The downward spiral in stock prices, a weak housing market and a tough economy have made 2008 a year to forget for most investors.
Yet some bargain hunters are looking for investment opportunities in the wreckage.
One such company, Diversified Mortgage Workout Corp. in White Plains, is targeting sectors that are deeply troubled by America’s housing crisis — distressed subprime mortgage portfolios, real estate and mortgages of troubled homeowners. The company said its goal is to buy such assets at “significant discounts” and eventually realize a profit once the economy turns around.
The company announced today that it will invest $20 million to buy a 23 percent stake in an offshore hedge fund that has a similar investment focus.
“Diversified believes this to be a great entrance strategy for a soon to be highly lucrative opportunity as banks, mortgage companies and investment banks in the United States start to unload its non performing real estate related assets, while the economy starts its recovery under the new incoming administration,” the company said in a written statement.
Diversified said it has the option to increase its position in the hedge fund by another 26 percent within a year.
Diversified did not disclose the name of the hedge fund in a news release. Company officials could not be reached for comment.
In August, Diversified said that it had financial commitments of $50 million from investors to buy subprime mortgage portfolios. It added then that it was negotiating for another $100 million in financing commitments.
“The company is very pleased with the progress that has been made in such a relatively short period of time in attracting investment capital and the interest of additional large sums of investment capital being presented to us,” Victoria Forlenza, president and chief operating officer of Diversified, said in a written statement in August. “With the proper analysis of the portfolios the company acquires and the proper pricing and terms, this will be a very lucrative profit center for the company and its shareholders.”
The Journal News
The parent company of Provident Bank in Montebello said it had higher profits and revenues for the fourth quarter and its full fiscal year, citing loan growth and more efficient operations.
The parent, Provident New York Bancorp, said that for the fourth quarter ending Sept. 30, it had net income of $6.5 million, or 17 cents a share, on net interest income of $25.5 million. For the comparable quarter a year earlier, it had net income of $5.15 million, or 13 cents a share, on net interest income of $22.2 million.
For fiscal 2008, it had net income of $23.8 million, or 61 cents a share, on net interest income of $95.3 million. for fiscal 2007, it had net income of $19.6 million, or 48 cents a share, on net interest income of $84.7 million.
Loans at Sept. 30 grew to $93.5 million, up 5.7 percent from the end of fiscal 2007. Growth was mainly in the commercial sector, the bank said.
The company charged off $1 million in the fourth quarter, compared to $812,000 in the third quarter and $910,000 for the fourth quarter of fiscal 2007. It said it doesnâ€™t originate subprime residential mortgages and doesnâ€™t hold any preferred stock in government sponsored entities that needs to be written down.
Providentâ€™s efficiency ratio improved. The ratio, a figure that reflects the amount of revenue that covers expenses, dropped from 70.1 percent in the fourth quarter of fiscal 2007 to 63.2 percent in the fourth quarter of 2008.
Reach Jerry Gleeson at email@example.com or 914-694-5026.
Standard & Poorâ€™s Rating Services yesterday affirmed its AA financial-strength rating of MBIA Inc., and removed the rating from credit watch negative.
S&Pâ€™s outlook for the troubled Armonk-based bond insurer is negative, S&P said.
â€œWe assigned a negative outlook to MBIA due to its significant exposure to domestic nonprime mortgages and related exposures,â€ S&P credit analyst David Veno said in a statement.
Removal of the negative outlook, Veno said, â€œwill depend on clarification of ultimate potential losses as well as future business prospects.â€
The possibility of new regulations and the outcome of MBIAâ€™s business decisions are also factors, he said.
Westchester County has signed a $150,000 contract with Westchester Residential Opportunities Inc., a nonprofit agency certified by the federal government, to reduce the number of evictions in the county caused by the nationâ€™s ongoing mortgage crisis.
The money was derived from a special fund the county set up to deal with emergencies, said County Legislator Peter Harckham, D-Katonah.
The agreement provides for the housing-support agency to use the funding to increase staffing to accommodate the growing number of requests for mortgage default and foreclosure counseling on its toll-free hotline, 877-976-4968, and the hotline’s continued operation.
The contract also calls for WRO officials to meet with top lenders and community stakeholders to discuss early intervention for potential defaulters, the county said.
WRO has offices at 470 Mamaroneck Ave. in White Plains and by appointment at the Mount Vernon Armory, 144 N. 5th Ave.
Its Web site is www.wroinc.org.
Shares of MBIA Inc. tumbled 13 percent today after Moodyâ€™s Investor Service stripped the struggling Armonk-based bond insurer of its prized Aaa rating, Moodyâ€™s highest.
Moodyâ€™s downgraded MBIAâ€™s rating two notches to A2. Moodyâ€™s also downgraded the rating for MBIA rival Ambac Financial Group Inc. one step to Aa.
The move, taken late Thursday, followed similar actions by Fitch Ratings and Standard & Poorâ€™s.
â€œMBIAâ€™s insured portfolio remains vulnerable to further economic deterioration,â€ Moodyâ€™s said in a statement. â€œThe outlook for the ratings is negative, reflecting the material uncertainty about the firmâ€™s strategy and the … likelihood of further adverse developments in its insurance portfolios or operations.â€
MBIA has recorded heavy losses largely due to its exposure to the weak housing market and a troubled market for subprime mortgages to riskier borrowers.
For its part, MBIA said yesterday that it was â€œdisappointedâ€ by Moodyâ€™s decision, saying it was â€œbaffledâ€ by the ratings agencyâ€™s analysis.
â€œWe believe the fundamentals of the company support a higher rating,â€ MBIA said.
MBIA shares ended the weekâ€™s trading down 86 cents to $5.59 each. The stock has fallen more than 91 percent in the last year.
Prudential Rand Realty has agreed to acquire Nelson Vrooman Real Estate, a White Plains-based firm established more than 50 years ago that has become victim of the downturn in home sales in the Lower Hudson Valley.
â€œThis is a very competitive market, and I knew that the best way to serve my clients and associates was to join a bigger team with more resources,â€ said Bill Vrooman, Nelson Vrooman founder and chief executive.
Vrooman, along with Nelson Vrooman President Mike Graessle, will join Prudential Rand as associate brokers, Prudential Rand said.
The deal, the terms of which werenâ€™t disclosed, makes Prudential Rand the largest real-estate firm in White Plains, the New City-based company said.
As part of the transaction, Nelson Vroomanâ€™s offices at 709 Westchester Ave. will close and combine with those of Prudential Rand at 1 N. Broadway.
The deal will also result in the transfer of 20 Nelson Vrooman workers to Prudential Rand, which has 20 offices in the Hudson Valley.
Universal American Corp. will reduce the value of some of its sub-prime holdings by $26.7 million to account for the reduced value of the assets, which has been revised downward to their worth as of Dec. 31.
The Rye Brook-based company took the action, it said today, in agreement with its auditors, after the assets were determined to be overvalued.
The after-tax impairment was shown as an unrealized loss in the preliminary balance sheet data that Universal American presented on Feb. 19 along with its earnings release, it said.
The majority of Universal Americanâ€™s subprime holdings â€œhave been placed on negative credit watch by rating agencies,â€ the company said in a statement.
The company said it continues to review the estimated fair value of the securities, believing that their value will further decrease in the first quarter.
Universal American said it believes that it â€œwill recover principal and interest greater than the market prices currently indicate.â€
MBIA Inc., the Armonk-based bond insurer, said the recent problems in the subprime mortgage market are not a major risk for the company. In a conference call with investors yesterday, MBIA Chief Financial Officer Chuck Chaplin said subprime exposure is not a threat to the companyÃ¢â‚¬â„¢s balance sheet. Subprime accounts for less than 2 percent of the companyÃ¢â‚¬â„¢s $651.8 billion portfolio, according to MBIA.
The subprime sector of the mortgage market, which makes loans to borrowers with weaker credit histories, has faced mounting problems as the housing market weakened and interest rates rose. A steep sell off in financial shares recently partly reflected investor fears that the subprime fallout and deteriorating credit quality could spread to the general economy. Yesterday, MBIAÃ¢â‚¬â„¢s shares fell 58 cents to $55.37.