January 2, 2009
By Paul Muolo
Capitalism is a wild and wacky game. And it’s not for those with weak guts, which brings me to the case of IndyMac whose long awaited sale was announced by the Federal Deposit Insurance Corp. Friday afternoon. The new “owners” of IndyMac are essentially a bunch of hedge funds that are well known for some of their contrarian bets in financial services. First and foremost among those private hedge funds is Paulson & Co., led by hedge fund guru John Paulson, who made a killing (a $15 billion killing) by shorting the ABX Index back in 2007 and early 2008. The ABX gauges the value of subprime bonds and we all know what happened there, don’t we? For some reason the FDIC didn’t mention Mr. Paulson’s $15 billion winning bet against the B&C market in its press release. The FDIC’s original investment banker on the sale of IndyMac was Lehman Brothers, which went bust a few months after getting the assignment. The advisor to the consortium? That would be Merrill Lynch & Co., which helped cause the subprime crisis by financing dozens of subprime lenders, buying their loans and packaging them into securities (CDOs) for sale to institutional investors in the U.S. and overseas. (Lehman did that too.) Like I said, capitalism is a wild and wacky game. But who knows any more, really? If John Paulson is putting his reputation (and a little bit of his money) on the line, maybe this actually signals a “bottom” in the mortgage and credit crisis. For the full story on the sale of IndyMac visit: http://www.nationalmortgagenews.com/…
How’s the refi boom looking these days? Answer: it depends on who you ask. On Friday I interviewed Brian F. Benjamin who runs Two River Mortgage & Investment of Red Bank, N.J. Last week, Brian said he received 15 calls for jumbo mortgages where the loan amount was north of $1.5 million. But of those 15 it looks like he will only be able to close two loans. Brian, who operates as a broker, said many lenders have tightened jumbo guidelines by so much that borrowers don’t have a chance. “Some will only do the loans if the LTV is 50% or better,” he said. He also complained about Fannie Mae “adders” where the GSE charges extra points and fees for low FICO score mortgages. He gave an example on a $275,000 mortgage where the borrower has a 659 FICO. The total “adders” (fees) came to 2.55 points. I asked him if the fees were going to the lender or Fannie. His reply: “It’s going to Fannie one way or the other — directly or indirectly,” he said. Meanwhile, one rank and file retail LO for a top ten ranked lender — who requested his name not be used — told us he’s getting “lots of calls” on refinancings via the company’s 800-number. But it’s not a slam dunk by any means. The biggest problem with the applicants who are looking to refinance is “not enough equity,” he said, “or poor credit.” Stay tuned…
