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Archive for July, 2011

FHFA house prices down 6.3% from one year ago

Thursday, July 21st, 2011

House prices on the Federal Housing Finance Agency index dropped 6.3% in May from one year ago.

The FHFA calculates its monthly index from the purchase prices of homes backing mortgages sold or guaranteed by Fannie Mae and Freddie Mac.

Prices did rise 0.4% from the month before. Both the yearly drop and the monthly increase nearly mirrored the Radar Logic index released Thursday as well. The FHFA reported house prices remained 19.6% below the peak in April 2007.

The steepest monthly drop in prices was 1% in the West South Central Division as mapped by the Census Burea. This area includes Texas, Louisiana, Arkansas and Oklahoma.

Prices did increase 2% in the Mountain Division, which includes Colorado, Arizona, and Nevada.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: Arizona, Fannie Mae, FHFA, freddie mac, house prices, mortgage, Nevada, Texas
Posted in Origination/Lending, Top Stories | 6 Comments »

New lows in home prices 'almost assured': Radar Logic

Thursday, July 21st, 2011

Home prices in May dropped 5.9% from the year before but gained 1.2% from the previous month, according to the RPX Composite Price index from analytics firm Radar Logic.

The annual drop is the steepest since September 2009. Radar Logic said the monthly gain barely offsets the declines seen earlier in the year.

"Home prices usually increase in the spring due to seasonal factors, and the bulk of the gains typically occur by May," Radar Logic said. "The lackluster performance of the RPX Composite Price to date means that we are almost assured to see new post-bust lows in the fall, when seasonal strength comes to an end and softening demand pulls housing prices downward."

Because of the new lows, analysts at the firm predicted more homeowners will become underwater on their mortgage than the already 10.9 million and thus more foreclosures are bound to occur.

The largest declines in May came in cities in the West and Midwest. Prices fell 14.7% in Seattle, followed by 11.9% in Sacramento, Calif., and 11.6% in Milwaukee. The smallest dip came in New York, at 0.4%, followed by a 1.1% drop in Charlotte, N.C., and a 4.6% decline in Washington.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: foreclosure, home prices, May, new lows, Radar Logic, underwater
Posted in Origination/Lending, Top Stories | 6 Comments »

Senate committee to hear from next generation of regulators

Thursday, July 21st, 2011

The Senate Banking Committee will get to question President Obama's nominees for top regulatory positions Tuesday.

Martin Gruenberg was picked to become the next chairman of the Federal Deposit Insurance Corp. and would follow Sheila Bair. He served as the vice chairman of the FDIC board since August 2005 and as acting chairman since Bair finished her term July 8.

Thomas Curry is the candidate to run the Office of the Comptroller of the Currency. He served on the FDIC board since January 2004. He would replace John Walsh who has led the bank regulator since August.

S. Roy Woodall, a former Treasury Department official and insurance commissioner for the state of Kentucky, was selected to become a member of the Financial Stability Oversight Council. Created under the Dodd-Frank Act, the FSOC will monitor the financial system and theoretically head off any threats.

Each candidate heads into an office steeped in controversy and challenges.

Gruenberg would take up the effort of returning the Deposit Insurance Fund to a positive level, which the FDIC announced earlier in the year could happen by the end 2011, as bank failures come off of the peak of last year.

Curry would step into the middle of the robo-signing controversy that has plagued the housing market since last fall.

Under Walsh, the OCC and other regulators signed consent orders with several servicers, requiring changes to how foreclosure operations and oversight is handled. These regulators are also attempting to align the requirements with the 50 state attorneys general investigation.

The OCC is also busy welcoming more than 600 employees from the Office of Thrift Supervision as the two agencies merged Thursday.

Woodall would join a committee with an uncertain amount of power. FSOC will oversee the controversial Consumer Financial Protection Bureau and hold veto power over any rules the committee deems systemically threatening. But Republicans complain FSOC would need such a large majority, the power is almost negligible and Congress is currently in a standoff over how or if the new entities should be restructured.

Still, Senate Banking Committee Chair Sen. Tim Johnson (D-S.D.) praised each nominee, while ranking member Sen. Richard Shelby (R-Ala.) said recently he "looks forward to the debate."

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: CFPB, FDIC, foreclosure, FSOC, Martin Gruenberg, mortgage, OCC, regulator, robo-signing, S. Roy Woodall, Senate banking committee, Thomas Curry
Posted in Origination/Lending, Top Stories | No Comments »

One year on, many mortgage bankers leery of Dodd-Frank

Thursday, July 21st, 2011

According to the Grant Thornton bank executive survey released Thursday, nearly half of bankers believe financial reform under the Dodd-Frank Act will not effectively prevent another taxpayer-led bailout. They do, however, report a growing confidence in the current economic recovery.

The results are published in association with Bank Director magazine. In the survey 48% of bankers polled said Dodd-Frank will not effectively detect broad risks capable of driving the economy back into a recession. Only 4% believe the sweeping reforms of the new law will be totally effective while 34% expect Dodd-Frank will only partially protect against economic risks.

As a way to bolster the effectiveness of Dodd-Frank, the Federal Deposit Insurance Corp. will call for banks to raise more capital.

FDIC acting chairman Martin Gruenberg, presented the argument for this hedging as he spoke before a Senate committee on banking, housing and urban affairs on the anniversary of Dodd-Frank.

"In this sense, stronger bank capital requirements complement the Dodd-Frank Act resolution tools designed to prevent future bailouts of financial companies," said Martin Guenberg of the FDIC. "Insufficient capital, in contrast, heightens a banking system's exposure to periodic crises. The knowledge that capital cushions are thin compared to the magnitude of risks that abruptly and unexpectedly loom large can contribute to a panic atmosphere and feed a crisis."

Bankers serving local communities are seeing improvements in there pockets of the nation, the survey also found. About 44% of respondents expect things to improve going into 2012.

"The survey reveals increased optimism, albeit cautious at times," said Nichole Jordan, national banking and securities industry leader at Grant Thornton.

"And as the economy recovers, one of the greatest assets of any bank is confidence — confidence from consumers and regulators, and confidence within banks themselves to jump start hiring.," she added.

Nearly one-third of bankers report plans to increase hiring in the next six months, while 16% expect to decrease hiring. The majority expect hiring levels to remain around the same.

Write to Jacob Gaffney.

Follow him on Twitter @jacobgaffney.

Tags: bank directors, bankers, Dodd-Frank, Grant Thornton
Posted in Origination/Lending, Top Stories | 5 Comments »

Genworth shares hit by mortgage troubles

Thursday, July 21st, 2011

Genworth Financial Inc. shares fell 12% at midday Thursday after the mortgage insurer said it bulked up its loan-loss reserves as homeowners fell behind on mortgage payments.

Genworth said it would post a net operating loss of 14 cents to 18 cents for the second quarter. Analysts had expected Genworth to post profit of 24 cents a share, according to FactSet Research.

The stock tumbled to $8.30 in midday trades.

In the pre-announcement issued late Wednesday, Genworth blamed “worsening trends” in its U.S. mortgage insurance business, citing “slow-moving pipelines of mortgages in some stage of foreclosure and delinquent loans under consideration for loan modification.”

Tags: Genworth Financial Inc.
Posted in Around the Web | No Comments »

Judge dismisses Timberwolf CDO suit against Goldman

Thursday, July 21st, 2011

A U.S. District Judge dismissed a year-long lawsuit Wednesday claiming Goldman Sachs (GS: 109.82 +1.16%) duped investors over a collateralized debt obligation known as Timberwolf 2007-1.

Basis Yield Alpha Fund, an insolvent mutual fund based in the Cayman Islands, brought the suit in June 2010, alleging the faulty CDO, which is a complex security backed my mortgages, gouged the firm for more than $50 million and forced it into insolvency. Goldman put the $1 billion Timberwolf deal together in March 2007. Soon after it was issued, the CDO lost most of its value.

BYAF presented an internal email at Goldman from Thomas Montag, the former head of sales and trading at Goldman, in which he called Timberwolf "one shitty deal."

BYAF claimed it and its financial adviser received misrepresentations from Goldman and its partners on the deal, specifically on the value of the offered securities. In a June 2007 conference call with Goldman and other representatives, BYAF alleges it was assured the CDO market would "remain price stable" going forward and Timberwolf would be a "good entry point."

That same day, BYAF purchased $50 million in triple-A rated securities and another $50 million in double-A rated securities from Timberwolf at a discounted price of $80.8 million.

According to BYAF, Goldman sent a series of margin calls totaling more than $30 million within weeks – meaning the valuation of the securities allegedly fell more than $30 million shortly after BYAF bought it.

But Judge Barbara Jones, of the U.S. District Court of the Southern District of New York, ruled that BYAF did not show the transaction was a domestic one and therefore, the case could not be tried in a U.S. court.

While Jones conceded the deceit was allegedly placed in New York, BYAF never explicitly said where the transaction took place. Rather, BYAF only alleges that "on or about June 13, 2007, BYAF agreed to purchase [the Timberwolf securities] from Goldman."

"Plaintiff fails to provide inference that the purchase or sale was made in the United States," Jones said.

Jones did leave room for the plaintiff to file an amended complaint with 30 days.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: CDO, Goldman, MBS, mortgage, Timberwolf, U.S. District Court of the Southern District of New York
Posted in Secondary Market/Investors, Top Stories | 1 Comment »

Litigation costs mount at BofA, Chase over foreclosure, mortgage issues

Thursday, July 21st, 2011

Legal expenses at Bank of America (BAC: 7.2125 -1.20%) and JPMorgan Chase (JPM: 37.25 -0.64%) more than doubled for the second quarter from the previous period, according to each bank's financial documents.

BofA reported $1.9 billion in litigation expenses for the second quarter, most of it related to its foreclosure and mortgage issues. It's an increase from $785 million for the previous quarter.

Chase reported $1.3 billion in legal expenses for the second quarter, more than triple from the $400 million for the previous quarter and nearly double the $700 million added to reserves one year ago. However, legal expenses peaked in the fourth quarter of 2010 at $1.5 billion.

The looming investigation into mishandled foreclosures at both of these banks and other major servicing shops around the country has dragged on since October 2010. Now, 10 months later, servicers and the AGs have yet to strike a settlement.

"This is something that is very fluid and continues to move around," said BofA Chief Financial Officer Bruce Thompson, during a conference call with investors this week. "I think everyone realizes this would be a good thing to move forward. As we look out at what's out there, during the 2Q we did provide some litigation reserves to help address any cash type penalties. We believe we have reserves we can direct toward the settlement."

Chase CEO Jamie Dimon was more direct. He told investors he wanted to end the negotiations and put the foreclosure woes behind him and the overall economy as quickly as possible.

"I would do anything to get it done today, but our counsel advises us that it could take quite awhile," Dimon said. "One of the reasons to do that is it's good for the United States of America to get behind us all this stuff, to fix it, and move on. Delaying foreclosures and all the uncertainty around mortgages is not a good thing for the economy."

But he added an important and almost threatening caveat.

"We've got to get (the settlement) right," Dimon said. "We're not going to do it and be subject to double and triple jeopardy. We'd rather litigate it."

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

Tags: AG, Bank of America, foreclosure, investigation, Jamie Dimon, JPMorgan Chase, legal, mortgage
Posted in Servicing/Default, Top Stories | No Comments »

Blackstone 2Q earnings climb 243%

Thursday, July 21st, 2011

Private equity firm Blackstone Group (BX: 15.52 -0.51%) posted record earnings Thursday, more than double the year earlier and at the highest since the company went public four years ago. Blackstone is so confident in the performance that it is creating a new fund for real estate investments.

Net income for Blackstone in the second quarter is $703 million on revenue of $1.3 billion, which is more than double the year ago, according to its earnings report. This is up 243% from $205 million from the second quarter of 2010, and higher than the $567.8 million for the first quarter 2011.

Blackstone said higher fees in the real estate and private equity segments, increased to $412.9 million and $211.5 million, respectively during the quarter and the company declared a quarterly distribution of 10 cents per common unit.

"Despite the challenges presented by slowing global economic growth, overall our portfolio companies and real estate investments performed well in the second quarter," CEO Stephen Schwarzman said.

"We experienced inflows across all of our businesses as we captured share and deepened relationships with our limited partner investors," he said. "We ended the quarter with record total assets under management of $159 billion, up from $111 billion during the same period last year."

Blackstone said it holds more money in reserve for investing than ever before. And it is looking at ways to put that $31 billion to work, with $7.4 billion dedicated to real estate.

In the second quarter, Blackstone commenced fund-raising for its next major real estate fund, BREP VII. The fund reached approximately 87% invested or committed capital as of the end of the second quarter.

A material portion of the firm's revenue came from preferred return hurdle in funds. This is when an investment firm reaches a profit goal for a fund, it becomes entitled to a greater portion of the returns going forward.

Total management fees increased 23% to $513.6 million from $417.5 million the prior year.

Write to Jacob Gaffney.

Follow him on Twitter @jacobgaffney.

Tags: Blackstone, real estate fund
Posted in Secondary Market/Investors, Top Stories | 2 Comments »

Mortgage rates relatively unchanged: Freddie Mac

Thursday, July 21st, 2011

Mortgage rates were virtually unchanged from the previous week following mixed economic and housing data. The 30-year, fixed-rate averaged 4.52% and the 15-year fixed-rate mortgage averaged 3.66% for the week ending July 21.

That's up ever so slightly from last week when the 30-year rate averaged 4.51% and the 15-year rate was 3.65%, according to Freddie Mac. Last year at this time, the 30-year FRM averaged 4.56% and the 15-year rate was 4.03%.

The five-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 3.27%, down from 3.29% last week and 3.79% a year ago.

The one-year Treasury-indexed ARM averaged 2.97% this week, up from 2.95% last week and down from 3.7% last year.

"Although both the overall producer price index and consumer price index fell moderately in June on lower energy costs, the core price indexes inched up," said Frank Nothaft, vice president and chief economist of Freddie Mac. "In addition, consumer sentiment sank to the lowest reading since March 2009, based on figures from the University of Michigan."

Recent housing data also varied. Single-family housing starts jumped 9.4% in June to the strongest pace since November 2010 and homebuilder confidence rebounded in July. Yet, existing home sales fell 0.8% in June and represented the fewest since November.

Mortgage rates took a slight downward tick in the latest Bankrate survey, which looks at rates at the nation's big banks.

The fixed-rate, 30-year mortgage dropped 1 basis point, averaging 4.68% compared to last week's 4.69%.

Other mortgages also saw little to no movement. The 15-year, fixed-rate mortgage averaged 3.82% — unchanged from a week earlier. Meanwhile, jumbo mortgages, or generally those for more than $417,000, slid to 5.17%, a dip of 3 basis points.

Write to Kerry Curry.

Follow her on Twitter @communicatorKLC.

Tags: Bankrate, Frank Nothaft, freddie mac, housing, housing starts, mortgage rates, Treasury, University of Michigan
Posted in Origination/Lending, Top Stories | 1 Comment »

Morgan Stanley 2Q loss hurt by preferred stock conversion

Thursday, July 21st, 2011

Morgan Stanley (MS: 18.06 -0.50%) swung to a second-quarter loss, as a $1.7 billion charge to convert preferred stock hurt results.

The investment banking giant reported a loss of $558 million, or 38 cents a share, for the three months ended June 30, down from income of nearly $1.6 billion, or $1.09 a share, last year. Results for the quarter include a loss of $1.02 a share from the conversion of Series B preferred shares held by Mitsubishi UFJ Financial Group Inc.

Second-quarter revenue rose 17% to $9.28 billion from $7.96 billion a year ago.

Morgan Stanley said second-quarter results include revenue of $244 million from movement in credit spreads on certain long-term and short-term debt. The same debt valuation adjustments resulted in a loss of $189 million in the first quarter and $750 million of positive revenue a year ago.

The institutional securities division reported second-quarter pretax income from continuing operations of $990 million, down 28% from about $1.4 billion a year earlier.

Investment banking revenue for the quarter rose 57% to nearly $1.7 billion from $1.08 billion a year ago with increases in advisory and underwriting volume. Equity sales and trading revenue rose to $1.9 billion on gains in market share.

"While global markets remained challenging this quarter, the firm delivered higher year-over-year revenues across our three major business segments. Equities achieved further client gains as revenues rose despite a fall in overall market volumes," according to President and Chief Executive James Gorman.

Morgan Stanley said its Tier 1 capital ratio was about 14.6% with a Tier 1 common ratio of about 16.8% at June 30.

"With this additional capital cushion and the clear momentum across our main businesses, we are well positioned to help our clients navigate the constantly changing markets and create additional value for our shareholders," Gorman said.

Write to Jason Philyaw.

Tags: 2Q loss, investment banking, Mitsubishi UFJ Financial Group Inc., Morgan Stanley
Posted in Secondary Market/Investors, Top Stories | 2 Comments »