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'Easing Up' on Hedging Can Backfire.(Fifth Third Bancorp reports second quarter results)
The second quarter wasn't an easy time to hedge servicing rights, it turns out. Just ask Washington Mutual. But WaMu wasn't alone in taking a hit related to the change in basis spread that caused some lenders to lose more on their hedge instruments than they gained on their servicing rights as interest rates rose.
Fifth Third Bancorp., Cincinnati, for instance, disclosed in its second quarter results that $43 million in losses on derivatives apparently used to hedge the servicing portfolio outweighed the $34 million in valuation and amortization gains posted for the servicing rights. Because mortgage banking accounts for a smaller share of income at Fifth Third and other banks that found themselves hamstrung by volatile rate conditions in the second quarter, the hit they took related to servicing hedges didn't garner as much publicity as WaMu's situation.
In short, the second quarter left little doubt that hedging strategies can add volatility to profit margins for companies that own mortgage servicing rights.
But even lenders that took a hit on servicing in the second quarter say they are poised to see better results in the second half of this year, especially if rates continue to trend upward.
In a conference call to discuss second quarter results, IndyMac Bancorp's chairman and CEO, Michael ...
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- Press release article from: PR Newswire October 19, 2000 700+ words
...3 million on the sale of mortgage servicing rights, equal to $.11 per diluted share...Exclusive of the gain on sale of servicing rights, return on average equity and return...of the $4.3 million gain on the servicing rights sale, total non-interest income...
- Washington Mutual Reports Third Quarter Earnings Per Share of 77 Cents --...
- Press release article from: Business Wire October 18, 2006 700+ words
...53 billion of mortgage servicing rights, and after tax charges...initiatives impacted third quarter results. "Retail Banking, Card...the company's mortgage servicing rights asset. Also, the slowing...announced sale of mortgage servicing rights. Pretax charges related...
- Flagstar Hurt by Change in Accounting for Servicing Rights.
- News wire article from: Mortgage Line June 6, 2008 700+ words
...change in accounting for mortgage servicing rights and higher credit costs damaged the...the fast majority of its mortgage servicing rights portfolio in the first quarter, contributing...for Flagstar, calling the first-quarter results "noisy." FBR noted that Flagstar...
- $363B of MSRs May Change Hands.(Mortgage servicing rights)(ABN AMRO Mortgage...
- Magazine article from: Mortgage Servicing News Muolo, Paul December 1, 2006 700+ words
...News, some $363 billion in servicing rights could change hands in the next...servicers with $74 billion in servicing rights on its books, according to...recently unveiled mixed third quarter results. However, its North America...
- Integra Unloads Servicing Rights.
- Magazine article from: National Mortgage News May 14, 2007 700+ words
Evansville, IN -- Integra Bank sold mortgage servicing rights for a $600,000 gain in the first quarter, helping...professional expenses. The company also said its first-quarter results include an expected $900,000 tax refund from the...
- MSR Disclosure Boosts Countrywide's Stock Price.(mortgage servicing rights and...
- Magazine article from: Mortgage Servicing News Cornwell, Ted June 1, 2003 700+ words
...wouldn't expect to see a company declare that its mortgage servicing rights lost $1 billion in value to impairment and amortization...once again report strong origination volume when second-quarter results are released. Another indication of Countrywide's success...
- MAF Bancorp Reports Third Quarter Results of $.59 Per Diluted Share.
- Press release article from: PR Newswire October 18, 2001 700+ words
...impairment writedown of servicing rights, equal to $.01...Last year's third quarter results also included an...sale of mortgage servicing rights, resulting in reported...the effect of the servicing rights gain). Cash earnings...
- Centrue Financial Corporation Announces Second Quarter Results.
- Press release article from: PR Newswire August 5, 2005 700+ words
...period. The Company's second quarter results included $666,000 ($0...valuation allowance for mortgage servicing rights of $50,000 and a gain of...credit card portfolio. Second Quarter Results For the second quarter of 2005...
- SFAS No. 122 eliminates inconsistencies in reporting mortgage-servicing rights....
- Magazine article from: The Ohio CPA Journal Jordan, Charles E. Clark, Stanley J. Li, June F. February 1, 1996 700+ words
...their mortgage loans but retain the servicing rights to these loans. Retaining the servicing rights benefits a bank in two primary ways...collections. Although many banks maintain servicing rights when mortgages are sold, the market...
- Accounting for mortgage servicing rights. (Statement of Financial Accounting...
- Magazine article from: The National Public Accountant Ratcliffe, Thomas A. Stewart, Robert E. May 1, 1996 700+ words
...entitled "Accounting for Mortgage Servicing Rights." SFAS No. 122 amends SFAS No...accounting attributable to mortgage servicing rights associated with loan origination activities...retroactive capitalization of mortgage servicing rights related to transactions entered into...
Source: HighBeam Research, 'Easing Up' on Hedging Can Backfire.(Fifth Third Bancorp reports...