Interest Rate Roundup

Monday, May 12, 2008

Monday morning roundup

Good Monday morning to you all. Here's a quick roundup of the headlines that are capturing my attention at this time ...

* HSBC set aside $3.2 billion to cover bad U.S. loans. That sounds awful, but it's actually below the $4.2 billion to $4.8 billion that analysts polled by Bloomberg were expecting. HSBC got into subprime mortgage lending in a big way when it acquired Household International back in 2003.

* Bond insurance firm MBIA announced a Q1 net loss of $2.4 billion, which compares to a profit of $198.6 million in the year-earlier period. The biggest hit came from a $3.6 billion, unrealized pre-tax loss on credit derivatives.

* IndyMac Bancorp, a leading Alt-A mortgage lender during the boom times, said it lost $184 million in the first quarter. That compared with a profit of $52.4 million in the same quarter a year earlier. The company is deferring interest payments on some securities and suspending dividend payments on others. It has boosted its credit reserves to $2.7 billion (from $813 million a year prior), and shifted to a GSE/FHA/VA lending model (88% of its production in the latest quarter fell into that category)

* Late Friday, we learned that another bank failed. ANB Financial of Bentonville, Arkansas was closed by the Office of the Comptroller of the Currency. Pulaski Bank and Trust Company assumed its deposits. ANB had roughly $2.1 billion in assets at the time of the closure. Some details on why the bank failed, and how its failure compares size-wise to other failures, are included in this AP story excerpt:

"It was the third closure this year of an FDIC-insured bank. Douglass National Bank, a Missouri bank with $58.5 million in assets, was shut in January; another Missouri institution with assets of $18.7 million, Hume Bank, was shut down in March.

"Both were dwarfed in size of ANB Financial, where regulators found lax lending standards, mostly for construction and development loans for projects in Utah, Idaho and Wyoming, as well as Arkansas."

* And just in case you were wondering whether the uber-rich are truly different from the rest of us, apparently that's not the case. The New York Post reports that 120 homes in the Hamptons are entering the foreclosure process -- the most ever. Here's the skinny ...

"Homeowners in the some of the toniest ZIP codes in the Hamptons are facing a frightening reality - they can't afford to foot the bill for their high-priced homes, The Post has learned.

"In the first three months of this year, banks have launched preliminary foreclosure actions - known as lis pendens proceedings - against a record 120 borrowers in East Hampton and Southampton towns.

"Twenty percent of those borrowers live in homes that are worth more than $1 million, according to figures from the Suffolk County clerk.

"And the list gets longer every week.

"This problem didn't even exist before," said John Brady, a broker with Coldwell Banker in East Hampton. "They used to pop up once in a while, and you wouldn't even pay attention. Now you expect to see new ones every week."

"A total of 10 East End homes, including a massive Westhampton mansion, were foreclosed outright since the beginning of the year.

"In addition, more than 800 East End homeowners - a mix of rich and middle-class people from Riverhead to Montauk - have been flagged by credit-monitoring companies this year for late payments."


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