Friday, October 15, 2010

Banks Getting Hammered Again (BAC; C; JPM; WFC; XLF; FAZ)

The WSJ's Developments blog headline is:
Real-Estate News: Foreclosure, Foreclosure, Foreclosure
Here are their links:
Foreclosure Crisis Slams Banks: The mortgage-foreclosure crisis spilled into the financial markets, driving down bank stocks and weighing on mortgage bonds as investors take a grim view of the potential costs.
Big Banks Face Foreclosure Review: The Office of the Comptroller of the Currency is examining big mortgage servicers’ foreclosure practices, a move that could lead to regulatory reprimands of banks for botched foreclosure documentation.
For Bondholders, Foreclosed is Forewarned: Investors awakened Thursday to the potential for huge bank losses from the foreclosure mess. But bondholders who own mortgage-backed securities should also be worried.
Trustee in Bankruptcy Joins Foreclosure Case: A federal bankruptcy trustee joined forces with a Mississippi family in a lawsuit that may shed new light on one of the biggest players in the U.S. foreclosure system.
Signer Issue Raised for Wells Fargo: A Wells Fargo mortgage-servicing employee in Florida said that she signed “hundreds” of foreclosure affidavits a day without verifying the documents’ information.
Here's the lead story, by Mark Gongloff:
Foreclosure Crisis Slams Into Banks 

After Days of Shrugging Off the Debacle, Financial Markets Start to Penalize U.S. Banks
The mortgage-foreclosure crisis spilled into the financial markets on Thursday, driving down bank stocks and weighing on mortgage bonds as investors took a grim view of the potential costs.

Shares of U.S. banks fell, while the broader stock market was essentially flat. Bank of America Corp., potentially among the most affected, dropped more than 5%. Bank bonds also fell, and the cost of buying protection against a possible debt default by banks climbed.

"The level of uncertainty in the economy is at extraordinarily high levels to begin with," said Jack Scott, chief investment officer at BlackHawk Capital Management, a Charlotte, N.C., money manager that owns mortgage securities. "The foreclosure problem adds another layer of acute uncertainty."

So far, the foreclosure crisis hasn't affected consumer mortgage rates, which remain near record lows. They are closely linked to rates on U.S. Treasurys, which have tumbled in recent months.

The crisis has been escalating for several weeks, as banks suspend foreclosures across the country, citing flaws they have uncovered, including faulty or missing documentation. Tales of mismanagement within the foreclosure process—including so-called robo-signers, who were paid to rubber stamp documents without properly reviewing them—are emerging daily....
...Estimates of the size of the foreclosure problem are still forming. Some $154 billion in mortgages could be affected by foreclosure delays, according to an estimate this week by Laurie Goodman, senior managing director at mortgage-bond trader Amherst Securities Group LP in New York.

Morgan Stanley trading-desk analyst Greg Gore estimated in a conference call on Tuesday that as much as $134 billion of mortgage bonds held by the nation's four biggest banks could ultimately be affected by foreclosure delays....MORE