In an email communication from my wholesale representative it appears that Wells Fargo is eliminating stated income immediately on its home equity programs and is seriously considering eliminating “borrower selected” stated income from its product mix. It appears that stated income may be still available based on risk grading via the automated underwriting engine; but otherwise will not be an option to borrowers. The email also mentions that non-conforming ARM loans are not performing well and that pricing should worsen signficantly on those products in the near future.

While I know some of you don’t care what Wells Fargo does (Russ) I think it’s important to track the evolution of the major banks and their lending criteria as veritable ‘canaries in the coal mine.’ What they do will inevitably where the bulk of the market will head.

Read it for yourself here:

The decision has been made to stop originating borrower selected SIVA [for equity products]. A Newsflash and an Iland are in the process of being prepared and will most likely be distributed on Friday. The effective date will be applications received on or after Tuesday, November 20th. For standalones, any SIVA applications will need to be received by end of day Monday, November 19th. For WF Simo’s, any SIVA applications will need to be in A15 status by end of day Monday, November 19th.

All existing pipeline will be honored based upon the applicable dates on the commitment letters
Nonconforming ARMS not executing well so we will see pricing hits and changes soon.
All “special doc type” loans are being looked at hard! Conforming as well ( yep, that sounds like Mtg. Express)
Bottom line is- lock your loans if you like what we have today because it may be gone tomorrow!!
The industry in general is moving back to late 80’s early 90’s. Full Doc Loans. Please look at your borrowers that will need a loan do to resets that have to go SIVA. We may be loosing that documentation option soon on our Conforming and Non-Conforming. All the more reason to use Direct Express and let the engine give you SIVA or SISA approval.

Share This

Share This

Bank of America announced today that it would realize at least $3 billion in write downs related to losses in CDO holdings. Banks of America cited “severe dislocations” in the CDO market triggered by downgrades at the ratings agencies as the primary culprit of the losses. Losses could become much greater as well. Bank of America has exposure to $15 billion in CDOs and $12 billion of that exposures is backed by risky (and failing) subprime mortgage debt. Not good news for near-future profit for the banking leader.

From Market Watch:

Since the end of the third quarter, “the credit ratings of certain CDOs were downgraded which, among other things, helped to trigger severe dislocations in the CDO markets,” said Chief Financial Officer Joe Price.

“As a result, many market participants have announced large write-downs,” the executive said during an investment conference hosted by Merrill Lynch & Co.

Charlotte, N.C.-based Bank of America said it has more than $15 billion in net exposure to CDOs, most of which comes from agreements that bank has with CDOs to provide loans in stressed situations. The rest is from CDO securities that the bank retained after putting these so-called structured credit products together.

Nearly $12 billion of the bank’s CDO exposure is mainly supported by subprime mortgage securities, the bank also noted.

Another day another write down.  It just further erodes the concept that in the 3rd quarter banks were being overly aggressive to “purge the system” of bad debt and take all the pain at once.  They may have, in fact, acted to take conservative write downs, but as performance continues to worsen in mortgage default the products themselves continue to lose value, requiring further write downs.  This isn’t a one-and-done event.

Share This

Share This

On this Veterans Day I want to say a special thank you to the men and women that I know personally and those that I have never met for what they do for me, my family, and all of us. Please, if you see a person in uniform today (or any day for that matter) thank them for what they do for us. Whether you agree or disagree with the policies or current or past administrations; you have to agree that these men and women do so much for us.

I say thank you for my freedom to every one listed below and everyone who has or is currently serving our great country.

My Grandfathers:
Morgan E. Dawson, Army, South-Pacific theatre, World War II
Philip Brown, Army, European theatre, World War II (I miss you Bump.)

My Dad:
Paul F. Brown, Army reserves, Vietnam War (thankfully never sent)

My Friends:
Roger L. Grant, U.S. Navy, Honorably Discharged
Jeff Smith, U.S. Navy, active
Michael McPhail, U.S. Navy, active
Ryan Shann, U.S. Navy SEALs, active
Justin Michel, U.S. Army, active

Thanks to you all. God bless you and America.

Share This

Share This

Filed under: Bad news, Management

Even Homer nods and so, apparently, does Carl Icahn.

Losses on WCI Communities (NYSE: WCI) and Lear (NYSE: LEA) have given his activist hedge funds their first quarterly declines in their 3-year history, according to Bloomberg News. The funds are only down 1.5%, and are are still up nearly 20%, before fees, on the year. The funds manage $7.1 billion.

What’s interesting is that Icahn’s big losses came on companies that he sought to acquire and saw his bids rejected by management. But given that WCI rejected Icahn’s $22 a share bid and the stock currently trades around $4, the failure of Icahn’s overtures is probably a boon to shareholders.

A 1.5% decline is pretty minor setback — and I would expect Icahn to recover. While his career has been a huge success landing him in the upper echelons of the Forbes list, it’s also been marked by several high profile failures: Icahn’s blunders at the helm of TWA that led to its bankruptcy exposed his weakness as an operational manager.

But as an activist investor and bottom-fisher, Mr. Icahn is virtually unparalleled. His publicly traded company Icahn Enterprises (NYSE: IEP) continues to be an extremely strong performer, even as virtually everything else touching real estate has floundered.

Read | Permalink | Email this | Comments

Share This

Filed under: Products and services, Consumer experience, Competitive strategy, Starbucks (SBUX), McDonald’s (MCD)

More than three weeks after its earnings release, fast-food giant McDonald’s (NYSE: MCD) is presenting a financial update to analysts later today. International sales have remained strong for the Dow component and a value menu has kept consumers in McDonald’s seats even amid economic tightening. Two of the popular items on the low-price menu are a “snack wrap” for $1.49 and a sundae for $1.00. But commodities prices are on the rise, crimping food producers and restaurateurs.

To keep its growth pace fleet of foot in light of various challenges, McDonald’s is taking a liquid focus. In recent years, the company has gained ground on Starbucks (NASDAQ: SBUX), even winning a taste test with its drip coffee last year. Now the behemoth of the Big Mac is exploring the option of moving further into the gourmet-coffee arena, offering beverages such as iced mochas, caramel lattes, and other espresso-based drinks.

Current experimental pricing has these new drinks at $3.00 a pop, which is cheaper than Starbucks but on par with (or slightly higher than) a full-sized burger or sandwich. While consumers are used to emerging from Starbucks five dollars lighter, can they justify spending more on the empty calories of a sweetened coffee drink than the (basically empty, but still protein-filled) calories of a quarter pounder?

Beth Gaston Moon is an analyst at Schaeffer’s Investment Research.

Read | Permalink | Email this | Comments

Share This

Filed under: Analyst reports, Analyst upgrades and downgrades

MOST NOTEWORTHY: Cognos, MSC Industrial Direct, Fastenal Company, Royal Kpn and Koppers Holdings were today’s noteworthy downgrades:

• Cognos (NASDAQ: COGN) was downgraded to Neutral from Buy at Goldman and at Broadpoint following the acquisition by IBM (NYSE: IBM).
• Baird downgraded MSC Industrial Direct (NYSE: MSM) and Fastenal Company (NASDAQ: FAST) to Neutral from Outperform, as they expect the difficult U.S. manufacturing environment to constrain shares.
• Credit Suisse lowered its rating on Royal Kpn (NYSE: KPN) to Neutral from Outperform based on Getronics integration risk and slowing mobile earnings momentum.
• Koppers Holdings (NYSE: KOP) was downgraded to Buy from Aggressive Buy at KeyBanc based on valuation and concerns on 1H08 comps.

OTHER DOWNGRADES:

• Goldman removed Foster Wheeler (NASDAQ: FWLT) from its Conviction Buy List.
• Gabelli downgraded shares of Constellation Brands (NYSE: STZ) to Sell from Buy.
• Stifel lowered its rating on Amerigroup (NYSE: AGP) to Hold from Buy.

Permalink | Email this | Comments

Share This

Filed under: Merrill Lynch (MER), Goldman Sachs Group (GS), Initial public offerings, Housing

It seems that investors have been yelling “timber!” at Lumber Liquidators (NYSE: LL). Late last week, the company priced its IPO at $11, which was below its $12-$14 range. Since then, the stock has plunged to $9.25.

Lumber Liquidators is a specialty retailer focused on hardwood flooring, offering more than 25 premium brands at everyday low prices. There are 111 stores in 42 states. And, of course, there are other channels, such as a catalog and Internet site.

The formula has worked quite well. From 2004 to 2006, sales have gone from $171.8 million to $332.1 million. Operating income was $21.4 million and same-store sales continue to hum.

It’s impressive stuff - especially in light of the slowdown in real estate.

But can the company sustain it?

Well, investors don’t think so. If the economy slows down, it seems inevitable that consumers will defer mega projects like flooring.

The underwriters on the deal include Goldman Sachs (NYSE: GS) and Merrill Lynch (NYSE: MER).

You can find the prospectus at the SEC website. Also, if you want to check out more information recent IPO activity, visit DealProfiles.com.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Permalink | Email this | Comments

Share This

Filed under: Analyst reports, Analyst initiations

MOST NOTEWORTHY: The engineering and construction sector, Sempra Energy, Cheniere Energy and Hoku Scientific were today’s noteworthy initiations:

• BMO Capital initiated Chicago Bridge & Iron Company (NYSE: CBI), URS Corporation (NYSE: URS) and Granite Construction (NYSE: GVA) with Outperform ratings.
• Banc of America believes Sempra Energy’s (NYSE: SRE) long-term growth projects can drive EPS CAGR of 7-8% through 2011 and they find the stock compelling despite the recent rally. The firm started shares off with a Buy rating and $72 target.
• Banc of America also initiated Cheniere Energy (AMEX: LNG) with a Buy rating and $50 target, as they expect the company will be the low-cost service provider in the North American liquefied natural gas market with ideal locations along the Gulf Coast.
• Broadpoint resumed coverage of Hoku Scientific (NASDAQ: HOKU) with a Buy rating, and views the company as a speculative play with a high risk/reward.

OTHER INITIATIONS:

• ThinkEquity started shares of CNet Networks (NASDAQ: CNET) with a Source of Funds rating and $7 target.
• KeyBanc initiated CommVault Systems (NASDAQ: CVLT) with a Buy rating and $23 target and Sybase (NYSE: SY) with a Hold rating.

Permalink | Email this | Comments

Share This

Filed under: Bad news, Exxon Mobil (XOM), Middle East, Chevron Corp (CVX), ConocoPhillips (COP), BP p.l.c. ADS (BP), Commodities, Oil

A day after word spread through the oil markets suggesting that Saudi Arabia was set to press for a 500,000-barrel OPEC oil output increase, Saudi Arabia’s oil minister said Tuesday that OPEC members will not announce an increase in oil production at an oil producers summit this weekend.

“There will be absolutely no discussion” of a production increase when the meeting convenes in Riyadh, the Saudi capital, Saudi Oil Minister Ali Naimi said, the Financial Times reported.

The markets had factored-in an OPEC production hike, a fact that helped oil prices pull-back more than $4 from recent highs. Oil continued to drift lower Tuesday, falling $1.00 to $93.62 in morning trading.

Continue reading No small favors: Saudis say no oil production hike ahead

Read | Permalink | Email this | Comments

Share This

Filed under: Analyst reports, Analyst upgrades and downgrades, Yahoo! (YHOO), Alcatel-LucentADS (ALU), Yamana Gold (AUY), Tyson Foods’A’ (TSN), POSCO (PKX)

MOST NOTEWORTHY: Tyson Foods, Unilever, Brooks Automation, Akzo Nobel and Yahoo! were today’s noteworthy upgrades:

• Deutsche Bank upgraded shares of Tyson Foods (NYSE: TSN) to Buy from Hold on valuation and the potential for protein complex improvement.
• Goldman upgraded shares of Unilever (NYSE: UN) to Neutral from Sell to reflect the company’s diversified product range and growing exposure to developing and emerging markets.
• Bear Stearns raised its rating on Brooks Automation (NASDAQ: BRKS) to Outperform from Peer Perform. The firm cited the company’s compelling valuation and growth drivers.
• Akzo Nobel (OTC: AKZOY) was upgraded to Buy from Hold at SNS Securities, as they see absolute total return greater than 20%.
• CIBC upgraded Yahoo! (NASDAQ: YHOO) to Sector Outperformer from Sector Performer on valuation following the recent pullback and their analysis of Yahoo’s non-operating assets. They believe Yahoo’s stake in Alibaba Group is now worth about $4/share and raised their target to $31 from $28.

OTHER UPGRADES:

• First Analysis upgraded Spss Inc (NASDAQ: SPSS) to Overweight from Equal Weight.
• UBS upgraded Yamana Gold (NYSE: AUY) to Buy from Neutral.
• WestLB upgraded Alcatel-Lucent (NYSE: ALU) to Hold from Reduce.
• HSBC upgraded Posco (NYSE: PKX) to Overweight from Neutral.

Permalink | Email this | Comments

Share This