GMAC will cut 5,000 jobs (60% of its employees) at Residential Capital, and shut its 200 GMAC Mortgage retail offices. http://www.reuters.com/article/domesticNews/idUSWNAB926120080903  Announcements went out saying that, in spite of eliminating their retail and wholesale channels, “GMAC is committed to maintaining and growing the Correspondent Channel, supported by the Warehouse Division. The Conduit is actively buying loans at $3B a month and the Warehouse Division continues to add new business. GMAC Bank remains a strong, well capitalized bank under regulatory and market standards.” “Today, GMAC Residential Capital, LLC (ResCap) announced its decision to exit the Homecomings Financial, LLC wholesale and GMAC Mortgage retail branch mortgage lending businesses. I'd like to reassure all of our correspondent and warehouse clients that your business relationship with GMAC Bank will not be impacted by these changes. GMAC Bank will continue to fund loans from correspondent lenders and offer financing through its warehouse lending business. These business lines have made and will continue to make significant contributions toward achieving performance expectations for our enterprise. In addition to remaining committed to our business-to-business relationships through GMAC Bank, ResCap will continue its direct-to-consumer channel and mortgage servicing businesses.”

Wachovia (the nation’s 4th largest bank) received some negative press in the San Francisco Chronicle regarding borrowers who try to modify mortgages in ways that would help local borrowers hold on to their properties. The full story can be found at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/03/BU2F12NEBN.DTL

Thornburg Mortgage, now showing up on the heinous Implode-O-Meter site, has extended the deadline of its preferred stock tender offer as it continues working on their bailout agreement. Fortunately Thornburg has met and exceeded the requirement that preferred stockholders tender at least two-thirds of the total preferred stock in all categories, but it has extended the deadline for the tender to September 9, to give it time to “negotiate clarifications” regarding future margin calls with the bailout investors.

Here is some clarification on some US Bank news. The information about US Bank eliminating correspondent business is from the Consumer Finance group (nonconforming Niche programs).  There is a separate business channel for the A-Paper Correspondent Lending group that has not been affected by this downsizing. No one should confuse the correspondent operation with the US Bank wholesale broker channel, which is in full operation.

When you’re selling a car, to attract buyers, the owner will clean & wax it, vacuum the interior, and have the oil changed. When you’re a bank, trying to attract deposits (which, remember, are liabilities on the bank’s balance sheet, but are the fuel for growth and lending), the branch will often offer great, above-market CD rates. I went into WaMu last week, and they were offering 5% for 1 year! I knew this because they had written it on a dry-erase board next to the line, and the teller told me about. The entire Treasury yield curve, including 30-yr bonds, is below 5% now, and a 1-year Treasury security is nearing 3%. Interesting times. When I went in yesterday, they had dropped their rate to 4.50%.

Yesterday rates improved, and so far this morning we’re looking at the same! The yield on the 10-yr is down to 3.67%. Yesterday during the morning we had Factory Orders +1.3% in July, stronger than expected. In fact, Factory Orders have been strong for several months now. However, the bond market seemed to shrug it off, and we improved as buyers for mortgages came in and the Fed’s Beige Book was released. (Goldman called it “An unremarkable report, reiterating weak growth trends in most sectors, an ongoing tightening in credit availability, continued input price increases (though with a nod to the recent downturn in commodity prices), and softening labor markets.”) This morning we’ve already had the ADP Employment Change Index, Jobless Claims and the next-up is ISM’s Non-Manufacturing Index. The number of U.S. workers filing new claims for jobless benefits jumped by 15,000 last week, indicating that the labor market is still weak. Initial claims for state unemployment insurance benefits climbed to a seasonally adjusted 444,000 in the week ended Aug. 30 from a revised 429,000 in the prior week, according to the Labor Department. Tomorrow, of course, we have Nonfarm Payrolls (expected -75k) and the Unemployment data (expected to go from 5.7% to 5.8%). Remember that interest rates have dropped quite a bit lately, and the market is technically “over-bought” – so think twice before believing that rates can fall much more after tomorrow’s numbers especially since there is no news due out Monday.

An older man approached an attractive younger woman at a shopping mall.
“Excuse me. I can't seem to find my wife. Can you talk to me for a couple of minutes?”
The woman, feeling a bit of compassion for the old fellow, said, “Of course, sir. Do you know where your wife might be?”
“I have no idea, but every time I talk to a woman with like you, she seems to appear out of nowhere.”

Rob