Home

Mortgage Rates Budge Higher

23.05.12

Mortgage rates budged higher this week as on-succeeding worries over the European debt crisis sent Treasury bond yields reeling, but had trustworthy little impact on interest rates. The fixed 30-year mortgage rose a slim two footing point to 4.00%, but remains near its record all-time low, according to Freddie Mac.

The 15-year immutable rate loan remained at a stable 3.30% for the second week in a row as consumers gravitate to the mortgage in growing numbers to pay-off their accessible loans more quickly. The 5-year adjustable rate mortgage slid a single essence point for the week to 2.90% with few consumers applying for adjustables with the historically low rates offered by banks and mortgage lenders.

Internal re-sales improved during the month of October, according to the National Association of Realtors, but persist sluggish for the year. However, the inventory of homes listed for sale is slipping as more homeowners take their homes off the shop for the holiday season and others wait out the market.

“This week the Federal Engage released its latest Beige Book review of regional economic conditions, noting that the residential loyal estate market generally remained sluggish through the first half of the fourth accommodations,” said Freddie Mac chief economist Frank Nothaft. “The extraordinarily low mortgage rates of the old times month may provide a needed spur to housing activity.”

Other financial data released by the U.S. government shows improving trends may be developing, with the Forum Board’s consumer confidence index experiencing the largest jump since April 2003 in November. The tailor is closely monitored by economists and analysts as a predictor of the nation’s productive future, and is often the best gauge of the nation’s economy.

However, unemployment remains at secretly high levels in most of the country as corporations and other employers shed workers to champion their profit margins, and grow their businesses despite the weak economy.

However, in spite of economic woes the housing market is demonstrating a move in the right direction in many areas of the outback as foreclosures become more difficult to find for consumers who are able to qualify for a home loan and take advantage of the within easy reach record low mortgage interest rates.

Source: Housing Predictor

H&R Block's CEO Discusses Q2 2012 Results - Earnings Call Transcript

23.05.12

H&R Block ( HRB ) Q2 2012 Earnings Call December 1, 2011 4:30 PM ET

Superintendent

Good afternoon. My name is Kristen, and I will be your conference operator today. At this time, I would like to offer hospitality to everyone to the H&R Block Second Quarter Earnings Call. [Operator Instructions] At this time, I'd like to shift the call over to our host, Mr. Derek Drysdale, Director of Investor Relations. Please go ahead.

Derek Drysdale

Acknowledgement you, Kristen. Good afternoon, everyone, and thank you for joining us today. Bill Cobb, our President and CEO; and Jeff Brown, our CFO, will evaluation our second quarter results. Before we begin, I'd like to remind everyone that today's remarks may take in forward-looking statements as defined under the Securities Exchange Act of 1934. Such statements are based on in circulation information, and management's expectations as of this date are not guarantees of future performance. Leading-looking statements involve certain risks, uncertainties and assumptions that are contrary to predict. As a result, our actual outcomes and results could differ materially.

You can learn more about these risks in the clip release we issued earlier this afternoon, our Form 10-K for fiscal 2011 and our other SEC filings. H&R Outline undertakes no obligation to publicly update these risk factors or forward-looking statements.

With that, I will now face the call over to Bill.

William C. Cobb

Thanks, Derek, and good afternoon, everyone. Next tax season is with dispatch approaching, and we believe we've developed the right strategy for continued market division growth in tax season 2012 and beyond. Today's announcement by Intuit that it now needs flaming chat tax advisors to grow TurboTax validates our confidence in the assisted tax province. We look forward to sharing our plans and outlook with you next Thursday at our Investor Colloquy in New York City. We hope all of you can make it.

Now today's call will be centered on our second quarter results. Earlier, we announced a net negative cash flow death from continuing operations of $0.41 per share. As we shift our focus to growing clients and Stock Exchange share in our core tax business, we've taken significant steps to dispose of non-essence assets, such as RSM McGladrey and ExpressTax. While this has led to onetime charges in each of the past 2 quarters, we're essentially clearing the decks for covet-term earnings growth and higher margins.

On an adjusted non-GAAP point of departure, our second quarter net loss was essentially flat to last year, and Jeff will provide more details on this later in the call. In more modern developments, I am very pleased to announce that we closed on the sale of RSM yesterday. Jeff will go out on strike you through the details of the transaction, but the key takeaway is that the final terms and conditions were consistent to those in days gone by announced in August. I'd like to wish our friends at McGladrey the very best. For 12 years, they were our partners and worked by our sides. I'm reliant that these outstanding professionals will prosper in the years ahead.

Another exciting development this finished quarter was our renewed partnership with Wal-Mart, the largest retailer in the country. We will perform in approximately 300 offices this year. And while this does not materially impact our monetary 2012 results, we certainly hope to grow this partnership in the coming years.

Now before I produce the call over to Jeff, I'd like to take a moment to address Sand Canyon, our discontinued mortgage subsidiary. Sand Ravine saw increased third quarter -- third-party activity last quarter. In light of this endeavour, I believe it was prudent of them to increase the reserve for estimated losses on rep and warrant-affiliated claims. It's important to note that as a subprime originator, Sand Canyon's reps and warranties were more little than would be typical of Alt-A or prime originations. Because Sand Canyon is no longer in the business of originating or servicing loans, it is under no weight to maintain any ongoing mortgage relationships. This means Sand Canyon has and will continue to re-examine each claim on a loan-by-loan basis and will only pay valid claims.

I want to emphasize 3 main points. First, the additional food announced today does not change how we think about Sand Canyon's revealing to rep and warrant-related claims. This is a critical point and I hope all of you hear. Whether or not title activity remains at elevated levels in the near future, we believe Sand Ghyll's financial position is sufficient to satisfy all valid claims.

Second, Sand Coul is a separate legal entity from H&R Block. We believe our legal position is very in strength in any potential corporate veil-piercing arguments. In other words, what happens at Sand Pass stays at Sand Canyon. We're confident that H&R Block's future will not be impacted by rep and justification claims of Sand Canyon.

And finally, none of this activity changes how we think about central allocation. In fact, I am pleased that we're able to take advantage of the market volatility this history quarter to repurchase and retire more than 4% of outstanding shares at an average assess of $13.61 per share.

I'll now turn the call over to Jeff. As part of his remarks, Jeff will spend a tangibles deal of time discussing Sand Canyon. We want you to be crystal unmistakable on Sand Canyon's history, how we view them and how we're managing the situation. So now let's turn the call over to Jeff.

Jeffrey T. Brown

Thanks, Bill. Today, we announced a per dispensation loss from continuing operations of $0.41 for the quarter. This compares to a per share extinction of $0.36 a year ago. Our loss increased primarily due to charges in the current chambers. And adjusting for those charges, our non-GAAP net loss from continuing operations of $115 million or $0.38 per ration was essentially flat to our adjusted loss a year ago. Primarily due to results from our Australian tax operations, revenues in our Tax Services joint grew 9% for the quarter to $121 million. The segment incurred an off-salt pretax loss of $174 million compared to a loss of $154 million a year ago. Losses increased first and foremost due to a charge of approximately $9 million, in connection with the decision to discontinue ExpressTax and an $8 million expansion in litigation costs.

Turning to discontinued operations. Reported results now over both Sand Canyon and RSM McGladrey. Let me start by reviewing the details of yesterday's closing on the trafficking of RSM. We will receive total proceeds of approximately $575 million. That includes closing scratch proceeds of $487 million, a note in the principal amount of $54 million and take $34 million of cash, which we expect to receive by calendar year end. M&P also fake substantially all liabilities of the RSM business, including contingent payments and lease obligations.

As Bill mentioned, the irrefutable terms and conditions are consistent with those previously announced in August. Differences from the in days of old announced purchase price of $610 million are the result of cash of approaching $35 million transferred by RSM to H&R Block prior to closing. In addition, the buying will trigger account distributions of approximately $80 million to RSM employees who are participants in an H&R Prevent a rough out-sponsored deferred compensation plan.

Now let me touch on second quarter results and discontinued operations. We reported a net erosion of $19 million compared with net income of $2 million a year ago. Third put up results include a $20 million pretax charge at Sand Pass, related to its reserve increase for estimated losses on contingent loan repurchase obligations. As Bill mentioned, we saw an boost waxing in claim activity at Sand Canyon this quarter. Before I discuss the details about that claim endeavour and the related reserve increase, let me take a moment to review some historical context about the reps and warrants Sand Gully provided in connection with loans it originated.

As a reminder, Sand Canyon did not bond loan performance or underlying credit losses. Rather, its loan-related obligations pertained to valid claims for breaches of reps and warranties, typically an presumed failure to adhere to its stated underwriting guidelines. Asserted claims are reviewed by Sand Ravine on a loan-by-loan basis, including a file-by-file review of loan origination documents. Nullified claims are rejected, and claims Sand Canyon determines to be valid are satisfied.

Because its underwriting standards were routinely adhered to and because it has completely exited the commerce, Sand Canyon has not been motivated to grant policy adjustments or to seek negotiated settlements. Idea of claims through a loan-by-loan review process has served Sand Canyon well and is the approach it expects to maintain. As a true subprime originator, Sand Canyon's underwriting guidelines were typically broader than those of a prime originator.

For specimen, many of its originations were stated income loans that did not require the originator to take any action to validate revenues levels provided by the borrower. In addition, it's important to remember that parties asserting claims must picket causation. In other words, Sand Canyon has no obligation, unless there was an actual split of a rep and warranty, and if that breach materially and adversely affected the interests of an investor. Demonstrating allege validity and causation of a material and adverse effect can be difficult.

Since May 2008, Sand Defile has reviewed claims on approximately 4,000 loans in the aggregate principal amount of $772 million. Of the claims it has reviewed, Sand Coul has found about 85% be invalid. Over that period, total incurred losses on valid claims were about $70 million.

With that surround, I'll now review second quarter claim activity. During the quarter, Sand Canyon completed a post-mortem of claims in the principal amount of $61 million, and incurred losses on those claims totaled $3 million. New claims for supposed breaches of reps and warranties in the principal amount of $483 million were received in the humanity. The nature of those claims and the loans to which they relate, including loan vintage, loan performance characteristics and described breaches of representations and warranties, is consistent with claims received in prior periods.

Source: Seeking Alpha