Daily Archives: December 4, 2014

New York Regulator Poses Formidable Threat To Mortgage Servicers

Benjamin Lawsky, a relatively unknown New York State regulator, has put the fast-growing non-bank mortgage servicing industry’s business model in jeopardy. Look no further than Ocwen Financial for proof of a servicing segment that remains marred in uncertainty.

Ocwen is reeling following a dispute with Lawsky that killed a promising a $39 billion acquisition of Wells Fargo’s servicing rights. News of the cancelled deal in mid-November sent the company’s shares down as much as 67 percent from their 52-week high. The stock has recovered slightly, but is still off more than 50 percent from a December 2013 high of $58.07.

Now, investors are left wondering whether the servicer – likened to a shark – will be allowed to continue feeding on new mortgages.

Read on.

Five Biggest U.S. Banks Control Nearly Half Industry’s $15 Trillion In Assets

This is not a surprise to me as I was told by a financial analyst in the ’90’s that there would be four banks that would control the GDP in this country. Wells Fargo and Bank of America were the ones mentioned.

The wreckage of the financial crisis led to pages upon pages of financial reform aimed at ending the era of Too Big To Fail, but six years after the banking system blew up the five biggest firms control 44% of the $15.3 trillion in assets held by U.S. banks according to data compiledby SNL Financial. Those banks — JPMorgan Chase JPM -0.42%, Bank of America BAC -0.67%, Wells Fargo WFC +0.11%, Citigroup C -0.31% and US Bancorp USB +0.23% — collectively held $6.8 trillion in assets as of Sept. 30.

JPMorgan holds just over $2 trillion in assets, or 13.1% of the industry’s total, followed by BofA at $1.5 trillion (9.9%), Wells Fargo just under $1.5 trillion (9.7%) and Citi at $1.4 trillion (9%), before a substantial dropoff to US Bank at $387 billion (2.5%).

SNL’s analysis, which considered only commercial banks, notes the drastic increase in banking industry concentration over the past few decades. In 1990, the five biggest U.S. banks held less than 10% of industry assets, but that figure has steadily marched higher ever since, pausing only for the year from 1999 to 2000. Today, Wells Fargo, the third biggest bank, controls basically the same percentage of assets the entire top five did in 1990.

Read on.

U.S. SEC’s Stein says Bank of America waiver policy is ‘breakthrough’

A top U.S. regulator praised the structure of a regulatory waiver granted last month to Bank of America Corp (>> Bank of America Corp), saying the tougher conditions imposed on the bank may help deter repeat offenses.

Securities and Exchange Commission Democratic member Kara Stein said such conditions as requiring the bank to hire an independent compliance consultant if it wants to keep selling shares in private deals will help “focus and empower” company management to change the corporate culture.

“This approach represents a breakthrough in the commission’s method of handling waivers, and I hope to see more of this and other thoughtful approaches in the future,” Stein said.

Stein made her comments in a speech on Thursday at the Consumer Federation of America’s financial services conference.

Read on.

Michael Moore said it all

From Moore’s twitter:

Because we’ve come so far. R.I.P. Eric Garner- ur crime was that u were selling untaxed cigarettes instead of derivatives & junk mortgages

Did You Know That Abraham Lincoln Lost His Home… Twice?

Abraham Lincoln is well known for being our 16th president and a resident of Illinois, but his story starts in Kentucky—where he was born and from where his family was forced to move due to land title issues.

Read on watch video below.


Government’s Small Business Administration Exposed As Corporate Welfare For Big Business

The full report can be found here, but what follows is some analysis of the report by Stephen Moore at Investors Business Daily:

The Small Business Administration is under fire for lending billions of taxpayer dollars a year to exclusive country clubs, golf resorts, yacht clubs, pet resorts, upscale plastic surgeons, wineries and other businesses catering to the lifestyles of the very wealthy.

A new report by the federal spending watchdog OpentheBooks.com has uncovered these and other questionable loan activities by the SBA and its roughly $106 billion loan portfolio.

It’s the latest in a long history of hard-to-justify lending activities by a federal agency that proclaims its purpose is to “help Americans start, build and grow businesses.”

The SBA has come under attack for gross misallocation of funds and even potential fraud. A 2008 inspector general report found 1-in-4 SBA loans involved improper payments.

In 2011 the Cato Institute investigated the program and concluded: “Although lawmakers portray the SBA’s programs as a boost for small businesses, the programs are actually a form of corporate welfare for some of America’s largest banks. The banks reap profits from the program, but taxpayers are liable for the losses.”

The profits flow to some of the biggest banks that snatch up the loan guarantees — which are like licenses to make money on risky loans.

In 2009, the top 10 lending institutions swallowed up roughly one-quarter of all the SBA loan guarantees. Wells Fargo & Co., JPMorgan Chase, U.S. Bancorp and PNC Financial Services Group were the big beneficiaries, with taxpayers guaranteeing repayment of the loans and the banks collecting the profits.

The businesses that benefit from the low-cost lending often aren’t small at all.

According to a 2010 audit by the Government Accountability Office, 61 of the top 100 small business contractors were in reality large businesses. This same study found that the government awarded more than half of the $8 billion of the government’s $14 billion in “small” business contracts to large businesses.

Open the Books found that from 2007-13, $92 million went to beauty spas in upscale towns such as Lake Tahoe and Napa Valley.

More than $160 million was lent to at least 40 exclusive “members only” country clubs. An additional $1.5 million was lent to the Pequonnock Yacht Club in Connecticut. Several Rolex jewelers cashed in on $20 million in loans. A $3.5 million loan went to Lamborghini dealerships in Chicago and Orange County, Calif.

Another scandal at SBA is how private equity firms game the system to cash in on loan guarantees. In total, $9 billion of SBA funds flowed through “venture capital, capital partner firms, mezzanine finance firms and private investment funds,” the report discovered.

“It’s an amazing scam,” says Andrzejewski. “These billion dollar equity firms are making investments backed by taxpayers. It’s a federally insured license to make money.”

But not for taxpayers. “Charge offs” on loans and guarantees have totaled $11 billion since 2010 and $27 billion since 2005.


The ghosts of originations past could still come back to haunt the housing industry according to a new report fromFitch Ratings.  The company says that half of those borrowers who have loans in performing residential mortgagebacked securities (RMBS) are facing increases in their mortgage payments over the next five years.

Fitch says the mortgages that will be affected by increases are those with adjustable interest rates (ARMs), loans that have had interest only payment features (IOs), and loans that were modified to save or redeem them from default.  Fitch notes that payment increases have historically led to high rates of default with a correlation between the size of the payment increase and the default rate.

‘Interest-only loans are in store for the largest payment increases,’ said Director Sean Nelson. ‘As a wave of peak vintage 10-year IOs approaches recast, many mortgage borrowers could see their monthly payments more than double.’

More here…