What We’re Hearing

On Friday the House Oversight Committee had its crack at Angelo Mozilo, Stan O’Neal and Charles Prince, considered by some to be the three horsemen of the subprime apocalypse. (In the Bible there are four horsemen but who’s counting?) The witnesses, along with the compensation chiefs of Countrywide, Merrill Lynch and Citigroup, respectively, came into the Rayburn hearing room through the back door, thus avoiding the press. However, once seated, 10 different photographers began clicking away as the men were sworn in. As might be expected, committee chairman Henry Waxman of California raked Mr. Mozilo over the coals for his insider stock sales (an estimated $400 million over seven years). Rep. Waxman, among other things, was interested in CFC’s decision in November 2006 to use $2.5 billion in capital ($1.5 billion of it borrowed) to buy back its stock in the open market. This decision was made just as Mr. Mozilo began speeding up his stock sales (after exercising options). Mr. Mozilo, who kept a calm demeanor throughout much of the hearing, said there was no connection between the corporate buyback and the acceleration of his stock sales. Harley Snyder, a CFC board member in charge of compensation, noted in his testimony that Mr. Mozilo was scheduled to retire from the company in late 2006, saying, “The individual we thought would succeed Mr. Mozilo as CEO had left the company.” Mr. Snyder forgot to say that the individual, Stanford Kurland, did not leave on his own accord. He was pushed. And I would guess Mr. Kurland is sitting poolside these days, sipping a cocktail, and thanking Mr. Mozilo and the board for kicking his butt the heck out of the company…

Two take-aways concerning congressmen sitting on the House Oversight Committee: Rep. Eleanor Holmes Norton of Washington needs to work on her pronunciation of Italian surnames. She repeatedly mangled “Mozilo” referring to him as “Mr. Mozlo.” (I just hope I never get called before the committee.) Rep. Tom Davis of Virginia was clearly the apologist on the panel, explaining away the mortgage crisis as something caused by “the unsustainable promise of ever-rising home prices.” I guess, Rep. Davis, a Republican, is unaware of ABS, CDOs, SIVs, payment-option ARMs, stated-income loans, subprime REITs, credit default swaps, inflated appraisals, predatory lending by such firms as Ameriquest and Household, loan fraud, broker fraud, accounting fraud, insider selling and related matters, which prompts me to ask: Why is this elected official sitting on an oversight committee?…

Meanwhile, CFC’s $28 billion payment-option ARM portfolio is in deep trouble with 5.36% of the loans 90 days past due. For the full story see the Monday edition of National Mortgage News. Don’t subscribe? Call: (800) 221-1809…

Jumbo REIT Thornburg Mortgage late this past week revealed that it will have to restate its results for 2007, noting that a spate of margin calls have raised substantial doubts about its ability to continue as a going concern. A week ago Friedman Billings Ramsey reiterated its “outperform” rating on the company, setting a price target on the stock of $13 a share. On Friday its shares were trading at just over $1. FBR, of course, has underwritten some of the lender’s equity offerings, which means its objectivity in regard to Thornburg is, shall we say, questionable…

MBA’s COMMERCIAL MORTGAGE WOES: The Mortgage Bankers Association expects to close on a mortgage this month to finance a newly constructed eight-story office building it purchased in downtown Washington last year. MBA officials signed the contract at the height of the office building boom. Its staff is scheduled to move to 1331 L St. NW this summer. But MBA’s elected officers are getting nervous. Office leasing has slowed in Washington and so far they have no tenants lined up for the top four floors, sources say.

MICHAEL JACKSON COMMERICAL MORTGAGE UPDATE: In November, NMN reported that Michael Jackson’s 2,800-acre estate was in danger of foreclosure after the former king of pop defaulted on his mortgage payments with Fortress Music Trust. According to documents filed with the county recorder’s office in Santa Barbara, Mr. Jackson finally paid the state tax lien of $600,000 on his abandoned Neverland Ranch in Los Olivos, Calif. However, according to NMN’s Nathasha Lim, this payment doesn’t cover any of the $24 million in loans taken out against the ranch, which are, shall we say, way past due. (There’s late penalties, too.) If Jackson fails to pay the outstanding balance by March 19, his property, along with everything at the ranch will be sold at a public auction…

WASHINGTON NEWS: Ginnie Mae said that pools backed by the Federal Housing Administration’s temporary high-balance loans will be ready for issuance on April 1.

LOAN OFFICER SURVEY NOTICE: National Mortgage News has launched its new 2008 Loan Officer Survey. To participate (it’s free) just visit http://data.nationalmortgagenews.com/surveys/losurvey.

MUST-ATTEND MORTGAGE MEETINGS: SourceMedia will hold its second annual Mortgage Servicing Conference at the Westin Park Hotel in Dallas on April 17 and 18. The keynote speaker is Paul Bennett, chief economist for the New York Stock Exchange. For more information visit http://www.sourcemediaconferences.com/MS08.

MORTGAGE BANKER/BROKER SURVEY NOTICE: National Mortgage News is in the process of surveying residential and commercial lenders, servicers, and loan brokers for its annual Mortgage Industry Directory. To participate in the survey (1,000 industry movers and shakers see the book) send an e-mail to: [email protected]