While Wall Street banks continue to feel the effects of the sub-prime meltdown, Australia’s own NAB was a trailblazer when it came to dropping billions in the US mortgage business. NAB infamously lost more than $3 billion when it bought Homeside Lending, a Florida-based mortgage originator. An internal investigation into the fiasco later reported that Homeside’s losses were caused by “an unprecedented US interest rate movement and a corresponding collapse in the market for bulk sales of mortgage servicing rights” – not all that different to the causes of the current credit losses.

Chief Operating Officer of Homeside at the time of the losses was an American named Kevin Race. Race, along with two other Homeside executives “resigned” shortly after the losses were discovered in September 2001.

The following year, NAB and several Homeside executives (including Mr Race) faced a class action from shareholders. The action alleged that Homeside had “knowingly used unreasonably optimistic valuation methodologies” in its $US180 million mortgage servicing portfolio (the class action was eventually settled by NAB in 2002 for $8.5 million). Ironically, a very similar claim would be leveled at lenders last year, as “liar loans” to borrowers with little or no ability to service the subsequent interest rates fuelled excessive property valuations.

While in some industries, being the operations chief of a business which loses more than $3 billion would render you “damaged goods”. Alas, apparently not in the banking industry, with Kevin Race quickly rebounding from the Homeside debacle to be appointed chief operating officer of “faith-based lender Homebanc” in 2003. Race become CEO of Homebanc in January 2007.

Proving that lightning can strike twice, a mere seven months into Race’s tenure as CEO, HomeBanc filed for bankruptcy, two days after selling its retail mortgage operations to Countrywide Financial Group. Much like RAMS, HomeBanc stated at the time that it would exit the mortgage origination business after it revealed it is unable to borrow on its credit facilities and was unable to fund its mortgage loan obligations.

Apart from the incompetence that seems to follow Race, there was also a touch of controversy. As footnoted.org reported in 2005, soon after Race was hired as COO of HomeBanc, the mortgage originator purchased Race’s Jacksonville residence for US$1.7 million. Two years later, the company sold the property for the not-so princely sum of US$1.45 million (after spending US$175,000 on renovations) – a loss of US$425,000. As footnoted.org stated, a fair effort given that Jacksonville house prices were skyrocketing at the time.

Crikey is unsure if Kevin Race has applied for the role of CEO of Bear Sterns or Merrill Lynch, but given his resume, he seems a natural to become CEO of a Wall Street bank.