Archive for April, 2011
Moody's Investors Service (MCO: 37.78 -0.74%) slashed the ratings on billions of dollars worth of prime jumbo residential mortgage-backed securities issued by Wells Fargo (WFC: 29.36 +1.07%) and Merrill Lynch (ML: 0.00 N/A) this week.
The ratings agency downgraded the ratings of 195 tranches from 23 prime RMBS jumbo deals issued by Merrill Lynch Mortgage Investors Trust from 2001 to 2004. The agency also confirmed the ratings of 12 tranches from the same deals. Overall, the agency took action on $2 billion in jumbo RMBS.
Moody's blamed the lowered ratings on the "deteriorating performance of prime jumbo pools securitized before 2005." In January, Moody's adjusted its criteria for RMBS issued before 2005. Analysts said that new approach means downgrades will likely continue for some time.
"Although most of these pools have paid down significantly, the remaining loans are affected by the housing and macroeconomic conditions that remain under duress," analysts said of the current downgrages.
Moody's then took action against $8.2 billion prime jumbo RMBS issued by Wells Fargo Mortgage Backed Securities Trust between the years 2002 and 2004.
The agency downgraded the ratings on 281 tranches and confirmed the ratings of 44 tranches from 53 prime jumbo deals issued by Wells Fargo Mortgage Backed Securities Trust. The loans backing the deals are primarily first-lien, fixed and adjustable-rate prime jumbo residential mortgages.
Write to Kerri Panchuk.
Tags: Jumbo RMBS, loans, Merrill Lynch, Moody's Investors Service, mortgages, residential mortgage-backed securities, RMBS, Wells Fargo
Posted in Secondary Market/Investors, Top Stories | No Comments »
Goldman Sachs Group (GS: 109.90 +1.23%) reported first-quarter income 72% lower than a year earlier as declining fees from equities trading offset gains in underwriting activity.
The investment banking giant said earnings for the three months ended March 31 fell to $908 million, or $1.56 a share, from $3.3 billion, or $5.59 a share, a year ago.
Excluding the redemption of preferred shares by Berkshire Hathaway (BRK-A: 118360.00 -0.91%), Goldman said first-quarter income was $4.38 a share.
Revenue for the quarter fell 7% to nearly $11.9 billion from $12.78 billion. Institutional client services revenue rose 83% from the fourth quarter to $6.65 billion but is 22% lower than a year earlier. Investing and lending revenue rose 37% to $2.7 billion from $1.97 billion a year ago.
"We are pleased with our first quarter results," Chairman and CEO Lloyd Blankfein said. "Generally improving market and economic conditions, coupled with our strong client franchise, produced solid results. Looking ahead, we continue to see encouraging indications for economic activity globally."
Write to Jason Philyaw.
Tags: Berkshire Hathaway, Goldman Sachs
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
U.S. Bancorp (USB: 27.78 -0.04%) grew its first-quarter profit from $669 million, or 34 cents per share, last year to $1.046 billion, or 52 cents per share, in the most recent 1Q as the firm's loan business expanded by 2.4% during the period.
The company beat the average analyst forecast by three cents, with most analysts forecasting earnings-per-share in the 49-cent range, according to Yahoo! Finance.
Meanwhile, net revenue on a year-over-year basis grew 4.6% to $4.5 billion from $4.3 billion last year.
Net charge-offs — or the percentage of debt deemed unrecoverable — fell 14.1% from the fourth quarter as the bank noted a trend in stronger credit quality within its lending segment.
"Our adherence to prudent underwriting and an improving economy resulted in significantly lower credit costs for the first quarter," the bank wrote. "Lower net charge-offs, improving risk ratings and a more positive economic outlook led to a $50 million reserve release in the current quarter, compared with a reserve build of $175 million in the first quarter of last year and a $25 million reserve release in the prior quarter. We expect net charge-offs and nonperforming assets to decline again in the coming quarter."
Lending activity also picked up with U.S. Bancorp lending $47.4 billion. That amount included $17.7 billion in mortgage and retail originations.
Write to Kerri Panchuk.
Tags: bad debt, commercial real estate, credit loss provisions, Lending, loan loss provisions, mortgage, Origination/Lending, U.S. Bancorp, Yahoo Finance
Posted in Origination/Lending, Top Stories | No Comments »
Regions Financial Corp. (RF: 5.19 +0.39%) earned $17 million, or 1 cent per share, in the first quarter, marking its second consecutive quarterly profit amid improving credit trends.
The bank said it continues to see profitability as net charge-offs and nonperforming loans decline. Earnings are down from the $36 million, or 3 cents a share, it earned last quarter but up from a loss of $196 million or 16 cents a share in the year-ago period.
The Birmingham, Ala.-based regional bank, which serves the South, Midwest and Texas, reported revenue of $539 million, up from $413 million in the year-ago period.
Regions said the net interest margin continued to expand, low-cost deposits increased, middle market commercial and industrial lending continued to grow and regulatory capital increased.
“We’re making solid headway towards sustainable profitability and key credit metrics continue to improve,” said Grayson Hall, president and chief executive officer. “The economic recovery is slow — especially in our southeastern markets — but our focus on customers is paying off."
Hall said the bank is also "expediently and prudently" dealing with more stressed credit portfolios.
The company’s inflows of nonperforming loans declined 23% versus the previous quarter, as the main driver was a $168 million or 64% decline in inflows of land, condo and single family loans.
Its nonperforming assets, including foreclosed homes, was 4.78% of its loans, down from 5.13% in the comparable period a year ago.
Regions made new or renewed loan commitments totaling $13.3 billion during the first quarter, primarily driven by residential first mortgage production and lending to commercial customers, including those operating small businesses.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: Birmingham, earnings, first quarter, Regions Financial Corp.
Posted in Origination/Lending, Top Stories | No Comments »
Institutional investment adviser State Street (STT: 38.845 +0.17%) reported first quarter revenue of $2.4 billion, up 3% from a year earlier primarily on a rise in asset management fees.
Total fee revenue climbed 16% to about $1.8 billion from $1.54 billion with a 22% rise in servicing fees.
First-quarter earnings, excluding items, rose to $439 million, or 88 cents a share, from $369 million, or 75 cents a share, a year ago. Results for the quarter include $212 million, or 25 cents a share, of discount accretion and about $32 million of merger and integration costs and restructuring charges associated with job cuts. Revenue for the three months ended March 31 included $62 million, or 8 cents a share, of interest revenue from discount accretion related to asset-backed commercial paper consolidated in 2009.
The company is now fully capitalized under Basel 3 requirements, State Street CEO Joseph Hooley said in a statement. However, fees related to credit ratings agencies continue to drag down profits. Implementation of new regulations under Dodd-Frank are proving costly as well, State Street reports.
"Our strong pipeline and significant business opportunities continue to support the momentum in our core business," Hooley said.
"While the recovery in the U.S. appears to be slowly strengthening and we have put some issues behind us, uncertainty still affects world markets, particularly in light of developments in the Middle East and Japan," he added. "Overall, we continue to be well-positioned to take advantage of global growth opportunities."
Added expenses include restructuring charges for real estate consolidation of $156 million.
Follow him on Twitter @JacobGaffney.
Tags: Basel 3, Dodd-Frank, earnings, State Street
Posted in Secondary Market/Investors, Top Stories | 3 Comments »
A bill introduced in the U.S. House of Representatives would waive early distribution penalties on certain qualified retirement plans if the funds are used to buy a house that has been in foreclosure for a year or more.
Bill Posey (R-Fla.) introduced H.R. 1526 — the Housing Recovery Act of 2011. It has been referred to the Committee on Ways and Means.
"It's not an end-all fix," Press Secretary George Cecala said. "It's just another idea to help the housing market."
The idea is to add stability to neighborhoods by promoting purchases by owner-occupants or those seeking a second home rather than investors who immediately "flip" the home. Under the bill, the purchaser must agree to hold the property for at least two years to be exempt from early retirement plan distribution penalties.
The bill is expected to apply to distributions from Roth IRAs, 401(k) plans and company pension plans. It would require the person to use the retirement distribution within 120 days of receipt by buying a home that "has been in foreclosure for a year or more."
Cecala said Posey, a Realtor, anticipates that the one-year period would begin at the point that the foreclosed property is listed for sale, but said the congressman is open to amending the bill to be more specific about when the clock would start ticking.
Several states have extremely drawn-out foreclosure processes. Foreclosures in judicial state average about 13 months from start to finish. But once foreclosures are repossessed by the lender and enter what is known as real estate-owned status, or REO, it is not uncommon for them to be snapped up once listed for sale.
In Posey's home state, his district covers Florida's "Space Coast" not far from Orlando area. He is owner and founder of Posey Realtors & Co. in Rockledge, near Cape Canaveral.
Florida accounted for nearly 9% of U.S. foreclosure activity during the first quarter, documenting 58,322 properties with a foreclosure filing, second behind California, which accounted for nearly 25% of foreclosure activity, according to RealtyTrac.
Florida foreclosure activity decreased 47% from the previous quarter and was down 62% from the first quarter of 2010 — although the state still posted the nation’s eighth highest foreclosure rate with one in every 152 housing units with a foreclosure filing during the first quarter.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: Florida, foreclosure, H.R. 1526, Posey, Posey Realtors & Co., RealtyTrac, REO
Posted in Servicing/Default, Slider, Top Stories | 11 Comments »
Online real estate marketplace Zillow Inc. filed an initial public offering with the Securities and Exchange Commission Monday, hoping to raise about $51.8 million.
The Seattle-based company narrowed its yearly loss to $6.8 million after reporting a loss of $12.9 million in 2009 and a loss of $21.2 million in 2008. It reported revenue of $30.5 million in 2010, up 74% from the previous year.
The 6-year-old firm said it plans to use proceeds from the IPO for general corporate purposes, including financial flexibility and increased market exposure.
Under risk factors, Zillow noted that it has "incurred significant operating losses in the past and we may not be able to generate sufficient revenue to be profitable over the long term," according to a regulatory filing. As of Dec. 31, 2010, Zillow had an accumulated deficit of $78.7 million and although its revenue grew from $10.8 million to about $30.5 million last year, that growth rate is expected to decline, the company said.
Zillow's financial model depends on advertising revenue that is generated "almost entirely through sales to real estate agents and brokerages, mortgage lenders and advertisers in categories relevant to real estate," the firm said in its filing.
"While real estate agents participating in our subscription-based Premier Agent program generally commit to contract terms of six or 12 months, we do not have long-term contracts with most of our other advertisers," it said. The company had about 19 million unique users to its website in March.
A month earlier, it began a partnership with Yahoo! Real Estate that provides the largest online real estate network. The company also recently acquired Postlets Inc., a real estate agent and rental property management service.
Technology Crossover Ventures and PAR Investment Partners are making a $5.5 million private investment in Zillow, according to the SEC filing.
Write to Christine Ricciardi.
Follow her on Twitter @HWnewbieCR.
Tags: PAR Investment Partners, Postlets Inc., Securities and Exchange Commission, Technology Crossover Ventures, Yahoo! Real Estate, Zillow Inc.
Posted in Secondary Market/Investors, Top Stories | No Comments »
Bank and lender KeyCorp (KEY: 7.96 +1.02%), parent of KeyBank, posted a profit of $173 million, or 19 cents per share, for the first quarter of fiscal 2011 — a month after announcing it had repaid all of the Troubled Asset Relief Program funds it borrowed from the government in the heat of the financial crisis.
That compares to a net loss of $96 million, or 11 cents per share, a year earlier. Revenue fell from $1.08 billion in the first quarter of last year to $1.06 billion in the most recent quarter.
KeyCorp says first quarter results "reflect improvement in noninterest expense and lower credit costs from the same period one-year ago."
The lender said by the end of the first quarter, nonperforming loans represented only 1.82% of all period-end loans.
Net charge-offs — or writedowns on debt unlikely to be repaid — fell by $193 million, representing only 1.59% of average loan balances for the quarter.
During the period, KeyCorp repurchased $2.5 billion of preferred stock related to its participation in TARP, the relief program designed by the Treasury in the wake of the financial crisis to provide banks with liquidity.
The bank's first-quarter profit is a far-cry from one of the financial institution's low points in 2009 when it recorded a net loss of $438 million in the third quarter of 2009. During that period, more than a year ago, the bank was forced to record a $733 million provision for loan losses.
Write to Kerri Panchuk.
Tags: credit costs, Key Bank, KeyCorp, loan loss provisions, net charge-offs, TARP, Troubled Asset Relief Program
Posted in Origination/Lending, Top Stories | No Comments »
AG Mortgage Investment Trust Inc., a recently formed mortgage REIT managed by Angelo, Gordon & Co., lowered expectations for its upcoming initial public offering from $300 million to roughly $248 million.
The trust is offering 12.5 million shares at $20 each, according to filings Monday with the Securities and Exchange Commission. It plans to trade on the New York Stock Exchange under the symbol MITT. The company initially filed to offer 20 million shares for $15 a share. Proceeds, which could climb to as high as $287.5 million if underwriters exercise an over allotment option, will be used to acquire mortgage securities, including those guaranteed by Ginnie Mae and those acquired by Freddie Mac and Fannie Mae.
AG Mortgage Investment Trust is going public at a time when REITs are hot in the market. Demand for agency mortgage-backed securities is rising, according to a recent Barclays Capital report. And REITs, which try to capitalize on spread differential, are coming to market with IPOs, raising some $6.6 billion of new capital since December.
"One of the underlying motives for these firms is a potential lack of available credit to fund new mortgages going forward as result of a wind-down of the GSEs and new risk retention rules for securitizations, both of which could increase demand for private capital for mortgage lending," according to Craig Guttenplan, an analysts with CreditSights.
The REIT plans to use a portion of the proceeds to invest in a portfolio of residential mortgage-backed securities and other assets, including commercial mortgage-backed securities.
Research firm Keefe, Bruyette & Woods said earlier in April that REITs are poised to increase their ownership in U.S. institutional commercial real estate.
Write to Kerri Panchuk.
Tags: AG Mortgage Investment Trust, Angelo, Angelo Gordon & Co., Barclays Capital, real-estate investment trusts, REITS, Securities and Exchange Commission
Posted in Secondary Market/Investors, Top Stories, Uncategorized | 1 Comment »
Board members for the National Association of Independent Housing Professionals voted to withdraw its lawsuit against the Federal Reserve over a rule governing mortgage loan officer compensation.
But the trade group said it is working on other options to revoke the rule.
The Fed rule, required under the Dodd-Frank Act, went into effect April 6 after a brief stay for judges at the U.S. Court of Appeals for the District of Columbia to hear lawsuits brought by NAIHP and the National Association of Mortgage Brokers to end the rule.
The original lawsuits were filed in the U.S. District Court for the District of Columbia.
The Fed effectively ended the practice of paying originators more when a borrower accepts a higher interest rate mortgage, known as the yield spread premium. The rule was written to prevent borrowers from being steered into higher-cost mortgage products than the lender requires.
The rule also ends of the practice of mortgage originators receiving payments directly from the borrower and the lender simultaneously.
The NAIHP and NAMB argued the Fed stepped beyond its regulatory authority to write such a rule and claimed it would only raise costs for borrowers.
"In our opinion, continuing with the appeal would be unwise; as it is unlikely a third ruling by the court would be different from the first two. Any further appeal would be heard by the same three judges who recently lifted the 'stay,'" said NAIHP President Marc Savitt. "Our legal team prepared an outstanding case with overwhelming evidence, which was ignored by the court."
NAMB did not immediately have a comment, but it did say recently that it was planning another appeal.
Savitt said NAIHP still has the ability to reinstate the suit at any time. The trade group added that is "well advanced into alternative options for revoking, what has already proven to be one of the most anti-consumer, anti-small business rules the board has ever promulgated."
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
Tags: compensation, Dodd-Frank, Federal Reserve, LO, mortgage, NAIHP, NAMB, National Association of Independent Housing Professionals, National Association of Mortgage Brokers
Posted in Origination/Lending, Top Stories | 1 Comment »
