3 Things That Could Move Financial Stocks Today
NEW YORK (
) -- The deadline for the foreclosure settlement agreement between the nation's biggest mortgage servicers and the 50 states is expected to expire late Monday. The talks over allegedly deceptive foreclosure practices including "robo-signing" have dragged on for more than a year, but expectations have mounted in recent weeks that the states will finally come to an agreement.
Still, analysts worry that the deal might not be positive for banks.
The settlement, expected at $25 billion, will require banks to reduce the principal owed on mortgages for borrowers as well as address their foreclosure procedures. Banks have been seeking a broad release from future mortgage claims from the states, but recent reports suggest that the immunity might be restricted to only matters concerning robosigning.
The New York Attorney General Eric Schneiderman on Friday sued
Bank of America
(BAC) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
and
Wells Fargo
(WFC) - Get Report
over their use of Mortgage Electronic Registration System or MERS, an electronic mortgage database, saying it resulted in deceptive and illegal practices, including false documents used in foreclosure proceedings.
The three banks, along with
Citigroup
(C) - Get Report
and
Ally Financial
- are at the center of the year-long negotiations with the states over their allegedly deceptive foreclosure practices, including robo-signing.
The NY AG's opposition to the deal was well known. Still, the announcement came days after President Obama named Schneiderman as the lead investigator of a new mortgage unit, which has fueled concerns that the lawsuits against banks will mount.
Meanwhile, states including California and Nevada have expressed concerns over the adequacy of the terms and it remains uncertain as to whether they would sign on to the deal. Analysts contend that a deal without California, which has been among the worst affected by the housing bust, will do little to resolve the legacy problems ailing banks.
While talks have frequently collapsed in the past year, failure to achieve a settlement again on Monday could give pause to the rally in bank stocks. Bank of America, which bears the brunt of the mortgage mess, is up over 30% so far in 2012.
Greece continues to hurtle towards default, with Prime Minister Lucas Papademos failing to convince party leaders in his coalition government Sunday to back new austerity measures that would help Greece secure a 130 billion euro bailout and avoid default.
Finance minister Evangelos Venizelos said on Sunday that negotiations with foreign leaders were on "razor's edge" according to a report by The Guardian. The Troika that is the European Central Bank, the International Monetary Fund and the European Union have insisted that Greece cuts minimum wage and holiday bonuses in exchange for the bailout. But Greek leaders remain concerned that the cuts will push the country further into recession.
The Euro Zone finance ministers postponed a meeting to reach an agreement in Brussels on the second bailout package on Monday.
Deadlines have come and gone for bailing out Greece, but time is running out as the country faces big bond redemptions due in March. Failure to receive the funding in time to meet the redemptions will likely result in a default.
U.S banks have said they have little direct exposure to Greece. JPMorgan Chase CEO Jamie Dimon said at a conference in Davos that the direct impact of a Greek default on the U.S. banks was "almost zero" as CDS exposure was very small and everyone was prepared for the event.
Still, not everyone is confident about the fallout of a default on the Euro Zone. According to Bank of America analyst Guy Moszkowski,
Goldman Sachs
(GS) - Get Report
management is concerned the most about " the potential for a disorderly Greek default leading to Greece's withdrawal from the Euro, which could of course provoke a rush to move bank deposits ahead of forced conversion. The bigger concern is that, if markets and depositors are not convinced of the ability and determination of the European authorities to "ring fence" other vulnerable markets (Italy and Spain, in particular), then depositors in those countries could come to fear Euro conversion as well, and the consequences would be severe."
President Obama said he will nominate JPMorgan Chase executive Jeremiah Norton to the FDIC board.
Norton, a former Bush administration aide who assisted former Treasury Secretary Henry Paulson during the financial crisis, is currently executive director of JPMorgan Securities and advises on mergers and acquisitions.
The announcement completes the five-member board at the FDIC.
--Written by Shanthi Bharatwaj in New York
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