The FED

March 26, 2008HP-887
Remarks by Secretary Henry M. Paulson, Jron Current Financial and Housing Marketsat the US Chamber of Commerce
Washington -- Thank you for inviting me to address your Capital Markets Competitiveness Conference. We share a commitment to competitive markets, and Treasury will soon release a Blueprint for Regulatory Reform that proposes a financial regulatory framework which we believe will more effectively promote orderly markets and foster financial sector innovation and competitiveness.
As you know, financial market stress began last August and has led to significant de-leveraging and repricing of risk, and sentiment has swung hard to risk aversion. There have been, as there always are during periods like this, bumps in the road and unpleasant surprises along the way.
I am constantly asked how much longer will this take to play out and if this is the worst period of market stress I have experienced. I respond that every period of prolonged turbulence seems to be the worst until it is resolved. And it always is resolved. Our economy and our capital markets are flexible and resilient and I have great confidence in them. I am certain we will work through this situation and go on to new heights as we always do.
As we work our way through this turbulence, our highest priority is limiting its impact on the real economy. We must maintain stable, orderly and liquid financial markets and our banks must continue to play their vital role of supporting the economy by making credit available to consumers and businesses. And we must of course focus on housing, which precipitated the turmoil in the capital markets, and is today the biggest downside risk to our economy. We must work to limit the impact of the housing downturn on the real economy without impeding the completion of the necessary housing correction. I will address each of these in turn. Regulators and policy makers are vigilant; we are not taking anything for granted.
Orderly Financial Markets
For some months now, reduced access to short term funding and liquidity issues have created turmoil in our capital markets. In the midst of these conditions, Bear Stearns found itself facing bankruptcy. The Federal Reserve acted promptly to resolve the Bear Stearns situation and avoid a disorderly wind-down. It is the job of regulators to come together to address times such as this; and we did so. Our focus was the stability and orderliness of our financial markets.
Discount Window Access
As the Federal Reserve resolved the Bear Stearns situation, it subsequently took a very important and consequential action of instituting a temporary program for providing liquidity to primary dealers. I fully support that action. Taking this step in a period of stress recognizes the changed nature of our financial system and the role played by investment banks in the post Glass-Steagall world.
Such direct lending from the central bank to non-depository institutions has not occurred since the 1930s. Recent market turmoil has required the Federal Reserve to adjust some of the mechanisms by which it provides liquidity to the financial system. Their creativity in the face of new challenges deserves praise, but the circumstances that led the Fed to modify its lending facilities raises significant policy considerations that need to be addressed.
Insured depository institutions remain important participants in financial markets, but this latest episode has highlighted that the world has changed as has the role of other non-bank financial institutions, and the interconnectedness among all financial institutions. These changes require us all to think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability. Now that the Fed is granting primary dealers temporary access to liquidity facilities, we must consider the policy implications associated with such access.
Historically, commercial banks have had regular access to the discount window. Access to the Federal Reserve's liquidity facilities traditionally has been accompanied by strong prudential oversight of depository institutions, which also has included consolidated supervision where appropriate. Certainly any regular access to the discount window should involve the same type of regulation and supervision.
While there has been extraordinary convergence in financial services, one distinction between banks and investment banks remains particularly important - banks have the advantage that they issue deposits that are insured by the Federal government. A properly designed program of deposit insurance greatly reduces the likelihood of liquidity pressures on depository institutions and as a corollary, makes the funding base of these institutions more stable. The trade-off for this subsidized funding is regulation tailored to protect the taxpayers from moral hazard this insurance creates.
For the non-depository institutions that now have temporary access to the discount window, I believe a few constructive steps would enable the Federal Reserve to protect its balance sheet, and ultimately protect U.S. taxpayers.
First, the process for obtaining funds by non-banks must continue to be as transparent as possible. The Fed should describe eligible institutions, articulate the situations in which funds will be made available, and the magnitude and pricing structure for the funds. The TAF process is a good model for a structure that would provide relevant information to the marketplace.
Second, and perhaps most importantly, the Federal Reserve should have the information about these institutions it deems necessary for making informed lending decisions. The Federal Reserve is currently working to ensure the adequacy of such information. We suggest that the Federal Reserve, the SEC, and the CFTC continue their work of building a robust cooperative framework. Already, at the invitation of the SEC, the Federal Reserve is working alongside their teams within these institutions. These regulators should consider whether a more formalized working agreement should be entered into to reflect these events.
With this added information flow, the Federal Reserve will be better positioned to consider market stability issues like liquidity provisioning and the interconnectedness of financial institutions. The Federal Reserve's participation could also allow for broader consideration of market stability issues by the SEC and the CFTC. This collaborative process will necessarily have a strong focus on liquidity and funding issues.
The combination of these steps should provide the Federal Reserve with a structure and the information that it would need to make liquidity backstop loans during periods of market instability to non-banks. They address the current situation, in which investment banks have temporary access to the discount window. Clearly, many difficult policy questions must also be addressed on a going-forward basis.
Despite the fundamental changes in our financial system, it would be premature to jump to the conclusion that all broker-dealers or other potentially important financial firms in our system today should have permanent access to the Fed's liquidity facility. Recent market conditions are an exception from the norm. At this time, the Federal Reserve's recent action should be viewed as a precedent only for unusual periods of turmoil.
As we work through this period, we will learn through this experience. And the Federal Reserve will learn as it works with financial institutions as they come to the window. It is appropriate that we evaluate that experience in the coming months, and use the lessons of that experience to inform a path forward. Very relevant to this issue is the fact that bank regulation, which applies to institutions with an explicit taxpayer-funded backstop, is fundamentally different from non-bank regulation, which applies to institutions that are not supported by federal deposit insurance. The President's Working Group on Financial Markets will evaluate these issues and their implications for regulation of bank and non-bank financial institutions.
Housing and Mortgage Markets
The housing downturn and the surrounding uncertainty are significantly impacting our financial institutions and capital markets. However, we should not lose sight of the fact that this downturn was precipitated by unsustainable home price appreciation which was particularly pronounced in a relatively few regions. A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth. Having stability in housing markets will in turn contribute to better conditions in credit markets for mortgage-backed securities.
Data releases every month create headlines about declining housing sales, starts and prices. Yet, declines are exactly what we should expect during a correction. It takes time to work through the excess inventory – and we are. The question many are asking is how deep the correction will be and how long it will last. The Case-Shiller index of home prices in 10 major metropolitan areas showed an 11.4 percent decline in home prices over the 12 months ending in January, and the futures market is predicting that the index will decline another 13 percent in 2008. But we do not have a national housing market; housing markets are regional – and there is considerable variation in adjustment, with prices changing the most in areas that had the greatest overbuilding.
Amid this correction, there are many calls to "do something about housing." When people say this, they are urging any number of possible things – minimize foreclosures, make affordable mortgages more available, improve the secondary market and liquidity for mortgages, improve the mortgage origination process, prosecute fraud, reduce the inventory of homes for sale, or help communities hardest hit by foreclosures.
The `to do' list tends to get conflated. We must sort through each of these shared and desired outcomes, carefully choosing policies that minimize the impact of – but do not slow – the housing correction.
Availability of Mortgage Finance
Turbulence in the financial markets has disrupted and reduced the availability and increased the cost of mortgage financing. The secondary mortgage market is still facing liquidity and pricing issues. We are taking steps to increase the availability of affordable mortgage financing. The Federal Reserve's temporary lending facility for non-banks will help in this area, as will the Federal Housing Finance Board's decision to authorize the Federal Home Loan Banks to increase purchases of agency mortgage backed securities, which could provide over $100 billion in new MBS market liquidity.
Another helpful step is the agreement reached last week among Fannie Mae, Freddie Mac and OHFEO, their independent regulator, to inject more capital into the mortgage market.
Fannie and Freddie, two of the nation's housing Government Sponsored Entities or GSEs, have been playing an important, countercyclical role in supporting the secondary market for mortgage finance. The GSEs' market share has grown substantially from 46 percent of all new mortgages in the second quarter of 2007 to 76 percent in the fourth quarter. It is very important that the GSEs remain positioned to play this critical role. That is why I was pleased that the GSEs committed to raise significant capital. A stronger capital base will better enable them to support more home purchases and refinancings through their securitization activities. Additional capital not only increases the availability of mortgage financing, but also strengthens mortgage market fundamentals.
The Economic Stimulus Act of 2008 also temporarily raised the conforming loan limit, which should reduce costs for homebuyers seeking a jumbo mortgage.
The subprime mortgage market accounted for a large portion of housing purchase growth before the downturn, and the market for subprime mortgage financing is now largely closed. Last August, President Bush launched the FHASecure initiative, an important new solution for subprime homeowners. To date, FHASecure has helped more than 130,000 families refinance their mortgages and stay in their homes. That number is expected to reach 300,000 by year end. More can be done. Secretary Jackson continues to examine administrative tools to make FHA mortgages more widely available. And it is essential that Congress pass FHA modernization that would provide FHA the authority to help as many as 250,000 more homeowners at this critical time.
We will continue to look for solutions that expand mortgage access and availability for all borrowers, including financially-able subprime borrowers.
Foreclosures
Home foreclosures are also a significant issue today. Foreclosures are painful and costly to homeowners and, neighborhoods. They also prolong the housing correction by adding to the inventory of unsold homes. Before quickly reviewing our initiatives to prevent avoidable foreclosures, let me observe that some current headlines make it difficult to put foreclosure rates in perspective. So let me try to do so.
First, 92 percent of all homeowners with mortgages pay that mortgage every month right on time. Roughly 2 percent of mortgages are in foreclosure. Even from 2001 to 2005, a time of solid U.S. economic growth and high home price appreciation, foreclosure starts averaged more than 650,000 per year.
Last year there were about 1.5 million foreclosures started and estimates are that foreclosure starts might be as high as 2 million in 2008. These foreclosures are highly concentrated – subprime mortgages account for 50 percent of foreclosure starts, even though they are only 13 percent of all mortgages outstanding. Adjustable rate subprime mortgages account for only 6 percent of all mortgages but 40 percent of the foreclosures. So we are right to focus many of our policies on subprime borrowers.
There are approximately 7 million outstanding subprime mortgage loans. Available data suggests that 10 percent of subprime borrowers were investors or speculators. This figure is likely higher, as some investors misrepresented themselves to take advantage of a cheaper rate, and others speculated on a primary residence, expecting prices to continue going up.
Other subprime loans were very poorly underwritten and borrowers simply can not afford the home they bought. Almost 18 percent of adjustable rate subprime mortgages underwritten in 2006 were in foreclosure six months before the initial rate was scheduled to reset. Subtracting the speculators and those who took on more than they could handle leaves us with our target population of subprime borrowers for whom we are seeking a solution – those who want to keep their homes, have the financial wherewithal, but are facing challenges making their monthly payments.
We are focused on private sector and government efforts to help these borrowers avoid foreclosure.
The HOPE NOW alliance has announced that, since July, more than 1 million struggling homeowners received a work out, either a loan modification or repayment plan that helped them avoid foreclosure. HOPE NOW's work-out efforts are accelerating more quickly than the foreclosure rate. In the month of January foreclosure starts were up 5 percent while the number of mortgage workouts grew 19 percent.
HOPE NOW and the American Securitization Forum together have implemented a protocol targeted specifically at subprime borrowers facing mortgage resets. Through the protocol, those who made their initial payments and want to keep their home should be fast-tracked into a sustainable refinancing or loan modification.
We are closely monitoring the implementation and results of HOPE NOW and the ASF efforts. Responsible homeowners who have been making their payments and want to find a way to stay in their home should not go into foreclosure merely because the volume of people seeking help overwhelms the system.
Homeowners with Negative Equity
Much attention has been given to the fact that an estimated 8.8 million households may currently have negative home equity. We can expect that number to rise as the housing correction plays out, and to begin to reverse once the correction has run its course. The best outcome for these homeowners is to work through this correction as quickly as possible.
Homeowners with negative equity are more common in this housing downturn because lending practices changed dramatically in recent years. In 2007, 29 percent of mortgages were originated with no down payment. Some of those mortgages went to speculators; others to responsible borrowers who were able to buy a home because of expanded access to credit.
But let me emphasize that we do not need a system-wide solution for the vast majority of loans where a homeowner temporarily has negative equity. Negative equity does not affect borrowers' ability to pay their loans. Homeowners who can afford their mortgage payment should honor their obligations --- and most do. They know that there are housing cycles, and they bought more than houses. They bought homes to become part of a community, and they bought them as places to live, not as investments. And if they live in them for the long term, they are likely to become good investments.
Let me also emphasize that any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator. Washington can not create any new mortgage program to induce these speculators to continue to own these homes, unless someone else foots the bill.
The people we seek to help are those who want to keep their homes but can't afford the monthly payment because of an ARM reset. If they also have negative equity in their homes, refinancing becomes almost impossible and so workouts become even more important. Secretary Jackson is examining the potential for FHA to be a solution for these borrowers.
Conclusion
In summary, there is bipartisan interest in bolstering our economy, maintaining stable and orderly capital markets, and helping struggling homeowners. New ideas and solutions can come from either side of the aisle. The Administration and Congress demonstrated how well bipartisanship can work when we quickly passed and enacted an economic stimulus package earlier this year. I am hopeful we can demonstrate this again by quickly concluding the FHA Modernization bill, and I am working hard to make progress on comprehensive GSE reform legislation because stronger oversight is essential for these large, critically important financial institutions.
I know Members of Congress have outlined other ideas, but most are not yet ready for the starting gate. FHA Modernization and GSE reform are well on their way to the finish line – let's complete this important legislation now, so we can implement them and help homeowners and our economy.
Timeliness is critical for adding confidence in today's markets. I continue to focus on additional steps that the Administration can take without delay – things that don't require congressional action and will immediately impact the availability of affordable mortgage finance.
We are obviously well aware that the housing market correction was not only a precipitating cause but continues to be an underlying factor in our capital markets' stress. Both are disrupting our economy right now. We will continue to pursue policies that strike the right balance: that do not slow the housing correction, yet also help avoid preventable foreclosures and unnecessary capital market turmoil.

Good News

Existing Home Sales Rise In February
WASHINGTON, March 24, 2008 -
Sales of existing homes increased in February and remain within a fairly stable range, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate (1) of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.
Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”
The national median existing-home price (2) for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.
Home prices within metropolitan areas are more telling. The most recent data shows roughly half of the metro areas in the U.S. with price increases, with healthy gains in markets such as Oklahoma City and Trenton, N.J. “In other areas such as Sacramento, a rapid price decline has induced buyers to come into the market and sales are now rising,” Yun said. “The relationship between home prices, interest rates and income has improved to the point where buyers are more serious about making offers.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.92 percent in February from 5.76 percent in January; the rate was 6.29 percent in February 2007.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said that negotiation and knowledge are even more important in the current market. “Consumers need to be aware of local market conditions and comparable sales prices to have a clear picture of a home’s value,” he said. “Realtors® understanding of local markets, negotiating expertise, and transaction experience are invaluable to both buyers and sellers, today as much as ever.”
Total housing inventory fell 3.0 percent at the end of February to 4.03 million existing homes available for sale, which represents a 9.6-month supply (3) at the current sales pace, down from a 10.2-month supply in January.
Single-family home sales increased 2.8 percent to a seasonally adjusted annual rate of 4.47 million in February from an upwardly revised 4.35 million in January, but are 22.9 percent below 5.80 million-unit level a year ago. The median existing single-family home price was $193,900 in February, down 8.7 percent from February 2007.
Existing condominium and co-op sales rose 3.7 percent to a seasonally adjusted annual rate of 560,000 units in February from a downwardly revised 540,000 in January, and are 29.7 percent below the 797,000-unit pace in February 2007. The median existing condo price (4) was $211,700 in February, which is 4.9 percent lower than a year ago.
Regionally, existing-home sales in the Northeast jumped 11.3 percent to an annual pace of 890,000 in February, but are 26.4 percent below February 2007. The median price in the Northeast was $264,800, up 0.4 percent from a year ago.
Existing-home sales in the Midwest rose 2.5 percent in February to a level of 1.24 million but are 19.5 percent below a year ago. The median price in the Midwest was $143,900, which is 7.1 percent lower than February 2007.
In the South, existing-home sales increased 2.1 percent to an annual rate of 1.99 million in February but are 22.0 percent below February 2007. The median price in the South was $163,400, down 8.6 percent from a year ago.
Existing-home sales in the West slipped 1.1 percent to an annual rate of 920,000 in February, and are 29.2 percent below a year ago. The median price in the West was $290,400, down 13.4 percent from February 2007.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.
# # #
(1) The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
(2) The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
(3) Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases (e.g., condos were 9.5 percent of transactions in 1998, 8.5 percent in 1990 and only 6.1 percent in 1982).
(4) Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for March will be released April 22. The next Forecast / Pending Home Sales Index is scheduled for April 8.

Arnold knows Real Estate

A vacant, 2.08-acre lot in Los Angeles’ Pacific Palisades area that once was owned by actor Michael Keaton and that subsequently was owned by TV executive Lloyd Braun has sold for $7,800,000.
Features on the lot include mature towering trees, a charming creek and a bridge, according to listing information, the most recent of which is here. The lot also included plans and permits for a 15,000-square-foot home designed by Richard Landry, according to listing information.

And how exclusive is the street? It’s so exclusive that the onetime Keaton and Braun lot that just sold is just two doors down from California Gov. Arnold Schwarzenegger’s onetime, 5.28-acre, four-lot compound, at 14203, 14209 and 14215 W. Sunset Boulevard / Evans Road. The Governator’s onetime compound had consisted of four separate, contiguous properties:
–A 4,177-square-foot house on a 1.37-acre parcel at 14203 W. Sunset Boulevard / Evans Road. Schwarzenegger had purchased that house in 2001 for an undisclosed amount, and sold it in April 2004 for $2,537,525, according to public records.
–A vacant, 1.29-acre lot at 14205 W. Sunset Boulevard / Evans Road that Schwarzenegger had purchased from actor Daniel J. Travanti in May 1995 for exactly $2,000,000, according to public records. He sold the lot, which had had a house on it when Travanti had owned it, in 2004 as part of the sale of the house next door at 14209 W. Sunset Boulevard / Evans Road (see next bullet point below).
–A 7,654-square-foot house on a 1.38-acre parcel at 14209 W. Sunset Boulevard / Evans Road that Schwarzenegger . The governor-actor sold this property – and the vacant lot next door – to celebrated golfer Denis Watson and his lawyer wife Susan Loggans in 2004 for $7,950,000, according to public records. Loggans famously had sued the governor in late 2004 for allegedly having hid damage to the estate’s pool and tennis court, as well as mold problems in the house’s screening room. Loggans long has had that house (along with the adjacent lot at 14205 that we reference above) on the market for $23,000,000. Check out an online listing sheet for that house here.
–And a 5,713-square-foot house on a 1.24-acre parcel at 14215 W. Sunset Boulevard / Evans Road. Schwarzenegger sold the house at 14215 in mid-2004 for $4,150,000, according to public records.
For those wondering, Gov. Schwarzenegger’s current L.A.-area home is a seven-bedroom, 14,500-square-foot mansion on 9.403 acres at 12989 Chalon Road in Los Angeles’ Bel-Air area, just off Mandeville Canyon Road, which the Governator he purchased in 2002 for $4,863,000, according to public records.

Someone wins, someone doesn't and the band plays on...

PENNY MAC

Private National Mortgage Acceptance Company, LLC (PNMAC or "PennyMac") is a financial services firm created to address the dislocations in the U.S. mortgage market. Our focus is investing and servicing residential mortgage assets on behalf of private investors.
PennyMac is acquiring loans from financial institutions seeking to reduce their mortgage exposures. Our core guiding principles are to create value for investors and consumers while preserving home ownership. We will support an environment of the highest standards, fostering ethical personal and business practices.


Stanford L. Kurland
Founder, Chairman and Chief Executive Officer
Stanford L. Kurland, Founder, Chairman and Chief Executive Officer, is an extremely accomplished executive in financial services with more than 27 years of experience in the mortgage banking arena. He is well recognized for his leadership in developing the strategic direction, risk management activities, financial management, and organizational development of Countrywide Financial Corporation. During his tenure at Countrywide Financial, until his departure in 2006, where he served as Chief Financial Officer and then Chief Operating Officer, the company grew in market capitalization from just over one million dollars to a leading financial services firm with over 25 billion dollars in market value. Under his leadership, Countrywide built a world class organizational and governance structure. Mr. Kurland began his professional career in 1975 in public accounting and practiced as a CPA for the international accounting firm, Grant Thornton. Mr. Kurland believes that the key to resolving the current turmoil in the mortgage market is to create and deliver loan enhancement opportunities that balance consumer and investor value generation through operational excellence and strong analytic capabilities. Mr. Kurland has an unwavering commitment to continual operational excellence, common sense risk management initiatives that are quantitatively sound, and ethical conduct. As Chief Executive Officer, Mr. Kurland brings the skills to organize, oversee, and direct PennyMac's efforts to address the challenges facing the mortgage industry and to raise the industry standard for discipline in the areas of risk management, customer care and value creation.
David Spector
Chief Investment Officer
David Spector, as Chief Investment Officer, is responsible for oversight of all activities pertaining to investments, and directs the activities of Portfolio Management, Capital Markets, and Credit as each relates to mortgage credit and company credit risk. Prior to joining PennyMac, Mr. Spector was Co-Head of Global Residential Mortgages for Morgan Stanley, London, and, previously, Senior Managing Director, Secondary Markets, for Countrywide Financial Corporation where he was responsible for Secondary Marketing, including Interest Rate Risk Management and related functions, directing loan trading, pricing, hedging, and servicing. He was also a member of the Countrywide Asset Liability and Credit Committees, as well as Freddie Mac and Fannie Mae Advisory Committees.
Farzad Abolfathi
Chief Technology Officer
Mr. Abolfathi, as Chief Technology Officer, is responsible for oversight of technology infrastructure, systems development, data transfer and warehousing, and for providing technology solutions and architectural guidelines for all systems. Prior to joining PennyMac, Mr. Abolfathi was Managing Director of Production Technologies for Countrywide Financial Corporation, where he led the development teams for all production organizations, headed the Standards Committee, established Governance Offices, and led the Technology Steering Committee, establishing a permanent center in India.
Adal Bisharat
Director, Strategic Planning
Adal Bisharat, as Director, Strategic Planning, is responsible for facilitating development of strategic business plans, budget forecasts, and other Company projects. Prior to joining PennyMac, Mr. Bisharat was Head of Sales & Production, Home Equity Division for Indymac Bank. He also served as Senior Vice President of National Production Support, Wholesale Lending Division and Senior Vice President of Strategic Planning for Countrywide Financial Corporation, where he was responsible for Corporate Development, Mergers, and Acquisitions, and, was Strategy Consultant for Philips Electronics N.V., Netherlands.
Andrew Chang
Chief Fund Administration Officer
Andrew S. Chang, as Chief Fund Administration Officer, is responsible for overseeing the administration of investment funds and leading strategic initiatives and special projects for the Company. Prior to joining PennyMac, Mr. Chang was a Director at BlackRock and a leader of its Advisory Services practice, specializing in financial strategy and risk management for banks and mortgage companies, and previously, an Engagement Manager in the New York office of a management consulting firm, McKinsey & Company.
James S. Furash
Chief Development Officer
James S. Furash, as Chief Development Officer, is responsible for establishing relationships with sellers, negotiating purchase/sales agreements, and coordinating transaction details. Prior to joining PennyMac, Mr. Furash was Co-Founder, President, and Chief Executive Officer of Countrywide Bank, N.A., a subsidiary of Countrywide Financial Corporation, where he led the growth of Countrywide Bank to become the eleventh largest national bank in the United States. Mr. Furash has been involved in all aspects of the financial services industry including commercial lending, capital markets, consumer lending, and retail banking, having co-founded Monument Financial Group, LLC., and was previously associated with SunTrust Bank, N.A., National Bank of Washington, and Mercer Management Consulting.
Jeffrey P. Grogin
Chief Legal Officer
Jeffrey P. Grogin, as Chief Legal Officer, is responsible for entity formation and ongoing compliance, establishing and protecting intellectual property, assisting with negotiations and approvals of contracts and agreements, implementing procedures and protocols to ensure Company compliance, determining and complying with federal, state, and local regulations and laws, and disseminating legal news and changes as appropriate. Mr. Grogin began his legal career as an associate with Gibson, Dunn & Crutcher where he gained national experience in mergers and acquisitions, securities, and significant mortgage banking issues. He later became Founding and Managing Partner of Samaha Grogin, LLP, a niche law firm representing local, national, and international clients in specialized litigation and complex transactional matters, and more recently, became Chief Executive Officer, General Counsel, and world-class creator, publisher, and distributor of computer games for Snood, LLC.
Aratha M. Johnson
Chief Administrative Officer
Aratha M. Johnson, as Chief Administrative Officer, is responsible for oversight of Human Resource functions and corporate policies and guidelines, coordination of all administrative functions, Board meetings, consumer advocacy groups, and public relations. Prior to joining PennyMac, Ms. Johnson was Managing Director and Chief of Staff for the Executive Office of the President at Countrywide Financial Corporation where she oversaw the president’s professional and administrative team, as well as executive communications. She previously served as Senior Manager of Corporate Strategy and Business Development for Hughes Electronics, and was Senior Associate of the Financial Services/Information Technology Group for Booz Allen & Hamilton.
Michael L. Muir
Chief Capital Markets Officer
Michael L. Muir, as Chief Capital Markets Officer, is responsible for maintaining loan pricing systems, distressed asset pricing models, overseeing trading systems, managing pooling, securitization activities, and market surveillance, as well as executing hedge transactions. Prior to joining PennyMac, Mr. Muir was Chief Financial Officer, Treasurer, and Chief Investment Officer for Countrywide Bank, N.A., a subsidiary of Countrywide Financial Corporation, and Managing Director of Countrywide Financial Corporation where he was responsible for the overall financial strategy, management, and reporting of the bank. Prior to joining Countrywide, Mr. Muir was a principal at Medallion Mortgage Company.
Lior Ofir
Director, Technology
Lior Ofir, as Director, Technology, is responsible for providing technology solutions and architectural guidelines for all systems. Prior to joining PennyMac, Mr. Ofir led the Emerging Technology and Innovation Group for Countrywide Financial Corporation. Previously, he was Co-Founder and Director of Product Development for iWeb Technologies. He has also led advanced technology development for the Intelligence Branch of the Israeli Defense Forces.
Mark P. Suter
Chief Portfolio Strategy Officer
Mark P. Suter, as Chief Portfolio Strategy Officer, is responsible for coordinating the development and implementation of strategies for maximizing return on assets, evaluating various alternatives for asset realization, and directing/approving remedial activities to be implemented within the servicing division. Prior to joining PennyMac, Mr. Suter was Chief Strategy Officer, Chief Governance Officer, Chief Retail Officer, and Head of Diversified Lending for Countrywide Bank, N.A., a subsidiary of Countrywide Financial Corporation where he co-founded the bank and helped to establish it as the fastest organically growing depository in the history of U.S. banking. Prior to joining Countrywide Bank, Mr. Suter founded a merchant banking and consulting organization, served as a Consultant and Managing Associate at the boutique bank consulting firm of Furash & Company, and was on the engagement team that developed modernization strategies for the Federal Home Loan Bank System.
David M. Walker
Chief Credit Officer
David M. Walker, as Chief Credit Officer, is responsible for developing and maintaining the loan grading system, default curves, the loan loss severity matrix, new loan underwriting and modification standards, overseeing representation and warranty claims, evaluating and determining the adequacy of reserves and valuation model loss assumptions, and directing the development of the Mortgage Sponsored Securities Entity. Prior to joining Pennymac, Mr. Walker was Chief Lending Officer for Countrywide Bank, N.A., a subsidiary of Countrywide Financial Corporation, where he was responsible for the Bank’s lending, credit and portfolio management activities. Previously, Mr. Walker spent ten years with Countrywide Financial Corporation in a variety of credit risk management and secondary marketing positions including Chief Credit Officer and Executive Vice President of Secondary Marketing. He was also a Vice President at Citicorp, and a member of McKinsey & Company’s corporate finance practice.

OFHEO, FANNIE MAE AND FREDDIE MAC ANNOUNCE INITIATIVE TO INCREASE MORTGAGE MARKET LIQUIDITY

Washington, DC - OFHEO, Fannie Mae and Freddie Mac today announced a major initiative to increase liquidity in support of the U.S. mortgage market. The initiative is expected to provide up to $200 billion of immediate liquidity to the mortgage-backed securities market. OFHEO estimates that Fannie Mae’s and Freddie Mac’s existing capabilities, combined with this new initiative and the release of the portfolio caps announced in February, should allow the GSEs to purchase or guarantee about $2 trillion in mortgages this year. This capacity will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas. To support growth and further restore market liquidity, OFHEO announced that it would begin to permit a significant portion of the GSEs’ 30 percent OFHEO-directed capital surplus to be invested in mortgages and MBS. As a key part of this initiative, both companies announced that they will begin the process to raise significant capital. Both companies also said they would maintain overall capital levels well in excess of requirements while the mortgage market recovers in order to ensure market confidence and fulfill their public mission. OFHEO announced that Fannie Mae is in full compliance with its Consent Order and that Freddie Mac has one remaining requirement relating to the separation of the Chairman and CEO positions. OFHEO expects to lift these Consent Orders in the near term. In view of this progress, the public purpose of the two companies, and ongoing market conditions, OFHEO concludes that it is appropriate to reduce immediately the existing 30 percent OFHEO-directed capital requirement to a 20 percent level, and will consider further reductions in the future. Additionally, all parties recognize the need for a world-class regulatory structure and have renewed a shared commitment to work for comprehensive GSE reform legislation. “Fannie Mae and Freddie Mac have played a very important and beneficial role in the mortgage markets over the last year,” said OFHEO Director James Lockhart. “Let me be clear – both companies have prudent cushions above the OFHEO-directed capital requirements and have increased their reserves. We believe they can play an even more positive role in providing the stability and liquidity the markets need right now. OFHEO will remain vigilant in supervising the safe and sound operations of these companies, and will act quickly to address any deficiencies that may arise. Furthermore, we recognize the need to ensure that their capital levels are strong, protecting them from unforeseen risks as the market recovers.” Fannie Mae President and Chief Executive Officer Dan Mudd said, “We are working with our customers, regulators and policy makers to minimize foreclosures, increase affordability – and as of today – to restore liquidity in the market. This progressive, sustainable plan will help bring the stability the market needs.” Freddie Mac Chairman and Chief Executive Officer Dick Syron said, “The recent environment demonstrates the benefits of the GSEs to the U.S. economy. This approach allows us to continue to create these benefits in a way that balances our mission to provide stability, liquidity, and affordability consistent with safety and soundness while enhancing the interests of shareholders.”

That drummer has been playing here for a year...

We've been talking about counter intuitive thinking in a sense for about a year so far and the main stream media keeps the mass(s) out of the BUYERS market of a lifetime and guess what,

" the 1,015 existing Sacramento County homes that closed escrow in February were only six fewer than in February 2007. It was the first time in at least two years that year-over-year sales didn't fall by double-digit percentages," reported the Sacramento Bee. DataQuick officials attributed the change partly to more investors buying foreclosed homes. Being in the housing and mortgage mortgage markets I hear average consumers say they are not buying in a bad market? It kills me how the mass(s) think much of the time. The smart money is looming large with the current real estate buffet of offerings. I keep telling people to get into the market - great wealth can be created over a 20 to 30 period if you buy in a very down market and and don't abuse and evaporate your equity, otherwise the uninformed can be truly locked out of the housing market in the decade to come. The feeling in my gut is when this market comes roaring back in a few years your going to see some happy homeowners. Watch the investors - when they start moving (buying) in mass(s) you know we are close to the bottom.

Investor buys accounted for 18.6 percent of February closings in Sacramento County. That's up significantly from 12.7 percent in November and December. DataQuick counts investment homes as those where the property tax bill goes to an address different from the purchase site.

Keep your flashlight on the overall market inventory. Before serious market corrections are felt on the street inventory levels need to come down and we see that happening - a little. One would have to think the influx of capital into the mortgage backed securities market will restore the "willingness" of money to make its way back into the US Real Estate Market.

Foreclosure and Bank Owned Properties

Everyday I see web sites charging for the information I am providing free of charge below. Each bank link will display their REO (Bank Owned Real Estate) etc. Have fun..If you need any more information or help with any of these pleased drop me a line.

http://epaxonline.com/ (Auctions)

http://www.streamfx.com/CW/3-13-2008/REO-California.html (CW California)

http://www.reoexperts.net/ (Coldwell Banker)

http://mortgage.chase.com/pages/other/co_properties_landing.jsp (Chase)

http://www.citimortgage.com/Mortgage/Oreo/SearchListing.do (Citi)

http://bankofamerica.reo.com/search/ (B of A)

http://www.countrywide.com/purchase/f_reo.asp (Country wide national)

http://www.downeysavings.com/ffs (Downey)

http://www.banking.us.hsbc.com/HICServlet?cmd_PropertySearchDefault=cmd_PropertySearchDefault (HSBC)

http://apps.indymacbank.com/Individuals/Realestate/Search.asp (Indy Mac)

http://www.ocwen.com/reo/residential/res_reofindbystate.cfm (OC WIN)

http://realestate.regions.com/servlet/Ore/ForeclosedPropertySearch.jsp (Regions)

http://www.pasreo.com/reo/consumerSvlt/nav/ConsumerNavL1.jsp/requestPage/consumer/PropertySearch.jsp (Wells Fargo)

Going up and coming down..thats just the way....

U.S. home foreclosure filings jumped 60 percent and bank seizures more than doubled in February as rates on adjustable mortgages rose and property owners were unable to sell or refinance amid falling prices.
More than 223,000 properties were in some stage of default, or 1 in every 557 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. Nevada, California and Florida had the highest rates.
``With declining prices, there is a pervasive problem of not being able to refinance or sell,'' said Susan Wachter\, professor of real estate at the University of Pennsylvania's Wharton School in Philadelphia. ``I'm very concerned.''
About $460 billion of adjustable-rate mortgages are scheduled to reset this year and another $420 billion will rise in 2011, according to New York-based analysts at Citigroup Inc. Homeowners faced higher payments as fourth-quarter home prices fell 8.9 percent, the biggest drop in 20 years as measured by the S&P/Case- Shiller home price index.
``This is continuing to worsen,'' Wachter said in an interview. ``It tells us that we are not at a bottom.''
Foreclosure filings are likely to be ``explosive'' in May and June as more payments jump, after remaining at current levels this month and next, Rick Sharga, executive vice president of RealtyTrac, said in an interview. There may be between 750,000 and 1 million bank repossessions in 2008. Bank seizures rose 110 percent in February from a year ago, he said.
`Vicious Cycle'
``We're in a vicious cycle,'' Sharga said. ``We've got depreciating home values and loans resetting at an outstanding volume just as banks are retrenching. Even people who want to buy a home now are having trouble getting a mortgage.''
February was the 26th consecutive month of year-on-year monthly foreclosure increases, Sharga said. Total filings fell 4 percent last month from the previous month, said RealtyTrac, which compiles statistics from a database of more than 1 million properties and monitors default notices, auction sale notices and bank repossessions.
A surge in defaults among subprime borrowers spurred the collapse of the U.S. home loan market and has led more than 100 mortgage companies to stop lending, close or sell themselves. As the value of securities tied to mortgages plummeted, lenders and securities firms have written down more than $180 billion in assets tied to home loans.
Rising foreclosures pushed the inventory of existing homes last year to the highest ever, making it more difficult for property owners to sell.
Fed Efforts
Defaults are jumping even as the Federal Reserve has cut the benchmark interest rate five times since September and the Bush administration has urged lenders to help homeowners by modifying mortgage terms.
The Fed, struggling to contain a crisis of confidence in credit markets, said this week it will for the first time lend Treasuries in exchange for debt that includes mortgage-backed securities.
Economists are forecasting the U.S. housing slump will push the economy into a recession this year and there are no signs housing will recover in 2008. U.S. sales of new and existing homes probably will fall to 5 million this year, down 33 percent from the all-time high of 7.46 million in 2005, before rising to 5.23 million in 2009, Freddie Mac said in a March 3 forecast.
Nevada led the nation with the highest foreclosure rate in February. Filings rose 68 percent last month to 6,167 from the year-earlier period. One in every 165 households there was in default or foreclosure, RealtyTrac said.
California, Florida, Texas
California had the second-highest rate with one in every 242 households. Florida was third with one in every 254.
The highest total number of foreclosure actions was in California, followed by Florida and Texas, RealtyTrac said. California reported a total of 53,629 last month, up 131 percent from February 2007. Florida had a total of 32,447, up 69 percent from the year earlier. Texas filings fell 1 percent to 12,261.
The Cape-Coral/Fort Myers, Florida, metropolitan area recorded the highest foreclosure rate of 229 metro areas tracked in the report. Its figure of one per 84 households was almost seven times the national average. Stockton, California, had the second-highest metro area rate.
The Mortgage Bankers Association said March 6 that mortgage foreclosures rose to a record at the end of 2007 as many borrowers with adjustable-rate loans walked away from properties even before their payments increased.
New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the Mortgage Bankers said in a report.
Borrowers with adjustable-rate subprime mortgages accounted for 42 percent of new foreclosures in the fourth quarter, according to the report. Those loans accounted for about 7 percent of all mortgages, the report said.

Fed to Lend $200 Billion

Since the coordinated actions taken in December 2007, the G-10 central banks have continued to work together closely and to consult regularly on liquidity pressures in funding markets. Pressures in some of these markets have recently increased again. We all continue to work together and will take appropriate steps to address those liquidity pressures.
To that end, today the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing specific measures.
Federal Reserve ActionsThe Federal Reserve announced today an expansion of its securities lending program. Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. As is the case with the current securities lending program, securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27, 2008. The Federal Reserve will consult with primary dealers on technical design features of the TSLF.
In addition, the Federal Open Market Committee has authorized increases in its existing temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008.
The actions announced today supplement the measures announced by the Federal Reserve on Friday to boost the size of the Term Auction Facility to $100 billion and to undertake a series of term repurchase transactions that will cumulate to $100 billion.
Information on Related Actions Being Taken by Other Central

The Federal Reserve, struggling to contain a crisis of confidence in credit markets, plans to lend up to $200 billion in exchange for mortgage-backed securities.
The Fed coordinated the effort with central banks in Europe and Canada, which plan to inject up to $45 billion into their banking systems. The Fed said in a statement it will hold auctions of Treasuries in exchange for debt including AAA rated mortgage securities sold by Fannie Mae, Freddie Mac and by banks.
Today's steps indicate the Fed is increasingly concerned about the investor exodus from mortgage debt, which threatens to deepen the housing contraction and the economic slowdown. While they fall short of the calls by some analysts for the Fed to make outright purchases of mortgage debt, the central bank left the door open to expanding the effort.
``This is the most significant step the Fed has taken so far,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``This relieves some of the pressure'' in the credit markets, he said.
Today's steps are the latest in Chairman Ben S. Bernanke's effort to alleviate increasing strains in financial markets that are curtailing credit to homeowners and companies, even after the Fed lowered its main interest rate by 2.25 percentage points.
Last week, the Fed said it would make up to $200 billion available to banks in a separate initiative to help boost liquidity.
New Tool
The Fed today set up a new tool, the Term Securities Lending Facility, to lend Treasuries to primary dealers for 28- day periods through weekly auctions. The Fed also said it's increasing the amount of dollars available to European central banks through swap lines.
The Federal Open Market Committee authorized increasing currency swap lines with the European Central Bank and Swiss National Bank to $30 billion and $6 billion, respectively, increasing the ECB's line by $10 billion and the Swiss line by $2 billion. The Fed extended the swaps through Sept. 30.
The ECB announced it will lend banks in Europe up to $15 billion for 28 days and the SNB announced a similar auction of up to $6 billion. The Bank of England will offer $20 billion of three-month loans on March 18 and hold another auction on April 15. The Bank of Canada announced plans to purchase $4 billion of securities for 28 days.
Treasuries slid after the announcement, with yields on 10- year notes rising to 3.60 percent at 10:32 a.m. in New York, from 3.46 percent late yesterday.
Rate Expectations
Traders removed bets on the Fed to lower its benchmark rate by a full percentage point, to 2 percent, by the end of the next meeting on March 18, futures showed. The contracts indicate a 60 percent chance of a 0.75 percentage-point reduction.
The Fed's auctions of Treasuries, which will begin March 27, may be secured by collateral including agency and private residential mortgage-backed securities, the Fed said. The central bank ``will consult with primary dealers on technical design features'' of the new tool.
Primary dealers are a group of 20 banks and securities firms that trade Treasuries directly with the Fed Bank of New York. Read what the expert reactions are:

http://blogs.wsj.com/economics/2008/03/11/economists-react-smartest-fed-move/

Carlyle Capital Corp.

Thought this might be of some interest - recieved it in my box. We all know of the Carlyle ( http://www.carlyle.com/) Group.

Numerian March 6, 2008 - 10:50am
Carlyle Capital Corp. failed to meet four margin calls yesterday for $37 million, and has received notice of default from its lenders. The fund is the publicly traded arm of the Carlyle Group, the Washington D.C. equity and leveraged buyout firm that lies at the nexus of corporate and governmental power in the U.S. The Carlyle Group is the modern day source of enormous wealth for the Bush family. George H.W. Bush is a shareholder and former board member, as are key members of his administration such as Frank Carlucci, former head of the CIA, and James A. Baker, former Secretary of State. Carlucci ran the Carlyle Group for many years and Baker served as legal counsel. The Carlyle Group is noted for its substantial contacts with governments around the world, especially in the military and intelligence areas. Former president Ferdinand Ramos of The Philippines, as well as John Major, former U.K. Prime Minister, have served on the board of directors.
Carlyle Capital Corp. was formed in July of 2007 with $300 million in publicly-raised capital. It proceeded to borrow $22 billion and invest in Aaa rated agency securities, which are bonds issued by Fannie Mae and Freddie Mac. These securities have generally been considered tantamount to no-risk U.S. Treasuries, because the agencies are chartered by the U.S. Congress. It is a sign of the increasing depth of the global credit crisis that a fund like Carlyle Capital Corp. is unable to find buyers for such securities [VERY SCARY] to raise cash for margin calls. Similarly, a year ago it would have been unlikely that the fund's lenders – mostly Wall Street banks – would have been issuing any margin calls against a fund holding such highly rated securities. But Wall Street brokers are now applying steep haircuts against even AAA rate securities in an attempt to preserve their own liquidity.
The very high amount of leverage used by the Carlyle Capital Corp, typical of hedge funds, is now working against it as well. Several months ago it received a $150 million line of credit from its parent, the Carlyle Group, but it is unclear why the parent firm is no longer providing such support to its fund. The Carlyle Group is privately owned, and the fund is the only publicly traded entity within the group.
It is now clear that the credit crisis is striking at the very epicenter of business and governmental power in America, and potentially threatening the fortune [ I don't know about that] of the Bush family. For a long time it was assumed that a board seat was being left open for President George W. Bush upon his retirement in 2009, but in recent years that speculation has been dampened since the Carlyle Group requires from its board members a minimum of useful international contacts and some basic business competence.

The light at the end of the tunnel is being worked on...

OFHEO, NY ATTORNEY GENERAL, FANNIE MAE AND FREDDIE MAC SIGN AGREEMENTS TO COMBAT APPRAISAL FRAUD

Washington, DC – OFHEO Director James B. Lockhart announced agreements with OFHEO, New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac (the Enterprises) to strengthen the independence of the appraisal process. For mortgages the Enterprises buy or guarantee, the agreements seek to enhance appraisal and evaluation services that are critical to the residential mortgage process. Flawed appraisals artificially inflate home prices and are often a sign of mortgage fraud and undue influence on appraisers.
"Accurate, independent appraisals are very important to ensuring the safety and soundness of Fannie Mae, Freddie Mac and the mortgage market," said Director Lockhart. "These agreements build upon existing federal and state laws and regulations to further strengthen the single-family home appraisal process. The agreements should help restore confidence in the mortgage market by enhancing underwriting practices, reducing mortgage fraud and making home valuations more reliable. I thank the Attorney General, Fannie Mae and Freddie Mac for their strong roles in this important effort."
There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.
The parties also agreed to establish and the Enterprises fund an Independent Valuation Protection Institute designed to supplement current efforts to provide an appraisal complaint process, mediation of appraisal disputes, and mortgage fraud reporting. The agreement seeks the comments and concurrence of the federal banking agencies and solicits the comments of market participants that will be considered in making amendments to the Code during the implementation process. “Attorney General Cuomo and I understand these are strong steps which will improve our mortgage finance system,” said Lockhart. “This Code is one way of ensuring that homebuyers and secondary mortgage market investors get the fair and independent property valuations that they expect and deserve. At the same time, I will be closely monitoring the nine-month period prior to implementation. OFHEO is committed to working closely with fellow regulators, the New York Attorney General, Fannie Mae, Freddie Mac, appraisers, lenders and other market participants to assure that the roll-out of the new code builds upon best practices, recognizes constructive comments to identify further refinements, and avoids unintended consequences." "In addition, OFHEO will continue its work to combat mortgage fraud, including its joint efforts with state and federal regulators. It is imperative that state appraisal licensing bodies be active in policing appraisal practices at the state level and that federal agencies share information on a timely basis in order to assist law enforcement and regulatory efforts to fight mortgage fraud," Lockhart said.

Thornburg

Thornburg doesn’t do subprime and is well known throughout the Bay Area for its single-minded focus on wealthy creditworthy borrowers.

The news keeps getting worse for Thornburg Mortgage (TMA). The Santa Fe, N.M., jumbo mortgage lender saw its shares plunge 23% in premarket trading Monday after the company said it received more margin calls as the market value of its mortgage securities holdings continued to fall. Thornburg, whose shares fell sharply late last week after the company said it received $300 million in calls for more collateral, said Monday morning that it has gotten an added $270 million in margin calls since then - and that it hasn’t been able to meet most of them. The company said it ”is working to meet all of its outstanding margin calls within a time frame acceptable to its lenders by either selling portfolio securities or raising additional debt or equity capital.” With Thornburg’s shares having lost three-quarters of their value over the past year, any capital-raising will come at a steep price to existing shareholders.
The company’s CEO, Larry Goldstone, blamed a quirk of fair value accounting for Thornburg’s plight. “The turmoil in the mortgage financing market that began last summer continues to be exacerbated by the mark-to-market accounting rules which are forcing companies to take unrealized write-downs on assets they have no intention of selling,” he said Monday. “In this environment, the current market price of assets has become disconnected from their underlying recoverable value, resulting in increased volatility and imprecise quarter-to-quarter comparisons of asset valuations.”
Goldstone isn’t the first to make this claim, but he remains upbeat about the prospect that Thornburg will muddle through the mortgage mess and realize higher profits. “These difficult market conditions have also created increased profit opportunities as lower-priced mortgage assets will translate into wider mortgage spreads and improved portfolio margins going forward,” Goldstone said. “We remain committed to manage through these challenging and volatile markets and remain focused on building long-term value for shareholders.”