The successful sale of a California-based subprime lender was overshadowed by more than $1 billion in charges, more investor class action lawsuits and the closure of another nonprime wholesaler. Meanwhile, the Securities and Exchange Commission has been asked by one state official to investigate the sale of stock by Countrywide Financial Corp.'s chairman.
But first, Joseph J. Murin was nominated to be president of Ginnie Mae, the White House announced on Thursday. Murin, of Pennsylvania, previously served as president of Mortgage Settlement Network LLC and has been chief executive officer of Basis100 Corp. and Lender's Service Inc.
On Wednesday, Downey Financial Corp. said it expected to incur an operating loss of about $23 million for the third quarter that will reduce net income for the first nine months of the year to $52 million. The quarter's results will include a $82 million provision for credit losses helping to push loan loss allowance to $144 million as a result of significant increases in single family loan delinquencies, poor secondary market conditions and foreclosure losses.
Sovereign Bancorp Inc. announced it also expects to increase credit loss provisions to between $155 million and $165 from $51 million in the second quarter, with about $50 million of the increase being related to its remaining correspondent home equity loan portfolio. A deterioration in the consumer credit environment and volatility in the mortgage-backed securities and credit markets was cited for the charge. It also expects $20 million in charges related to losses on financing it provided to mortgage companies that have went bankrupt or defaulted on certain agreements, and charges of about $15 million related to reclassifying loans held for sale.
Meanwhile, Thornburg Mortgage Inc. said that its third quarter results will likely reflect a $1.1 billion charge as a result of selling $21.9 billion in high quality ARM assets since Aug. 10, up respectively about $236 million and $1.6 billion from the losses and sales originally estimated.
The Federal Deposit Insurance Corp. announced it processed 19 orders of administrative enforcement actions against banks and individuals in July. These included five cease-and-desist orders, including one against Green Belt Bank & Trust in Iowa Falls, Iowa, and another against Bank of Commerce in Greenwood, Miss., 13 civil money penalties and one termination of a cease-and-desist order.
The Federal Housing Finance Board and Federal Home Loan Bank of Chicago entered into a consent cease-and-desist order that restricts the bank from all repurchases and redemptions of its capital stock until supervisory concerns have been addressed. The order also calls for the bank to make in improvements in market risk management and hedging policies, procedures, and practices; submit a capital structure plan; and has to provide advance notice of any dividends it intends to declare or pay, according to the order.
The Law Firm of Schiffrin Barroway Topaz & Kessler LLP announced a class action filed against E*TRADE Financial Corp. on behalf of investors of the company's stock from Dec. 14, 2006, to Sept. 25, 2007. The financial services firm and some of its officers and directors allegedly failed to misrepresented material adverse facts about its financial position and earnings.
Finkelstein & Krinsk said it filed a class action lawsuit on behalf of purchasers of Countrywide common stock between Jan. 31, 2006, and Aug. 9, 2007. The Calabasas, Calif.-based lender is accused of issuing materially false and misleading information on its financial condition that caused shares to trade at artificially inflated prices.
North Carolina Treasurer Richard H. Moore asked the SEC to investigate the stock sales of Countrywide CEO Angelo R. Mozilo. Moore is questioning whether the timing of Mozilo's sales and changes to trading plans are mere coincidence or manipulation.
In a letter to the SEC, Moore points out that Mozilo sold 4.9 million Countrywide shares worth over $138 million between last November and August 2007, plus changed plans three times in a five-month period beginning October 2006 as to how many of his shares would be sold per month, "allowing him to sell the stock before its price fell dramatically."
"As an investor and a Countrywide shareholder, I was shocked to learn that CEO Angelo Mozilo apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide's fortunes were cooling off," Moore said.
Investment bankers, including Citigroup, Goldman Sachs, JPMorgan Chase and Bear Stearns, are opposing the sale of American Home Mortgage Investment Corp.'s servicing unit to investor Wilbur Ross because they believe American Home is not entitled to sell servicing rights to $46 billion in loans due to the rights being "inextricably intertwined" with loans they bought from the lender, according to the Wall Street Journal.
World Savings branches in Arizona, California, Colorado, Illinois, Kansas, Nevada and Texas assumed the Wachovia name today. The new signs should be in place by Monday, according to a media advisory.
Principal Mortgage Fund Inc. entered into a letter of intent to acquire Fair Home Lending Financial Inc. for $750 million during the last week of October. Fair Home's portfolio consists of roughly 96 percent prime borrowers and the rest subprime, Principal reported.
Independent Bank Corp. will purchase Slade's Ferry Bancorp through a $105 million stock-and-cash deal expected to close next quarter, the Massachusetts-based companies jointly announced on Thursday.
Lone Star Fund V L.P. today said it completed acquiring Accredited Home Lenders Holding Co. for $11.75 per share, which was the amount last agreed to from the original offer of $15.10 per share. Accredited has requested that its common stock be delisted from NASDAQ. There is still 9.75 percent of series A perpetual cumulative preferred shares, par value at $1.00 each, of Accredited Mortgage Loan REIT Trust outstanding.
First Mariner Bancorp said it closed its wholesale lending operation in July after identifying losses would result from the unit, which had its products repurchased under recourse provisions, and declining value in residential real estate resulted in increased loan loss provisions.