$700 billion in GSE mortgages will need special servicing - (www.housingwire.com) The government-sponsored enterprises together have about $600 to $700 billion in unpaid principal balance tied to mortgage loans that will eventually require special servicing, suggested Paul Miller, with FBR Capital Markets, in a report Wednesday. Miller's estimation provides a sampling of what servicing opportunities await certain specialty servicers next year if they specialize in high-touch, credit sensitive loans. The potential beneficiaries of this pipeline include special servicers, with Miller highlighting Walter Investment Management and Nationstar Mortgage Holdings as potential beneficiaries, Miller suggested…. Miller cites Federal Housing Finance Agency data, which shows Freddie Mac has about $200 billion in unpaid principal balance that needs servicing, while Fannie Mae has $300 billion in servicing assets to shed. The FHA has about $150 billion in agency paper.
Trichet: Fed, ECB Balance Sheets ‘Abnormal’ - (www.cnbc.com) Ballooning central bank balance sheets across the U.S., Europe, the U.K. and Japan are "profoundly abnormal", according to Jean-Claude Trichet, the former president of the European Central Bank. "If you look at the increase in the size of balance sheets since the crisis erupted in 2007, you see the same order of magnitude: at least 12 percent of gross domestic product… You see something which is profoundly abnormal in the U.K., Japan, Europe, and the U.S.," Trichet told CNBC on Friday. According to its own data, the Bank of England's balance sheet topped 20 percent of annual gross domestic product (GDP) in the first quarter of 2012, and was roughly four times larger than at the start of 2007.
Swaps ‘Armageddon’ Lingers as New Rules Concentrate Risk - (www.bloomberg.com) On a good day, 27-year-old Bobby Timberlake at CME Group Inc. (CME) in Chicago rounds up $2.5 billion from the world’s biggest traders and banks such as JPMorgan Chase & Co. (JPM) to cover their losses in the $639 trillion derivatives markets. What happens on a bad day will test new rules in the Dodd- Frank Act designed to prevent a repeat of 2008’s credit crisis. Starting in March, as much as 79 percent of derivatives trades known as swaps must be backed by collateral and go through clearinghouses such as CME Group. Traders may have to post $927 billion with Timberlake and his peers at LCH.Clearnet Group Ltd. and IntercontinentalExchange Inc. (ICE), whose role as middlemen is to ensure participants get paid. This arrangement can withstand almost any shock, including defaults by four of the biggest lenders, according to the clearinghouses. Some bankers and researchers aren’t convinced. They warn unprecedented amounts of risk will be concentrated in a handful of clearinghouses -- some newly eligible for emergency Federal Reserve loans. If they fail, taxpayers who financed $1.2 trillion of bailouts last time could be on the hook again.
Diggers Pile Up Unsold After Caterpillar Adds China Capacity - (www.bloomberg.com) Caterpillar Inc. (CAT), Komatsu Ltd. (6301) and other construction-equipment makers have built enough capacity in China to satisfy global demand twice over while sales in the country are falling, according to a research company. Manufacturing capacity in China is almost 600,000 excavators a year while the worldwide market is about 300,000, according to London-based Off-Highway Research. Inventories of crawler excavators in China are about 100,000, almost equal to projected 2012 domestic sales, the research firm’s Managing Director David C.A. Phillips said. The supply glut is a blow to Peoria, Illinois-based Caterpillar and its competitors who built factories and bought local companies to grab a share of the biggest construction equipment market. Now, with government property controls slowing construction, those companies are cutting output and trying to export unsold equipment.
Slumping fees to force investment banking shake-up - (www.reuters.com) Fees for advising on mergers, share listings and bond issues have fallen again in 2012, forcing investment banks to cut jobs and start overhauling business models they had stuck by in times of crisis over the past decade. Economic woes, particularly in the euro zone, have hurt dealmaking and dragged worldwide investment banking income down 7 percent to $69.4 billion so far this year, data from Thomson Reuters and Freeman Consulting showed. In Europe, fees were at a 10-year low as volatile markets forced many companies to put off plans to list or make acquisitions, and the prolonged slowdown is pushing even top advisers to restructure teams and cut back. Some are even contemplating more drastic options.
The federal reserve's printing money may save housing but at a very high cost - (www.ochousingnews.com)