the as argument that firms in a crisis will try and stabilize their positions “markets politics” (Fligstein, 1996). Reporting on discussions at the June 2004 American Securitization Forum in Las Vegas, the trade journal noted that limited mortgage supply remained the Asset Securitization Report but also noted the generally amongst analysts from the “hot topic”, “harmonious agreement” major banks that the largely untapped nonconventional market segments could offer a solution to the supply crunch (Asset Securitization Review, p.10, June 14, 2004). An editorial in National from March 2005 also highlighted the compensatory logic driving the growth of Mortgage News the nonconventional markets: nonconventional market is booming this year. Taking up the “The slack (as it did last year) for the big drop off in prime lending, and keeping record numbers of people employed in the mortgage 2005). industry” (March Countrywide Financial was one of the most successful beneficiaries of this shift, and they became a model that other firms emulated in order to profit from nonconventional lending. Their annual report boasted: well balanced business model continues to produce strong operational results “Countrywide’s amidst a transitional environment. Compared to a year ago, the total mortgage origination market is smaller as a result of lower refinance volume. This impact has been mitigated by growth in purchase funding and record volumes of adjustable rate, Countrywide’s dramatic home equity, and nonconventional loans”. (2005) The rapidity with which the main players reoriented toward nonconventional lending and securitization after 2003 is evident in figure 3. By 2005, the formerly niche nonconventional lending and securitization sectors had been rapidly transformed into a core business for the largest financial institutions in the country. In 2001 the largest conventional originator (Citibank) did 91% of its origination business in the conventional market, and only 9% in the non-prime market. In contrast, by 2005 the originator (Countrywide) was doing largest conventional less
the “markets as politics” argument that firms in a crisis will try and stabilize their positions (Fligstein, 1996). Reporting on discussions at the June 2004 American Securitization Forum in Las Vegas, the trade journal Asset Securitization Report noted that limited mortgage supply remained the “hot topic”, but also noted the generally “harmonious agreement” amongst analysts from the major banks that the largely untapped nonconventional market segments could offer a solution to the supply crunch (Asset Securitization Review, p.10, June 14, 2004). An editorial in National Mortgage News from March 2005 also highlighted the compensatory logic driving the growth of the nonconventional markets: “The nonconventional market is booming this year. Taking up the slack (as it did last year) for the big drop off in prime lending, and keeping record numbers of people employed in the mortgage industry” (March 2005). Countrywide Financial was one of the most successful beneficiaries of this shift, and they became a model that other firms emulated in order to profit from nonconventional lending. Their annual report boasted: “Countrywide’s well balanced business model continues to produce strong operational results amidst a transitional environment. Compared to a year ago, the total mortgage origination market is smaller as a result of lower refinance volume. This impact has been mitigated by Countrywide’s dramatic growth in purchase funding and record volumes of adjustable rate, home equity, and nonconventional loans”. (2005) The rapidity with which the main players reoriented toward nonconventional lending and securitization after 2003 is evident in figure 3. By 2005, the formerly niche nonconventional lending and securitization sectors had been rapidly transformed into a core business for the largest financial institutions in the country. In 2001 the largest conventional originator (Citibank) did 91% of its origination business in the conventional market, and only 9% in the non-prime market. In contrast, by 2005 the largest conventional originator (Countrywide) was doing less
Fligstein_169.docx