Archive for March, 2010
FLAGSTAR BANK STOCK HITS $0.54 SHARE
Posted by: | CommentsFLAGSTAR BANCORP RAISES $250MM IN STOCK OFFERING
Flagstar Bancorp Inc. has priced a public offering of 500 million shares of common stock at $0.50 per share, which is below the stock’s 52-week low. Over the past 12 months, the stock hit a low of $0.54 per share on Dec. 16, 2009, according to Yahoo. On March 25, the stock closed at $0.72 per share. But after news that the offering is being priced at $0.50 per share, the next morning Flagstar opened at $0.54 per share. The company will receive total gross proceeds of approximately $250 million. The Troy, Mich., based company expects to close the sale on March 31, 2010. The underwriters will have a 30-day option to purchase up to an additional 75 million shares of common stock at the offering price, less underwriters’ discounts and commissions solely to cover over-allotments. The public offering is being underwritten by Sandler O’Neill & Partners, L.P., as book-running manager, and Keefe, Bruyette & Woods, Inc., as co-manager.
-published in Broker Universe March 26, 2010
SHOULD YOU USE A CREDIT CARD ONLINE?
Posted by: | CommentsReducing the Anxiety of Paying Online
Last year, 92 million people bought things online using credit cards, debit cards and services like PayPal and Google Checkout. Millions of others paid bills and wired money electronically from bank accounts with just a few clicks.
Despite the apparent popularity of all these services, they still cause nagging anxiety for many of us.
We wonder, how secure are these payment systems? Will I be out the money if someone steals my account numbers and goes on a wild shopping spree or bleeds my savings dry?
Deciding which online payment method to use would seem to be a simple matter of picking whichever offers higher security. But the wise consumer also weighs the legal protections in the case of theft: the best security and the lowest liability don’t necessarily go together.
Here’s the lowdown on the risks associated with the most popular ways to pay online:
CREDIT CARDS
After you hear some of the horror stories, using a credit card online may seem as risky as Russian roulette. Crooks can and frequently do capture card numbers by sneaking malware onto home computers or by tricking people into revealing numbers in “phishing” schemes in which people unwittingly type in the numbers on fake sites. Some thieves hack shopping sites.
There are a few precautions everyone should take. First, look for signs of quality security at sites you use, like logos, or seals, from security providers like VeriSign and McAfee, said Aleksandr Yampolskiy, director of security at the luxury shopping site Gilt Groupe. To check that a seal is legitimate, click on it to make sure it takes you to the verification page of the security service.
Also make sure that “https” appears in the address bar, because that indicates that digital transmissions from the site are being encrypted, Mr. Yampolskiy said.
Security seals, however, are just a starting point, not a guarantee a site is secure. They affirm only that it has met specific criteria set by that security service. And the lack of a seal doesn’t necessarily mean a site is risky. So use common sense when deciding which merchants to do business with. For instance, it isn’t wise to shop at a site you reached by clicking on a spam e-mail. If you’re suspicious of a site, run its name through a search engine and see if there are complaints from other shoppers.
SSL encryption, which is indicated by the “s” in “https” in the address bar and a padlock icon in the lower right-hand corner of the browser, is your best insurance against theft of your data while it’s being transmitted.
Sending your personal data across a network is a key moment of vulnerability, said Robert Zigweid, a senior security consultant at IOActive, which helps companies secure their sites and networks. Responsible sites will automatically use “https” on pages where sensitive information is sent and received.
If you get a pop-up or other warning that something is wrong with a site’s SSL certificate, “back away,” said Tim Callan, vice president at VeriSign. Professional, well-put-together sites do not tend to have certificates that are expired or have other problems.
And since shady sites can use encryption, too, also check the address bar for a bit of green or the site owner’s name written in green. (Recent versions of major browsers all now use green in some way to indicate the existence of another layer of security called an extended validation SSL certificate). It indicates that the site you’re visiting has been vetted and belongs to a legitimate company; it is not a phishing site. You will certainly see green on larger e-commerce sites and on bank sites.
None of this encryption will help you if you’re infected with malware known as a keylogger. It captures your keystrokes and images from your screen and then sends them to hackers. Your only real line of defense is to use security software and install all the updates from that software and all the other software you use.
Password-management software can also help. This stores your login information and, typically, the personal data used in Web forms in an encrypted place on your computer. You can then enter this sensitive data onto Web site forms without retyping it.
Now that you are frightened enough, here’s the good news about online payments: There is little to worry about using credit cards online, because the risk of loss from unauthorized charges, by law, is almost nil.
“The strongest protections are when you pay by credit card,” says Carole Reynolds, a senior lawyer at the Federal Trade Commission. Under the Truth in Lending Act, consumers’ maximum liability for unauthorized use of their credit card is only $50, and when a card is used online, it’s zero.
If you report fraud quickly, banks will typically reverse the charges rapidly and without much fuss, though in these tight times banks are scrutinizing fraud claims more closely, says Avivah Litan, a payment-fraud expert at research firm Gartner.
For extra protection against having your card number stolen, consider using one-time credit card numbers for online purchases, which you can often set up with your card provider.
DEBIT CARDS
Using debit cards online is a bit riskier. These transactions, which draw directly from your bank account, are subject to a different federal law, the Electronic Fund Transfer Act. This law provides considerable protection from liability, but the level of protection diminishes as time passes.
If you report unauthorized charges on a debit card within two business days of discovering the problem, your liability is limited to $50 offline and zero for online transactions, Ms. Reynolds says. If you neglect to do that, but report the loss within 60 days of the date your bank sent the statement listing the bogus transactions, your liability is capped at $500 for offline transactions and remains zero online. If you miss those deadlines, however, you could end up in a bigger mess. Ms. Reynolds warned that your liability could be unlimited. (See a related blog post at nyti.ms/6VEItV for other information.)
PAYMENT SERVICES AND BILL PAYMENT
Shopping online using services like PayPal, Google Checkout and BillMeLater offer some useful additional security because you entrust your sensitive account information to one company and not to every online store you may buy something from. This can be a good idea, especially if you frequently buy from little-known merchants that may not have top-notch Web defenses.
But Ms. Litan warns that if your PayPal account is used fraudulently, it may be harder to get your money back than if you use a credit card.
For those who pay bills online, note that, like debit cards, online bank accounts — savings, checking and other personal “asset accounts” — are covered by the Electronic Fund Transfer Act, so your responsibility for unauthorized transactions is limited depending on when you discover and report fraud.
So even if your computer becomes infected with a malicious program and thieves are able to steal your password and plunder your bank account, you will get your money back if you catch it quickly. Ms. Litan says it’s a good idea to set up automatic bill payments with your bank, as opposed to individual billers like the gas company or the day care provider, because banks and their payment processors are generally better at protecting data than merchants.
A version of this article appeared in print on March 18, 2010, on page B10 of the New York Times.by RIVA RICHMOND
Bank of America First to End Debit Overdraft Fees
Posted by: | CommentsBank of America to End Debit Overdraft Fees
By ANDREW MARTIN
Published: March 9, 2010
In a move that could bring an end to the $40 cup of coffee, Bank of America said on Tuesday that it was doing away with overdraft fees on purchases made with debit cards, a decision that could cost the bank tens of millions a year in revenue and put pressure on other banks to do the same.
summer, customers who try to make purchases with their debit cards without enough money in their checking accounts will simply be declined. Debit purchases account for roughly 60 percent of overdrafts at Bank of America, the nation’s largest issuer of debit cards.
Banks are bracing for a new federal rule that will require them to get permission from account holders before providing overdraft services for debit purchases and A.T.M. withdrawals. That change was already expected to wipe out billions of dollars in overdraft revenue for the banks.
“What our customers kept telling me is ‘just don’t let me spend money that I don’t have,’ ” said Susan Faulkner, the bank’s deposit and card product executive, who said the overdraft changes were part of a broader push to build trust among its customers. “We wanted to help them avoid those unexpected overdraft fees.”
The bank will continue to provide overdraft protection, for a fee, for checks and automatic payments, say to a biller that debits money from an account each month. Consumers who try to exceed their balance when making an A.T.M. withdrawal are already being notified that they will be charged a $35 overdraft fee if they choose to proceed.
There has been considerable consumer and political outcry against overdraft fees on deposit accounts. Over the last decade, the fees have become a major source of revenue for banks as they realized they could make more money by covering consumer overdrafts, offering a short-term loan for a fee, than in denying them.
Last year alone, banks generated about $20 billion from overdraft fees on debit purchases and A.T.M. transactions, and $12 billion more by covering checks and recurring bills, according to Moebs Services, an economic research firm.
But as reports surfaced of customers incurring hundreds, even thousands, in overdraft fees, often for purchases of just a few dollars like a cup of coffee, regulators and lawmakers stepped in. As of July 1, the Federal Reserve will require that banks obtain a customer’s consent before they can charge them overdraft fees for A.T.M. transactions and debit purchases; many banks now automatically enroll customers.
In anticipation of the new Fed rule, some banks have begun marketing campaigns to encourage their customers to opt in to overdraft protection to keep the dollars flowing.
Several bills have been introduced in Congress that would go beyond the Fed’s rules on overdraft fees.
Bank of America, by deciding to scrap overdraft charges on debit card purchases instead, is hoping to bolster its reputation with consumers at a time when anger at banks for their role in the financial crisis remains high.
The bank’s overdraft policy will take effect on June 19 for new customers and in early August for existing ones. Overdraft protection will still be available, typically for a fee of $10, to customers who link their checking accounts to savings accounts or credit cards.
Bank officials declined to say how much money the bank earned from overdraft fees, but anecdotal evidence suggests it had been a multibillion-dollar business for the bank.
“Consumers have shown a willingness to incur overdrafts if it’s covering mortgage payments or car payments, but not to cover a hot dog and a soda,” said Greg McBride, senior financial analyst at Bankrate.com and one of a handful of analysts and consumer advocates briefed by Bank of America on its new policy. “They don’t want to incur overdrafts on everyday purchases.”
Martin Eakes, chief executive for the Center for Responsible Lending, called Bank of America’s decision “a very big deal.”
“If Bank of America can forgo the fee income and do the right thing by their customers, this should be seen as a direct challenge to the other big banks to match and do the same,” said Mr. Eakes, who serves on a Bank of America advisory council, an unpaid position.
Of course, because of the new federal rule that requires customers to opt in to overdraft protection, all the big banks are anticipating a sharp drop in revenue once it goes into effect this summer.
But Mr. Eakes said that because of Bank of America’s size, it might have still charged hundreds of millions of dollars in overdraft fees even if most of its 37 million debit customers in the United States dropped out of overdraft protection.
Most major banks continue to charge overdraft fees on debit purchases, though some have modified their policies to appease critics. Some banks, notably Citibank, do not allow overdrafts for debit purchases or A.T.M. withdrawals.
It was not known on Tuesday how other banks would react to the change in Bank of America’s overdraft policy.
Told of the change late Tuesday, a spokesman for JPMorgan Chase declined to comment. A spokeswoman for Wells Fargo said the bank was still working on its overdraft plan as it relates to the new federal rules and was not yet prepared to release the details.
Banks are rethinking their policies on consumer products like credit cards, mortgages and debit cards to comply with new laws and regulations and the continued economic malaise. In the past, a relatively small number of customers generated such enormous fees from overdraft charges and penalties on credit cards that they subsidized free checking and generous rewards programs for the majority of customers.
In the case of overdraft, 93 percent of the fees are generated by just 14 percent of the customers who exceed their balances five times or more a year, according to a 2008 study by the Federal Deposit Insurance Corporation. Three-quarters of customers are not charged overdraft fees at all, the study found.
But the collapse in consumer credit, combined with new rules limiting banks’ ability to make money on credit cards and overdraft fees, has prompted banks to experiment with fees that reach a broader set of customers, like annual fees on credit cards and monthly fees on checking accounts.
published in the NewYork Times
‘LENDER SEIZED WRONG HOME’ STATES SUIT
Posted by: | CommentsBy Sara Lepro
Reports of lenders repossessing the wrong home are further tarnishing the banking industry’s image, already bruised by bailouts and bonuses.
The mix-ups have been perpetuated by the sheer number of foreclosures being processed today as well as the various layers of communication involved. Addresses and other information passed from one department to another, or from a contractor to a subcontractor, can get garbled along the way.
“It’s what you call a new weakness,” said Joe Bada, chief executive of Five Brothers Mortgage Co. Services and Securing Inc., a Warren, Mich., company that inspects and manages foreclosed properties for lenders. “There’s just so much happening at the same time. The means of communicating haven’t been refined. Information is not moving fast enough from one department to the other.”
Though such gaffes are rare, they have happened enough times to lead at least one major servicer to rethink and retool its default-management process. Bank of America Corp., the nation’s largest servicer, is updating its contractor-training tools and adding a step when securing a property to ensure that the right home receives the repossession notice.
B of A “rekeys” – changes the locks – on about 16,000 properties a month, said Rebecca Mairone, the Charlotte company’s head of servicing. In the last seven months, B of A is aware of just 11 mistakes. That gives it an accuracy rate of about 99.99%.
Still, B of A has been burned. Many of the more recent stories in the news about foreclosure mistakes have involved the company.
There’s the case of Alan Schroit, for example, who filed a lawsuit against B of A in January claiming the lender mistakenly seized his Galveston, Texas, vacation home. According to the suit, Schroit did not have a mortgage with B of A, or any other lender. His case in federal court in Texas is still pending. Similar incidents involving B of A have been reported in Spring Hill, Fla., in January and Trenton, N.J., in December.
Overall, B of A admits there was room for improvement.
“There were big mistakes that happened in the past,” Mairone said. “As a result of that, we really tightened our process.”
B of A “took a deep dive” on the 11 cases to understand what went wrong and how to improve on the process, she said. Most of the mistakes, the company discovered, happened at the contractor level and usually involved the field service representative being dispatched to the wrong property.
B of A works with “hundreds and hundreds” of contractors around the country, Mairone said. And most of those contractors hire their own subcontractors, so as in a game of telephone, it’s easy for the instructions to get jumbled.
B of A is not the only company to blunder in this area.
In July 2008, a story surfaced about an Austin family whose possessions were given away to thrift stores after a JPMorgan Chase & Co. contractor, Field Asset Services Inc., seized their home and emptied their house. The home had been headed to foreclosure, but the proceedings were never stopped after the family bought the home. “The foreclosure attorney did not communicate to the client that the property had been sold to a third party,” said Dale McPherson, the president and CEO of Field Asset Services in Austin. “So the client then communicated to us that they needed to get it ready for resale.” JPMorgan spokesman Tom Kelly said the company has since reached “an amicable settlement” with the family.
The reported mistakes made during the foreclosure process are statistically minuscule considering that there were 315,716 foreclosure filings on homes around the country in January alone, according to the latest data from RealtyTrac Inc. “The likelihood of securing the wrong property on a normal inspection probably happens less than one out of a thousand times,” said Marty Foster, senior vice president of loan servicing at PHH Corp., a top-10 mortgage servicer. “And a wrongful-eviction process is probably one out of every 10,000 times.”
But “it’s such a bad perception problem for [banks],” said Glenn Selig, founder of Publicity Agency in Tampa. “It’s such a great example for the consumer that it’s ‘a big bank against the little guy.’”
Cheryl Lang, the president of Integrated Mortgage Solutions, a default management company in Houston, said the problem often comes down to using inexperienced or newly hired contractors who are not familiar with a lender’s guidelines. “It sounds like it might be an easy thing, but experience plays a big role in making things right,” she said.
B of A has updated the checklist its contractors use when seizing properties. The list now includes a detailed description of the property in addition to the address.
By April, B of A also will require the contractor to call the servicer and describe the home to a representative to ensure the descriptions match. “Before, they just dispatched with the orders, and there was no handshake back,” Mairone said. Now, “the rep on the phone … walks through the process with the vendor. They’re standing at the property when they’re doing this.”
Once B of A confirms the contractor has the right home, it gives him or her an authorization number. That number is also included on the sticker that is placed on the front door, with a toll-free number that the homeowner can call.
B of A has also assigned about 50 employees, some of them new hires, to a new 24-hour hotline for homeowners and contractors.
Outdated loan information can also lead to mistakes. “The status of the loan can literally change daily,” said Alan Jaffa, chief operating officer of Safeguard Properties Inc., a Valley View, Ohio, company that lenders hire to manage foreclosed properties.
Safeguard, which works for some of the country’s largest servicers, has access to its clients’ databases, so it can check the status of the loan right up to the point of securing the property.
“It’s possible that even if we found the property vacant on a Friday, on Monday, they could have had conversations with their servicer,” Jaffa said. “We would never have known that if we hadn’t looked in the system.”
Determining whether a home is vacant can be tricky. The homeowner may be away on an extended vacation, or in the process of moving and still have possessions in the home. To address this issue, PHH implemented a control about a year and a half ago that requires its field service contractor to give a homeowner a three-day notice before securing a property. “The notice is really a precaution,” Foster said.
McPherson at Field Asset Services said photo evidence is especially important when determining whether a property is vacant. He said his contractors take about 120 photos per job. If there is personal property in the home and it appears to be worth more than $500, his company submits the photos to the client, which makes the final decision on whether the property is removed. “You can’t be too careful,” he said. “And you can’t have too much documentation.”
Sara Lepro is a reporter for American Banker.
HOME PRICES UP 5% OVER LAST YEAR
Posted by: | CommentsHome Prices Up 5% Year-Over-Year: Clear Capital
New data released by Clear Capital Thursday shows that home prices nationally are up 5.0 percent compared to February 2009.
The quarter-over-quarter price change for the numbers through last month was flat at 0.0 percent, indicating a softening during the winter months. But Clear Capital noted that the year-over-year price variations have been in positive territory for two months straight, and the company said it expects another big price boost to come when home sales pick up before the contract deadline for the homebuyer tax credit.
“If the increase in demand that preceded the end of the last tax credit is any indication, home prices may dip only slightly into negative territory before getting an added boost before the April tax credit deadline,” said Dr. Alex Villacorta, senior statistician for Clear Capital.
All four U.S. regions posted very consistent quarterly price changes in February, according to Clear Capital’s analysis, with only the Northeast showing a decline of 1.4 percent.
On a year-over-year basis, just the West had a drop, and it was a mere 0.5 percent. Prices in the Midwest skyrocketed 13.8 percent compared to February 2009.
Clear Capital says February’s year-over-year price gains speak volumes about the improved market picture today compared to the first months of 2009, when credit was limited, nearly all properties were rapidly losing value, and REOs flooded the market as banks faced the risk of failure.
While the current supply of foreclosed homes is significant and the swollen pipeline for loan resolution is feeding concerns over shadow inventories, Clear Capital says demand for discounted REOs by investors and new homebuyers has buoyed prices well into the winter and should continue into the spring. The company noted, though, that this demand has been muted by the typical slowdown in winter sales, pushing REO saturation to 26.1 percent – a 1.3 percent increase over January.
“We observed an expected increase in REO saturation this month, as the flow of foreclosures continued to come into the market, while traditional non-distressed sales wait to be listed in the spring and summer months,” Villacorta explained.
Clear Capital says while the risk of additional REO inventories arriving later in 2010 should not be taken lightly, the company suspects this inflow will arrive with a stronger springtime and summer buying season, helping to ease the shock to the marketplace.
“Although many markets have seen a slow down in price gains, I’m encouraged that prices have remained positive through the first two months of the year despite all the negative economic news and threat of more REOs hitting the markets,” Villacorta said.