| Servicer creates homeowner woes
Morgan Stanley said Tuesday it is cutting about 600 jobs and slimming its mortgage business, after a credit crisis upended the home loan industry this summer and forced other investment banks into similar moves. Two weeks after the Wall Street investment bank missed analysts' expectations for the fiscal third quarter and took a writedown of $940 million for corporate loans stuck on its books, Morgan Stanley said it will eliminate about 1 percent of its work force. "It is the direction everybody is going," said Sanford C. Bernstein & Co. analyst Brad Hintz. "This is Wall Street voting with their feet about how rapidly the mortgage market is coming back. They are saying it is not coming back quickly." As part of a plan to fuse its three mortgage businesses into one subsidiary based in Irving, Texas, Morgan Stanley will close certain offices and cut 500 jobs in the U.S.
ITT Educational confident in 2008 view
CARMEL, Ind. - Post-secondary education provider ITT Educational Services Inc. said Thursday it is "confident" it can achieve 2008 earnings per share of $4.50 to $4.60 despite the reduction in lender subsidies under federal student loan programs and tight credit markets which are pressuring students. Analysts surveyed by Thomson Financial expect full-year profit of $4.47 per share, on average. The company said it expects to continue to improve student retention, but believes future increases in the quarterly persistence rate will moderate from 2007 levels. "Recently, there has been a lot of speculation in the market with respect to the ability of our students to obtain the financing needed to pay their education costs," said Chief Executive Kevin Modany in a statement. "This speculation was caused by a recent reduction in lender subsidies under the federal student loan programs and the current credit crunch that arose from the subprime mortgage crisis." ITT said it has arranged for Bank of America, Chase Education Finance and Citibank, The Student Loan Corp.
UK lenders steer away from 100% mortgages
Mortgage lenders are withdrawing from offering 100 per cent home loans over fears that such products will now attract a flood of high-risk borrowers. Those lenders still offering 100 per cent deals are now charging interest rates of 8 per cent or more. In recent months, 10 lenders have stopped offering to advance the full value of a property, reducing the availability of these mortgages by almost one third compared with a year ago. But while brokers blame concerns over liquidity and a weakening housing market, some lenders admit they do not want to bear the cost of processing – and rejecting – applications from bad credit risks. Some providers fear as competitors withdraw from the market, they will face a sharp increase in applications. Norwich and Peterborough has now reduced its maximum loan-to-value from 100 per cent to 90 per cent.
Credit crunch imperils lender
Angelo Mozilo, chief executive of Countrywide Financial Corp., has been fond of saying that the company became America'sNo. 1 mortgage lender by being smarter than the competition.
In a harangue to Wall Street analysts early last year, the combative Mozilo denounced upstarts for shoveling out too many loans, too easily, to too many people with bad credit, heavy debt and skimpy income.
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Capital One's mortgage pain & gain
We're pulling back on loan growth, focusing on our most resilient businesses and closely managing credit with the insights and experience we have garnered in prior economic downturns." Its shares rose $4.39, or 11 percent, to $44.20 Wednesday and have traded between $37.41 and $83.84 in the last 52 weeks. Capital One, a credit card issuer that continues to expand into retail banking, said it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion it expects to write off as uncollectible. The company is also adding about $650 million to its charge-off allowance because of recent delinquencies in its consumer lending businesses in "recognition of the weakening trends in the U.S. economy." The company has worked hard to expand beyond its credit card roots into banking and mortgages.
Brooklyn neighborhoods top subprime foreclosures in nation
A Brooklyn community had the highest subprime foreclosure rate in the state in October, according to Federal Reserve Bank of New York data. One in four homeowners with subprime mortgages in the 11233 zip code, which spans Brooklyn's Bedford-Stuyvesant and Crown Heights neighborhoods, lost their homes, the Fed said. The community had a foreclosure rate of almost four times the national subprime figure of 6.89%, which was the highest since March 2003. Blacks and Latinos are 30% more likely to be charged a higher rate for a home loan than whites with similar credit histories, according to a 2006 study of 50,000 mortgages. Bedford-Stuyvesant and Crown Heights had 194 foreclosures out of 770 subprime borrowers, Fed data show. .
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