Wachovia, PHH, Citi, Fannie Mae and Indy Mac all reported negative news this week. As the mortgage meltdown continues to unfold, the damage assessment among the nation’s firms is not pretty. Wachovia announced a 1.1B hit due to sub-prime write downs of their collateralized debt obligations. PHH took at 38M loss while Citi’s lost its chief executive officer in part due to their mortgage losses. The big question is if we have reached the bottom of the trough. The short answer is probably not. The bloodletting of the tentacles of the mortgage mess will involve further hits to mortgage investors, insurers and of course borrowers if prices of real estate continue to decline. Finally, Fed Chairman Bernanke found some solid ground in understanding that Fannie Mae and Freddie Mac really need to provide liquidity for loans above $417,000. Hopefully, this will foreshadow further legislative changes that enhance the liquidity in the mortgage market. A national registry for mortgage licensing of lenders, loan officers and brokers is inevitable as forty states joined in a plan this week to launch a nationwide mortgage licensing system. In the meantime, the Federal Reserve Board is thinking about mandatory escrow accounts for subprime loans—it seems like that step is a bit late. We look forward to better news next week
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