While the Home Affordable Mortgage Program (HAMP) has triggered servicers to make hundreds of thousands of loan modifications, it would be a mistake to think that this program has effectively salvaged the housing market.

HAMP makes temporary modifications on first lien conventional home purchase loans that are delinquent.  In most instances, HAMP only covers agency loans, although servicers of non-agency debt can seek to use the HAMP guidelines for modifications.  The terms of HAMP stipulates that for at least a short time, that a borrower’s payments should not exceed 31 percent of their income.  HAMP’s latest report shows that the program has provoked more than 650,000 loan modifications.  More than 134,000 of those mods are in California alone.

Questioning the Lasting Impact of these Mods

The short-term nature of these mods means that it is very possible that all HAMP is doing is spreading out the pace of new foreclosures (more…)

Just listening to Tuesday’s investor call with Pacific Capital Bancorp‘s (PCBC), following on their quarterly filing.

• Bad loan to deposit ratio is 97 percent
• $200 million in new brokered deposits.
• tier one – below 9 percent
• total risk-based capital ratio is below regulator requirements
• $8.9 million impairment on investments on lihtc projects, or sometimes referred to as CRA investments. $2.7 million in fdic insurance.
• net interest margin drops 60 basis points.  Invested in low-yielding assets in order to get liquidity, according to CFO Stephen Masterson.  Pacific Capital CEO George Leis says that liquidity is good, but of course, it is thwarting net interest margin.

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Unbelievable.

Citibank announced this morning that it will charge customers a $7.50 bank fee for any month when the balance on their Access or EZ checking account falls below $1,500.

Of course, what is even more upsetting is that Citibank is hardly an outlier.  If anything, they are just the latest bank to follow a new trend.  NBC reports that 54 percent of banks have raised fees on their checking accounts in the last year.  Bank of America, for example, just raised the monthly fee on its checking accounts by $3. Bank of America’s no frills MyAccess checking is touted as a service fee-free account with no minimum balance.  If you make your way to the third page of disclosures, though, you will see that it has an $8.95 monthly maintenance fee if you don’t keep $1,500 in the account without direct deposit.  So, it is true – no service fee.  Perhaps the fact (more…)

In the next year, look for H&R Block (HRB)to pulverize its competition for retail tax prep.  Fundamental changes, going on this week, will impact the tax prep marketplace.  It will be one of those disruptive events that should make winners  out of Block, and losers out of Liberty Tax Service and Jackson Hewitt.

The unknown is how JP Morgan will respond.  They are already in the RAL business with a lot of the independents.  Even so, tax season is about two months off.  Can they come to terms with Jackson Hewitt and Liberty Tax?  Can they reach an agreement in time for this year’s tax season?

How RALs Drive Tax Prep Services

The tax prep chains draw in customers based on two things: the quality of their tax prep service, and the availability of advances on expected tax refunds.   In today’s market, tax prepares must provide loans, or really 9 day advances – on tax refunds.  For the kind of consumers that flock to strip-mall tax places, that refund is the payola of the year.  It can often be as much as $2,000 for a family making approximately $40,000 per year.

Refund anticipation loans are a sizeable chunk of income for tax prep chains.  The chains take about 10 percent of the (more…)

Yesterday’s earnings report at Pacific Capital was, at best, a mixed bag.  Pacific Capital lost 87 cents per share.  They were expected to lose 80 cents per share, but then again, last quarter they lost $7.77 per share, so maybe it is a vast improvement.

CEO George Leis was optimistic about their quarter.

“The aggressive approach we took earlier in 2009 towards resolving our problem loans helped drive a substantial decline in our credit costs, particularly in the construction and land portfolio, said Leis in a prepared release.  “While our credit costs still remain elevated above historical levels, we are encouraged by the moderation we experienced in the third quarter.”

Gee, that’s swell.  Lose $41 million, call it encouraging.

This earnings report should concern shareholders not just at Pacific Capital, but also franchise owners and shareholders at their RAL partners, Jackson Hewitt and Liberty Tax Service.

Unusual Accounting

The problem for PCBC is that they don’t have much more room for more losses.  Shareholder equity is now just $397 (more…)