Foreclosure
Problem banks list hits 888
May 24, 2011: 10:39 AM ETThe zombie banking industry took another half step forward Tuesday.
The list of banks at risk of failing expanded at its slowest rate since before the credit crisis, the Federal Deposit Insurance Corp. said. The so-called problem bank list rose by just four institutions to 888, FDIC chief Sheila Bair said.
One step up
That's still the highest number in two decades and the highest ratio since 1987 as a share of existing banks. It's a fact that Bair, who is leaving in July after five years on the job, is painfully aware of. When she took the helm at the FDIC in 2006, profits were at a record and the problem banking list comprised just 50 institutions.
"Some will refer to that period as a golden age of banking," she said, but "with the benefit of hindsight we now know that a substantial part of those record profits were illusory."
The profits are coming back now, but in some ways they are just as questionable. Banks posted their biggest quarterly profit since the credit bubble burst in the first quarter, earning $29 billion in the first quarter. That is biggest number since a $36 billion profit in the second quarter of 2007.
But as has been the case in recent quarters, the main driver of bank profitability was not revenue growth but the release of loan loss reserves. Banks took $31 billion worth of loss provisions and turned them into profits in the latest quarter, Bair said.
So-called reserve releases are legitimate but unsustainable, and point to even more pressure on bank profits till the economy turns around and loan balances start to grow.
"There is a limit to how far reductions and loan loss provisions can be in industry earnings," Bair said. "At some point if banks are to continue to increase their profitability, they will have to grow their revenue."
Meanwhile, loan balances dropped at their fastest clip since the end of 2009, marking their 10th decline in 11 quarters. They dropped at banks both big and small, in what Bair said was a sign of both questionable bank decisionmaking and a weak economy producing soft loan demand.
"Loan balances are down at the smaller banks in the quarter, and they need to make loans to make money," Bair said. "That's the business model and they are having trouble finding creditworthy borrowers."
Even if this quarter does mark the peak on the problem bank list, it's going to be a very long time before we see another reading in the double digits.
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Foreclosure fraud: The homeowner nightmares continue
Reading between the lines of settlement proposals, the states attorneys general aren't speaking the same language as the big banks. And struggling homeowners are paying the price.
By Abigail Field, contributor
FORTUNE -- Over the past several months regulators have finally noticed what consumer attorneys have been saying for years: the big banks have routinely committed fraud in their foreclosure filings and their records of how much people owe are too often MORE
Apr 7, 2011 1:23 PM ETPosted in: Bank of America, Banking, Foreclosure, housing, jpmorgan chase, mortgages, SunTrust Banks, wells fargo -
Freddie shares its foreclosure fears
The foreclosure follies are turning into quite a headache for Freddie Mac, the taxpayer-owned mortgage investor.
So says a look at Freddie's (FMCC) quarterly report filed Wednesday with regulators.
The entire "risk factors" section of the report comprises a 1,351-word explanation of how "deficiencies in foreclosure documentation" could raise costs, make business harder to plan and otherwise throw a wrench into what already is far from a smooth-running machine.
Last quarter, if you MORE
Colin Barr - Nov 3, 2010 12:59 PM ET -
Bank of America is still taking big risks
Taking on too much risk got the banks in trouble. So why are Bank of America and GMAC taking on more by resuming foreclosures?
Earlier this week, Bank of America (BAC) and Ally Financial's GMAC mortgage unit announced they would resume foreclosures in many states, even while government investigations into foreclosure procedures ramp up.
Their timing was curious -- both banks went back in on the same day? But what's really remarkable MORE
Nin-Hai Tseng, Writer - Oct 20, 2010 1:28 PM ET -
Banks face $3.7 billion foreclosure hit
Settling the foreclosure fiasco could set the biggest banks back a cool $3.7 billion.
So says Janney Capital Markets analyst Guy LeBas, who writes in a note to clients Monday that he continues to view the unrest over banks' mortgage missteps as a headache rather than a brewing crisis.
But an expensive headache it will be: two banks, the giant mortgage lenders Bank of America (BAC) and JPMorgan Chase (JPM), MORE
Colin Barr - Oct 18, 2010 2:23 PM ET -
BofA's unfunny foreclosure tricks
Bank of America has outdone itself yet again.
The irresponsible foreclosure practices of banks have been in the headlines. Employees of both GMAC and JPMorgan Chase (JPM) have admitted to signing off on foreclosure documents without actually having read them. The reports have led to renewed questions about the banks' foreclosure practices.
But as usual, the no holds barred winner in the irresponsible bank tricks department is BofA (BAC).
The bank recently foreclosed MORE
Colin Barr - Sep 23, 2010 11:12 AM ET -
Housing market shows glimmer of hope
Why the new housing numbers likely aren't a fluke, but a sign of the start of a housing comeback
No doubt the housing market is still in turmoil, but signs today signal that it could be stabilizing.
Housing starts in August unexpectedly rose to their highest level in four months, the U.S. Commerce Department announced today. The 10.5% increase, reflecting a seasonally adjusted annual rate of 598,000 units, is the biggest rise in MORE
Nin-Hai Tseng, Writer - Sep 21, 2010 11:03 AM ET
