Archive for May, 2009
The US Treasury Department invested another $45.5m in seven financial institutions through the Capital Purchase Program (CPP), Treasury reported this week.
The one publicly-traded institution to participate in the daily transaction, Village Bank and Trust Financial Corp. (VBFC: 1.845 -0.81%), received $14.74m. The second-largest infusion of the day, $10.75m, went to Security State Bank Holding Co. Ohio-based CenterBank received the smallest daily transaction of $2.25m.
The Treasury so far funded $199bn in total capital purchases and received only $1.04bn in returned funds from 11 firms as of April 22. The Treasury still retains preferred stock for the remaining purchases. These are the same stocks the government suggested major US banks could convert to common shares in order to raise capital needed under the recent stress tests.
The Treasury also announced this week another addition to the servicers funded for modification incentives by the TARP through its Making Home Affordable Modification Program. Aurora Loan Services joined the growing list as the 14th servicer with $798m for lender/investor, servicer and borrower incentives to participate.
See the latest TARP transaction report.
Write to Diana Golobay.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
[Update 1 reflects corrected loan ranges for Silo.]
KPO Ventures bridged a real estate capital gap Wednesday when it committed $100m to a Stamford-based direct mortgage lender.
The partnership allows Silo Financial Corp. to continue providing short-term bridge loans secured by commercial and investment property — focusing on loans from $750,000 to $20,000,000.
"With the backing of KPO, in conjunction with our internal Mortgage Opportunity Fund and existing capital platform, we plan to take full advantage of the current opportunities by funding even more of the deals other lenders continue to pass up," Silo president Jonathan Daniel says in a media statement.
"There's very little going on right now — deals aren't happening because lenders aren't lending," he adds. "But like KPO, we see tremendous opportunity, especially in the current market."
Write to Diana Golobay.
The average bank in Q109 experienced stress levels five times those seen in the mid-'90s, according to the quarterly IRA Bank Monitor, released today.
The quarter's data indicates the average bank's stress index moved from a stress index of 1.8 at the end of Q408 to 5.6 coming out of Q109, Institutional Risk Analytics (IRA) reported. An index of 1.0 indicates the average December 1995 stress level.
IRA suggested the sheer volume of banks posting first-quarter losses swung the overall geography of banks studied into red ink territory. So far, 1,575 banks posted losses in Q109, based on call reports tracked by IRA. Many of these institutions suffered losses related to mark-to-market accounting, goodwill write-downs and other return on equity (ROE) issues.
"The numbers indicate we need to seriously ask the question as to whether economic recovery for the United States can still come from repairing Wall Street — or whether instead we should be worried about addressing the underlying loss rates that are driving the provisioning behind these poor ROE results," IRA analysts said in the preliminary results statement.
Write to Diana Golobay.
JP Morgan Chase (JPM: 37.21 -0.75%) is reportedly in the clear, by not requiring any additional capital after enduring the government's stress test, according to the Wall Street Journal, citing people familiar with the situation.
The news doesn't come as much of a surprise.
Throughout the credit crisis, JP Morgan avoided reporting even one quarterly loss. In mid-April, the bank kept its perfect streak intact, reporting $2.14bn, or $.40/share, in net earnings for the first quarter. The total was off 10% from one year earlier, but better than most analysts had expected. The firm has benefited from an expanding deposit base, thanks to its acquisition of Washington Mutual last year, and a recent jump in mortgage refinancing activity.
CEO Jamie Dimon has been clear about his desire to repay $25bn in government funds the bank has already received via the Troubled Asset Relief Program — even calling TARP funding a “scarlet letter.” With stress test results confirming JP Morgan does not need additional capital, Dimon is likely to press on with his plan to repay the funds as soon as possible.
The government tests studied the potential performance of the 19 largest U.S. banks under projected economic expectations and a more adverse outlook with a longer, more severe recession. The point is to determine the capital buffer needed to ensure the firms remain appropriately capitalized at the end of 2010 if the economy proves weaker than expected.
The government's findings weren't all rosy.
Federal regulators found Monday Bank of America (BAC: 7.29 -0.14%) is lacking capital on the order of $33.9bn, according to a bank executive who spoke with the New York Times, while Citigroup (C: 30.87 +1.61%) is reported to need at least $10bn in fresh capital. Regions Financial Corp. (RF: 5.31 +2.71%) is said to require additional capital, but the amount is not yet known.
American Express (AXP: 49.85 -0.26%) and Bank of New York Mellon (BK: 20.23 +1.15%) are among those firms that won't need to raise additional capital according to reports Wednesday by the Wall Street Journal.
Write to Kelly Curran.
New, real-time data transmissions will help Fannie Mae (FNM: 0.00 N/A) improve analytics and evaluate potential workout solutions for borrowers, especially those in the early-stages of delinquency.
The information, powered by technology provider Fiserv, allows the agency to review borrower credit capacity in order to make more informed decisions about loan workouts.
The Platform supports all retail loan types including mortgage, home equity, consumer and indirect financing so that a complete snapshot of borrower data is retrievable, regardless of loan type.
"Fannie Mae is taking steps to gain more real-time information about our mortgage portfolio," said Jerry McCoy, vice president of business development at Fannie Mae.
McCoy says Fannie May has engaged Fiserv to work with its servicers that utilize such a platform to provide ongoing data updates directly to Fannie on the loans it services. "This represents an expedient and non-intrusive way to get the data in a timely fashion," he says.
Authorization has been granted for the data transmissions from nearly all of Fiserv's clients who service loans for Fannie Mae and data transmissions are already in effect.
Write to Kelly Curran.
LoanSifter says its recently released LoanSifter 3.0, mortgage pricing and marketing tool, allows loan professionals to install a customizable search engine on their website that provides live, accurate pricing to potential borrowers.
"These hot leads" then automatically appear in the professional's account, making follow-up easy, the company says.
The product also includes an email campaign manager allowing users to create email campaigns that automatically update borrowers or realtor partners with scenario-specific pricing.
The re-vamped contact manager allows for "easy management" of contacts for email campaigns, creation of group lists, and uploading of multiple contacts from personal contact managers and LOS systems.
In addition to its customizable features, LoanSifter 3.0 can tailor those features to match a bank's workflow and image.
Write to Kelly Curran.
The Senate voted 91-5 in favor of S 896, the Helping Families Save Their Homes Act of 2009, which includes legal protection for servicers that modify residential mortgages. Five Senate Republicans voted against the housing bill.
The safe harbor protects mortgage servicers from lawsuits by investors holding relevant modified mortgage bonds.
The provision is intended to encourage more servicers to modify more mortgages, but critics say it will hurt private investors whose funds help maintain banks' liquidity and stimulate lending.
Modifications often involve altering original mortgage terms and forbearing a portion of the principal for lump repayment at the end of the loan life. The reduced principal lowers monthly payments, increasing affordability for borrowers and consequentially reducing the monthly return for investors.
If the mortgage is securitized, then the principal payment coupons, or pass-throughs, will also take a hit. For the long investor, change to term is a bad thing and likely to shake-up an already nervous financial market.
However, the aim of the bill essentially provides legal protection for servicers to alter mortgage contracts and, as the argument goes, investor contracts where mortgages have been securitized.
The bill also changes the borrower certifications under Hope for Homeowners, a program that encourages refinancing into Federal Housing Administration-guaranteed mortgages. The bill's changes mean borrowers going forward must provide proof they didn't intentionally default on their mortgage in order to qualify.
The bill provides the Federal Deposit Insurance Corp. with increased borrowing authority, extends the time period for restoration of the insurance fund from five to eight years, provides a temporary extension of the FDIC's $250,000 deposit insurance limit. Supporters of the bill say these changes will bolster confidence in the FDIC and meet banks' lending needs.
“During this time of economic uncertainty, bankers recognize the importance of maintaining public confidence in the FDIC," American Banker Association executive director Floyd Stoner. "We also believe that it is important to strike the right balance between maintaining a strong deposit insurance fund without unnecessarily taking money out of the system.
Write to Diana Golobay.
In an economy where distressed real estate assets are piling up, Americans are looking for ways to recover from the downturn.
Tapping into this need, Capstone Advisors expanded its real estate investment, advisory and development platform to include receivership and asset management services for distressed residential and commercial real estate.
The company says it will concentrate on stabilizing and adding value (a challenging feat, to say the least) to problem real estate assets, including residential developments and land, condominiums and condominium conversions and commercial developments.
It's focus will be on the western United States with an emphasis on California, Nevada and Arizona, according to a press release Tuesday.
"Our sophisticated, institutional quality operating platform allows us to quickly take control of an asset and execute a wide variety of business plans designed to not only stabilize it, but to add value," says Alex Zikakis, CEO of Capstone Advisors.
The company didn't offer any details as to how it planned to add value to distressed assets. Typically, the worth of an asset increases when market conditions cause property values to rise. In other instances, the condition of a home can be re-vamped through home improvements and such, which in turn, ups the value of the property.
Write to Kelly Curran.
Federal Deposit Insurance Corp. (FDIC) chairwoman Sheila Bair today asked a Senate committee on banking to consider a government regulatory framework to monitor global, systemic financial institutions considered "too big to fail."
Bair argued the implementation of Basel II by financial institutions led to procyclicality (not an uncommon claim) and these firms should be subject to higher capital buffer requirements and stricter prompt corrective action under US law.
She suggested the Federal Reserve could play an important role as systemic risk regulator to monitor and regulate the activities of systemically important institutions. US Treasury Department, Federal Reserve Board, FDIC and Securities and Exchange Commission could also join together in a system-wide regulatory monitoring effort, a systemic risk council
"The creation of a comprehensive systemic risk regulatory regime will not be a panacea," Bair said. "Once the government formally establishes a systemic risk regulatory regime…market participants may incorrectly discount the possibility of sector-wide disturbances and avoid expending private resources to safeguard their capital positions."
Even beyond the establishment of a risk regulatory regime, Bair called for the foundation of a legal mechanism for the orderly resolution of too-big-to-fail institutions, similar to the authority the FDIC imposes on insured banks. She recommended reducing risks associated with the derivatives market by imposing haircuts of up to 20% of the secured claim for companies with derivatives claims against the failed firm, if the taxpayer or a resolution fund is on the hook for losses.
"This would ensure that market participants always have an interest in monitoring the financial health of their counterparties," Bair said.
The measures she called for today would lead to increased transparency of financial institutions' liquidity pools. Firms would likely have to provide greater disclosure of the sources of capital as well as assets and liabilities on their books.
It would make financial institutions more transparent than ever, but it would also mean heavy government regulation of a largely private industry. Critics of this kind of government interference argue that often good policy (increasing transparency to the public) makes for bad business (driving away clients who may not approve of where institutions get capital).
Bair's testimony skips over the fact that private institutions, such as hedge funds, are not required to implement Basel II and would fall outside of the perimeter of procyclicality.
Write to Diana Golobay.
A new interactive, online training course for securities professionals from Wolters Kluwer Financial Services offers firms customizable tools for communicating compliance requirements to employees.
"The interactive courses help provide confidence that the transfer of knowledge has occurred with each employee–something that can't always be achieved through more passive educational tools or communications," says Anna Monteiro, senior director of regulatory products at Wolters Kluwer.
The platform offers tools to create customized portals for employees based on their individual needs, considering various factors such as business area, job role and location, for example.
Each course evaluates employees by asking for their input and testing them on the information that's presented. The learning management system covers an array of standard reports, which Wolters Kluwer says enable the compliance officer to actively monitor the progress and success of each employee.
The courses cover various compliance topics, including money laundering prevention, conflicts of interest and ethical standards, among others.
Write to Kelly Curran.
