Mortgage Lending Up, Capital Purchases Down: TARP Update

The intended message out of the Treasury Department is clear: Troubled Asset Relief Program (TARP) funds may be dwindling, but the program is working. The Treasury this week released details of another brief round of capital investments, as well as a monthly lending report that highlights the growing mortgage business among the 21 top TARP recipients. The Treasury said Wednesday it invested another $23m in financial institutions through the Capital Purchase Program (CPP). According to Treasury reports, two transactions occurred Thursday through the new Automotive Supplier Support Program. The Treasury granted GM Supplier Receivables LLC a loan worth up to $3.5bn; it also gave Chrysler Receivables SPV LLC a loan worth up to $1.5bn. The CPP injections — made Friday — showed the continued slowing of TARP funds since the previous week, from $54.8m on April 3 to $22.8m on April 10. Daily capital investments have slowed at a fairly steady pace since the March 13 infusion of $1.46 billion in 19 institutions. CPP investments slowed to $80.75 million on March 20 and ticked up to $192.96 million on March 27 before plunging to $54.83 million on April 3. The decline in daily volume indicates the Treasury may be reigning in its daily spending of TARP funds in order to reserve remaining capital at its disposal. Five privately held institutions participated Friday. The largest injection — $9.4m — went to Newark, N.J.-based City National Bancshares Corp., while the smallest daily injection — $2.04m — went to Chicago, Ill.-based Metropolitan Capital Bancorp Inc. According to the latest TARP transaction report, another firm joined the five financial institutions that repaid a combined $353m on March 31. Vineland, N.J.-based Sun Bancorp Inc. (SNBC) on April 8 repurchased the $89.31m in stocks from the Treasury. Easton, Md.-based Shore Bancshares Inc. (SHBI) on Wednesday also completed the repayment of its TARP funds by repurchasing $25m in shares sold to the Treasury on January 9, according to a press release. All told, the seven firms repaid a total $467.31m to the Treasury. See the latest TARP transaction report. Capital injections overall may have slowed, but lending among the top 21 TARP recipients remained relatively strong in February, Treasury reported Wednesday. Mortgage lending, in particular, continued to grow since January, showing an increasing gap between the volume of purchase money mortgages and refinance volume as mortgage rates linger at historic lows and homeowners attempt to lower monthly payments. “Within this challenging environment, the February survey shows that banks extended only a slightly smaller total volume of loan originations in February than January,” Treasury officials said in the press release. The 21 top banks posted a median 2% slip in total lending, with nine banks posting increases in lending growth and 12 reporting declines, Treasury said. The Treasury’s monthly report found Bank of America Corp. (BAC) funded $28.7bn in mortgage originations in February, up from $22.8bn in January. Refinances accounted for almost 78% of BofA’s February mortgage originations, with new home purchases made up the remaining $6.4bn. In January, the bank’s refi share of mortgage originations was 72%. JP Morgan Chase & Co. (JPM) funded $13bn in mortgage originations in February, up from $9.6bn in January; refis made up 84% of the business last month, up from 72% of Chase’s January mortgage business. Wells Fargo & Co. (WFC) posted $34.8bn in mortgage originations in February, up from $24bn in January. Refis accounted for 82% of Wells’ mortgage business in February, from 70% in January, according to the Treasury’s report. Write to Diana Golobay at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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