Yesterday Bloomberg reported that BofA is getting out of its correspondent mortgage business. That business, if you need a little refresher, works as follows:
1. Bank of a Horrible Small Town originates a mortgage
2. BoaHST sells mortgage to BofA, repping that there’s nothing wrong with it
3. BofA sells mortgage to securitization/GSE, also repping that there’s nothing wrong with it
4. There’s something wrong with it!
5. Investors/GSE sue BofA on the reps
6. BofA tries to sue BoaHST but it’s gone out of business/gone to jail/been replaced by tumbleweed
7. BofA is sad/broke
So you could see why that would be unattractive.
Sadly, you know what might be even less attractive? Originating mortgages yourself, if you are BofA – Bloomberg notes that 27% of BofA’s outstanding rep/warranty claims are from correspondent lending, but 54% of new originations are from correspondents. That’s not apples to apples (no one knows how the current vintage will turn out) but also not encouraging work by BofA’s retail channels.
Meanwhile, in another part of town, Goldman today closed on its sale of Litton Loan Servicing, which it bought to extend its tentacles into servicing so that it could better trade mortgage securities. And then sold when that turned out to be a bit more trouble than it was worth.
You would think that only so much could go wrong with a servicing business, which doesn’t really have significant credit exposure to the underlying loans. You would be wrong. In order to be allowed to get rid of Litton, Goldman had to agree to consent orders with the Fed and New York regulators acknowledging robo-signing problems, promising not to do it again, and leaving open potential monetary penalties. And this:
If Goldman Sachs re-enters the mortgage servicing business while the action is in effect, it will be required to implement enhanced corporate governance, risk-management, compliance, borrower communication, servicing and foreclosure practices comparable to what the 14 mortgage servicers are implementing.
Somehow it does not feel like Goldman is anxious to re-enter the mortgage servicing business.
"which it bought to extend its tentacles into servicing"
I see what you did there.
I like this guy's style.
Oh Golem, you so cray cray!
8. ???
9. Profit!
that 7 point item list is the most analytical thing I've seen you do. Keep up the good work.
Sorry, Matt, but I take umbrage at your use of 'horrible' to describe the small town…..It shold be "1. Horrible bank of a Small Town originates a mortgage" Only good qualities represent the people of Main Street.
-Guy from a small town who now lives in a big city, but still fondly remembers his small town roots
8. Buy Country Wide Financial to reap what Angelo Mozilo has sowed
9. Don't Profit!
Yeah, haha.. that was great. Matt, why don't you take a little walk with me down that alley over there? Just a quick little shortcut…
-LB
Bullshit.
-guy who once had to spend a night in Jackman, ME
You got that right!
-Sinclair Lewis
8. Have Warren bail you out.
You're like my youngest grandson….you don't think things through.
I'm having trouble understanding why people think Warren "bailed out" BoAW. He's getting an above market interest rate, has huge warrant coverage in the event there is upside, and has put himself in a preferential position relative to common equity in the event of a failure / forced reorg.
9. Sell the rest of BofA to me for the change I found in my couch this morning
-WB
Great piece.
8. Find another asset that could be sold at firesale prices
9. Fire a few more thousands of those high paid banker types
10. Once talen (wgatever was left of it) is completely drained, start rehiring the same talent paying 2x for it
11. Fuck people out of bonuses
12. Promote medeocraty
13. Make another dumb acquisition
14. Have US bail your ass out
15. Profit
by your grammar i can see that step #12 is succeeding
How about just not letting your drunk CEO buy shitty businesses from little orange men?
I'm really hoping the 'Bank of a Horrible Small Town' tag gets well used from now on.
Now a list for you:
1. Learn to spell "talent" and "mediocrity" and "whatever"
2. Realize that was time poorly spent since you are a waste of limited resources and should cease your miserable existence; subsequently go through with ceasing your existence
That was solid IMO.
I'm not an expert at preferreds, but I believe B of A preferreds currently have a market yield higher than the 6% Warren is getting, thus making his preferred below market. Please correct me if I'm wrong.
they should extend their testicles into servicing instead
biggest asshole in the universe
thinning the drunken overpaid herd