Archive for May, 2009
Former Washington Mutual executives Sreeni Prabhu and Brad Friedlander partnered with SouthStar Funding founding partner, Michael Fierman, to start Angel Oak Capital Partners.
Angel Oak is now focusing on distressed mortgage-backed securities (MBS), currently manages $30m in assets and is looking for more.
So far, the fund's strategy is focused on acquiring pools of MBS that are trading at distressed prices despite prime performance. "We underwrite to buy and hold but will look to opportunistically sell when market liquidity returns," explains Prabhu.
"The key difference with bigger firms who have the same strategy as us, we distribute monthly cash flows generated from these bonds back to investors on a monthly basis," he adds.
Angel Oak is based in Atlanta, as was SouthStar, the wholesale and subprime mortgage lender that originated as much as $6.5bn of non agency mortgage products annually before it closed operations in 2007.
Write to Jacob Gaffney.
A new real estate investment trust (REIT) is seeking an initial public offering through the Securities and Exchange Commission, adding to the emerging trend of new REITs going after public capital over more traditional private funds.
Sutherland Asset Management Corp. on Thursday announced the filing of a form regarding the offering, although the registration statement is not yet effective. Sutherland Asset plans to list its common stock on the New York Stock Exchange (NYSE) under the symbol "SLD."
The REIT intends to acquire non-agency and agency residential mortgage backed securities, residential mortgage loans, asset-backed securities and other assets. But Sutherland Asset isn't the first in the emerging trend of REITs pursuing public capital.
Asset manager Invesco on May 8 similarly announced plans for an IPO of stock in a newly formed REIT, Invesco Mortgage Capital, which also intends to invest in agency and non-agency RMBS, CMBS and mortgage loans in concert with government funding through the Public-Private Investment Program and the Term Asset-Backed Securities Lending Facility.
Invesco Mortgage Capital will be listed on the NYSE under "IVR."
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.
Banks can now use US Treasury Department capital acquired through the Troubled Asset Relief Program (TARP) toward their Tier 1 capital.
This boosts capital ratios and puts TARP money to work not only as a liquidity injection but also as a potential lift to the same capital ratios studied by regulators as part of the government-initiated stress tests.
The Fed's announcement comes as many large banks are interested in a TARP exit, lining up to repurchase stocks
The final rule adopted by the Fed today allows bank holding companies to include senior perpetual preferred stock issued to the Treasury through TARP toward their Tier 1 capital "without restriction," according to a media statement out of the Fed. This is the same capital ratio used by federal regulators in the stress tests of major banks .
Bank holding companies that failed the government’s Supervisory Capital Assessment Program (SCAP) must achieve a 6% Tier 1 risk-based capital ratio and a 4% Tier 1 common risk-based ratio by year-end ‘10. Banks found to lack capital have until June 8 to develop a detailed plan to raise capital and until November 9 to put the plan to work, according to details released in early May by the Treasury.
The deadline could not prevent TARP repayments by the 14 banks to already have repurchased preferred stock through the Capital Purchase Program, according to the latest transaction report. The reasons for repayment ranged from the stigma associated with accepting government aid and tighter compensation-related regulations to capital raised at the institutions, to sufficient capital raised under profitable business practices.
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.
Nineteen-year Fannie Mae (FNM: 0.00 N/A) veteran Karen Pallotta on June 1 heads up the company's single-family mortgage business segment, taking over for 14-year veteran Thomas Lund.
"I expect the leadership transition in our single-family division to be seamless as we continue to do all we can to support the market and help prevent foreclosures during this challenging time for the mortgage industry and the economy as a whole," Fannie's CEO Michael Williams said in a media statement on the promotion this week.
Since joining Fannie in '90, Pallotta served in several leadership roles including an executive role at the company's marketing and lender strategies segment, where she managed a team responsible for marketing the single-family business. She takes over as Lund retires from the company effective June 30 after 14 years of service at Fannie.
"Tom's leadership of our single-family division through one of the most turbulent and trying periods in mortgage market history has been exemplary, and he has left an invaluable imprint on our company and the industry as a whole," Williams said.
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.
The financial climate born of the recent credit crisis shines particular emphasis on the consideration of credit as a critical component for both lenders and consumers, as well as the need for tools to teach the ins-and-outs of credit.
AllRegs, a publisher of industry guidelines, and analytics technology provider, FICO, released Thursday a new online course designed to do just that: teach credit decision makers the fundamentals of FICO scores.
"Whether you are an underwriter, a mortgage relief counselor, a credit counselor or other credit decision maker, this course will provide the most current information regarding FICO credit scores," says Dan Thomas, senior vice president of AllRegs.
The 30-minute self-study online course provides methods to improve financial health and tips for managing credit responsibly. Students will also learn the proper way to read a credit report .
Upon successful completion of the course, students will receive an industry-recognized certificate of completion and transcript.
Write to Kelly Curran.
While the nation's recession is likely to continue into the near term, the economy's deterioration will be far less intense than in recent quarters, according to The Conference Board, whose Leading Economic Index released Thursday shows a significant 1.0% increase in April.
The index posted a 0.2% decline in March and a 0.5% decline in February.
"The question is how long before declines in activity give way to small increases," says Ken Goldstein, economist at The Conference Board. "If the indicators continue on the current track, that point might be reached in the second half of the year.”
The movement in April's index is the first increase seen in seven months, and the strengths among its components exceeded the weaknesses for the first time in one and a half years, the Board says.
The largest positive contributor to the index was stock prices, followed by the interest rate spread, consumer expectations and vendor performance, among others.
The largest negative contributor was once again, real money supply, followed by a plunge in building permits, which highlights the on-going struggle felt within the housing market — the sector which most economists say must begin its recovery before the economy will be able to fully recuperate.
Builders, in particular, are feeling the pains of an ailing economy, as they are forced to compete with deeply discounted, foreclosed homes. But recent, seasonal strength in home values — which have been free falling since early 2008 — signals early stages of price stabilization.
And signs of stabilization in the housing sector is likely to further boost the index's consumer confidence indicator.
Write to Kelly Curran.
As US Treasury Department secretary Timothy Geithner testified this week that he saw green shoots sprouting across the economy as credit once again begins to flow, the green pouring out of the central bank into MBS markets continued to slow.
The Federal Reserve's weekly agency mortgage-backed securities (MBS) purchases slowed in the week ending May 20 as its balance sheet topped $2.17trn with efforts to lift mortgage-related assets from banks' balance sheets and stimulate continued lending.
The Fed bought a gross $25.52bn MBS from mortgage giants Freddie Mac (FRE: 0.00 N/A) and Fannie Mae (FNM: 0.00 N/A), as well as from Ginnie Mae, down from $35.6bn purchased last week. The weekly purchases favored MBS with 30-year maturations at 4.5% coupons, with $3.7bn to settle in June, $5.85bn to settle in July and $5.5bn to settle in August.
Of the Fed's $15.05bn in purchases of these MBS, only $95m of similar MBS is slated for sale this week, to settle in May. The Fed also sold $250m of 30-year MBS at 5% coupons, $200m of 30-year MBS at 6% coupons and $300m of 15-year MBS with coupons between 4% and 4.5% for a total of $845m in weekly sales.
See a detailed chart of the Fed’s weekly purchases and sales.
The discrepancy in these purchases and sales has made an impact on the Fed’s balance sheet in recent months. The balance sheet rose $48.64bn the same week ending May 20 to a total $2.17trn, according to a weekly summary released Thursday. The balance sheet shows the Fed added $430.49bn to its balance sheet from MBS alone since the same time last year. It also added $74.55bn in agency debt securities since last year, in an attempt to free up capital at the agencies and encourage more mortgage activity at lenders that package and sell loans to the agencies.
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.
American International Group (AIG: 25.25 +0.44%) Chairman and CEO Edward Liddy said Thursday he will leave his position as head of the firm once the board of directors is able to locate the appropriate replacements.
The roles of CEO and chairman are likely to be split going forward, the company says.
Liddy stepped into his position as CEO in September, at the request of previous Treasury Secretary Henry Paulson, when the company turned over a majority of its stake in exchange for a federal bailout.
At the time, Liddy vocalized the arrangement was not permanent, but he didn't specifying exactly how long he would serve in such a capacity. Liddy, who has earned $1 for his work at AIG, has come under intense fire from congressional leaders for awarding employee bonuses while the company was kept afloat by more than $170 billion in bailout funds.
But Liddy hopes he will leave with an "enhanced reputation" and a feeling as though he "stepped in at an incredibly vulnerable time and provided some stability."
It’s easy to forget just how awful the situation was in September,” he said.
Within hours of Liddy's announcement, AIG made the headlines yet again, as California insurance policy holders announced a suit against AIG, following a six month analysis of AIG's financial records which allegedly show the company "raided" California insurance companies to gamble on high-risk, sub-prime market investments in effort to keep the financial side of the firm afloat.
The court action was filed by an insurance broker who purchased and sold over $15m of AIG life insurance.
"The complaint presents the most in-depth financial analysis of the impact of the hundreds of billions AIG lost in the high-risk derivatives market," says Patrick DeBlase of Kiesel, Boucher & Larson, the co-lead counsel for the plaintiffs.
The suit claims AIG channeled funds from its California insurance companies into a lending program that put over $75bn of AIG insurance assets at risk, using the companies' bonds and investments to speculate in high risk real estate mortgage securities.
"AIG lost the gamble and taxpayers have paid over $180bn," the counsel for the plaintiffs said in a press release.
Write to Kelly Curran.
Relocation is what it's all about for homeowners unsatisfied with the declining house prices and rising joblessness in tight local markets, according to survey results released Thursday by Relocation.com.
The online moving resource, which provides quotes on relocation-related expenses from moving companies to storage facilities, named the top 20 cities for consumers looking for a "fresh start." Relocation.com studied the popularity of cities — where large numbers of people are moving, indicating an impending boom in the local economy — the housing market affordability in the area, the local economic prospects and the volunteerism rate, presumably to gauge the local level of community service.
Texas cities claimed four of the top 20 slots for best "fresh start" relocation areas. Austin nabbed the No. 1 slot, followed by the Dallas-Fort Worth area. Charlotte snatched up third place while Denver slipped into fourth. Columbus and Indianapolis tied for fifth.
"Studies have shown that many people don't like where they live," the online market's founder Sharon Asher said in a media statement. "At the same time, a lot of people are looking for work, whether they're unemployed now or fearing layoffs. It's a scary time, but for some it might be a good time to think about starting over."
And for other homeowners either sitting underwater on a house that already lost much of its value or looking to keep as much equity as possible, relocating to an area like Dallas/Fort Worth — where the housing market did not inflate too much during the housing bubble, Relocation.com found — might mean living in a more stable housing market and avoiding future price declines. That is, of course, if these homeowners can manage to sell in their local markets at high enough prices to afford relocation.
For those looking for a change in the economic scenery, Relocation.com found Austin the highest ranking city for its popularity, job growth and volunteerism. Charlotte boasts a more diverse economy with financial strength, for the investment-minded.
Write to Diana Golobay.
The Federal Emergency Management Agency is showing off its latest temporary housing solutions to victims of natural disasters.
The new accommodation is highlighted in this article that uses prostitution terminology while proclaiming the author's desire to become homeless in a traumatic weather event.
And if Todd Wright's coverage isn't baffling enough, FEMA is announcing that of the remaining 5,101 households still lodging in the old trailers (though some are living in motels), all must vacate by the end of this month.
One option short of vacating is to buy the old trailer, of course, though the structures are allegedly prone to being engulfed in flames.
And, that's not the only problem according to the agency: "On July 24, 2007, in response to concerns about potential health concerns associated with formaldehyde in temporary housing units, FEMA suspended the installation, sale, transfer or donation of travel trailers in its inventory while the agency worked with health and environmental experts to assess health-related concerns."
For the record, displacement of Hurricane Katrina victims is reaching the four-year mark. So, for those lucky enough to narrowly escape death only to live in dangerous and squalid conditions for nearly half a decade, feel inspired that others in such a situation will not have to face the same tragedy.
In fact, journalists like Wright seem to be dying to get into one of the new trailers. Let's hope he succeeds!
And remember, if you opt to stay in your old trailer, you'll be playing with fire: "For those who continue to remain in the FEMA unit after May 30, FEMA may request DOJ's assistance to pursue legal action to gain possession of the temporary housing units," the agency warns.
Write to Jacob Gaffney.
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