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.Hagerty and Jonathan Karp,Wall Street Journal, October 3, 2007; memo from Andrew Gissinger III,Countrywide president and chief operating officer.Background on public relations firm Burson-Marsteller: Corporate Watch, Issue #2,Winter 1996.Information on stock sales by Countrywide insiders courtesy of ThomsonFinancial; trading information available through Yahoo! Finance.SEC probe of Mozilo s stock sales:  SEC Investigating Stock Sales by CountrywideCEO by Kara Scannell and James R.Hagerty, Wall Street Journal, October17, 2007.Countrywide s payment option ARM problems and investigations:  CFC s POA Debt at $1.2 Billion and Growing, National Mortgage News (no byline),March 10, 2008;  Illinois Probes Countrywide s Practices, Associated Press,December 13, 2007. Source and Interview Notes 317Chapter 12 What the Hell Happened?Argent s lending practices in the Cleveland area:  Argent Mortgage CompanyLending and Foreclosure Activity, Cuyahoga County, Ohio by Thomas Bierand Ivan Maric, Center for Housing Research and Policy, Maxine GoodmanLevin College of Urban Affairs, Cleveland State University, June 3, 2007.Argent s lending activity in Slavic Village:  The Shadow of Debt, op-ed piece byJim Rokakis, Washington Post, September 30, 2007.Iowa Attorney General Tom Miller targeting loan brokers and wholesale lend-ers:  Iowa AG Warns on LO Culpability, National Mortgage News (no byline),April 3, 2006.Standard & Poor s downgrades on 8,342 ratings: S&P press release, January 30, 2008.Standard & Poor s response and defense of its rating practices: Testimony of VickieA.Tillman, executive vice president of S&P s credit market services before theCommittee on Banking, Housing, and Urban Affairs, U.S.Senate, September26, 2007.Treasury Secretary Henry Paulson and the roots of the credit crisis:  PolicyStatement on Financial Market Developments by the President s WorkingGroup on Financial Markets, March 13, 2008.S&L-related lawsuits involving Andrew Cuomo:  Florida Suit Names AndrewCuomo, December 23, 1987, Associated Press (no byline);  Suit InvolvingCuomo s Son over Savings-Loan Is Settled by Jeffrey Schmalz, New YorkTimes, April 19, 1988.Foreclosures in Orange County:  Bidders See Bargain Homes at AnaheimAuction by Andrew Galvin, Orange County Register, February 3, 2008.BooksInside Job: The Looting of America s Savings and Loans by Stephen Pizzo, MaryFricker, and Paul Muolo (New York: HarperCollins, 1989, 1991).Liar s Poker: Rising Through the Wreckage on Wall Street by Michael Lewis (New York:W.W.Norton, 1989).GlossaryNote: In the world of mortgage lending, definitions can vary from com-pany to company and from professional to professional which may bewhy there is sometimes so much confusion surrounding the mortgageprocess.What follow are definitions of loan types, products, originationchannels, company types, and other phrases that make up the alphabetsoup of residential mortgage banking. A credit quality loan A mortgage where the borrower has thebest credit rating possible usually north of 700.Fannie Mae andFreddie Mac which have government charters tend to buy theseloans, although they also purchase some subprime and alt-A credits.Bypurchasing mortgages, Fannie and Freddie provide liquidity to the resi-dential market.Also known as a prime or conventional loan.ABX index An index or instrument created by a handful of WallStreet firms, including Deutsche Bank, that represents the value of abasket (sample) of asset-backed securities collateralized by subprimeloans.Investors can go either long or short the index.account executive (AE) A professional whose job it is to workwith loan brokers.Brokers sell or facilitate mortgages to the public but319320 glos s arydo not use their own money to originate the loan at the closing table.An account executive works for a wholesale lender who  table funds(brings a check) to the closing, where the house is actually sold and thetitle changes over to the new owner(s).alt-A mortgage (loan) A nonconforming mortgage where the bor-rower has a higher than subprime credit score.Alt-A is short for alterna-tive A.Typically, these loans may not be immediately eligible for purchaseby Fannie Mae or Freddie Mac because they have underwriting anom-alies that might include higher than normal debt-to-income ratios, orirregular income.However, Fannie and Freddie have bought billions ofdollars worth of bonds backed by some alt-A loans.asset-backed security (ABS) A bond backed by subprime, alt-A,or other types of nonconforming loans.The term ABS is used to dis-tinguish these securities from bonds backed by Fannie Mae/FreddieMac quality loans.automated valuation model (AVM) An electronic appraisal basedon property information gathered on the ground in a neighborhoodand then disseminated over the Internet.collateralized debt obligation (CDO) A bond created fromtranches of other bonds.A tranche represents cash fl ow from a pool ofdifferent mortgages.In an attempt to diversify risk, a CDO might containmany different tranches from different asset-backed securities.(CDOs notonly buy tranches of other securities, but they issue their own tranches,layering and complicating the risk inherent in the security.)collateralized mortgage obligation (CMO) A type of mortgage-backed security (MBS) where the cash fl ows from the underlying loansare paid into a trust that guarantees payments to the end investor.CMOsconsist of various tranches that have different cash flows and maturities.correspondent channel (lender) Under a correspondent loan trans-action, a mortgage company purchases an already originated loan fromanother lender.Usually, the purchase happens right away or shortly afterthe loan is funded in the primary market.credit default swap An instrument used to hedge against losses, orto speculate on the value of bonds (mortgages or otherwise).CreditGlossary 321default swaps act as an insurance policy of sorts where one party mustpay another one in the event the bonds lose value.The total creditdefault bets against a bond can actually outweigh the size of the bondbeing bet against.credit score/FICO score A grade given to a consumer based onhis/her credit history.A credit score involves a statistical analysis of aborrower s ability to pay.Credit scores were fi rst developed by the FairIsaac Corporation of Minneapolis.(In general, a subprime borrower issomeone whose score is 620 or under. A paper borrowers have scoresnorth of 700.A borrower whose credit is in between those two num-bers might be considered an alt-A or some other type of credit.)early payment default (EPD) A loan that goes delinquent within60 to 90 days of being originated [ Pobierz całość w formacie PDF ]