Archive for July, 2009

Genworth shares fall as 2Q results miss estimates (AP)

Friday, July 31st, 2009 | Finance News

NEW YORK – Genworth Financial Inc. shares slipped on Friday, a day after the insurer reported worse-than-expected second-quarter results as it was hit by losses in its U.S. mortgage insurance division and investment portfolio.

Its shares declined 36 cents, or 5.1 percent, to $6.75 in afternoon trading.

CEO Michael Fraizer said Friday that even while it is disappointing to post a quarterly loss, the company has seen some signs of improvement in divisions where it was hit the hardest, such as mortgage insurance.

Richmond, Va.-based Genworth reported a net loss of $50 million, or 11 cents per share, during the second quarter, smaller than the year-ago period. Excluding special one time items, the insurer earned $9 million, or 2 cents per share.

However, that fell short of analysts' expectations for earnings of 16 cents per share, according to Thomson Reuters. Analysts typically exclude special items from their estimates.

Genworth reported an operating loss of $134 million in its U.S. mortgage insurance business, compared with a loss of $59 million during the same quarter last year. Despite the growing loss, Fraizer said there are signs the housing market is stabilizing, loss mitigation activities could reduce losses in the coming quarters and new mortgage insurance business is performing well.

In the housing market, "not all signals are negative now," Fraizer told The Associated Press. "Momentum is shifting to the positive."

Over the past week, new reports showed better-than-expected increases in home sales in June. Also, a key reading on house prices showed a smaller year-over-year decline in May than in previous months, while prices in some major markets rose between April and May.

Fraizer noted those improving trends, coupled with better pricing and stricter underwriting standards, should improve new business in the coming quarters.

However, losses from existing policies are likely to remain a problem.

"The primary pressure remains whether people are working," Fraizer said of the deciding factor on homeowners' abilities to pay their mortgage. Mortgage insurers cover principal and interest payments if a borrow defaults on the loan.

Unemployment hit a 26-year high in June, climbing to 9.5 percent. It is widely expected the unemployment rate will eventually eclipse 10 percent.

Loan modification programs and other risk mitigation practices could help minimize losses as mortgage defaults mount and lead to additional claims payments, Fraizer said.

Fraizer also noted Genworth continues to strengthen its capital position. Genworth generated $705 million in cash as it completed an initial public offering for a minority stake in its Canadian mortgage insurance business. That extra cash further pads reserves, which exceed target requirements by $2.3 billion, Fraizer said.

Genworth has also paid off all upcoming debt maturities for 2009 and has no outstanding debt due until the middle of 2011.

Liquidity pressure has stung other financial firms in recent months as they face upcoming debt maturities in a time when credit markets haven't fully recovered from their near collapse last fall.

Earlier in the year, investors were concerned insurers and some other financial firms might not be able to survive because mounting investment losses would cripple cash reserves. Genworth shares dropped below $1 amid investors' broader concerns about liquidity problems at insurers, but have moved sharply higher as confidence returned to the sector.

Net investment losses totaled $59 million during the second quarter.


Federal authorities create mortgage fraud team (AP)

Friday, July 31st, 2009 | Finance News

NEW HAVEN, Conn. – Federal authorities are creating a mortgage fraud task force in Connecticut to investigate schemes that contributed to the economic crisis and emerging crime trends associated with the growing tide of foreclosures.

Prosecutors in the past year have brought charges or secured convictions in several major mortgage fraud cases with the help of federal and state law enforcement agencies. Authorities said the task force will help coordinate those efforts.

"Mortgage fraud hurts everybody, and we need the public's help to bring mortgage fraudsters to justice, as they have reaped a large amount of money and helped to create our state's and our nation's current housing and credit problems," said FBI Special Agent in Charge Kimberly K. Mertz.

The task force includes the U.S. attorney's office, FBI and other state and federal agencies. Acting U.S. Attorney Nora R. Dannehy said mortgage fraud investigations are a key component of the office's efforts to fight economic crime.

Most mortgage fraud cases involve false representations on mortgage loan applications and inflated property appraisals, authorities said.

The task force will focus on "foreclosure rescue" schemes and "short sale" schemes.

Foreclosure rescue schemes prey on desperate homeowners by persuading them to sign over the deeds to their homes to a "specialist" who promises homeowners that they can stay in their homes, make "rent" payments and eventually repurchase the homes. Instead of passing along the rent payments to a mortgage company, however, the "specialist" illegally retains the payments along with extra fees and the homes continue into foreclosure and the homeowners suffer additional losses.

In a short sale scheme, a buyer purchases a home with no intention of making payments and often keeps additional money included in the purchase loan that was supposed to go for improvements. After a few months, the buyer informs the lender that the house will foreclose and presents the lender a possible pre-foreclosure buyer who, unknown to the lender, is part of the fraud scheme and offers to purchase the home at a price below the current loan amount.


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Chevron profit tumbles, misses Wall Street view (Reuters)

Friday, July 31st, 2009 | Finance News

NEW YORK (Reuters) –
Chevron Corp (CVX.N) reported a 71 percent drop in second-quarter profit Friday as oil and gas prices fell from a year earlier and the economic slump shrank demand for fuel.

The second-largest U.S. oil company posted net profit of $1.75 billion, or 87 cents per share, down from $5.98 billion, or $2.90 a share, a year earlier.

Wall Street's average earnings forecast was 97 cents per share, according to Reuters Estimates.

Revenue fell 51 percent to $40 billion .

On Thursday, larger rival Exxon Mobil Corp (XOM.N) reported a steeper-than-expected drop in profit, and Royal Dutch Shell Plc's (RDSa.L) CEO said he saw no near-term respite from weak energy demand, excess capacity and high costs.

Chevron said earnings from its oil and gas production arm fell 79 percent, although global production rose by 133,000 barrels per day to 2.67 million barrels of oil equivalent.

The price of benchmark U.S. crude averaged just short of $60 per barrel in the second quarter, up from $43 in the first quarter but less than half of year-earlier levels. U.S. natural gas prices remain near seven-year lows.

Chevron's U.S. refining operations posted a loss of $95 million in the quarter, pulling global refining profits down to $161 million.

Chevron shares were down 1 percent at $67.00 in premarket trade after closing at $67.70 Thursday on the New York Stock Exchange.

At Thursday's close, the shares were down 8 percent this year, compared with a 2 percent rise for the Chicago Board Options Exchange index of oil stocks (.OIX). Companies with refining arms have been hit hardest. Exxon and Shell are both down 11 percent this year.

(Reporting by Matt Daily; additional reporting by Braden Reddall in San Francisco; editing by John Wallace)