Following the tragic death of the Human Cannonball at the Springfield Autumn
Fair,
a spokesman said "We'll struggle to get another man of the same caliber."
(Such
a classic line.) But HUD will not be struggling to find a company of the
same caliber
to replace Allied Home Mortgage after HUD and Ginnie Mae suspended Allied
Home Mortgage.
At this point Allied (Houston, TX) can't underwrite new mortgage insured by
the
FHA or issue Ginnie Mae securities. The suspensions include by name the
company's
president and CEO, James C. Hodge, and its EVP and CCO Jeanne L. Stell.
Allied is
accused of engaging in fraudulent lending practices that have cost the
government
more than $834 million in FHA insurance claims. The suit said that the
lenders
had engaged "in reckless mortgage lending, flouting the requirements of the
FHA
mortgage insurance program, and repeatedly lying about its compliance."
Reader input continues on the prospective HARP 2.0 program, with firm agency
guidelines
due in 13 days. One wrote, "Your readers should be aware that Fannie allows
most
credit enhancements unless there is something in the charter of the pool
policy
that prohibits it. Fannie allows different types of borrower paid and
non-borrower
paid MI, but readers should know that Fannie's program in a few weeks may
have certain
restrictions that address pool policy requirements for charter compliance."
There was a response to the comments about a large number of a lender's HARP
loans
being kicked out. (The original note read, "The one item that seems to be
obviously
missing from the recent discussion of "improvements" is addressing loans
currently
owned by Fannie or Freddie that otherwise would be eligible but are not
eligible
because the loan being refinanced was sold to Fannie or Freddie under some
type
of 'credit enhancement feature.' My experience is that at least 50% of the
recent
refinances I have attempted are not eligible under HARP because of this.") A
person
"in the know" wrote, "Loans that were under captive reinsurance agreements
are eligible
for HARP. Loans under "certain types of credit enhancement" agreements that
would
not be eligible would be very rare. If a lender is seeing 50% of his loan
submissions
kicked out, it would be best to contact his Fannie Mae account team and they
could
investigate to see why he is seeing such a high fallout rate - it could be a
simple
and easy error to correct."
PHH Inc. reported a net loss of $148 million in the third quarter, much
worse than
last year's loss of $8 million. A chunk of the losses are due to a negative
fair
value adjustment of PHH's mortgage servicing rights. The
mortgage-production segment
of PHH, however, had third-quarter income of $95 million, while the
servicing segment
lost $368 million for a combined loss in the mortgage-services unit of $273
million.
Total mortgage closing volume was $12.7 billion of which 67% was retail and
33%
was wholesale/correspondent. This volume represents a 1% increase over the
third
quarter of 2010. Annaly Capital Management, the nation's largest mortgage
investing
REIT, posted a $922 million net loss in the third quarter, citing a
flattening yield
curve and faster prepayment speeds. But Radian Group (#3 in MI) posted
strong third
quarter earnings of $183.6 million, but attributed those gains to changes in
the
"fair value" of "derivatives and other financial instruments." And lastly,
for
corporate news, BB&T will acquire BankAtlantic for approximately a $301
million
premium, or 2x book. (Some banks are indeed expanding, although the seven
largest
banks based on asset size during the 2nd quarter (BofA, Chase, Citi, Wells,
Goldman,
Morgan Stanely, and MetLife) accounted for well over 50% of total bank
assets: $10.3
trillion.)
(PHH, by the way, just released new 10-yr and 20-yr Fannie Mae HARP product
terms
starting on Friday. The 10 year and 20 year product terms will follow the
same product
guidelines as DU Refi Plus, with the maximum LTV's based on maturity and
whether
or not PHH is currently servicing the borrower's loan.)
MetLife is "in play," and PNC seems to be one of the potential purchasers.
There
are even marketing pieces about it: MetLifeBlurb
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108448067246&s=8721&e=001KsqAxx
y8dHtjKLRIhLEMQ3qM4PxXWkc7BiH9yb4XGRo--SIO4fgSN0OOH25iUvEsEfOf48Yb6Yy6EJWyh_
bChp3q_nH5tWsOr4RT-Vm0bgiBilZHAUqlCW4Jk1wc7nFfR9xY_MQrF1Q5bP3Pv7rg-YxC8e32mF
Wv-xSgVMLOGJ_s8cAC_wI3-Q==].
Many banks and mortgage companies are searching for merger or acquisition
candidates.
But what is the best branding strategy in a merger? In any merger, there are
5 choices
on what to do about the brand: 1) The acquirer maintains its name and
disregards
the acquiree's name (most common; like Bank of America and Fleet), 2) Both
brands
are kept separate (2nd most common), 3) Both brands are kept in a fusion
that maintains
certain elements of both (3rd most common, similar to JP Morgan Chase), 4)
Create
a new brand from the combined entity (rare, similar to Virginia Financial
Group
and First National Bank forming "Stellar One), or 5) the acquirer drops its
name
and takes the name of the acquiree (rare, like when Norwest bought Wells
Fargo
but kept the Wells name).
A study was done by IE Business School in Madrid and the University of North
Carolina,
with the research looking at 216 US companies formed by merger between 1997
and
2006. Most mergers during that time period underperformed the market by
about 18%.
Mergers that maintain the acquirer's brand and disregard the weaker one
underperformed
the marked by an average of 15%. In similar fashion, mergers that kept the
brands
separate underperformed the market by a whopping 25%. However, in cases
where brands
are fused together, the new brand ends up outperforming the market by 3%.
Performance
is one thing; we do see how management treats the brand as a sympathetic
response
that likely highlights a general attitude about cultural, process and
infrastructure
assimilation.
The method of discarding the acquisition brand likely points out that while
some
cost savings are achieved, valuable talent and processes were also likely
jettisoned
(thereby hurting performance). Likewise, keeping brands separate is most
likely
also a sign that overlapping cost structures were maintained and internal
cultural
silos kept. Keeping brands completely separate likely kept the organization
from
reaching its full potential. Because a merger's success relies in part on
the successful
integration of two cultures into a powerful new entity, a branding strategy
that
explicitly underscores the best of both worlds is likely worth considering
for
increasing value. While bank mergers are good at valuing property, loans,
deposits
and other assets; management teams usually treat what to do about the name
as an
afterthought. Since a bank's intangible or brand value may compose a
material amount
of performance, considering this question pre-decision is highly recommended
as
a way to capture more merger value. Using a fusion strategy to send
reassuring signals
to customers, employees, other stakeholders and most importantly, investors,
may
increase the level of success.
A company named Bella Homes is receiving some attention. "Rob, I've had this
crazy
home I-don't-know-what-to-call-it program touted to me by a Realtor who is
now a
"qualified representative" and a network marketer. How could this be
possible?
Wouldn't this need to be regulated? It seems to me they are trying to
sell it
like Amway: Bella
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1108448067246&s=8721&e=001KsqAxx
y8dHs50QNldghJ2cob_McqXXnjNmsxJ4Zov6vcyRSEGDAlaT_IvF2_TO-RdW3-qphZm8lffSte84
pY73bhPvf6T025ultYtnFfPusbd7xTv7syEyC0p9ay9PkXm0JfQ7Q6SlAoSuf_DE5MYQ==].
The parts I don't understand are how do they "purchase their house from them
for
the amount of the first mortgage and second mortgage and other liens..."
and then
"purchase the mortgages at a discounted rate". The order of operations here
is
rather muddy. And would the transfers of property and rights be out of
compliance
with regulatory consumer protection requirements? It seems like anyone is
encouraged
to participate in being a rep and bring in clients. So what of Section 8
restrictions
on referral fees?"
For the markets, Europe news continues to move things. Of course, in this
country,
it didn't help that the ISM Purchasing Managers Index decreased to 50.8%,
down from
51.6% in September, (but still, there is expansion in the manufacturing
sector for
the 27th consecutive month.) But Construction Spending rose 0.2% in
September as
private projects outpaced a drop in government outlays, and followed a 1.6%
jump
in August. Regardless, the markets are focused on Europe: global equities
tumbled
with the Dow off 2.5% while 10-year T-notes improved 1.5 in price down to a
yield
of 2.00%. But on the mortgage side, as with any large rate improvement,
mortgages
lagged somewhat. MBS prices improved by about .625.
For today we can chew on continued jawboning about whether or not sometime
in the
near future the Greek people will vote to place austerity measures on
themselves
(hmmmm, let me think about that one), but we'll also have the release of
the FOMC
statement, expected at 12:30, with a press conference following at 14:15.
Most economists
are not expecting any major policy changes. Also for news we have the MBA's
weekly
report on mortgage application activity and the ADP Employment report.
(Parental discretion advised.)
Betty and Barney have a dog named Tuffy that snores. Annoyed because she
can't sleep,
Betty goes to the vet to see if he can help. The vet tells Betty to tie a
ribbon
around the dog's testicles and he will stop snoring. "Yeah, right!" she
says.
A few minutes after going to bed, the dog begins snoring as usual. She
tosses and
turns unable to sleep. Muttering to herself, Betty goes to the closet and
grabs
a piece of ribbon and ties it carefully around the dog's testicles.
Sure enough the dog stops snoring. Betty is amazed!
Later that night, Barney returns home drunk from being out with his buddies.
He
climbs into bed, falls asleep, and begins snoring loudly.
Betty thinks maybe a ribbon will work on him, so she goes to the closet
again, grabs
a piece of ribbon, and ties it around her husband's.
Amazingly, it also works on him! Betty sleeps soundly.
A few hours later Barney awakes from a drunken stupor and stumbles into the
bathroom.
As he stands in front of the toilet, he glances in the mirror and sees a
blue ribbon
attached to his privates.
He is very confused, and as he walks back into the bedroom, he sees a red
ribbon
attached to Tuffy's.
He shakes his head and looks at Tuffy and says, "I don't know where we were
or what
we did, but, by God, we got First and Second place!"
If you're interested, visit my twice-a-month blog at the STRATMOR Group web
site
located at www.stratmorgroup.com
[http://r20.rs6.net/tn.jsp?llr=zy6u9cdab&et=1106435366068&s=4179&e=001SVt-lj
bp53436QjxD9vbwURtIPPjV05jEcEKyBN3SjS2forXe0C_foO8RjEV-Uye0N7Z_Sh1il0SRXPx6P
jQauayNXQjni-Hc9Sseu-hhZcR1ujeZyAEpw==]
. The current blog takes a look at Fannie & Freddie & the FHFA, and the
changes
they have in the hopper. If you have both the time and inclination, make a
comment
on what I have written, or on other comments so that folks can learn what's
going
on out there from the other readers.
Rob
No comments:
Post a Comment