FDIC Doing "A LOT" of Hiring; Less Loan Production in 2010; Neighborhood Watch Scorecard; California Tax Exempt Bonds; FY2011 Budget
We mentioned recently that Google was sitting on $24.5 billion in cash. Apple has $40 billion in cash, and even after paying out huge dividends, Microsoft still has $37 billion in the green stuff.
From a friend at the FDIC: “We are doing a LOT of hiring right now, in case you want to make your readers aware. These are temporary jobs (2+ years) mainly located in So. California, No. Florida, Chicago, Dallas and some other spots here and there. These are bank resolutions jobs - closing banks and liquidating them. HERE IS THE JOBS LINK . Okay, you guys. This may be a great way to get back on the merry-go-round!
Unless you think California will default on its bonds, you can buy California Lease Revenue Bonds maturing in 19 years and yielding 5.82%. Since they’re tax exempt, this is the equivalent of about 9.5%.
Writing this Report is easy, but it’s editing it that’s hard. Oscar Wilde once wrote out editing one his works: ”I was working on the proof of one of my poems all the morning, and I took out a comma. In the afternoon I put it back in again.”
Most mortgage bankers we speak to are planning to expand and do even more volume in 2010 than in 2009. We don’t want to name names, but we spoke to one Orange County (CA) owner whose company closed about $530 million last year who told us that that “We’ll close $400 million in 2010 if we’re lucky, and will probably do $350 million.” It’s so refreshing to see such a realistic approach. And it’s no wonder that their warehouse lender likes them so much.
Look at some of these Neighborhood Watch scores. Kate Berry of American Banker did some excellent investigative reporting on this. Notice how poor the scores are for the homebuilder controlled companies?
41% Bank of America
76% U.S. Bank
115% GMAC Bank
129% Lennar Homes (Universal)
136% DR Horton Homes
160% CTX Mortgage (Centex)
These numbers are as a percentage of the national average. This means that Bank of America’s loans default only 41% as often as the national average. HUD has made it clear that every three months it will review all FHA loans originated over the preceding two years. It also said that it can terminate any lender whose default and claims rate was more than triple that of its region.
We were looking at Obama’s new budget and we have a few thoughts on dealing with the deficit: $135 billion for the Dept. of Agriculture? Except for food stamps, do we even need this department? What do they do, teach farmers how to farm? Let farmers hedge their production with futures and forward sales. $82 billion for the Education Department? Education is run at the state and local level, so what does this department even do? Have schools gotten better since this department was formed 25-30 years ago? NASA ($18 billion) and Commerce ($14 billion) are small potatoes, but would anyone even notice if we cut their budgets by half? And $206 billion for a Labor Department? What do they do there? They might need a little to run the National Labor Relations Board and a few things like that. If part of their budget is for unemployment, keep that but dump everything else they do. As Ronald Regan once said, there may not be easy solutions, but there are simple ones.
We get asked every so often about accounting packages, and we pretty much like them all. QuickBooks is kind of weak on security, but it works. We like Great Plains, MAS-90, and maybe our favorite is AMB, the only one we know of which is designed specifically for mortgage banking.
Leakage: One company tells us they have a hard time tracking leakage loan by loan. They asked if it would work to track it in the aggregate month-by-month. Absolutely yes. Even if you can’t do it at a loan level detail, you’ll learn a lot if, say, you know you build in a profit of 150 bps on FHA loans and over a trailing three months, you averaged only 139 bps. That’s almost as good as doing it loan by loan.