Mortgage Daily Logo
mortgage news from industry experts

CSFB Mortgage Trading Exec Out After Huge Hedge Losses

CSFB Mortgage Trading Exec Out After Huge Hedge Losses

Matthew Ruppel left CSFB after mortgage group lost a reported $80 million to $100 million on certain mortgage trades

December 15, 2003

By PATRICK CROWLEY


The former head of Credit Suisse First Boston’s (CSFB) mortgage-trading division left the company amid huge losses just two weeks after he was forced to relinquish some control in a power-sharing shakeup.According to published reports by ReutersThe Wall Street Journal and others, Matthew Ruppel left the international financial services and investment banking firm during the first week of December after CSFBs mortgage group lost a reported $80 million to $100 million on certain mortgage trades made during the second half of the year.

Ruppel, who had been with the firm since 1998, couldn’t be reached and CSFB did not return calls to comment or issue any type of formal statement on his departure.

But in mid-November, CSFB reorganized its mortgage-backed securities unit, according to a report on BondWeek.com.

Ruppel was stripped of his duties as solely overseeing the mortgage-backed securities and was designated “co-head” of the group along with Andy Kimura, who is described as a “veteran CSFB mortgage trader.”

BondWeek.com reported the change after obtaining an internal memo from Jim Healy and Jerry Wood, co-heads of fixed income at CSFB.

The memo cited “risk management challenges” as one of the reasons for the change and indicated Ruppel would oversee “conduit, including origination and operational issues, and new business” while Kimura was put in charge of trading and risk management.

But the report also said the changes came after CSFB booked a $50 million loss “in its high-profile whole loan collateralized mortgage obligation book from hedges of interest-only positions.”

BondWeek.com reported that “some professionals outside the firm (speculated) the change in hierarchy is directly related to these losses.”

The Wall Street Journal, reporting on Ruppel’s departure, said CSFB had launched an internal investigation about a mortgage trade that lost at least $25 million in November.

CSFB brought in an outside law firm to investigate how the loss occurred and whether trading positions were property disclosed and monitored by supervisors, the journal reported.

In the wake of Ruppel’s sudden departure CSFB has announced a reorganization of its asset-baked and residential- and commercial-mortgage-backed operations.

The new unit will be run by Kimura, Michael Marriott and Ben Aitkenhead, who will oversee risk management, sales and trading, according to Reuters.

CSFB had operated residential mortgage-backed securities, CMBS and asset-backed securities as separate units.

CSFB, a unit of Credit Suisse Group, had reported in November that third-quarter fixed income revenues had fallen 41% from the second quarter.

Bond markets were hurt by a big summer selloff while the mortgage-backed securities market was hit by heavy refinancing and volatile mortgage rates, Reuters reported.

“The mortgage business has never seen such a large volume of refinancing,” David Hendler, bank and finance analyst at CreditSights, an independent New York research firm, told the news wire service.

“Some people who managed their risk based on historical events were not prepared. It’s another example of how you can’t drive forward by looking at the rear-view mirror,” he said.

Related Stories:

WaMu Top Mortgage Exec Out
Washington Mutual Inc. announced that its top mortgage executive retired this week, following the company’s disclosure last month that problems in hedging the rising rate environment led to third quarter losses in the sale of home mortgages..

Fidelity Mortgage Unable to Meet WA Rate Lock Commitments
Rising rates have left some borrowers with worthless rate locks from an Arizona mortgage lender.

Capitol Commerce Collapses
Capitol Commerce Mortgage shut down Friday, stunning employees and brokers who were counting on loan closings. “They did not hedge their bet, very simply,” said Jim Chapman, chief executive of a San Rafael mortgage broker and banker, to the Independent Journal.

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION