Mortgage REIT Shines

Delta Financial Corp. filed Monday for Chapter 11 bankruptcy protection, according to the voice case information system of the U.S. Bankruptcy Court District of Delaware. Earlier this month, The Woodbury, N.Y.-based subprime lender said it would probably file for bankruptcy and collapse due to its inability to execute a loan securitization that was required in an agreement with three warehouse lenders.

On Thursday, a bankruptcy court judge approved for Fieldstone Mortgage Co., which filed for Chapter 11 bankruptcy protection on Nov. 23, to borrow a total of $3.8 million from parent Credit-Based Asset Servicing & Securitization LLC and to use cash collateral in order to continue operating. Previously, the judge had given Fieldstone interim approval to tap only $1.5 million of the bankruptcy loan from C-BASS.

Moody’s Investors Service downgraded the long-term ratings of Citigroup Inc. to Aa3 from Aa2 because the company’s capital ratios are expected to remain low, as “sizable” write-downs are likely against its subprime residential mortgage-backed securities and collateralized debt obligations portfolio. Moody’s also anticipates Citigroup to make “significant” sustained provisions against its $200 billion residential mortgage book. The ratings agency also lowered the Bank Financial Strength Rating of Citibank, N.A. to B from A-. The rating outlook for Citigroup is stable.

During 2008, “Citigroup’s weak earnings should prohibit the bank from rapidly restoring capital ratios, despite its recent issuance of $7.5 billion hybrid capital,” Moody’s said in the announcement.

Lehman Brothers Holdings Inc.’s earnings of $886 million for the fourth quarter ended Nov. 30 fell 12 percent annually and represented the second consecutive quarterly decline for the investment firm. Decreased value in Fixed Income Capital Markets’ trading assets, principally in securitized products and real estate businesses, cut revenue by $830 million, according to Lehman’s earnings announcement Friday. The gross writedown was $3.5 billion in the fourth quarter, of which $2.2 billion was for residential mortgages and related assets and the remainder came from commercial mortgages, Chris O’Meara, Lehman’s global head of risk management, said in the related conference call.

But not all of the news was bad in the mortgage sector.

Capstead Mortgage Corp. said Friday that its core investment portfolio of agency-guaranteed adjustable-rate mortgage securities has seen “marked improvements” in financing spreads and net interest due primarily to lower borrowing rates resulting from recent reductions in the federal funds target rate.

The Dallas, Texas-based company also noted that mortgage prepayments have “slowed considerably” this quarter, partly because of tighter mortgage underwriting standards, and that its fourth quarter results are also benefiting from two public offerings that raised nearly $200 million in new capital. The REIT said it will pay a quarterly dividend of $0.24, compared to a dividend of $0.04 in the third quarter.

“While credit markets remain challenging for many participants in the mortgage sector, events of the last five months have strengthened our belief that our core investment strategy of conservatively managing a leveraged portfolio of agency-guaranteed residential ARM securities can produce attractive risk-adjusted returns over the long term,” Capstead said in the announcement.

The Goldman Sachs Group Inc. reported today $3.22 billion in net earnings for the fiscal fourth quarter. Earnings rose from $2.85 billion the prior quarter and $3.15 billion a year earlier. Fixed income, currency and commodities saw a 34 percent increase in net revenues from the prior year, while net revenues in mortgages and interest rate products were higher.

First Banks Inc. recently completed acquiring Coast Financial Holdings Inc., according to an announcement. At Sept. 30, First Banks had assets of $10.3 billion and Coast assets of $0.6 billion.

Effective Jan. 1, John Fisk will serve as chief executive officer of the Federal Home Loan Banks Office of Finance, according to a news release. While replacing John K. Darr, who will retire, Fisk will also become president of the Financing Corp. and the Resolution Funding Corp.

The Federal Reserve Board’s Thrift Institutions Advisory Council appointed F. Weller Meyer as its president for the new year, according to an announcement Thursday. Meyer is chairman, president and CEO of , Acacia Federal Savings Bank, and serving with him as vice president of the council will be Kerry Killinger, chairman and CEO of Washington Mutual Inc.