Ambac, MBIA, Shares Jump on Foreclosures
NEW YORK (TheStreet) -- Bank stocks' pain was mortgage insurers' gain on Thursday, as investors hoped foreclosure snafus might allow troubled mortgage insurers some breathing room.
The driver was foreclosure snafus by Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and other banks. Those banks hired people who signed affidavits saying they had personally reviewed foreclosure files, when it fact they had processed far too many far too quickly to make that claim believable.
Some banks, including Bank of America and JPMorgan, have agreed to halt foreclosures while they sort out the mess. Others, including Wells and Citigroup (C), have so far resisted calls for them to do the same.But those moratoriums, as well as investigations by attorneys general in several states, could push claims that the insurers would have to be paid out this quarter to the first quarter of 2011, says Jim Ryan, a senior analyst at Morningstar. That would allow them to reinvest that money, potentially at a profit, Ryan explains. Ryan also believes the foreclosure mess could help the insurers in lawsuits against the banks where they are claiming the banks made misrepresentations on some of the mortgages the insurers covered. "This is really about survival. It would help the monolines and be better for their future. They could rebuild capital and even potentially get their ratings back," Ryan said. "The question is can they last that long." Edward Grebeck, CEO of Tempus Advisors and a New York University professor cautions investors, however. "You are basically betting on the outcome of a court case. It is not extremely clear how the bond insurers are going to come out." -- Written by Dan Freed and Maria Woehr in New York.
To contact the writer of this article, click here: Maria Woehr. To follow the writer on Twitter, go to http://twitter.com/newsgirlmw. To submit a news tip, send an email to: email@example.com.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV