U-M coaches borrowed from athletic director's bank - Detroit News
On the front page. Just as the love fest was going top speed....a sped bump?
http://www.detnews.com/article/20090918/SPORTS0201/909180350/U-M-coache…
"Michigan football coach Rich Rodriguez and seven of his assistants have received $3.3 million in mortgages and lines of credit from the bank founded by U-M athletic director Bill Martin, records show.
Basketball coach John Beilein received his mortgage at Bank of Ann Arbor too, as did another basketball assistant; men's swimming coach Mike Bottom has a line of credit there. All told, the 11 coaches have secured more than $4 million in loans from the bank where Martin is a shareholder and chairman of the board."
Discuss
September 18th, 2009 at 1:41 AM ^
More ado about nothing. Even their conflict of interest specialist says so.
September 18th, 2009 at 10:21 AM ^
What this article and the preceeding Free Press imbroglio points out how utterly clueless the typical newspaper "reporter" is about how the world works. That RichRod got a mortgate from the bank Martin chairs is of no great significance unless special terms were agreed to, in which case it is Martin, and not RichRod, who has a problem. But it sure seems to me that the bank knows exactly how it would get its money back in the event of a default on the mortgage. I'm guessing that Rich Rod's mortgage is one of the most secure in the loan portfolio. NOTE TO ALL NEWSPAPER REPORTERS AND EDITORS: In the real world banks make loans based on their confidence they will be repaid. Think a guy with a five year $12.5 million dollar contract from the University of Michigan is a good loan bet? Better perhaps than a $75,000 per year reporter with no contract from a failing newspaper?
September 18th, 2009 at 11:50 AM ^
So you're telling me that there's a meaningful probability that a coach who makes $2.5mm a year is going to be able to repay a $417,000 FHA-conforming 30-year mortgage that they've already securitized and no longer have any principal risk in? There's really no conflict if they don't have any principal risk.
This is not news.
Assuming 6% interest, that's about $2500/month in mtge payments, or about 1/10th of 1% of his annual comp.
Looking at it another way, the $30k in annual mortgage payments would take Rodriguez a little less than 5 days to earn and pay.
And if he didn't pay, the house sold for $1.5mm, the mortgage is approx 28% of the market value of the house. I'm pretty confident they could foreclose and recover their $417k.
The line of credit is another issue, but again, $783k, even if fully drawn, could pretty easily be recovered based on RR's earning potential in Ann Arbor or elsewhere.
The only possible issue is a sweetheart deal with favorable terms, but it's pretty hard to prove given the relatively small pool of comparable earners and the low default risk. It's not like it's a subprime credit extension at zero interest.
Ridiculous.
September 18th, 2009 at 5:42 PM ^
Both by the News and by those that are even remotely upset about it.
But re: "they have no risk if the loan was securitized" - not necessarily true. Depends on the documents that securitized the loan, etc. Often times these agreements will have either buy back/replacement provisions (say, if the originator represented a pool of loans to meet certain underwriting criteria, and then when loans defaulted the trustee finds out they didn't meet the criteria), or in the insurance agreements. Depending on the size of the securitized pool and the provisions in the agreement (reps and warranties), the loans can get kicked back out.
Just saying. This is happening a ton right now, I'm sure you can imagine.
September 19th, 2009 at 8:49 PM ^
You're right - there is some unwind risk that the mortgage might get kicked back to the originator if there's a material misrepresentation of the credit quality of the mortgage. But, and I caveat that I'm a restructuring banker and not an MBS originator, that risk usually lasts until such time as the warehoused mortgages are bundled and securitized. That said, it's all subject to how the warehousing facility documents are worded - reps & warranties as you correctly point out.
I should rephrase here as "there's virtually no principal risk" to B of AA. Unwinds are rare for loans of this quality. In this case, you've got an FHA-conforming note that's 28% loan to value (assuming sale price is a decent indicator of current FMV), and a borrower that could retire the note by writing a check tomorrow. This mortgage is in place to optimize the capital structure of the house, not because RR couldn't afford to pay cash.
Anyway, we're in violent agreement. It's a nonstory.
September 18th, 2009 at 11:39 AM ^
There is nothing that will come from that. Even if he was somehow getting sweetheart deal I can't imagine why this is a problem. I'm a little surprised at the News for running this one.
September 18th, 2009 at 1:43 AM ^
Just another media attempted witch hunt.
I dont know what anyone would expect, when a bunch of coaches come in from another state and need housing...no doubt that they are going to apply for loans at whatever place is conveinant.
George Lowenstein, a professor of economics and psychology at Carnegie Mellon University in Pittsburgh, is a recognized expert on conflicts of interest, like those of a drug-prescribing doctor who's taking money from a pharmaceutical company.
But he said the coaches' loans are a "garden variety" conflict for Martin between his professional responsibility to the university as athletic director and his personal interest in the bank.
"In the scheme of conflicts of interest, this doesn't seem that major," Lowenstein said.
so..fk the Det. media... they all are looking at the most ridiculous angles to try and get RR and staff.
September 18th, 2009 at 1:48 AM ^
Martin's investment in RR is considerably larger than the converse. Non-story.
September 18th, 2009 at 1:55 AM ^
Nah...I highly doubt Martin would be worried about the ability of these people to pay off their loans. If they were approved for the loans in the first place, then their default risk should be the same as any other approved consumer.
Of course, the media could spin this in any direction. Perhaps someone will say this is the reason why Martin let Lloyd Carr keep his job for as long as he did -- because he had a mortgage through BofAA.
September 18th, 2009 at 1:56 AM ^
THIS JUST IN: COACHES UTILIZE INTERNET PROVIDED BY UNIVERSITY OF MICHIGAN TO CHECK OUT KANYE CLIP, LOLCATS
September 18th, 2009 at 1:58 AM ^
Didn't we know about this when we originally signed them? It sounds vaguely familiar.
September 18th, 2009 at 8:04 AM ^
During his lawsuit with WVU he filed a line of credit with the court to show he could make that first payment. That line of credit came from Martin's bank. This story is two years old at this point.
September 18th, 2009 at 2:00 AM ^
I have it narrowed down to two choices: "Rich Rod buys a gallon of milk at the same Busch's Value Land where unambomber once shopped!" or "Rich Rod fails to prevent sun from setting as scheduled, no extra daylight for A2!"
September 18th, 2009 at 5:58 AM ^
RR seen buying groceries at Save-a-Lot. Spartan fans (and their media lapdogs) immediately accuse RR of conflict of interest.
September 18th, 2009 at 9:41 AM ^
Fight that Green Wall, tater.
One mlive comment at a time...
September 18th, 2009 at 2:06 AM ^
This is not news. 8 coaches at the University of Michigan can afford to borrow 3.3 million in mortgages and lines of credit. What constitutes news is absurd.
September 18th, 2009 at 7:19 AM ^
It's even less significant than that...the article says Bank of AA has given 2.8 million in mortgages and 1.1 million in lines of credit. Of the 2.8 million in mortgages all but 400k of that amount has already been sold and is therefore not at risk to the bank.
The lines of credit are all from the football staff, but there's no information on whether any of it is being used. And honestly that's not much, I can't imagine a filthy rich guy like Martin worrying about a 700k line of credit when deciding whether to fire someone.
But the article at least sort of point out that it's not a big deal. One of those things where they did all that legwork and felt like they had to publish it one way or another.
September 18th, 2009 at 2:10 AM ^
Only time and event will tell if this is anything at all.
I'm not as confident as others on how this ends up after the national media "spin" cycle. Too many want to tie our resurgence in football and basketball to something unsavory.
To some this story will be like play dough for kids-they try to bend it into something and then tell you look until you see it too.
As an investigative report the News at least placed things in context, looked at others for comparison, discussed the policy, spoke with Martin, and spoke with a national expert.
This might be the end of any shot Mary Sue Coleman had at running the NCAA. Even if this is just noise it can't help her. For that matter Bill Martin can't be too happy about this now.
September 18th, 2009 at 2:14 AM ^
1) Bank of Ann Arbor must have just given Barwis a bag of $$ for the Wolf's Den free of charge. (And who wouldn't?)
2) This is innocuous. No different than universities giving faculty low interest loans as a recruiting tool.
3) It's apparently cub reporter day in Motown.
September 18th, 2009 at 2:26 AM ^
Waiting for the Corleone's of the mgoblog to show up.
September 18th, 2009 at 3:03 AM ^
Now hold it right there. The Don is semi-retired and Mike is in charge of the Family business now. If you have anything to say, say it to Michael.
September 18th, 2009 at 2:50 AM ^
As soon as I saw the headline in Google Reader I thought to myself, "Here we go again..." But thankfully the article turned out to be nothing more than attempt to cause trouble. The content of the article was a complete waste of everyone's time and I'd like that minute of my life back. I can't imagine why anyone saw the need to green light that and try to manufacture more controversy, especially by saying that Martin might need to make a decision on Rodriguez soon. So dumb.
September 18th, 2009 at 3:29 AM ^
Seems that this is a bank issue. So what? Why should anyone care? Maybe it is good that coaches owe Martin's bank money. It means that Martin has an extra interest in picking good coaches who will not be fired so they will be able to pay the money back.
September 18th, 2009 at 8:06 AM ^
As I read it, if there is a conflict of interest the problem is Martin's, not RR's. But of course that is too fine a brush for the national MSM, which in cases like this can only write in screaming headline font.
September 18th, 2009 at 9:23 AM ^
The credit-card and mortgage crises along with the bailout illustrate that mainstream America either doesn't understand or doesn't care how banking, credit lines, risk management, write-offs and real-property investments actually work.
So this could make RR/BM look bad in the eyes of people who haven't taken the time to understand how (really simple) financial concepts work. To them, it's probably "RR borrowed $3 million from Bill Martin's bank account!" even though the truth is nothing like that.
That being said, if BM is still a controlling partner or officer at the bank, since Martin's office is guaranteeing the coaches' salaries, I don't think it's a sharp idea. But if the conflict manager at UM says differently, I don't have a problem.
September 18th, 2009 at 7:13 AM ^
...let's make a story out of nothing and in the process villify a successful local businessman and group of highly paid, qualified borrowers all of whom kept their business with a Michigan based bank. Perhaps they would have been better off using an out-of-state bank so at least we wouldn't have to read this absurd story.
Thank god the article at least shows both sides (unlike the Freep) so if you actually read the story you see it is a non-issue.
Unfortunately the way the headline is written you would expect to read about how Bill Martin cracked open the safe late one night and started handing out stacks of $100 bills to the coaches.
I can't wait for tomorrows headline about how Rich Rod is responsible for the spread of swine flu.
September 18th, 2009 at 7:52 AM ^
"Spread offense, spread swine flu. What's the difference? Run that story, Lenny!"
September 18th, 2009 at 7:21 AM ^
I'm a stadium employee and I bank at that bank! Scandal! Uproar! Clearly this is all very suspect! When I scan your ticket I'm somehow getting a vague kickback in some manner, possibly!
Next week: Rich Rod bought a car from a LOCAL CAR DEALER! OH NOES!
September 18th, 2009 at 7:23 AM ^
This story makes me wanna..
ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ
September 18th, 2009 at 7:25 AM ^
Which, of course, would say MSU coaches do not have loans..they pay with cash...
September 18th, 2009 at 7:38 AM ^
from their expert in conflicts, "In the scheme of conflicts of interest, this doesn't seem that major," Lowenstein said.
Also, this journalistic masterpiece does not mention whether his or any of the coaches' rates are significantly below market.
Finally, RR's loan has been sold, so the bank doesn't even hold it anymore. It's likely in somebody's pension fund.
The more interesting story is why are Detroit papers attacking Michigan coaches. What happened?
September 18th, 2009 at 7:55 AM ^
That was five times my salary at the time! I am an official Victor's Club member! This must be a conflict of interest!
September 18th, 2009 at 7:55 AM ^
as soon as i read that this 'scandal' had something to do with Bill Martin I knew it was a joke. nothing to read here..
September 18th, 2009 at 8:33 AM ^
And the MSM wonders why it has no credibility with the public anymore? Hello?
*EDIT*: I just sent this email to the Detnews reporter:
What? Is it Cub Reporter Day at the Detroit News?
This hardly seems like "news", (FLASH: In a possible stock
manipulation scheme known as "pump-and-dump", Rich
Rodriguez and Bill Martin own stock in Merck and have
suggested the use of Propecia to friends, a drug used to
treat baldness).
Get a life, folks.
September 18th, 2009 at 8:05 AM ^
Poor guys just couldn't stand watching the Freep get so much pub for Rosensnyder's efforts, so they just had to put somebody to work in hopes of catching up.
I wonder if any Red Wings or Tigers have bought Little Caesar's pizza in the last 15 years. Come to think of it, Mel Farr once had a Ford dealership. I think the News should investigate immediately to see if other Lions players ever had a financial relationship with WC Ford.
September 18th, 2009 at 8:07 AM ^
It seems like there are some seriously pissed people that are looking to sink the program. Chris Balas on Rivals hinted that there are some folks still in the program that want the rednecks to go back where they came from. Could it be them?
September 18th, 2009 at 9:39 AM ^
You can't just walk into a bank and demand a list of bank customers, so what made the News think there were loans to coaches at the bank in the first place? It's one of two things: there's either one or more people inside the Athletic Department who are secretly feeding information to outside media, or the News and the Freep are paying people full-time to sit around and dream up possible scenarios to investigate.
And something's seriously out of whack when it's legally impossible for parents to get information about their own child at college, whether it's academic or health-related, without the student's consent, even if the student is over the age of 18, while at the same time it's apparently perfectly normal for major media outlets to request and receive information about where University employees are doing their private banking, and then publish it.
September 18th, 2009 at 10:18 AM ^
Mortgage and other loan liens are public records, available to anyone who takes the time to look at them. I suspect this reporter got an idea to look these up and came to an editor with the "hot" story. In contrast to what happened at the Free Press, someone at the News made sure all angles were covered, including contacting a credible third party expert (who told them it was not that big a deal) as well as talking to the bank, which then disclosed the fact that most of the loans have been re-sold.
You can legitimately question why the story was run at all, but you must admit that it was written in a pretty objective manner, at least for a newspaper.
September 18th, 2009 at 10:24 AM ^
Many counties and cities have public, online databases that allows anyone to search for tax, property and deed info. That's where you'd get the name of the bank holding the mortgages.
Note: there'd also be a record of when your mortgage gets sold from one bank to another.
September 18th, 2009 at 9:41 AM ^
Is it reasonable to believe the reporter came up with the idea to investigate this issue on his own? If so why? Bill Martin has a reputation for being highly ethical (a primary reason he was hired back in 2000) hence his comments that indicate he isn't comfortable with these loans now that he knows they exist. Is it more likely that someone is feeding bits of potentially bad info to the media? If so, WTF?
Even though the article seems to have more balance (journalistic integrity) that the Freep hit job it still comes across as a desperate attempt to ride it's coat tails for a quick bump in readership. Print media really is circling the drain.
September 18th, 2009 at 8:16 AM ^
Non issue. Geez. What difference does it make? A legal loan.
People need to STFU and GBTW.
September 18th, 2009 at 8:45 AM ^
lol... I think the writer lost interest by the end of the article.
- We have a great story that will clearly show Martin has a huge conflict of interest.
- Our own expert says it's not a big deal.
- shit, we have nothing but I'll print it anyway.
September 18th, 2009 at 8:50 AM ^
is fucking stupid.
September 18th, 2009 at 9:02 AM ^
Unlike Rosenberg's hit job, this is actually decent journalism. It may not be a big story, but it is newsworthy. There's a whole section called "Is there a conflict?" where the author seems to conclude that yes it is, but it's not a big deal. "Garden variety" conflict of interest says randomly interviewed professor. It doesn't sound like the journalist has it in for Michigan.
Martin's stance on this is curious. He didn't know about the loans, except when he told the media a year ago that RR does his banking at Bank of AA? Some clarification from Martin would be nice.
Not really a big deal, but it's a somewhat interesting article.
September 18th, 2009 at 9:38 AM ^
I was happy with my mortgage there, and have recommended it to others. Should coaches not be able to use one of the best banks in town? Maybe, but do you really think Bill Martin is writing loans, or tracking on exactly who got what?
September 18th, 2009 at 10:10 AM ^
Of course I do not think they should be prohibited from using Bank of AA. The large number of coaches receiving loans from Bank of AA indicates that Bank of AA might be giving the coaches favorable deals, which might implicate Martin in unethical behavior. OTOH, maybe Bank of AA is getting good word of mouth independent of Martin, so this could be nothing.
I don't think the journalist makes this out to be anything bigger than it is. It's the kind of minor story that's worthy of being in the middle of the sports section. Will this story have any legs? I doubt it.
September 18th, 2009 at 9:20 AM ^
1) the only thing of any substance left at the bank is rr's line of credit- which they don't know how much, if any, is drawn on. so in fact there may be no money out to anybody and the bank can certainly cut those off if it looks like things were going south
2) martin is worth 9 figures so when if it came down to it he could pay off all the lines and fire them with no conflict no harm to anyone but himself. for a man who took the ad job for $0 he would do that before letting this smudge his resume
3) does the university do any banking at the bank? i would imagine they do as i imagine they bank with most banks in aa.
isn't that a potential conflict?
god, what people will do to print papers. what people will believe to trash other people.
just keep winning
September 18th, 2009 at 9:25 AM ^
As long as it isn't his personal bank, and by that I mean his wallet.
Even then, I don't see why that's a big deal. They do have salaries and can be paid in whatever way Michigan wants to pay them.
September 18th, 2009 at 9:27 AM ^
RICHROD LEASES CAR FROM DEALER WHO WATCHED MICHIGAN FOOTBALL OCCASSIONALLY FROM TIME TO TIME!!
-Department of Redundancy Department (aka Detroit News Outlets)
September 18th, 2009 at 9:47 AM ^
OMG COACHES GET LOANS JUST LIKE REAL PEOPLE RUN FOR THE HILLS