Even as Bank of America sees the cost of a potential mortgage settlement balloon to $17 billion, the bank is still struggling to prove it can grow revenue at the same time it is selling off branches and reducing its footprint in other business units, analysts say.
Ocwen Financial saw its shares rise Wednesday, apparently due to optimism among investors the nation's largest non-bank collector of mortgage debt can win regulatory approvals to proceed on a deal with Wells Fargo involving $39 billion worth of mortgage debt.
There are indications that the rise in mortgage rates over the past year may have stalled the housing market's recovery.
I have been a longtime follower and admirer and sometime owner of Ocwen Financial. In 2009-2010 I purchased Ocwen around $10 a share and its spinoff, Altisource Portfolio Solutions, at approximately $17 a share.
For bank investors, boring is good. Boring is the new black. Citigroup suffers from its Banamex scandal, Bank of America faces anothermortgage lawsuit from the SEC and JPMorgan Chase continues to suffer from the London Whale.
PennyMac Financial Services has received a pair of analyst upgrades lately following a recent sell-off, but an investment in the non-bank mortgage lender and servicer still looks risky.
Large-cap bank have seen a major boost from the release of loan-loss reserves over the past several years, and a return to typical provisioning for reserves could have quite a negative effect on earnings.
A refinancing boom that buoyed Wells Fargo's earnings in late 2012 and the first half of 2013 has petered out as rates rose in the second half of the year, sharply cutting at the bank's mortgage origination activity.
Ocwen Financial, the nation's fourth-largest collector or "servicer" of mortgage debt, reached a settlement with regulators to pay more than $2 billion to mortgage borrowers over alleged "significant and systemic misconduct" in servicing their loans.
Banks are ramping up the marketing of home-purchase loans to borrowers as refinancing volumes plummet, but there are still few signs that they are ready to ease lending standards materially.