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Some Relief for Battered Lenders

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While earnings of financial services companies continue to be pounded by a difficult market, two mortgage companies got a reprieve from their creditors while two acquisitions moved further through the mergers and acquisitions pipeline.

But first, Alvaro G. de Molina will take over as chief executive officer of GMAC Financial Services, an announcement today said. He replaces Eric Feldstein, who is moving over to Cerberus Capital Management L.P., an affiliate that holds a majority interest in the parent of Residential Capital LLC. de Molina worked at Bank of America before joining GMAC last year.

The Goldman Sachs Group Inc. reported today net earnings of $1.5 billion for the fiscal first quarter 2008 ended Feb. 29. Net losses on residential mortgage loans and securities were around $1 billion and credit products losses were also around $1 billion.

“Market conditions are clearly very difficult,” Goldman Chairman and Chief Executive Officer Lloyd C. Blankfein said in the statement.

The PMI Group Inc. reported Monday a $1.0 billion fourth quarter loss, bringing net earnings for all of last year to an $0.9 billion loss.

“The net loss for the fourth quarter of 2007 was primarily due to our equity in the losses from FGIC of $776.1 million (after tax) and a net loss of $236.0 million in the U.S. mortgage insurance operations due to increases in paid claims, loss adjustment expenses and additions to the reserve for losses,” the Walnut Creek, Calif.-based company said in the release.

PMI’s announcement was promptly followed by an announcement from Dreier LLP that a class action lawsuit was commenced in the U.S. District Court for the Northern District of California on behalf of investors who purchased common stock from November 2, 2006, through March 3, 2008. The complaint reportedly alleges that PMI and some of its officers and directors misled investors by making materially false and misleading statements about its business and financial results.

Pulte Mortgage LLC had its borrowing capacity cut from $150 million to $100 million, according to a filing with the Securities and Exchange Commission Monday by parent Pulte Homes Inc.

In another SEC filing Monday, NovaStar Financial Inc. said “the magnitude of changes occurring in” its business has forced it to miss the March 15 deadline for filing its Form 10-K, though it plans to make the filing within 15 days. NovaStar did indicate earnings for 2007 have deteriorated significantly from 2006.

The Kansas City, Mo.-based company said Friday that Wachovia Bank N.A. has yet again reduced the minimum liquidity requirement for a master repurchase agreement, this time to $15 million from $30 million, until April 11, according to an SEC filing. The waiver enables NovaStar to avoid another event of default. The last waiver was granted last month.

Thornburg Mortgage Inc., which earlier this month warned it may not be able to stay in business because of margin calls it could not meet, reached a deal with its creditors.

“We have entered into an override agreement with five of our remaining reverse repurchase agreement counterparties which freezes additional margin calls through March 2009,” the company said in an SEC filing Monday. But it also cautioned, “There is no assurance that we will be able to obtain sufficient liquidity in order to satisfy our liabilities, that the value of our purchased ARM assets and hedging instruments will not decline further, that the override agreement described above will not be terminated by the counterparties if we do not meet certain conditions, and that, if that override agreement is terminated, that counterparties will not make additional margin calls or that we will be able to satisfy additional margin calls, if any, or that we will be able to continue as a going concern.”

The Office of the Comptroller of the Currency announced Monday cease and desist orders were issued against First Integrity Bank, National Association, Staples, Minn.; United Bank For Africa PLC, New York; and Commerce Bank/Harrisburg National Association, Lemoyne, Pa.

OCC reported civil money penalty orders issued against Kevin Marvin, American National Bank, Denver; Robert Stevenson, American National Bank, Denver; and Crown Bank, National Association, Ocean City, Colo.

Formal agreements were made with Olmsted National Bank, Rochester, Minn., and Millennium Bank, National Association, Reston, Va., the regulator said. Meanwhile, cease and desist enforcement actions were terminated against United Bank For Africa PLC and Bangkok Bank Public Company Limited, both in New York.

Wilmington, N.C.-based AAXA Mortgage announced it acquired mortgage broker American Harbor Mortgage Co. and opened a branch in Southport, N.C. The regional mortgage company, a subsidiary of AAXA Discount Mortgage Inc., said it will consider further acquisitions in the region.

Toronto-Dominion Bank has received Federal Reserve approval to form bank holding companies, acquire Commerce Bancorp Inc., and acquire two subsidiaries of Commerce as well as Commerce’s minority interest in Pennsylvania Commerce Bancorp Inc.

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