Magazine article American Banker


Magazine article American Banker


Article excerpt

Subprime, And Beyond

For those who have lost track, here is a roundup of the past weeks turmoil in the mortgage and credit markets.

Bear Stearns Cos. said profits in its fiscal first quarter, which ended Feb. 29, fell 79% from a year earlier, to $115 million, ahead of a liquidity crisis that led to the deal to sell the investment bank to JPMorgan Chase & Co. The results include about $600 million of writedowns tied to mortgage and leveraged finance.

JPMorgan Chases first-quarter earnings fell 50%, to $2.37 billion, as it increased its loan-loss provision and marked down $2.6 billion of leveraged loans, mortgage-related securities, and other assets.

Clayton Holdings Inc. said it is selling itself to the private-equity firm Greenfield Partners LLC for about $134 million, plus the repayment of $23.8 million of debt. The deal is designed to allow the troubled Shelton, Conn., provider of mortgage due diligence and servicing to restore its balance sheet.

Fremont General Corp. appeared to rescue itself from potential seizure by regulators, agreeing to sell most of its Fremont Investment and Loan to CapitalSource Inc., a Chevy Chase, Md., commercial finance company. CapitalSource would pay a 2% premium on Fremonts $5.6 billion of deposits, along with $58 million for the banks branches, and would receive a 3% discount on a pool of commercial real estate loans.

Wachovia Corp. posted a first-quarter loss of $350 million and said it would raise $7 billion of capital through the sale of common and convertible preferred stock and slashing its dividend 41% to bolter its balance sheet. Wachovia also said it would tighten its mortgage underwriting standards by implementing minimum credit scores and requiring applicants to verify assets and employment.

Washington Mutual Inc. reported a $1.14 billion loss for the first quarter, reflecting a higher level of loan-loss provisioning as a result of steep declines in home prices. The Seattle thrift company said it needed to set aside $3.51 billion to cover bad loans, more than twice as much as it did a year earlier.

Wamu also announced Mary Pughs resignation from its board. Investors led by CtW Investment Group have been critical of the board, saying its members stood idly by as the company jumped headfirst into risky mortgage lending.

Eye on Countrywide

A shareholder class action against Countrywide Financial Corp. has been expanded to include a claim the Calabasas, Calif., company classified many loans as 'prime that failed to meet the requisite industry definitions for that term.

Several shareholder suits were consolidated in November in the U.S. District Court for the Central District of California, with New York State Comptroller Thomas DiNapoli and New York City Comptroller William Thompson Jr. …

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