Friday, August 17, 2007

Trendwatch: KKR Moving in on Hedge Funds

While we're waiting for the capital to swoop in and pick up cheap servicing, KKR is moving in on other parts of the market. Here's the story from Businesswire.

I've been reading FierceFinance and enjoying their take on the situation. Here's what they have to say about this story.

Wednesday, August 15, 2007

Trendwatch: Watching for Vultures

Like everyone else, I find myself watching the news to see which lender or hedge fund is going to bite the dust next. Very proud to see Thornburg fighting back against all odds. That's a company that deserves to survive, IMHO.

But even more interesting to me is who will come in when the dust settles (or just before) and snap up all the cheap servicing rights. I just had a conversation with a mortgage industry consultant who told me that scratched and dented loans are going for about 50 cents on the dollar right now.

"With delinquency and default approaching 13%, we're looking at 87% of the pool a money-making proposition," he said. "Someone is going to make a lot of money."

I suppose that's true, but it won't be as easy as it sounds. It all comes back to loss severity, which is a real threat in markets where properties are no longer appreciating. Even so, someone is going to come in and snap that stuff up. I'll be very interested to see who it is and how they proceed.

Tuesday, August 07, 2007

Trendwatch: Analysts must feel like gods

For all the yelling about who got greedy and who didn't regulate who well enough and who should have seen it all coming, at the end of the day this business continues to be operated in a manner designed to make investors feel happy.

It may not have been that way when a loan committee sat down at the table in the community S&L to decide whether to give farmer Peterson a new home equity second to cover the cost of next years feed and seed, but as soon as you started bundling up pools of loans into securities and selling them (along with publicly-traded shares of company stock) off to folks who don't know a mortgage loan from a sandy loam it became about meeting investor expectations. And if there's one thing investors expect, it's not to be afraid they might lose their money.

That makes it easy for guys in suits who spit out terms like credit shock and liquidity crisis to suck nearly 9% of the equity out of a publicly-traded company in one day. Some executive teams have to work all year to lose that much money. Not to mention the fact that some lenders haven't been impacted by credit shocks or suffered from liquidity problems yet. Never mind. It could happen. Believe me, you don't want to be the only analyst that wasn't shouting a warning from the rooftops if it all goes to hell.

Of course, if you're an investor it's your job to listen to analysts and take action on what they say just a little faster than the next guy. You don't have time to figure out the difference between subprime and Alt-A or Jumbo. Nonconforming says it all. That's why investors in American Home were able to abandon the company completely before defaults or delinquency had even made a noticeable dent, taking away 7000 jobs in less than a week.

I know that lenders will ultimately be blamed for the mortgage meltdown, but in the meantime, it must be a heady experience being an analyst.

Wednesday, August 01, 2007

Mortgage Cadence: Orchestrator interfaces to CBCInnovus

Mortgage Cadence, Denver, has added an interface to the consumer credit and flood determination services of Ohio-based CBCInnovus. An automated interface has been built into the company's Orchestrator™ lending platform that will allow users to leverage the ACE business rules engine to automatically determine which products are required for each deal.

The credit reporting and related services provided by CBCInnovis include Single Bureau, Dual-Merge and Tri-Merge Credit Reports; Authentication Cross Check Report; Electronic Trade-Line Updates; Mailed Score Disclosure Service; as well as Residential Mortgage Credit
Report (RMCR).

CBCInnovis provides Lenders a single source for flood zone determinations on residential and commercial properties nationwide to verify the need for flood insurance.