The mortgage industry changed in the last year. Most companies have found themselves under significant financial pressure. Some mortgage firms have disappeared. Others have grown and expanded their market share by acquiring struggling competitors.

The number of mortgage loan originations has also been on the rise, allowing lenders to add to the growth from mergers and acquisitions. First quarter 2009 production among American mortgage lenders increased by 73 percent over the fourth quarter 2008, based on earnings data analyzed by MortgageDaily.com. As a result, there have been some changes to the lists of top originators and top servicers helping consumers achieve the American dream of homeownership.

Wells Fargo is the nation’s biggest lender. First-quarter originations more than doubled from the fourth quarter level. Volume, including Wachovia Corp. was up 22 percent over the same quarter in 2008 – prior t the merger of the two banks. Well Fargo is the second largest servicer in the nation. Despite this, Market Intelligence Center reports that Wells Fargo shares are trading at or near a 52-week low, however, the recent offering of 341 million share of common Wells Fargo raised more than $8.6 billion.

“We’re known and admired for our conservative financial position, and a disciplined acquisition strategy that will not change,” said John Stumph, Wells Fargo President and CEO in October 2008. “In that regard, we look forward with great anticipation and confidence to completing our merger with Wachovia Corporation by year end. The union of of our two companies with provide compelling value for all our stakeholders, including Wachovia’s team members, combining the industry’s best in service and best in sales, an unbeatable combination that will create the nation’s premier coast-to-coast financial services company.”

More recently, Ed Terpening wrote on the Wells Fargo – Wachovia Blog (May 8, 2009) that “We knew from the start there’d be an awkward period between the time the merger started and the time you saw results. [….] As John said, we’re taking 2-3 years to complete this transition because we want to do what’s right for you, our customers. No sense in rushing this and making a mess in the process.”

The merger is apparently already yielding positive results, because the combined company is leading the nation in mortgage originations.

Another acquisition that has paid off in growth has been MetLife’s acquisition of most of First Horizon National Corp.’s mortgage operations. MetLife business more than doubled from the fourth quarter, landing the company at Number 8 in originations. First Horizon’s mortgage operations weren’t MetLife’s only acquisition during 2008. MetLife also acquired EverBank Reverse Mortgage LLC and selected assets from First Tennessee Bank in 2008.

Bank of America Corp. (BoA) topped the list of the biggest servicers. The company also saw originations rise by 79 percent, making it the second biggest originator in the country. BoA’s acquisition of Countrywide Financial Corp. last year has not paid off with originations from the most recent quarter down 20 percent from combined production a year ago.

JPMorgan Chase & Co., the third biggest originator and servicer, also declined despite improving activity by 30 percent over the fourth quarter. Fundings were 44 percent below the level JPMorgan and Washington Mutual Bank reported in the first quarter of 2008 before their merger.

The 10 biggest originators during the first quarter 2009 were:

1. Wells Fargo
2. Bank of America
3. JPMorgan Chase
4. Citigroup Inc.
5. SunTrust Bank Inc.
6. U.S. Bank Home Mortgage
7. Residential Capital LLC
8. MetLife
9. Flagstar Bank
10. PHH Mortgage

With a total combined portfolio exceeding $140 billion, the 10 biggest servicers as of March 31, 2009 were:

1. Bank of America
2. Wells Fargo
3. JPMorgan
4. Citigroup
5. ResCap
6. PNC
7. U.S. Bank
8. SunTrust Bank Inc.
9. OneWest Bank
10. PHH

JPMorgan Chase, MetLife and US Bancorp were among the banks recently identified by regulators as not needing any additional capital. Only MetLife had not previously received funds from the Troubled Asset Relief Program, or TARP, DailyFinance reports.

Source [blownmortgage]

Share This

Via [bloggingstocks]

Share This

Four states have felt the joy of housing appreciation and the agony of the housing bust in a very deep and extreme way.  Without a doubt, this economic crisis is touching every corner of the global economy but four states have seen the multifaceted punishment of this housing and credit bust.  Those states are California, […]

Four states have felt the joy of housing appreciation and the agony of the housing bust in a very deep and extreme way.  Without a doubt, this economic crisis is touching every corner of the global economy but four states have seen the multifaceted punishment of this housing and credit bust.  Those states are California, Florida, Nevada, and Arizona and these past days I was able to see first hand three of the states.  Spending time in these few states and contributing my own economic stimulus to these economies, I realize that the housing downturn still has further to go.  These states are ground zero for the coming Alt-A and pay Option ARM wave that will be crashing down on us later in the year.

Driving through these states and the vast subdivisions hugging the desert you can quickly put a face to the economic devastation.  How many of these homes sit empty?  Will these homes ever have occupants?  How much money has been lost in this pursuit of endless housing wealth?  You also witness the countless commercial real estate developments that encircle these areas with your typical chain fast food restaurants and your mega shopping center.  Some don’t realize that these commercial real estate developments are usually brought out 12 to 18 months after the construction of the new subdivisions.  That is, the commercial real estate bust is the next big thing to watch since these stores were developed to service a population that isn’t moving in.

Let us first take a quick look at the numbers:

These four states make up 56% of all U.S. foreclosure filings.  And this trend does not show any signs of abating given that these states also hold a disproportionate amount of Alt-A loans which are tied to some of the more toxic recast type mortgages that I have discussed.  So how many Alt-A loans reside in these states?  Let us break down those numbers further:

Again, what you will find is that these four states hold a disproportionately high amount of Alt-A loans.  To be precise, these four states hold 46 percent of all active Alt-A mortgages.  Now why would this be so problematic?  A large portion of these loans have yet to face a serious recast.  Forget about the resets that are tied to LIBOR for example, with rates at historically low levels.  This isn’t the issue.  The problem with the recast is the massive jump in payments that can easily double the monthly payment as I have discussed in detail in a previous article.  The major concern is these four states have seen there large metropolitan areas face some of the deepest year over year price drops in history.  Take a look at the Case-Shiller price drops for the largest MSA data series for each state:

Florida and California have multiple MSA data points in the Case-Shiller monthly reports but I used Miami and Los Angeles as samples for the two states.  For Nevada and Arizona I used the Las Vegas and Phoenix MSA data which is the largest for each state.  And herein lies the coming tsunami.  The L.A. MSA is doing the best out of the four and that is now down 40.4% from the peak reached in September of 2006.  Arizona with Phoenix is being slammed with a 50.8% drop in housing prices.  In fact, the 111 mark assigned to this MSA now puts us back in 2001 price territory.  These markets are flooded with inventory.  So when the recasts hit with those Alt-A mortgages they will be hitting a market that is extremely depressed.  Keep in mind that many of these Alt-A products have negative amortization which allowed the principal balance to actually increase.  This has created a time bomb with these mortgages.  They will be going off in the most depressed markets possible.  The endgame is a flood of foreclosures in markets that already have a flood of foreclosures.

Someone sent me over this must watch video called Lost Vegas from Vanguard:

The video highlights the troubles faced by Las Vegas.  In the episode, you will see a story that is all too common where a would-be investor bought a property and “forgot” to tell the renters that he was being foreclosed on.  You will also see projects stalled since growth has halted given the current economy.  We also see a former mortgage company worker who is now an exotic dancer and calls it a “big step up” from her previous job.  It is definitely worth watching.

These states are facing the double whammy of the debt bubble.  A fall from grace is always painful.  States that did not see major housing bubbles are still having difficulties but these four states went from perma-growth and never ending housing appreciation to an absolute bust.

It would appear that financial prudence is now going mainstream and I saw this funny clip from a show being aired on ABC this Friday called Un-Broke.  In this one clip, Seth Green highlights a Real Home of Genius here in California:

You have to watch the clip, it is hilarious.  But aside from the humor, I couldn’t believe that I was getting better financial advice in two minutes from Seth Green rather than on CNBC, a supposedly self labeled financial network.  In this little clip, we are told about living within your means, driving a paid off car, and not buying a McMansion.  Living prudently has now gone mainstream in a big way.

Yet going back to our four states, living within your means is something that has been foreign for over a decade.  The massive McMansions that I saw in three states is a sad reminder to the perma-debt growth model.  In this model, you couldn’t have enough fast food chains or auto dealers and forget about the mega department stores.  If we were to study this as an ecological environment, you would think that humans as a species only had one purpose in life.  That purpose was to eat junk food, buy gigantic cars, and upgrade every countertop in the globe to granite.

Yet there is a finite number of what we can consume and we hit it.  The empty subdivisions are a testament to this over building and over consuming era.  And that is a large reason I do not see a second half recovery.  Because to recover, we have to assume we are going back to the ways of old.  Do you see that happening?  Do you see us once again going back to buying massive gas guzzling highway tanks and buying 3,000 square foot McManions again in a mega way?  I don’t and that was a large contributor to our growth.  Let us not even talk about the ancillary crony banking system and lenders that fed on this bubble for their life.  The two biggest purchase items for Americans are homes and cars.  How are those two industries doing?

So looking at these four states, I’m not sure I see a second half recovery.  We are still heading directly into the Alt-A and pay Option ARM tsunami and these four states are hurting in a big way.  Need we examine the California budget boondoggle?  If these four states are any indication, we won’t be out of this mess in 6 months.  The clock starts next week.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

Post from: Dr. Housing Bubble Blog

Alt-A and Pay Options ARMs: Four States make up 46% of Alt-A loans. Examining California, Florida, Nevada, and Arizona. From Bubble Housing Glory to Housing Bust Toxic Mortgage Pain.

Share This

Via [DrHousingBubble]

Share This

Filed under: Stocks to Buy

Few companies have as even-balanced revenue streams in a business line as J.M. Smucker does: it’s an operational strength that’s worth consideration by investors who can tolerate moderate risk.

In general, analysts like Smucker’s purchase of Folgers’ coffee business, with expected, annual, $100 million synergy and economy of scale benefits in FY2010, following one-time charges of $100-125 million.

Continue reading J.M. Smucker spreads around its profits

J.M. Smucker spreads around its profits originally appeared on BloggingStocks on Fri, 29 May 2009 17:20:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

The mortgage industry changed in the last year. Most companies have found themselves under significant financial pressure. Some mortgage firms have disappeared. Others have grown and expanded their market share by acquiring struggling competitors.

The number of mortgage loan originations has also been on the rise, allowing lenders to add to the growth from mergers and acquisitions. First quarter 2009 production among American mortgage lenders increased by 73 percent over the fourth quarter 2008, based on earnings data analyzed by MortgageDaily.com. As a result, there have been some changes to the lists of top originators and top servicers helping consumers achieve the American dream of homeownership.

Wells Fargo is the nation’s biggest lender. First-quarter originations more than doubled from the fourth quarter level. Volume, including Wachovia Corp. was up 22 percent over the same quarter in 2008 – prior t the merger of the two banks. Well Fargo is the second largest servicer in the nation. Despite this, Market Intelligence Center reports that Wells Fargo shares are trading at or near a 52-week low, however, the recent offering of 341 million share of common Wells Fargo raised more than $8.6 billion.

“We’re known and admired for our conservative financial position, and a disciplined acquisition strategy that will not change,” said John Stumph, Wells Fargo President and CEO in October 2008. “In that regard, we look forward with great anticipation and confidence to completing our merger with Wachovia Corporation by year end. The union of of our two companies with provide compelling value for all our stakeholders, including Wachovia’s team members, combining the industry’s best in service and best in sales, an unbeatable combination that will create the nation’s premier coast-to-coast financial services company.”

More recently, Ed Terpening wrote on the Wells Fargo – Wachovia Blog (May 8, 2009) that “We knew from the start there’d be an awkward period between the time the merger started and the time you saw results. [….] As John said, we’re taking 2-3 years to complete this transition because we want to do what’s right for you, our customers. No sense in rushing this and making a mess in the process.”

The merger is apparently already yielding positive results, because the combined company is leading the nation in mortgage originations.

Another acquisition that has paid off in growth has been MetLife’s acquisition of most of First Horizon National Corp.’s mortgage operations. MetLife business more than doubled from the fourth quarter, landing the company at Number 8 in originations. First Horizon’s mortgage operations weren’t MetLife’s only acquisition during 2008. MetLife also acquired EverBank Reverse Mortgage LLC and selected assets from First Tennessee Bank in 2008.

Bank of America Corp. (BoA) topped the list of the biggest servicers. The company also saw originations rise by 79 percent, making it the second biggest originator in the country. BoA’s acquisition of Countrywide Financial Corp. last year has not paid off with originations from the most recent quarter down 20 percent from combined production a year ago.

JPMorgan Chase & Co., the third biggest originator and servicer, also declined despite improving activity by 30 percent over the fourth quarter. Fundings were 44 percent below the level JPMorgan and Washington Mutual Bank reported in the first quarter of 2008 before their merger.

The 10 biggest originators during the first quarter 2009 were:

1. Wells Fargo
2. Bank of America
3. JPMorgan Chase
4. Citigroup Inc.
5. SunTrust Bank Inc.
6. U.S. Bank Home Mortgage
7. Residential Capital LLC
8. MetLife
9. Flagstar Bank
10. PHH Mortgage

With a total combined portfolio exceeding $140 billion, the 10 biggest servicers as of March 31, 2009 were:

1. Bank of America
2. Wells Fargo
3. JPMorgan
4. Citigroup
5. ResCap
6. PNC
7. U.S. Bank
8. SunTrust Bank Inc.
9. OneWest Bank
10. PHH

JPMorgan Chase, MetLife and US Bancorp were among the banks recently identified by regulators as not needing any additional capital. Only MetLife had not previously received funds from the Troubled Asset Relief Program, or TARP, DailyFinance reports.

Source [blownmortgage]

Share This

Filed under: Microsoft (MSFT), Apple Inc (AAPL), Sony Corp ADR (SNE), Technology, Nintendo (NTDOY)

The news flow is abuzz this week with stats about Microsoft Corporation (NASDAQ: MSFT) and its Xbox 360 console. According to reports, the company has sold 30 million units of the gaming hardware around the world. Nintendo Co., Ltd. (OTC: NTDOY) is still in first place with 50 million Wii consoles sold. And Sony Corporation (NYSE: SNE)? Well, the PlayStation 3 is decidedly third with roughly 22 million systems moved through retail channels. And don’t give me that Xbox-360-had-a-year-over-Sony excuse. Doesn’t matter. Microsoft has so far played it well.

But I’d like to see Microsoft do even better when it comes to the Xbox 360. I think, out of all the investments Microsoft makes that are outside of the core operating system asset, the Xbox 360 is the one with the most potential promise.

Continue reading Microsoft does well with Xbox 360, but needs to try harder

Microsoft does well with Xbox 360, but needs to try harder originally appeared on BloggingStocks on Fri, 29 May 2009 18:40:00 EST. Please see our terms for use of feeds.

Read | Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Microsoft (MSFT), Apple Inc (AAPL), Sony Corp ADR (SNE), Technology, Nintendo (NTDOY)

The news flow is abuzz this week with stats about Microsoft Corporation (NASDAQ: MSFT) and its Xbox 360 console. According to reports, the company has sold 30 million units of the gaming hardware around the world. Nintendo Co., Ltd. (OTC: NTDOY) is still in first place with 50 million Wii consoles sold. And Sony Corporation (NYSE: SNE)? Well, the PlayStation 3 is decidedly third with roughly 22 million systems moved through retail channels. And don’t give me that Xbox-360-had-a-year-over-Sony excuse. Doesn’t matter. Microsoft has so far played it well.

But I’d like to see Microsoft do even better when it comes to the Xbox 360. I think, out of all the investments Microsoft makes that are outside of the core operating system asset, the Xbox 360 is the one with the most potential promise.

Continue reading Microsoft does well with Xbox 360, but needs to try harder

Microsoft does well with Xbox 360, but needs to try harder originally appeared on BloggingStocks on Fri, 29 May 2009 18:40:00 EST. Please see our terms for use of feeds.

Read | Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Chubb Corp (CB), Stocks to Buy

The Dow’s sell-off from 14,000 and the accompanying investor reluctance to deploy capital has created bargains, and Chubb is one.

In general, analysts expect Chubb’s (NYSE: CB) financial strength and resultant market share gains from weaker insurers exiting business lines to offset a likely incremental decline in FY2009 revenue.

Continue reading Chubb is undervalued

Chubb is undervalued originally appeared on BloggingStocks on Fri, 29 May 2009 15:00:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

One of the many things I have realized during this crisis is people will flat out make things up when it comes to housing.  I’m not talking about little white lies like “sure buddy, your golf swing isn’t so bad” but Watergate style lies like “we don’t have any Alt-A or Pay Option ARMs anymore.”  […]

One of the many things I have realized during this crisis is people will flat out make things up when it comes to housing.  I’m not talking about little white lies like “sure buddy, your golf swing isn’t so bad” but Watergate style lies like “we don’t have any Alt-A or Pay Option ARMs anymore.”  I’m not sure where people are pulling their data but from the multiple sources I’m looking at, we have roughly $450 to $500 billion in Alt-A mortgages floating in our market.  And let us for argument sake, set aside those toxic mortgages.  We have a new problem hitting the market.  Prime mortgages are now imploding on a massive scale.  After all, with no job and no income it is hard to make the house payment no matter how conventional and Leave It to Beaver your mortgage looks like.

The Mortgage Bankers Association came out today stating that 12.07 percent of all mortgages were delinquent or in foreclosure.  This is the highest on record going back to 1972.  What is even more troubling is prime fixed-rate mortgages to the most creditworthy borrowers made up a substantial jump of the new foreclosures coming in at 29 percent.  One out of every eight Americans is now either late on a mortgage payment or in the foreclosure process.  That statistic is nuts.  Here is an observation from previous economic downturns.  This economic recession was largely driven by a global housing bubble fueled by easy access to the Wall Street casino.  Toxic mortgages which became a larger part of the overall market have pummeled housing prices into the ground.  This is where we are at (you are here in your mall map).  Yet in this stage of the recession, we are now seeing the double whammy of housing prices falling for more historical reasons like job losses and this is spilling over into the prime mortgage market.  That is not a good sign because the prime market is gigantic:

The above data is from the OCC and OTS Mortgage Metrics Report.  As you can see for yourself, 6.6 million in Alt-A and subprime mortgages is clearly a sign that there is still many toxic mortgages in the market.  This above data is for the combined national bank and thrift servicing portfolio and holds nearly $6.1 trillion in mortgages.  The largest part of this portfolio of course is the prime segment making up 66% of all loans.  So the rapid rise in prime defaults is extremely concerning.  Look at it this way.  Let us assume the remaining Alt-A and subprime loans implode at 25%.  That gives us 1.65 million more defaults and of course this is absurdly conservative on these toxic banana republic loans.  But what if we reach a 10 percent default rate with prime mortgages?  That will give us 2.2 million more defaults.  That is why the cracks in the prime market are going to cause deeper pain:

The rapid change of pace is also showing that many Americans are having a tough time making their home payments.  In fact, the current rate is blasting past even data we had from the fourth quarter of 2008:

I know many of you astute readers are saying, “hey DhB, don’t we have over $10 trillion in home mortgages in the U.S.?  Why only the $6.1 trillion figure above?”  Good question.  You need to remember another portion of the mortgage market is with uncle Fannie and Freddie.  The current aggregate amount of mortgage loans in the United States comes in at $10.4 trillion.  The large portion of that is prime (which you can take that for what it is worth given we nationalized, whoops, I mean took into conservatorship the two GSEs).  And as we all know with the optimistic stress test results and the U.S. Treasury PPIP focused largely on happy day scenarios - they ran weak historical default rates on prime mortgages.  How many times do we need to say that this isn’t a historical recession?  This is a housing bubble led recession.  That is unique.  We have never had an economy pumped up by housing and collapsing because of housing on this grand of a scale.  Housing either gained or suffered as an after effect of the economy.  This time it became the economy.  And we clearly see this with the growth in debt versus stagnant wages:

Every single recession since the 1950s saw household debt on a year over year basis decline during and after the recession.  This makes total common sense because a recession is a contraction in the economy meaning businesses are pulling back.  Not with the 2001 recession.  Alan Greenspan (Mr. $100,000 speaking fee) decided to lower the Fed funds rate to 1 percent and flooded the market with easy credit.  He also touted the virtues of adjustable rate mortgages fully knowing that the market was going the way of the Wild West.  He knew that by the time he left his post, the market would implode under another Fed chief as it did and is with Ben Bernanke.  The problem is we have reached a point of epic debt and there is no other bubble to be found.  We keep giving money to banks and they keep hoarding it:

While pay Option ARMs and Alt-A loans implode left and right leaving American homeowners with no buffer, banks have a tidy buffer of nearly $1 trillion in excess reserves and every other taxpayer funded bailout you can imagine.  Many of you know that I have never advocated for the government stepping in to help homeowners in trouble especially those with toxic mortgages.  Before shedding  a tear, in the U.S. we have a fantastic rental market and there is literally nothing wrong with renting.  So the worst that happens is someone doesn’t own a home but has the utility of renting a home.  Yet my biggest issue with the current environment is those people being kicked out into the street are also paying for the taxpayer bailouts of those on Wall Street.  What is worse, what about the prudent financial class in the U.S.?  What about all those tens of millions of Americans that lived within their means, didn’t lease a Mercedes, and buy a McMansion with a toxic mortgage?  This group suffered during the bubble mania because they were priced out since they didn’t want to walk the mortgage plank but are suffering again because they are now being asked (forced) to bailout the same crony banking system that caused this mess in the first place.

There is nothing more obvious that this last decade being a Mirage Decade.  This is clearly seen in looking at the homeownership rate in the epic bubble state of California:

From 1984 to 1999, the homeownership rate in California never cracked the 56% mark.  At the peak in 2006 we hit 60.2 percent.  Now, we are back to 58.3 percent which puts us back to 2001 levels.  And with the 135,000 Notice of Defaults hitting in Q1 of 2009, we are definitely heading back to 1990s levels.  So we have lost a decade already in terms of homeownership.  There is no stopping this trend in the near term especially with the rise of prime mortgages going bad.  Since we are in the eye of the hurricane and markets abhor a vacuum, many people have a necessity to rush out and buy something.  That is why you are seeing some strong activity in home sales.  But keep in mind that many of these home sales are distressed with 50+ percent in Southern California being foreclosure resales.  I would estimate that a large portion of these buyers are from the prudent class that are simply throwing up their arms in the air and saying, “up, down, up, screw it!  I want to own a place for my family so I’m diving in.”  I have no problem with that.  People can do what they want with their money.  But you are not buying at the bottom.  You are simply buying because prices have dropped at an astonishing rate.  Yet we need to remember that prices shot up for 10 stinking years!  We are in year 2 of prices falling.  Do you really think this is the bottom?  Unemployment is at 11% in the state.  Maybe at the lower end is bottoming but I doubt someone with a $100,000 sitting in the bank wants to buy some of those lower end bargains.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

Post from: Dr. Housing Bubble Blog

First Ever Global Housing Led Recession: One out of Eight American Mortgage Holders either Late or in Foreclosure on their Mortgage: 66 Percent of Mortgages Prime but what does that mean if Prime is now Defaulting at High Rates?

Share This

Via [DrHousingBubble]

Share This

Filed under: Bank of America (BAC), Morgan Stanley (MS), Wells Fargo (WFC), Comfort Zone Investing

IPO. Initial public offering. Or as they used to be known among the Wall Street cynics: “It’s probably overpriced.” Not any more. Nothing that is too expensive will fly these days. In fact, if it’s not a bargain, don’t bother to talk with the bankers. Investors want history, especially ones with increasing sales and profits.

The year 2009 has already produced more IPOs than all of 2008. Sound impressive? Here are the numbers: this year there have been seven. So there aren’t a lot of companies going public right now, but still, there are some. And most of them are doing well.

Continue reading Comfort Zone Investing: Remember IPOs? They’re back … sorta

Comfort Zone Investing: Remember IPOs? They’re back … sorta originally appeared on BloggingStocks on Sat, 30 May 2009 16:35:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This