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Lost Liquidity

Lost LiquidityRecent corporate activity

September 9, 2008

By SAM GARCIA

 

Regulators have been busy this past week issuing orders against banks, while a number of companies are still assessing the fallout from their holdings of Fannie Mae and Freddie Mac securities. A big bank gained a new senior executive and a small bank lost one.

David K. Zwiener has been named chief financial officer of Wachovia Corp., a press release Monday said. Zwiener, 54, replaces Thomas Wurtz, who the company said in July would leave. Zwiener, who starts on Oct. 1, comes from the Carlyle Group — which saw its mortgage subsidiary, Carlyle Capital Corporation Limited, collapse in March.

Robert J. Weatherbie resigned as chief executive officer of Team Financial Inc., a statement last week said. He started his career with the Paola, Kan.-based company in 1973.

Downey Financial Corp. disclosed Friday that it received a cease-and-desist order from the Office of Thrift Supervision to enhance its financial strength. The action included the sale of real estate assets — generating $110 million in cash proceeds at a $68 million profit — and a dividend paid from a subsidiary that increased regulatory capital by a total of $109 million.

“The orders also require that, within 45 days, the bank submit for OTS review and non-objection a comprehensive classified asset reduction plan, a long-term business plan, a real estate owned disposition plan, and a plan to strengthen executive management,” Downey said.

BankUnited Financial Corp. said Friday OTS notified it that it has lost its well-capitalized classification and has been reclassified as adequately capitalized. The action limits its ability to accept brokered deposits.

A consent order of prohibition was issued by the Federal Reserve Board against Roslyn Y. Terry, a former employee and institution-affiliated party of SunTrust Bank, a press release Thursday said. The order was based on her alleged participation in violations of law, unsafe and unsound banking practices, and breaches of fiduciary duty in connection with her embezzlement of funds from the bank and falsification of the bank’s books and records.

The government’s takeover of Freddie and Fannie Sunday led Wells Fargo & Co. to warn yesterday that it will take a third-quarter charge on preferred securities it holds from the government sponsored enterprises. Its Fannie holdings are $336 million and its Freddie holdings are $144 million. The securities currently trade at 5 percent to 10 percent of par value.

First American Corp. said today it holds perpetual preferred securities in Fannie at a cost of around $30 million, while its Freddie holdings are at a cost of approximately $8 million. As a result of the government’s actions, it will record other-than-temporary impairment and take a non-cash charge to third-quarter earnings.

Security Bank Corp. announced today it owns a $1 million Freddie Mac bond. But any loss on the bond is expected to have no material impact on its financial condition.

On Friday, prior to the GSEs being placed in receivership, the Law Offices of Howard G. Smith announced an investigation of potential claims against Fannie. The investigation centers on allegedly misleading statements and material omissions in a circular and other materials issued in connection with the series 2008-1 preferred stock offering.

Yesterday, Coughlin Stoia Geller Rudman & Robbins LLP announced it filed a class action in U.S. District Court for the Southern District of New York against Fannie executives, including former chief executive officer Daniel H. Mudd, on behalf of purchasers of the company’s securities between Nov. 16, 2007, and Sept. 5, 2008. The defendants are accused of violating the Securities Exchange Act of 1934 by issuing false and misleading statements about Fannie’s business, prospects and financial statements.

Another GSE, the Federal Home Loan Bank of Atlanta, reported today that it has approved a lending agreement with the U.S. Department of the Treasury. The Treasury announced the available financing for the FHLBs as part of its plan to take over Fannie and Freddie. The facility is available until Dec. 31, 2009.

The Government National Mortgage Association said Friday it enhanced its risk-management strategy. The strategy includes the establishment of a risk committee, the appointment of a chief risk officer and the reconstitution of its issuer review board to ensure its securities continue to remain safe and stable. Stephen L. Ledbetter has been brought in as chief risk officer to oversee the strategy.

Government-owned Ginnie Mae noted the current volatile environment has caused its securitization volume to swell to $27 billion in June and $26 billion in July, “more than triple what it had been for the same two months in 2007.” The risk-management enhancements will help it stay on top of the financial condition and program compliance of its issuers.

First Tennessee Bank N.A., which sold its mortgage operations outside of Tennessee on Aug. 31 to MetLife Bank, N.A., said last week that it will outsource its retail mortgage loan origination, processing and loan servicing to PHH Mortgage. First Tennessee will offer mortgages by telephone, on the Internet and through branches while PHH will handle loan processing, underwriting and closings.

John A. Genovese, Individually and On Behalf of All Others Similarly Situated, vs. Stephen B. Ashley, Daniel H. Mudd, Stephen M. Swad and Robert J. Levin
Sept. 8, 2008 (U.S. District Court for the Southern District of New York)

Downey Financial Corp. Order to Cease and Desist, Office of Thrift Supervision
Order No. WE-08-013, OTS Docket No. H-2408

In the Matter of Roslyn Y. Terry, a Former Institution-Affiliated Party of SunTrust Bank, Atlanta, Georgia
Docket No. 08-016-E-1, Aug. 29, 2008 (The Board of Governors of the Federal Reserve System, Washington, D.C.)

 

 

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com


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