Friday, October 24, 2008

Bush Administration Planning Foreclosure Help, Taxpayers help PNC Buy National City

The New York Times reports U.S. Vows More Help for Homeowners

A senior policy maker told a Senate committee that the administration was working on a plan under which the government would offer to shoulder some of the losses on loans that are modified.

The insurance program could cost tens of billions of dollars, according to a person briefed on discussions about the plan, and would be run by the Treasury Department under the $700 billion financial rescue bill Congress passed earlier this month.

…Details of the plan are expected in the next week or two. Ms. Bair told senators that policy makers were contemplating creating standardized loan modification practices that would be used by mortgage servicing firms, which handle billing and collection on behalf of investors and banks. Loans modified under those principles would qualify for a partial federal guarantee. In other words, if homeowners defaulted on their loan again, part of the loss would be borne by the government. It was unclear whether investors or homeowners would have to pay premiums for that protection.

…Why more loans are not being modified is the subject of heated debate. Some in the industry say it is hard to reach borrowers and many of them do not want to stay in their homes anyway. Advocates for low-income homeowners say servicing firms are overwhelmed by defaults. People on both sides acknowledge that modifications are complicated because most mortgages are no longer held by banks. Instead, they are packaged into securities.

The administration’s latest approach of guaranteeing loans appears to be intended to give the servicing firms an incentive to modify loans in ways that they may have been reluctant to do so far. The guarantee could strengthen the hand of firms in discussion with investors who are upset about modifications.

Bloomberg reports PNC Financial to Buy National City for $5.2 Billion

PNC will pay $2.23 a share, 19 percent less than National City's closing price yesterday, to create the fifth-largest U.S. bank by deposits, the Pittsburgh-based lender said today in a statement. The $7.7 billion of Treasury funding has helped ``put this transaction on a very solid footing,'' PNC said.

National City, Ohio's largest bank, joins Washington Mutual Inc. and Wachovia Corp. in agreeing to a takeover after losses tied to failed home loans. National City, based in Cleveland, declined 83 percent in New York Stock Exchange composite trading this year through yesterday and has posted more than $2 billion in losses during the past two quarters.

``It certainly beats having these troubled banks end up being taken over by the government,'' said David Havens, a credit desk analyst at UBS AG in Stamford, Connecticut. ``It's better for just about everybody that you have a private-market solution and the government facilitating to make sure it happens.''

PNC expects merger-related costs of $2.3 billion and said the deal would add to earnings in the second year. Cumulative impairments from loans in National City's portfolio will be about $20 billion, PNC said in a presentation on its Web site. The combined bank will cut $1.2 billion in costs.

Federal Help

National City Chief Executive Officer Peter Raskind will become a vice chairman at PNC. The deal is expected to be completed by the end of this year. PNC shares dropped 13 percent this year through yesterday.

Neel Kashkari, the Treasury official running the federal rescue program on an interim basis, told lawmakers yesterday that the department supported lenders using funds from the $700 billion bailout law for mergers.

So…they are buying Nat City for 5.2 Billion and the Taxpayers had to fork over 7.7 Billion…am I missing something?

1 comment:

  1. nothing wrong. all large shaky banks going this way now. the fun continues. happy halloween!