Mortgage Contract Values Down
Flagstar Bancorp Inc., the 10th largest U.S. mortgage underwriter, in one of a number of banks being pressured by Fannie Mae to go after delinquent loans in a more aggressive manner. Flagstar is controlled by MatlinPatterson Global Advisers LLC which channeled $350 million into Flagstar to reinforce the Flagstar’s finances after the company posted losses for the last eight quarters. The seriously delinquent loans are costing more than they are worth to process. On August 17 the bank’s market valuation was $342 million although Flagstar handled around $60.5 billion of loans for Fannie Mae and Freddie Mac – almost twice the bank’s market valuation. If the government prevails, Flagstar Bank will have to sell the contracts for a loss. The report on August 17 is that Flagstar is participating on talks that have not settled yet. None of the players have made any statements regarding the sale as yet.
Business Foreclosures
The two telemarketing companies accused of fraud by the Federal Trade Commission for selling advance-fee credit cards they said were similar to Master Card and Visa but were actually only good for ordering items from the company’s web site or through their catalogs saw their assets go on the auction block Saturday, August 22nd. USA Financial LLC and American Financial Inc. aka Capital Financial Inc. was shut down in May of 2008 as part of a national sweep on telemarketing fraud and its assets were frozen. A year later the BMW, Porsche, Mercedes Benz, limousine, boat and other assets of the companies are on the auction block. It is estimated there is over $700,000.00 in value that can be used to pay off claims against the companies.
Financial Services Legislation
FDIC’s deposit insurance fund is looking at raising the FDIC premiums as high as 25% of the banking industries pretax income to keep the fund solvent. Regulators closed Guaranty’s banking unit on Friday, August 21st and sold the assets of the lender to Banco Bilbao Vizcaya Argentaria SA. The Spanish bank and the FDIC agreed to share the losses. The Bank United Financial Corp, Colonial BancGroup Inc. and now the Guaranty Financial Group Inc. failures this year have cost the FDIC fund about $10.7 billion. At the end of March the fund reportedly only had $13 billion remaining. This latest sale of assets to a non-U.S. bank is due to the difficulty in finding healthy banks to buy the failing ones. Banking analysts are projecting 150 to 200 more American banks will fall before the current banking crisis passes. Richard Bove of Roshdale Securities believes that these closures will force the FDIC to look outside the U.S. system for private equity funds and banks to maintain the United States banking system. For that reason relaxation of the regulations around foreign entities involvement in the banking industry is being sought.
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