Quote of the Day
"As we begin this year's conference, the still unsteady condition of credit markets is no doubt at the top of the mind for most.” - Federal Reserve Bank of Atlanta President Dennis Lockhart, speaking at the Atlanta Fed's annual financial markets conference on Sea Island. Lockhart said financial markets were still fragile despite all of the Fed’s efforts.
HSBC Profits Rise Despite $3.2 Bln Subprime Hit. “HSBC: First-quarter profits climbed, despite taking a $3.2-billion (€2.07B) hit from its exposure to the US subprime housing market slump. In total, HSBC wrote off $5.8B in Q1 as a result of losses linked both directly and indirectly to the subprime crisis which it said would very likely push the US economy into recession. The group's share price rallied 1.85% to 882 pence in early afternoon London deals as investors welcomed news that HSBC's credit-crunch losses were less than expect3ed in Q1’08.”
Jumbo Mortgage Rates Becoming Affordable. “Those new jumbo-conforming mortgages, created by Congress… are finally getting cheaper. Late last week, many lenders slashed their rates by about one-half of a percentage point on jumbo-conforming loans - mortgages between $417,000-$729,750 that can be guaranteed by Fannie Mae (FNM) and Freddie Mac (FRE). The rate cut makes them nearly as cheap as standard conforming loans below $417,000. RPM Mortgage in San Rafael: On Monday, the rate on a 30-year fixed-rate jumbo-conforming loan with no points was around 6.125% compared with 5.875% for standard conforming and 6.75% for regular jumbo loans. However, jumbo-conforming loan [criteria] are still stricter than for standard conforming loans.”
First American to Host MBA Loss Mit Boot Camp. “The First American Corp., a provider of business information services, announced this week that its campus in Westlake, Texas, has been slated as the venue for the upcoming Mortgage Bankers Association’s CampusMBA loss mitigation workshop. The [June 2008] course includes loss mitigation training in the form of five practical exercises; a panel discussion led by Rick Roniger, CFO of First American’s Loss Mitigation Services; and a final exam online. First American describes the loss mitigation training course as a “boot camp-style workshop” for those who either service mortgage loans or conduct and monitor loss mitigation workouts.”
NAR Pushes Mortgage Reform in D.C. “Realtors are gathering in Washington, D.C., this week for the National Association of Realtors Midyear Legislative Meetings & Trade Expo. The event gives Realtors a chance to lobby for their top initiatives, which currently includes tax credits for the benefit of home buyers, mortgage reform, affordable loans and access to property and casualty and flood insurance, according to NAR.”
HUD Extends Comment Period on Proposed Mortgage Reforms. “The U.S. Department of Housing and Urban Development announced that it is extending the public comment period on the Bush Administration's proposed reforms to the real estate settlement process. The comment period for the Department's proposed rule to simplify and improve the process of obtaining mortgages and reducing settlement costs under the Real Estate Settlement Procedures Act [RESPA)] will be extended 30 days until June 12, 2008.”
Agencies Issue Proposed Rules on Risk-Based Pricing Notices. “The Federal Trade Commission and the Federal Reserve Board announced proposed regulations that generally would require a creditor to provide a consumer with a risk-based pricing notice when, based in whole or in part on the consumer’s credit report, the creditor offers or provides credit to the consumer on terms less favorable than the terms it offers or provides to other consumers. Risk-based pricing refers to the practice of using a consumer’s credit report, which reflects his or her risk of nonpayment, in setting or adjusting the price and other terms of credit offered or extended to a particular consumer.”
Kerry: Fed Survey Shows Need To Cut SBA Loan Fees. “Federal Reserve Board quarterly survey: About 50% of U.S. banks had tightened their lending standards on loans to small businesses in April. That's up from 30%... in January. About 65% of banks surveyed had increased their spreads -- the difference between a loan's rate and the bank's cost of funds -- on small business loans, and many banks also tightened other price-related loan terms. A net 15% of large U.S. banks reported loan demand from small businesses had declined. About 20% of small banks reporter weaker demand for business loans from companies of all sizes. About 55% of domestic banks tightened lending standards for large and middle-market companies [in Q1.]”
Senate Seeks Bipartisan Support For Housing -Rescue Package. “The Senate Banking Committee is expected to vote Thursday on a housing-rescue package similar to a measure that passed the House last week, but efforts by Democrats and Republicans to broker a bipartisan deal have failed so far. [The plan] would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages. It would create a new regulator for mortgage-finance giants Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks. A similar measure passed the House of Representatives last week.”
Shipbuilding Torpedoed by Subprime Causes Cost Surge. “The biggest shipbuilding boom in history collided with the largest credit-market losses ever, undermining forecasts for a plunge [56% by 2011] in freight rates. As much as $14 billion in ship orders is threatened by cancellations and delays, equal to 94% of annual revenue at Hyundai Heavy Industries Co., the largest shipbuilder. Merchant bank Fortis: Tightening credit markets mean lenders demand a bigger deposit and shorter terms for financing. The loss or delay in deliveries of about 250 cargo ships, or 10% of orders, will tighten the supply of vessels and support rates when demand from China and India for everything from soybeans to coal has never been greater.”
FHA Relief Plan Missing Its Target. “Last August, President Bush promised to help homeowners who had fallen behind on their mortgage payments refinance with stable government-insured loans. This month, officials asserted that more than 150,000 people had benefited. But federal statistics show that fewer than 2,000 homeowners at risk of foreclosure have been helped by… the Federal Housing Administration [program.] Most people who have refinanced are homeowners who have made their mortgage payments on time, not the borrowers in crisis who were the targets of the president's plan. Housing officials, who initially expected 60,000 or more delinquent borrowers to benefit, say they greatly overestimated the demand.”
CEOs Grapple With Subprime Beast. “Investors pummeled AIG shares Friday even as CEO Martin Sullivan and other executives tried to explain why the company was raising $12.5 billion in new capital. AIG needs the money to prop up its balance sheet after it reported a $7.8B loss… Since December, the company has taken roughly $20B in write-downs on credit derivatives that essentially protect against losses in subprime mortgages, among other things. It reported what was by far its worst quarterly loss [ever]... And despite assurances that AIG had extra capital, it is diluting shareholders by raising equity.”
Citigroup to `Wind Down' About $400 Billion of Assets. “Citigroup Inc. CEO Vikram Pandit plans to “wind down” about $400 billion of assets over the next three years as part of his plan to return the biggest U.S. bank to profitability. “There will be more'' divestitures, Pandit told shareholders... The company, which lost $5.1B in Q1, has recorded more than $40Bof credit losses and writedowns since the subprime mortgage market collapsed last year. Pandit, 51, has raised $44B in capital, more than any financial-services company, through stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.”
AIG See No Rebound Yet For Subprime Securities. “American International Group (AIG) on Friday told investors that the structured credit market for residential mortgage securities, including subprime, does not appear to have rebounded. "We don't see any precise evidence to date that those markets have rebounded," said Steve Bensinger, who it was announced yesterday will step aside as CFO to assume a new post.”
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