If you’re watching the real estate markets, the good news is that the Federal Reserve has pledged to keep interest rates low through 2014. The bad news is that the market is going to need it. The November Case-Shiller housing numbers, released this morning, indicate that prices tumbled 3.7% from the year before. That’s below expectations of a 3.2% drop.

Even worse, it contradicts a trend in which the rate of price drops had been slowing. For several months, prices had been falling, but by a slightly smaller percentage each month — indicating a bottoming out. This latest data may be an outlier, or it may (horrors!) presage another leg down. (Housing prices are currently 32.9% off their peak).

However, there’s a lot of optimism building in the real estate community, too, so when prices turn, they may turn suddenly. Unemployment claims, for instance, hit nearly a four-year low, while the national jobless rate is at 8.5% — not spectacular by any means but certainly better than the 9% to 10% range we’ve seen in recent years.

(MORE: Election 2012: Will the Real GOP Candidate Please Stand Up?)

Sentiment among homebuilders, meanwhile, hit its highest level in four years, while the National Association of Home Builders Remodeling Index rose last week to a five-year high.

For housing prices, the regional picture did not change, with Washington, D.C., a bright spot for some time, posting year-over-year increases.

Phoenix, meanwhile, is a city to watch. The metro area posted an increase in prices of 0.6% from the previous month. While the market there is still down 3.6% year-over-year, the monthly pop might indicate that sun-seekers are finally biting at bargains of more than 50% off peak prices.

Article source: http://moneyland.time.com/2012/01/31/no-bottoming-out-for-real-estate-market-as-home-values-keep-falling/

January 31, 2012, 3:51 PM EST

By Charles Penty

(Updates with chairman’s comment in seventh paragraph.)

Jan. 31 (Bloomberg) — Banco Santander SA, Spain’s biggest lender, said fourth-quarter profit plunged 98 percent as it anticipated tougher rules on recognizing real-estate losses at home and earnings declined in the U.K. and Brazil.

Net income fell to 47 million euros ($61.9 million) from 2.1 billion euros a year earlier, the bank said in a filing to regulators today. That compared with the average 1.78 billion- euro estimate in a Bloomberg survey of 10 analysts.

Santander and other Spanish banks are under pressure from Mariano Rajoy’s new government to recognize more losses on building land and apartments that have piled up on their balance sheets as a result of the country’s property crash. The lender booked 1.81 billion euros in charges for Spanish real-estate provisions and a 600 million-euro goodwill charge at its Portuguese unit as profit sagged in its biggest markets.

“Cleaning up the real estate is a sensible thing to do and it’s probably long overdue,” said Andrea Williams, who helps manage about $1 billion, including Santander shares, as head of European equities at Royal London Asset Management. “I guess the other banks will now have to go and follow suit.”

Santander fell 0.6 percent to 5.95 euros in Madrid trading, paring this year’s gain to 1.4 percent and valuing the lender at 54.2 billion euros. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, will publish earnings Feb. 2.

Short of Pledge

Full-year net income fell to 5.35 billion euros from 8.18 billion euros and profit excluding one-time items was 7.02 billion euros, the Santander, Spain-based lender said. The bank fell short of a pledge by Chairman Emilio Botin last June to report earnings “in line” with the 8.18 billion euros posted in 2010.

Santander will maintain its dividend of 60 euro cents a share and boost earnings from Brazil, its biggest market, by 15 percent this year, Botin told reporters in Madrid today. The bank had reached “a turning point” in Spain, Botin said.

Politicians should take a “large” part of the blame for the economic crisis while banks have very little responsibility, he said.

Botin reiterated a target he set in September for Santander to achieve return on equity of 12 percent to 14 percent in 2014 “despite the recent worsening of the international environment.” The bank will have to see how things go this year and next because of the impact on earnings of a worsening economic outlook and tougher regulation, he said.

Time to Normalize

Botin told investors in September that earnings this year would be similar to those in 2011 after Chief Executive Officer Alfredo Saenz said at the same event in London that it may take three years for profit to “normalize.”

Net interest income rose to 7.97 billion euros in the fourth quarter from 7.33 billion euros a year ago, the bank said. The Santander group’s lending increased 3.6 percent from a year ago as customer deposits rose 2.6 percent.

Bad loans as a proportion of total lending reached 3.89 percent in December from 3.86 percent in September, Santander said. Net loans newly classified as in default were 4.05 billion euros compared with 4.21 billion euros in the third quarter.

The bank booked provisions for loan losses of 2.8 billion euros in the fourth quarter compared with 2.4 billion euros a year earlier, Santander said.

Real-Estate Cover

The bank previously said it had about 1.5 billion euros in gains from sales of insurance and auto loans unit stakes in the Americas to bolster its balance sheet. Santander used those funds to partly offset 3.18 billion euros in one-time provisions that included the pretax charges for Spanish real estate and Portuguese goodwill, plus portfolio writedowns and the amortization of intangibles and pensions, the bank said.

Following the real-estate charges, the bank now has provisions to cover 50 percent of properties on its balance sheet, up from 31 percent previously, Santander said. The bank said it has 8.55 billion euros of real estate on its books.

Santander’s profit before provisions of 24.4 billion euros in 2011 “underlines the group’s ability to generate future earnings in a situation where lower requirements for provisions will feed through to net profit,” the bank said in a statement.

Fourth-quarter profit from Spain plunged to 29 million euros in the fourth quarter from 320 million euros a year earlier as lending shrank 4.6 percent, Santander said.

Brazil Earnings

Bad loans as a proportion of total lending in Spain rose to 5.49 percent from 5.15 percent in September. The bad-loans ratio at its Santander branch network jumped to 8.47 percent from 5.52 percent a year earlier, the bank said.

Earnings from Brazil fell to 637 million euros in the fourth quarter from 751 million euros a year earlier.

Profit from the U.K. declined to 388 million euros from 436 million euros. Ana Patricia Botin, Botin’s eldest daughter who runs the U.K. unit, in September predicted a decline in its profitability in 2012 and 2013 as the bank focuses on investment. Full-year profit declined more than 40 percent because of a charge to cover compensation claims to customers mis-sold mortgage-loan insurance.

Santander’s core capital ratio rose to 10.02 percent in December under Basel II criteria from 9.42 percent in September. The bank said Jan. 9 it had met the 9 percent core capital ratio requirement set under European Banking Authority criteria six months ahead of the June deadline after selling stakes in its banks in Brazil and Chile, swapping preferred shares for equity and paying dividends in stock.

–Editors: Dylan Griffiths, Stephen Taylor.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Article source: http://www.businessweek.com/news/2012-01-31/santander-profit-slumps-after-spanish-real-estate-cleanup.html

January 30, 2012 8:27 pm

By Shahien Nasiripour in Washington

Article source: http://www.ft.com/cms/s/0/cf9fed00-4a89-11e1-8110-00144feabdc0.html

January 31, 2012, 1:15 AM EST

By David McLaughlin

Jan. 31 (Bloomberg) — States have until Feb. 3 to decide whether to accept a proposed nationwide settlement of a foreclosure probe with banks including JPMorgan Chase Co. and Citigroup Inc. that may total as much as $25 billion.

State and federal officials have been negotiating an agreement with the largest mortgage servicers that would set standards for how banks conduct home foreclosures while providing mortgage relief to borrowers. Any accord would be separate from a state-federal probe of mortgage securitization announced last week.

Nevada Attorney General Catherine Cortez Masto wrote in a Jan. 27 letter to the U.S. Justice Department, the Department of Housing and Urban Development and Iowa Attorney General Tom Miller, who is helping to lead negotiations, seeking more details on the deal. Masto said she needs answers quickly to 38 questions to evaluate the agreement because the sign-on deadline is Feb. 3.

“I need this information as soon as possible to allow my office to continue to evaluate the proposal on behalf of the state of Nevada,” she wrote. Jennifer Lopez, a spokeswoman for Masto, confirmed the letter, a copy of which was obtained by Bloomberg News, and declined further comment.

Flawed Documents

All 50 states announced an investigation into bank foreclosure practices in 2010 following disclosures that companies were using flawed documents in seizing homes. A group of state attorneys general and federal officials have since negotiated terms of a proposed settlement.

Separately, Joseph Smith, the North Carolina commissioner of banks, will serve as monitor to ensure banks comply with terms of the settlement, according to a person familiar with the matter who wasn’t authorized to speak publicly about it. A representative of the office couldn’t be reached for comment after regular business hours yesterday.

States are now considering whether to sign on the agreement and discussed the terms last week. At a meeting in Chicago with officials from Democratic attorney general offices, Miller declined to comment about whether there’s a deadline for states to accept the deal.

“We, along with our federal partners, are responding directly to Attorney General Masto to try to address her concerns,” Geoff Greenwood, a spokesman for Miller’s office, said in an e-mail yesterday. Greenwood confirmed the Feb. 3 deadline.

Masto is part of a group of attorneys general including New York’s Eric Schneiderman and Delaware’s Beau Biden who have said any settlement shouldn’t provide liability releases to the banks for claims that haven’t been investigated.

‘Inadequate for California’

Biden has said he won’t sign onto the deal as drafted. California Attorney General Kamala Harris’s office last week called it “inadequate for California.”

“You investigate first and settle later, and we’re still in the midst of investigations,” Biden said in an interview last week.

Schneiderman, who’s joining federal agencies to investigate the bundling of mortgage loans into securities sold to investors, said in an interview last week that the releases in the proposed foreclosure settlement will allow that probe to proceed.

“That major hurdle is out of the way,” he said.

–Editors: David E. Rovella, Andrew Dunn

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

Article source: http://www.businessweek.com/news/2012-01-31/bank-foreclosure-agreement-deadline-for-states-set-for-feb-3.html