Global Pain for Banks

Mortgage News

Mortgage Daily Staff

                                                 April 14, 2008

Wachovia Corp. announced a massive plan to raise capital, while a much smaller California-based bank said it would unload all of its assets. A Japanese bank warned that its earnings will be more than $1.5 billion worse than previously projected as a result of U.S. subprime losses.

Japan’s Mizuho Financial Group Inc. reported that it revised its estimate of earnings for the year ended March 31 down by 170 billion Yen (U.S. $1.7 billion ). The downward adjustment was attributed “to the dislocation in the global financial market stemming from the U.S. subprime loan issues increased at Mizuho Securities Co. Ltd.”

Wachovia said it will announce first quarter earnings today and announced a $7 billion stock offering. Half of the offering will be in preferred shares and the other half will be in preferred shares.

“This issuance was a prudent response to unprecedented economic conditions, and will sharply increase our capital ratios,” Wachovia Chairman and Chief Executive Officer Ken Thompson said in a statement. “With fortified capital and our strong deposit base, we believe we’re well-positioned to continue to successfully weather this uniquely challenging period.”

The Office of Finance announced Standard & Poor’s Ratings Services placed the Federal Home Loan Bank of Chicago on Credit Watch with negative implications following the termination of merger discussions with the FHLBank of Dallas.

The American Bankers Association issued a press release reminding member community bankers that they can invest in Community Bank Mortgage LLC. The unit, which was launched last year by America’s Community Bankers, which subsequently merged with ABA, was created to enable better secondary market through pooled volume.

Radian Group Inc. reported its lenders have agreed to a waiver until April 30 of the ratings covenant in its credit facility. The move was made in anticipation of a ratings downgrade. The Philadelphia-based mortgage insurer said the credit line will be frozen until and unless it negotiates a permanent waiver with its lenders.

CapitalSource TRS Inc. will acquire substantially all of the assets of Fremont Investment & Loan, parent Fremont General Corp. announced. The transaction, which is subject to the approval of the Federal Deposit Insurance Corporation and the California Department of Financial Institutions, was the result of a Supervisory Prompt Corrective Action Directive that called for an increase in capital or the divestiture of the bank.

The deal includes Fremont’s participation interest in previously sold commercial real estate loans, the assumption of all the bank’s deposits and the acquisition of all its branches. The interest in the commercial mortgages will be acquired at a 3 percent discount to net book value.

Mortgage Daily Staff

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