not... probably least likely a "doomsayer"....

HOWEVER... I don't see any out-of-place negativity in Triciae's posts... she's just announcing what us insiders are seeing, in the real world, on a real, everyday basis!

Flat out; The mortgage industry is in a state of almost complete collapse at the moment. Nothing fluffier than that (and again, you all know me as a "glass half full" kind of guy!)

NONETHELESS... this is FAR from NEGATIVE... it's merely a SHIFT!

Here's who it is AWESOME news for;
A) Responsible, patient Home Buyers,
B) Real estate cashflow investors (as opposed to flippers & speculators,)
C) Landlords,
D) Conservative mortgage companies and originators (who are watching the competition drop like flies,)

The others had their day in the sun... the speculators got to flip for some temporary instant gratitude... the irresponsible renters had their handful of ownership years opportunities... the ex-barristas and ex-car-salesmen got to earn 6 figures hucking refinances for a couple years....

NOW the tortoises get their days in the sun. NO WORRIES!

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner
cordovamom
16 years ago
I appreciate Tricia's posts for the news they contain. Keep the posts coming Tricia.
chisue
16 years ago
How much do you think the EXTREMELY low FED rates over the last few years contributed to the current mess? Did Bernanke inherit the wind?
eal51
16 years ago
Dave,

Great Post!!!!!!!!!

I think everybody needs to see that the "Hit and run artists" - those wanting a quick buck - have had their ceiling collapse. Unfortunately, their greed affects the rest of us.

It's important to know that slow and steady - those who are really qualified - are going to be fine.

For the rest, Triciae just posts what the rest of the financials already know. It's reality. Hopefully, the lessons will be learned.

Enjoy the journey.
eal51 in western CT
quandary
16 years ago
Dave -- What's a barrista?
kec01
16 years ago
To share where I'm coming from, I work in risk management for a global investment banking firm and I specialize in fixed income products, of which mortgage backed securities are a huge chunk. I've been in risk management for 5 years and I have worked with virtually all the fixed income investments for another 25 before that. I'm working first-hand with this stuff every day.

I agree with what the Secretary of the Treasury Paulson said today... Despite warning investors that there was no easy fix for markets, the Treasury Secretary also urged calm. "Credit is being repriced, reassessed across our capital markets," he said. "This will play out over time, and liquidity will return to normal when the market has a better understanding of the risk-return trade-off.
"Markets straighten themselves out over time. This is going to take a while to play out." Mr Paulson argued that action by the Fed, which last week cut the rate it charges US banks for short-term lending, "makes it easier for the markets to focus on risk".

We had the S&L crisis in the 1980's, we had a large US bank fail in the 80's, we had Long Term Capital Mgmt in the 90's, now we have this. It's cyclical, it straightens out and then at some point, the next debacle happens. Yes, I'm cold about it - that's what my experience tells me will happen when greed kicks in again. And humans being humans, greed WILL kick in.

I made an observation in my original post and I stand by it. To me, an observation is not anything other than just that. I see that others of you equate observations to judgments. That's not what I said or intended.

And for a positive, those of you who own Lowe's stock - hang on to it for awhile. Keep fixing up your houses and the stockholders will thank you for it.
disneyrsh
16 years ago
Another Triciae fan here.

Sheesh, what a buncha whiners pop up on the boards every now and then.

Boo hoo (fast becoming my favorite pg phrase), more info from an educated, connected person, what a nightmare.

So not.

Keep it coming, triciae, it makes me sound smart at meeting when I talk about your posts on jumbo loan problems :D
quip
16 years ago
My observation: I found Triciae's original info was far more interesting and informative than Sec. Paulson's words. I, for one, am weary of politician's dull, predictable, placating words. Cyclical or not, we are here because we are currently interested in buying and selling RE, not necessarily waiting for next cycle of greed.
dave_donhoff
16 years ago
Hi Quandary,

Google is your friend! ;~)
http://www.wisegeek.com/what-is-a-barrista.htm

Cheers,
Dave Donhoff
Strategic Equity & Mortgage Planner

Here is a link that might be useful: What is a Barrista
katclaws_mo
16 years ago
Another Tricia fan here. Sometimes I learn more from her & the other expert peeps that post than from my broker. Passing a RE exam can be tough, but real life situations presented here by all sides are even tougher.

Another mortgage lending shutting down...

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