Sunday, February 22, 2009

“No good deed……”

It’s great that President Obama and his team are thick skinned and not faint of heart, since no matter what they do seems to generate a GOP political strafing. And, he and his team have been in office a month now.

But that’s a democracy, that’s politics, and that’s Washington.

The latest shot came from some folks complaining that the Obama mortgage assistance program might help some people who got in over their heads while not assisting other mortgagors who “did the right thing” and acquired loans that they could afford.

That’s an understandable position, but it’s those problem mortgage loans that have caused the domestic and international financial agonies. Healing or otherwise fixing as many of those, as quickly as possible, is a national imperative and the goal of Obama’s policies.

I don’t know if there is a “morality issue” here, but--as a country--we’ll have to worry about that borrower distinction later, just as we later will judge the many large commercial banks the Treasury is bailing out, but which still won’t lend until they see gilt-edged borrowers come through their doors.

Oh, and I can’t wait for the first of those Republican Governors to truly reject any federal stimulus cash. He or she will earn the gubernatorial dunce cap. Let’s see if Haley Barbour, Sarah Palin or any of the other complaining GOP governors will “walk the walk.”

Bank Nationalization: “We Don’t Need No Stinkin’ Nationalization…”

That “N-word:” scared the hell out a lot of bankers last week, not to mention the stock market last week, requiring the President to issue a statement that he likes the U. S. banking system run by private interests. And, so do those who run the banks. Many of them, suddenly, were talking about quickly paying back their Treasury obligations, just to avoid the “N” possibility.

But when Ben Bernanke, Alan Greenspan (remember him), Senator Chris Dodd (D-Ct), and other solons discuss nationalizing some of the nation’s banks, then I would think those bankers—and their shareholders--should worry about the connection between smoke and fire.

Fannie Mae and Freddie Mac

The President’s mortgage restructuring plan calls for heavy use of Fannie Mae and Freddie Mac, plus possible further cash infusions from the Treasury.

The optimist in me hopes that this latest step allows the Obama Administration and the market—as well as those “policy makers” on Capitol Hill—to appreciate the value of the two firms and the ongoing role they might play in the mortgage market stabilization.

I have yet to see or hear any plan for the evolution of a “conventional secondary mortgage market” and it seems logical that when the national and international markers rebound and that question is addressed, the U.S. answer starts with Fannie and Freddie .
If it comes out that way, it will occur with the realization that those who demonized the former GSEs and “nationalized them,” did so precipitously (in Fannie’s case) and for ideological reasons, without thought to the market consequences.

One gauge of how much this most recent step means to Fannie and Freddie gaining some life will be the noise on Capitol Hill from those who vilified the two.

The Bush Administration is history, but you still have some voices in the House and Senate who have been active purveyors of “Fannie and Freddie caused everything” tale.

With Karl Rove still out there, along with the AEI’s Messrs Wallison and Calomiris and new initiate, Ed Pinto, former Fannie official, I wonder if the mortgage banshees will return to prominence.

Could we see the return of “FM Watch,” or whatever was their last iteration? I don’t know, since AIG, B of A, the MI’s and other charter members have been pretty beaten down. But, where there is a lobbyist, you still have a chance for a coalition.

This Company Is Part of the Solution and So Near, You Can…..

If I was a senior official at Fannie , Freddie, the Treasury, FDIC or the Fed, I would be beating down the door of a little company, headquartered in Bethesda, Maryland, called Overture Technology.

This firm, with years of mortgage experience, has developed a software underwriting engine that seems to answer every need of any entity managing millions of whole mortgage loans or mortgage backed securities.

Overture was founded several years ago by a former Fannie colleague of mine, Bill Kelvie. I have no financial interest in Overture, nor do I represent the company in any way, except I was blown away by a demo of their new exclusive software, at lunch (sandwiches provided by Kelvie) a few days ago. That’s the full disclosure.

Treasury, the Fed, FDIC, and any other institution facing the management and “pricing” of toxic mortgage assets should insist getting a, Overture systems demo because of their major new tasks. Implementing it likely will save them time and money, plus ease their jobs.

Yes, the “platform” strikes directly at the illusive, “How can we price mortgage assets when there is no market” issue? It also is filled with what I call “consumer friendly” features which can help even the most unsophisticated mortgagor chose restructuring elements of a new loan, making it affordable.

I hope those federal agencies—now weighted down with a new obligation to underwrite, manage, and sell mortgage assets--don’t waste time, money and effort trying to build their own underwriting engines when an amazing one—designed by mortgage market experts 7 miles away—“and ready to be driven out of the showroom” sits in suburban Maryland, just waiting for them to test it.

According to the designers, positive results can flow from the system in about two months. Consider that, you new toxic mortgage managers.

Maloni 2-22-2009

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