Fed Suggests Recession Nearing An End

The White House this week ridiculed Newsweek Magazine's cover that declared “The Recession is Over,” but the Federal Reserve reported Wednesday that, if the recession isn't over, it's getting close.

In its so-called “Beige Book,” the Fed concluded that the economy is no longer in a free-fall, and in fact, some regions of the country are starting to show signs of stabilization. The report is based on data collected from businesses across the country.

“The recession is nearing its end. But that doesn?t mean that every sector has turned the corner,” said Joel Naroff, chief economist for Naroff Economic Advisors, in Holland, Pa. “Some industries are starting to see some pick-up in demand but others will have to wait. In addition, any improvement is likely to be uneven and sluggish.”

The beige book covered the six-week period since the last book on June 10 and was prepared in advance of the August 11 and 12 meeting of the Federal Open Market Committee, which sets interest rates.

Analysts say they don't expect the FMOC to make any changes, keeping a key interest rate close to zero. The Fed may also buy billions of dollars in government and mortgage-related debt to try and keep mortgage rates low.

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Lawsuit Seeks to Block Home Foreclosures in Minn.

A group seeking to stop home foreclosures in Minnesota sued the federal government Tuesday, saying a program meant to help struggling homeowners refinance their mortgages fails to give them proper notice or the right to appeal when they're rejected.

The Home Affordable Modification Program, set up earlier this year, reduces monthly mortgage payments for at-risk borrowers. The Obama administration has set aside $75 billion for the program to try to prevent 3 million to 4 million foreclosures.

But Mark Ireland, an attorney with the Foreclosure Law Relief Project, said the government has failed to establish clear procedures.

''The government does not require its loan servicers to tell a homeowner the specific reason why they have been denied a loan modification,'' Ireland said. ''Decisions are made under a cloak of secrecy and there is no formal way to challenge these decisions.''

The lawsuit, which seeks class-action status, was filed in federal court in Minneapolis. It asks for an injunction against all foreclosures until the federal government puts safeguards in place.

Ireland said the group hopes housing advocates in other states file similar lawsuits.

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Study Finds Underwater Borrowers Drowned Themselves with Refinancings

Why are so many homeowners underwater on their mortgages?

In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.
A new study challenges this premise and finds that excessive borrowing may have played as great a role.

Michael LaCour-Little, a finance professor at California State University at Fullerton, looked at 4,000 foreclosures in Southern California from 2006-08. He found that, at least in Southern California, borrowers who defaulted on their mortgages didn’t purchase their homes at the top of the market. Instead, the average acquisition was made in 2002 and many homes lost to foreclosure were bought in the 1990s. More than half of all borrowers who lost their homes had already refinanced at least once, and four out of five had a second mortgage.

The original loan-to-value ratio for these borrowers stood at a reasonable 84%, but second and third liens left homeowners with a combined loan-to-value ratio of about 150% by the time of the foreclosure sale date.

Borrowers, meanwhile, took out around $2 billion in equity from their homes, or nearly eight times the $262 million that they put into their homes. Lenders lost around four times as much as borrowers, seeing $1 billion in losses.

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Avoid Foreclosure, There Is Always HOPE

There are few things scarier than losing your home and seeing your family on the street. Unfortunately many Americans and people worldwide are facing this problem due to the worldwide crisis. As we know most governments are doing their best to protect poor families that are at risk of losing their home because they are unable to meet the mortgage payments. One of the measures the American government has provided is the HOPE program. This program began under the Bush administration and the current administration has just expanded the availability and extent of the mortgage protection program for families.

Sadly many families don’t understand or know about the program and how they can benefit, if you fit this profile what can you do make the most of the helping hand the government is trying to provide. Information is as usual the most powerful weapon whether you are trying to fight a war or pay your home loan. If you are having trouble paying your mortgage and need aid to avoid foreclosure you need to get working on solving your situation.
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Loan balloons coming, could trigger new foreclosure 'tsunami'

A coming wave of mortgage adjustments threatens to prolong, and possibly worsen, the foreclosure crisis, industry analysts warn.

An estimated 2.8 million option adjustable-rate mortgages are scheduled to reset in the coming years, with the peak in mid-2011. Those resets will cause those borrowers’ monthly payments to balloon, potentially triggering a third wave of foreclosures.

“We do believe there is another wave coming, and I personally believe it will be the tsunami,” said L.R. “Chip” Waterman of Hunt Real Estate ERA in Sarasota, who specializes in foreclosed and bank-owned properties. “There’s no way we’ve begun to see the end of this.”
Others question if such dire predictions are exaggerated — but acknowledge the crisis is nowhere close to ending.

“I think we’re past the absolute tsunami of foreclosures, but we still have many more to go through,” said Ken Chapman Jr., a Sarasota attorney and president of the Sarasota-Bradenton Attorneys Real Estate Council.

Foreclosures rising

As of the close of business Friday, lenders have filed 3,602 foreclosure suits this year in Manatee County Circuit Court, court records show. There were 3.034 filed at the same point in 2008, which went on to set a local record with 5,592 in all.
The state and national pictures are not much better.

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Accountants Gain Courage to Stand Up to Bankers: Jonathan Weil

July 23 (Bloomberg) -- Turns out America’s accounting poobahs have some fight in them after all.

Call them crazy, or maybe just brave. The Financial Accounting Standards Board is girding for another brawl with the banking industry over mark-to-market accounting. And this time, it’s the FASB that has come out swinging.

It was only last April that the FASB caved to congressional pressure by passing emergency rule changes so that banks and insurance companies could keep long-term losses from crummy debt securities off their income statements.

Now the FASB says it may expand the use of fair-market values on corporate income statements and balance sheets in ways it never has before. Even loans would have to be carried on the balance sheet at fair value, under a preliminary decision reached July 15. The board might decide whether to issue a formal proposal on the matter as soon as next month.

“They know they screwed up, and they took action to correct for it,” says Adam Hurwich, a partner at New York investment manager Jupiter Advisors LLC and a member of the FASB’s Investors Technical Advisory Committee. “The more pushback there’s going to be, the more their credibility is going to be established.”

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The Quarterly Bloomberg Global Poll of financial investors and analysts finds attitudes about the new president in Asia and Europe are overwhelmingly positive. In the U.S., by contrast, they are slightly negative.

In Europe and Asia, 87 percent of respondents say they view Obama positively, compared with just 49 percent in the U.S. His standing among American investors is even lower on economic matters: only a quarter of U.S. poll respondents rate his economic policies as “good” or “excellent,” compared with more than half in Europe and Asia.

Obama’s “stratospheric favorability ratings” outside the U.S. after five months in office are related to attitudes about his predecessor, former President George W. Bush, says J. Ann Selzer, the president of Selzer & Co., a Des Moines, Iowa-based polling firm that conducted the survey.

“It speaks as much to the visceral distaste for George Bush outside of the U.S,” she says. In Europe and Asia, more than four of five poll respondents choose Obama over Bush as the president offering better economic leadership. In the U.S., investors pick Bush, 43 percent to 41 percent.

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WASHINGTON — The federal government has devoted $4.7 trillion to help the financial sector through its crisis, a level of assistance equal to about one-third of the overall U.S. economy, a watchdog report said Monday.

Under the worst of circumstances, the report said, the government's maximum exposure could total nearly $24 trillion, or $80,000 for every American.

The figures are part of a tough new quarterly report to Congress from special inspector general Neil Barofsky, who accuses the Treasury Department of repeatedly failing to adopt recommendations aimed at making one component of the government financial rescue effort more accountable and transparent.

The $4.7 trillion commitment to the industry takes into account about 50 initiatives and programs set up since 2007 by the Bush and Obama administrations as well as by the Federal Reserve. Barofsky oversees one of the initiatives — the $700 billion Troubled Asset Relief Program.

Much of the government assistance is backed by collateral and Barofsky's $23.7 trillion estimate represents the gross, not net, exposure that the government could face.
Because of declining participation in short-term loan programs and because some infusions of money have been repaid, the maximum amount actually spent has declined to a current outstanding balance of $3 trillion, Barofsky said.

Treasury spokesman Andrew Williams said the actual cash outlay to date of all the programs cited by Barofsky is actually less than $2 trillion and said the maximum exposure estimate "is inflated in a number of ways."

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A woman with learning disabilities claims she should not have to repay a loan for more than $45,000 she took out more than two and a half years ago because she was not fully explained the terms of the loan.

In a complaint she filed on July 10 in St. Clair County Circuit Court, Anita Oglesby also claims the neighbors who promised to make necessary repairs to her home with the loan money failed to complete the work.

Named as defendants in the suit are Lime Financial Services, LNV Corporation, Electronic Registration Systems, Ultimate Title, Equity One Mortgage, Solomon Butler, Eagle Investors, Venetha A. Davis and Kerry Davis.

Oglesby claims her grandmother quickclaimed a home at 617 Terrace Dr. to her in 1997. Years later, in 2004, Venetha A. Davis and Kerry Davis moved into a home a few doors down from Oglesby at 629 Terrace Dr.

Over the years, the couple became friendly with Oglesby, and after seeing repairs they had performed to their home, Oglesby told the Davises she would like repairs done to her house, according to the complaint.

Kerry Davis told Oglesby he was a home contractor and promised to make repairs to her home if she could obtain a loan, the complaint says.

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EMC wins bidding war in $2.1B deal for Data Domain

SAN JOSE, California (AP) -- For the last month and a half, a fierce bidding contest has lit up a staid but increasingly critical part of the computing world. On Wednesday, EMC Corp. walked away with the prize.

After muscling its way into talks it wasn't invited to, EMC outbid rival NetApp Inc. for a company called Data Domain Inc., whose technology helps companies cut the amount of data that gets stored multiple times. Data Domain had earlier agreed to get acquired by NetApp, but EMC swooped in with a higher price.

Data Domain said Wednesday that it has agreed to let EMC buy it for $33.50 per share, which is nearly double the price Data Domain's shares had when NetApp announced its intent to buy the company in May. EMC's offer amounts to $2.1 billion, when Data Domain's cash is subtracted from the price of the deal.

The offer was apparently too rich for NetApp, which had tried to buy Data Domain with a mixture of cash and stock. NetApp's last offer was $30 per share.

Analysts say NetApp couldn't match EMC's price and still make a compelling case to its shareholders for the deal, because it would have to issue too many new shares to raise the value of its offer. EMC offered all cash and a quicker closing for the deal.

EMC has $7.25 billion in cash and short-term investments -- nearly three times as much as NetApp.

Data Domain said Wednesday it terminated its previous merger agreement with NetApp, and will pay the company a $57 million penalty for pulling out.
For Hopkinton, Massachusetts-based EMC, "it was both a defensive and offensive move," said Ashok Kumar, an analyst with Collins Stewart. "If nothing else they wanted to keep Data Domain out of NetApp's hands."

Data Domain might seem a surprising company to inspire a heated takeover fight, especially in a recession that has companies watching their funds more closely. Also, by cutting out duplicative files, Data Domain's technology reduces the need for companies to buy more data-storage machines from EMC and NetApp.

Yet both companies wanted Data Domain simply because customers are asking for its technology. EMC and NetApp decided that any loss in sales from Data Domain's technology would be more than offset but the rising amount of data that companies are producing overall.

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US GOVTS: HUD Expands Refinance Program To Borrowers 125% Underwater

Washington, Jul 01 2009 (IFR) - Housing and Urban Development Secretary Shaun Donovan announced today that his Department will expand the Obama Administration's Home Affordable Refinance Program to borrowers up to to 125% underwater on their mortgages.

Currently, only those borrowers with mortgages below 105% of the current market value of the property are eligible of the program, which refinances mortgages currently owned or guaranteed by Fannie Mae ( FNM - news - people ) and Freddie Mac ( FRE - news - people ).

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