Bank are starting disclose their losses associated with mortgage meltdown. The Palm Beach Post reports:
“Bank of America Corp., the nation's second-largest bank, said Thursday its profit fell 32 percent in the third quarter as trading losses and write-downs on a wide variety of loans offset solid revenue growth in most businesses.”
“Investment banking revenue fell 44 percent from a year ago as sales and trading-revenue declined. The bank wrote down $247 million for leveraged loans and other financing commitments, and suffered a $607 million trading loss.”
“It also had a $527 million loss related to structured products, including asset- and residential mortgage-backed securities and collateralized debt obligations.”
“‘Bank of America's trading losses in third quarter were significant and also worse than peers while marks taken on leverage loans and mortgage assets seem lower than others,’ wrote Goldman Sachs analyst Lori B. Appelbaum in a research note. ‘Lower marks potentially reflect Bank of America's lower risk exposure in these areas.’”
Capital One also saw large losses associated with the mortgage mess:
:Capital One Financial Corp. posted a third-quarter net loss Thursday, hurt by charges from shutting down its GreenPoint Mortgage business.”
“The McLean, Va.-based company, a credit card issuer that continues to expand into retail banking, said its third-quarter net loss totaled $81.6 million, or 21 cents per share, in the July-September period, compared with a profit of $587.8 million, or $1.89 per share, in the year-ago quarter.”
“Excluding the company's $898 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted third-quarter earnings of $2.09 per share.”
“As the nation's housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclose because they haven't been able to sell their homes or end up owing more than their home is worth.”
“As a result, it has become more difficult for lenders like GreenPoint to sell the mortgages they originate to investors.”
SunTrust wasn’t spared:
“SunTrust Banks Inc. said Thursday its profit fell 23 percent during the third quarter, as the Atlanta-based banking giant wrestled with rising mortgage-related losses and ongoing costs of work-force reductions and streamlining.”
“‘We are not immune to the deterioration in the housing market and related turmoil in the capital markets, and change in the credit cycle,’ James Wells, SunTrust's president and chief executive officer, said in a written statement.”
“SunTrust, already in the middle of a companywide downsizing and real estate sell-off, said it is considering even more restructuring in the months ahead.”
First Horizon also announced losses:
“First Horizon National Corp. posted a loss of $14.2 million in the third quarter as the mortgage banking business continued to be a drag on profits.”
“The company's mortgage banking division had a loss of $45.8 million for the quarter, hurt primarily by what the company was able to resell the mortgages for in the jittery secondary market.”
WaMu wasn’t left out:
“Washington Mutual Inc.'s third-quarter profit shrank 72 percent as sagging home prices made it harder for borrowers to pay their bills and hurt the value of the bank's portfolio of mortgage loans.”
“The third-biggest home lender on Wednesday reported quarterly profit of $210 million, or 23 cents per share, compared with profit of $748 million, or 77 cents per share, a year earlier.”
“Washington Mutual socked away $967 million in the third quarter to prepare for borrowers defaulting on their debt, mostly mortgages and credit card loans. The reserve is nearly six times bigger than the provision in the same quarter last year.”
“‘I have never seen housing credit conditions change so significantly over such a short period of time, nor can I remember a period when there was less clarity about near-term housing and credit trends,’ Chief Financial Officer Tom Casey told financial analysts.”
Meanwhile, local homebuilder, Levitt & Sons, seem to be clutching its last straws:
“Levitt & Sons, the home builder that invented suburbia when it developed Levittown, Long Island, 60 years ago, is in deep trouble.”
“The Fort Lauderdale-based company has stopped construction of homes in all its Florida subdivisions, including the Cascades at Sarasota, as it attempts to renegotiate its massive debt.”
“‘Levitt & Sons is currently in discussions with lenders and has told its subcontractors that at least for now they should stop work,’ said Michael Freitag, a spokesman for the home builder's parent, Levitt Corp.”
“Numerous big builders with a heavy Florida presence -- including Miami-based Lennar Corp., The St. Joe Co. in Jacksonville and WCI Communities in Bonita Springs -- have announced write-offs, red ink, layoffs, or a combination of the three.”
“‘Every builder is taking hits,’ said Jack McCabe, a Deerfield Beach consultant who advises developers and investors on Florida real estate trends. ‘It doesn't matter how big they are, how good they are. Everybody is taking hits, some worse that others.’”
Dade-County-based Watsco announced a loss:
“Shares in Watsco (WSO) fell 94 cents to $40.70 Thursday after the Coconut Grove-based distributor of heating and cooling equipment reported worse than expected profits.”
“Watsco reported that third-quarter earnings fell 13 percent, due in part to a slowdown in home building.”
“Watsco also reduced its fiscal year 2007 outlook on Thursday, as the housing slowdown and pricing pressures persist.”
With all this terrible earnings news, it’s not surprising that jobless claims are climbing:
“The number of newly laid off workers filing claims for unemployment benefits shot up by the largest amount since early February, a far bigger increase than had been expected.”
“The Labor Department reported Thursday that applications for jobless benefits hit 337,000 last week, an increase of 28,000 from the previous week. That was the biggest one-week surge since jobless claims jumped 42,000 the week of Feb. 10.”
“The increase was four times larger than the gain of 6,000 that economists had been expecting and could be a sign that the labor market is starting to weaken under the impact of a severe downturn in housing and the credit crisis that jolted financial markets in August.”
“Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.”
“Construction of new homes and apartments plunged to a 14-year low in September while the National Association of Home Builders' survey of builder confidence plunged in early October to the lowest level ever recorded in the 22-year history of the survey.”
Finally, the Palm Beach Post is reporting that local rental prices are stagnant:
“Palm Beach County and the Treasure Coast - two of the hottest real estate markets in the nation during the housing boom - kept relatively high rental rates steady in the third quarter of this year, according to a RealFacts study of the nation's metropolitan areas released today.”
“The average rent for an apartment in Palm Beach County from July through September was $1,146, relatively unchanged from the same period a year ago, when it was $1,141, RealFacts said. The study averaged rents for all unit sizes for those figures. It also tracked rents by apartment size.”
“Declining occupancy is a trend that confuses Bates, given that other data-analysis companies have documented a tsunami of foreclosures in what has come to be known as the ‘mortgage meltdown.’”
“‘We cover nine of the 10 markets in those foreclosure reports,’ Bates said, ‘and we looked for an increase in rental occupancies after all those people lost their homes. We didn't find it.’”
“Then he realized that credit reports took a nosedive after foreclosure.”
“‘When they're foreclosed on, their FICO (credit) scores are screwed, and landlords take that seriously,’ Bates said, referring to investment-grade units. ‘They can't rent.’”
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11 comments:
Some commentary on the final article on rental prices in PBC:
First, there is a major problem with these rental/occupancy studies. The biggest problem is they tend to only survey large rental communities. They do not survey private rentals.
Anyone who has paid attention to the local rental market knows that, while apartment complexes have maintained high rental prices, the cost of renting from private owners has plunged.
All anyone needs to do is to look at Craigslist to see how many amazing deal there are out there from private landlord. And, the market is absolutely flooded -- like nothing I have seen before.
At the same time, the comments by Bates are just plain silly. Anyone who follows the market knows that the vast majority of foreclosures to date are NOT at owner-occupied homes. The vast majority are with f@cked flippers and speculators that are simply walking away. These people do not need to seek out replacement housing.
Furthermore, the few owner-occupied folks that are losing their homes are simply turning to private landlords that usually do not check FICO scores.
I have also talked to some folks I know that work in rental property management. They're telling me that they are relaxing credit requirements for prospective tenants. They're especially ignorning foreclosures on credit reports because they've had good experiences with former homeowners that lost their homes.
Has anyone else observed the same in the local rental market?
I like to laugh at the rental properties that are MLS listed.
Currently in Lauderhill there is an 1,100 sq ft 3/2/1 listed for $1,800/mth
Yes let me pay your exorbitant mortgage for you. PLEASE!!!
MLS: M1182182
Bought for: $292,900
Purchased with an ARM!!!
FYI
I just logged into www.realtor.com to find the MLS number for reference and realtor.com allows you to save searches, which also tells you how many "new" listings there are in the last 7 days.
For those interested: My Search criteria is 3/2/1 in a specific 5 mile radius (from 33331) for my rentals, and 3/2/2 from a 5 mile radius of 33331 for "sale" properties.
There are ONE HUNDRED SIXTY EIGHT (168) new rental properties listed in the last 7 days. When I checked it Monday there were only something like 60!!!!!
I have a same search set up for properties that are for sale. ONE HUNDRED TWO (102) new properties!!!! Holy crap SOMETHING just blew up!!
I think I am also seeing the begins of a true market meltdown. Here is a f@cked Buyer short sale:
4333 NW 88th TE
Coral Springs, 33065
bought 8/25/2006 509,000
MLS F877753 339,900
This is a pre-forclosure.
-HappyRenting.
Give it till next summer 2008.
Right now the banks are acting like homeowners in Lighthouse Point, hovering in the $800's thinking they are $4-500k lower than they lent, BUT are NOT looking at the recent sold comps (non-repo's) which suggest they should be in the $600's if they want a quick sale.
They need to take a beating and watch non repo homeowners lead the charge into the $700's for a while.
Also by then the banks will have an overwhelming inventory of overpriced crap on their hands.
It's heating up slowly but steadily.
140,
I used to think Summer of 2008 as well, but now I am starting to think it might take a little longer to hit bottom.
A few things are coming into play...
First, it seems like the foreclosure process is taking much longer than it has in the past. Traditionally a home could go from first Notice of Default to hitting the MLS in about 120 days. Lately, I've been seeing time closer to 180 days, but the trend seems to be getting worse. By March of next year, I imagine that the time will be closer to 240 days.
Why?
I think it's mostly because everyone, lawyers, banks, the courts, are completely overwhelmed by the flood of defaults. They simply can’t keep up. Also, securitization is really slowing things down. A few years ago, when banks were still holding the mortgages, the banks wanted to clear the bad debt off their balance sheets as soon as possible. Now that most of the bad loans are either held by non-public entities or are buried deep in off-balance sheet accounts, there isn’t the same sense of urgency. Also, when a loan change hands half a dozen times in a couple years, it is bound to create inefficiency. Lastly, some of the loan holders like hedge funds simply aren’t equipped to handle the foreclosure process and outsourcing the process isn’t easy when foreclosure firms across the country are overwhelmed.
And, the inefficiencies in the foreclosure process will just get worse.
Another thing that I didn’t really consider back when I was predicting a Summer 2008 bottom is the very recent trend of low-risk homeowners walking away from their loans. These are people who have the money to service their loans, who didn’t take out teaser rate ARMs, who have good income and good FICO scores. Yet, despite their ability to service their loans, they’re simply walking away rather than be saddled by hundreds of thousands in negative equity. This phenomenon has just started, but I imagine will get MUCH worse by the Summer 2008. By then, with many property values 40% off their peaks in 2005, I think we’re going to see thousands of otherwise responsible homeowners mailing in their keys. Why wouldn’t they, especially if there are no tax consequences in doing so?
When these types of foreclosures start to pick up steam, I think it will extend the downward trend and push the bottom further and further back.
Of course, this is purely conjecture and I could be entirely wrong.
Yes.. the rental market is definitely loosening up--even among the managed units.
Up here in northern Palm Beach County, I've noticed several managed apartment complexes now are advertising on TV which did not before, and the leasing office at a large complex a friend of mine lives in is now open on Sunday and expanded hours on Saturday (used to be only open a few hours on Saturday).
I have a few rentals in Palm Beach county, and what I see is that renters are negotiate the rent with the private landlords. I have seen listings for 1800.00 that was eventually rented for 1500.00 or even less. I my self lowered the rent for one of my tenant, because did not want to lose him.
test
SFHB,
That makes sense, and I wonder what other types of concessions the banks may make to owners in addition to short sales. Will they allow an owner to make reduced payments while trying to sell short in order to keep some cash flow and forestall the inevitable foreclosure?
If so, that will slow down but not halt the decline of prices.
In order to do a short sale, does the owner still make his scheduled monthly payments?
I'm a little off track however, last weekend I was at an auction in India River County. I was interested in a 1.6 acre dry lot zoned r-6 adjacent to a nice waterfront community.
OK, my point is, the highest bid was $110,000 which was $20K less than the lot sold for in 1999. this was a well advertised auction and only four bidders showed up.
Indian River County is in big trouble
anon,
Thanks for sharing that auction info on Indian River, it's good to know what's happening at auctions.
They are having one soon (may be past already) at a new construction Lighthouse Point 6k sq ft waterfront.
Beautiful home with elevator all the toys. Minimum bid $2 mil.
It was previously on the market for about $4 mil.
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