Archive for the 'Citigroup' Category
April 22nd, 2009, 2:21 pm by Jeff Collins
 Some defunct Orange County lenders accounted for the highest proportion of bad loans generated during one of the most notorius periods for bad-loan originations, DataQuick reported today.
In its latest report on defaults and foreclosures, the real estate data firm noted that the highest percentage of defaults occurred from August through November 2006 — a period DataQuick called “a particularly toxic period” for issuing home loans.
Nine percent of the loans issued during that period ended up in default, DataQuick said. Then, it added:
“The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6 percent).”
All three were Orange County subprime lenders before they bit the dust.
Other lenders’ default rates for loans originated in this period: IndyMac, 18.9 percent; World Savings, 8 percent; Countrywide, 7.7 percent; Washington Mutual, 6.3 percent; Wells Fargo, 3.4 percent; and Citibank and Bank of America, less than 1 percent apiece.
In addition, DataQuick reported:
- Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice.
- Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far.
- Of the 3 million in 2006, 8.5 percent have so far resulted in default.
- Of the 2.1 million loans made in 2007, it’s 4.6 percent – “a percentage that’s likelyto rise significantly during the rest of this year.”
DataQuick said the figures suggest that 2006 was “a period where underwriting criteria were particularly lax.” It quoted company President John Walsh as saying:
“The nastiest batch of California home loans appears to have been made in mid- to late 2006, and the foreclosure process is working its way through those. Back then, different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low-down-payment loans, interest-only loans, stated-income loans, etc. But if you combine these elements into one loan, it’s toxic.”
The figures were part of a DataQuick news release reporting that both California and Orange County recorded a record number of default notices during the first three months of this year.
Statewide, 135,431 default notices were issued during the January-to-March period; O.C. accounted for 8,427 of those. Both figures were up 19 percent from the year before. For more on O.C. foreclosure and default figures in March, CLICK HERE!
To read the Register’s award-winning analysis of subprime lending, CLICK HERE!
Read more …
Posted in: Bad debt • Bank failures • Bank of America • Citigroup • Countrywide • Defaults & Foreclosures • IndyMac • Loan underwriting • Washington Mutual • dataquick • dataquick • delinquencies • distressed homes • distressed properties • foreclosure • foreclosures • IndyMac • liar loans • notices of default • Orange County • record • REO • subprime | 4 Comments »
March 10th, 2009, 7:52 am by Mathew Padilla
The Associated Press reports Citigroup has had an operating profit so far this year. Here’s more:
In a letter sent to employees Monday, Citi Chief Executive Vikram Pandit said the bank had an operating profit of $8.3 billion before taxes and special items through February - its best performance since the third quarter of 2007.
Pandit declined to say how large credit losses and other one-time items have been that would at least partially offset profit.
As I write this, the Dow is up about 4%. And Citi’s stock is up 27% — of course that translates to just 28 cents or so, since the stock has been hovering around $1.
Meanwhile the Wall Street Journal reports more grim news on Citi:
Barely a week after the third rescue of Citigroup Inc., U.S. officials are examining what fresh steps they might need to take to stabilize the bank if its problems mount, according to people familiar with the matter.
Federal officials describe the discussions, which are wide-ranging and preliminary, as “contingency planning.” Regulators are trying to ensure that they are prepared if Citigroup takes a sudden turn for the worse, which they aren’t expecting, these people say.
The Journal story is short on details. Some members of Congress, especially Republicans, are becoming more hostile to bank coddling. Sen. Richard Shelby, R-Ala., recently told George Stephanopoulos on ABC:
STEPHANOPOULOS: Well — well, we’ve seen Secretary Geithner and the president say that now we’re going to take a middle-ground approach. They’ve out the beginnings of their plan on the banks. You don’t approve of that?
SHELBY: I don’t think it’ll work. I think that they’ve got to close some big banks. They don’t want to do it. We’re — we’re going down the same road Japan was going down.
STEPHANOPOULOS: So you’re in the same place — I had Senator Lindsey Graham on the problem a couple of weeks ago. He said we’re going to have to close, nationalize some of the big banks.
SHELBY: I don’t want to nationalize them. I think we need to close them…
(CROSSTALK)
STEPHANOPOULOS: So when you say “close,” what do you mean by them?
SHELBY: Close — close them down, get them out of business. If they’re dead, they ought to be buried. We bury the small banks; we’ve got to bury some big ones and send a strong message to the market. And I believe that people will start investing in banks. People aren’t…
STEPHANOPOULOS: So you’re talking Citigroup?
SHELBY: Well, whatever. Citi’s always been a problem child.
Shelby seems to be saying Citi should be shut down, but I think he means, what some economists have said, that Citi should be seized, its investors wiped out, its management fired, its balance sheet cleaned up and finally what’s left of the company should be resold to new investors who may or may not keep the brand.
When he mentions small banks, that is likely a reference to the FDIC, which has been seizing deeply troubled smaller banks on a weekly basis and selling them or their deposits and assets to healthier banks. The largest failure like this has been Washington Mutual in which JPMorgan got its deposits, branches and loans.
But I doubt there is anyone large enough or healthy enough to take all of Citigroup, so after an FDIC/government seizure it will take more time to clean up the mess. The government will likely need to sell it in pieces or shift the bad assets to some type of bad bank.
Other lending/banking stories …
Posted in: Bailout Buzz • Citigroup • Company Watch • Meltdown | 4 Comments »
March 5th, 2009, 11:43 am by Mathew Padilla
(Update: $1 rule suspended.)
Stock of Citigroup, one of the largest financial companies in the U.S., today dropped below $1 and is trading around $1 as I write this. If any company’s stock on the NYSE consistently trades below $1, it is eventually removed from the exchange. However, as reader T.O. Jason pointed out, the NYSE late last month relaxed the rule until June 30.
Here’s a Google snapshot:
Posted in: Citigroup • Company Watch | 7 Comments »
March 3rd, 2009, 8:18 am by Mathew Padilla
The Associated Press reports:
Citigroup Inc. said Tuesday that it will lower mortgage payments for some homeowners to an average of $500 a month for three months as part of a new program to help the unemployed.
The struggling bank makes the move as President Barack Obama looks to lenders to adjust the way loans are handled.
Citigroup’s new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government’s exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months.
I am not sure what lowering payments for three months accomplishes, since it can take a lot longer to find a job. But I suppose every little bit helps. However, Citi must own and service the mortgage and it must be a conforming loan. That will limit those who qualify.
In other news…
Posted in: Citigroup • Company Watch • Meltdown | 17 Comments »
February 11th, 2009, 3:00 am by John Gittelsohn
A new documentary on CNBC, “House of Cards,” analyzes the economic meltdown and points to Orange County as the birthplace of the subprime loans that infected the world financial system.
The 90-minute program, which first airs Thursday, features locals such as Bill Dallas, founder of Ownit; Lou Pacific, a Mission Viejo real estate consultant; Daniel Sadek, founder of Quick Loan Funding — and a few clips of this reporter.
It also connects the born-in-O.C. mortgages to Wall Street and to Narvik, Norway, where a town went broke investing in CDOs.
Here’s a clip …
Is Orange County the birthplace of the financial crisis?
By the way, Orange County’s role in the subprime experiment is chronicled in the book Chain of Blame, co-authored by blogger Mathew Padilla.
Related stories …
Posted in: Bad ads • Bank woes • Bear Stearns • Citigroup • Credit Crunch • Meltdown • Subprime news • TV spots • Uncategorized • Wells Fargo • Bill Dallas • CNBC • Daniel Sadek • House of Cards • Lou Pacific | 55 Comments »
January 22nd, 2009, 4:00 pm by Mathew Padilla
Ellington Management Group LLC, a hedge-fund firm focused on mortgage bonds, sued Ameriquest Mortgage and other units of Orange-based ACC Capital Holdings over soured subprime home loans, reports Bloomberg. Here’s more:
Funds run by Old Greenwich, Connecticut-based Ellington saw the value of $354 million of investments in securities backed by the loans “largely lost” following misrepresentations about the debt’s risks, according to a complaint filed Jan. 14 in federal court in New York.
Ellington joins M&T Bank Corp. and HSH Nordbank AG in turning to the courts to recoup losses from bad mortgage bonds. Insurers including PMI Group Inc. and MBIA Inc. have sought to recover or block claims through lawsuits. Ameriquest’s lending failed to meet its own guidelines when it didn’t verify borrowers’ employment, ignored past late payments and misstated whether they lived in properties, according to the complaint.
The defendants’ “liability arises not from increasing default rates associated with a general economic downturn, but from their fraud — from lying to Ellington about the riskiness of the loans,” Ellington said in the complaint.
Defendants in the lawsuit against Ameriquest, parent ACC Capital Holdings and other related companies — once collectively the largest U.S. subprime lender — include businesses bought by Citigroup Inc. in 2007, according to the complaint. The suit didn’t name Citigroup.
American Banker reported the lawsuit on its Web site earlier today.
Bloomberg goes on to say that Chris Orlando, a spokesman for ACC Capital, didn’t immediately return a telephone message seeking comment. ACC shut down the Ameriquest retail mortgage business in 2007. Roland Arnall, who founded Ameriquest and was influential in creating the modern subprime industry, died in March 2008.
As for Citigroup, it has repeatedly said it bought ACC’s servicing and Argent Mortgage wholesale lending businesses, without actually buying the companies. Mark Rodgers, a spokesman for Citi, told Bloomberg, the units “are not successors to Ameriquest or Argent, they did not originate any of the loans at issue, nor were they involved in the 2005 to 2007 securitizations referenced.”
Read full story HERE. I think it’s reasonable to assume there will be widespread litigation from the subprime debacle, dragging on for years and years.
And in other news…
Posted in: Ameriquest • Citigroup • Meltdown | 4 Comments »
January 8th, 2009, 1:07 pm by Mathew Padilla
A trio of senators say Citigroup will support their plan to allow bankruptcy judges to reduce what homeowners owe their lenders, in an effort to stem foreclosures, reports the Associated Press.
But a key point: The change would only impact loans made before the bill is enacted (if it ever becomes law). In my opinion that would encourage loan servicers to modify home loans so borrowers can better afford them — otherwise a deal could be forced upon them by a judge. But it would not help prevent another fiasco of reckless lending, since future loans would not be impacted.
The senators, all Democrats, are Richard Durbin of Illinois, Charles Schumer of New York and Christopher Dodd of Connecticut. Read the short AP story HERE.
And vote in a poll on the topic HERE.
Read more…
Posted in: Citigroup • Defaults & Foreclosures • Meltdown | 12 Comments »
November 24th, 2008, 12:00 pm by Mathew Padilla
Some economists are attacking the government’s plan to invest $20 billion in ailing Citigroup and back $306 billion of its assets. The latest plan, announced Sunday, follows a $25 billion infusion in the bank last month.
Paul Krugman, nobel-prize winning economist, writes…
“A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.”
For a good roundup of reactions from economists see THIS.
Nearly 20 readers commenting on my previous post on the Citigroup deal are strongly against the bailout. ‘SavinginLA’ posted a link to a Bloomberg piece on Citigroup’s nebulous capital.
Here’s a sample of comments from readers:
Cliff:
“More money we don’t have! Those printing presses are on overtime!!”
ocobserver:
“The height of irony. Capitalism has died. It’s done. Put a fork in it. If I ran a competitor financial institution that played by the rules, did not take on risky toxic investments, did not over leverage, did not allow greed to overcome prudent business practices by loaning money to unqualified borrowers, etc…. I would be furious. The government bailout would put me at a significant competitive disadvantage. And if I was not ‘too big to fail’ based on government standards Citigroup could theoretically put me out of business! How many more bailouts can the taxpayer afford without suffering the obvious consequences? We can’t. We’re maxed out. If we don’t go into a complete meltdown mode in 2008 expect one in 2009. No way is this sustainable. You simply can’t spend your way out of this mess that they have created. Impossible. Math just doesn’t work that way.”
Buy Houses Now!:
“In order to save the taxpayer’s bank account, it became necessary to empty it.”
And in other mortgage news…
Posted in: Citigroup • Company Watch • Meltdown | 10 Comments »
November 23rd, 2008, 11:23 pm by Mathew Padilla
The U.S. government is coming to the aid of financial giant Citigroup, by backing $306 billion of its loans and related assets and injecting it with $20 billion in capital.
A joint statement by the FDIC, Treasury and Federal Reserve states:
The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital.
As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.
With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.
Read the full statement HERE.
By the way, not long ago Citigroup was the FDIC’s pick to takeover Wachovia, another financial giant in trouble. But Wells Fargo stepped in with a sweeter deal and got Wachovia — that now appears fortunate.
And in other news…
Posted in: Bailout Buzz • Citigroup • Company Watch | 26 Comments »
November 17th, 2008, 8:28 am by Mathew Padilla
Citigroup said today it plans to cut more than 50,000 jobs as it reduces its headcount from 352,000 at the end of September to under 300,000. The Associated Press reports that the job cuts could come in “the coming quarters.”
Those figures are posted on the company’s Web site as part of a town hall presentation that CEO Vikram Pandit is giving today to employees in New York. According to AP, the Citigroup spokesman said the cuts would be across the board. It is not known how many of those job will be in Orange County. (See the presentation HERE.)
Citigroup’s employment peaked in late 2007 at 375,000 workers.
A little recent history: Citigroup almost bought fellow ailing financial giant Wachovia, and last year it bought Orange-based subprime wholesaler Argent, which it later shut down.
And in other mortgage news…
Posted in: Citigroup • Company Watch • Meltdown | 8 Comments »
October 14th, 2008, 6:56 am by Mathew Padilla
President Bush this morning said the government will buy shares in banks, injecting them with capital in a bid to make credit more available to businesses and consumers. The government plans to spend as much as $250 billion as part of the $700 billion plan previously approved by Congress.
 The Associated Press reports the Bush plan will focus on nine major banks initially, including all of the nation’s largest financial institutions. Read that story HERE.
“This is an essential short-term measure to ensure the viability of America’s banking system,” Bush said “And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors.”
He said the plan is “not intended to take over the free market, but to preserve it.”
Here are other key points Bush outlined:
- “Second, and effective immediately, the FDIC will temporarily guarantee most new debt issued by insured banks. This will address one of the central problems plaguing our financial system — banks have been unable to borrow money, and that has restricted their ability to lend to consumers and businesses. When money flows more freely between banks, it will make it easier for Americans to borrow for cars, and homes, and for small businesses to expand.
- Third, the FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts. These accounts are used primarily by small businesses to cover day-to-day operations. By insuring every dollar in these accounts, we will give small business owners peace of mind and bring stability to the — and bring greater stability to the banking system.
- Fourth, the Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper. This is a key source of short-term financing for American businesses and financial institutions. And by unfreezing the market for commercial paper, the Federal Reserve will help American businesses meet payroll, and purchase inventory, and invest to create jobs.”
Read his full speech HERE.
And in other meltdown news…
Posted in: Bailout Buzz • Bank of America • Bank woes • Citigroup • Meltdown • Wells Fargo | 12 Comments »
October 1st, 2008, 3:00 am by Ronald Campbell
The list of major subprime lenders for 2006 and 2007 resembles the casualty roster from the Battle of Verdun in World War I. Only difference: way fewer walking wounded this time.
Of the 30 biggest subprime home lenders in 2006, measured by dollar volume, 22 have gone bankrupt, shut down, been sold or been seized by Uncle Sam. Most of the survivors have scaled back.
Yesterday we began exploring The Fed’s Home Mortgage Disclosure Act database by describing how Washington Mutual quadrupled its bet on subprime lending in 2007, just in time for the housing downturn.
Today we’re going deeper, using HMDA data to show what happened to the top 30 subprime lenders nationwide in 2006; these 30 together accounted for 64 percent of the subprime home loans made that year.
The list makes for grim reading:
| Lender |
Rank 2006 |
Volume 2006 (billions) |
Rank 2007 |
Volume 2007 (billions) |
Status |
| New Century Mortgage Corp. |
1 |
$36.9 |
NA |
$- |
Bankrupt |
| Countrywide Home Loans |
2 |
$36.4 |
2 |
$17.4 |
Bought by BofA |
| Fremont Investment & Loan |
3 |
$30.0 |
26 |
$3.0 |
Shut down |
| National City Bank |
4 |
$30.0 |
17 |
$4.3 |
Struggling |
| WMC Mortgage Co. |
5 |
$27.1 |
330 |
$0.1 |
Shut down |
| Option One Mortgage Corp |
6 |
$23.9 |
7 |
$9.4 |
Shut down, servicing unit sold |
| Argent Mortgage Co. |
7 |
$21.2 |
36 |
$2.0 |
Shut down |
| Long Beach Mortgage Co. |
8 |
$18.2 |
NA |
$- |
Shut down |
| Wells Fargo Bank |
9 |
$16.4 |
9 |
$7.1 |
Wholesale unit closed |
| American Home Mortgage Corp. |
10 |
$14.5 |
0 |
$- |
Shut down |
| Accredited Home Lenders Inc |
11 |
$13.4 |
23 |
$3.4 |
Wholesale unit closed |
| Indymac Bank |
12 |
$12.2 |
3 |
$12.6 |
Seized by FDIC |
| BNC Mortgage |
13 |
$11.8 |
14 |
$5.0 |
Shut down |
| Decision One Mortgage |
14 |
$11.2 |
30 |
$2.5 |
Shut down |
| Equifirst Corp. |
15 |
$9.8 |
10 |
$6.7 |
Switched to FHA |
| Countrywide Bank |
16 |
$9.3 |
5 |
$11.1 |
Bought by BofA |
| Chase Manhattan Bank USA |
17 |
$8.0 |
8 |
$9.2 |
Wholesale unit closed |
| Greenpoint Mortgage Funding |
18 |
$7.3 |
15 |
$5.0 |
Shut down |
| Wilmington Finance Inc. |
19 |
$7.2 |
19 |
$4.1 |
Wholesale unit closed |
| Novastar Mortgage Inc. |
20 |
$7.1 |
39 |
$1.8 |
Shut down |
| Resmae Mortgage Corp. |
21 |
$6.8 |
48 |
$1.2 |
Shut down |
| Homecomings Financial Network |
22 |
$6.8 |
18 |
$4.2 |
Shut down |
| Beneficial Co. |
23 |
$6.0 |
11 |
$6.7 |
Operating |
| First Magnus Financial Corp. |
24 |
$5.9 |
NA |
$- |
Shut down |
| Washington Mutual Bank |
25 |
$5.6 |
1 |
$19.7 |
Seized by FDIC, sold to JPMorgan Chase |
| Encore Credit Corp. |
26 |
$5.0 |
NA |
$- |
Shut down |
| Lehman Brothers Bank |
27 |
$5.0 |
12 |
$6.2 |
Bankrupt |
| First NLC Financial Services |
28 |
$4.5 |
NA |
$- |
Shut down |
| People’s Choice Financial Corp. |
29 |
$4.5 |
NA |
$- |
Shut down |
| HFC Co. |
30 |
$4.4 |
16 |
$4.9 |
Operating |
Countrywide shows up twice by the way because it operates under two federal regulators. The Fed oversees Countrywide Home Loans while the Office of Comptroller of the Currency supervises Countrywide Bank.
WaMu was not the only major lender that rolled the dice on subprime in 2007.
World Savings made WaMu look timid, expanding its subprime business by seven times, from $1.5 billion in 2006 to $10.65 billion in 2007. Banking operations of its parent, Wachovia, were just taken over by Citigroup in a shotgun marriage arranged by the Fed.
And then there’s Bear Stearns — remember them? — who doubled their subprime lending from $1.95 billion in 2006 to $3.9 billion in 2007.
World Savings and Bear Stearns were both too small in 2006 to make our list.
Thanks to Matt for digging up the status of all the lenders. In many cases that involved grave-digging.
We’ll continue our exploration of HMDA in future posts. If you have an idea, please tell us in the Comments section or send me an e-mail.
Here’s more mortgage meltdown coverage:
Posted in: Bank woes • Bear Stearns • Citigroup • Countrywide • Credit Crunch • Fed • Fremont • IndyMac • New Century • Option One • Subprime news • Uncategorized • Washington Mutual | 18 Comments »
September 29th, 2008, 6:42 am by Mathew Padilla
Citigroup is buying the banking operations of struggling Wachovia Corp., in a deal facilitated by federal regulators and one that protects all consumer deposits, the Federal Deposit Insurance Corp. announced today.
Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, with the FDIC covering any remaining losses. In exchange, the FDIC gets $12 billion in preferred stock and warrants.
Unlike Washington Mutual last week, the FDIC says Wachovia didn’t actually fail and that deposits are safe.
Wachovia is keeping AG Edwards and Evergreen. Here are some other facts and sources of information on the deal, the latest in the ongoing financial meltdown:
- Wachovia has at least nine locations in Orange County. See the full list HERE.
- FDIC Chairman Sheila Bair said in a release, “For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits. There will be no interruption in services and bank customers should expect business as usual.” Read the full FDIC release HERE.
- The Associated Press has a good story on the deal HERE.
By the way, Citigroup previously tried to make a go at subprime lending by buying last year the wholesale (Argent Mortgage) and loan servicing businesses of subprime king Roland Arnall, who died earlier this year. In May, Citigroup said it was closing all that down or integrating it, cutting nearly 2,000 jobs (about 400 local ones) and shutting offices in Orange and Irvine.
And here’s more meltdown coverage…
And other mortgage topics…
Posted in: Citigroup • Company Watch • Credit Crunch • Meltdown • Wachovia | 10 Comments »
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