Aug. 1, 2007: C-BASS, And Wells Fargo & FNMA moving away from TPO!

Aug. 1, 2007: C-BASS, And Wells Fargo & FNMA moving away from TPO! Rob Chrisman

Credit-Based Asset Servicing and Securitization LLC (C-BASS), a New York-based subprime loan company, said it’s in talks with investors to ensure it has sufficient funds. Mortgage insurers MGIC Investment Corp. and Radian Group Inc. yesterday said their C-Bass joint venture may be worthless, requiring more than $1 billion in write downs. Ouch. “The current severe state of disruption in the credit markets has caused C-Bass to be subject to an unprecedented amount of margin calls from our lenders,” C-Bass said today in a statement on Market Wire. C-Bass buys mortgages with overdue payments, aiming to improve collection rates before selling packages of the debt at a profit. “I’m surprised,” said Mark Patterson, a managing director at Los Angeles-based NWQ Investment Management, who may win the “Naïve person of the year” award.

IndyMac, which sells the bulk of its loans to investors, said second quarter earnings fell 57%. IndyMac reported total mortgage production in the second quarter fell 12% to $22.5 billion from the second quarter of 2006. Indy faced repurchase requests of $221 million during the second quarter, up from $71 million during the second quarter of 2006.

Fannie Mae will begin disclosing pool-level TPO, Third Party Originator, statistics beginning in September 2007 in order to “respond to the needs of MBS investors”. Prospectus supplements will provide unpaid principal balance (UPB) percent of loans in the pool that were originated by a third party. In addition, a breakout of originations by retail, broker, and correspondent by loan count, percent UPB and aggregate UPB will be provided. And Wells Fargo, who last week announced that their subprime would only be originated by their retail channel, yesterday announced that their entire line of Alt-A products will not be available through their wholesale or correspondent channels – only through their retail channel, until further notice. “Currently, we are not accepting locks on Alt-A Prime and Alt-A Minus products in both of our Institutional Lending channels – Correspondent and Wholesale.”

Yesterday news hit the market that American Home Mortgages had stopped funding loans and investors shifted money out of equities and back into the relative security of treasuries, which helped mortgage prices somewhat. The Chicago Purchasing Managers Index dropped, but Consumer Confidence rose, but then Construction Spending dropped below analysts’ projections. Where are we today? The 10-yr stands at 4.75%

A man is at work one day when he notices that his co-worker is wearing an earring. This man knows his co-worker to be a normally conservative fellow, and is curious about his sudden change in “fashion sense”.

The man walks up to him and says, “I didn’t know you were into earrings.”

“Don’t make such a big deal, it’s only an earring,” he replies sheepishly.

His friend falls silent for a few minutes, but then his curiosity prods him to say, “So, how long have you been wearing one?”

“Ever since my wife found it in my truck.”