Blackrock’s $1b Jumbo Mortgage Fund, Top 10 Lenders For 2Q, Bigger Bank Dividends?

Top 10 Lenders For 2Q
Here’s the top 10 residential lenders for 2Q from Mortgage Stats. Total production for lenders 3-10 basically matches Wells Fargo’s total (in spite of its back office backlog). And here’s good stats on #2 Bank of America’s loan production: they originated $73 billion in first mortgages in the third quarter, down 24.7% from a year ago.

Recap of Market Week
All of the news this week has, as expected, created a lot of volatility in the markets. Yesterday, for example, both stocks and bonds soared. Mortgages were better by .375-.50 in MBS-land, but with only $1.5 billion in production being sold and traders reporting pension funds, money managers, and “delta hedgers” buying positions. After the QE2 information from Wednesday was digested, the S&P500, a better indicator of the general stock market than the Dow (which only has 30 stocks), hit its highest level in 2 years. The yield on the 10-yr dropped to 2.48%.

This morning we learned that Nonfarm Payrolls were up 151,000, the unemployment rate came in at 9.6%, and August and September numbers were revised higher. Private sector jobs jumped, and Hourly Earnings were up .2%. The headline number was more than twice as high as what was expected, and so far in 2009 874,000 jobs have been created. Do we really need QE2? This unemployment data really shocked the market, pushing stocks higher (so far) yet again, and driving rates higher. As I type this the 10-yr yield is sitting around 2.53%, and MBS prices are all over the board which means higher rates.

Latest On Jumbo Mortgages
BlackRock gave folks with non-agency mortgage interest some good news. Upwards of 90% of production is passing through the agencies (Fannie, Freddie, Ginnie) right now, but Blackrock’s planning a $1b fund to finance prime jumbo mortgages for a new version of a private-label residential mortgage-backed security. “But unlike the old RMBS issuance, BlackRock said this product will separate the originator of the loan and the servicer, a conflict of interest many investors feel have left them out in the cold as modifications and refinancing demand grew.” Its appetite is estimated to be about $100-$250 million in mortgages per quarter, per Reuters.

Homeownership Lowest In Decade, 19m Homes Vacant
The nation’s homeownership rate is at the lowest level in more than a decade. But really, is this a bad thing? Many would argue that it isn’t. Earlier this week the Census Bureau announced that the percentage of households that owned their homes was unchanged at about 67% last quarter, unchanged from the 2nd quarter and matching numbers from back in 1999. For several years prior to 1999 it was running around 64%, and hit its peak in 2004 at 69%. But almost 19 million homes, or 14.4 percent of all houses and apartments, were vacant according to the government survey.

Bigger Bank Dividends?
Reuters has good news for certain bank stocks:

“The U.S. Federal Reserve is expected to soon allow some healthy banks with strong capital levels to increase dividend payments…It is expected to take a conservative approach in deciding which banks can increase dividends and assess each bank individually.” “Banks have been pushing to boost dividends. But regulators have balked at giving them the green light, citing uncertainty about the economic outlook and new capital rules. With global capital rules and the U.S. financial regulatory system retooling farther down the track, the environment is more conducive to letting strong banks increase dividend payments. The Fed does not want to prevent banks that are viewed as particularly strong from boosting dividends.”

Speaking of investment income, yes, lower rates have an impact. Coca-Cola issued $4.5 billion in 3-year debt yesterday that pays investors .75%. Walmart issued similar debt last month. Remember that 3-yr US Treasury paper is only yielding .46% – but investors are apparently willing to accept those low levels of interest income. There has been heavy issuance of corporate bonds in the past two years and record amounts of inflows into corporate debt mutual funds. Colgate-Palmolive has sold five year debt with a coupon of 1.375 per cent while Johnson & Johnson issued 10-year debt paying just 2.95 per cent. Per Financial Times, Coca-Cola will use the proceeds to “restructure its debts after it acquired the North American business of Coca-Cola Enterprises, the bottler”.

More Housing Industry Earnings
Beazer Homes (#8 in the USA operating in 16 states) posted a loss in the last quarter of about $60 million, much worse than expected. Total revenue fell 25 percent to $274.8 million. For the fourth quarter, net new home orders decreased 20.6 percent, while the number of homes closed decreased 30 percent. Homebuilding revenues from continuing operations decreased 25.5 percent, the company said.

CoreLogic, a provider of real estate services and analytics, and which was spun off from First American earlier this year, lost $93 in the 3rd quarter versus income of $24 million in the second quarter. Until the end of the year, the company said it will repurchase up to $100 million in common stock, which is at about the same level it was when it first traded in early June.

In the 3rd quarter Ocwen Financial lost about $9 million, including $33.9 million in costs related to the acquisition of HomEq and $20.1 million in litigation charges stemming from a judgment in a case with Cartel Asset Management. For the year earlier third quarter, Ocwen reported a loss of $42 million. Ocwen (Newco spelled backwards, which is where the name came from) reported its servicing portfolio rise to $76 billion from $40 billion a year ago, and servicing revenue for the quarter rose 51% to $95.3 million from about $63 million a year ago.