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January 27, 2010
Phil Angelides
Via FedEx
Mr. C.R. "Rusty" Cloutier
President and Chief Executive Officer
Midsouth Bank, N.A.
P.O. Box 3745
Lafayette, LA 70502
Chairman
Re:
Hon. Bill Thomas
Vice Chairman
Brooksley Born
Commissioner
Byron S. Georgiou
Commissioner
Senator Bob Graham
Commissioner
Keith Hennessey
Commissioner
Douglas Holtz-Eakin
Financial Crisis Inquiry Commission Hearing on
January 13,2010
Dear Mr. Cloutier:
On January 20, 2010, Chairman Angelides and Vice Chairman Thomas sent you a
letter thanking you for testifying at the January 13, 2010 hearing and informing
you that the staff of the FCIC might be contacting you to follow up on certain
areas of your testimony and to submit written questions and requests for
information related to your testimony. In response to a question from Vice
Chairman Thomas, you stated that you could provide data on the extent to which
community banks engaged in subprime loan originations. The FCIC would
appreciate it if you or the ICBA could provide that information for the years 2001
through 2008 .
The Commissioners and staff of the FCIC sincerely appreciate your continued
cooperation with this inquiry. If you have any questions or concerns, please do
not hesitate to contact Chris Seefer at (202) 292-2799, or cseefer@fcic.gov.
Commissioner
Heather H. Murren, CFA
Sincerely,
Commissioner
John W. Thompson
Commissioner
Peter J. Wallison
Thomas Greene
Executive Director
Commissioner
cc:
Phil Angelides, Chairman, Financial Crisis Inquiry Commission
Bill Thomas, Vice Chairman, Financial Crisis Inquiry Commission
1717 Pennsylvania Avenue, NW, Suite 800 • Washington, DC 20006-4614
Thomas Greene
Executive Director
202.292.2799 • 202.632.1604 Fax
~~NDENT
BANKERS
R. MICHAEL MENZIES SR.
ChairllhTn
JAMES D. MACPHEE
Chairmnn-Elect
SALVATORE MARRANCA
Vit'e Chairman
COMMUNITY
of AMERICA
LARRY W. WINUM
Treasurer
WAYNE A. COTILE
Sf!cr~'ral)1
CYNTHIA L. BLANKENSHIP
lmmcdiat<! Past Chairl1um
May 10, 2010
CAMDEN R. FINE
President and CEO
Thomas Greene
Executive Director
Financial Crisis Inquiry Commission
1717 Pennsylvania Avenue, NW, Suite 800
Washington, D.C. 20006-4614
Dear Mr. Greene:
The Independent Community Bankers of America 1 (ICBA) is responding to your
request to Mr. Rusty Cloutier for additional information regarding an issue that he
discussed when he testified before the Financial Crisis Inquiry Commission on
January 13, 2010. Specifically, in a letter to him dated January 27, 2010, you
requested that either he or ICBA "provide further data on the extent to which
community banks engaged in subprime loan originations."
Mr. Cloutier was correct when he testified that few, if any, community banks
engaged in subprime lending. Community banks have always been the
conservative mortgage lenders and ICBA can provide you some data to support
this assertion.
Although it is difficult to compile definitive information on subprime lending and
origination, the two charts that are attached to this letter give you a list of who
were the largest subprime producers in 2006 and 2007. According to Inside
Mortgage Finance 2, the 20 largest subprime producers during those two years
were either large mortgage companies or were affiliated with the large
commercial banks, including Citibank, HSBC, Wells Fargo and Countrywide. To
the best of our knowledge, no community bank is owned or affiliated with any of
1 The Independent Community Bankers of America represents nearly 5,000 community banks of all sizes
and charter types throughout the United States and is dedicated exclusively to representing the interests of
the community banking industry and the communities and customers we serve. ICBA aggregates the power
of its members to provide a voice for community banking interests in Washington, resources to enhance
community bank education and marketability, and profitability options to help community banks compete in
an ever-changing marketplace.
With nearly 5,000 members, representing more than 20,000 locations nationwide and employing nearly
300,000 Americans, ICBA members hold $1 trillion in assets, $800 billion in deposits, and $700 billion in
loans to consumers, small businesses and the agricultural community. For more information, visit ICBA's
website at www.icba.org.
2
Inside Mortgage Finance, March 23, 2007 and March 28, 2008.
IN DE PEN DENT COMM UN lTV BAN K E RS
of AM E RICA The Nation's Voice for Community Banks®
1615 L Street NW Suile 900. Vlashingwn. DC 20036· (800)422-8439· FAX: (202)659-3604 • Email: inJ()@icba.t)rg • \{!ww.icba.(w:J
2
these top 20 subprime producers, which together, control about 90% of the
subprime market during those two years.
The same should also be noted about the attached list of the largest originators
of Alt A mortgages during 2006 and 2007 from Inside Mortgage Finance. Again,
this list is made of the large mortgage companies or commercial banks including
Countrywide, IndyMac and Wamu. Few community banks were involved in Alt A
lending. With respect to Taylor, Bean & Whitaker Mortgage Corporation, we
know that several community banks were selling loans to Taylor, Bean &
Whitaker but to the best of our knowledge, at least 95% of the loans sold by
community banks to that company were conforming, fixed rate mortgages.
Also attached is a chart that was compiled by the National Community Law
Center and that was cited in an Appendix to Comptroller of the Currency's John
Dugan written testimony before the FCIC. 3 The NCLC chart reveals again that
the top national bank originators of subprime loans during 2006 were the large
banks such as Citibank, Wells Fargo and Wamu and that community banks had
little to do with the origination of most of the subprime loans during that period.
Also attached are charts from the acc appendix referred to above which list the
21 companies that made up the "Worse Ten" subprime mortgage originators list
of the "Worse Ten" MSAs-those MSAs that experienced the worse rate of
foreclosures from subprime and Alt A mortgages. Again, this list is almost
entirely made up of large mortgage companies and the large banks. To the best
of our knowledge, none of these institutions are community banks.
If the FCIC would like further information about the types of mortgage loans that
community banks originated during the period 2005-2008, we would recommend
that you obtain that information from Fannie Mae and Freddie Mac. Either of the
two sponsored enterprises may be able to provide information regarding the
characteristics of the mortgage loans they purchase from community banks.
Hopefully, this information should convince you that community banks did not
engage in significant subprime lending and did not contribute to the economic
crisis that our nation now faces because of the reckless lending practices of
several large banks and unregulated mortgage lenders. Please let me know if
you need any further information.
Sincerely,
CJ~~f.df~~
Christopher Cole
Senior Vice President and Senior Regulatory Counsel
Testimony of John Dugan, Comptroller ofthe Currency, before the FCIC dated April 8, 20 10, Appendix
B.
3
IN
DEPENDENT COMMU N lTV BANKERS of AMERICA The Nation's Voice for Community BankS®
1615 L Street NW, Suite 900, Washington, DC 20036· (800)422-8439. FAX: (202)659-3604· Email: inio@icba.org • www.icba.org
INSIDE MORTGAGE FINANCE - MARCH 23, 2007
Top 20 Subprime Producers in 2006
(For 12 Months - Dollars In BIlDons)
2006 Subprlms Originations
Rank
Lender
Volume
Pet of Total
MktShare
2005 Subpnme Onglnatrons
Volume
Pet of Tolal
MktShare
1
HSBC Finance, IL
$52.80
l00.O"'{'
8.8%
$58.61
100.0%
9.4%
2
New Centul}' FinanCial, CA
$51.80
86.3%
8.6%
$52.70
93.9%
8.4%
7.1%
3
Countrywide AnanCial, CA
$40.60
8.8%
6.8%
$44.64
9.1%
4
CiliMortgage, NY
$38.04
20.7%
6.3%
$20.51
16.5%
3.3%
5
Fremont Investment & Loan, CA
$32.30
99.4%
5.4%
$36.24
100.0%
5.8%
12.1%
6
Amertquest Mortgage, CA
$29.50
100.0%
4.9%
$75.56
100.0%
8
Option One Mortgage, CA
$28.79
82.3%
4.8%
$40.33
100.7%
6.5%
9
Wells Fargo Home Mortgage, IN
$27.87
7.0%
4.6%
$30.34
7.7%
4.9%
4.7%
10
First Franklin Anandal Corp, CA
$27.67
100.0%
4.6%
$29.33
100.0%
11
Washinglon Mutual, WA
$26.60
13.6%
4.4%
$33.90
13.6%
5.4%
12
Residential Capital Group, MN
$21.20
22.4%
3.5%
$25.26
34.5%
4.0%
13
Aegis Mortgage Corp., TX
$17.00
100.0%
2.8%
$17.64
100.0%
2.9",1,
14
Accrediled Home Lenders, CA
$15.77
100.0%
2.6%
$16.58
100.0%
2.7%
16
BNC Mortgage, CA
$13.70
100.0%
2.3%
$15.00
96.3%
2.4%
17
Chase Home Anance, NJ
$11.55
6.7%
1.9%
$9.65
5.3%
1.5%
15
Amertcan General Rnance,lN
$11.50
100.0%
1.9%
$15.43
100.0%
2.5%
16
WMC Mortgage. CA
$11.30
34.0%
1.9%
$10.60
33.3%
1.7%
18
Equifirst, NC
$10.75
100.0%
1.8%
$8.84
100.0%
1.4%
19
NovaStar Finandal, KS
$10.23
91.2%
1.7%
$9.28
100.0%
1.5%
20
Ownit Mortgage Solutions, CA
$9.50
100.00/.
1.6%
$8.29
100.0%
1.3%
$600.0
20.1%
$625.0
20.0%
Estimated Totals for All Lenders:
Top 20 Alt A Mortgage Producers in 2006
(For 12 Months - Dollars In BIIDons)
2006 Alt A Origin.hons
Rank
Lender
Volume
2005 Alt A Originations
Pet of Total
Mkl Share
Volume
Pet of Total
MktShare
IndyMac, CA
$70.15
78.0%
17.5%
$47.22
77.7%
12.4%
2
Countrywide FinanCial, CA
$68.00
14.7%
17.0%
$63.00
12.8%
16.6%
3
Residential CapHaJ Group, MN
$44.00
46.6%
11.0%
$22.24
30.3%
5.9%
4
EMC Mortgage, TX
$28.27
39.0%
7.1%
$32.76
36.1%
8.6%
5
Washington Mutual, WA
$25.30
12.9%
6.3%
$0.83
0.3%
0.2%
6
Aurora Loan Services, CO
$19.40
52.7%
4.9%
$39.88
76.8%
10.5%
7
GreenPoint Mortgage Funding Inc., CA
$18.30
SO.3%
4.6%
$18.42
43.6%
4.8%
8
WMC Mortgage Corp., CA
$17.70
53.3%
4.4%
$17.70
55.7%
4.7%
9
First Magnus FinanCial, AZ
$13.32
44.3%
3.3%
$10.53
38.9%
2.8%
10
Impac Mortgage Holdings, CA
$11.57
92.1%
2.9%
$21.46
96.2%
5.6%
2.3%
11
SunTrus! Mortgage Inc., VA
$10.09
17.9%
2.5%
$8.71
18.3%
12
Chase Home Finance, NJ
$9.40
5.4%
2.4%
$5.40
2.9%
1.4%
13
National City Mortgage Co., OH
$8.74
20.3%
2.2%
$5.94
10.1%
1.6%
0.2%
14
CitiMortgage Inc., MO
$8.22
4.5%
2.1 %
$0.90
0.7%
15
NewCentul}'FinanciaICorp.,CA
S8.10
13.5%
2.0%
$7.70
13.7%
2.0%
16
Firs! Horizon Home Loans, TX
$7.25
23.2%
1.8%
$11.55
26.8%
3.0%
1.3%
17
American Mortgage Network, CA
$6.61
48.1%
1.7%
$5.01
33.7%
18
PHH Mortgage, NJ
$6.50
15.8%
1.6%
$2.51
5.2%
0.7%
19
Taylor, Bean, & Whilaker Mortgage Corp.. FL
$6.27
25.3%
1.6%
$4.61
24.1%
1.2%
20
American Home Mortgage Corp., NY
$5.24
8.9%
1.3%
$5.24
11.6%
1.4%
$400.0
13.4%
$380.0
12.2',{,
Estimated Totals for All Lenders:
Notes: Ranking 01 lop subprime and All A mortgage originalolS;s derilled 'tom a survey of 60 lenders by Inside Mortgage Finance. the Inside Mortgage Finance MBS Database.
company eamlngs and other public sou/Ges. Wens Fargo restated its SUbprime production to excfude co";ssuance.
Soun;e: Insid" MDngag" Finance. Copyright 2007
PAGE 4
INSIDE MORTGAGE FINANCE - MARCH 28, 2008
Top 20 Subprime Producers in 2007
(For 12 Months - Dol/a"" in Billions)
.;·tl.l·A
2007 Subprime Originations
Rank
Lender
2007
40D7
3007
2007
MktShare
2006-07
Citi,NY
$19.70
$2.30
$3.50
$5.BO
10.2%
-48.2%
2
HSBC Finance, IL
$17,99
$2.14
$3.51
$4.71
9.3%
-65.9%
3
Counlrywide Financial, CA
$16.99
$0.07
$3.33
$5.72
B.8%
-58.1%
4
Wells Fargo Home Mortgage, IA
$15.42
$2.27
$3.38
$4.11
8.0%
-44.7%
5
First Franklin Financial Corp, CA
$13.48
$0.50
$1.72
$5.30
7.0%
-51.3%
6
Chase Home Finance, NJ
$11.52
$2.30
$2.90
$3.30
6.0%
-0.3%
7
Option One Mortgage, CA
$11.18
$0.00
$1.59
$3.39
5.8%
-61.2%
8
EMC Mortgage Corp, 1)(
$7.91
$0.11
$0.B6
$2.81
4.1%
-16.6%
9
Ameriquest Mortgage, CA
$6.40
SO.OO
$0.40
$2.10
3.3%
-78.3%
10
BNC Mortgage, CA
$6.10
$0.10
$1.00
$2.40
3.2%
-55.5%
11
Washlnglon MulUaJ, WA
$5.50
$0.00
$0.50
$2.00
2.9%
-79.3%
12
WMC Mortgage, CA
$5.00
$0.00
$0.00
".60
2.6%
-64.9%
13
Ne.v Century Financial, CA
$4.70
$0.00
$0.00
$0.00
2.4%
-90.9%
14
American General Finance, IN
$4.50
$1.00
".25
$1.15
2.3%
-70.1%
-59.50/.
15
Equilirst, NC
$4.35
$0.55
$0.70
$1.30
2.3%
16
Aegis Mortgage Corp" TX
$4.30
SO.OO
$0.20
$1.20
2.2%
-74.7%
17
Residential Capital LLC
$4.24
$0.10
$0.20
$0.69
2.2%
-86.1%
18
Saxon Mortgage, VA
$4.13
$0.60
$0.90
$1.43
2.1%
24.5%
19
Accredited Home Lenders, CA
$4.00
$0.38
$0.66
$1.33
2.1%
-74.6%
20
Delta Financial Corp" NY
1.9%
-11.3%
100.0%
-67.9%
Estimatect Totals for All Lenclers:
$3.58
$0.18
$0.81
$1.35
S192.50
'13.50
'28.00
$511.00
Top 20 Alt A Mortgage Producers in 2007
(For 12 Months - Dolla"" in BiQjons)
.;,;I.I.u
2007 All A Originalions
Rank
Lender
2007
4007
3007
2007
MktShare
200&-07
Counlrywide Financial, CA
$41.45
S3.90
$6.65
$15.10
15.1%
-39.0%
2
IndyMac, CA
$30.70
S1.70
$3.50
S10.5O
11.2%
-56.2%
3
Lelunan Brolhers, NY
$19.25
$1.10
$4.70
S7,45
7.0%
-0.8%
4
Citi,MO
$16.50
$1.00
$2.50
S6.OO
6.0%
100.7%
5
Washington Mulual, WA
$14.70
$0.10
$1.80
SS.4O
5.3"..
-41.9%
6
Residential Capital LLC, NY
$14.70
SO.oo
$3.50
$4.00
5.3%
-67.0%
7
Chase Home Finance, NJ
$9.90
SO.70
$2.50
$3.BO
3.6%
5.3%
8
EMC Mortgage, TX
$9.42
$0.14
$1.39
$3.18
3.4%
-66.7%
-57.6%
9
GreenPoint Mortgage Funding Inc., CA
$7.76
$0.00
S1.80
$2.82
2.B%
10
Wells Fargo & Company, IA
$6.80
$0.18
$1.10
S2.97
2.5%
72.6%
11
First Magnus FinanCial, AZ.
$6.39
SO.OO
SO. 25
S2.B7
2.3%
-52.0%
12
AmTrust Bank, OH
$6.18
$1.78
$1.85
$1.83
2.2%
120.0%
13
Nalional City Mortgage Co., OH
$5.75
$0.03
$0.97
$2.22
2.1%
-34.2%
14
Flagslar Bank, MI
$5.40
$0.60
$1.34
$2.11
2.0%
65.6%
15
Quicken Loans Inc., MI
$5.20
SO.20
$1.00
$2.00
1.9%
11.1%
16
Wachovia Corporation, NC
$4.29
$0.02
$0.66
$1.26
1.6%
-63.9%
17
Impac Mortgage Holdings, CA
$4.58
$0.50
$0.58
$1.30
1.7%
-e0.5%
18
First Horizon Home Loans, 1)(
S3.67
$0.40
$0.77
$1.21
1.3%
-49.4%
19
Bank of America Mig. & Affiliales, NC
$3.40
$0.20
$0.80
$1.40
1.2%
385.7%
20
HSBC Mortgage Corp., NY
$3.30
$0.73
$0.71
$0.78
1.2%
-19.7%
'275.0
$27:0
$54.0
$96.0
Estimalect TOlals for All Lenders:
-31.3%
Notes: Ranking of top subprime and All A mortgage Originators is derived 110m a survey of 60 tender.s by Inside Mortgage Finance, the Inside Mortgage Finance MBS Database,
company earnings and olher pubfic SOU/CeS. Wells Fargo restated US subprime produqion to exclude CD-issuance.
Source: Inside Mortgage Finance, Copyrighl2DDB
PAGE 7
Appendix B
Page 7
From NCLC White Paper:
Table l~ Subprime Loan~ By National Banks ,and Federal Thrifts 2006
(indllde~ operating mbsidiarie~)
$ (BILLIONS)
LENDER.
CitilVlortg;lge,NY'
\VM:C Mortgage (GE), CA
Wells Fargo Home Mort., L1\
FirstFrrulklin (National City
l\lA.l?KETSHAKE
4
$38
6.3%
5
33
28
5.5%
4.6%
9
B;mk},CA
10
2&
Washington Mtltu."tl, \VA
BNe Mortg~, G..t\. (Lebmart
Bros. Balli::)
Chase Home Fin..'1llCe, NJ
Equifust, NC (Regions R.1llk)
TOT.4.L
11
27
4.4%
16
15
2.4%
17
12
1.9"10
18
11
$190
1.8%
315%
S01!1"Ce: Inside J"fo,ltgage Firumce
•Citilld:ortgaga became an operating subsidialy ofCitiBmk in Ocmber 200(i- Its voIumeohu:bprime
origjnaliomrose. in me 4ib quarter, and it:; =ket share lncre.ased ta 10%.
NCLC incorrectly characterizes Equifirst as a national bank when in fact it was a
subsidiary of state-chartered Regions Bank, and the figures given for some lenders (most notably
WMC Mortgage) differ somewhat from the original source numbers provided by Inside
Mortgage Finance. Removing Equifirst and correcting other data errors reduces the total
"market share" ofthese federally supervised institutions to 26 percent. 6 However, as noted
above, little confidence should be placed even in this corrected figure, due to the unreliable
estimate of the overall size of the subprime market used as its denominator.
c.
OCC Analysis ofSubprime and Alt-A Loan Performance
National banks and their operating subsidiaries engaged in subprime mortgage lending to
a relatively modest extent, as demonstrated above. However, not all subprime loans have
subsequently caused problems for borrowers, lenders, and others. Subprime and Alt-A loans
may be appropriate for some borrowers in some situations. The quality of the underwriting
process - that is, determining through analysis of the borrower and market conditions that a
borrower is highly likely to be able to repay the loan as promised - is a major determinant of
subsequent loan performance. The quality of underwriting varies across lenders, a factor that is
evident through comparisons of rates of delinquency, foreclosure, or other loan performance
measures across loan originators. Through analysis of the available data, the OCC has
determined that subprime loans originated by OCC-supervised institutions have generally
performed better than similar loans originated by other lenders.
The subprime data from LPC used for the analysis of market share above also contains
information on how loans have performed since they were originated. In analysis done in 2008,
the OCC used that information to analyze the foreclosure experience in the ten metropolitan
areas hardest hit by foreclosures, and to identify the ten originators with the largest number of
non-prime loans that went into foreclosure in those markets. The results are described in the
6
The correct figure for BNC Mortgage is $14 billion, and for WMC Mortgage $11 billion.
Attachment 1
11/1~OO6
WQtst Ten
jn the Worst Ten
•
Th~ table below sets forth tMt.en m~tfp:p,()li~n area::sexPeriencing the highest rates of
foreclosure as reported by ReaJtyrrac(the "\NorstTen" MSAs). Fore:closure rates for sub·
prime and Alt-A mortgages originateq from 20Q5 through 2007 in these MSAswerecQmputeQ
using data from Loan Perf()rm~i'Oce.
•
For ~ach of these metro~'ar~as"th~ ''WO$tTen''li>riginatQrswereideritified: thetenof"iginators
In eaC'h MSA with thelarg,e'$tl'l,\elmper~fh()rH>rimemQrtgage fQreclosuresit'l the Loan'
Pel'l'Orman(!e databa$e'Jot20dei~2007QtJtJit]atillfl5.
.
•
Only 21 companies in variQ.U$. compjn~tiQhs. (seejattaehed tables for MSA-Ievel detaIls)
occupy the Worst Ten slots. in ,theVl/orstl'enrI'Jetroa:re.as:
AEGIS FUNDING CORPORATI(,)N
AMERICAN HOME MQRTGAGECQRP.
AMERIQUEST MORTeAGE,eOMPANY
ARGENT MORTGA9E COMPANY
BNC MORTGAGE
COUNTRYVvlQE
DECISION ONEMQRTGAGE
D.ELTA FUND1NC3 GORPORATIQN
Fli::LDSTONi:: MQRTG;AGECQMPANY
FIRST FRANKLIN CQRPGR;A;TION
FREMONT INVESTMENT &.LQAN
$R~PO(NT MORTGAGE FUNDING
INDYMAC SANK, F.S.B.
LoNC$eEACH MORTGAGECO.
NEV\fCENTURY MORTGAGE
OPTIONONE MORTGAGE CORP
OWNJT MORTGAG.ESQLUTlONSJNC.
PEQPLE'S.CHQICEfINANCIALG0RP
RE,sMAE MORTGAGE CORPORATION
WELLS FARGO
WMC.I\IIORTGAG5 CORP.
• o.f these 21 firms, 1.2 were exch.lsivelysuperIJl$~.d bythe states; overall, such or~9inatQrs
accounted for nearly60pef¢entQfnon~prithe.mortgage ioarts and foreclosures in the Worst
Ten metro areas In 2005..2001.
. .'
•
Only thre.e firms on fhelistVtiere. subje::cf to QCC supervision during 2005-2007 , and tho.se
three accounted for fewer than 12p~i¢erit,cifforacrO$ures in the Wotst Ten metro ateas~
•
Results for the U.S. as awholeare.$imilarlothosefor the Worst Ten metropolitan areas,
OCC>supervisad institutions aC·Cbllnte:d for approximately 12 to 14 percent ()f the non-prime
originations; moreover.foretlo:SUte rat$s forOGC~stJRervjsed institutions were markedly lower
on average than for other types of0 riginators ,
Worst Ten in the Worst Ten:
Results for individual metropo/ltanareas
Bakersfield
Cleveland
Detroit
11113/2008
@FedFRASER