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Bahl & Gaynor Investment Counsel Matt McCormick on how the mortgage settlement will impact banks' capital.
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But we even get with this Fox Business alert the nation's five largest mortgage lenders edging closer to a settlement over foreclosure abuse.
But five states are still holding out as of now it looks like the banks.
What provides seventeen billion in loan modifications for -- -- -- borrowers.
Three million dollars in refinancing for homeowners who are currently unable to refine -- but 'cause they are under water.
And then around one point five billion dollars in direct payments of up to 2000 dollars -- to borrowers.
Who lost their homes to foreclosure.
But will good deal hurt banks' bottom lines Banc analyst Matt McCormick is vice president and portfolio manager -- Gaynor investment counsel.
What do you think does this hurt the financial health of the banks.
Hi Sheryl I think when you look at the proposal in its current form.
I think short term can be hidden terms a cap or -- issues they got a pay out more money for this on top of it.
They have the stress tests coming out of march 15 which is gonna raise capital -- -- looming after that you have diesel three in the bottom line.
Is the only more capital and it's not like they have a ton of that left over especially when you look.
At earnings came out that all of them seem to be lacking on the revenue side.
I think when you look at what is going to happen to these companies I think it's a short term hit.
It may modestly.
Hurt the stock's price but I think a lot of it is already built into the market and I think it's not gonna really be too helpful to share prices I don't think it's gonna be helpful to housing.
And I think it's really kind of a ho hum situation I think all the good news is already baked in.
Is that why we're saying such strong performance do you think up from the financials is that if you look at.
The year to date performance for these major servicers are talking about Bank of America JPMorgan Citi and -- -- -- an incredible month in January.
But does that continue do you think maybe they shoot higher after this deal is confirmed announced.
When you look at.
A lot of them had a great team new area early February but it terrible 2000 -- And I think really it's a multitude of factors one you haven't seen a lot of negative news coming out of Europe the regional banks of the -- industry have done much more better than a money center banks.
But I think what you're seeing is a risk on trade on moderate economic growth I think this news is baked into.
The mortgage lenders as one of the reasons why the stock has been propelled I would not be surprised if you see a modest sell off.
After this.
Agreement is as announced because I think what this is very similar to like -- -- a lot of analysts talk about the Cheryl.
It's very similar to the 1998 tobacco lawsuits where essentially the attorney general say okay.
We're gonna extract a sizable sum from you you don't really have a lot of political backing and everybody moves on.
But the net effect is people still continue to smoke I think the net effect here is it's not really gonna be helpful to housing.
The people are gonna get up a principal reduction or 2000 are probably not the means to go out and buy a house right now I expect more for closures not -- You bring an interesting point there because like half of America right now -- is in the stock market.
Whether it's -- a pension a 401K one ever since you're holding shares in banks in the financial sector has been doing what you see an understatement.
Are you more concerned as an investor with the fact that the guide on the street is -- as house and that hurts your home value.
Or you more concerned of bank stocks I keep the gains that they produced which is that -- I think a lot of people are first off looking at the top line number meaning what does the market whether -- yes and peered out doing people get a sense of confidence and feeling that OK things have turned.
I think obviously people focus on themselves -- -- -- others are focused on there for a locate their bottom line.
But everyone is really very concerned about housing everyone understands it has in valuations.
Even though there might be a modest uptick here -- are still fraught with peril and I think until you start seeing.
This foreclosure situation ramp up meaning you need to see more houses foreclose upon to get a true bottom.
-- -- post right now where we have I believe kind of a purgatory where you don't really see a lot of movement.
These banks need to move these foreclosed homes off their inventories -- need to move more way to get a true sense of where really where housing is so.
Bottom line people -- focused on.
Their bottom line they want housing valuations to say the same but the reality banks need to do what they have to do with any depressed asset they gotta find a valuation means it's gonna sell.
And others back to California who has the most foreclosures across the nation -- there you go out.
Matt McCormick thank you very much -- talked on the topic.
