Monday, June 5, 2017

June 5: Bank rankings; RESCAP legal news; June Fed Rate Hike Odds

by rchrisman@robchrisman.com


(Warning: Rated PG, I guess. Thanks to Nick S. for this one.)
A firefighter was working on the engine outside the station when he noticed a little girl nearby in a little red wagon with little ladders hung off the sides and a garden hose tightly coiled in the middle.
The girl was wearing a firefighter's helmet. The wagon was being pulled by her dog and her cat.
The firefighter walked over to take a closer look.
"That sure is a nice fire truck," the firefighter said with admiration.
"Thanks," the girl replied.
The firefighter looked a little closer. The girl had tied the wagon to her dog's collar and to the cat's testicles.
"Little partner," the firefighter said, "I don't want to tell you how to run your rig, but if you were to tie that rope around the cat's collar, I think you could go faster."
The little girl replied thoughtfully, "You're probably right, but then I wouldn't have a siren." 


Bank news

"Bigger is better" with some things, right? For those that think it applies to banks, and for those who like lists, S&P Global Market Intelligence finds the largest US banks by assets as of the end of Q1 in order were: JPMorgan ($2.55T); Bank of America ($2.24T); Wells Fargo ($1.95T), Citigroup ($1.82T), US Bancorp ($450B); PNC ($371B), TD Group ($371B), Capital One ($349B), Bank of New York Mellon ($338B), and HSBC North America ($295B).

People's Intermountain Bank ($1.7B, UT) will acquire Town & Country Bank ($135mm, UT) for about $20.9mm in cash (35%) and stock (65%). Doolin Security Savings Bank ($48mm, OH) will combine with Belpre Savings Bank ($48mm, WV) in a merger of equals. In nearby Indiana Horizon Bank ($3.2B) will acquire Lafayette Community Bank ($172mm) for about $32mm in cash (10%) and stock (90%) or about 1.66x tangible book. And banks don't only have to buy banks, right? Peapack-Gladstone Bank ($4.0B, NJ) will acquire asset manager Murphy Capital Management Inc. (NJ) with its $850mm in assets under management.

Things aren't always rosy of course. Regulators closed Fayette County Bank ($34mm, IL) and sold it to United Fidelity Bank ($574mm, IN) under a purchase and assumption agreement. (United picks up one branch, all the deposits, and about 84% of the assets.)

Banks are where the money is... but what if you don't have much? SmartAsset did a study that considered affordability and livability factors to find the best cities for people who earn the U.S. median salary of $55,000.

Legal update

Clem Ziroli Jr., President of First Mortgage Corporation, reports that on May 18, 2017 attorneys for the corporation argued in U.S. District Court proceedings in Minnesota that claims by the RESCAP Liquidating Trust for $24.5M should be mostly dismissed, and that the remaining claims were overstated by 90%. RESCAP is the successor to the bankrupt unit of General Motors Acceptance Corporation's RFC, which was a dominant figure in the 2008 financial meltdown.

"RESCAP lodged claims of breach of warranty and representation at loan origination for loans dating back to 1999. First Mortgage argued that all claims for 93 of 169 loans should be dismissed for being brought after a 6-year Statute of Limitations had passed. First Mortgage also argued that all claims for another 46 loans should be dismissed because the damages claimed were actually caused by a superseding cause such as RFC voluntarily agreeing to a short sale or a loan modification. Then, First Mortgage also argued that RFC's actions to elect to do non-judicial foreclosure for 45 loans was a further basis for dismissing all but 6 of the 169 loans.

"Then, with respect to RESCAP's $1.4M claims for those last 6 loans, First Mortgage argued that RESCAP's claims were overstated by 90%, relying upon an August 2014 decision from the same courthouse about the same dispute against another RESCAP defendant which said,
'In May 2012, RFC declared bankruptcy in the Bankruptcy Court for the Southern District of New York. The dozens of lawsuits against RFC involved a balance of more than $100 billion in original loan principal. And because RFC extended a promise to repurchase faulty loans and investments as part of its offerings, RFC had already spent millions of dollars repurchasing investments and loans. After RFC declared bankruptcy, investors and other interested parties filed hundreds of proofs of claim. Ultimately, the bankruptcy court approved a global settlement of over $10 billion to resolve the claims against RFC. The settlement assigned the rights and interests of RFC to the ResCap Liquidating Trust.'

"The judge said First Mortgage may file its motions together with similar motions by the other RESCAP defendants, but must wait for expert discovery to be completed. That may be as early as Thanksgiving. First Mortgage is committed to continuing this fight."

The Office of the Comptroller of the Currency(OCC) issued Bulletin 2017-18: Violations of Laws and Regulations. The updated policy and procedures are effective on July 1, 2017 and apply to examinations of all national banks, federal savings associations, and federal branches and agencies. With these changes, the OCC aims to increase the effectiveness of its process for handling violations of laws and regulations. The updated policies and procedures provide the OCC with guidelines on consistent terminology, communication, format, follow-up, analysis, documentation, and reporting of violations.

Capital markets
Despite the arguably weak payroll number, the Fed Funds futures market (a way of gauging what all the smart folks think the probability is) increased their probability of a June hike to 93%. The 10 year continues to rally, and we are at the lowest yields since early November. The Trump "reflation trade" - $1 trillion on infrastructure plus tax breaks - continues to deflate, at least as far as bonds are concerned.

Friday, after the employment data, we had a nice treasury rally following the weaker than expected payrolls report as the 10-year note led the market higher, price-wise, and rates dropped with the 10-year yield dropping to 2.14%. (If employment is not strong, inflation is not an issue, so rates shouldn't go up, right?) And so on Friday the 10-year note price improved .5 and closed with a yield of 2.16% whereas the 5-year and agency MBS prices improved about .250 depending on coupon and maturity.

But it's a new week as we head into June. From overseas, scheduled news-wise, are two central bank decisions on Tuesday and Thursday. Also on Thursday is the UK general election - another election to talk about! Skipping over today (see next paragraph), tomorrow we'll have the JOLTS job openings figure, Wednesday is the MBA apps data from last week, Thursday is initial jobless claims, and Friday the 9th is...not much.

This morning isn't much either. We've had some 2nd tier productivity (unchanged in 1st quarter) and unit labor costs (+2.2%). Coming up later are some factory-orders numbers and ISM numbers. We launch the week with rates a smidge higher versus Friday's closing levels. As a proxy for rates in general, the 10-year's yield is 2.18% and agency MBS prices are worse nearly .125.
 

1 comment:

  1. Its actually 73 months from the time he when in plus 30 days of good time that equals 74 months. calculate how much house i can afford

    ReplyDelete