Archive for January, 2009
Memphis-based First Horizon National Corp. (FHN: 8.79 +0.69%), the bank holding company for First Tennesse Bank, said Wednesday morning that it bank had sold mortgage servicing rights on $14 billion of first-lien mortgage loans owned or securitized by Fannie Mae (FNM: 0.00 N/A) or Freddie Mac (FRE: 0.00 N/A).
The move comes as First Horizon has aggressively been pulling back its national mortgage footprint amid continued industry upheaval.
The sale reduces the outstanding balance of first lien loans for which First Tennessee holds the servicing rights to $48 billion, from a peak of about $100 billion a year ago, the bank said in a press statement. "While not material to overall quarterly financial results, the transaction is reflective of First Tennessee Bank's ongoing strategy to reduce its investment in mortgage servicing rights," the company said.
The sales agreement was signed Tuesday, with a sale date and closing date of Jan. 30, 2009, with legal transfer expected within 90 – 120 days following the receipt of customary investor approvals. Details on the purchasing party were not provided.
First Horizon reported a $55.7 million Q4 net loss on Jan. 16, after reporting heavy losses in mid- and late-2008 and receiving a $866,540,000 injection from the U.S. Treasury's TARP as a transaction under the Capital Purchase Program on Nov. 14, 2008.
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
(Update 1: noted that WFC's results did not include Wachovia)
The controversial acquisition of Wachovia Corp. wasn't needed to help push Wells Fargo & Co. (WFC: 29.60 +1.89%) into the red for the first time in seven years, with the San Francisco-based bank saying Wednesday morning that it lost $2.55 billion, or (.79/share), during the fourth quarter of 2008. Wachovia itself — which wasn't included in the bank's bottom-line results — recorded a fourth quarter loss of $11.2 billion, including $2.8 billion deferred tax asset write-down, $4.2 billion credit reserve build and $4.3 billion of market disruption losses, Wells Fargo said in a press statement.
Wells itself wasn't immune to the credit crisis, outside of Wachovia, either; the bank said it built credit reserves by $5.6 billion for future expected losses, while absorbing $473 million in other-than-temporary-impairment charges in its securities portfolio and another $413 million in write-downs on mortgages in warehouse facilities.
Of the major four U.S. banks left standing, only JP Morgan Chase & Co. (JPM: 37.21 -0.75%) managed to post a quarterly profit; Citigroup Inc. (C: 30.87 +1.61%) posted the widest loss of $8.29 billion for Q4, and has been forced to break itself up, while Bank of America Corp. (BAC: 7.29 -0.14%) lost $1.79 billion.
Wells stressed that despite the loss, it has no plans to request additional capital from the U.S. Treasury via the Troubled Asset Relief Program.
Mortgage applications soared at WFC during the quarter, bank officials said — apps reached $116 billion, up 158 percent annualized on a linked-quarter basis. December represent the 4th-highest month of application activity recorded in the bank's history, the company said, although it did not specify how many of those applications successfully transformed into a loan.
The bank reported a mortgage application pipeline of $71 billion at year end to go with $50 billion in closed loans during Q4, and estimated that its share of the mortgage market grew to 12 percent, up from 10 percent one year earlier.
Chief credit officer Mike Loughlin cited continued home price declines and increased bankruptcies as key drivers for deteriorating credit performance — which makes us wonder if cram-down legislation, recently passed by a key House of Representatives committee earlier this week, could portend further portfolio losses for Wells, should it become law.
Net charge-offs in the real estate 1-4 family first mortgage portfolio increased $54 million between Q3 and Q4, while charge-offs in junior liens increased $61 million in the same time frame. “As previously stated, loss levels in this portfolio directly correlate to property values,” said Loughlin.
“Until residential real estate values stabilize, our home equity portfolios will produce higher than normal loss levels.”
Wells Fargo itself held $78.2 billion in residential 1-4 family first mortgages and $75.8 billion in second liens on its books at the end of the fourth quarter; now combined with Wachovia, Wells holds $247.8 billion in first liens, and $110.1 billion in seconds. $122 billion of that increased total comes in the form of Wachovia's now-discontinued Pick-a-Pay Option ARM product; it remains to be seen how the bank pushes through managing such a toxic loan book, in addition to its own substantial second lien exposure.
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Former Freddie Mac (FRE: 0.00 N/A) CFO Anthony "Buddy" Piszel has been named chief financial officer and treasurer at the First American Corp. (FAF: 14.98 +0.07%), after leaving the ailing GSE in late September amid a management shake-up after the mortgage giant was taken over by its regulator.
Piszel's new responsibilities include overseeing First American's financial reporting group, capital markets activities and investor relations, the company said in a press statement.
Piszel spent a year and a half as executive vice president and chief financial officer for Freddie Mac. His background also includes two years as chief financial officer for Health Net, Inc. and more than a decade in senior financial positions at Prudential Financial, Inc., including senior vice president and corporate controller, chief financial officer of the individual life insurance business and chief financial officer of the asset management and retirement business.
During his tenure at Prudential, he also played a leading role in transforming Prudential from a private company to a public, SEC-registered company. Piszel's extensive background also includes serving as an audit partner with Deloitte & Touche and two years as a practice fellow with the Financial Accounting Standards Board.
"The experience and insight Buddy brings to First American will be invaluable as we continue our efforts to maximize our operational results and effectively manage our capital," said Parker Kennedy, chairman and CEO at First American.
Piszel, who earned a bachelor's degree in economics from Rutgers University and an M.B.A. from Golden Gate University, also serves on the board of directors of RehabCare Group, Inc. and is chairman of that company's audit committee.
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
The New York Federal Reserve announced Tuesday it selected William C. Dudley as its new president and CEO. Dudley, 56, will succeed Timothy Geithner, who was sworn in as the new Treasury secretary late Monday.
Prior to joining the New York Federal Reserve Bank in January 2007 as one of Geithner's top aids — where he played a key role in structuring the Federal Reserve's strategy to buy up assets in the effort to stabilize financial markets — Dudley held various top level positions at Goldman Sachs & Co. (GS: 111.77 +2.96%), including chief economist for nearly a decade.
“Bill [Dudley] has led our Markets Group at a crucial time and helped conceptualize, develop and manage many of the Fed’s responses to extraordinary financial conditions," said Denis M. Hughes, deputy chairman and a member of the Board search committee. "Under his leadership, the New York Fed will continue to work closely with the Treasury and the Board of Governors in dealing with the economic situation we confront.”
Dudley also serves as vice chairman of the Monetary Policy Committee, and formerly served as a member of the Technical Consultants group to the Congressional Budget Office and a member of the Economic Advisory Committee to the New York Fed.
"His deep economics background, extensive working knowledge of the markets and hands-on policy making role make him an outstanding choice to succeed Tim Geithner,” said Stephen Friedman, chairman of the New York Fed's Board of Directors and of the search committee.
Upon his selection, Dudley said he was honored to have the opportunity to "lead an institution of such high quality…"
“The New York Fed, standing at the critical intersection of the financial markets and the banking system, has a leading role to play in assisting in the reform of the architecture of the U.S. and global financial system to ensure that what has transpired over the past year can never occur again,” Dudley said.
Write to Kelly Curran at kelly.curran@housingwire.com.
The Federal Deposit Insurance Corp. on Tuesday proposed new restrictions on deposit interest rates paid by less-than-adequately capitalized lenders. The current regulation allows "less than well-capitalized" banks to pay interest on nationally solicited deposits at a similar rate paid on a comparable maturity Treasury yield. The regulation was put in place to keep these banks — about 154 of 8,300 FDIC-insured banks nationwide — from paying too much on brokered deposits.
The proposed regulation would change that standard to a nationally prevailing deposit rate — calculated from national averages — recognizing "the blurring of local deposit market boundaries brought about by the Internet and other innovations…." The FDIC said the regulation would presume that locally prevailing deposit rates reflect those of the national averages it publishes, but acknowledged the presumption could be overturned, should banks present sufficient contrary evidence.
"This proposed regulation would bring much needed concreteness to the administration of these statutory interest rate restrictions," said FDIC chairman Sheila Bair. "Our expectation is that this additional concreteness would result in lower deposit rates being paid by a number of banks that are less than Well Capitalized and closer adherence to the statute."
Write to Diana Golobay at diana.golobay@housingwire.com.
Wells Fargo & Co. (WFC: 29.60 +1.89%) said Monday it had extended access to its streamlined modification plan to some 478,000 customers of the absorbed Wachovia Corp. after the merger completed Dec. 21, 2008. The bank said it could not estimate an exact number of delinquent mortgages — or mortgages risking delinquency — of the approximately $120 billion mortgage portfolio. Mortgage customers being referred to foreclosure as well as those in foreclosure will receive an extension until Feb. 28 in order to work with Wells Fargo on an "appropriate" solution, according to the bank. Modifications will target a 38 percent payment-to-income ratio.
“As the ‘investor’ for these loans, we are rapidly designing programs to help these customers,” said Mike Heid, co-president of Wells Fargo Home Mortgage. “For those at-risk, we will offer combinations of term extensions of up to 40 years, interest rate reductions, charge no interest on a portion of the principal for some period of time and, in geographies with substantial property value declines, we will even use permanent principal reductions.”
Due to a history of "responsible lending and servicing principles," 93 percent of Wells Fargo mortgage customers are current on their payments, Heid said. But the bank officials said Wells Fargo is still committed to developing programs that have delivered more than 650,000 foreclosure-prevention solutions to its customers since July 2007.
Through its active outreach and education campaign, Wells said it has reached 94 percent of the customer base two or more payments past due. Approximately 70 percent of the customers it contacts actively pursues a solution; about 20 percent declines help while the remainder cannot be contacted. "Of the customers who received a loan modification, one year after the loan was modified approximately seven of every 10 of these customers were either current on their loans or less than 90-days past due," bank officials said.
As proof the bank is committed to servicing these modification and workout needs, Wells Fargo reported it had increased its full-time default and home retention staff to almost 6,000 from just 125 two years earlier. "Wells Fargo will continue to further increase these teams, all U.S.-based, as demand warrants," bank officials said in the media statement. The news Wells may be hiring — depending on whether an influx of Wachovia customers becomes enough demand to warrant increased staff — comes as the economy grapples with rising jobless claims and the U.S. and U.K. markets shedding 76,000 jobs on Monday alone, according to a tally reported by Financial Times.
Wells Fargo is the recipient of $25 billion through the Treasury Department's Troubled Asset Relief Program. Earlier this month, Wells Fargo announced it was exiting nonconforming lending through its wholesale channel due to "low market demand and higher risks," according to a statement.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Fannie Mae (FNM: 0.00 N/A) reported Tuesday in a filing with the Securities and Exchange Commission that it expects the Federal Housing Finance Agency, acting as conservator of Fannie Mae, to soon request funds from the Treasury Department under the $100 billion senior preferred stock purchase agreement. Under the agreement, active as of September, the Treasury is required to provide funds whenever the GSEs report a negative net worth.
The request is based on preliminary unaudited information concerning Fannie Mae's fourth quarter and year-end results, according to the press release issued Tuesday.
Management currently estimates that the amount of the draw will be somewhere between $11 billion and $16 billion. Although, the actual amount of the draw could differ significantly from this estimate, the statement said, because Fannie Mae is still preparing and finalizing its financial statements.
The estimated draw expected to be requested reflects management's current estimate of the effect that the company's anticipated net loss — primarily as a result of credit expenses and fair value losses during the fourth quarter of 2008 — as well as other items, would have on Fannie Mae's net worth as of fourth-quarter's end.
The Federal Housing Finance Agency has not previously requested any funds on behalf of Fannie Mae under the Purchase Agreement, and as of the current date, Fannie Mae has not received any cash proceeds from the Treasury, unlike government-sponsored entity Freddie Mac.
Freddie Mac (FRE: 0.00 N/A) on Friday filed a report with the Securities and Exchange Commission acknowledging the Federal Housing Finance Agency, acting as Freddie’s conservator, will request a second round of aid — in the amount of $30 to $35 billion — from the Treasury under the $100 billion purchasing program. Freddie drew $13.8 billion under the agreement when it reported weak third-quarter results in November, suggesting a trend of increasingly great financial need.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Well, We'd like to tell you consumer confidence is on the rise — goodness, if just for a change in pace — just as we'd like to tell you foreclosures were on the downfall and unemployment claims were rapidly falling, but unfortunately, that's not the case. Consumer confidence actually hit a record low in January amid worries over future income, according to the Conference Board's monthly index reported Tuesday. The proportion of consumers expecting an increase in their incomes declined to 10 percent from 12.7 percent in December.
The Consumer Confidence Index eased to 37.7 from December's 38.6 figure. Consumers' view of the economy's overall conditions weakened, with 47.9 percent of respondents saying business conditions are "bad," up from 45.8 percent in December.
"It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008," said Lynn Franco, director of the Conference Board's Consumer Research Center. "Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings."
Consumers' short-term outlook also remained negative, the report said, although those expecting business conditions to worsen over the next six months decreased slightly to 31.1 percent from 32.9 percent. And those anticipating conditions to improve remained relatively unchanged at 13.3 percent in January, compared to 13.4 percent in December. This suggests, as Franco mentioned in the report, that economic conditions did not deteriorate significantly further in January, but they surely didn't improve either.
There's no doubt the new year got off to an inauspicious start for american workers, with major companies such as GM, Pfizer, Home Depot and Sprint announcing massive job cuts, leaving the job outlook somewhat "mixed," the Board said — but not all doom and gloom. The percentage of consumers expecting fewer jobs in the months ahead decreased to 36.7 percent from 40.6 percent, while those expecting more jobs, on the other hand, edged from 9.8 percent down to 9.4 percent.
Consumers' view on inflation over the next 12 months improved, with respondents looking for a rate of 5.6 percent, compared to 5.8 percent reported in the prior month. The percentage of respondents with plans to buy a home fell to 2.5 percent from 2.6 percent.
Write to Kelly Curran at kelly.curran@housingwire.com.
Hours after his confirmation, Treasury Department secretary Timothy Geithner got to work, imposing regulations to limit lobbyist influence in the distribution of funds through the Troubled Asset Relief Program. The Senate voted 60 to 34 late Monday in favor of confirming Geithner for the position of Treasury secretary. The confirmation came after a Senate panel voted last week to approve the nomination despite criticism surrounding Geithner's now-infamous tax flub: He failed to pay more than $34,000 in taxes because, as he has claimed, he didn't realize he was self-employed at the time he worked at the International Monetary Fund.
In statements made moments after being sworn in by Vice President Joe Biden, Geithner promised to "move quickly" with the Treasury to meet economic challenges, to "launch the programs that will bring economic recovery sooner, to make our economy more productive, to restore trust in our financial system with fundamental reform, to make our tax system better at rewarding work and investment, more fair and more simple."
The former president of the Federal Reserve Bank of New York made good on his promise early Tuesday when he issued new rules to limit lobbyist, special-interest influence on the $700 billion rescue package.The rules aim to maintain objectivity in the issuance of TARP funds and by limiting the contact officials can have with lobbyists that are connected with bailout funds applications. The rules also aim to keep politics out of funding decisions by using limits on political influence over tax matters as a model. Another rule aims to ensure the objectivity of investments made under the Emergency Economic Stabilization Act by requiring the Office of Financial Stability (OFS) to certify each investment is based only on facts of the case and certain criteria: banks must be recommended by the primary bank regulator to be eligible for capital investments, the OFS will publish the investment review process, and the Treasury will "ensure adequate resources exist to process applications as quickly as possible…."
In his remarks, Geithner seemed to acknowledge the rising criticism lately over the lack of transparency in the TARP and weak oversight of funds distributed to major banks. "American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system," Geithner said in a media statement regarding the new rules. "Today's actions reaffirm our commitment toward that goal."
President Barack Obama's economic team has also been pushing for additional bank bailout funds, possibly tied with the $800 billion-plus economic stimulus package in the works and excess of the remaining funds under the $700 billion rescue package. Pending legislation authored by Barney Frank, D-Mass., aims to enforce regulations on how the rescue funds are administered and tracked. If the so-called "Frank legislation" passes, some $50 billion of the bailout funds could be reserved especially for modifying mortgages and helping struggling borrowers to stay in their homes.
Write to Diana Golobay at diana.golobay@housingwire.com.
Home values continued to decline in all 20 metro areas of The Case-Shiller 20-city home price index in the 12 months ending in November, with 11 of the 20 areas posting record rates of annual decline, Standard & Poor's reported Tuesday.
The 20-City Composite Index as a whole fell 2.2 percent from October to November — with home values in all 20 cities falling at least one percent — and a record-setting 18.2 percent for the year ending November.
"Since August 2006, the 10-city and 20-city composites have declined every month — a total of 28 consecutive months," said David Blitzer, chairman of the index committee at Standard & Poor's. As of November, Case-Shiller's 10-city index was down 27 percent from its 2006 peak and the 20-city was down 25 percent.
The Sun Belt continues to be hit the hardest, particularly Phoenix and Las Vegas which were the worst performers for the month, dropping 3.4 percent and 3.3 percent respectively. As for the year, prices in Phoenix fell a whopping 33 percent. Las Vegas followed closely with a 32 percent plunge in prices.
Denver and Cleveland were the best reporting markets for the month, where values dropped 1.1 percent and 1.2 percent, respectively. On a relatively positive note, Standard & Poors said eight of the 20 metro areas recorded better annual returns compared to last month.
In terms of relative year-over-year returns, Dallas and Denver faired the best in November. Overall bleak data, however, shows that the decline in home prices is proving to be a challenge for all regions — regardless of geography or employment opportunities, the report said.
"Housing wealth is falling by some $380 billion per month, or about $370 per adult per week," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics, according to Market Watch. "No wonder people are miserable."
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
