Having trouble finding those bulk purchases? You’re not the only one, from NMN:
Stan Kurland, the former Countrywide president who hoped to make a killing by purchasing distressed mortgage assets at bargain prices, is facing a cold reality that’s thrown a monkey wrench into his strategy: banks and Wall Street firms aren’t selling.
The financial garage sale of the century — with an anticipated $1 trillion in trash changing hands — is a bust or as Penny Mac notes in a recent public filing: “Through its interactions in the marketplace, our manager [a unit of the company] has observed that during our initial period of operations, relatively few holders of distressed mortgage loans have offered these loans for sale.”
In other words, Penny Mac’s entire reason for being has (for now) turned out to be a bad idea — even though in its IPO filing and “road show” to institutional investors Mr. Kurland and other company executives were talking as if it was the Gold Rush of 1849. The sky was the limit. Well, maybe not. Mr. Kurland and his team, which includes several former Countrywide executives, hoped to raise $700 million when it went public in August. It appears that even though the potential to make a killing in nonperforming loans is there, investors were queasy. The publicly traded REIT raised just $300 million — during a bull market.
To date, Penny Mac has bought just one portfolio of size, a $558 million pool of loans from the FDIC, which it paid just $226 million for. That’s it. Meanwhile, Penny Mac isn’t talking to the press these days, this columnist included. It recently pulled its profile from YahooFinance.com so if you want to take a quick look at who its top executives are and what they earn you’re out of luck unless you have an account with the SEC’s EdgarOnline system. (Luckily, I do.)
So, what’s its game plan? Let’s go to the SEC filing. It still believes there are opportunities in distressed mortgages, but its first quarter as a publicly traded company was less than stellar. It lost just under $1 million. And now it has a new idea. It wants to be a mortgage banker. Huh? Mr. Kurland wants to re-enter the lending arena by having Penny Mac start a conduit. Why? I guess it’s obvious. The firm isn’t making it as a vulture fund (and specialty servicer) but it sees an opportunity acting a middleman between the GSEs and what it calls “smaller mortgage lenders.”
It plans to find (presumably) nonbanks that are ineligible to become Fannie Mae, Freddie Mac and GNMA seller/servicers, buy their loans and securitize them using the government eagle. It also believes that in time the private-label market might come back and that its conduit (which is being organized as I write this) would be in the catbird seat should such a revival occur. Then again, maybe Mr. Kurland isn’t familiar with Sen. Chris Dodd’s bill to have nongovernment MBS issuers retain 10% of the risk.
With the government dumping billions at the problem kind of messed up their plan. The banks are not being forced to account for their imbalance. It is all rainbows and unicorns.
So as former mortgage executives they knew(know) the greatest recovery comes from completing foreclosure and selling the property. However, they believed other mortgage owners would just make a sub optimal decision so they could profit. I think you call that hubris.
Wow, imagine that. Some of the architects of the disaster surprised to discover it is impossible to make an honest buck. So what do they do? Go back to making the dishonest bucks.
Rob Dawg – exactly. Making a dishonest buck has become the new American Way over the past 30 years. Honest work doesn’t pay anywhere near as well as dishonest. Everyone is looking to hit the lottery; people want to invest in an IPO that will make them a millionaire next year, they want to buy a house that will be worth double in two years, they want to bundle and sell off loans that are “modeled” to be worth twice at the sale than if you just serviced for the revenue. People see flat out criminals getting away with it and they start feeling like chumps for living an honest life. It started at the top with slaps on the wrist for white collar criminals and over the years it seeped down throughout our culture. White collar crime pays. Not only does it pay, but the chances of actually serving any time are slim if you do get caught because our society thinks it’s more important to lock up the kid selling weed in the park than the fund manager who embezzled millions of dollars from his clients.
We don’t prosecute and lock up white collar criminals, we applaud them and call them entrepreneurs. This is why there is so much money to be made in the fraud food chain, the rewards for dishonest behavior have always been extremely high because there is that little bit of risk.
Is this the same scheme proposed by Blackrock and PIMCO to acquire toxic assets from the govt with the money loaned to them by the govt to create CEF’s???
This shouldn’t surprise anyone.
When they let banks mark-to-fantasy instead of mark-to-market they turned the incentives on their heads. Selling their trash means realizing losses immediately, whereas sitting on them it’s “extend & pretend”.
Well, SD county is disappointing. I should have bought in 4S Ranch or San Marco when foreclosure were all over…but the agent told me not to bother with the short sales but they actually closed on those..
So I went up to Corona. Lately there are new listings daily, unlike San Diego, however, their listing prices have gone up after the summer’s bidding war.
I meant I should’ve bought last summer-fall after spending months looking all over, but I didn’t cuz my agent advised me to wait as the worse is yet to come (this yr)
Art Electric,
Your post (#4) was right on target. Very well said.
The PMT ipo priced at 20 bucks, closed at 17.04 friday.So investors gave these bozos 300 million.They will likely go bankrupt while spending that 300 million.I would like to see their xmas party and the bonus checks.The ceo pay is probably pretty good too.the stock market has become a way to fleece mom and pop investors legally.
Invest in IPOs? You know that most of these IPOs are offered to insiders first and then flipped when the actual trading happens. It’s the frenzy of the wanna-bes who provide the money for the insiders.
Suckers.