JPM Evaded Subprime, But Not Construction Loans [Housing Tracker]

Subprime Banking Fallout

Lehman’s Sticky Situation. “Having tried shopping its troubled real-estate holdings, Lehman knows what the market thinks they are really worth… Lehman (LEH) [could] share losses on its… troubled real estate assets with [an] outside sponsor above a certain level. That could disappoint those who want the bank to offload the risk completely… [but] would have some intriguing consequences. Presumably, the "bad Lehman" company would have to disclose more detail about the real-estate holdings, to give investors enough information to come up with an appropriate valuation. The new entity could become a rare opportunity for brave retail investors wanting a focused bet on distressed commercial real-estate assets.” (WSJ, Sept. 2) 

Insurance Is Unlikely An Issue For Mass. Banks. “Massachusetts' state-chartered banks and credit unions are unlikely to face higher deposit insurance rates this fall, officials said, in a sign that local institutions are largely weathering the financial storms buffeting banks elsewhere. Unusual insurance programs in Massachusetts provide extra coverage for deposits at state-chartered savings banks, cooperative banks, and credit unions. The system fully insures deposits over and above the better-known Federal Deposit Insurance Corp.'s coverage of $100,000 per depositor… The failure of IndyMac Bank in July left depositors with about $600 million in uninsured holdings… Many expect the FDIC to raise the rates it charges member institutions.” (Boston Globe, Sept. 2) 

How Jamie Dimon Got JP Morgan Chase Out Of Subprime. “In October 2006… the mortgage servicing business [at a JP Morgan (JPM) retail bank] reported that late payments on subprime mortgages were rising at an alarming rate. JPM concluded that quality control had slipped at the originator level and decided to slash its holdings of subprime debt… There are [herein] the seeds of an even greater story defending the efficacy of the mega-bank. After all, it was the fact from a retail business that tipped JPM CEO Jamie Dimon off to a strategic change at the investment level. A smaller brokerage or investment bank would not have had access to this data. Maybe the model of mega-banks [isn’t] broken, after all.” (Dealbreaker, Sept. 2)

Builder Says It Will Continue Work During Bankruptcy Case. “Last week, a group of creditors led by JPMorgan Chase Bank forced California-based Woodside Homes Corp. and nearly 200 affiliated entities into involuntary Chapter 11 reorganization proceedings, claiming the company owed them more than $700 million in bank, bond and note debt. Woodside's 2007 revenue totaled about $1 billion, down from $1.3B the previous year… Don Gaffney, a Phoenix attorney representing JPMorgan Chase, said Woodside and its many affiliates owe his client $335 million in unpaid debt. The builder owes another $370M in bond and note debt to investors, including five life-insurance companies.”  (Arizona Republic, Aug. 30)

Regulators Shut Integrity Bancshares In 10th U.S. Bank Failure This Year. “Regulators shut down Integrity Bancshares Inc. of Georgia on Friday and sold all deposits to Regions Financial Corp. of Alabama, marking the 10th U.S. bank failure this year. Atlanta community bank Integrity had been under regulatory scrutiny since early this year as it… struggled under the weight of rising loan defaults… The Federal Deposit Insurance Corp. estimated the failure would cost its deposit-insurance fund between $250M-$350M. Integrity had $1.1 billion in assets as of June 30, and $974M in deposits… Regions, the acquiring bank, is the nation's 20th-largest financial institution as ranked by market capitalization and 12th-largest as ranked by assets, with $144B.” (WSJ, Aug. 30) 

Fitch Warns on Fidelity National, Downgrades Other Title Insurers. “More [title insurance] claims [are] rolling in [and] the amount paid per claim is on the rise. Far fewer new policies are rolling in the front door too, making for a trifecta of lost revenue for most of the industry… Fitch Ratings [has] axed ratings of two title insurers, while warning that it would likely cut the ratings of another soon. Second-largest underwriter Fidelity National Financial, Inc. (FNF) faces the prospect of seeing its ‘BBB+’ issuer default rating and the ‘A’ insurer financial strength ratings of its nine title insurance underwriting subsidiaries downgraded over concerns that a current dividend may be unsustainable.” (Housing Wire, Aug. 29)  

Worker Assets Shrink at Fannie and Freddie. “Fannie Mae’s workers had $116 million in the employee stock ownership plan at the end of 2006. Today, it’s more like $17.5M… Freddie Mac (FRE) CEO Richard F. Syron made about $18.3M last year, two-thirds of that in stock and options that are worth a lot less today. Fannie Mae (FNM) CEO Daniel H. Mudd made $11.6M, also much of it in stock. Midlevel employees were paid in stock, too. Stock and options could account for a fifth of their total compensation, according to former employees and financial planners. Their ability to sell and diversify was often limited by restrictions on the grants… and tighter rules on selling by employees.” (NY Times, Aug. 28)

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

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Comments

[helplessobs...:]

Judy.
Lots of useful info in your postings, keep up the good work.

2008 Sep 03 09:25 AM

[8-Alpha-Zulu:]

thanks Judy, lots.

2008 Sep 03 05:08 PM