Home Mortgage Aid

Homes don’t cost the same in Topeka versus the Bay Area. Neither does gas. Neither does a night out on the town. In fact, just about everything in Topeka is probably cheaper. So does it make sense to have a static IRA maximum donation rate when cost-of-living varies so wildly from place to place? No, it does not. There’s no reason to consider this an equitable system. The folks over at lazyman and money make a much better argument than I ever could. Check it out at

Adjust Roth IRA Limits, Please!

The Digerati life has a great blog post about how we’ve found ourselves in the current subprime mess, and how to get ourselves out of it. It explores the reasons behind what has happened and without going into complicated economics that a normal person couldn’t understand. You can check it out at:

What’s Next After The Housing Bust and the Lending Crisis: the Reinvention of Credit

Bank of America rolled the dice a few months ago when they committed two billion dollars to underwriting Countrywide’s short term cash flow problems. With that gamble, BofA was banking on a relatively modest recovery in the housing and mortgage market. Obviously, that has not happened. Had Countrywide’s stock improved, Bank of America had an opportunity to reap a massive profit, with the option to buy shares at $18 a piece. Unfortunately for them, the stock has continued to plummet into the six dollar range as of last week. So, Bank of America was left with no choice but throw more money into the black hole of Countrywide and purchase the entire operation. Otherwise, they would stand no chance of recouping their initial investment. Lets hope they don’t take the rest of the Banking and Mortgage industries down with them.

WASHINGTON (AP) — The Securities and Exchange Commission is examining stock sales of the chief executive of Countrywide Financial Corp., the nation’s largest mortgage lender, a person familiar with the matter said Wednesday.

The informal SEC inquiry of stock sales by CEO Angelo R. Mozilo has been under way for a while, the person said, speaking on condition of anonymity because the probe has not been made public.

The inquiry was first reported online Wednesday afternoon by The Wall Street Journal.

Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b51 trading plan. These plans allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material nonpublic information.

Read More At CNN

Critics have long questioned the outsize pay packages and lucrative share sales of Countrywide Financial Corp.’s chairman and chief executive, Angelo Mozilo. But outside members of the company’s board also have above-average compensation, and three of them have sold more than $2 million of Countrywide shares apiece since mid-2006.

The directors are likely to be in the spotlight in the months ahead as the nation’s biggest home-mortgage lender by loan volume struggles with rising defaults and a drooping share price. They face tricky choices in deciding how much to challenge 68-year-old Mr. Mozilo, who co-founded the company 38 years ago.

After Countrywide reported a $1.2 billion loss for the third quarter, Mr. Mozilo put his credibility on the line by forecasting late last month that the Calabasas, Calif., company will make a modest profit in the current quarter, despite continued turmoil in the markets. Countrywide’s stock is down 66% so far this year.

Click Here To Read More From the Wall Street Journal

consider selling financial after a presumed .25 cut, or before that if there is a significant run up.

Countrywide continues to offer mortgages, although it seems they are exiting the subprime area. For a company almost given up for dead a few weeks ago, they seem to be emerging from their darkest hour. Having already started the painful downsizing of lay-offs and more stringent loan requirements, they also now have a major financier in Bank of America (and Warren Buffett, if you consider that he recently purchased a large stake in the bank). Their stock price bottomed out around $15 and now trades around $19. Where they go from here is anyone’s guess, but it’s quite possible they have seen the worst of it.

Countrywide

With Bernanke and the Fed’s rate cut, it seems the credit crunch may be easing for some of us. The fall out in the subprime industry will be interesting. This past week, ETrade made news by exiting the mortgage market. Countrywide has already left the subprime market. This will leave big players, like Wells Fargo (WFC) as one of the ‘titans of the industry’.

Subprime doesn’t have to be a financial sinkhole for companies, especially if it’s done right (e.g. with documentation). Obviously, the firms wouldn’t get involved if they didn’t think they could turn a profit.

Wachovia and their Golden West acquisition is another mortgage player going forward. While everyone is running from the mortgage industry right now, the consolidation will only help those left standing.

My stock in Wachovia bounced well with Bernanke’s unexpected .50 rate cut. It was up as high as 53, but now has settled back down into the mid 51s. I wish I had sold at 53, as I wasn’t planning on this being a long term hold. Until I find something better to put it in though, it’ll stay in WB. The stock is not very volatile (low B) so I’m not overly concerned. Earnings will be announced mid-to-late October.

WEN has also done well, up a few percent. It seems as though there are now at least 12 parties interested in buying the chain, and the rate cut should give an ease to the “credit crunch”. What that means is that financing will be easier to come by, and in turn mergers and acquisitions will start rolling. That’s my hope anyway

bought Wendy’s today at 32.60…looks like a strong candidate to be bought out by billionaire investor, Norman Peltz, owner of TRIARC. He already owns Arby’s and recently signed a non-disclosure agreement to get a chance to look at Wendy’s books. Prior to this recent development, Peltz said he would be considering an offer between 37 and 41 dollars a share. Reasons I have to be optomistic:

- Peltz already owns about 10% of the shares.

- Peltz is investing his time and people in the evaluation of the company.

- If WEN’s management doesn’t play ball, they are going to have a heck of a time answering the major shareholders who sit on the board.

- Peltz represents Arby’s — Wendy’s wouldn’t share their books with a competitor unless they thought it was a legit offer.

I’m hoping for news by the end of September, early October.