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Eye on Warehousing

The good news for nonbank lenders that rely on warehouse lines to fund their mortgages: Citigroup Inc. is returning to the market.

The bad news: the fates of two of the warehouse market's remaining providers remain uncertain.

Citi said Tuesday in a "progress report" on how it is using Troubled Asset Relief Program funds that it has budgeted $2 billion for warehouse lending.

"By providing liquidity to third-party mortgage lenders, the initiative adds to the primary funding available for new homeowners to obtain mortgages or for current homeowners to refinance," the company said. (The government has invested $45 billion in Citi.)

Citi shut down its warehouse lending unit First Collateral Services last year. Wells Fargo & Co., GMAC Inc. and Flagstar Bancorp have also entered or expanded in warehousing this year.

All of this may be cold comfort to the warehousing clients of Colonial BancGroup Inc., which said July 31 that its survival was in jeopardy.

At the end of March, Colonial was the nation's largest warehouse lender, with $4.1 billion in commitments, according to National Mortgage News.

The prospect of 70 or so nonbank lenders losing their funding prompted the Mortgage Bankers Association to meet with officials at the Federal Deposit Insurance Corp. last week, National Mortgage News reported on its Web site Tuesday. (The paper, like American Banker, is published by SourceMedia Inc.)

Another big warehouse lender, Guaranty Financial Group Inc., has said its failure is imminent. (See related story).

'Writing' Mortgages

Who needs to be a friend of Angelo Mozilo when you work in high-end media?

For Graydon Carter, the editor-in-chief of Vanity Fair, celebrity has brought unusual perks: hosting Oscar parties, running a restaurant that charges $55 for macaroni and cheese — and, since 2006, paying no interest on a $5.3 million mortgage from his employer.

Carter's 2006 mortgage agreement with Advance Magazine Publishers Inc., the parent company of Conde Nast, requires him to make principal payments of $25,000 on Jan. 1 of each year that he remains at Vanity Fair, according to property records published Monday by the media and gossip Web site Gawker.com.

The no-interest feature lasts only as long as Carter remains at the magazine, and the agreement requires him to pay the remaining principal balance a year after he leaves. Assuming he keeps his job and the same mortgage agreement, "Carter would repay the loan in 212 years," Gawker calculated.

Until then, Carter is paying what amounts to $2,083.33 a month for a four-story townhouse in Manhattan. The New York Observer reported his 2004 salary to be $1.5 million — meaning that, if he did not get a raise since then, Carter spends about 1.67% of his pay on housing. (Most personal finance experts recommend budgeting 25% to 33% of a salary for housing expenses.)

The loans Mozilo arranged for VIPs as chairman and chief executive of Countrywide Financial Corp. look expensive by comparison. Senate Banking Committee Chairman Christopher Dodd, D-Conn., reportedly paid 4.25% on one of his "friend of Angelo" loans and 4.5% for the other. (Last week an ethics panel cleared Dodd of wrongdoing for his participation in the VIP program.)

A spokeswoman for Vanity Fair would not discuss the Carter loan Wednesday.

Conde Nast, which in addition to Vanity Fair publishes Vogue and The New Yorker, holds mortgages on several of its employees' homes, the Observer reported in 2006. Citing city records, the paper said: "Over 20 Conde Nast executives, editors and even a couple of writers have either been loaned money directly by the company … or had the media giant secure mortgages in order to purchase properties. … With Conde Nast acting as the secured party, buyers can potentially get far better rates."

The publishing industry's troubles may spell the end of this side business. On July 20, citing "substantial revenue losses resulting from the deep and prolonged recession," Conde Nast said it had hired the consulting firm McKinsey & Co. "to develop new perspectives on optimizing our approach to business."

Negative Exposure

Not all of Vanity Fair's star contributors have had such an easy time with their lenders.

On July 29, the photographer Annie Leibovitz was sued by the lender Art Capital Group Inc. over nonpayment of a $24 million loan made last year. Leibovitz now stands to lose her homes, her negatives and rights to her archive.

Last week, Gawker reported that she took out the loan after accumulating $15.5 million of mortgage debt — including $6.9 million held by companies affiliated with Conde Nast.

Quotable …

"A borrower said to me the other day that they want to buy the house across the street at half price. The only problem is, they'd have to sell their own home."

Bill Dallas, the chairman of Skyline Financial Corp., a mortgage lender in Calabasas, Calif., and the former CEO of the defunct Ownit Mortgage Solutions Inc.

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