{"id":187283,"date":"2010-01-16T07:41:20","date_gmt":"2010-01-16T12:41:20","guid":{"rendered":"http:\/\/mortgagenewsclips.com\/2010\/01\/16\/the-garrett-watts-report-jan-15-2010\/"},"modified":"2010-01-16T07:41:20","modified_gmt":"2010-01-16T12:41:20","slug":"the-garrett-watts-report-jan-15-2010","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/187283","title":{"rendered":"The Garrett, Watts Report (Jan. 15, 2010)"},"content":{"rendered":"<p>\u00a0<\/p>\n<p><a href=\"http:\/\/garrettwatts.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-watts14.png\" border=\"0\" alt=\"garrett-watts1\" width=\"384\" height=\"83\" \/><\/a><\/p>\n<p>\u00a0<\/p>\n<p>To Our Clients, Colleagues and Friends,<em>\u00a0<\/em><\/p>\n<ul>\n<li>Are mortgage bankers getting smarter about compensation? We\u2019re finally seeing some pushback on the outrageous commission splits we used to see, and 90-10 splits seem to be going the way of the dinosaur.\u00a0 We\u2019re also seeing salaries in general adjusting downward compared to 2005-06.<\/li>\n<li>Four years ago, we saw Ops managers at $150,000 a year.\u00a0 We saw that drop to $90,000 as the mortgage world started collapsing in 2007 and then watched it fall even lower in 2008.\u00a0 It\u2019s coming back, but it\u2019s still a long way from the peak a few years ago.<\/li>\n<li>A hero has died, Miep Gies passing away last week at age 100.\u00a0\u00a0 She was the woman who hid Anne Frank and her family in her Amsterdam apartment during the Nazi occupation.\u00a0 If we could name some sort of award to people who act who display great courage, we\u2019d call it the Miep Gies Award.<\/li>\n<li>With Mark McGwire admitting the obvious about his steroid use, it\u2019s time to remember the true record holder for the most home runs in one season.\u00a0 Roger Maris hit 61 home runs in 1961, passing Babe Ruth by one. Yes, we know he played in a longer season, but the asterisk next to his record is long gone.\u00a0 The movie about him (*61)\u00a0 is worth renting.<\/li>\n<\/ul>\n<p>\u00a0 <a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/01\/j1.png\"><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_thumb.png\" border=\"0\" alt=\"j1\" width=\"505\" height=\"202\" \/><\/a><\/p>\n<p>The middle photo of McGwire was when he was right out of college, and we remember him vividly as a tall, lanky, <em>scrawny<\/em> 1<sup>st<\/sup> baseman for the Oakland A\u2019s.\u00a0 The third photo is when scrawny Mark started doing his Arnold Schwarzenegger imitation.\u00a0 At least Arnold admitted his steroid use from the start.<\/p>\n<ul>\n<li>We got a few e-mails about our thumbs down on <em>Up in the Air<\/em>, and watching George Clooney travel from city to city made us think of Willie Loman.\u00a0 How can you be in the housing finance business and <em>not<\/em> think about <em>Death of a<\/em> <em>Salesman?<\/em>\u00a0 Willie Loman\u2019s last act before taking his life was making the final payment on his mortgage, and the man who spent a lifetime in search of the American Dream finally achieved a piece of that dream by owning his home free and clear.\u00a0 In fact, his wife\u2019s last words at the gravesite were \u201cWillie, why did you do it?\u00a0 We\u2019re free and clear, Willie, free and clear.\u201d A few parts of the play feel dated (it was written 61 years ago) but it\u2019s still a timeless piece of literature.\u00a0 And isn\u2019t it interesting that paying off one\u2019s mortgage was once such a big party of the American Dream?<\/li>\n<li>We hate to be cynical, but sometimes we think people view the American Dream as getting a cash-out refinance at 4.5%.<\/li>\n<\/ul>\n<ul>\n<li>Look up the performance of AmeriCredit\u2019s <em>sub-prime<\/em> <em>auto loan<\/em> portfolio.\u00a0 Their 30 day delinquencies were 9.3% in December and their 61+ day lates were only 3.09%.\u00a0 That looks pretty good compared to <em>subprime<\/em> <em>mortgages<\/em>, doesn\u2019t it?\u00a0 Wouldn\u2019t you think subprime auto loans would be a <em>bigger<\/em> disaster than subprime residential? But think about all the gardeners and contractors who depend on their Toyota pick-ups to carry their tools when they go to work.\u00a0 The theory is that you can always sleep in your truck, but you can\u2019t drive your house to work.<\/li>\n<li>Although it was filmed fifty years ago, <em>Splendor in the Grass<\/em> may still be the most poignant story of young love ever made. Here\u2019s the final segment of that movie, and if you haven\u2019t seen it, this just might inspire you to rent the movie:\u00a0 <a href=\"http:\/\/www.youtube.com\/watch?v=ylal5gfj_kY&amp;feature=related\">http:\/\/www.youtube.com\/watch?v=ylal5gfj_kY&amp;feature=related<\/a>.\u00a0 Watch it with your wife or husband or date.\u00a0 Shocking as it might sounds, you could even take your spouse <em>as<\/em>your date.<\/li>\n<li>We meet a lot of bank Presidents, and they always impress the heck out of us. When things are going well, it\u2019s the most fun job in the world, but in tough times like these, it\u2019s probably the toughest job in the world.\u00a0 If we really did get to pass out <em>Miep Gies Awards<\/em> for sheer courage, we\u2019d give them to all the bank Presidents we know.<\/li>\n<li>We\u2019ve done a fair amount of Due Diligence for banks acquiring mortgage banking companies lately, and if you\u2019re a bank which is thinking about buying one, check out page nine of the January 15<sup>th<\/sup> <em>American<\/em> <em>Banker<\/em>.\u00a0 They ran an article we wrote on the things banks must look at prior to an acquisition.\u00a0 One example is that lots of banks want to project earnings once their capital allows the mortgage company to really grow its volume.\u00a0 That\u2019s fine, but we like to show the acquiring bank what things will look like if margins drop by 30% and volume drops by 50%.<\/li>\n<li>We\u2019ve said it many, many times, but we still think most of the regulators\u2019 criticism of brokered deposits is misplaced.\u00a0 They seem to think that brokered deposits cause management to make bad loans, but it\u2019s really the opposite.\u00a0 Banks that make bad loans tend to use brokered deposits. The bad loans come <em>first<\/em>. And let\u2019s remember that correlation is not causation.\u00a0 Crack down on bad loans, not brokered deposits.<\/li>\n<li>Speaking of banks, we were just at NexBank in Dallas , and our hotel was in nearby Frisco.\u00a0 If you\u2019re from San Francisco , that will make you laugh because we consider it really bad form to call our fair city Frisco. San Francisco has had a long tradition of eccentrics, and one of the biggest was Joshua A. Norton.\u00a0 He made a fortune in the Gold Rush but lost it all through speculation, and when he lost his money, he also lost his mind. He declared himself <em>Norton I, Emperor of the United States and Protector of Mexico<\/em> , wore a Royal uniform, and made various declarations. One was that he declared it illegal to refer to San Francisco as Frisco, and he wandered the streets handing out citations to people who referred to it is as such.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/01\/j13.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_thumb3.jpg\" border=\"0\" alt=\"j1\" width=\"146\" height=\"244\" \/><\/a><br \/>\n<a href=\"http:\/\/www.scribd.com\/doc\/25302413\/Emperor-Norton\">He convinced the papers to print his various declarations, a list of which is attached.<\/a> While everyone knew he was crazy, people loved him.\u00a0 Restaurants gave him free meals, hotels gave him free rooms, and when he died, 10,000 San Franciscans turned out for his funeral.\u00a0<\/li>\n<li>We have a ton of coffee mugs given us by banks we\u2019ve done work for, and here are a few comments:\u00a0 We normally don\u2019t like light lettering on dark backgrounds, but the <em>Liberty Bank<\/em> mug is okay,\u00a0 The lettering is big enough to make it work. We love the look and feel of <em>Farmers National Bank<\/em> (\u201ccelebrating 100 years\u201d), but the gold lettering doesn\u2019t stand our enough.\u00a0 <em>First Security Bank<\/em> has bold lettering that jumps out at you.\u00a0 Nice.\u00a0 The <em>Goldman Sachs<\/em> one is boring, and we\u2019re surprised they even have them.\u00a0 We love <em>Alta Alliance Bank<\/em> and think the world of their management, but guys, the gold lettering on the green cup is almost invisible.\u00a0 Our favorite is the <em>Golf Savings<\/em> mug.\u00a0 We like the shape, the size, and the clarity of the name. We realize that how your coffee mug looks isn\u2019t quite as important as your CAMELS rating, but hey, it\u2019s a lot easier to your coffee mugs look cool than to get your CAMELS rating down to a two<em>. <\/em><\/li>\n<li>Can you believe we write about bank coffee mugs? Or even think about them?<\/li>\n<li>Are you really bored? We have an idea for you.\u00a0 Collect coffee mugs and giveaways from banks and thrifts that no longer exist. Great Western, Home Savings, American Savings, Homeowners, Dime, Imperial, Gibraltar , State Savings, Lincoln, Citizens.\u00a0 You could display them on a website, and in the background, you\u2019d have someone singing <em>Where have all the flowers<\/em> <em>gone<\/em>, but you\u2019d change it to <em>Where have all the S&amp;L\u2019s gone\u2026.<\/em><\/li>\n<li>Wouldn\u2019t you agree that mortgage banking is a commodity business?\u00a0 Everyone does the same types of loans (GSE and FHA), everyone sells to the same investors (BofA, Chase, Wells, and directly or indirectly, FNMA and Freddie Mac), and everyone uses the same underwriting standards.\u00a0 Why, then, is there such a disparity in profitability.\u00a0 We see top performers making 100+ bps per loan, and we see companies struggling to make 10 bps. Why? There\u2019s no Secret Sauce, so why?<br \/>\nIn the past year, the\u00a0 biggest cause of under-performance we\u2019ve seen has been leakage.\u00a0 If you build in a profit of, say, 125 bps on a loan, you should be realizing 125 bps. The most profitable companies have almost no leakage.\u00a0 The strugglers always do.<br \/>\nTake <em>Bill &amp; Ted\u2019s Excellent Mortgage Company<\/em> and let\u2019s compare it to <em>Bob &amp; Tom\u2019s Horrible Mortgage Company<\/em>.\u00a0 Both are in the same city . Both are retail originators.\u00a0 Both pay the same commissions. Both originate FHA loans.\u00a0 Both sell their loans to BofA and Wells.\u00a0 Both use DataTrac.\u00a0 Both use Optimal Blue as a pricing engine.\u00a0 Both build in the same profit margin.\u00a0 But Bill and Ted net 120 bps on each loan and Bob &amp; Tom net 20 bps.\u00a0 We see this all the time, and the reason for the disparity in profitability is leakage.\u00a0 The Horrible Mortgage Co. is just not realizing on their loan sales the margin they built in. There are a finite number of reasons for this leakage, and we don\u2019t have room to go into them here.\u00a0 But if there\u2019s one thing you should look at if you\u2019re uncertain why you\u2019re not doing better, look at the gain-on-sale you build in and compare it to the gain-on-sale you actually realize.<br \/>\nMaybe there needs to be a Leakers Anonymous.\u00a0 \u201cHi, my name is Bob and I suffer from leakage.\u201d\u00a0\u00a0 Actually, the good news is that you don\u2019t need 12 steps to get better.\u00a0 But you do need to see what your numbers are. Once you do that, the rest is pretty straightforward.<\/li>\n<\/ul>\n<p>Richard Nixon\u2019s 97<sup>th<\/sup> birthday just came and went with nobody noticing, and won\u2019t it be interesting to see how history views him 50 years from now?\u00a0 If Martin Luther King were alive today,\u00a0 he\u2019d be 81, and it seems that with every passing year, his message of love and tolerance looms ever larger.<\/p>\n<p><a href=\"http:\/\/garrettwatts.com\/\">Garrett, Watts &amp; Co.<\/a><\/p>\n<p><em>\u201cHelping<\/em><em> <\/em><em>mortgage 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=XNE6VveyfZE:_3OEmT6ioqI: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=XNE6VveyfZE:_3OEmT6ioqI:D7DqB2pKExk\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=XNE6VveyfZE:_3OEmT6ioqI:D7DqB2pKExk\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=XNE6VveyfZE:_3OEmT6ioqI:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=XNE6VveyfZE:_3OEmT6ioqI:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=XNE6VveyfZE:_3OEmT6ioqI:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=XNE6VveyfZE:_3OEmT6ioqI:V_sGLiPBpWU\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/mortgagenewsclips\/qTBe\/~4\/XNE6VveyfZE\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0 \u00a0 To Our Clients, Colleagues and Friends,\u00a0 Are mortgage bankers getting smarter about compensation? We\u2019re finally seeing some pushback on the outrageous commission splits we used to see, and 90-10 splits seem to be going the way of the dinosaur.\u00a0 We\u2019re also seeing salaries in general adjusting downward compared to 2005-06. Four years ago, [&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-187283","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/187283","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=187283"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/187283\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=187283"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=187283"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=187283"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}