OK,OK, selling at once half of my oversized position (18%) in BOFI could be my mistake!
Hi Maria, You don’t have to apologize for selling half an oversized position you became uncomfortable with.
Best,
Saul
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Thank you Saul for all you are doing in this board to educate and enrich other people’s life
I’m learning a lot and trying to apply my brand new “Saulish” way of thinking
Take care of you!
Maria
1 Like
My son, who is a very astute investor with an MBA from Chicago, recently made this comment to me during the short attack on BOFI:
“Reading their business model (BOFI) reminded me of how my current employer, Capital One, came to be. Twenty years ago, some ex-McKinsey (and other) consultants, figured out that by using data, they could better predict who was a good risk and who was a bad risk to give a credit card. They ended up giving a lot of credit cards to a lot of people other companies wouldn’t. Seems to have worked out pretty well so far”.
Jim
22 Likes
After seeing some conflicting reports of what the CEO said on the call, I went back and actually listened to it (as opposed to just reading the transcript, which is what I did initially) and it turns out the transcript – and therefore what I quoted – is wrong. Here is what I quoted:
At June 30, 2015, the weighted average loan-to-value of our entire portfolio of real estate loans was 56%. The very low average loan-to-value ratios in our loan book are not obscuring risk in the tails of our portfolio. For example, in the bank’s entire single-family loan portfolio, both jumbo size and below, excluding loans originated for sale for the government sponsored entities, there is only one loan that was originated at greater than 80% loan-to-value. We have had a direct pledge of liquid collateral that would reduce the collateral exposure levels below 80%.
But that last part is not actually what he said. This is what he said:
For example, in the bank’s entire single-family loan portfolio, both jumbo size and below, excluding loans originated for sale to the government sponsored entities, there is only one loan that was originated at greater than 80% loan-to-value without a direct pledge of liquid collateral that would reduce the collateral exposure levels below 80%.
That’s a very different statement. And as Fletch points out on the RB board, the question is whether the bank is using these “direct pledges” to get creative with its reporting of the LTV figures – and how reliable those pledges would be in the actual event of default. After all, it’s the low LTV figures that provide us with some margin of safety if the loans goes south.
Sorry about any earlier confusion.
Neil
Long BOFI
9 Likes
unnerving for me to place 10% trailing stop loss orders on my BOFI holdings
Is that a stop limit or stop market order. Stop market could still get you out at 20% down on a flash crash only to see it bounce back after you sell. It might be better to get some ‘real-time’ alerts (Fidelity does pretty well).
FYI, I believe it is called Spewing Alpha, not seeking Alpha 
I am an investor in BOFI as well as a customer. I refinanced two mortgages (primary and vacation homes) with them. Believe me when I tell you there was no stone left unturned to qualify. I had cash to pay off the mortgages but with the low rates I wanted to have free cash to invest.
It took over a month to file necessary papers documents (over 300 pages!) before we closed. I actually had to file documents from my IRA which stated how much I was withdrawing per month for several years so that I could prove income!! BTW I’m retired.
I’m staying for the haul.
Trout
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Thanks for sharing your personal experience, Trout. Do you mind if I ask what the LTV was on those mortgages?
One thing everyone should keep in mind is that, in addition to holding some loans on the books, BOFI does originate and sell loans to the government agencies like other banks, and those must obviously pass all the usual checks and clear the usual hurdles.
Neil
Long BOFI
…Bottom-line: This is a growth bank with a unique strategy. The strategy is going to push this stock higher over the next 5 years especially if there’s a stock split…
http://seekingalpha.com/article/3479446-a-bullish-view-on-bo…
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Hello,
Not only do the loans they sell have to pass muster with the government,
they are subject to bank examination by the federal government. Rather than peruse some recordings of loan documents like the short seller did to bash the bank’s underwriting standards (and come up with a few questions) the examiner can look at the entire loan file. The fact that the government took a long time to approve the transaction with H & R Block should indicate that there was an in-depth look at BOFI’s loan portfolio.
With the transaction closing today, I would expect a good pop in the stock at tomorrow’s open.
Mike
1 Like
LTV on home loan was 48% and vacation 35% so pretty wide margins of safety.
Trout
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It seems to me that all this talk of BOFI loans being more risky (not as well thought out) is compared to conventional banks. Now I don’t know about BOFI but I do know that conventional bankers have used very poor risk judgment in the past. Savings and Loan crisis, 2008-2009, multiple bad loans to Latin American countries etc. The incentive to bankers is to take as much risk is possible, hopefully they will be retired by the time the loans turn bad. No matter what happens they keep their fat bonuses.
Federal insurance of bank deposits means bank customers no longer worry about the risks of bank failures. That, plus “too big to fail” pretty much removes “prudence” from the vocabulary of big banks.
If BOFI is doing something different in assessing the risk of loans, different does not mean worse. It just means different.
What could be riskier than lending money to places like Venezuela?
Or more recently
http://www.bloomberg.com/news/articles/2013-10-15/citigroup-…
lending money to Mexican homebuilders? Wasn’t lending money to US homebuilders bad enough? Because homebuilders are just like beavers, they can’t stop themselves from over building.
As a non banker, and an outsider of BOFI I can’t judge their loan quality. But a general banking rule should be lend to the rich , lend to those who really don’t need a loan…
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