Does Bank of American big man Ken Lewis know what he’s getting into with Countrywide? The recent news tying former Fannie Mae chief executives to sweetheart loans from Countrywide may result in the home lender getting cut off from the GSE gravy train. At the very least, Countrywide’s share of Fannie Mae’s dollars for mortgages exchange program is sure to decline.
But it’s not just Countrywide’s revenues that are in trouble. It’s piling up declining real estate assets as borrowers default. “As the deal moves ever closer, the number of homes that Countrywide owns in Florida has now climbed above 1,600 and the prices, despite being slashed repeatedly, continue to fall,” Michelle Leder writes at Footnoted.org.
More examples of Countrywide’s multiplier effect… [Footnoted]
mortgages
You know what’s something that used to be considered gauche but is now de rigueur with the Hamptons set so you know it’s cool? Not paying your mortgage. Apparently a bunch of Hamptons residents have been neglecting to send their checks to Angelo Mozilo’s PO Box these last couple months, former UBS executives included, which sounds about right. Erstwhile UBS employee Marc Warren is among the 120 homeowners who’ve had preliminary foreclosure actions (lis pendens proceedings) taken against them for loans exceeding $1 million. And they may soon be in even better company, if no one’s in a buying mood—Concoran broker Susan Breitenbach says she’s been called by dozens of Bear Stearns employees “desperate to unload their East End homes.” Hopefully they’ll be able to do so, and not join the growing number of EE homes (ten to date) that’ve been foreclosed outright since January. Which brings us to today’s reader poll– who’s the (former) deadbeat owner of this $15 million Westhampton home, pictured above? The Post doesn’t say, but we have faith the DealBreaker brain trust can figure it out.
Related: Trader Made Billions on Subprime
Trouble In LI Paradise [NYP]
Obviously all the homeowners who read DealBreaker bought their pads in cash, but for the one or two of you with mortgages, listen up: make those payments. And we don’t say this because we care about you losing your house or because we’re worried about more securitized mortgage products defaulting, but because if you don’t the government’s going to come poking around and when they do they’re going to find the grow house you set up and you will go to prison. Period. End of sentence. (On the plus side, you’ll no longer have to go into the office every day with the gripping fear you’re about to get laid off, but you’ll also be robbing yourself of the chance to be one of the lucky recipients of a visit from The Cheeseteak Fairy, who does not make house calls.)
Foreclosed Home Becomes Marijuana Farm [USNews]
That’s what David Gaffen implies when on the Market Beat today.
And herein lies the peril of mark-to-market accounting. The company says “difficult market conditions that have resulted in a significant deterioration of prices of mortgage-backed collateral.” Market strategists have pointed out often that the assets in question being held — in Thornburg’s case, adjustable-rate mortgages with high credit ratings — are being priced at levels that reflect the expectation of a higher rate of defaults than most expect.
Thornburg CEO Larry Goldstone signs on with this view in its release, saying “the mortgage financing market’s complete inability to differentiate and appropriately value superior AAA-/AA-rated mortgage securities from all other mortgage assets is as unprecedented as it is frustrating,” said Mr. Goldstone. “Quite simply, the panic that has gripped the mortgage financing market is irrational and has no basis in investment reality.”
We understand why Thornburg’s believes that his company is a victim of a panic but we’re not ready to sign off on that analysis. We doubt Goldstone regarded the markets as irrational when Thornburg was flying high and real-estate values climbing. Irrational markets are like rogue traders: people only notice them when they’re losing money.
Market Remains Irrational Longer than Thornburg Remains Solvent [Wall Street Journal]
We like to end every week with a special gift for our readers: we’re finding you a new job. So we spent part of the afternoon combing through our Career Center in search of the most interesting jobs. There are dozens to choose from, all categorized according to specialization. But one special one has been selected as our Job of The Week. Sadly, on Friday we had technical difficulties that prevented us from posting a job for you. But we’re back now, and so is the Job of the (last) Week.
Citco is seeking several hedge fund accountants and operations specialists with strong mortgage knowledge and experience at all levels to help them service new mortgage funds and hedge fund clients. Party like it’s 2005 all over again!
Mortgage! Mortgage! Mortgage! [DealBreaker Career Center]
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