role of banks in mtg finance
TRANSCRIPT
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The Real Role of Banks in
Residential Mortgage Finance2012 REthink Symposium
Palm Beach, FL
March 22, 2012
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Industry Outlook
Weakness in housing sector, lack of consumer
credit and scant progress in terms of job
creation suggests continued deflation.
Benefit of Fed boost to NIM via QE 2 waning.
Global central banks moving to neutral
posture, but deleveraging process continues in
US banking sector.
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Industry Outlook
ZIRP maintained by Fed is encouraging banks such asWells Fargo to originate loans at yields that are noteconomic.
WFC on verge of becoming monopoly in US secondaryloan market, distorting loan pricing across wholeindustry and raising anti-trust issues.
Fed rate policy is single biggest factor blocking therecovery of the private-label market for home loans andRMBS. Price, not legal issues, is the impediment toreviving PLS market.
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Bank Industry Ratings: Units
Period A+ A B C D F
2011 12 3,507 1,678 457 402 69 1,198
2011 09 3,698 1,640 419 389 46 1,199
2011 06 3,669 1,606 482 414 79 1,216
2011 03 3,738 1,550 501 457 72 1,209
2010 12 3,232 1,641 545 444 83 1,659
2010 09 3,493 1,592 519 400 67 1,638
2010 06 3,551 1,575 480 463 77 1,632
2010 03 3,676 1,592 504 480 93 1,534
2009 12 2,978 1,539 480 432 85 2,441
Source: FDIC/The IRA Bank Monitor
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Bank Industry Ratings: Assets ($B)
Period A+ A B C D F
2011 12 $2,817 $6,849 $2,525 $1,062 $20 $597
2011 09 $2,755 $6,895 $941 2,637 13 $547
2011 06 $2,560 $5,060 $2,654 2,569 21 $723
2011 03 $2,507 $6,336 $1,124 $2,723 $39 $672
2010 12 $2,192 $3,289 $4,909 $1,037 $535 $1,340
2010 09 $2,218 $3,185 $4,985 $1,173 $336 $1,464
2010 06 $2,164 $2,837 $4,942 $1,337 $465 $1,458
2010 03 $2,109 $1,295 $6,622 $1,088 $381 $1,843
2009 12 $1,457 $1,826 $3,072 $1,839 $295 $4,601
Source: FDIC/The IRA Bank Monitor
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Return on Equity (%)
Source: FDIC/The IRA Bank Monitor
0
5
10
15
20
25
30
Mar-00
Jul-00
Nov-00
Mar-01
Jul-01
Nov-01
Mar-02
Jul-02
Nov-02
Mar-03
Jul-03
Nov-03
Mar-04
Jul-04
Nov-04
Mar-05
Jul-05
Nov-0
5
Mar-06
Jul-06
Nov-0
6
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
C
Peer Avg
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Gross Defaults (bp)
Source: FDIC/The IRA Bank Monitor
0
100
200
300
400
500
600
Mar-00
Jul-00
Nov-00
Mar-01
Jul-01
Nov-01
Mar-02
Jul-02
Nov-02
Mar-03
Jul-03
Nov-03
Mar-04
Jul-04
Nov-04
Mar-05
Jul-05
Nov-0
5
Mar-06
Jul-06
Nov-0
6
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
C
Peer Avg
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Loss Given Default (%)
Source: FDIC/The IRA Bank Monitor
50
55
60
65
70
75
80
85
90
95
100
Mar-00
Jul-00
Nov-00
Mar-01
Jul-01
Nov-01
Mar-02
Jul-02
Nov-02
Mar-03
Jul-03
Nov-03
Mar-04
Jul-04
Nov-04
Mar-05
Jul-05
Nov-0
5
Mar-06
Jul-06
Nov-0
6
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
C
Peer Avg
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Exposure at Default (%)
Source: FDIC/The IRA Bank Monitor
50
100
150
200
250
300
Citi
Peer Avg
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Industry: Unused Credit ($M)
Source: FDIC (RIS)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000Unused loancommitments -total
Unused homeequity lines
Unused credit
card lines
Unusedcommercial realestate lines
Unused unsecuredcommercial realestate lines
Unused securitiesunderwritingcommitments
All other unusedcommitments
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Interest/Non-Interest Deposits(millions of $)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Interest-bearing deposits
Noninterest-bearing deposits
Source: FDIC/RIS
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Net Interest Income(millions of $)
Source: FDIC (RIS)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000Total interest income
Total interest expense
Net interest income
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Net Op-Income/Charge-Offs(millions of $)
Source: FDIC/RIS
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
Net operating income
Net charge-offs
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Deposits/FHLB Advances(millions of $)
Source: FDIC (RIS)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
Domestic officedeposits
Interest-bearingdeposits
Noninterest-
bearing deposits
Estimated insureddeposits
Time deposits
Brokered deposits
FHLB advances
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Real Estate Lending ($T)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000Loans secured by real estate
1-4 Family residential mortgages
Nonfarm nonresidential
Construction and development
Home equity lines
Multifamily residential real estate
Farmland
Source: FDIC (RIS)
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Real Estate Income
Source: FDIC (RIS)
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
Net servicing fees
Net securitization income
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Contact Information
IRA Corporate Offices
Institutional Risk Analyticsa unit of Lord, Whalen LLC371 Van Ness Way, Suite 110Torrance, California 90501
Sales contact: Diana Waters
Tel. 310.676.3300Fax. 310.943.1570
www.institutionalriskanalytics.com
www.irabankratings.com
Personal Information
R. Christopher Whalen
Vice Chairman
Lord, Whalen LLC
&Senior Managing Director
Tangent Capital Partners9 W 57th Street, 26th Floor
New York, NY 10019
office: 212-804-6016