3 Things That Could Move Financial Stocks Today
NEW YORK (
) -- The Obama administration on Wednesday unveiled details of
a broad refinancing program , first announced by the President in his State of the Union address last month.
The program, which would require
congressional approval , is directed at helping "responsible" homeowners, including those who owe more than their homes are currently worth, save an average $3,000 a year by refinancing their mortgages at attractive interest rates.
Borrowers with standard non-GSE mortgages (not jumbo loans) who have been current on their payments for at least the last 6 months and not skipped more than one payment in the 6 months prior and who have a minimum credit score of 580 will be eligible to get their loans refinanced through the
Federal Housing Administration
(FHA) into a 4.25% 30-year loan.
To determine a borrower's eligibility, a lender need only confirm that the borrower is employed. The borrower will not have to submit a new appraisal or tax return.
The $5 billion to $10 billion proposal is expected to be funded by a proposed "Financial Crisis Responsibility Fee" that would be imposed on the largest financial institutions, based on their size and riskiness.
While
Bank of America
(BAC) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
and
Wells Fargo
, as the three biggest mortgage servicers, are likely to be most affected by the new proposal, it remains uncertain whether the plan will win approval from Republicans, given the controversial bank tax has failed to gain support when suggested in the past.
Federal Reserve
Chairman Ben Bernanke will speak on "The economic outlook and the federal budget situation" before the committee on budget, U.S. House of Representatives on Thursday.
Later in the evening, Dallas Fed President Richard Fisher will speak on the economy and monetary policy in Austin, Texas.
The Fed recently pledged to keep short-term rates near zero till 2014, a move that is considered negative for banks who are sensitive to interest rates. Banks make money from the spread between the interest they earn on assets and that paid on deposits. Often, when interest rates rise, banks are able to profit by raising rates on loans at a faster pace than on deposits.
On Wednesday, Philadelphia Fed President Charles Plosser said he thought the decision to keep rates low was a mistake. "..with the economy gradually improving, I saw little justification to further ease monetary policy and felt it risked undermining confidence in the process," he said in a speech at Gladwyne, Penn.
Fisher, another hawk among Fed officials, might sound a similar note of dissent.
Deutsche Bank AG
(DB) - Get Report
reported a big fourth quarter profit drop Thursday, with net income of 186 million euros ($244 million) compared to net income of 605 million euros ($794 million) during the same period last year. The bank also post a posted a whopping pretax loss of 351 million euros in the fourth quarter 2011 compared to income gain of 707 million euros in the fourth quarter 2010.
The European debt crisis and the resulting slowdown in capital markets activity was the main culprit for the disappointment. Net revenues for the quarter were 6.9 billion euros, down 7% from the fourth quarter revenues of 7.4 billion euros in 2010.
"In 2011, our classic banking business produced record earnings, thus counterbalancing the impact of weak markets in investment banking," said bank chairman Josef Ackermann in a statement. We also significantly strengthened our capital base, boosted our liquidity reserves and reinforced our funding position. All in all, we have built an excellent platform to continue on the successful path of recent years."
--Written by Shanthi Bharatwaj in New York
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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
