Archive for June, 2009
Still in the shadow of the government's total $45bn capital injections and following news the institution needs another $5.5bn to withstand more severe economic conditions, Citigroup (C: 30.87 +1.61%) will be delisted from the Dow Jones Industrial Average.
Dow Jonestoday said The Travelers Companies (TRV: 58.05 -1.11%) is replacing Citigroup on the Dow Jones Industrial Average as of June 8. Travelers, which spun off Citigroup in 2002, provides property and casualty insurance.
"We were reluctant to remove Citigroup at the height of the financial frenzy, but it is clear that the bank is in the midst of a substantial restructuring which will see the government with a large and ongoing stake," Dow Jones editor-in-chief Robert Thomson says in a media statement today.
"We genuinely hope that once the bank has refashioned itself that we will again be able to consider it for inclusion – Citigroup is a renowned institution, not only in this country, but around the world," he adds.
Additionally, Cisco Systems (CSCO: 19.56 -1.36%) will replace General Motors (GM: 24.37 -1.42%) as of June 8, a result of the automaker's bankruptcy filing this morning.
Citi stocks traded at $3.72 and GM traded at $0.92 in mid-morning trading as this story went to press. Travelers, on the other hand, traded at $42.37 and Cisco traded at $19.42 around the same time.
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.
On Friday, the British press was abuzz with news from Nationwide, the third largest mortgage lender, on the rise in house prices for two consecutive month-on-month cycles.
However, new research from two other monitoring services draw separate conclusions.
“The price of a typical house rose by 1.2% in May, providing further evidence of some improvement in housing market conditions over the last few months," says Martin Gahbauer, Nationwide's Chief Economist. "The 3 month on 3 month rate of change – a smoother indicator of short-term price trends – rose from -3.0% in April to -0.5% in May and now stands at its highest level since January 2008."
Data from automated valuations and risk analytics service provider Hometrack shows "British house prices were unchanged in May, ending 20 consecutive months of declines as sales volumes and buyer interest picked up amid a dwindling supply of property for sale to over 90% of UK Mortgage Lenders," according to this report MarketWatch.
Richard Donnell, the head of research at Hometrack, released research in April that seems to support the Nationwide claim. In it he states: "a pick up in the number of sales agreed over the last few months has brought with it talk of the green shoots of recovery in the housing market."
"The increase in sales is off an almost non existent base and overall volumes remain well down on what one would expect in a normal market. The current run rate over the last 3 months equates to an annual average of just 476,000 sales, compared to a normal market of 1-1.5m sales a year," he adds.
The government body, Her Majesty's Land Registry, which tracks purchases in England and Wales shows that despite the more positive month-on-month performance, annual house prices in England and Wales fell by 16.2% in April. Data from Scotland and Northern Ireland is not included in this, however, with the former doing much better economically than the latter.
But, if there is one similarity in all this, spokespeople are clear that no distinct trend is emerging. “Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively," Gahbauer says.
Write to Jacob Gaffney.
Stock of mortgage insurer PMI Group (PMI: 0.00 N/A) spiked more than 33% at one point in early trading today on the heels of some positive news out of the company.
PMI met the conditions necessary to reach an amended and restated credit agreement that reduces the size of the credit facility to $125m and eliminates certain financial covenants and events of default previously contained in the facility.
"We are pleased to…continue our strong relationship with our syndicate of lenders, despite a difficult credit market," CFO Donald Lofe Jr. said in a media statement today. "This revolving credit agreement provides additional financial flexibility for PMI's holding company through its scheduled maturity in October, 2011."
Bank of America (BOFA: 0.00 N/A) acts as the facility's administrative agent, while the lender group comprises BofA, Goldman Sachs Lending Partners (GS: 111.77 +2.96%), JP Morgan Chase Bank (JPM: 37.21 -0.75%) and Bank of New York Mellon (BK: 20.23 +1.15%), among others.
The announcement comes weeks after PMI posted a Q109 loss of $115.3m, or $1.41 per share, from continuing operations, driven primarily by higher-than-expected negative earnings and loss adjustment expenses in its US mortgage insurance operations.
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.
Mortgage loans 60 or more days delinquent rose to 5.2% of total mortgage loans in Q109, from 4.6% in Q408, as the housing industry continues to suffer the extent of the economic downturn.
It marks the ninth straight quarterly increase in the delinquency rate seen in TransUnion.com's analysis of 27m anonymous, randomly sampled credit files.
TransUnion, one of the major US credit bureaus, conducts a survey of exactly 27m credit files from its total consumer base, or about one in every nine consumer files in its database of 250m consumer files each quarter, a spokesperson told HousingWire.
The Q109 delinquency rate is up from 3.2% in the year-ago quarter.
Nevada and Florida saw the highest delinquency rates of 11.6% and 11%, respectively, while North Dakota, South Dakota and Alaska saw the lowest rates of 1.5%, 1.9% and 2.1% respectively.
"The troubling news is that the mortgage delinquency rate continues to climb upward at an average quarterly pace almost doubling that experienced in the last recession," says Keith Carson, a TransUnion senior consultant, in a media statement today.
"For example," he adds, "during the 2001 recession…the average quarter-to-quarter national mortgage delinquency growth rate was nearly 6.5% — compared to the nearly 12% quarter-to-quarter delinquency growth we are experiencing today. However…[F]or the first time since the recession began at the end of 2007, the quarterly growth rate for national mortgage delinquency decreased."
Florida's quarterly delinquency growth rate, for instance, slowed from 22% during Q408 to about 16% during Q109. In other words, the rate at which delinquencies increase is slowing down in most areas.
"While this may sound like trying to make good news out of bad, in fact it is an indication that we may be currently working our way through the worst of the recession," Carson adds.
The industry still has a long way to fall, with delinquencies among single-family mortgages at the government-sponsored enterprises Fannie Mae (FNM: 0.00 N/A) and Freddie Mac (FRE: 0.00 N/A) now up to 2.96% and 2.44%, respectively.
Write to Diana Golobay.
Equity trading firm Rochdale Securities recently established a fixed income sales and trading division, which will devote its attention to mortgage-backed securities, asset-backed securities (ABS) and other securitized products.
The new team will be led by three industry veterans: Michael Glover, Brandon Dunn and Brett Houghton.
Glover and Houghton are both Lehman Brother veterans. Glover most recently worked as head of securitized product sales for the firm. Houghton traded and invested in catastrophe bonds, insurance-linked securities and asset-backed products, and led the esoteric ABS trading desk at Lehman.
Dunn came from UBS Investment Bank, where he was head of US structured product sales.
The firm intends to expand into other fixed income sectors in the near term, with the hires.
Rochdale also provides brokerage services and market research to institutional clients
Write to Kelly Curran.
The total delinquency rate among conventional single-family mortgages at Fannie Mae (FNM: 0.00 N/A) jumped to 2.96% in February from 2.77% a month earlier, and is up more than half from 1.1% seen in February 08, despite the agency's participation in the Administration's Home Affordable refinance program.
The higher delinquency rate at the government-sponsored enterprise (GSE) came a month before the balance of its gross mortgage portfolio slipped $856m to $783.87bn in March, according to a monthly volume summary.
The delinquency issues do not seem to go unnoticed at the GSE, which began purchasing refinance mortgage originations made under the Making Home Affordable Program (MHA Program) in April as part of an attempt to encourage servicers to pursue workout options with delinquent and at-risk borrowers.
"We expect that the MHA Program will bolster refinance volumes over time as major lenders adopt necessary system changes and consumer awareness continues to build," Fannie officials said in the monthly summary report.
Fannie reported issuing $87.8bn of mortgage-backed securities in the month while it's refinance volume increased to $77bn, nearly double from a month earlier.
Over at Fannie's brother GSE, Freddie Mac (FRE: 0.00 N/A), April's delinquency rate doesn't look much better. Freddie reported total mortgage-related purchases and issuance fell to $58.1bn in April from $86.1bn in March. At the same time, the total delinquency rate among Freddie’s single-family mortgages increased to 2.44% from 2.29% a month earlier.
Freddie officials attributed the increase in delinquencies to the expiration of its temporary foreclosure freeze: “We are currently assessing the impact on our delinquency rates of the suspension of foreclosure transfers that began on March 7 for loans eligible for modification under the MHA Program.”
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: includes clarification of Radian's influence on year-on-year figures]
Defaults on privately insured US mortgages are up nearly 10% percent from one year ago.
However, defaults fell more than 3% in April from March, by way of comparison.
It marked the third consecutive month of decline in primary insurance defaults, since the 106,482 defaults seen in January. After falling more than 6% in March from February, primary insurance defaults slipped to 81,171 in April, according to data released Friday by the Mortgage Insurance Companies of America (MICA).
The trade association — representing data from AIG United Guaranty, Genworth Mortgage Insurance, Radian Guaranty and Republic Mortgage Insurance — reported primary insurance in force slipped slightly to $932.04bn in April, from $937.06bn in March.
MICA's member companies wrote $7.82bn in new insurance on newly originated mortgage loans in the month, insuring servicers against losses in the event of default.
“In addition to insuring low down payment mortgages for new purchases, the mortgage insurance industry is working closely with borrowers, lenders and government agencies to modify existing loans and prevent foreclosures,” MICA's executive vice president, Suzanne Hutchinson, said in a media statement.
MICA's member companies reported 58,587 cures in April, a 16% slip from last month but still holding 47.7% above the volume of cures seen in the same time last year.
An MICA spokesperson told HousingWire comparing year-on-year figures is irrelevant, as the high default figure resulted from Radian re-joining the association in late 08.
Write to Diana Golobay.
A look at the stories on HousingWire's weekend desk… with more coverage to come on bigger issues.
Researchers at Barclays Capital offered some guidance after the major disruptions in the bond market last week:
Treasury Secretary Tim Geithner is giving a speech at Peking University in Beijing. The speech, titled "The United States and China, Cooperating for Recovery and Growth," is scheduled for later today. An excerpt:
Fitch Ratings announced it holds a negative outlook on California's single-A credit rating. England's credit rating may be downgraded, and there are market rumors the United States is not immune to such a possibility. However, a report from Reuters states investors may not be driven away from such downgrades, should it happen.
Credit rating agency Moody's Investors Service downgraded a swath of synthetics. Again, issues of definition come to the fore with ARMs rated triple-A initially. The move shows that synthetics, where no asset changes hands, are as exposed as the 'real deal:'
According to Tampa Bay online, hedge funds are now focusing on acquisitions in the Florida real estate market. The article questions if this is ultimately a positive development for the state's embattled housing industry.
Write to Jacob Gaffney.
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