I should know's Comments

Credit Markets Take a Beating

Thu, 15 Jan 2009 08:59:22 -0500

Wells Fargo’s Chairman, Dick Kovacevich, was fit to be tied at the meeting with Bernanke; he did NOT want to sign the documents giving the Feds any ownership or “say” in Wells Fargo & Co, he did NOT want the money.

It took the rest of the CEOs in attendance, especially Ken Lewis, to convince him to “go along” with the plan “for the good of others”. He was told that if he decided to “op-out” he would look like he was “un American”. He and the others were told by Bernanke that “they had little to say about it”, if they didn’t take the money and sign the agreement THAT DAY, they would suffer the consequences (in so many words). Treasury Secretary Henry Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy.

Yes, Wells Fargo & Co stock is down and yes, they will have more loan losses in the future, but far less as a percentage than 99% of the others. Wells is a conservative lender and did NO option ARMs on their own. They certainly obtained some heavy baggage with their Wachovia purchase, but they also got hundreds of millions in tax write-offs that they can use for years to come. They are now the nation’s biggest bank as far as bank branches. They are second in total assets and first in market cap. Short term, 12 to 18 months, their stock is going to be in the toilet, long term, they are the “bank” to own.

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On Jan 14 03:16 PM curbs-in wrote:

> John... You are long WFC? As I recall they were the bank that made statements in October that they were rock solid, then turned around and took the taxpayers money. Is that the same bank? Isn't that considered lying to investors? If they were so strong, why didn't they turn down TARP funds?

The Easiest Hardest Mortgage Question Ever

Thu, 08 Jan 2009 08:23:19 -0500

The below is correct. I round my monthly mortgage payment up and pay an additional $130 each month towards principal. The payment remains the same, but the portion of next month's payment to interest is smaller and the portion applied to principle is increased equivalent. MOST mortgage companies calculate interest on the monthly balance, not the original amortizing balance.

On Jan 08 02:17 AM RatWatcher wrote:

> Unlike credit cards, additional payments on a mortgage do not reduce
> the required 'minimum' payment, which is fixed. Instead, the loan
> matures ahead of schedule. Interest is charged only on the outstanding
> principal balance...so, each payment after a one-time buydown has
> a little less interest, and a little more applied to principal. Done
> regularly (say, $100/mo additional principal) can significantly shorten
> a loan and the total cost thereof.

Dick Kovacevich on Banks and This Financial Crisis

Tue, 30 Dec 2008 08:39:44 -0500

If all banks, especially those who call themselves “banks” but are really stock and investment houses, legalized casinos that allow us to take a risk in hope of financial rewards such as Bear Stearns, Lehman Brothers, Goldman Sachs, Morgan Stanley, Merril Lynch, would have acted in the same conservative manner as Wells Fargo & Co in NOT hawking, buying and selling derivatives and other highly risky investments, and did NOT do Option ARMS, and did a limited amount of subprime loans with good underwriting standards and caps on all overages at 150 basis points versus the unlimited and average amount of 600 basis points, we would probably NOT be in this financial meltdown. Sure, Wells Fargo & Co did plenty of loans that they probably shouldn’t have done, but a minute percentage as compared to most other major mortgage lenders.

The Problem with Option ARMs

Sat, 27 Dec 2008 10:05:06 -0500

CORRECTION:

- - attempted to shield themselves from criticism and cloak themselves in altruism by throwing a few - "million" - over to the Center for Responsible Lending.

The Problem with Option ARMs

Sat, 27 Dec 2008 10:01:16 -0500

I competed with Herbert and Marion Sandler and their company, World Savings Bank, for years and years. Your statement that “They clearly cared more about underwriting than most mortgage lenders, and they didn't found the Center for Responsible Lending as some kind of PR stunt” is completely inaccurate. Their standards were almost nonexistent. They would approve nearly anyone and give them whatever program or product they wanted, but pushed the product that threw-off the most money to WSB, the option ARMS. Most of their loans were originated, not by WSB employed loan originators that may or may not have understood the pitfalls of this toxic loan, but by slimy mortgage brokers who only care about making the sale and making as much money as possible from the particular loan they were pushing; most often, the Option ARM. WSB paid the highest commission and SRP on Option ARMS, not standard ARMs or fixed rate products.

Here is a direct quote by Herb Sandler: “You have to understand how independent brokers work, they are the whores of the world.”

Despite that distaste, World Savings made extensive use of brokers. By 2006, they were generating some 60 percent of its loan business, he acknowledged. He said he was compelled to do so because of brokers were a dominant force in the mortgage industry. Money trumped ethics once again for the Sandlers.

I lost some business to these hucksters and snake-oil-salesman that were pushing this product, and at one-time the upper managers of our company went to the senior managers and requested that we be allowed to originate these loans, if even for the purpose of showing just how bad they were. When we were competing against this product and tried to tell buyers, Realtors, and builders how unethical the product was, they usually said we were just “bad mouthing” it because we couldn’t do them”. Our senior managers said NO, we would never do the Option ARM. The product was not good for our customers and was not good for our company and stakeholders. We didn’t like that answer, but it sure turned-out to be right. When the miscreant huckster team of Herbert and Marion Sandler sold out to Wachovia, one of their big selling points was the huge income they were making on these Option ARMS. When they became part of the Wachovia board of directors, they continued to press the origination of these loans and even convinced Wachovia to have it available to their bank branch originators. The bank branch originators hated the product and sold almost none of it.

Going back to your statement “They clearly cared more about underwriting than most mortgage lenders, and they didn't found the Center for Responsible Lending as some kind of PR stunt”; you are seriously mistaken, they could not have cared less about their slimy, pathetic underwriting standards and absolutely, positively attempted to shield themselves from criticism and cloak themselves in altruism by throwing a few milling over to the Center for Responsible Lending. It was very cleaver on their part, not unlike the support and financial contribution made by Bernard Madoff, the huckster extraordinaire, master of the Ponzi scheme, that were made to legitimate organizations. The Option ARM product was a giant Ponzi scheme dependant on a house going up in value to refinance and pay-off the unpaid negative amortization on the Option ARM.

Madoff and Herbert and Marion Sandler, three peas in a pod.

Fear and Loathing in 2009

Thu, 25 Dec 2008 08:44:36 -0500

Todd,
Overall, good analogy of the upcoming market.

I have to agree with the below comment. Wells Fargo originated and purchased through wholesale, broker-in, and correspondent, ZERO Option Arm loans; NONE. They wouldn't do them. The senior managers did not think the loans were good for its customers or good for WFC.

True, they inherited a bunch with their Wachovia acquisition, but WFC already provided for $38 billion in Wachovia losses (after Wachovia ALREADY wrote-down billions on these loans). A $38 billion loss on $182 billion of mortgages "says" that 21% of these loans have NO value whatsoever, or 41% only have 50 cents on the dollar remaining. Even with the worse case forclosure on these types of loans, recapturing 50 cents on the dollar is a slam dunk. WFC will not come out unscathed, but they will be a strong survivor. The have the best senior management and a conservative lending mentality. Their loans are the highest performing in the industry. I panicked back in July and sold a bunch of their stock at $20.75 and have regretted it ever since. I wouldn't sell them short again.

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On Dec 24 09:41 PM E Nuff Sed wrote:

> Wells-Fargo has already provided for 39 Billion losses on the 182
> Billion mortgage book it has taken from Wachovia.
>
> Looks like you are assuming losses will be a lot worse than that.

How Will We Finance the MBS Fix?

Tue, 23 Dec 2008 09:00:41 -0500

Your 957 word, 23 paragraph rhetorical oratory could have been summed up in a few sentences.

The government’s proposal to buy up MBS has substantial unresolved issues. There is plenty of excessive work in servicing toxic loans versus well performing loans. The government is ill equipped to perform this task and customarily boggles these type of tasks. A small number of major banks and mortgage servicing companies are qualified and equipped to service the MBS purchased by the Feds such as Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC). There may be a buying opportunity with one or more of these companies.

Anthony, your picture, or mug shot looks like is was taken in the exercise yard of Attica Correctional Facility. The fact that you worked in marketing, originating, processing, closing, secondary markets, and even foreclosures does NOT make you a “subject matter expert”. A blind, one-armed monkey could and probably does do those small tasks on a daily basis.

SHEESH!

Here Comes a Consumer Killer

Sun, 30 Nov 2008 09:45:26 -0500

WHY would you have one nickle of debt at 7.4% interest unless you don't have the cash on hand to buy that burrito or IPod and not use your handy-dandy credit card?

Three Financial Stocks Worth Holding

Sun, 30 Nov 2008 09:24:51 -0500

I like Wells and JP Morgan Chase. B of A bit-off a little more than they can chew, especially with Countrywide. They could of had the "parts' of the company they wanted and little, if any, of the toxic loans. AND, they could of had it for pennies.

Kovacevich's Delayed Retirement: Bove's Criticism is Totally Off Base

Fri, 07 Nov 2008 11:28:03 -0500

Wells Fargo & Co has a great record for their merger and integration of other banks and financial institutions. When Norwest Bank merged with Wells Fargo, Norwest was the survivor. That merger is considered the best and smoothest mid-sized bank merger in history, masterminded by Dick Kovacevich who was CEO of Norwest at the time. He is still onboard and this merger is his baby. I am sure he will make this his "crowning achievement". Give him time, he has the best management team in the industry!

A Dual Strategy to Balance Banking Sector Trade

Tue, 04 Nov 2008 12:57:40 -0500

Your quote: "Knowing other banks will follow suit, JPM has taken a proactive lead to weaken their competitors. BofA and Wells have weaker balance sheets and more pressing needs. Both these companies are undertaking transformative mergers outside of their areas of expertise."

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I would disagree with the above statement. Wells Fargo & Co has a great record for their merger and integration of other banks and financial institutions. When Norwest Bank merged with Wells Fargo, Norwest was the survivor. That merger is considered the best and smoothest major bank merger in history, masterminded by Dick Kovacevich who was CEO of Norwest at the time. He is still onboard and this merger is his baby. I DON’T disagree that with the acquisition of Wachovia, Wells Fargo took on a bunch of stinky loans originated by Great Western; now they are going to have to do something about them. However, I think they have planned a $71 billion write down on these loans. No bank is immune from meltdown in this volatile market, but Wells Fargo is up 12% from this day last year, while at the same time, the Dow is down 27%.

Increased Government Investment in Banks?

Tue, 04 Nov 2008 12:21:15 -0500

mik123
Nov 04 08:47 AM

If TARP states the money can not be used for acquisitions and can only be used for lending as Barney Frank stated Friday, I don't see how there will be regulatory approval on the PNC -Nat City deal. That's probably why you haven't heard of any other deals. National City can stand alone and save thousands of jobs. TARP was passed to help National City. Blah, blah, blah. . .

Call Latourette, Barney Frank, Sen Shumer and your local house and senate representatives and demand National Citys share of TARP. Blah, blah, blah. . .

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YEA, Barney Frank, there’s a pillar of credibility and knowledge. I think he is one of the miscreants that got us into this mess. Yea, call Barney, call bleeding-heart Shumer, see what those two nincompoops can do for you.

Sorry about the National City stocks you bought on the “recommendation” of 10 or so nitwits.

The Trouble with Rescues and Stimulus

Sun, 02 Nov 2008 10:18:37 -0500

@VIC: Bill Ackman on Wachovia

Wed, 08 Oct 2008 08:36:28 -0400

I'm long on WF and I'm not sure if I want their offer to go through or not. The Feds aren't going to cover or buy 100% of Wachovia's toxic loans and they probably have the most in the country just behind WaMu at #1 and Countrywide (B of A) at #2. If the incompetent dopes at Citi take Wachovia at a price higher than the Wells offer, Wells will have the opportunity to come-in and take the whole shebang 18 to 24 months from now. Buying Wachovia will not make the Citi higher-ups any smarter; they couldn’t run a 7-11 effectively.

Time to Hoard Cash - Cramer's Mad Money (10/6/08)

Tue, 07 Oct 2008 09:20:00 -0400

The FDIC has a little less than 4/5ths of a cent on hand for every dollar of deposits and 1.25 cents for every dollar of insured deposits. There is approximately $45 billion in FDIC’s capital fund that would be used to payback or cover insured deposits totaling about $4.29 trillion. There is approximately $2.1 TRILLION in uninsured funds. I doubt that people would get a “warm & fuzzy” feeling if they new the facts and assessed the risk. Cash is king; real cash in hand.

Worrying About Large-Deposit Bank Runs

Sat, 27 Sep 2008 09:07:26 -0400

I pulled all of my money out of my three banks yesterday. Now I have to find a safe, secure place to stash this $145.95. Any suggestions??

Foreclosures Actually Dropped (If You Don't Count Five States)

Sat, 13 Sep 2008 08:29:00 -0400

Excellent and informative logic from this story. It reminds me somewhat of the below logical statement:

“Outside of the killings, Washington has one of the lowest crime rates in the country. ” - - - Mayor Marion Barry, Washington, DC“

Foreclosures Actually Dropped (If You Don't Count Five States)

Sat, 13 Sep 2008 08:26:19 -0400

Comment by The Realist:

Yeah, and if I don't count my belly I weight only 170 pounds.

Who gets to decide what we arbitrarily strip from these numbers. Like S&P earnings minus financials? What does that mean?

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Come on now Realist, 170? You and I know it would be more like 175, 180 maybe. . .

Bill Ackman's Letter to Paulson On Restructuring Plan

Sun, 07 Sep 2008 09:00:00 -0400

A number of things here:

Did Ackman really "send a letter on Friday"? If so, it will probably get there by Tuesday maybe Wednesday.

I'm taking a guess that Paulson may be pretty busy over the weekend and this upcoming week and "may" not get too much time to peruse through his mail.

I'll go out on a limb here and say that IF the letter makes it, and IF Paulson reads it, he will not give a rat's ass what Ackman has to say about this issue; neither do 99.9999999% of the world's population.

Investing in the Housing Crisis Aftermath: Stock Picks and Pans

Sun, 07 Sep 2008 08:30:15 -0400

woodchuck,
You comments are right on target. They also gave me a good laugh this morning.

Signed,
Sir Ramjam Delilah Funkyboogaloo-Smythe
Chief Academic Officer(Provost)
Chulafinee City Community College

Investing in the Housing Crisis Aftermath: Stock Picks and Pans

Sun, 07 Sep 2008 08:28:46 -0400

The Reality of Real Estate and the Economy

Fri, 05 Sep 2008 09:49:46 -0400

My personal disclosure: I spent 40 years in mortgage lending and real estate. Over this time, I held a variety of positions, licenses and been granted a variety of authorities in lending and real estate. As an Area Manager, I personally originated and or oversaw more than $20 BILLION in retail mortgage fundings. Over the past 6 years prior to my retirement, my area was funding in excess of $100 million per month in retail originated mortgages. I did my first conventional loan in 1965. I speak from my various experiences.

FHA section 245(a) loans were very, very rare indeed; almost never used. There are several plans under this section with most involving some degree of "negative amortization" i.e., the payments are not sufficient to pay the interest due or pay off the loan within the required period of years. When given the option, borrowers almost always choose the lowest payment and, therefore, incurred negative amortization, not at all unlike the current toxic Option ARMs.

Unlike the writer of the above article who stated “ I cannot recall the last time I had a borrower who actually met the published guidelines”, by far the vast majority of our borrowers either met or slightly exceeded normal and customary guidelines.

The writers statement that “ . . in reality, in mid-2007, 60/65 was good enough, with other relevant factors, to get F/F’s highest level loan approvals” is absolutely ridiculous. Sure, EXCEPTIONS were made to normal underwriting guidelines for ratios, but they were few and far between. If the LTV was 70% or below, greater exceptions to the ratios would be made. If the bowers had significantly large cash reserves, an exception might be made.

Yes, F/F both had relatively similar automated underwriting systems that most brokers and mom & pop mortgage lenders would use (<25% of all loan originations), but most loans were underwritten through big lenders’ proprietary automated underwriting systems. Some lenders such as Countrywide and Great Western stretched their guidelines to meet F/F guidelines, but most lenders such as Chase and Wells Fargo & Co used guidelines more in-line with normal and customary ratios of 28/36 or 30/38 or 40. The statement “In December, 2007 a 605 mid credit score was also good enough for the best that F/F had, at 100% LTV” may or may not be true; I very seldom had a loan approved with a credit score below 620, and if we did, we required at least a 10% down payment, usually more. Yea, we certainly missed out on a lot of business because we were more conservative and didn’t push the envelope on every loan whenever possible, but like most large respectable lenders, we tried to do the right thing for our customers, stockholders, and stakeholders. The vast majority of outstanding mortgages are NOT liar loans or subprime loans. They’re just not.

And just as an FYI in reference to the thought that all these past due loans should be refinance at a lower rate and better turns at the taxpayers’ expense, on July 16, Moody’s Investors Service noted that 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008. That number was well north of 50 percent when looking at previously-modified loans 60 or more days delinquent.

The Reality of Real Estate and the Economy

Fri, 05 Sep 2008 08:45:59 -0400

Jimmy,

EXCELLENT and 100% correct.

Option ARM Time Bomb About To Explode

Wed, 03 Sep 2008 09:27:26 -0400

WaMu, Countrywide, Wachovia, Indy Mac, Downey, and Bear Stearns were/are among the largest Option ARM lenders. Option ARMs are literally worthless with no bids found for many months for these assets. Bank of America is now stuck with the loan portfolio previously originated and held by Countrywide. A great deal of these B of A loans are in California, Nevada, and Florida, states that have been hit hard by the housing crisis. WaMu “specialized” in Option ARMs starting in 2000; that was their biggest and primary product. Their entire sales force was addicted to this product because of the “easy sell” and higher commissions. The sales force turned many builders and real estate agents into Option ARM junkies.

Even though there was great pressure put on senior management from the sales force at Wells Fargo Home Mortgage to do these loans, Wells Fargo elected not to do them. They said it was not a product that was good for their customers or good for the company. They did NO Option ARMS, NONE. Turns out they were right.

Mortgage/Credit Trends [Housing Tracker]

Mon, 25 Aug 2008 08:38:25 -0400

Jason, ditto.. .. . .

Additionally, as an FYI to those interested in the Option ARM issue, Wells Fargo did ZERO Option ARMS, none. They didn't like the program and didn't think it was the right thing for their customer or bank. The sales field lost an opportunity to do 20% or more additional business during the Option ARM hay-days ('01 through '06) but the senior management stuck to their guns. Turns out they were right.

Checking In on George Soros

Sat, 16 Aug 2008 09:18:23 -0400

The above comments are correct; this article is full of discrepancies and incorrect data. This is just another example of the quality and value of 99.98% of these stock advisors/soothsayer/sn... oil salesman’s advice and recommendations.

The vast majority of these so called financial advisors and “Strategic Wealth Builders” are gene-related to the Snake Oil salesman from the late 1800s and early 1900. Yea, there are a few great ones like Warren Buffett, but most of these guys make money off of trading stocks back and forth (usually churning) using somebody else’s money. IF you guys are so bright and smart (NOT the above commenters) why are you “selling, touting, and hawking” your advice at $39.95 a month when you could be making millions per day investing, buying, and selling based on your knowledge of the market. The advertisement I most enjoy is the one that professes that he turned $33,000 into $7,000,000 in less than two years. YEA, right. IF he did that, then he should be able to turn his $7,000,000 into $1,484,848,485 in the next 2 1/2 years or so and retire comfortably rather that pimp his DVD and book at $79 bucks apiece or so. The other thing is, if all these guys profess to never “take a haircut” why are so many bald??

Checking In on George Soros

Sat, 16 Aug 2008 09:16:57 -0400

The above comments are correct; this article is full of discrepancies and incorrect data. This is just another example of the quality and value of 99.98% of these stock advisors/soothsayer/sn... salesman’s advice and recommendations. The vast majority of these so called financial advisors and “Strategic Wealth Builders” are gene-related to the Snake Oil salesman from the late 1800s and early 1900. Yea, there are a few great ones like Warren Buffett, but most of these guys make money off of trading stocks back and forth (usually churning) using somebody else’s money. IF you guys are so bright and smart (NOT the above commenters) why are you “selling, touting, and hawking” your advice at $39.95 a month when you could be making millions per day investing, buying, and selling based on your knowledge of the market. The advertisement I most enjoy is the one that professes that he turned $33,000 into $7,000,000 in less than two years. YEA, right. IF he did that, then he should be able to turn his $7,000,000 into $1,484,848,485 in the next 2 1/2 years or so and retire comfortably rather that pimp his DVD and book at $79 bucks apiece or so. The other thing is, if all these guys profess to never “take a haircut” why are so many bald??

A Very Cheap Shot on the WSJ Editorial Page

Sun, 27 Jul 2008 11:07:44 -0400

I just re-read the WSJ editorial and I think it's right on target. What part is so incorrect that it should be called a "Cheap Shot"?

Writedowns and Capital Raised by Financial Firms

Sun, 29 Jun 2008 09:49:03 -0400

You’ve got to buy when everybody says "sell", and sell when the crowds say "buy". While watching the stock market and getting caught up in the dramatic rise in price and the buying frenzy, I asked my stock broker about Apple stock. He said it was a great buy so I bought 500 shares on 9/18/06 at $73.81 each or a total of $36,905. On May 14th 2007 my broker called and said the stock was up to $109.62, did I want to buy some more. NO way I said, too costly. Through Spring, Summer, and Fall of 2007 Apple stock was going through the roof; it was skyrocketing, it was Wall Street’s new favorite stock. I was really upset with myself because I felt like this express train to financial nirvana was leaving without me. I got caught-up in the herd mentality (sounds a little like the real estate market, doesn’t it?). On December 11th 2007 I frantically called my stock broker and told him to buy 1000 shares; I didn’t care what the price was, I wasn’t going to be left out of this market, these rising prices. The price was $194.75. In February and early March I was tired of the roller coaster ride and was ready to dump everything at about $120 a share; more herd mentality. I still own the stock, I like the company. Wells Fargo is a GREAT, well-run company that’s been around for 156 years. They have a well known and well respected brand name as well know world-wide as Coke and McDonalds. Sure, they are getting beat-up and will suffer additional losses due to the credit and real estate meltdown, but they will be left standing and strong, ready to gain market share from their competitors. I think Warren Buffet is its biggest investor and Wells Fargo & Co is his third most popular stock. I own some WFC stock and I’m not happy about its price reduction, but like Warren Buffet, I’m in for the long haul. When asked “When is the best time to sell a stock”, Warren Buffet answered “Never”.

More on HELOCs, Second Liens and Rose Colored Glasses

Thu, 29 May 2008 08:33:25 -0400

Your data is informative and interesting; very well done. However, your charts are so full of your logos and self promotion that they are nearly impossible to read. The last two charts with line graphs use similar colors and pencil thin lines. Increase the color contrast and line size. Also, please stop twisting them sideways, it doesn't change the outcome, it just makes it harder to read, once again.