Tuesday, 18 October 2011 12:59

Wells Fargo Earnings Fall Short

Wells Fargo's 'Record' Q3 Earnings Fall Short of Analysts' Expectations

Wells Fargo reported net income of $4.1 billion over the July-to-September period.

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The company called it a “record” quarter, but even with profits up 21 percent from the prior year and up 3 percent from the previous quarter, the numbers were overshadowed by the fact that the bank’s Q3 results missed market expectations.

Analysts polled by Thomson Reuters were expecting revenue of $20.24 billion, but the bank’s third quarter produced revenue of $19.6 billion, a 6 percent decline from a year earlier. At the same time, net income of 72 cents per share just missed forecasts of 73 cents per share.

According to the Wall Street Journal, it’s the first time in more than two years that Wells Fargo didn’t live up to analysts’ expectations. Improvement associated with credit quality helped to bolster the San Francisco-based bank’s net income despite declining revenue.

Net loan charge-offs declined to $2.6 billion in Q3, down $227 million from the previous quarter and down $1.5 billion from the same period last year. Nonperforming assets totaled $26.8 billion, a decline of $1.1 billion from the second quarter of this year and down $7.6 billion from the third quarter of 2010. The company also released $800 million from its loan loss reserves – a move Wells Fargo says reflects “improved portfolio performance.”

While the bank is seeing evidence of improving credit quality, pre-existing mortgage troubles continue to weigh heavy on its balance sheet.

Wells Fargo’s latest earnings report reflects a 61 percent increase in its provisions for expected mortgage buybacks. The company earmarked $390 million for mortgage loan repurchase losses, compared with $242 million at the end of the second quarter.

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Published in News Blog
Tuesday, 19 October 2010 20:20

BOA Resumes Foreclosures

BOA Resumes Foreclosures in 23 States

Bank of America reviewed 102,000 foreclosures in the 23 states where a court must sign off on the proceedings, and it is now restarting the process on those cases, the company said yesterday. The company said the first of the new affidavits will be submitted by Oct. 25, and that it will continue its review in 27 other states. According to a spokeswoman for the bank, no errors were found during the review, and fewer than 30,000 foreclosure sales across all 50 states will be delayed as a result of the investigation. The announcement comes one day before the bank's third quarter earnings report, and might ease investor concerns over the scale and timeframe of the bank's review process. "This is an even better outcome than we previously thought," said Paul Miller, an analyst at FBR Capital Markets. "We thought January was a more likely time to restart the [foreclosure] process." All told, 1.8 million loans are in foreclosure in the 23 so-called judicial states, while 1.3 million are pending elsewhere in the country, according to a Morgan Stanley analyst report.

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Published in News Blog
Thursday, October 14, 2010
To secure title insurance on REO sales, Bank of America has agreed to indemnify a major insurer if the title is challenged due to robo-signings and other improper foreclosure processing practices.

"Bank of America and Fidelity National Financial have reached an agreement confirming that Fidelity will provide title insurance on the sale of foreclosed properties," said B of A spokesman Dan Frahm.

Under the agreement, Fidelity will defend the new homeowner in court if a foreclosed owner challenges the title. B of A will cover the costs and, if necessary, any damages awarded to the previous owner.

"Bank of America and Fidelity National are taking this step to facilitate the continued availability of title insurance that is vital to the marketability of foreclosed properties," Frahm said.

The giant bank is seeking similar agreements with other title insurers.

American Land Title Association chief executive Kurt Pfotenhauer welcomed the B of A/Fidelity agreement.

“Title insurers are looking to lenders to provide appropriate indemnities," he said. ALTA also has approached the GSE regulator about title indemnifications.

"We will continue to work with federal and state regulators, Fannie Mae, Freddie Mac and lenders to bring certainty to the marketplace," Pfotenhauer said.

Published in News Blog
Friday, 15 October 2010 00:13

Foreclosure Auctions Hit New Record

RealtyTrac says 372,445 foreclosure auctions were scheduled in July, August and September, while 288,345 properties were repossessed by lenders over the same time period. Overall foreclosure filings edged up to 930,437 in the third quarter, a 4% increase from the previous quarter. One in every 139 homeowners received a foreclosure filing during those three months. Bank repossessions, or REOs, also are on the rise. In September, a record 102,134 homes were taken back by banks. It's the first time repos have topped 100,000 in a single month. The uptick is not expected to last, RealtyTrac CEO James Saccacio said in a statement, because several major loan servicers have halted foreclosure sales pending a review of documents. Nevada had the nation's highest foreclosure rate, up 1% from earlier, for the 15th quarter in a row.

One in every 29 Nevada homes received a foreclosure filing during the third quarter. Looking at total numbers of foreclosures, neighboring California was worst, with 191,016, followed by Florida, Arizona, Illinois and Michigan. Combined, the five states accounted for half of all foreclosures last quarter. Of course, once the moratorium ends, we can expect a new tidal wave of foreclosures. John McGeough, a broker, said that the current foreclosure freeze may give distressed homeowners extra time to do a short sale and avoid having their homes repossessed by the banks. "Foreclosure should be the last resort."

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Published in News Blog
Wednesday, 28 July 2010 16:23

More Homeowners Selling Short

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The 30-year, fixed-rate mortgage hit its lowest point in more than 50 years. The Freddie Mac Primary Mortgage Market Survey reported the average rate for a 30-year, fixed-rate mortgage at 4.19% with an average 0.8 origination point for the week ending Oct. 14, down from last week's average of 4.27%. A year ago the average was 4.92%. This is the lowest rate the survey has recorded since its inception in 1971. Mortgage rates were last at this level in April 1951, according to Freddie Mac. The Bankrate survey of large banks and thrifts reported the average rate for a 30-year, fixed mortgage is 4.47% with a 0.32 origination point, slightly above the 25-year-old survey's record low of 4.45% posted last month. Rates for 15-year FRMs are falling steeply, setting a new low for Freddie Mac.

The GSE said the rate was down to 3.62% with an average origination point of 0.8. The rate for a 15-year FRM was 4.37% a year earlier. Bankrate said the average rate for 15-year, FRMs of 3.85% is a new record low and down from 3.87% a week earlier. Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the declining rates to the loss of 95,000 nonfarm payroll jobs in September. The GSE said the average for a 5-year, adjustable-rate mortgage is 3.47% with an average 0.6 origination point, down from 4.38% a year ago. The average remained flat with last week. Bankrate reported the average rate for a 5-year, ARM fell last week to 3.62% from 3.64% previously. The one-year Treasury-indexed ARM averaged 3.43% with an average 0.7 point up slightly from 3.4%. At this time last year, the one-year ARM averaged 4.6%.

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Published in News Blog
Friday, 15 October 2010 20:03

WSJ - Foreclosure Disaster Hits Banks

The mortgage-foreclosure crisis spilled into the financial markets on Thursday, driving down bank stocks and weighing on mortgage bonds as investors took a grim view of the potential costs. Shares of U.S. banks fell, while the broader stock market was essentially flat. Bank of America Corp., potentially among the most affected, dropped more than 5%. Bank bonds also fell, and the cost of buying protection against a possible debt default by banks climbed. "The level of uncertainty in the economy is at extraordinarily high levels to begin with," said Jack Scott, chief investment officer at BlackHawk Capital Management, a Charlotte, N.C., money manager that owns mortgage securities. "The foreclosure problem adds another layer of acute uncertainty."

So far, the foreclosure crisis hasn't affected consumer mortgage rates, which remain near record lows. They are closely linked to rates on U.S. Treasurys, which have tumbled in recent months. Until recently, investors hadn't fled financial stocks. If the issues raised about foreclosure practices in recent days are easily resolved technical glitches, with most foreclosures resuming after brief delays, then the impact on most investors would be small. "The [mortgage] market seems to be functioning relatively well, but that could change depending on how we see this play out," said BlackRock Inc. portfolio manager John Vibert. But some fear that it may be difficult to do any foreclosures for a while.

The risk is that foreclosure flaws are so widespread, or the political furor so heated, that the entire process grinds to a halt, as Citigroup analyst Joshua Levin said in a conference call this week. In some cases, that would choke off much of the cash flow used to pay mortgage bondholders. Another concern is that banks could be forced to modify billions of dollars in loans, including reducing principal, which could leave bondholders as big losers. Banks, meanwhile, could be hit with investor lawsuits, and foreclosure delays could bring short-term losses. Some investors are pushing for banks to take back nonperforming mortgages in cases of faulty documentation.

Published in News Blog
Tuesday, 12 October 2010 23:03

JPMorgan Expanding Mortgage Review

In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval. Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks. In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold. The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.

In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said. Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews. On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale. Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.
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Published in News Blog
Monday, 11 October 2010 11:23

No Relief For Homeowners

Harry Smith spoke with economics correspondent Rebecca Jarvis about the government program designed to help struggling homeowners.

Published in News Blog
The Treasury published the outcomes of failed HAMP trials that were canceled because of insufficient documents. Of the 148,129 Home Affordable Modification Program trials Bank of America (BoA) has canceled through August, more than 63,000, or 43%, still await additional loss mitigation action, according to Treasury Department data. The Treasury also included data on the amount of foreclosure starts for these canceled trials. BoA has started the foreclosure process on 8,062 of its 148,000 canceled trials, or 5.4%, half of the industry average of 11%. Wells Fargo has started 17,882 foreclosures, and JPMorgan Chase started 16,089 foreclosures on these canceled trials. Citi started 6,351 foreclosures on its canceled trials. BoA holds 383,482 mortgages that are eligible for a HAMP trial, according to the Treasury, nearly double the 201,771 held by JPMorgan Chase, the next highest.

BofA serviced $2.1 trillion in mortgages in 2009 overall, a 5% increase from the year before. Of the other "big-four" lenders, only Wells had a yearly increase at 0.9%. Both Chase and Citi saw decreases. Simon said Bank of America is working through the backlog of its HAMP trials that are still awaiting action. "Progress has been made by Bank of America as we have focused on getting through the backlog of aged trial modifications over the past three months and completing actions on the ineligible mortgages will begin to show up in coming reports," Richard Simon, a spokesman for BoA said. "Until then, any conclusions seem premature." But HAMP may only be a microcosm of the issues in loss mitigation. Lender Processing Services’ Applied Analytics division reported in August that more than 2.6 million mortgage loans are 90+ days delinquent and not yet in foreclosure, the heart of the shadow inventory of homes waiting to hit a troubled market.

Published in Homepage News
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