kcf, welcome to the board, I don't recall your ID before tonight. Hopefully you will continue to stay around.
(article from PR newswire)
"Lenders' diminished purchase mortgage demand outlook is broadly in line with the softened consumer housing sentiment seen in the August National Housing Survey results released last week," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges." These latest third quarter results are largely consistent with Fannie Mae's study released last month, titled "Impact of QM," that shows larger lenders are more likely than smaller lenders to pursue non-QM loans. "Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end," said Duncan.
Most lenders reported no major changes in their credit standards for the prior three months and expected no major changes for the next three months. However, larger lenders continue to be more likely than smaller lenders to say their credit standards eased over the prior three months and that they expect standards to ease during the next three months, in particular for non-GSE eligible and government loans.
(article by Zacks investments)
Wells Fargo mortgage production head Franklin Codel said “We’re tweaking our condo [condominium] approvals to make them more consistent with what Fannie [Mae] and Freddie [Mac] allow.”
The latest procedure will not require certain information that usually take longer time to collect and pose a hindrance for people seeking a loan. Previously, it was necessary for borrowers to obtain additional information from their condominium associations. These associations are basically their local group, which collects fees and administers decision-making for the apartment block regarding areas like fee collections, tax payments and the number of homes in foreclosure.
US condominium sales have not been able to reach their pre-crisis level when the real estate market was flourishing on simple credit standards. However, condominium sales have shown signs of improvement since 2008.
As the housing market is showing gradual improvement, Wells Fargo aims to capitalize on the rising demand for new home purchase. According to the company’s recently released survey, over two-thirds of Americans believe the time is right to invest in property. However, as per the survey many argue that higher downpayments might be required.
Wells Fargo’s mortgage revenues improved sequentially in second-quarter 2014 and management expects origination volumes to be higher in third-quarter 2014.
Notably, per a Bloomberg report last month, the bank has increased employees’ payoff, in a similar effort to boost the mortgage bu
Obviously they will lay off employees as they close out some old positions, as well as also having a smaller amount of new job openings created in the future.
BG, have you been over to the other board lately..... it looks like there is someone making up new aliases everyday just to mention how many how many posters dislike banks and mention moveon.org
welcome to the board, it will be good for WFC' interest income.
Not only will their interest income from their loans increase, but the rate they charge on their over night commercial loans will be impacted with almost an exact correlation.
The rate they pay out to their depositors will be lagging by a considerable amount of time until WFC has the need to attract additional depositors. WFC interest margin is presently about 1.75% below what they consider normal.
by steve johnson FT
The size of any potential fine is unquantifiable, so this represents an unquantifiable risk,” said Mr Woodford, a 25-year veteran at Invesco Perpetual who now runs his own asset management house.
His comments build on rising concerns that legal risk has overtaken more traditional metrics such as credit risk as the key uncertainty facing banks. Given the opacity and unpredictability of the former – bordering on an “unknown unknown” in the parlance of former US defence secretary Donald Rumsfeld – banks may be becoming uninvestable.
The best guide to whether this is so is presumably market valuation. Unsurprisingly, banks have recovered somewhat from their mid-crisis lows, with the global sector now trading on a price-to-book ratio of 1.14 and a historical price-to-earnings ratio of 13, up from lows of 0.6 and 6.7 respectively in early 2009, according to Datastream.
A Bank of America branch is seen in Times Square October 19, 2010 in New York City.
BoA: Fined £16.7bn by US to settle claims of mis-selling mortgage-backed securities
Yet prices are still well below historical norms. Excluding the crisis and post-crisis period, they have not been this low since 1985, and for most of this period were markedly higher.
Divining the reasons for the historically low valuations is harder. Banks are certainly less profitable than they once were, but this lowers the “e” in the p/e ratio, not the ratio itself.
Expectations for weak earnings growth in a low-economic-growth, low-interest-rate environment are probably a factor keeping prices depressed, alongside the lingering reputational risk of banks.
But, in the wake of a five-year lstock market rally, it does suggest the uncertainty engendered from by the seemingly endless taxing of banks via fines may be a factor in the still low valuations.
Steve Johnson Financial Times
gillie, its good to see you back home on the WFC board.
I have not been reading all the posts during the past week, but from what I can see those people posting that are from the from the occupy wallstreet persuasion posting on the WFC mb have been polite and sincere. There are many people out there that believe that bankers are immoral people that should be jailed even if they havent broken any laws on the books. They simply think we should simply change the laws and subsequently convict them
We should discuss our different views.
geo.banks, in the end it is hard to imagine the CEO to make a decision that will shrink their share price. But having said that, the CEO position may actually earn more if he chose to shrink the company as long as it leads to higher ROE and other metrics. For example, I don't think the present CEO, Stumpf, earns more than the prior CEO, Kovecevich, even though the bank is more than twice as big.
Interesting market next week.
This past month the dollar has strengthend, interest rates have been going up, yet employment numbers were lack luster.
Wells Fargo price action did relatively OK recently, I imagine its because interest rates have been increasing.
Both China and the Euro may be buying up the dollar in order to weekend their own currency, just a guess, but yet treasuries are selling off??
My wild guess is that the stock might continue to weaken until the Fed speaks again. Normally the stock market has done well after the Fed speaks due to removing the unknown.
With such moves in the currencies this past couple weeks, and with a move the treasuries of over 20 basis points Yellin has probably got her adrenalin flowing. She is having to deal with the sharp movements we have already had, while the following days after her meeting she is going to show her mettle in explaining what she meant.
With the strengthening dollar and the sinking price of oil, there will be many outspoken people on CNBC touting to stay the coarse. Throw in the lack luster jobs this month and Yellin might flinch.
****continued**** by John Carney
What's more, persistently low interest rates and narrow credit spreads mean the rewards for these risks are vanishingly small. It makes more sense for a bank to just hold the line and only make loans that its internal models consider low risk.
This could kick off a negative cycle that feeds upon itself: Without growth in low-income lending, the FHFA's new goals could just shift demand away from other types of mortgages. Banks will then be faced with the choice of shrinking their other mortgage books or piling additional mortgage exposure onto their own balance sheets. The latter seems unlikely as banks are still attempting to slim down their home-loan exposure.
It is possible that nonbank mortgage lenders will step into the gap, making the low-income loans that Fannie and Freddie want to buy. But that has its own risks, as nonbank lenders aren't as tightly supervised as the banks. In fact, it was the growth of nonbank lenders that helped push the mortgage market over the edge of sanity during the last housing bubble.
In any case, the new goals seem like a recipe for shrinking bank mortgage lending—and therefore bank earnings.
Yes, it seems to be heading that way, that is unless some fairness toward the banks starts to take place. As it stands right now, our country has lost its sense of fairness in that the political winds are blowing so hard against the banks that underwriters are afraid to approve many loans in fear of literally going to jail.
We have loans being put back onto Wells Fargo for such minor things that would shock taxpayers if they knew the facts. What is casually referred to as fraud by media riles up the American public over such simple mistakes as typo'.
The pendulum has swung to outrageous lengths, but if regulators can reverse coarse banks need not to tighten up any more than common sense would dictate.
Back when Bush was in office, congress came up with the idea of having FnF increase their loans to low income from 50% to 55% of their book. The appropriate response by FnF should have probably been to actually reduce the total number of loans they did in order to get the percentages to line up with the law, but instead they increased their market share unfortunately.
Now it looks like the banks are going to reduce the number of their loans because they are smart, they dont want to get burned. John Carney wrote a great article.
I should also mention that the Wells Fargo board gets taken over by a crazy guy every once in a while, and during one of his stints I just couldnt take it any more. If you go over they now, he gave over 300 thumbs up on one post that was negative toward Wells Fargo. I have zero doubt that this guy has that many aliases.
By John Carney:
The latest plan to juice the mortgage market and improve access to credit could backfire.
The Federal Housing Finance Agency, which regulates Fannie Mae FNMA -2.81% and Freddie Mac, FMCC -2.86% wants to make it easier for low-income Americans to take out mortgages and refinance home loans. Late last month, it released proposed goals for Fannie and Freddie aimed at increasing their support for such loans.
Under the FHFA proposal, loans financing single-family-home buying by low-income families would continue to make up 23% of mortgages purchased by each of Fannie and Freddie. The share of low-income family refinancings, however, would rise to 27% from 20%. In addition to this, regulators would have the companies raise the share of purchases of mortgages in low-income areas with sizable minority populations.
The FHFA hopes that increasing demand for low-income mortgages from Fannie and Freddie will spur lenders to make more of these loans. That is certainly the way things worked before the financial crisis, when lenders could be counted upon to quickly adapt their lending practices to satisfy the appetites of the mortgage giants that dominate housing-finance markets.
This time around, lenders might not be so willing to follow Fannie's and Freddie's lead. The risk is that the expansion of low-income goals may actually lead to a lending contraction. That is because banks don't want to make any type of loan that they wouldn't want to keep on their balance sheet.
As multibillion-dollar mortgage settlements with the Justice Department and other government entities have made clear, doing otherwise opens them up to liability for allegedly faulty underwriting. And repurchase demands can force them to take back loans they never planned on holding.
I can speak for myself, I migrated here because I listened to your CC and investor presentations, in tandem with Wells and USB used to be very much alike before Wells morphed into something they used to tout they were not.
I think everyone interested in bank stocks should listen to USB' CEO give CC because he is a straight shooter and people like us can learn alot by listening to him. And because I used to listen to USB' CEO I naturally migrated over here even though I have never owned their stock.
Yeah, I read that article a few days ago, the author mentioned a capital ratio of 12.5% which would be a hefty increase. I don't know where he got that number from , whether it was from the CFO or some other source.... but 12.5% would probably not get done organically, but rather through issuing equity which is very aggravating, imo
C.Dillion, I understand why such an article "reads" as if it is something drastically nefarious at Wells Fargo, but if you worked in a bank you'd understand it to be much different. There are so many rules and regulations that banks are required to follow perfectly, that whenever a depositor is caught laundering money the bank gets blamed and fined, that is unless they followed regulations perfectly.
Don't think of it as Wells Fargo, the banking institution being guilty of being greedy, but rather an employee or two that did not follow all of the rules.
Regulators have been de-risking the banking industry during our lifetimes, this is a newsworthy story mainly because it garners so much interest from the public, otherwise I personally do not think increasing the capital ratio' for banks really impacts the average joe.
However there have been other regulations hoisted upon the banking industry that has had a major impact on many of us checking account holders such as when Walmart and Target successfully lobbied congress to lower the cost of fees Walmart and Target had to pay banks with each debit card swipe. It unfortunately changed the banking business model to take away free checking thus adding onto Walmart and Targets profits.
If Wells Fargo chooses not to grow any larger, or even shrink itself, I personally am of the opinion that it won't hurt america' competitivenss.
And as far as stockholders, a safer bank that has a higher payout ratio could in theory trade at a mutliple as high as General Electric, however that has yet to be seen. I would predict Wells will continue to grow at its slow and methodical rate no matter how much capital requirements are imposed upon it.