Hudson City Bancorp, an active correspondent buyer of residential loans in the mid-Atlantic area, revealed that it soon may become the subject of an "informal regulatory enforcement action" known as a 'memorandum of understanding.'
In a new filing with the Securities and Exchange Commission, the Paramus, N.J.-based thrift — one of the largest in the nation — said the Office of Thrift Supervision could force it to reduce its "level" of interest rate risk and funding concentrations.
Credit Suisse, in a research note, said the thrift could be asked to reduce its long term debt by $15 billion and its assets by $7 billion in order to maintain a 6% leverage ratio.
Among mortgage lenders, the S&L ranks 28th nationwide, according to figures compiled by National Mortgage News and the Quarterly Data Report.
CS notes that "Given the uncertainty of the dividend and the size of the book value impairment arising from the MOU and likely balance sheet restructuring we are maintaining our Neutral rating [on the stock]."
In trading Wednesday, Hudson City's stock price fell more than 10% at one point but was up 2% early Thursday.
