Sector Shakeup Continues

National City Mortgage Co. President Joe Cartellone will become CEO upon Paul Bibb’s retirement from the position in the first quarter 2008, parent National City Corp. announced today. Cartellone previously served as an executive of National City Home Equity and was named as president in April.

On Wednesday, TransLand Financial Services’ involuntary Chapter 11 bankruptcy was dismissed, according to documents filed with a Florida court. A day prior, TierOne Bank and MidCountry Bank, which had petitioned the bankruptcy protection, had requested the case be dismissed because TransLand, which was accused of failing to remit collections on paid off loans, agreed to sell off mortgage loans and liquidate other assets, and distribute the proceeds to creditors.

Impac announced it was notified by the NYSE Regulation Inc. of noncompliance for continued NYSE listing due to not maintaining a required consecutive 30-day average closing stock price of over $1.00 per common share. At Nov. 27, Impac’s average was $0.91 and its absolute closing price was $0.69 per common share. The lender has six months to bring its average and share price back to above $1.00. Impac intends to submit plans to address the price deficiency, within a required 10-day period.

Murray, Frank & Sailer LLP announced Tuesday it filed a class action on behalf of investors of preferred securities or common stock of Merrill Lynch & Co. Inc. on Nov. 3, 2006, through Nov. 2, 2007. The investment firm is accused of misleading and materially false financial statements because it failed to disclose the true extent of its exposure to collateralized debt obligations containing subprime debt and losses arising from such investments. The law firm noted Merrill’s Oct. 24 announcement that it expected an $8 billion charge in the third quarter related to mortgage and credit problems, versus $4.5 billion anticipated about three weeks earlier.

And Merrill is expected to writedown an additional $4.5 billion in the fourth quarter due to deteriorating market valuations since mid-October, according to a report Monday by Citi Investment Research analyst Prashant Bhatia. Merrill’s $15 billion of CDO exposure will likely be marked 15 percent to 20 percent lower, up to $3 billion mark, and significant deterioration is expected in its $1.6 billion residual subprime loan exposure. The analyst forecast Merrill will report a loss of $2.50 a share for the fourth quarter and lowered his estimate for share price to $0.85 from $0.90 to reflect the anticipated writedown.

Additionally, Morgan Stanley, which expects to write down $3.7 billion of its U.S. subprime assets in its fourth quarter ending Nov. 30, will likely lower its collateralized debt obligations by an another $750 million, Bhatia said, cutting the company’s share-price estimate to $80 from $85.

The analyst additionally lowered his fourth quarter profit forecast for Goldman Sachs Group Inc. to $7 a share from $8.15 and for Lehman Brothers Holdings Inc. to $1.40 a share from $1.90. He said his estimates are above consensus on Morgan Stanley and Goldman, and below consensus on Lehman and Merrill.

American International Group Inc. reported that its Mortgage Guaranty business reported a $215 million operating loss in the third quarter resulting from continued deterioration in the U.S. housing market. Within its net realized capital losses are $529 million of charges for “other-than-temporary declines in value, including impairments of approximately $149 million related to AIG’s residential mortgage-backed securities portfolio.” The company noted, however, that its exposure to the RMBS market within the investment portfolio remains high quality and with substantial protection through collateral subordination, despite the volatility of the recent quarter.

Largely due to spread widening, Metlife’s unrealized losses on Alt-A and subprime mortgages increased $54 million as of October’s end from $150 million previously disclosed for the third quarter, Metlife Chief Investment Officer Steve Kenadrin said in a Web cast presentation. The CIO stressed, however, that its risk management actions since identifying lax underwriting standards in 2004 have led it to have very limited exposure to subprime RMBS and virtually no subprime CDOs or exposure to structured investment vehicles. As of Sept. 30, Alt-A and subprime mortgage holdings, which include Alt-A and subprime residential mortgage backed securities and subprime collateralized debt obligations, were over $8.8 billion.

The review for possible downgrade of Block Financial Corp.’s Baa1 long-term rating will not be affected by yesterday’s announcement that its parent, H&R Block, and Cerberus Capital Management terminated the sale agreement for Option One Mortgage Corp., Moody’s Investor Services said.

Fannie Mae said it expects credit losses to worsen next year to between 8 to 10 basis points from an anticipated 4 to 6 BPS this year due to continued house price declines and loan defaults — single-family delinquent loans were 142,000 on Oct. 31, which is 37,000 more than at yearend 2006, according to a slide presentation today for planned preferred stock offerings.

To add capital to manage increased risk in the housing and credit markets and pursue emerging growth opportunities, the secondary lender announced it intends to raise $7 billion through the issuance of non-convertible preferred stock in one or more offerings in December. In connection with the offerings, Fannie also plans to reduce its quarterly common stock dividend to $0.35 per share from $0.50 beginning next quarter.

Wachovia Corp. has agreed to continue to waive loan agreements with NovaStar through Friday, NovaStar said in a Securities Exchange Commission filing Wednesday. Wachovia had waived a net worth requirement through Nov. 30. Wachovia reserved the right to terminate the agreement before Friday if any default or breach occurs due to any reason other than failure to maintain the required adjustable tangible net worth requirements.

The merger of American Bankers Association and America’s Community Bankers became effective Saturday, according to an announcement Monday. Among the additional resources ABA now offers are ACB’s NASDAQ Index and new mortgage solutions. Members comprise over 95 percent of the banking industry’s $12.7 trillion in assets and employ over 2 million people.