Tuesday, March 25, 2008
Countrywide Execs Get Into the Investing Game, You Should Too....
Some say Countrywide Financial executives helped destabilize the mortgage market by lowering lending standards and using shady sales policies. But should these same execs now try and fix this mess?
That's the question on some analysts' minds after investment management firms BlackRock (nyse: BLK - news - people ) and Highfields Capital Management announced they are funding a venture, which will be called Private National Mortgage Acceptance or PennyMac, and will be run by Stanford Kurland, a 27-year veteran of Countrywide Financial (nyse: CFC - news - people ). Kurland served as president and chief operating officer at the lender through 2006.
PennyMac will buy distressed mortgages at rock bottom prices with capital raised from private investors and turn around and sell the mortgages for a profit. The aim, Kurland said, is to avoid home foreclosures and restructure loans so borrowers can maintain payments and stay in their homes.
PennyMac will acquire loans from financial institutions seeking to reduce their mortgage exposure. BlackRock Chief Executive Officer Laurence D. Fink said PennyMac is looking to bring “patient capital to the unprecedented distress in residential mortgages.”
Highfields Co-Founder Jonathon S. Jacobson said although there has been significant attention on write-downs of mortgage-related losses, "whole loan losses have barely begun to materialize.” But Jacobson expects losses to soar over the next two to three years. “PennyMac will be extraordinarily well positioned as both a buyer and servicer of these assets,” Jacobson said.
Meanwhile, some question whether executives from a company facing probes by the Federal Bureau of Investigation for securities fraud, as well as lawsuits and regulatory questioning, should profit from a downturn in the mortgage market it helped to create. (See “ Countrywide’s New Bad News”)
"He (Kurland) won't be the first or the last person trying to make money on both sides of a trade," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods who covers Countrywide.
"On the one hand you could make the case that he was (with) the company that made all these loans. On the other hand, what we need right now is to find some buyers for these assets," Cannon said. "Is it fair? Hard to say."
David Spector, the former co-head of global residential mortgages for Morgan Stanley, will be chief investment officer of PennyMac.
Other former Countrywide execs will also be part of PennyMac's management team. These include: David M. Walker, the former chief lending officer for Countrywide Bank, a subsidiary of Countrywide Financial, who will be chief credit officer at PennyMac; Mark P. Suter, the former chief strategy officer for Countrywide Bank, who will be chief portfolio strategy officer at PennyMac; and Michael L. Muir, the former chief financial officer for Countrywide Bank, who will be chief capital markets officer.
The firm’s operations will be based in Calabasas, Calif., headquarters of Countrywide.
Countrywide lost nearly $1.6 billion in the last six months of 2007 as higher defaults forced the lender to boost its provisions for anticipated losses. In January, Bank of America (nyse: BAC - news - people ) agreed to buy Countrywide for $4 billion. (See " Countrywide On Clearance")
The Associated Press contributed to this article.
That's the question on some analysts' minds after investment management firms BlackRock (nyse: BLK - news - people ) and Highfields Capital Management announced they are funding a venture, which will be called Private National Mortgage Acceptance or PennyMac, and will be run by Stanford Kurland, a 27-year veteran of Countrywide Financial (nyse: CFC - news - people ). Kurland served as president and chief operating officer at the lender through 2006.
PennyMac will buy distressed mortgages at rock bottom prices with capital raised from private investors and turn around and sell the mortgages for a profit. The aim, Kurland said, is to avoid home foreclosures and restructure loans so borrowers can maintain payments and stay in their homes.
PennyMac will acquire loans from financial institutions seeking to reduce their mortgage exposure. BlackRock Chief Executive Officer Laurence D. Fink said PennyMac is looking to bring “patient capital to the unprecedented distress in residential mortgages.”
Highfields Co-Founder Jonathon S. Jacobson said although there has been significant attention on write-downs of mortgage-related losses, "whole loan losses have barely begun to materialize.” But Jacobson expects losses to soar over the next two to three years. “PennyMac will be extraordinarily well positioned as both a buyer and servicer of these assets,” Jacobson said.
Meanwhile, some question whether executives from a company facing probes by the Federal Bureau of Investigation for securities fraud, as well as lawsuits and regulatory questioning, should profit from a downturn in the mortgage market it helped to create. (See “ Countrywide’s New Bad News”)
"He (Kurland) won't be the first or the last person trying to make money on both sides of a trade," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods who covers Countrywide.
"On the one hand you could make the case that he was (with) the company that made all these loans. On the other hand, what we need right now is to find some buyers for these assets," Cannon said. "Is it fair? Hard to say."
David Spector, the former co-head of global residential mortgages for Morgan Stanley, will be chief investment officer of PennyMac.
Other former Countrywide execs will also be part of PennyMac's management team. These include: David M. Walker, the former chief lending officer for Countrywide Bank, a subsidiary of Countrywide Financial, who will be chief credit officer at PennyMac; Mark P. Suter, the former chief strategy officer for Countrywide Bank, who will be chief portfolio strategy officer at PennyMac; and Michael L. Muir, the former chief financial officer for Countrywide Bank, who will be chief capital markets officer.
The firm’s operations will be based in Calabasas, Calif., headquarters of Countrywide.
Countrywide lost nearly $1.6 billion in the last six months of 2007 as higher defaults forced the lender to boost its provisions for anticipated losses. In January, Bank of America (nyse: BAC - news - people ) agreed to buy Countrywide for $4 billion. (See " Countrywide On Clearance")
The Associated Press contributed to this article.
Now Is The Time To Buy!
WASHINGTON (Thomson Financial) - The collapse of US home prices was spread across the whole country according to the S&P/Case-Shiller Home Price Indexes released today.
The January 20-city price index was down 10.7 pct from the year before, in line with expectations of a 10.5 pct decline. The January-to-December decline was 2.4 pct.
The 10-city composite index, which contains more of the large 'bubble markets', was down a record 11.4 pct year-over-year and down 2.3 pct for the month.
Prices fell in 19 of the top 20 markets, with 10 posting double-digit declines and 13 posting their single biggest monthly declines.
'Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,' says David M. Blitzer, chairman of the Index Committee at Standard & Poor's. 'Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis.'
None of the metro areas had a monthly increase and only one, Charlotte, North Carolina, managed a meagre 1.8 pct annual increase.
'The year-over-year rate of decline on a nationwide basis is now greater than seen at the end of the 1990-91 recession,' said MFR economist Joshua Shapiro. 'With supply overhang enormous and mortgage financing tougher to obtain, home prices are going to decline considerably further in the quarters ahead, most likely to a double-digit pace on a yearly basis before not too long.'
Former bubble markets were closing in on 20 pct annual price drops in February. Miami and Las Vegas were the worst performers, both falling 19.3 pct. Phoenix was a close third with prices off 18.2 pct.
Monday, the National Association of Realtors existing home resales report for February showed a 2.9 pct increase in sales, but the median price of a single-family house was down 8.7 pct year-over-year and the downward price pressure from the inventory overhang, at 9.2 months, was still substantial.
Analysts warned against confusing a one-month boost in the volume of sales with any near-term possibility of prices rebounding. In fact, 'falling home prices were a key factor in the 2.9% rebound in February existing home sales,' said Ashraf Laidi of CMC Markets.
The January 20-city price index was down 10.7 pct from the year before, in line with expectations of a 10.5 pct decline. The January-to-December decline was 2.4 pct.
The 10-city composite index, which contains more of the large 'bubble markets', was down a record 11.4 pct year-over-year and down 2.3 pct for the month.
Prices fell in 19 of the top 20 markets, with 10 posting double-digit declines and 13 posting their single biggest monthly declines.
'Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,' says David M. Blitzer, chairman of the Index Committee at Standard & Poor's. 'Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis.'
None of the metro areas had a monthly increase and only one, Charlotte, North Carolina, managed a meagre 1.8 pct annual increase.
'The year-over-year rate of decline on a nationwide basis is now greater than seen at the end of the 1990-91 recession,' said MFR economist Joshua Shapiro. 'With supply overhang enormous and mortgage financing tougher to obtain, home prices are going to decline considerably further in the quarters ahead, most likely to a double-digit pace on a yearly basis before not too long.'
Former bubble markets were closing in on 20 pct annual price drops in February. Miami and Las Vegas were the worst performers, both falling 19.3 pct. Phoenix was a close third with prices off 18.2 pct.
Monday, the National Association of Realtors existing home resales report for February showed a 2.9 pct increase in sales, but the median price of a single-family house was down 8.7 pct year-over-year and the downward price pressure from the inventory overhang, at 9.2 months, was still substantial.
Analysts warned against confusing a one-month boost in the volume of sales with any near-term possibility of prices rebounding. In fact, 'falling home prices were a key factor in the 2.9% rebound in February existing home sales,' said Ashraf Laidi of CMC Markets.
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