Goldman to Pay $5 Billion Over Mortgage Bonds
THE COLLINGWOOD GROUP MORNING BRIEFING
Everything you need to know to stay ahead of your competitors
January 15, 2016
TGIF, ahead of a three-day-long Martin Luther King Holiday weekend for many of you.
Here’s what’s happening today:
WSJ: Goldman Reaches $5 Billion Settlement Over Mortgage-Backed Securities
Goldman Sachs Group Inc. agreed to the largest regulatory penalty in its history, resolving U.S. and state claims stemming from the Wall Street firm’s sale of mortgage bonds heading into the financial crisis.
In settling with the Justice Department and a collection of other state and federal entities for more than $5 billion, Goldman will join a list of other big banks in moving past one of the biggest, and most costly, legal headaches of the crisis era.
Goldman said litigation legal expenses stemming from the accord would trim its fourth-quarter earnings by about $1.5 billion, after taxes. The firm is scheduled to report results Wednesday.
We are pleased to have reached an agreement in principle to resolve these matters,” Lloyd Blankfein, Goldman’s chief executive, said in a statement.
Government officials previously won multibillion-dollar settlements from J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc. The probes examined how Wall Street sold bonds tied to residential mortgages, and whether banks deceived investors by misrepresenting the quality of underlying loans.
read more: http://www.wsj.com/articles/goldman-reaches-5-billion-settlement-over-mortgage-backed-securities-1452808185
Commercial Real Estate Tumbles with Stocks
The commercial real estate market is heading lower and many are blaming the plummeting stock market. U.S. equity markets had their worst opening week of the year, ever. Stock markets recovered a bit yesterday with the Dow scoring its biggest gain of the year.
“We’ve seen three consecutive months of slowing price appreciation in the commercial real estate market,” says Ten-X Executive Vice President Rick Sharga, a Collingwood Group Media Client, “While prices continue to rise, month-over-month price appreciation is the weakest it’s been in over five years.”
Manhattan office leasing activity plummeted nearly 25 percent to roughly 28 million square feet last year from about 38 million square feet in 2014, according to a JLL report provided exclusively to The Commercial Observer.
“Both the Office and Retail sectors may be nearing peak pricing, as technology is creating strong headwinds,” says Sharga, “Telecommuting and ‘open office’ environments favored by technology firms reduce the need for office space; E-tail growth is having an impact on brick and mortar retail operations.”
Performance varies by sector – in December, for example, Ten-X Research reported that the hospitality sector was actually down by almost 3%, while the Industrial sector saw a significant increase.
There was also a decrease in “large-block transactions,” the phrase JLL uses for 100,000-square-foot or larger leases, signed last year. Only 35 such deals were completed in 2015 compared with 53 in the previous year.
“These market factors, combined with the dip that usually occurs during stock market volatility, are definitely having an effect on CRE transaction volume and pricing,” says Sharga.
But, Sharga cautions it’s not time to panic yet, since, “It’s still unclear whether this is just a temporary blip in what has been a long bull run for Commercial Real Estate, or the beginning of a weaker cycle.”
Mortgage Rates Lower Again
Freddie Mac says mortgage rates are moving lower with the 30-year fixed-rate declining for the second straight week.
“This will juice affordability and will probably kick people off the fence since many thought they’d never see 30 year fixed-rates below 4% again in their lifetime,” says The Collingwood Group Chairman Tim Rood, “God loves a loan officer.”
Freddie reports 30-year fixed-rate mortgage averaged 3.92 percent with an average 0.6 point for the week ending January 14, 2016, down from last week when it averaged 3.97 percent. 15-year FRM this week averaged 3.19 percent with an average 0.5 point, down from 3.26 percent last week. 15-year FRM averaged 2.98 percent. 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.01 percent this week with an average 0.4 point, down from last week when it averaged 3.09 percent.
”Long-term Treasury yields continue to drop, dragging mortgage rates down with them, “ says Sean Becketti, chief economist, Freddie Mac. “Turbulence in overseas financial markets is generating a flight-to-quality which benefits U.S. Treasury securities. In addition, sagging oil prices are capping inflation expectations. The net effect on the 30-year mortgage rate was a 5 basis point drop to 3.92 percent.”
Fannie Mae Gazes into its Chrystal Ball
Fannie Mae’s Economic & Strategic Research Group expects that further labor market tightening will lead to increased household income and job security amid more relaxed lending standards and easier access to mortgage credit. However, strong home price gains, especially in the lower-end of the market, continue to outpace household income growth, eroding affordability.
Consumer spending is expected to underpin economic growth again this year, while residential investment and government spending should help drive growth despite some drag from net exports. Overall, the ESR Group expects the economy to grow 2.2 percent for all of 2016, with China’s deteriorating economic activity, a stronger dollar, geopolitical turmoil, and uncertainty about monetary policy remaining downside risks to the outlook.
“We ended 2015 with a positive jobs report, an annual record high for auto sales, and the housing market poised to be the strongest since 2007,” said Fannie Mae Chief Economist Doug Duncan. “The first fed funds rate hike since 2006 has had a minimal impact on mortgage interest rates so far, and we believe mortgage rates will edge up only gradually, ending the year around 4.2 percent.
read more: http://www.fanniemae.com/portal/about-us/media/financial-news/2016/6338.html
Inside Mortgage Finance: JPM Suffers a 23 Percent Decline in Residential Lending
JPMorgan Chase originated $24.7 billion of residential loans in the fourth quarter of 2015, a 23.3 percent sequential decline. Compared to the same period a year earlier, fundings were down just 1.2 percent.
The nations second-largest residential lender and servicer booked mortgage banking income of $266 million during the period, an ugly 55.8 percent drop from the third quarter. Mortgage profits fell 21.3 percent compared to the fourth quarter of 2014.
Although both earnings and lending volume suffered, mortgage revenue improved by $125 million from 3Q to $1.68 billion in the fourth quarter. In its 4Q earnings statement, JPM attributed the revenue improvement to higher MSR [mortgage servicing rights] risk management and loan growth, partially offset by lower repurchase benefit.
read more: http://www.insidemortgagefinance.com/imfnews/1_769/daily/jpm-suffers-large-decline-in-home-mortgage-lending-in-4q-2015-1000035144-1.html?ET=imfpubs:e7286:63041a:&st=email&s=imfnews
Bloomberg: Brookfield Eyes Blackstone Status With Private-Equity Push
Bruce Flatt, chief executive officer of Brookfield Asset Management Inc., is putting B
about to make a major push into private equity.
Flatt says his buyout firm will earn comparisons to the largest of Wall Street’s alternative-asset managers.
“If you don’t mention it today, you should,” Flatt said in an interview at his New York office with Bloomberg Television’s Erik Schatzker.
That may take time. While Brookfield Asset Management oversees a total of more than $225 billion in assets, its private-equity arm, Brookfield Business Partners, has just $7.7 billion. Blackstone’s buyout business has $91 billion, while Carlyle has $63 billion.
Flatt has history on his side. Brookfield, which grew out of the Canadian billionaire Bronfman family’s Brascan Corp. holding company, has increased book value by almost 10-fold since Flatt became CEO in 2002, more than twice as fast as Warren Buffett’s Berkshire Hathaway Inc. Over the same period, Brookfield shares have returned more than 800 percent versus about 170 percent for Berkshire.
read more: http://www.bloomberg.com/news/articles/2016-01-13/brookfield-eyes-blackstone-status-with-private-equity-push
Crain’s: Trump sells Park Avenue condo for $14.1 million after slashing price
Donald Trump sold a condominium at one of his Manhattan properties for almost $14.1 million—about a sixth less than the price listed last month—as luxury home prices in the borough slide.
The 4,192-square-foot apartment spanning the entire 27th floor of 502 Park Ave. has a private elevator, four bedrooms and six-and-a-half baths, according to property website StreetEasy. It was listed Dec. 1 for $16.8 million, the site shows. Trump sold a unit on the building’s 24th floor for $21 million in July.
Amanda Miller, a Trump Organization spokeswoman, confirmed that the sale occurred. The billionaire never lived in the condo, according to a Wall Street Journal report on the transaction Wednesday.
A Bloomberg analysis valued Trump’s net worth at $2.9 billion in July, including $200 million for condominium stock at 502 Park Ave. The analysis valued the 27th-floor apartment at $18 million, based on then-recent sales at the property.
read more: http://www.crainsnewyork.com/article/20160114/REAL_ESTATE/160119923/trump-sells-park-avenue-condo-for-14-1-million-after-slashing-price#utm_medium=email&utm_source=cnyb-realestate&utm_campaign=cnyb-realestate-20160114
AP: For Sale – ‘Silence of the Lambs” House
A Pennsylvania couple is struggling to sell a house used as the home of psychotic killer Buffalo Bill in the 1991 film “The Silence of the Lambs.”
Scott and Barbara Lloyd listed the house last summer, but they’ve dropped the asking price from $300,000 to $250,000.
The three-story Victorian in Layton was the second-most-clicked home on Realtor.com last year, but Scott Lloyd told the Pittsburgh Tribune-Review that the publicity has attracted curiosity seekers, but no serious buyers.
“We’re finally starting to see a little bit of motion,” Lloyd said.
The home’s location in a tiny village about an hour’s drive southeast of Pittsburgh works against it. So does the fact that it has only one bathroom to go with its four bedrooms.
“Even though it’s got notoriety, location still is a big deal,” said Erik Gunther, a senior editor and expert on unique homes for Realtor.com.
Have a prosperous day, and a great long weekend.!