GLG News by Subprime Mortgage Experts (US)

Joe GarrettPrincipal ConsultantGarrett, Watts & Co

What is their plan?

September 24, 2007

Analysis of:Accredited, Lone Star amend merger deal | www.reuters.com

What a strange marriage, with Lone Star refusing to come to the wedding ceremony, Accredited sueing them, and the two eventually tieing the knot.  Lone Star must have some vision for what to do with Accredited, but at the moment, there is almost no market for sub-prime loans. The only logical plan is that Accredited will be the Last Man Standing when the sub-prime sector comes back to life.  It's actually a valid business, but one that was trashed with lax credit standards and financial engineering that allowed sub-prime loans to end up in securities, some of which now had triple-a ratings. Sub-prime works when you limit the loan-to-value ratios.  It worked just fine when the max LTV was 70%.  It didn't workwhen these moved up to 95% or even 100%. At some point, new, tighter standards will emerge, and investors will tip-toe back in.  The yield requirements will be higher and the loan-to-value ratios will be lower, and 3-5 years from now, people will have forgotten 2007.

Joseph SmithPresident and CEODefault Mitigation Management

It is more than liquidity and perception - the Housing Crisis

September 20, 2007

Analysis of:Financial crisis triggers first stress test | investing.reuters.co.uk

Stress is yet to be seen, early indicators are bad, the future is going to be worse. The actions to date have failed the test for working out of the mortgage crisis. What is yet to come on the mortgage market can be changed if acted on, current trends are leading to disaster.

Maureen BoltonPrincipalGlobal Capital Access

C-Bass breaks up Radian/MGIC marriage

September 10, 2007

Analysis of:MGIC, Radian End Merger Deal As Joint Venture Sustains Losses | online.wsj.com

This article is important because it announces the break up of what was to be one of the most synergistic mergers in mortgage-insurance history.  MGIC with its portfolio of traditional mortgage and bond insurance business  coupled with a bit of international exposure and Radian with its new product development skills and ability to rapidly respond to clients and assist them in assessing and pricing risk.  Unfortunately Radian lost MGIC's interest when their in-housen expertise at pricing and profiting from distressed mortgages -C-Bass lost  US$1 billion in market value due to investments in non-investment grade subprime mbs.

Joseph ChathamPresidentChatham Mortgage Partners Inc.

Bush, Bernanke, BandAids & Bloodletting

September 7, 2007

Analysis of:Bush, Bernanke Pledge To Stabilize Mortgage Meltdown | www.consumeraffairs.com

*Recent Bush proposals ease anxiety more than solve issues. *Some parts of proposals may worsen the foreclosure markets. *FHA is overdue reform, despite markets. *Bloodletting is necessary.

Joseph ChathamPresidentChatham Mortgage Partners Inc.

At this point, who cares about Q2!?

September 5, 2007

Analysis of:U.S. Housing Market Conditions | www.huduser.org

The HUD report means little at this point.  We need to be looking forward.

Joe GarrettPrincipal ConsultantGarrett, Watts & Co

A win-win for BofA and Countrywide

August 27, 2007

Analysis of:Bank of America to Invest $2 Billion in Countrywide | online.wsj.com

It's good for the industry.  Sends a signal that there will be winners, that there will be money to be made in this business.  It does seem, however, like very expensive capital for Countrywide, especially when you compare it to their preferred converts last year or earlier this year which were in the 2-3% range and out of the money.  This seeminlgy implies how desperate Countrywide must have been.

Joe GarrettPrincipal ConsultantGarrett, Watts & Co

It's not Alt-A v. Sub-prime v. A-paper

August 27, 2007

Analysis of:Capital One to Close Its GreenPoint Unit | online.wsj.com

When the history of the Mortgage Crisis of 2007 is finally written, it won't be about subprime or Alt-A. I believe it will be all about layered risk and Loan to Value ratios. All of these products worked and performed well - up until the LTVs started rising. 100% LTVs justs don't make sense.

Maureen BoltonPrincipalGlobal Capital Access

Schwartz May Be Smooth, But Spector Succeeded In Creating Bear Stearns' Primary Source of Growth

August 8, 2007

Analysis of:Bear Stearns Heir Apparent Tries to Restore Some Faith | www.nytimes.com

This article is important because it introduces the reader to Alan D. Schwartz, the new sole President of Bear Stearns, a dominant player in the mbs markets and raises the question of whether he can assure bankers regarding Bear's ability to retain the same access to the same money at the same rates.  The article also questions whether Bear Stearns can be successfully run by an investment banker and whether an outside investor may be solicited or decide to take advantage of Bear's lower stock price and take a sizeable position.  Current market conditions have caused the collapse of two hedge funds run by Bear and a crisis in confidence among its lenders. 

Maureen BoltonPrincipalGlobal Capital Access

China's Media Mirage

July 26, 2007

Analysis of:Cracks in the Great Wall of China | www.theglobalguru.com

Recent discoveries regarding Chinese distribution of poisonous toothpaste, dog food and candy should cause us to reassess China's position as an Economic powerhouse. Sure, the Japanese and Koreans once made dodgy products, but their mistakes were due to their learning curve, as opposed to a deliberate deception in order to save money by swapping poisonous materials for more expensive ones. In this article, Nicholas Vardy cogently compares the mirage of China created by the media with the cold reality of its shaky economic state.

Maureen BoltonPrincipalGlobal Capital Access

The Fed's estimates of subprime credit losses are irresponsible.

July 24, 2007

Analysis of:Subprime Losses Could Cost $100 Billion | newsmax.com

This article summarizes Fed Chief Ben Bernanke's recent testimony last week before the Senate Banking Committee and the House of Representatives. the Subprime Mortgage/housing market and the expansion of the Federal Regulators' role in monitoring mortgage lenders. Mr. Bernanke's remarks regarding both of these subjects are extremely significant, as hundreds of billions of subprime mbs and CDOs invested in such securities will be impacted by how the Fed views the damage caused by improper lending/underwriting and describes its impact on the overall potential for continued economic growth.  

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