{"id":170897,"date":"2010-01-12T15:17:59","date_gmt":"2010-01-12T20:17:59","guid":{"rendered":"http:\/\/mortgagenewsclips.com\/2010\/01\/12\/the-garrett-watts-report-january-12-2010\/"},"modified":"2010-01-12T15:17:59","modified_gmt":"2010-01-12T20:17:59","slug":"the-garrett-watts-report-january-12-2010","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/170897","title":{"rendered":"The Garrett, Watts Report (January 12, 2010)"},"content":{"rendered":"<p><a href=\"http:\/\/garettwatts.com\/\"><img loading=\"lazy\" decoding=\"async\" style=\"border-bottom: 0px; border-left: 0px; border-top: 0px; border-right: 0px\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/01\/garrett-watts13.png\" border=\"0\" alt=\"garrett-watts1\" width=\"371\" height=\"80\" \/><\/a><\/p>\n<p>To Our Clients, Colleagues and Friends,<em> <\/em><\/p>\n<ul>\n<li>You know how the Fed has been buying up so many Fannie, Freddie and Ginnie Mae MBS?\u00a0 We read that last year the Fed made up something like 83% of all purchases of all such purchases. We can\u2019t find the article, and it may have been 73%, but either way, it\u2019s a big number. It will be interesting to see what happens as they stop buying.\u00a0 The conventional wisdom is that it will cause rates to go up, but the conventional wisdom isn\u2019t always right.<\/li>\n<li>And while we\u2019re talking about mortgages, we all know what an MBS is, right?\u00a0 It\u2019s a mortgage backed security, <em>singular<\/em>.\u00a0 So when you\u2019re talking about a bunch of them, <em>plural<\/em>, do you call it \u201ca bunch of <span style=\"text-decoration: underline;\">MBS<\/span>\u201d or is it \u201ca bunch of <span style=\"text-decoration: underline;\">MBS\u2019s<\/span>\u201d or, maybe <span style=\"text-decoration: underline;\">MBSs<\/span> without the apostrophe?\u00a0 Do you pronounce the plural of MBS like Em-bee-ess-iz or is it more properly Em-bee-ess-uh-zuz?\u00a0 Would someone please call Lew Ranieri and ask him?<\/li>\n<li>We mentioned Elvis Presley last week, and we came across something interesting. Below is the famous photograph of Nixon and Elvis shaking hands in the White House, this meeting taking place as a result of a letter Elvis wrote the President.\u00a0 <a href=\"http:\/\/www.scribd.com\/doc\/25115930\/Elvis-to-Nixon-Letter\">The National Archives kept a copy of the letter, which we\u2019ve attached.<\/a> It paints a picture of Elvis as being somewhat strange, but it\u2019s also quite touching in a way.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/01\/j12.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-bottom: 0px; border-left: 0px; border-top: 0px; border-right: 0px\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/01\/j1_thumb2.jpg\" border=\"0\" alt=\"j1\" width=\"244\" height=\"187\" \/><\/a><br \/>\nThis photo is the property of the U.S. government, and it happens to be the one most requested item year after from the Archives. At the Richard Nixon Library and Museum, you can buy postcards with this photo. It\u2019s their top seller.<\/li>\n<li>By the way, if you\u2019re interested in U.S. history and politics, the Nixon Library is a great way to spend 3-4 hours.\u00a0 They hide none of the embarrassing stuff and display Watergate quite prominently. You\u2019ll learn that the EPA was Nixon\u2019s idea, that he proposed a health plan similar to Obama\u2019s, and when you listen to some of his secretly recorded office conversations,\u00a0 you\u2019ll hear him swear like a sailor.\u00a0 We even heard him say \u201cWe need to stick the IRS on those Jew ___ suckers. \u201c\u00a0 A favorite is a small auditorium where a holograph of the former President is projected onto the stage.\u00a0 You ask him certain pre-selected questions, and he answers them!\u00a0 You get the eerie sense that he\u2019s right there in the room with you, talking directly to you!<\/li>\n<li>How do you handle volatility?\u00a0\u00a0 From late 2007 to the 2009 lows, the Bank of America stock was down 94%.\u00a0 By year-end 2009, it was up 380%.<\/li>\n<li>Thumbs down for <em>Up in the Air.<\/em> George Clooney\u2019s character is empty, and while he has a certain charm, he has no friends, no family, no home, and no possessions.\u00a0 His acting is what we\u2019ve come to expect from him, and while there are a few light moments, the overall theme is depressing.<\/li>\n<li>We just read about call centers that pay their employees by the minute, but only for the time the person\u2019s actually on the phone with customers. The one we read about pays $0.25 a minute, meaning that the most a person could make if they talked every second of every minute of every hour would be $15 an hour.\u00a0 It\u2019s like the old days of piece work. It seems weird at first, but it actually seems to make sense.\u00a0 Sort of.<\/li>\n<li>Remember when Lomas &amp; Nettleton was the nation\u2019s biggest servicer with about $20 billion?\u00a0 Here are the top servicers today.<\/li>\n<\/ul>\n<table class=\"MsoTableGrid\" style=\"border-bottom-style: none; border-right-style: none; background-color: #ffff99; border-collapse: collapse; border-top-style: none; margin-left: 0.95in; border-left-style: none; -webkit-background-clip: initial; -webkit-background-origin: initial\" border=\"1\" cellspacing=\"0\" cellpadding=\"0\" bgcolor=\"#ffff99\">\n<tbody>\n<tr>\n<td style=\"padding-bottom: 0in; padding-left: 5.4pt; width: 2.25in; padding-right: 5.4pt; padding-top: 0in; border: windowtext 1pt solid;\" width=\"216\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">1.\u00a0 $2.1 trillion\u00a0\u00a0\u00a0\u00a0 BofA<\/span><\/span><\/p>\n<\/td>\n<td style=\"border-bottom: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 153pt; padding-right: 5.4pt; border-left-style: none; border-top: windowtext 1pt solid; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"204\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">6.\u00a0\u00a0 $181 billion\u00a0\u00a0 U.S. Bancorp<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 2.25in; padding-right: 5.4pt; border-top-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"216\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">2.\u00a0 $1.8 trillion\u00a0\u00a0\u00a0 Wells Fargo<\/span><\/span><\/p>\n<\/td>\n<td style=\"border-bottom: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 153pt; padding-right: 5.4pt; border-top-style: none; border-left-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"204\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">7.\u00a0\u00a0 $175 billion\u00a0\u00a0 Suntrust<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 2.25in; padding-right: 5.4pt; border-top-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"216\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">3.\u00a0 $1.4 trillion\u00a0\u00a0\u00a0 Chase<\/span><\/span><\/p>\n<\/td>\n<td style=\"border-bottom: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 153pt; padding-right: 5.4pt; border-top-style: none; border-left-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"204\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">8.\u00a0\u00a0 $172 billion\u00a0\u00a0 PNC<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 2.25in; padding-right: 5.4pt; border-top-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"216\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">4.\u00a0 $744 billion\u00a0\u00a0 Citi<\/span><\/span><\/p>\n<\/td>\n<td style=\"border-bottom: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 153pt; padding-right: 5.4pt; border-top-style: none; border-left-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"204\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">9.\u00a0\u00a0 $150 billion\u00a0\u00a0 PHH<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 2.25in; padding-right: 5.4pt; border-top-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"216\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">5.\u00a0 $380 billion\u00a0\u00a0 GMAC<\/span><\/span><\/p>\n<\/td>\n<td style=\"border-bottom: windowtext 1pt solid; padding-bottom: 0in; padding-left: 5.4pt; width: 153pt; padding-right: 5.4pt; border-top-style: none; border-left-style: none; border-right: windowtext 1pt solid; padding-top: 0in;\" width=\"204\" valign=\"top\">\n<p class=\"MsoNormal\" style=\"margin: 0in 0in 0pt; font-family: 'Times New Roman'; font-size: 12pt\"><span style=\"font-family: 'Comic Sans MS'; font-size: x-small;\"><span style=\"font-family: 'Comic Sans MS'; font-size: 10pt\" lang=\"EN\">10.\u00a0 $130 billion\u00a0 OneWest<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Number 10 OneWest is the new name for what used to be Indy Mac Bank.\u00a0 What kind of cash flow does $2 trillion throw off?\u00a0 Let\u2019s assume 35 bps of servicing income, and if our math is right, the servicing fee is about $7 billion a year or $580 million a month of gross revenue.<\/p>\n<ul>\n<li>Horizon Bank in Washington State with $1.3\u00a0 billion of assets has failed, and the FDIC estimates that the cost will be approximately 41% of stated assets.\u00a0 It seems like only yesterday when the Northwest banks were doing so well.\u00a0 About 30% of Horizon\u2019s portfolio was construction and land development, with another 34% in multi-family and commercial real estate.\u00a0 That 41% loss still seems shocking.<\/li>\n<li>You always read about how the key to real estate investing is to use OPM, or Other People\u2019s Money, and here\u2019s an interesting example: Tishman Speyer paid $5.4 billion for a huge apartment complex in New York ( Peter Cooper Village ), and it\u2019s now worth $1.8 billion.\u00a0 How much of that $3.6 billion loss did the Speyer family lose?\u00a0 They lost only $112 million, with the big losses being taken by their investors.\u00a0 This will knock your socks off, but one of their biggest investors in the deal was the Church of England.<\/li>\n<li>The Dornbusch Law (named, imaginatively, after the late MIT professor of economics, Rudi Dornbusch) states that \u201cIn financial markets, things always take longer to happen than you expect \u2013 but once they happen, events unfold more quickly than you\u2019d ever have imagined.\u201d\u00a0 Think back on the financial crisis of 2008-2009.\u00a0 Isn\u2019t this exactly how it unfolded?<\/li>\n<li>Heavyweight boxer Mike Tyson once said that \u201ceverybody has a plan until they\u2019re hit.\u201d An interesting statement and one worth thinking about when you\u2019re updating your strategic plan.\u00a0 The real message is to always have a Plan B.<\/li>\n<li>No one\u2019s going to ring a bell announcing that the refinance boom is over, but we were puzzled by the MBA refinance Index.\u00a0 It was 5,904 one year ago and this week it was 1,976.\u00a0 That\u2019s a 67% drop over the past twelve months. Should mortgage lenders be worried? We\u2019re not on the front lines with loan officers, but it sure seems like things could be cooling down, now or in the near future.<\/li>\n<li>We mentioned last week that two banks raised their dividends <em>twice<\/em> last year, and some of you wanted to know which.\u00a0 They were 1<sup>st<\/sup> Source (SRCE) and Hudson City (HCBK).\u00a0 Pretty amazing, to raise the dividend not once but twice in such a tough year.\u00a0 Some more on 1<sup>st<\/sup> Source:<\/li>\n<li>1<sup>st<\/sup> Source was founded in 1863 as First National Bank of South Bend ( Indiana ). It currently has 75 branches in Indiana and Michigan and $4.4 billion in assets.\u00a0 A few of their metrics aren\u2019t all that great: A 0.57% ROA, 4.1% ROE, 3.1% net interest margin, and an efficiency ratio of 68%.\u00a0 What has really stood out for them, however, is that only 2.9% of their loans are non-performing.\u00a0 Credit quality always pays off in the end. We like this bank.<\/li>\n<li>Okay, we\u2019ll go along with the idea that keeping GMAC alive is somehow in our national interest and worthy of federal bailout money.\u00a0 But when are they going to start getting things turned around there?\u00a0 It\u2019s hard to know how their auto-lending is doing, but Ally Bank will report a $1.3 billion loss and ResCap, not to be outdone, will report a $700 million loss.\u00a0 And finally, their international lending group didn\u2019t want to be left out, so it will report a loss of $1.3.\u00a0 These are apparently due to re-classifying loans from held-for-investment to held-for-sale, but whatever.\u00a0 GMAC and ResCap have brought in some great people like Steve Abreu, so maybe we\u2019ll start seeing a turnaround soon.<\/li>\n<li>We get asked from time to time if we do recruiting. We\u2019re not recruiters or head hunters, not by a long shot.\u00a0 However, we <em>have<\/em> done a number of select searches for clients, mostly in the areas of Secondary Marketing, Heads of Operations, and Finance.\u00a0\u00a0 Our fee, by the way, is about a third of the typical recruitment firm.<\/li>\n<\/ul>\n<ul>\n<li>Ladies, do you have one of those lower back tattoos? A study showed that if an epidural is pushed through the tattoo during child birth, there could be severe problems if the ink enters the spine. There may, however, now be a way to remove that tattoo someday: (<a href=\"http:\/\/www.hulu.com\/watch\/61336\/saturday-night-live-turlingtons-lower-back-tattoo-remover\">http:\/\/www.hulu.com\/watch\/61336\/saturday-night-live-turlingtons-lower-back-tattoo-remover<\/a>).\u00a0\u00a0\u00a0 Well, that\u2019s all for now.\u00a0\u00a0 See you next week sometime.<\/li>\n<\/ul>\n<p><a href=\"http:\/\/garrettwatts.com\/\">Garrett, Watts &amp; Co.<\/a><\/p>\n<p><em>\u201cHelping<\/em><em> lenders increase revenues, control costs, and better manage risk.\u201d<\/em><\/p>\n<p><strong><em> <\/em><\/strong><\/p>\n<p>Joe Garrett\u00a0\u00a0 (510-469-8633)<\/p>\n<p>Corky Watts\u00a0\u00a0 (408-395-5504)<br \/>\nMike McAuley\u00a0\u00a0\u00a0 (281-250-2536)<\/p>\n<div class=\"feedflare\">\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=k-IkTcCHrTg:Ff-JsbLCpd8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=k-IkTcCHrTg:Ff-JsbLCpd8:D7DqB2pKExk\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=k-IkTcCHrTg:Ff-JsbLCpd8:D7DqB2pKExk\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=k-IkTcCHrTg:Ff-JsbLCpd8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=k-IkTcCHrTg:Ff-JsbLCpd8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=k-IkTcCHrTg:Ff-JsbLCpd8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=k-IkTcCHrTg:Ff-JsbLCpd8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/mortgagenewsclips\/qTBe\/~4\/k-IkTcCHrTg\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>To Our Clients, Colleagues and Friends, You know how the Fed has been buying up so many Fannie, Freddie and Ginnie Mae MBS?\u00a0 We read that last year the Fed made up something like 83% of all purchases of all such purchases. We can\u2019t find the article, and it may have been 73%, but either [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-170897","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/170897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=170897"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/170897\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=170897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=170897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=170897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}