home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map

twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Corporate Mortgage News
M e r g e r s, a c q u i s i t i o n s and private and public offerings. Other corporate activity including executive appointments, bankruptcies name changes.

Some E*TRADE Recovery After Bankruptcy Warning

Citi analyst warned bankruptcy a possibility

November 13, 2007


Shares of E*TRADE Financial Corp. recovered some of yesterday's stinging losses that were prompted by an analyst's warning of possible bankruptcy.

According to a Citi Investment Research report Sunday, the New York-based company is likely to lose clients because of continued negative news about its exposure to mortgages and collateralized debt obligations, a Securities and Exchange investigation into its loan and securities portfolio, and continued deterioration in its financial condition.

Despite Citi's comments, E*TRADE's president and chief operating officer, R. Jarrett Lilien, said in a statement yesterday, "We continue to see momentum with new and existing customers."

The company is facing pressure from its deteriorating $12.4 billion home equity portfolio, of which 60 percent has less than full documentation, 60 percent is from 2005 or 2006, and 90 percent was originated from mortgage brokers, Analyst Prashant Bhatiathe wrote. E*TRADE could face quarterly loss provisions of around $100 million from its HEL holdings.

The financial services firm also faces pressure from its $3.1 billion ABS portfolio -- which could see $500 million in subprime related losses, Citi explained.

If the company, which is not required to mark certain loans and securities to market, attempted to liquidate its loan and asset backed securities portfolio, Citi estimated it would take $5 billion in charges -- "more than wiping out tangible equity."

E*TRADE faces the possibility of falling below a level considered well capitalized, which could trigger violations of covenants in its $250 million revolving line, Citi wrote.

Top executives and the board of directors face a loss of investor confidence also.

"Management lowered its earnings guidance for the 5th time in 8 months and now management believes that it is no longer beneficial to provide earnings expectations for 2007," Citi's analyst wrote. "The extent of poor risk management in our view, has put the viability of the franchise at risk."

Citi added that more important than executive flaws are the board of directors, auditors and regulators.

Half of E*TRADE's deposits exceed the FDIC's maximum insured amount of $100,000 -- increasing the likelihood of attrition, the analyst estimated.

Employees, with little hope of profitably cashing in on options, are also leaving the company -- with an 8 percent reduction in head count during the past two quarters, the report indicated.

And the company also has little chance of being acquired.

"In its current form, burdened with a significant and deteriorating $42 billion mortgage portfolio, this franchise is an extremely unattractive acquisition candidate," the report said. "Even without the credit issues, in our view, the core discount brokerage business at E*Trade has virtually no organic growth."

Citi cited NetBank, which only received a penny for every dollar in deposits as it collapsed.

"Bankruptcy risk cannot be ruled out," Citi said. "Downgrading to a Sell based on a higher probability of a run on the bank."

The stock market reacted violently to the report -- sending shares more than $5 lower to $3.55 yesterday. Shares are trading 51 cents higher early today -- though well below the Jan. 16, 2007, high of $26.08.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]

Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.


SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders