Inside The Blog: So Everybody Loves Kal; Why is That News?

If you haven't been following the saga of Atlanta mortgage originator Kal Wayman, this item is not for you. For those playing catch-up, we criticized Kal's over-the-top, sex-drenched TV ad as inappropriate to the serious business of mortgages, and then dozens of Kal's friends and clients rushed to his defense in the "comments" section of this blog.

Which raised a number of questions -- Why did we publish so many promotional comments about Kal? Didn't all those supportive comments add up to free advertising? And how do we know Kal himself wasn't sitting there at a keyboard, sending one love letter after another to himself?

That's what one regular reader asked tonight: "Have you checked the IP addresses of all the Kal fanboys to be sure it isn't Kal himself spamming the blog?"

I'll deal with that issue first, and then the others. First of all, comments are moderated, in the sense that I try to keep profanity and personal attacks off the blog. So I had seen all the comments. Sheepishly, I went back and checked IP addresses of all 48 comments, and found only two that were suspicious -- different names, same IP address. So it appears Kal really does have that many friends.

Friday Morning: NY Times: "Smart Money" Betting on Subprime Comeback

This story from Friday's New York Times is pretty important: the headline reports "Big Investors Jumping Back Into Shaky Home Loans."
Highlights: "The subprime mortgage business is in tatters ...  some of the biggest lenders have cut back or shut down."

"So what is the smart money — private equity, hedge funds and investment banks — doing? They are swooping in and taking over those battered businesses, seeing opportunity amid the wreckage ... betting that the market will snap back quickly.”

"It is a risky proposition. ... "'The reality is that the mortgage business for the foreseeable future is not a growth business,” said Jeffrey Kirsch, president of American Residential Equities.

Why we think this is important (Bloviation Alert):  Because, in our opinion, The Housing Bubble is not really about housing at all. It's about credit. (Why is a Santa Monica condo worth $800,000? Because lenders will fight each other for the chance to loan someone $800,000 to buy it.) As long as Wall Street keeps buying these loans, prices will not collapse. And this article in Friday's New York Times says that investors are willing to keep the credit flowing. That's important, we think.

But enough about us. What do you think?
Photo Credit: AP

Sanity At Last? Asking Price of San Pedro "Leprechaun Cottage" Reduced by 100K

What do you call a 559 Square Foot house on a 1,263 SF lot? Somebody witty over at Curbed.LA called it the Leprechaun House, and somebody else called it "crazy" when it was listed at $399,000. Now, as Curbed.LA reports here, the price has been reduced by 100K.

"In mid-March, we featured this charming 1bd, 1ba cottage near the shores of San Pedro. Most of you expressed shocked outrage at the asking price of $399,000 for the 559 SF home. And we quote:

"Commenter Anonymous: "559 SF on a 1,263 SF lot? that has to be record. Since it's St. Patty's day, can we assume that a family of leprechauns live there?"

"Apparently, the seller heard you and has dropped their asking price by an astounding $100,000," to 299K.

Comments? Thoughts?
Photo Credit: Curbed.LA

Celebrity Flipper: Vincent Gallo Flips A Lautner House In The Hollywood Hills

Weird Indie movie star Vincent Gallo isn't exactly our cup of joe, but he's building a reputation as quite a house flipper, specializing in architecturally significant digs. Radar online has the very latest:

"In July 2006, Gallo purchased the John Lautner-designed Wolffe House in the Hollywood Hills—an insanely modern work of art in wood, stone, and glass—for just under $4 million. Now, with the staggering asking price of $5.9 million, he stands to clear a nearly $2 million dollar profit in less than one year.

More: "And it's hardly his first purchase and sale of architecturally significant property. He recently sold a one-bedroom apartment at the Sierra Towers in West Hollywood (formerly owned by David Geffen) to Cher for close to $4.5 million.

Who is John Lautner? (There are no stupid questions) From Wikipedia:  "Influential American architect whose work in Southern California combined progressive engineering with humane design and dramatic space-age flair... created an entire genre of commercial architecture, "Googie," with the 1949 design for Googie's Coffee Shop at the corner of Sunset Strip and Crescent Heights."

Photo Credit: NNDB
 

Life of A 20-Something Mortgage Salesman: 120G and "The Best Clothes, The Cars, The Girls, Everything!"

No, we're not talking about our new best friend Kal in Atlanta. We're quoting from a fascinating Bloomberg profile of a 27-year-old who played the mortgage game in Orange County until the music stopped.

Highlights of the story Taher Afghani:
--Decided to become a mortgage broker after partying with a bunch of young brokers in Cabo: "I had never seen so much money thrown around in one weekend ... It was crazy. All these kids, literally 18 to 26, were loaded -- the best clothes, the cars, the girls, everything.''
--Quit a $58,000-a-year job managing a Target distribution center to make $120,000 -- often more than $3,000 per loan -- as a broker for Costa Mesa-based Secured Funding Corp.
-- Selling mortgages over the phone to people who had signed up for credit cards, Afghani says he and fellow brokers dispensed with details about rates and fees and instead talked up how borrowers could use home equity loans to pay down other debts. "It was easier than financing a car,'' Afghani says.
--Brokers like Afghani are not required to be licensed or trained to sell loans in California. "In other words, the corporation can hire a loan originator right off the street and have them originating loans that day without any education, licensing or individual accountability,'' the California Association of Mortgage Brokers says.
--Game over: Secured Funding's once-buzzing office is gutted, Afghani no longer sells loans. "Enough is enough,'' he says. "I'm so rock bottom I had to move out of my apartment in Irvine and live rent free with my girlfriend.''

Thoughts? Comments?
Photo Credit: Reuters

Subprime Borrowers Say, 'Wow -- I Could Have Had a Prime Mortgage!'

Another good piece of enterprise reporting by Les Christie at CNNMoney.com: lots of people who were steered into expensive and risky subprime mortgages actually qualified for cheaper, prime-rate loans.

Under the headline "Wow, I Could Have Had a Prime Mortgage," Christie writes: "Imagine you're a homeowner, and you discover that instead of the expensive subprime mortgage loan you signed on for, you actually qualified for a prime-rate mortgage with much lower interest rates.

More: "I reviewed several hundred [subprime] loans recently for our wholesale division," said Allen Hardester, regional director of development for mortgage-broker, Guaranteed Rate, "and all of them, with one exception, qualified for a prime-rate loan."

More: "Fannie Mae estimated up to 50 percent of the borrowers, whose subprimes it bought that year, had credit profiles that could have qualified them for prime rates."

Comments? Thoughts?
Photo Credit: Reuters

We Told You So: Fed More Worried About Inflation Than Housing

Truthfully, we didn't tell you so, our buddy Lou Barnes did last week, when he wrote that the Fed is more concerned about runaway global growth and inflation than the housing slump.

The AP confirms as much in its reading of Fed minutes released today: "Concerns about inflation trumped worries about the slumping housing market last month in the minds of Federal Reserve officials," Martin Crutsinger writes today.

Portfolio.com reads it the same way: "Fed watchers will translate this verbiage into "We're not about to lower rates."

The Fed is oddly surprised by the housing downturn. We say "oddly," because we don't see any surprises -- we continue to witness a steady worsening of the housing sector, which has been going on for quite a while. We're not sure what the Fed expected -- a Spring Rebound?

More from AP: "Fed officials said the downturn in housing was turning out to be more severe than expected ... Bernanke and his colleagues did express the view in the minutes that the slump in home sales and construction that began last year would last longer than had been expected... 'The correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year, somewhat longer than previously expected,' the minutes said."

The Most Disturbing TV Mortgage Ad We've Ever Seen

This TV ad -- you can see it here on YouTube -- is wrong on so many levels, we don't know where to begin. Like ours, your first response will probably be that it can't possibly be real. We thought the same thing, and so did Morgan Brown at Blown Mortgage, who blogged about it first.

Here's Blown Mortgage: "The following is an ad on YouTube for Kal Wayman, a mortgage originator from Atlanta Georgia.  Don't let your kids watch - and it may not be suitable for all office environments.  Trust me - this is a 100% legitimate ad for a real mortgage company and originator."

More: "At first I didn't believe it. I looked up Kal Wayman's web site at the end of the ad, sure enough www.gotkal.com is real.  Then, I looked up Kal Wayman's company online and found them.  They are F1rst Discount Mortgage.  They are a real company and are licensed in several states including California.  I looked up their license listed on First Discount Mortgage's licensing page with the California Department of Corporations.  The license listed is expired, but they did renew after a year gap in licensing and as of April have an active California Finance Lender license with a new number."

I'm not sure what to say. Go, Kal, Go?

Comments? Thoughts?
Photo Credit: www.gotkal.com

Santa Monica Sticker Shock: Passing the $5 Million Mark

We reported twice today on falling prices in the LA area, so it's only fair we also report this: Westside Bubble reports prices in Santa Monica are busting through the $5 million mark -- and this house is not close to the beach.

From Westside Bubble: "This really got me a week ago, asking over $5 million north of Montana, east of 7th. I remember when $3M was high-end, then $4M, now they're trying to pass $5M. It's at 333 20th, 5 bed/6.5 bath, asking $5,095K, featuring all the usual stuff. For an ordinary-looking house on a 60' lot. Aren't you supposed to get a faux chateau for that? (Actually 127 17th crossed the $5M line first, asking $5,395K, sold in March, but I think that's a double lot with tennis court.)"

Twentieth Street is 20 blocks east of Ocean, which in turn is a good distance east of the beach.

Blogger's note: I find these neighborhood price milestones to be meaningful -- somewhat similar to when the Dow rises over one of those "psychologically important barriers," like 13,000. Once somebody has broken the barrier, even if it's just as an asking price, it makes it that much easier for other realtors, and other homeowners, to follow suit.

Comments? Insights?
Photo Credit: Westside Bubble

Guest Commentary: Tired of the Blame Game, This Mortgage Insider Says, "Lay Off The Brokers"

Blogger's Note: Lou Barnes, a Colorado-based mortgage banker who writes a Fed-watching column for Inman.com, sent us email decrying the "intra-industry mudslinging" in which mortgage brokers are being blamed for the subprime meltdown. His thoughts follow.

"Everyone in the mortgage business today is effectively a broker. Mortgage "Lenders" died with the S&Ls and the birth of the modern mortgage-backed securities market, sometime around 1983.

"Wells Fargo brokers its mortgage loans out the back just the same as a broker working from home does. Countrywide fancies itself a bank and a lender, but is just an immense mortgage bank, operationally indistinguishable from the 1960s pioneers.

"Brokers are blamed for vast misbehavior, but that's just intra-industry mudslinging. Wells was the largest sub-prime originator in 2006 by a mile, roughly $85 billion; as that position became embarrassing, it admitted this spring that it only kept $24 billion, and had "no credit risk" in that portfolio (it had sold the risk into the nouveau "credit derivative" market, born around  2000, which spawned all of this horrifying product). So, who did more harm with subprime 2/28 resets and suicidal underwrting, the brokers down the block, or the big guys?

"It doesn't matter! Today, mortgage "retailers" all do the same things, selling to wholesale, which in turn sells to Wall Street, which in turn derivatizes, selling both interest-rate risk  and credit risk."

So speaks Lou Barnes. Thoughts? Comments? Fire away.
Photo Credit: LATimes