THE BASIS POINT

Bank Failure Update. Pre-QE2 Bond Strategy. Mozilo’s $67.5m Fine vs. 2007 Pay.

 

Mozilo’s $67.5m Fine vs. His 2007 Compensation
There will be no civil fraud trial for Angelo Mozilo. On Friday he agreed to settle fraud charges with the U.S. Securities and Exchange Commission by paying a fine of $67.5 million. It is the highest fine ever for an executive of a public company, although critics are quick to point out that in 2007 alone Mozilo took in $121.5 million from exercising Countrywide stock options and was awarded another $22.1 million of compensation.

Mortgage Ponzi Scheme Busted
In an unrelated, but interesting to compare, story, Peter Bakowski (a mortgage banker in Tampa, Florida) was sentenced by a federal judge to more than 15 years in federal prison with a fine of $16.1 million after he pleaded guilty on charges related to a mortgage fraud scheme. “Officials say the Tampa resident was involved in a $20 million mortgage fraud Ponzi-type scheme. More than 30 victims, including investors and institutions, were affected, as were more than 150 properties. Officials say Bakowski sold the same mortgage to multiple people, and then paid returns on the preceding investor’s investments with money from later investors.”

Bank Failures Friday
For bank closings on Friday we had WestBridge Bank and Trust (MO) taken over by the Missouri Division of Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver who in turn entered into a purchase and assumption agreement with Midland States Bank (IL). Premier Bank (MO) had a similar fate, and is now being run by Providence Bank (MO). And Security Savings Bank (KS) was closed by the OTS, the FDIC came in as receiver, and Simmons First National Bank (Arkansas) assumed all of the deposits.

Race To Non-Treasury/Mortgage Bonds Before QE2?
On Friday Ben Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high. Is this late breaking news? No, it is not. Of slightly more interest was the fact that he didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its meeting in a few weeks. The FOMC is considering ways they can stimulate the economy – but of course one guy can’t motivate the entire economy to grow. Much of expansion will depend on banks and companies using the trillions of dollars they are sitting on, and consumers picking up their spending. Overall inflation is low, but commodity prices are on fire and gold prices continue to set new highs. The U.S. dollar, the global reserve currency, keeps sinking amid expectations that the Federal Reserve will dilute the existing stock starting in a few weeks. On the fixed-income side, “junk bond” issuance already set a record for the year, with demand for high-yield debt narrowing spreads to Treasuries. Investors are pouring money into emerging markets debt issued in local currencies by less-developed countries.

Appraisal Reg Update
As we near the end of the Home Valuation Code of Conduct (HVCC), which regulated that loan officers are not able to talk to home appraisers, it is good to remember that in late 2008 HVCC was not really considered a regulatory requirement – it was more of a compromise between the agencies and New York attorney general Cuomo. HVCC was included in the agreements with Fannie Mae and Freddie Mac, and here’s how it will change going forward. Freddie is:

“implementing several changes to our appraisal, credit, and counterparty eligibility requirements that align with risk management practices appropriate for today’s marketplace. These changes allow Freddie Mac to more effectively address market risks as we continue to support a stable mortgage industry and long-term homeownership success.”

Fannie also told its clients that the “Appraiser Independence Requirements” replace the HVCC. “These updated requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market. The HVCC is being replaced by the Appraiser Independence Requirements; however, all conventional, single-family mortgage loans with application dates on or after May 1, 2009, must additionally comply with the HVCC until the earlier of the release of the Interim Final Rules by the Federal Reserve as required by the Dodd-Frank Wall Street Reform” legislation.

Starting Friday Freddie is adopting:

“appraiser independence requirements that maintain the spirit and intent of the HVCC. Freddie Mac has worked with the Federal Housing Finance Agency and Fannie Mae to develop appraisal independence requirements to replace the HVCC, which is expected to sunset this month. Effective for mortgages with applications dated on or after February 1, 2011, we are requiring specific photographs of the subject property’s interior for all appraisals requiring interior and exterior inspections. Today’s Bulletin also includes important reminders about our current appraisal requirements for comparable sales and the appraiser’s opinion on market value.”

 

WANT TO OUTSMART YOUR FRIENDS?

GET OUR NEWSLETTER

Comments [ 0 ]

WHAT DID WE MISS? COMMENT BELOW.

All comments reviewed before publishing.

2 × 5 =

x