Posted by RESPA Dog

Feb. 12 (Bloomberg) — Merrill Lynch & Co. Chief Executive Officer Stanley O’Neal was willing to lose $230 million to catch Bear Stearns Cos. and the shakeout is just beginning.

That’s because Merrill is determined to capture a dominant share of trading in bonds backed by home loans, the fastest- growing debt market since 1995 and this year’s most troubled. O’Neal’s enthusiasm for mortgages to potentially delinquent borrowers coincides with the highest default rate in more than six years, a record contraction in demand for so-called subprime loans and descending bond prices.

Merrill already has bankrolled two home lenders that subsequently failed and purchased a third, First Franklin Financial Corp., for $1.3 billion, just before HSBC Holdings Plc disclosed that its bad-loan provisions increased 20 percent because of the unraveling U.S. subprime market.

“You’ve got to remember'’ that New York-based Bear Stearns, the perennial leader in mortgage bonds with only a quarter of Merrill’s 56,000 headcount, “got into this business at the height of the boom, when you could not lose,'’ Angelo Mozilo, Countrywide Financial Corp.’s CEO, said in a …..

Read more….

Rick Soukoulis, the CEO of LoanCity Inc. in San Jose, said that the industry is still learning to manage the conflicts between trading partners that arise from early-payment defaults.

LoanCity revised its practices in this area in August, he said. "As soon as we get an EPD [buyback] request, we notify an account executive, contact the borrower directly, get all the servicing information, and work with our brokers to get the borrower a new mortgage that is proper to their payment habits, and then we work with our buy side to go through each request. "If there’s really a problem, we indemnify or make it whole. … You have to push it back to the broker, because the broker values his relationship with us," Mr. Soukoulis said

Buybacks could be "an existential threat" for some lenders that do not have big balance sheets, Mr. Poulos said. "If you have to buy back even 5% of your pool, that’s a tremendous amount of capital," he said. "It would hurt a lot if you had to sell it at 90 cents on the dollar. But if you have to sell it at 75 cents on the dollar … that’s a tremendous amount of pain."

Read more…

HARTFORD, Conn., Feb. 9, 2007 (PRIME NEWSWIRE) — The law firm of Schatz Nobel Izard, P.C., which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Central District of California on behalf of all persons who purchased or otherwise acquired the publicly traded securities of New Century Financial Corp. (“New Century'’ or the “Company'’) (NYSE:NEW - News) between May 4, 2006 through February 7, 2007, inclusive, (the “Class Period'’).
 
The Complaint alleges that New Century and certain of its officers and directors violated Federal Securities laws. Specifically, defendants made false and misleading statements and concerning the Company’s operations and financial results for the first three quarters of 2006. New Century is a mortgage finance company that makes a substantial number of residential mortgage loans. It does not hold these loans but sells the loans to banks and investors. The purchasers can require New Century to repurchase loans which become troubled.

Read more…

Posted by RESPA Dog

Feb. 8 (Bloomberg) — HSBC Holdings Plc Chief Executive Officer Michael Geoghegan will shake up management and change lending policies after the bank’s losses from bad home loans in the U.S. increased.

HSBC is setting aside $1.76 billion, 20 percent more than analysts estimated for bad-loan provisions in 2006, because the U.S. mortgage business is worsening, it said late yesterday. Shares of Europe’s biggest bank today dropped the most in eight months.

“The buck stops with me,'’ Geoghegan said today at a press conference in London. “We will resolve it.'’ He wouldn’t say whether HSBC will need to raise bad-debt provisions again in 2007.

Earnings growth at HSBC, the world’s third largest lender, has trailed global rivals including Bank of America Corp. and JPMorgan Chase & Co. HSBC spent $15.5 billion in 2003 to buy Household International Inc., which makes loans to U.S. consumers with poor credit records. Investors have criticized Chairman Stephen Green and Geoghegan for hurting HSBC’s stock with the Household takeover.

“I am responding, and more action will be taken,'’ Geoghegan said. “This is a problem, we have taken the severity on board.'’

Among the planned changes, HSBC U.S. Group Executive Brendan McDonagh will take a bigger role at the finance company, HSBC Finance Corp., Geoghegan said today. The Prospect Height, Illinois- based unit has been run by Bobby Mehta.

HSBC will also seek to make loans to immigrant communities from Asia and Eastern Europe in Texas and Florida, Geoghegan said. HSBC management made the mistake of “going for volume'’ and selling second lien, or second charge mortgages, he said.

Read more…