Displaying items by tag: Mortgage Banking

Relevant commentary from BoomBustBlog and sources throughout the Web on the accounting change that added 80% to the S&P since March 2009!!!

Warning Shots from the IASB: FT

• The IASB came under fire in the fall/winter of 2009 in regards to mark to market rules
• Banks wanted continued relaxation of valuing models in order to “smooth out volatility swings in asset prices”
• IASB and FASB plan to converge on mark to market ruling by 2011, both have stated a desire for more transparent financial statements, but have been politically compromised by bankers and commercial lenders

FASB Plan Would Force Banks to Report Loan Fair Value: BusinessWeek

• FASB is seeking to approve a proposal that would force banks to mark loans at market value by 2013, potentially having billions of dollars at risk for writedowns
• In April 2009, FASB gave significant leeway to banks in regards to pricing and modeling loan values, banking consultants are very opposed to a reversal of the measures
• Pension obligations and leases will be exempt from new measures
  

This is the public version of our quarterly review of Alt-A and subprime mortgage performance sourced from the NY Fed and FDIC data. All paying subscribers can access the entire document here: 4Q09 Alt-A and Subprime commentary (452.33 kB 2010-05-21 05:49:09).

Foreclosures on First Lien Mortgages increased from 11.5% as on 31st October 2009 to 11.74% as on 31st January, 2010. Mortgage rates on Prime loans and Alt-A loans increased by 25bps and 21bps to 7.66% and 12.23% respectively over the same period. Delinquency rates for first lien mortgages on the other hand decreased by 7bps to 5.6%, for the quarter ended December 31, 2009.. While Net Charge-off rates for Alt-A loans increased by 2.12% points q-o-q to 30.49% as on 31st Dec 2009, delinquency rates dropped by 27bps over the same period to 12.1%

In case of Subprime loans, Net Charge off rates and Foreclosure rates, both rose to 44.6% and 15.6% respectively during 4Q09, compared to 42.9% and 15.4% during 3Q09. Delinquency rates declined from 26.4% in 3Q09 to 25.3% in 4Q09. Net charge of rates for HELOCs rose 13bps to 3.34% during 4Q09 while delinquency rates had a negligible decline.

Net charge-off rates and delinquency rates for Business Loans (C&I loans) marginally declined during 4Q09 remaining more or less constant at 2.5% and 4.5% respectively.

Delinquency rates under CRE loans remained steady during 4Q09 at 8.8% when compared with 3Q09. While delinquency rates for multifamily loans did not show any drastic changes in 4Q09, net charge-off rates under construction loans increased considerably from 6.3% in 3Q09 to 8.4% in 4Q09

Credit cards had a better quarter with net charge off rates and delinquency rates showing marginal improvements in 4Q09. Net charge off rates declined from 10.2% in 3Q09 to 9.5% in 4Q09, while delinquency rates declined from 6.6% to 6.4% over the same period.

Other consumer loans showed a healthier 2.7% net charge off rate in 4Q09 as against 3.2% in the previous quarter. Delinquency rate in this segment also improved marginally, declining by 19 bps to 3.5% in 4Q09.

Net charge-off rates and delinquency rates for Other loans marginally increased. While net charge off rates increased from 1.7% in 3Q09 to 1.8% in 4Q09, Delinquency rates remained constant at 1.1% over 4Q09.

Professional

This is the skinny on those French and German banks that are at significant risk to PIIGS drowning, or potentially even getting significantly wet. The sell side banks have released reports on which bank is exposed to Greece, etc., but we decided to take it a few steps farther in order to create a truly actionable document that our subscribers can actually use to base concrete decisions upon. As is customary, I am releasing snippets of the proprietary research for free to the blogoshpere. This time around, I'll feature a European bank that we feel is thoroughly insolvent, yet trading at one of the highest premiums in all of Europe! As excepted from the reports referenced below:

Deutsche Postbank

The bank reported its exposure to sovereign debt of Greece, Italy, Ireland, Portugal and Spain at €1.3 billion, €4.7 billion, €350 million, €50 million and €1.2 billion.

Applying the loss rates under the base case, the total estimated losses on sovereign debt holdings is €1.7 billion (60.1% of tangible equity) on the total European sovereign debt exposure of nearly €24.9 billion (based on the reported sovereign debt exposure of December 2009). The existing Texas ratio of the bank is 139%, and if we include the losses on sovereign debt (unconventional, but illustrates solvency in a clearer fashion), the Texas ratio* will be 177%. The bank is trading at price to tangible book value of 1.83x. The stock is trading on a high multiple largely owing to speculation of full takeover by Deutsche bank. The float is 36% of shares outstanding as 39.5% is owned by Deutsche Post and 25% is owned by Deutsche Bank. See Deutsche Bank vs Postbank Review & Summary Analysis - Pro & Institutional and Deutsche Bank vs Postbank Review & Summary Analysis - Retail for a detailed overview and analysis of the unusual Deutsche Postbank situation.