{"id":481682,"date":"2010-03-28T10:46:56","date_gmt":"2010-03-28T14:46:56","guid":{"rendered":"http:\/\/mortgagenewsclips.com\/2010\/03\/28\/the-garrett-watts-report-march-26-2010\/"},"modified":"2010-03-28T10:46:56","modified_gmt":"2010-03-28T14:46:56","slug":"the-garrett-watts-report-march-26-2010","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/481682","title":{"rendered":"The Garrett, Watts Report (March 26, 2010)"},"content":{"rendered":"<p>\u00a0<\/p>\n<p><a href=\"http:\/\/garrettwatts.com\/\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"garrettwatts\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/garrettwatts9.jpg\" border=\"0\" alt=\"garrettwatts\" width=\"440\" height=\"69\" \/><\/a><\/p>\n<p>\u00a0<\/p>\n<p>To Our Clients, Colleagues and Friends<strong>,\u00a0\u00a0 <\/strong><\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<ul>\n<li>Attached is a very interesting <a href=\"http:\/\/www.scribd.com\/doc\/29052822\/Liquidity-Start-Page-19\"><strong>Interagency Policy Statement on Funding and Liquidity Risk Management.<\/strong><\/a> Interagency means it\u2019s issued by the OTS, the OCC, the Federal Reserve, the FDIC, and the National Credit Union Administration.\u00a0 Skip all the boring stuff at the beginning and <strong>go right to page 19<\/strong>. Although the document is a \u201cguidance\u201d, it doesn\u2019t mean you might want to <em>maybe <\/em>think about it. We always took guidance to mean we\u2019d damn well <em>better<\/em> do it.\u00a0 Either that or get slammed in the next Safety &amp; Soundness Exam.<\/li>\n<li>We got a great suggestion regarding this photo.\u00a0 This contest is to come up with a thought bubble to be the caption for this photo.\u00a0 Come up with a good line for what Geithner is thinking, and we\u2019ll enter you into a sweepstakes, one in which the winner just might have Ed McMahon knocking on your door with a prize.\u00a0 By the way, is Ed McMahon even alive?<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j62.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j6\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j6_thumb2.jpg\" border=\"0\" alt=\"j6\" width=\"308\" height=\"216\" \/><\/a><br \/>\nAnd does anyone know what ever happened to Ed McMahon\u2019s home? A year or so ago he was being foreclosed on.<br \/>\n<em><\/em><\/li>\n<li>We ran a little item on the book <em>Elements of Style<\/em> last week, and we were really surprised at how many people wrote in about it. About 25-30 of you wrote us how much they loved the book.\u00a0 Same here.<\/li>\n<li>From an article in the <em>Rocky Mountain News<\/em>.\u00a0 \u201cFor customers, Wells Fargo would be able to attend to their business to the ends of the earth if required.\u201d\u00a0 That\u2019s from an 1866 issue of the paper.\u00a0 If you think about it, the Wells Fargo brand and reputation have been in the making for almost 150 years.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j54.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j5\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j5_thumb4.jpg\" border=\"0\" alt=\"j5\" width=\"242\" height=\"292\" \/><\/a><br \/>\nIt\u2019s kind of faint, but the sign on the top of the building says Wells Fargo &amp; Co.<\/li>\n<li>By the way, isn\u2019t there an argument to be made that Wells Fargo no longer exists? Legally, Norwest bought Wells but then kept the name.\u00a0 Does it even matter?<\/li>\n<li>One of the items that resonated during the final weeks of the fight over Health Reform was when Anthem Blue Cross raised their premiums by 39%.\u00a0 Great timing there, Blue Cross.\u00a0 In the history of corporate public relations, has there ever been worse timing?<\/li>\n<li>Many of you remember Lauren McSorley from her days at WAMU\u2019s warehouse lending group, and Lauren wrote us that \u201cI am raising my daughter Madden (19 months old now) and I\u2019m 7 months pregnant with baby girl #2!!!\u201d\u00a0 She adds that \u201cI have never had a job that required more patience on a daily basis but I love every second of it.\u201d\u00a0 Hmmm.\u00a0 We don\u2019t recall her ever being that enthusiastic about the warehouse lending business!<\/li>\n<li>We must have been bored, but we actually read the annual report on the <em>Schwab Cash Reserves<\/em> money market fund.\u00a0 Lots of their holdings were recognizable (Federal Home Loan Bank, Deutsche Bank, Chase, etc.) but there was a lot of stuff with names like Falcon Asset Securitization Corp., Starbird Funding Corp., and Tulip Funding.\u00a0 We\u2019re sure they\u2019re fine, but remember how mortgage securities would get generic, meaningless names like these?\u00a0 Maybe we\u2019ll call them and ask.\u00a0 By the way, this $31 billion fund is yielding 0.07% (as in seven bps), after Schwab pays itself 47 bps.<\/li>\n<li>In 2004, Iranian President Rafsanjani bragged that an Iranian nuclear attack on Israel would kill 5 million Jews. He estimated that if Israel retaliated with nuclear weapons, Iran would lose 15 million people, and he went on to say that this would be a small \u201csacrifice.\u201d\u00a0 Even if a nuclear Iran doesn\u2019t bomb Israel , it would alter everything by their simply and repeatedly threatening to launch a nuclear attack.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\nAnd isn\u2019t he referred to as a <em>moderate<\/em> Iranian?\u00a0 What\u2019s wrong with the leadership there?\u00a0 Under the Shah, Iran had very good relations with Israel .<\/li>\n<\/ul>\n<ul>\n<li>San Francisco mayor Gavin Newsom pushed through a law a few years back to encourage taxi cabs into using hybrid engines or other less-polluting fuel.\u00a0 We just read that 57% of all cabs in the City by the Bay are now green.\u00a0 Very cool.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j46.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j4\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j4_thumb6.jpg\" border=\"0\" alt=\"j4\" width=\"221\" height=\"221\" \/><\/a><br \/>\nAnd doesn\u2019t our Mayor have the kind of hair even Mitt Romney would be jealous of?<\/li>\n<li>A year or two ago, 90% of our FOCIS-<em>plus<\/em> Reviews were for mortgage companies or their Warehouse Lenders. Interestingly, it\u2019s about 50-50 now between those two v. banks and thrifts that have mortgage banking operations.<\/li>\n<li><strong><strong>The Temporary Liquidity Guarantee Program (TLGP) turned out to be pretty huge. Under TLGP, the FDIC insures <\/strong><\/strong>non-interest-bearing accounts above the $250,000 limit.\u00a0 We just read in the <em>FDIC Quarterly<\/em> that this program has brought in $834 billion in non-interest-bearing transaction accounts. Banks can make a lot of money when given deposits for which they pay zero interest.<strong><br \/>\n<\/strong><\/li>\n<li>We\u2019re in Seattle 15-20 times a year, but we practically never cross the lake over to Bellevue . We were there last week, and hey, when did all those big buildings go up? It seems like only yesterday none of them were there.<\/li>\n<li>There\u2018s some talk about doubling the number of teams in the NCAA basketball play- offs, and does that really make sense? There are 347 NCAA Division 1 teams and if they go from inviting 64 teams up to 128, it would mean that 37% of all teams would go.\u00a0 Wouldn\u2019t that make it all kind of meaningless?<br \/>\n<strong><\/strong><\/li>\n<li><a href=\"http:\/\/www.fdic.gov\/bank\/analytical\/banking\/2006mar\/article2\/index.html\">Here\u2019s a very interesting research article titled \u201cTroubled Banks: Why Don&#8217;t They All Fail?<\/a>\u00a0<a href=\"http:\/\/www.fdic.gov\/bank\/analytical\/banking\/2006mar\/article2\/index.html#*#*\"><\/a>\u00a0 Skip all the statistical mumbo jumbo (\u201cPredictions of Unordered Multistate and Bivariate Models\u201d, whatever the heck that means) and go right to the graphs at the end. It\u2019s easy to assume that most CAMELS 4 &amp; 5 banks will fail, but there are some interesting events that can occur among these troubled banks that correlate with <em>non<\/em>-failure.<\/li>\n<li>Now that no one trusts airlines with their luggage, it takes forever when people try to board the plane and try jamming their suitcases into the overhead bins.\u00a0 We have a solution!! The people without carry-ons get on and off first!\u00a0 Simple, brilliant, elegant. This should speed things up a ton. We think this is so brilliant that we just might nominate ourselves for a Nobel Prize of some sort.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j36.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j3\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j3_thumb6.jpg\" border=\"0\" alt=\"j3\" width=\"334\" height=\"173\" \/><\/a><\/li>\n<li>Have you ever wondered how much Hollywood spends on those scenes where about ten cars get smashed up in a chase scene?\u00a0 Well, we\u2019ll tell you. The first SBA loan we did at Sequoia National Bank 10 years ago was to San Francisco \u2019s 2<sup>nd<\/sup> or 3<sup>rd<\/sup>biggest taxi cab company, and they told us what they did with cabs that got too old to operate.\u00a0 They\u2019d sell them to movie companies for $25 each where they\u2019d get re-painted colors other than yellow, and these would be the cars used in crash scenes.<br \/>\n<a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j27.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j2\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j2_thumb7.jpg\" border=\"0\" alt=\"j2\" width=\"309\" height=\"207\" \/><\/a><\/li>\n<li>We also remember something else from doing that loan.\u00a0 It was a big loan, right around $1 million, and we sold the guaranteed piece for 110. That\u2019s ten points!\u00a0 Not ten basis points but ten points.\u00a0 The loan officer got a half point commission, we netted something like $80,000, and we kept the servicing, which threw off 50 bps of annual cash flow.\u00a0 We also got the company\u2019s non-interest bearing checking accounts.\u00a0 Is this a great country, or what?<\/li>\n<li>There are completely legitimate arguments on both sides of the health care debate, but what we find intellectually disingenuous is people who say that any government involvement in health care will be a disaster that will only hurt the patients.\u00a0\u00a0 Wait a minute.\u00a0 What about VA hospitals?\u00a0 What about Medicare? Haven\u2019t these been monster success stories? If people think these programs are so horrible, they should publicly declare that they will not sign up for Medicare when they turn 65 and that they\u2019ll have their parents immediately cancel their Medicare coverage.<\/li>\n<\/ul>\n<p>And what about those lawsuits asking the courts to declare the new legislation unconstitutional because it is \u201can unprecedented encroachment\u201d on the rights of individuals?\u00a0 Well, here in California it\u2019s illegal to ride a motorcycle without a helmet, and everyone who drives a car is legally forced to have auto insurance. Are these encroachments on certain rights?\u00a0 Yes, absolutely, but somehow life goes on.\u00a0 Maybe, just maybe, for the better.\u00a0\u00a0<\/p>\n<ul>\n<li>We did some work for Firstrust Bank last year, and the history of this bank is a testament to the tradition of great family-owned banks.\u00a0 In 1934, on New Years Day before you could spend the whole day watching football, Samuel Green founded the bank in South Philadelphia .\u00a0 His son, Daniel Green, took it over in 1970, and for the last 15 years, his grandson, Richard Green, has run it. Family-owned banks have a deep sense of dedication to the community they serve, and they\u2019re a rich part of the American banking landscape.<\/li>\n<\/ul>\n<p><a href=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j19.jpg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-right-width: 0px; display: inline; border-top-width: 0px; border-bottom-width: 0px; border-left-width: 0px\" title=\"j1\" src=\"http:\/\/mortgagenewsclips.com\/wp-content\/uploads\/2010\/03\/j1_thumb8.jpg\" border=\"0\" alt=\"j1\" width=\"318\" height=\"213\" \/><\/a><br \/>\nThis photo is of Samuel Green, the banks founder, and his son Daniel. Firstrust today has over $2.3 billion in assets!<\/p>\n<p>\u00b7 We hate to sound like a nag, but what are you doing to track your leakage?\u00a0 If you\u2019re building in a profit of, say, 150 bps on FHA loans, are you realizing those 150 bps when the loan is purchased?\u00a0 We see companies that will build in 150 bps, and on average only realize 70-80. The reasons are varied, but not getting the margins you build into your pricing is almost always one of the biggest reasons for a company that\u2019s doing poorly. We do a lot of detective work on this issue, trying to figure out what causes this leakage, and lately we\u2019re seeing credit overlays as a big source.<br \/>\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 *\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 *<\/p>\n<p>From a loan a mortgage banker we know: \u201cIt\u2019s interesting that the Garrett, Watts Report mentioned parietals, <em><em>in loco parentis<\/em><\/em> and lock-outs!\u00a0 Freshman year at Temple we had curfews and at the end of the year for the first time had a weekend when they had open visiting hours and female students could visit a male student in their room for one hour with the door open!\u00a0 There was\u00a0 a rule about one foot on the floor if sitting on the bed as well.\u00a0\u00a0\u00a0\u00a0 My roommate that year had been expelled from another college the prior year for not making curfew and had to start all over again at my school as a freshman.\u00a0 We even had drills in the middle of the night where attendance was taken!\u201d<br \/>\nOur freshman year at Dartmouth was filled with stories of students expelled \u2013 not suspended by expelled \u2013 for having women in their rooms.\u00a0 After transferring to Berkeley , the walls started crumbling fast.\u00a0 Parietals were the complex set of rules of behavior for when male and female students visited each other, and Lock-outs meant that if that a coed didn\u2019t make it back to the dorm by curfew, she was locked out and couldn\u2019t sleep there.\u00a0 Was this stupid or what?\u00a0 As guys, we were always <em>trying<\/em> to bring our dates home late. If our date were locked out, heck, well, gee, I guess you\u2019ll have to spend the night at my place.<br \/>\nIn the dorms (where we lived for one quarter), they tried an experiment.\u00a0 On the last Sunday of each month, girls could be in the boys\u2019 rooms from 3:00 to 5:00.\u00a0 The door had to be open the width of a book, which we always defined as the width of a match book.\u00a0 And yes, they literarily required that at least one foot per person had to be on the floor (as opposed to the bed) at all times.<br \/>\nThis lasted a month or two till someone burned down the school\u2019s Naval Architecture building as a means of ending the war in Vietnam .\u00a0 Riots and tear gas were the daily norm, and the school decided the hell with trying to enforce parietals, curfew and the number of feet on the floor.\u00a0<br \/>\n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 *\u00a0\u00a0\u00a0\u00a0 *<\/p>\n<p>At the beginning of this newsletter we wrote about Due Diligence and investor scorecards. We\u2019ve done Due Diligence on very small companies being acquired where it took only one of us two days, and we\u2019ve also done it on much bigger transactions, some of which had servicing departments, where it took three of us a full week.\u00a0 Not always, but usually, we uncover things that the buyer had no clue about. And when the acquiring company is a bank or thrift, we try to pay particular attention to those areas we know the regulators will look at.<br \/>\nSee you guys soon.\u00a0 And remember to always keep at least one foot on the floor.\u00a0\u00a0<\/p>\n<p>Garrett, Watts &amp; Co.\u00a0<br \/>\n<em>Helping <\/em><em>lenders increase revenues, control costs, and better manage risk<\/em><em>.<\/em><\/p>\n<ul>\n<li>Mike McAuley\u00a0\u00a0 (281-250-2536)<em><\/em><\/li>\n<li>Corky Watts\u00a0\u00a0\u00a0\u00a0\u00a0 (408-497-3135)\u00a0<\/li>\n<li>Joe Garrett\u00a0\u00a0\u00a0\u00a0\u00a0 (510-469-8633)<\/li>\n<\/ul>\n<div class=\"feedflare\">\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=iPQPtp2pPe8:zTMKTG2lvwY: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=iPQPtp2pPe8:zTMKTG2lvwY:D7DqB2pKExk\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=iPQPtp2pPe8:zTMKTG2lvwY:D7DqB2pKExk\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=iPQPtp2pPe8:zTMKTG2lvwY:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=iPQPtp2pPe8:zTMKTG2lvwY:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?a=iPQPtp2pPe8:zTMKTG2lvwY:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/mortgagenewsclips\/qTBe?i=iPQPtp2pPe8:zTMKTG2lvwY:V_sGLiPBpWU\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/mortgagenewsclips\/qTBe\/~4\/iPQPtp2pPe8\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0 \u00a0 To Our Clients, Colleagues and Friends,\u00a0\u00a0 \u00a0 Attached is a very interesting Interagency Policy Statement on Funding and Liquidity Risk Management. Interagency means it\u2019s issued by the OTS, the OCC, the Federal Reserve, the FDIC, and the National Credit Union Administration.\u00a0 Skip all the boring stuff at the beginning and go right to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-481682","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/481682","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=481682"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/481682\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=481682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=481682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=481682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}