Blaming the Fed
During Countrywide Financial Corp.'s
"The Fed knew that well over 50% to 60% of loans made in 2003 and 2005 were indexed to the fed funds rate, and yet they increased the fed funds rate 17 times," Mr. Mozilo said. "So for a Fed governor to say the lending industry had this coming is unbelievable when the Fed was an unknowing contributing factor."
A Countrywide spokeswoman said she could not say which Fed official he was referring to. But last week William Poole, the president of the Federal Reserve Bank of St. Louis, said he found it "odd that apparently sophisticated investors in nonprime mortgage-backed securities now claim surprise that many nonprime ARM borrowers are facing payment shock because of the increase in short-term interest rates over the past few years." He also said that "a better-functioning market will require
Hard Money Buy
Quality Home Loans Inc., a hard money lender in Agoura Hills, Calif., said Wednesday that it has
Brian O'Shaughnessy, the president of Quality Home, said Wednesday that it plans to "change the face of hard money lending" by becoming one of the first companies to securitize such loans.
"There wasn't a tremendous need for hard money five years ago when houses sold in 12 days," said Mr. O'Shaughnessy, who had been the president of Bankers Express until the acquisition. "But now there's a need for people who are in foreclosure … and subprime won't help them."
Quality Home, which operates in 15 states, closed $695 million of hard money loans last year, and it plans to enter three more states in the next year, he said. Buying Bankers Express expanded Quality Home's broker network by more than half, to 10,000.
Mr. O'Shaughnessy said hard money lending "has actually been fed by the shrinking guidelines on subprime." His company plans to introduce a product in the next few weeks called Alternative Subprime.
Doubling Down?
CompuCredit Corp., best known as a marketer of subprime credit cards, has taken some hits from the mortgage-bond rout, but it says it is not dissuaded from investing in the sector and is even looking at buying opportunities.
In a
Of those, $10.3 million were paper losses; the rest were taken on asset sales, net of interest income.
None of the losses were anticipated when CompuCredit issued earnings guidance in May, the company warned. Nevertheless, its shares rallied Wednesday — by midday they had risen about 3.5% from Tuesday's closing price — perhaps on relief that the company's exposure was not as bad as suggested by a July 24 headline in the New York Post: "
The tabloid had reported that CompuCredit had invested in one of the Horizon Funds run by John Devaney, and that the fund had told investors it expects to sustain losses in June and for the year.
But in the filing, CompuCredit said that even though its unit had bought securities brokered by Mr. Devaney's United Capital Markets Inc., it had not invested in any funds.
CompuCredit said it was furnishing this information "to eliminate investor confusion that recently has arisen based on erroneous media accounts regarding our relationship" with Mr. Devaney.
On June 30 the unit had $45 million of remaining exposure to asset-backed paper issued by third parties, CompuCredit said. Since then the unit "has experienced continued trading weakness" and "may experience further material … losses in our third quarter and beyond."
On the bright side, the company said, "The dislocation … is producing trading values for many securities that are irrationally low … and we currently are assessing all potential options," including buying bonds the market is undervaluing.
Lots of Luck
There has been much
Speaking at a California Mortgage Bankers Association conference in San Francisco last week, Ms. Bridwell said there is a "huge career risk" in buying distressed assets. She compared subprime assets today to mortgage derivatives in 1994. "No one could buy them, because they couldn't go in to their boss and say, 'These are a great bargain. What do you think?' "
Mr. Mozilo made
