As reported here on HW last week, National City Corporation confirmed today that it has exited the wholesale mortgage origination channel.
The bank also slashed its dividend by nearly 50 percent in order to “position the company properly for the future,” and said it will issue additional capital in an effort to increase its tier-1 risk based capital ratio. (For readers needing a primer on capital requirements, click here).
In a press statement, National City said its decision to exit the wholesale mortgage channel will reduce staffing at its National City Mortgage unit by an additional 900 positions beyond the 1,700 announced partly in September.
The bank’s mortgage arm will continue to originate loans via its national retail office network, as well as through 1,400 National City Bank branches in nine states.
“We remain committed to the mortgage business, as the home mortgage is an essential consumer product,” said Raskind. “However, it is clear that origination volumes will be lower going forward, and we are configuring our mortgage business to operate profitably in that environment.”
National City also announced a 49 percent reduction in its quarterly dividend to $0.21 per share from $0.41 per share, with president and CEO Peter E. Raskind saying that the bank “did not take the decision to reduce it lightly.”
The move to preserve capital came with a decision to raise even more:
In addition to the dividend action, National City also intends to issue non-dilutive, Tier 1 capital in the first quarter of 2008. These actions will accelerate previously stated plans to increase capital ratios to the high end of their respective target ranges: 5 percent to 6 percent for tangible common equity and 7 percent to 8 percent for Tier 1 risk-based capital.
The bank has been heavily-focused on ‘right-sizing’ its operations. Third quarter staffing in core bank operations saw approximately 800 positions eliminated, the bank said, combined with the announced cuts in mortgage banking. Combined, National City said it had reduced headcount by a total of 3,400 positions going into 2008.
Standard & Poor’s said the move by National City to exit wholesale lending and raise capital will not affect the bank’s ratings.
For more information, visit http://www.nationalcity.com.
Another regional bank is facing mortgage problems: Indiana-based Horizon Bancorp said Wednesday that it increased loan loss reserves by $1.4 million in December to address problems in both its wholesale mortgage and indirect auto loan portfolios.
HW reported on December 26 that the effects of the credit crunch were reaching beyond national banks and into smaller, more local operations.
Citing “credit quality deterioration” in a press statement, Horizon said that its total loss provisions for the fourth quarter are expected to be $1.77 million, compared to a provision of $550 thousand in the third quarter.
Horizon’s wholesale mortgage portfolio, $8.9 million at the end of December, represents approximately 1 percent of its total loan portfolio of approximately $889 million. The bank said it exited wholesale mortgage origination in June 2007.
Horizon also said that its auto portfolio has suffered as the bank “has experienced an increasing trend in repossessions and voluntary surrenders of vehicles.” (So-called ‘jingle mail’ isn’t just for houses, apparently).
Despite the additional charge, Horizon said that it anticipated to report 2007 earnings that bested 2006’s total.
Disclosure: The author held no positions in HBNC as of when this post was published.
We do not need congressional intervention to resolve the current sub prime mortgage fiasco. The market place will and can resolve these issues readily itself without government intervention and it is doing it every day.
The problem is that many people involved in this situation simply are unaware of exactly how to navigate this problem successfully thus they crash and burn and loose everything.
This is how to do it.
1. Have the mortgaged house appraised. It should be valued significantly less now then when you last mortgaged it, as the real estate market has declined markedly during this time period.
2. Arrange for the house to be refinanced by a private lender not a regular normal brick and mortar bank. Use the numbers the new appraisal provides irrespective of the size of the first mortgage.
3. Clearly the refi will be significantly less then the current mortgage and there is the issue. We must then convince the original mortgagor to release and take a loss accepting the new refi money as the total payoff and forgiving the shortfall.
This is were the skill is required and there are many issues and problems with this part of the plan, but it can be done.
You may need the assistance of an expert in negotiating this, however this is the way out...it can be done.
If your credit score needs boosting this too can be worked on.
In short, we do not need the government to get involved in commercial enterprise. Let the market provide the answers. Allow the market to resolve this dilemma and frankly, the answer and strategy described above leaves you in better shape then you were before... hows that for a solution.
Call me if you need a referral to someone who can handle this matter for you...successfully.
Most people don't spot the signs that might help them avoid going bankrupt or losing the house. Going bust on a personal level does not happen overnight it takes and time and bad management in the majority of cases. Over time the walls start closing in and before you know it you've lost the house, the car or the lot. The best plan of attack is to avoid this situation at all cost! You need some foresight when making personal finance decisions, for example the 12 / 24 month interest free deal look great on the surface but the real cost is hidden over the term of the agreement and people get suckered into them time after time. You need to ask you what circumstances are going to change in the future that is going to allow you to pay that debt, why can't you pay it today? If you answer honestly then you most probably will walk away. They don't teach financial literacy in school sadly. The rule is simple, don't borrow to buy consumable items that lose value it's just not smart. Learn to go over the fine print with a microscope, you will need to do this to find the hidden land mines. think national sub prime disaster, I can't offer up a more valuable example. Consider this also, the cheaper the item the worse the finance package is going to be for the consumer. To make it viable for the seller they are going to try and make big margin on the finance. Small item price = high price for you. Credit cards are pretty much evil unless you know how to manage them, if you must have one set the limit low and pay it off inside the monthly interest free period to avoid the bank fees. A small financial hole is much easier to get out of than a big one, never take on extra debt unless it's a matter of necessity. A home loan is the top of the tree, car loans are second, think long and hard about any debt that goes beyond these two items. Cars and homes you need the rest you live without, the don't teach you this in school but it's uncommon sense most people need to learn and seldom will.