4 More Banks Fail, 30 Have Failed In 2010. Signs of Life In Private MBS Market.

4 More Banks Fail, 30 Have Failed In 2010
New York regulators on Friday closed the Park Avenue Bank with total assets of $520 million and total deposits of $494 million. The FDIC has arranged for Valley National Bank (NJ) to run it. (Valley National is also taking over LibertyPointe Bank, which was shuttered Thursday.) Down in Florida Old Southern Bank was shut down, and will be run by Centennial Bank out of Arkansas. And in Louisiana, Statewide Bank was closed by the Louisiana Office of Financial Institutions, which appointed the FDIC as receiver. Home Bank, also based in Louisiana, will assume all of the deposits.

Movement in MBS Market
There is indeed movement in the secondary markets for mortgages. The FDIC sold $1.81 billion of notes backed by 103 non-agency residential mortgage backed securities (RMBS) from seven failed bank receiverships. “The transaction was met with robust investor demand, with over 70 investors participating across fixed and floating rate series.” The investors included banks, investment funds, insurance funds and pension funds. The aggregate unpaid balance of the 103 securities was approximately $3.6 billion at the time of the sale, and the timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States.

Foreclosure Filings Down, Default Notices Up
Attribute it to whatever you like, RealtyTrac announced that foreclosure filings increased in February at “only” a 6% year-over-year rate, the slowest in four years, and actually declined from January’s number. Perhaps those foreclosure-prevention programs, legislation, and other processing delays are capping monthly foreclosure activity. Default notices, meanwhile, were up 3% from the prior month but down 3% from a year earlier. Nevada residents can continue to chant, “We’re #1” for the 38th month in a row: 1 in every 102 Nevada homes received a filing, more than four times the national rate.

WAMU/JP Morgan Deposit Dispute Resolved
New came out on Friday that WAMU has tentatively resolved disputes with JPMorgan Chase and the FDIC over $4 billion of disputed deposit accounts. As we remember, in 2008 the FDIC seized WAMU and sold its assets to JPMorgan for $1.9 billion, but this resulted in lawsuits over the deposits. JPMorgan has agreed to turn over the money to WAMU after deducting $172 million as its share of tax refunds received in exchange for 70% of expected tax refunds resulting from WAMU’s prior operating losses that are valued at about $3 billion, with Washington Mutual receiving 30% and other tax refund benefits.

Fed Winding Down MBS Purchases
It’s a good thing the private MBS market is showing some signs of life as noted above because the Fed is winding down it’s MBS buying. The Fed purchased $10 billion (net) in agency mortgage-backed securities over the past week, bringing its total net purchase to about $1.226 trillion. That leaves the Fed with a little under 3 weeks to purchase an additional $25 billion – after that we may have to watch them sell it. Tomorrow we have a Fed meeting, and any surprises in the Fed’s statement could produce a large reaction – but the end of their program is no surprise.

Rates Volatile Friday
After a decent Retail Sales number on Friday drove rates higher (Super Bowl-related electronic sales?), they bounced right back throughout the day after a weak University of Michigan Consumer Confidence number, and some investors improved pricing. Insurance companies, the Fed, money managers, and hedge funds were in buying mortgages, as has become standard. Much of the buying has been in higher coupons, possibly because of the impact of Fannie & Freddie’s buy downs. Origination was “moderate”. One thing to note is that dealers are seeing some interest from investors in buying pools of 15-yr mortgages.

Economic Preview This Week
As opposed to last week, this week is full of scheduled economic news to move the equity and bond markets, the most important being the inflation twins, PPI and CPI. Today we have the Empire State Manufacturing Survey, along with Industrial Production and Capacity Utilization. Tomorrow we have some Import & Export numbers, and New Residential Construction. Wednesday is the Producer Price Index; Thursday is Initial Claims, the Consumer Price Index, and the Philly Fed. Pre-numbers this morning we find the 10-yr at 3.70% and mortgages better by about .125 in price.

Daily Humor
(Rated PG)
Into a Belfast pub comes Paddy Murphy, looking like he’d just been run over by a train. His arm is in a sling, his nose is broken, his face is cut, and bruised, and he’s walking with a limp.

“What happened to you?” asks Sean, the bartender.

“Michael O’Connor and me had a fight,” says Paddy.

“That little O’Connor,” says Sean, “He couldn’t do that to you; he must have had something in his hand.”

“That he did,” says Paddy, “a shovel is what he had, and a terrible lickin’ he gave me with it.”

“Well,” says Sean, “you should have defended yourself. Didn’t you have something in your hand?”

“That I did,” said Paddy, “Mrs. O’Connor’s breast, and a thing of beauty it was; but useless in a fight.”