E*Trade Unloads $3 Billion of MBS and Related Bonds

Ahead of its January 24 earnings report, E*Trade Financial Corp. said today that it had successfully sold $3 billion of mortgage-backed securities and municipal bonds classified as held-for-sale. The sale came at a cost, however, with the company saying the assets were sold through a series of transactions at a realized loss of less than $5 million.

E*Trade had recently been the subject of bankruptcy rumors, after disclosing that its ABS holdings had included $450 million of exposure to the CDO market. Its turnaround plan has been centered on restructuring a balance sheet that had placed 70 percent of the firm’s total assets in residential real estate loans and mortgage-backed and asset-backed securities.

Along with the asset sales and a reduction in home equity loans, the company also said it had eliminated approximately $3.5 billion in Federal Home Loan Bank (FHLB) advances and repurchase agreements. E*Trade’s banking operation ended the year with $10.5 billion of excess borrowing capacity from the FHLB, it said.

As it continues to roil from its mortgage exposure, the company said it had formed a special committee designed to “aggressively reduce” the risk of its remaining real estate exposure. Leading the committee will be recently-appiointed COO Robert Burton, who joined E*Trade from Wachovia Corp., where he was responsible for the bank’s mortgage and home equity lending operations.

For more information, visit http://www.etrade.com.