Bank of America has suspended its relationship with under fire community organization ACORN (Association of Community Organizations for Reform Now), according to the AP.
The grassroots non-profit, that among other things, works to eliminate predatory financial practices by mortgage lenders, was recently caught giving advice to what appeared to be a pimp and a prostitute.
The pair, who received questionable tax advice from an ACORN counselor, were actually actors with a hidden camera working on behalf of a right-wing organization called Biggovernment.com.
As a result, Bank of America decided to suspend work with the housing affiliate of ACORN, following a plea by three Republicans in Congress to provide a complete account of their dealings with the group.
The Charlotte-based bank and mortgage lender said it would not enter into further agreements with ACORN until it is satisfied that all “issues” are resolved.
Citibank, which also received a letter from those House Republicans, said it was “deeply concerned” and looking forward to the findings of an independent audit regarding the matter.
ACORN officials, which argued that the very same Republicans ignored predatory lending accusations back when the crisis took hold, said they’ve taken a number of steps to get back on track, including ethics training for all staff.
ACORN, which is a member of foreclosure prevention alliance Hope Now, pushed former top lender Countrywide to offer more loan workouts for its struggling borrowers, a positive measure that could be sidelined as a result of the allegations.
However, the group came under fire back in late February after breaking into a foreclosed home in Baltimore to reclaim ownership for a past homeowner, leading to the arrest of one its members; it turned out the previous owner had been a bit of a serial refinancer…
To read the original article click here
Other articles of interest...
FDIC’s Bair Says U.S. Should Move Carefully on Basel II Rules
Federal Deposit Insurance Corp. Chairman Sheila Bair said the U.S. shouldn’t fully adopt new international banking standards...
The Foreclosure Shadow Is Growing
There are all kinds of "experts" out there who are claiming that the housing market has bottomed,
Dems debate shielding banks from state laws
Moderate House Democrats are drafting a proposal that would continue to shield big banks from potentially tougher state regulations...
FDIC tries another gimmick
In the latest government gimmick to protect bank capital, the FDIC plans to replenish its Deposit Insurance Fund by front-loading regular premiums in lieu of another “special assessment
Wednesday, September 30, 2009
Tuesday, September 29, 2009
Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
This is important information. What I've found and present below is that the Federal Reserve is not just supporting the housing market, it is the housing market.
Just as important as a person's desire to buy a home is their ability to gain access to mortgage funding.
The mortgage market is a gigantic beast with many moving parts, but it is pretty easy to understand from a high level.
The process works like this: A homeowner secures a mortgage from a bank or mortgage company. Then the mortgage is sold off to another company, with the cash generated by that sale now available to lend to other potential homeowners. Ultimately the mortgage may pass through several sets of hands but ultimately it lands with a terminal holder.
In that chain, the mortgage might get sold off several times, or perhaps sliced and diced by Wall Street wizards, but all that matters is that some company (with cash) is there at the end to buy the mortgage to keep the whole chain moving along.
Lately, the "terminal buyers" in that chain have increasingly ended up being the federal government (through the GSEs) and the Federal Reserve.
And not just by a little bit, but by a lot.
Here are the numbers:
So far in 2009 (through August), a total of 3.2 million existing homes were sold for an average price of $217,000, while 263,000 new homes were sold for an average price of $264,000.
To read the original article click here
Other articles of interest...
Tax Credit Alone Fails to Lure Many Homebuyers, Says Zillow
Nearly one-third of prospective first-time homebuyers said an extension of the $8,000 first-time homebuyer tax credit would have “no influence” on their decision to purchase a home in 2010,
Freddie Mac Delinquency Rate Hits Record High
The delinquency rate on single-family homes hit a record high 3.13 percent last month at mortgage financier Freddie Mac.
FDIC expected to ask banks to prepay $36B in fees
FDIC likely will require banks to prepay $36 billion fees to replenish deposit insurance fund
FACT CHECK: Flaws in Obama's health care anecdotes
FACT CHECK: In health debate, Obama's stories of hardship don't always hold up to scrutiny
Just as important as a person's desire to buy a home is their ability to gain access to mortgage funding.
The mortgage market is a gigantic beast with many moving parts, but it is pretty easy to understand from a high level.
The process works like this: A homeowner secures a mortgage from a bank or mortgage company. Then the mortgage is sold off to another company, with the cash generated by that sale now available to lend to other potential homeowners. Ultimately the mortgage may pass through several sets of hands but ultimately it lands with a terminal holder.
In that chain, the mortgage might get sold off several times, or perhaps sliced and diced by Wall Street wizards, but all that matters is that some company (with cash) is there at the end to buy the mortgage to keep the whole chain moving along.
Lately, the "terminal buyers" in that chain have increasingly ended up being the federal government (through the GSEs) and the Federal Reserve.
And not just by a little bit, but by a lot.
Here are the numbers:
So far in 2009 (through August), a total of 3.2 million existing homes were sold for an average price of $217,000, while 263,000 new homes were sold for an average price of $264,000.
To read the original article click here
Other articles of interest...
Tax Credit Alone Fails to Lure Many Homebuyers, Says Zillow
Nearly one-third of prospective first-time homebuyers said an extension of the $8,000 first-time homebuyer tax credit would have “no influence” on their decision to purchase a home in 2010,
Freddie Mac Delinquency Rate Hits Record High
The delinquency rate on single-family homes hit a record high 3.13 percent last month at mortgage financier Freddie Mac.
FDIC expected to ask banks to prepay $36B in fees
FDIC likely will require banks to prepay $36 billion fees to replenish deposit insurance fund
FACT CHECK: Flaws in Obama's health care anecdotes
FACT CHECK: In health debate, Obama's stories of hardship don't always hold up to scrutiny
Monday, September 28, 2009
New Rules Coming Soon
STATES have taken the lead in adopting laws to protect consumers from some of the problem loans that helped trigger the home foreclosure crisis, but the federal government is now stepping up its efforts.
On Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who make so-called high cost loans for borrowers with weak credit. The interest rates on these loans are at least 1.5 percentage points higher than the average prime mortgage rate.
Some consumer advocates applaud the new rules but say they come too late to help many borrowers. Mortgage executives, meanwhile, have expressed concern that the changes could further dry up the mortgage market.
The regulations — finalized in July 2008 but only now being put into effect — bar lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not simply through a foreclosure sale.
During the home lending boom from 2003 to 2006, subprime lenders would often offer loans without requiring borrowers to prove that they could make the monthly payments. With stated-income loans — or as some called them, “liar loans” — borrowers could easily fabricate annual income figures and even buy a home without a down payment.
Those lies represented mortgage fraud, but brokers and lenders often overlooked them — and in some cases even encouraged lying — in the interest of generating loan fees.
The new regulations represent one of the most substantial efforts on the part of the federal government to combat such lending practices, at least in the realm of subprime loans.
In recent years, states like New York and Connecticut have enacted legislation that requires greater underwriting diligence from lenders who make subprime loans.
But those laws applied only to state-chartered institutions, like community savings banks, and not the federally chartered banking institutions, like JPMorgan Chase and Wells Fargo, that dominate the mortgage industry.
According to Uriah King, a senior policy associate for the Center for Responsible Lending, a consumer advocacy group based in Durham, N.C., the new federal rules are “important, and they are good.”
But Mr. King says the new regulations are “five years too late.” Had they been in place earlier in the decade, he said, they would have prevented some of the damage done in the foreclosure crisis.
Lenders continued to make stated-income loans into 2007, but by that time, the volume of these loans had tailed off sharply.
Since then, borrowers who cannot fully document their income — like restaurant waiters or others who take cash payments — have largely been turned away by lenders.
Mr. King said another shortcoming in the new regulations is that they do not cover option ARMs, adjustable-rate mortgages on which borrowers can choose from several monthly payments options during the loan’s early years. (Borrowers often chose the minimum-payment option, which usually didn’t even cover the loan’s monthly interest charge.)
JIM PAIR, the president of the National Association of Mortgage Brokers, which is based in McLean, Va., says he is pleased that the new rules do not enact a “suitability standard,” whereby loan officers are legally responsible for offering loans that best suit the borrower’s circumstances.
To read the original article click here
Other articles of interest...
A New Model for Banks?
How Hedge Funds Got It Right on Risk
Leading Economic Indicator Isn't Indicating the Real Recovery
The board of directors of the Federal Reserve - Federal Open Market Committee (FOMC) meeting statement this week
Job losses, early retirements hurt Social Security
Big job losses, spike in early retirements claims from seniors swamp Social Security system
From Deflation to Inflation
Step by step, with little fanfare and great complacency, we are witnessing a fundamental, global shift that’s rapidly transforming the investment scene:
On Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who make so-called high cost loans for borrowers with weak credit. The interest rates on these loans are at least 1.5 percentage points higher than the average prime mortgage rate.
Some consumer advocates applaud the new rules but say they come too late to help many borrowers. Mortgage executives, meanwhile, have expressed concern that the changes could further dry up the mortgage market.
The regulations — finalized in July 2008 but only now being put into effect — bar lenders from making a high-cost mortgage without verifying that a borrower could repay the loan in the conventional way, and not simply through a foreclosure sale.
During the home lending boom from 2003 to 2006, subprime lenders would often offer loans without requiring borrowers to prove that they could make the monthly payments. With stated-income loans — or as some called them, “liar loans” — borrowers could easily fabricate annual income figures and even buy a home without a down payment.
Those lies represented mortgage fraud, but brokers and lenders often overlooked them — and in some cases even encouraged lying — in the interest of generating loan fees.
The new regulations represent one of the most substantial efforts on the part of the federal government to combat such lending practices, at least in the realm of subprime loans.
In recent years, states like New York and Connecticut have enacted legislation that requires greater underwriting diligence from lenders who make subprime loans.
But those laws applied only to state-chartered institutions, like community savings banks, and not the federally chartered banking institutions, like JPMorgan Chase and Wells Fargo, that dominate the mortgage industry.
According to Uriah King, a senior policy associate for the Center for Responsible Lending, a consumer advocacy group based in Durham, N.C., the new federal rules are “important, and they are good.”
But Mr. King says the new regulations are “five years too late.” Had they been in place earlier in the decade, he said, they would have prevented some of the damage done in the foreclosure crisis.
Lenders continued to make stated-income loans into 2007, but by that time, the volume of these loans had tailed off sharply.
Since then, borrowers who cannot fully document their income — like restaurant waiters or others who take cash payments — have largely been turned away by lenders.
Mr. King said another shortcoming in the new regulations is that they do not cover option ARMs, adjustable-rate mortgages on which borrowers can choose from several monthly payments options during the loan’s early years. (Borrowers often chose the minimum-payment option, which usually didn’t even cover the loan’s monthly interest charge.)
JIM PAIR, the president of the National Association of Mortgage Brokers, which is based in McLean, Va., says he is pleased that the new rules do not enact a “suitability standard,” whereby loan officers are legally responsible for offering loans that best suit the borrower’s circumstances.
To read the original article click here
Other articles of interest...
A New Model for Banks?
How Hedge Funds Got It Right on Risk
Leading Economic Indicator Isn't Indicating the Real Recovery
The board of directors of the Federal Reserve - Federal Open Market Committee (FOMC) meeting statement this week
Job losses, early retirements hurt Social Security
Big job losses, spike in early retirements claims from seniors swamp Social Security system
From Deflation to Inflation
Step by step, with little fanfare and great complacency, we are witnessing a fundamental, global shift that’s rapidly transforming the investment scene:
Friday, September 25, 2009
Why Authorities Haven’t Stopped the Foreclosure ‘Rescue’ Boom
During the go-go years of the real estate bubble, shady mortgage brokers [3] thrived, thanks to the sluggish response of regulators and law enforcement agencies. Amid the ruins of the crash, there’s a new boom attracting unscrupulous mortgage professionals: “Foreclosure rescue” companies promising — in exchange for a large up-front fee — to persuade lenders to modify desperate homeowners’ mortgages. And authorities are again finding themselves ill-equipped to deal with the deluge.
In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise.
“This is a very big scam,” says California Attorney General Jerry Brown. “They’re all over the place, and as soon as you get one, they migrate to somewhere else.”
The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities’ moves against the companies often are.
Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.
Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.
Homeowners do not have to pay a company to negotiate on their behalf: they can always contact their mortgage servicer directly for a loan modification, at no cost. But consumers often find the process frustrating [4]. For those who want guidance, nonprofit housing counselors approved by the Department of Housing and Urban Development [5] will help for free.
Consumers should especially be wary of companies charging up-front fees or touting guarantees. The Illinois attorney general says that her office has yet to see any such company operate within the boundaries of state law.
Deception seems to be at the heart of the business model. Internal e-mails [6] from an Anaheim-based firm sued in July by the Federal Trade Commission alongside the states of California and Missouri reveal a boiler-room sales operation where management motivated its “counselors” with commissions and “Rolex races.”
When the company’s operations manager wrote that the firm ought to inform clients that it couldn’t stop foreclosure, a sales manager, Feisal Cortez, replied [6]: “If we say ‘WE DO NOT STOP FORECLOSURE’ we are going to lose 75% of our business. If they implement this verbage (sic) in customer service … excuse my language but WE’RE FUCKED!”
The ongoing suit charges that the company, US Foreclosure Relief, and eight associated firms deceived consumers. Steve Krongold, the lawyer for the firm’s owner, said there were “a couple errant rogue salespeople who lied in e-mails and on calls,” but that the company had been making progress in modifying its customers’ loans when a court order in the case this summer allowed authorities to take control of the company.
Real estate professionals and mortgage brokers are the driving force behind the boom. Indeed, some of the same brokers who stoked the housing boom are now making their living off homeowners stuck in the sort of toxic loans they peddled.
"The mortgage brokerage business dried up, and so the same loans that they went out and originated, they’re coming in to try and modify,” said Thomas McNamara, a former prosecutor appointed by the federal court to assess US Foreclosure Relief’s business.
Take the case of the Southern California-based 21st Century Legal Services, and its president, Andrea Ramirez.
In a lawsuit filed in federal court in California, former clients have accused Ramirez, then working as a mortgage broker, of fabricating documentation to support their application in 2006 for an adjustable-rate loan they couldn’t afford.
To read the original article click here
Other articles of interest...
Bankruptcy Judges, Justice Dept. Rip Mortgage Companies
Systemic abuse [1].” “Extraordinary incompetence [2].” “Reckless [3].”
Fed’s Strategy Reduces U.S. Bailout Pledges to $11.6 Trillion
The Federal Reserve decided to keep pumping $1.25 trillion of new money into the mortgage market to focus on rescuing the U.S. economy as the financial system revives and banks ask for less help.
How Many Modifications Has Your Mortgage Servicer Started?
Take a look...
Seven million strong foreclosure overhang to depress home prices
It seems all the positive housing sentiment is taking a turn for the worse again, thanks in part to a new report from Amherst Securities.
In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise.
“This is a very big scam,” says California Attorney General Jerry Brown. “They’re all over the place, and as soon as you get one, they migrate to somewhere else.”
The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities’ moves against the companies often are.
Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.
Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.
Homeowners do not have to pay a company to negotiate on their behalf: they can always contact their mortgage servicer directly for a loan modification, at no cost. But consumers often find the process frustrating [4]. For those who want guidance, nonprofit housing counselors approved by the Department of Housing and Urban Development [5] will help for free.
Consumers should especially be wary of companies charging up-front fees or touting guarantees. The Illinois attorney general says that her office has yet to see any such company operate within the boundaries of state law.
Deception seems to be at the heart of the business model. Internal e-mails [6] from an Anaheim-based firm sued in July by the Federal Trade Commission alongside the states of California and Missouri reveal a boiler-room sales operation where management motivated its “counselors” with commissions and “Rolex races.”
When the company’s operations manager wrote that the firm ought to inform clients that it couldn’t stop foreclosure, a sales manager, Feisal Cortez, replied [6]: “If we say ‘WE DO NOT STOP FORECLOSURE’ we are going to lose 75% of our business. If they implement this verbage (sic) in customer service … excuse my language but WE’RE FUCKED!”
The ongoing suit charges that the company, US Foreclosure Relief, and eight associated firms deceived consumers. Steve Krongold, the lawyer for the firm’s owner, said there were “a couple errant rogue salespeople who lied in e-mails and on calls,” but that the company had been making progress in modifying its customers’ loans when a court order in the case this summer allowed authorities to take control of the company.
Real estate professionals and mortgage brokers are the driving force behind the boom. Indeed, some of the same brokers who stoked the housing boom are now making their living off homeowners stuck in the sort of toxic loans they peddled.
"The mortgage brokerage business dried up, and so the same loans that they went out and originated, they’re coming in to try and modify,” said Thomas McNamara, a former prosecutor appointed by the federal court to assess US Foreclosure Relief’s business.
Take the case of the Southern California-based 21st Century Legal Services, and its president, Andrea Ramirez.
In a lawsuit filed in federal court in California, former clients have accused Ramirez, then working as a mortgage broker, of fabricating documentation to support their application in 2006 for an adjustable-rate loan they couldn’t afford.
To read the original article click here
Other articles of interest...
Bankruptcy Judges, Justice Dept. Rip Mortgage Companies
Systemic abuse [1].” “Extraordinary incompetence [2].” “Reckless [3].”
Fed’s Strategy Reduces U.S. Bailout Pledges to $11.6 Trillion
The Federal Reserve decided to keep pumping $1.25 trillion of new money into the mortgage market to focus on rescuing the U.S. economy as the financial system revives and banks ask for less help.
How Many Modifications Has Your Mortgage Servicer Started?
Take a look...
Seven million strong foreclosure overhang to depress home prices
It seems all the positive housing sentiment is taking a turn for the worse again, thanks in part to a new report from Amherst Securities.
Thursday, September 24, 2009
Housing: Short sales spread across real estate market, leaving frustration in their wake
Offers may roll in, but banks often slow to respond, prompting buyers to walk away
A few years ago, few people in the housing market had ever heard of a short sale.
Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.
The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn't ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale.
The Obama administration is aware of the frustrations. In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages.
Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks.
Meanwhile, homeowners like Dallas O'Day are in limbo.
O'Day, a Chicago attorney, and his family relocated from California in June 2004 and bought a Mediterranean-style home in Chicago's Beverly neighborhood for $395,000. They rewired the house, stripped and refinished the wood floors and the woodwork and did other work to restore its charm.
Last year, personal circumstances prompted them to list the home for sale just as the housing industry's meltdown was picking up steam. With no takers and no longer even expecting to break even on his investment, O'Day relisted the 2,700-square-foot home in January as a short sale.
Four months and three price reductions brought the house down to $384,900, at which point a potential buyer made an offer in late May. O'Day accepted it and submitted the paperwork to the lenders holding first and second mortgages on the home.
He has yet to receive a response. Meanwhile, the family has moved into a North Side apartment, the refrigerator has broken in the home and there's evidence of mold in the basement.
"The only thing we keep hearing is they keep wanting current payroll stubs, bank statements and taxes," said O'Day's real estate agent, Pam Decker at Prudential Biros Real Estate in Evergreen Park.
"What has astonished me is that in the presence of one of the softest housing markets I can remember, we're hitting up on four months and they've just had a person assigned to look at it, that they would move at such a glacial pace," O'Day said. "My expectation is I'll be renting until whatever blemish is gone. I've just accepted the fact that at some point it'll be foreclosed upon because I just don't think the banks will pull it together. I feel like I've done everything I can do."...
To read the original article click here
Other articles of interest...
A Coming Flood of Bank Owned Homes
“There’s going to be a flood of bank-owned homes listed for sale at some point.”
Housing Crash to Resume on 7 Million Foreclosures, Amherst Says
about 7 million properties that are likely to be seized by lenders have yet to hit the market,
MSM: Nice Try, Two Years Later
If Bernanke gave Paulson the slightest hint of what he was thinking, Paulson would have been in possession of very valuable information.
Obama to world: Don't expect America to fix it all
"Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone,"
A few years ago, few people in the housing market had ever heard of a short sale.
Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.
The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn't ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale.
The Obama administration is aware of the frustrations. In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages.
Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks.
Meanwhile, homeowners like Dallas O'Day are in limbo.
O'Day, a Chicago attorney, and his family relocated from California in June 2004 and bought a Mediterranean-style home in Chicago's Beverly neighborhood for $395,000. They rewired the house, stripped and refinished the wood floors and the woodwork and did other work to restore its charm.
Last year, personal circumstances prompted them to list the home for sale just as the housing industry's meltdown was picking up steam. With no takers and no longer even expecting to break even on his investment, O'Day relisted the 2,700-square-foot home in January as a short sale.
Four months and three price reductions brought the house down to $384,900, at which point a potential buyer made an offer in late May. O'Day accepted it and submitted the paperwork to the lenders holding first and second mortgages on the home.
He has yet to receive a response. Meanwhile, the family has moved into a North Side apartment, the refrigerator has broken in the home and there's evidence of mold in the basement.
"The only thing we keep hearing is they keep wanting current payroll stubs, bank statements and taxes," said O'Day's real estate agent, Pam Decker at Prudential Biros Real Estate in Evergreen Park.
"What has astonished me is that in the presence of one of the softest housing markets I can remember, we're hitting up on four months and they've just had a person assigned to look at it, that they would move at such a glacial pace," O'Day said. "My expectation is I'll be renting until whatever blemish is gone. I've just accepted the fact that at some point it'll be foreclosed upon because I just don't think the banks will pull it together. I feel like I've done everything I can do."...
To read the original article click here
Other articles of interest...
A Coming Flood of Bank Owned Homes
“There’s going to be a flood of bank-owned homes listed for sale at some point.”
Housing Crash to Resume on 7 Million Foreclosures, Amherst Says
about 7 million properties that are likely to be seized by lenders have yet to hit the market,
MSM: Nice Try, Two Years Later
If Bernanke gave Paulson the slightest hint of what he was thinking, Paulson would have been in possession of very valuable information.
Obama to world: Don't expect America to fix it all
"Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone,"
Wednesday, September 23, 2009
Bank of America Screwed Taxpayers Out Of Billions
We asked professor Linus Wilson, a finance professor at the University of Louisiana at Lafayette, to analyze Bank of America's agreement with the US Treasury to end the $118 billion asset guarantee by paying $425 million. As you'll see, once again the taxpayers got screwed.
Here's Wilson's report:
This agreement is another example of a “too-big-to-fail” bank underpaying taxpayers for the insurance that helped keep it afloat during the market troughs.
This is less than one-tenth of the price Bank of America promised taxpayers on January 15, 2009. For all the talk by BofA CEO Ken Lewis and others that they did not reach a final agreement, it took Bank of America until May 6, 2009, to notify the Federal Reserve that the loss-sharing agreement was to be cancelled per the asset guarantee term sheet. During that period, BofA’s stock hit a low of $2.53 in March. It could have gone lower without the explicit federal support.
According to my calculations based on the May 6, 2009, cancellation date, BofA owed taxpayers $96 million in dividends, the fair market value of the warrants as of yesterday would have been about $331 million, and the preferred stock was worth $4 billion. Thus, taxpayers were owed $4,4 billion for the guarantee. They got $425 million. That is less than 10 cents on the dollar. Just because you don’t burn down your house, the insurance company will not give you a ninety percent refund of the premiums.
Taxpayers do benefit from getting rid of the insurance liability, but that liability was likely worth much less than $4 billion. Asset markets have significantly recovered since January 15, 2009, and the guarantee likely worth less today. If the asset insurance liability was worth just over $4 billion in January when Ken Lewis agreed to the guarantee, then it is likely worth at least a couple of billion dollars less on May 6, 2009. Thus, if Tim Geithner was protecting taxpayers’ interests, he would not have agreed $425 billion settlement, he should have demanded a couple of billion dollars more.
Unfortunately, since there is no publicly available actuarial analysis of the value of the BofA asset guarantee on May 6, 2009, we cannot easily come up with a good estimate of how much taxpayer money was given to BofA’s shareholders from the deal announced on September 21, 2009. That underpayment to taxpayers is likely over a billion dollars.
I’m glad BofA wants to exit TARP...
To read the original article click here
Other articles of interest...
New CMBS Tax Rules Miss Underwater Factor, BofA Says
The market for commercial mortgage-backed securities (CMBS) experienced a rally last week following the issuance of new guidelines regarding acceptable loan modifications within real estate mortgage investment conduits (REMICs)
Fed likely to leave economic supports in place
To foster recovery, Fed likely to leave rates at record-low, economic supports in place
Investor Tired of Servicers Not Modifying Take Action
You know how when you call Bank of America to request a loan modification they’re always so helpful and do everything so quickly… NOT.
Here's Wilson's report:
This agreement is another example of a “too-big-to-fail” bank underpaying taxpayers for the insurance that helped keep it afloat during the market troughs.
This is less than one-tenth of the price Bank of America promised taxpayers on January 15, 2009. For all the talk by BofA CEO Ken Lewis and others that they did not reach a final agreement, it took Bank of America until May 6, 2009, to notify the Federal Reserve that the loss-sharing agreement was to be cancelled per the asset guarantee term sheet. During that period, BofA’s stock hit a low of $2.53 in March. It could have gone lower without the explicit federal support.
According to my calculations based on the May 6, 2009, cancellation date, BofA owed taxpayers $96 million in dividends, the fair market value of the warrants as of yesterday would have been about $331 million, and the preferred stock was worth $4 billion. Thus, taxpayers were owed $4,4 billion for the guarantee. They got $425 million. That is less than 10 cents on the dollar. Just because you don’t burn down your house, the insurance company will not give you a ninety percent refund of the premiums.
Taxpayers do benefit from getting rid of the insurance liability, but that liability was likely worth much less than $4 billion. Asset markets have significantly recovered since January 15, 2009, and the guarantee likely worth less today. If the asset insurance liability was worth just over $4 billion in January when Ken Lewis agreed to the guarantee, then it is likely worth at least a couple of billion dollars less on May 6, 2009. Thus, if Tim Geithner was protecting taxpayers’ interests, he would not have agreed $425 billion settlement, he should have demanded a couple of billion dollars more.
Unfortunately, since there is no publicly available actuarial analysis of the value of the BofA asset guarantee on May 6, 2009, we cannot easily come up with a good estimate of how much taxpayer money was given to BofA’s shareholders from the deal announced on September 21, 2009. That underpayment to taxpayers is likely over a billion dollars.
I’m glad BofA wants to exit TARP...
To read the original article click here
Other articles of interest...
New CMBS Tax Rules Miss Underwater Factor, BofA Says
The market for commercial mortgage-backed securities (CMBS) experienced a rally last week following the issuance of new guidelines regarding acceptable loan modifications within real estate mortgage investment conduits (REMICs)
Fed likely to leave economic supports in place
To foster recovery, Fed likely to leave rates at record-low, economic supports in place
Investor Tired of Servicers Not Modifying Take Action
You know how when you call Bank of America to request a loan modification they’re always so helpful and do everything so quickly… NOT.
Tuesday, September 22, 2009
FDIC saw risks at IndyMac in 2002 but failed to act
The Federal Deposit Insurance Corp.’s Inspector General released a report today on the regulator’s handling of failed IndyMac Bank, which specialized in stated-income loans to folks with decent credit scores.
The FDIC noted issues at IndyMac as early as 2002, but did not stop the bank’s risk taking, the report says.
“It was not until August 2007 that the FDIC began to understand the implications that the historic collapse of the credit market and housing slowdown could have on IMB and took additional actions to evaluate IMB’s viability,” the report says.
IndyMac’s failure is expected to cost the FDIC’s insurance fund $10.7 billion.
Critics of regulators have long said their failure to recognize and deal with the housing bubble and related loose lending is a key reason why the entire financial system nearly collapsed.
According to the Inspector General’s report, from 2001 to 2003, the FDIC worked with IndyMac’s main regulator, the Office of Thrift Supervision, and became concerned about IndyMac’s business model and its exposure to a potential housing bubble (they still weren’t sure if a bubble actually existed).
FDIC employees spent 8,096 hours in a “back-up capacity” at Indymac, the report says. Yet the FDIC failed to do much about their concerns, accept give the bank a higher risk ranking than OTS wanted.
In January 2002, examiners noted that “non-recession-tested lending programs such as subprime lending and (high loan-to-value) lending may pose the biggest threat to consumer loan portfolio credit quality in a slowing economy.”
The report says FDIC examiners also noted:
“consumers’ ever-increasing debt load, the expansion of adjustable rate mortgages, and a potential housing bubble;
“pricing and modeling charge-off risk with respect to the originate-to-sell model of the mortgage business.”
Despite these risks, the FDIC switched to relying on examinations from the OTS from 2004 to mid 2007, a period in which Indymac “continued to rely heavily on volatile funding sources such as brokered deposits and (Federal Home Loan Bank) advances to fund its growth.”
During that period, FDIC had a turnover problem, with five different case managers handling IndyMac.
As has been previously reported, the Office of Thrift Supervision allowed IndyMac to backdate a capital infusion to the first quarter of 2008, even though it was made in the second quarter. Here’s more from the report (bold added):
Further, although there was a noticeable deterioration in IMB in the fourth quarter of 2007 and into 2008, the FDIC did not suggest that OTS take, or itself take, any enforcement action against IMB. Notably, the FDIC’s analysis and conclusions of IMB’s first quarter 2008 financial data were affected by a capital contribution adjustment that was permitted by OTS. Had the capital contribution not been reflected in the first quarter data:
(1) IMB would have been required to request a waiver from the FDIC to continue to receive brokered deposits and
(2) the value of assets pledged as collateral to secure FHLB advances would have been reduced, thereby limiting the amount of FHLB advances and possibly the cost of IMB’s failure.
The report paints FDIC officials as aware of risks but not doing enough about them. That’s a $10 billion mistake.
To read the original article click here
Other articles of interest...
Bankruptcy Filings Approach 2005 Highs
Now, in conjunction with soaring unemployment, Bankruptcy filings return to pre-reform-law pace.
Obama: We Need To Bailout Newspapers To Stop New Media Taking Over
President says preserving “mutual understanding” is critical to democracy
LANDMARK DECISION PROMISES MASSIVE RELIEF FOR HOMEOWNERS AND TROUBLE FOR BANKS
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure.
The FDIC noted issues at IndyMac as early as 2002, but did not stop the bank’s risk taking, the report says.
“It was not until August 2007 that the FDIC began to understand the implications that the historic collapse of the credit market and housing slowdown could have on IMB and took additional actions to evaluate IMB’s viability,” the report says.
IndyMac’s failure is expected to cost the FDIC’s insurance fund $10.7 billion.
Critics of regulators have long said their failure to recognize and deal with the housing bubble and related loose lending is a key reason why the entire financial system nearly collapsed.
According to the Inspector General’s report, from 2001 to 2003, the FDIC worked with IndyMac’s main regulator, the Office of Thrift Supervision, and became concerned about IndyMac’s business model and its exposure to a potential housing bubble (they still weren’t sure if a bubble actually existed).
FDIC employees spent 8,096 hours in a “back-up capacity” at Indymac, the report says. Yet the FDIC failed to do much about their concerns, accept give the bank a higher risk ranking than OTS wanted.
In January 2002, examiners noted that “non-recession-tested lending programs such as subprime lending and (high loan-to-value) lending may pose the biggest threat to consumer loan portfolio credit quality in a slowing economy.”
The report says FDIC examiners also noted:
“consumers’ ever-increasing debt load, the expansion of adjustable rate mortgages, and a potential housing bubble;
“pricing and modeling charge-off risk with respect to the originate-to-sell model of the mortgage business.”
Despite these risks, the FDIC switched to relying on examinations from the OTS from 2004 to mid 2007, a period in which Indymac “continued to rely heavily on volatile funding sources such as brokered deposits and (Federal Home Loan Bank) advances to fund its growth.”
During that period, FDIC had a turnover problem, with five different case managers handling IndyMac.
As has been previously reported, the Office of Thrift Supervision allowed IndyMac to backdate a capital infusion to the first quarter of 2008, even though it was made in the second quarter. Here’s more from the report (bold added):
Further, although there was a noticeable deterioration in IMB in the fourth quarter of 2007 and into 2008, the FDIC did not suggest that OTS take, or itself take, any enforcement action against IMB. Notably, the FDIC’s analysis and conclusions of IMB’s first quarter 2008 financial data were affected by a capital contribution adjustment that was permitted by OTS. Had the capital contribution not been reflected in the first quarter data:
(1) IMB would have been required to request a waiver from the FDIC to continue to receive brokered deposits and
(2) the value of assets pledged as collateral to secure FHLB advances would have been reduced, thereby limiting the amount of FHLB advances and possibly the cost of IMB’s failure.
The report paints FDIC officials as aware of risks but not doing enough about them. That’s a $10 billion mistake.
To read the original article click here
Other articles of interest...
Bankruptcy Filings Approach 2005 Highs
Now, in conjunction with soaring unemployment, Bankruptcy filings return to pre-reform-law pace.
Obama: We Need To Bailout Newspapers To Stop New Media Taking Over
President says preserving “mutual understanding” is critical to democracy
LANDMARK DECISION PROMISES MASSIVE RELIEF FOR HOMEOWNERS AND TROUBLE FOR BANKS
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure.
Monday, September 21, 2009
$30 billion home loan time bomb set for 2010
Thousands of Bay Area homes have a ticking time bomb embedded in their mortgage. The homes were purchased with loans known as option ARMs, short for adjustable rate mortgages.
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures - and home-loan data show that the risky loans were heavily used in the Bay Area.
From 2004 to 2008, "one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM," said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. "That's more than twice the national average.
"People think option ARMs (will be) a national crisis," he said. "That's not really true. It's just in higher-cost areas like California where you see their prevalence."
Of the 10 metro areas nationwide with the most option ARMs, three are in the Bay Area, according to Fitch Ratings, a New York research firm. They are the East Bay counties of Alameda and Contra Costa, the South Bay area of Santa Clara and San Benito counties, and the counties of San Francisco, Marin and San Mateo.
Together, these areas account for the second-most option ARMs in the country, although they are still far behind the greater Los Angeles area (including Los Angeles, Riverside, San Bernardino and Orange counties), according to Fitch data.
Understated data
First American shows more than 54,000 option ARMs issued here with a value of about $30.9 billion. Fitch shows more than 47,000 option ARMs here with a value of about $28 billion. Both say their data underestimate the totals.
Why are so many option ARMs clustered here?
"In markets where home prices were going up rapidly, more and more borrowers needed a product like this to afford something," said Alla Sirotic, senior director at Fitch Ratings. Option ARMs were designed for savvy real estate investors and people whose income fluctuates, such as those paid on commission. Instead, the loans became a tool for regular people to "stretch" to buy homes that were beyond their means.
That's because option ARMs let borrowers choose to make very low payments for the first five years. During that initial period, borrowers can pick their payment option - they can pay interest and principal, interest only, or a minimum monthly payment that doesn't even cover the interest.
Fitch said 94 percent of borrowers elected to make minimum payments only. The shortfall gets added to their loan balance, which is called negative amortization. The amount they owe can grow substantially.
The mortgages 'recast'
After five years, or once the loan balance reaches a certain threshold above the original balance, the mortgages "recast" and borrowers must make full principal and interest payments spread over the loan's remaining life. Fitch said that new payments average 63 percent higher than the minimum payments, but could be more than double in some cases.
"When option ARMs recast, the payment shock is much more intense than we've seen (with other types of loans, such as subprime)," said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, a consumer advocacy group. "That makes them potentially much more damaging.
To read the original article click here
Other articles of interest...
Lennar posts wider loss in Q3, but market improves
Lennar loses $172 million in fiscal third quarter, but sees housing market improving
IRS extends amnesty program for tax cheats
IRS extends amnesty program for international tax cheats to accommodate rush of applicants
The ARE trying to kick the bad mortgages down the road, here's proof!
Housing Suffering Relapse Confronts Bernanke Credit Conundrum
The recovering housing market may be heading for a relapse as President Barack Obama and Federal Reserve Chairman Ben S. Bernanke consider ending support for the source of the global financial crisis.
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures - and home-loan data show that the risky loans were heavily used in the Bay Area.
From 2004 to 2008, "one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM," said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. "That's more than twice the national average.
"People think option ARMs (will be) a national crisis," he said. "That's not really true. It's just in higher-cost areas like California where you see their prevalence."
Of the 10 metro areas nationwide with the most option ARMs, three are in the Bay Area, according to Fitch Ratings, a New York research firm. They are the East Bay counties of Alameda and Contra Costa, the South Bay area of Santa Clara and San Benito counties, and the counties of San Francisco, Marin and San Mateo.
Together, these areas account for the second-most option ARMs in the country, although they are still far behind the greater Los Angeles area (including Los Angeles, Riverside, San Bernardino and Orange counties), according to Fitch data.
Understated data
First American shows more than 54,000 option ARMs issued here with a value of about $30.9 billion. Fitch shows more than 47,000 option ARMs here with a value of about $28 billion. Both say their data underestimate the totals.
Why are so many option ARMs clustered here?
"In markets where home prices were going up rapidly, more and more borrowers needed a product like this to afford something," said Alla Sirotic, senior director at Fitch Ratings. Option ARMs were designed for savvy real estate investors and people whose income fluctuates, such as those paid on commission. Instead, the loans became a tool for regular people to "stretch" to buy homes that were beyond their means.
That's because option ARMs let borrowers choose to make very low payments for the first five years. During that initial period, borrowers can pick their payment option - they can pay interest and principal, interest only, or a minimum monthly payment that doesn't even cover the interest.
Fitch said 94 percent of borrowers elected to make minimum payments only. The shortfall gets added to their loan balance, which is called negative amortization. The amount they owe can grow substantially.
The mortgages 'recast'
After five years, or once the loan balance reaches a certain threshold above the original balance, the mortgages "recast" and borrowers must make full principal and interest payments spread over the loan's remaining life. Fitch said that new payments average 63 percent higher than the minimum payments, but could be more than double in some cases.
"When option ARMs recast, the payment shock is much more intense than we've seen (with other types of loans, such as subprime)," said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, a consumer advocacy group. "That makes them potentially much more damaging.
To read the original article click here
Other articles of interest...
Lennar posts wider loss in Q3, but market improves
Lennar loses $172 million in fiscal third quarter, but sees housing market improving
IRS extends amnesty program for tax cheats
IRS extends amnesty program for international tax cheats to accommodate rush of applicants
The ARE trying to kick the bad mortgages down the road, here's proof!
Housing Suffering Relapse Confronts Bernanke Credit Conundrum
The recovering housing market may be heading for a relapse as President Barack Obama and Federal Reserve Chairman Ben S. Bernanke consider ending support for the source of the global financial crisis.
Friday, September 18, 2009
"Option" mortgages to explode, officials warn
The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset.
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."
The mortgages differ from other ARMs by offering an option to pay only the interest each month or a low minimum payment that leads to a rising balance in the loan's principal.
When the balance of the loan reaches a certain level or the mortgage hits a specific date, the borrower must begin making full payments to cover the new amount. The loan's interest rate also may have been fixed at a low level for the first few years with a so-called teaser rate, but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers are accustomed to paying, they "threaten a much greater hit to the consumer than the subprimes," Goddard said, referring to the mortgages often extended to less credit-worthy borrowers that fed the first wave of the financial crisis.
Miller said option-ARMs were discussed at Tuesday's meeting on mortgage scams, which brought state attorneys general from across the country together with U.S. Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, and Federal Trade Commission Chairman Jon Leibowitz.
The mortgages tend to be "jumbo," or for significantly large amounts, Goddard said, making it even harder for borrowers to sidestep foreclosure. He said he expected to see an increase in scams as distressed homeowners become more desperate to refinance big debts.
Goddard said his office is investigating hundreds of cases where companies have made fraudulent promises, and charged large fees, to mortgage defaulters.
The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy.
Some signs of stabilization emerged recently, with sales rising and home price declines moderating in many regions of the country. Home prices in some regions have risen.
To read the original article click here
Other articles of interest...
WaMu Part II? (Wells Fargo)
What You Need to Know About Social Security
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Mortgage Profits Surge in First Quarter of 2009
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."
The mortgages differ from other ARMs by offering an option to pay only the interest each month or a low minimum payment that leads to a rising balance in the loan's principal.
When the balance of the loan reaches a certain level or the mortgage hits a specific date, the borrower must begin making full payments to cover the new amount. The loan's interest rate also may have been fixed at a low level for the first few years with a so-called teaser rate, but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers are accustomed to paying, they "threaten a much greater hit to the consumer than the subprimes," Goddard said, referring to the mortgages often extended to less credit-worthy borrowers that fed the first wave of the financial crisis.
Miller said option-ARMs were discussed at Tuesday's meeting on mortgage scams, which brought state attorneys general from across the country together with U.S. Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, and Federal Trade Commission Chairman Jon Leibowitz.
The mortgages tend to be "jumbo," or for significantly large amounts, Goddard said, making it even harder for borrowers to sidestep foreclosure. He said he expected to see an increase in scams as distressed homeowners become more desperate to refinance big debts.
Goddard said his office is investigating hundreds of cases where companies have made fraudulent promises, and charged large fees, to mortgage defaulters.
The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy.
Some signs of stabilization emerged recently, with sales rising and home price declines moderating in many regions of the country. Home prices in some regions have risen.
To read the original article click here
Other articles of interest...
WaMu Part II? (Wells Fargo)
What You Need to Know About Social Security
More fights ahead in Congress over health care
Mortgage Profits Surge in First Quarter of 2009
Thursday, September 17, 2009
Bank of America, Citigroup, Credit Card Defaults Soar To New Highs
Last month's improvements in credit card defaults appears to be an outlier. Credit card defaults have resumed their natural tendency to track rising unemployment.Inquiring minds are reading U.S. credit card defaults up, signal consumer stress.
Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks' consumer lending woes are far from over."
The defaults are a wake-up call for those expecting a V-shaped recovery," said Elliot Spar, options market strategist at Stifel Nicolaus & Co.
Bank of America said its charge off-rate -- loans the company does not expect to be repaid -- rose to 14.54 percent in August from 13.81 percent in July.
Citigroup, the largest issuer of MasterCard-branded credit cards, said its charge-off rate rose to 12.14 percent in August from 10.03 percent in July.
The charge-off rates for both Citi and Bank of America, two of the biggest recipients of U.S. government bailouts, were the highest yet during the financial crisis.
JPMorgan Chase & Co, the largest issuer of Visa-branded credit cards, said its charge-off rate rose to 8.73 percent from 7.92 percent, while smaller Discover Financial Services said its rate rose to 9.16 percent from 8.43 percent.
American Express Co's default rate fell to 8.5 percent from 8.9 percent as the company increased its lending portfolio.
JPMorgan, Discover and Capital One Financial Corp reported late payments on credit cards -- an indicator of future defaults -- rose in August after several monthly declines.
As credit card losses rose to record highs in recent months, credit card companies closed millions of accounts, trimmed lending limits and slashed rewards.
Lenders are also raising fees and interest rates ahead of a new law that increases protection for consumers. The law is expected to shrink the industry and limit subprime borrowers' access to plastic money.
Unemployment is likely to rise for another year, then flatten out so it is likely that card defaults keep rising for quite some time.
To read the original article click here
Other articles of interest...
US won’t ID banks rejected for aid
Critics say decision inhibits efforts to assess TARP
The Secret Test That Ensures Lenders Win on Loan Mods
"NPV Test: Failed.”
How Long After Foreclosure Can I Purchase a Home?
A foreclosure will remain on your credit report for seven years, which can be a total drag both on your credit score and your ability to obtain a mortgage.
Obama Wins Higher Ratings From Average Americans Than Investors
President Barack Obama is rated more highly by the general public than by affluent U.S. investors for the job he’s doing and his economic stewardship.
Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks' consumer lending woes are far from over."
The defaults are a wake-up call for those expecting a V-shaped recovery," said Elliot Spar, options market strategist at Stifel Nicolaus & Co.
Bank of America said its charge off-rate -- loans the company does not expect to be repaid -- rose to 14.54 percent in August from 13.81 percent in July.
Citigroup, the largest issuer of MasterCard-branded credit cards, said its charge-off rate rose to 12.14 percent in August from 10.03 percent in July.
The charge-off rates for both Citi and Bank of America, two of the biggest recipients of U.S. government bailouts, were the highest yet during the financial crisis.
JPMorgan Chase & Co, the largest issuer of Visa-branded credit cards, said its charge-off rate rose to 8.73 percent from 7.92 percent, while smaller Discover Financial Services said its rate rose to 9.16 percent from 8.43 percent.
American Express Co's default rate fell to 8.5 percent from 8.9 percent as the company increased its lending portfolio.
JPMorgan, Discover and Capital One Financial Corp reported late payments on credit cards -- an indicator of future defaults -- rose in August after several monthly declines.
As credit card losses rose to record highs in recent months, credit card companies closed millions of accounts, trimmed lending limits and slashed rewards.
Lenders are also raising fees and interest rates ahead of a new law that increases protection for consumers. The law is expected to shrink the industry and limit subprime borrowers' access to plastic money.
Unemployment is likely to rise for another year, then flatten out so it is likely that card defaults keep rising for quite some time.
To read the original article click here
Other articles of interest...
US won’t ID banks rejected for aid
Critics say decision inhibits efforts to assess TARP
The Secret Test That Ensures Lenders Win on Loan Mods
"NPV Test: Failed.”
How Long After Foreclosure Can I Purchase a Home?
A foreclosure will remain on your credit report for seven years, which can be a total drag both on your credit score and your ability to obtain a mortgage.
Obama Wins Higher Ratings From Average Americans Than Investors
President Barack Obama is rated more highly by the general public than by affluent U.S. investors for the job he’s doing and his economic stewardship.
Wednesday, September 16, 2009
Bernanke: "Recession Is Over" (Depression Has Just Begun)
Then explain this for credit card charge-offs for the last month:
Discover Financial Services Reports Aug Master Trust; Net Charge offs 9.16% v 8.43% m/m
JPMorgan Chase and Co Reports Aug Master Trust; Net charge offs 10.07% v 7.92% m/m
Bank of America Corp Reports Aug Master Trust; Net Charge offs 14.54% v 13.82% m/m
Citigroup Inc Reports Aug Master Trust; Net Charge offs 12.1% v 10.03% m/m
American Express Co Reports Aug Master Trust: Net write offs on managed basis 9.0% v 9.2% m/m (v 9.9% in June)
So out of these, only Amex reported a (tiny) improvement. Everyone else is worse - a lot worse.
As for Bair? Here's what she said:
FDIC's Bair: US financial industry is not much more stable presently,
I'd say its not much more stable when you've got a charge-off rate on revolving credit beyond 10% - and climbing!
Anyone care to dispute "the consumer has no more credit availability" with me again?
Again, I come back to the same point: Credit is contracting as a consequence of borrowing ABILITY, not (so much) desire. All the "liquidity pumping" in the world does NOTHING if there are no willing and able borrowers.
The entire premise of both government and our central bank is that "credit is too tight." In point of fact what we continue to see proof of month after month is that credit has been and still is too loose as borrowers are unable to pay back the money lent, which in turn leads to more and more onerous terms for those who still have money out.
That's deflationary as hell and the longer the game of "pretend" is played the more deflationary it is and the more damage is done to the underlying structure of the economy, as the money blown to "prop up the fable" simply disappears into a puff of smoke but the debt is left behind and continues to be a drag on economic activity.
Bernanke's gambit has failed - ...
To read the original article click here
Other articles of interest...
Florida Streamlines the Foreclosure Courtroom
The Florida Supreme Court Task Force on Residential Mortgage Foreclosure Cases released its report, streamlining the foreclosure process throughout the state.
Consumer prices expected to have remained in check
Inflation expected to have remained in check as weak economy limits prices increases
How Long Does a Foreclosure Stay on Your Credit?
With all the foreclosures sprouting up, struggling homeowners that are either going through the process or teetering on the brink may be wondering what the repercussions are.
President's opinion of Kanye West sparks debate
President Barack Obama's candid thoughts about Kanye West are provoking a debate over standards of journalism in the Twitter age.
Break up the big banks
President Barack Obama pledged on Monday “to put an end to the idea that some firms are ‘too big to fail.’”
Discover Financial Services Reports Aug Master Trust; Net Charge offs 9.16% v 8.43% m/m
JPMorgan Chase and Co Reports Aug Master Trust; Net charge offs 10.07% v 7.92% m/m
Bank of America Corp Reports Aug Master Trust; Net Charge offs 14.54% v 13.82% m/m
Citigroup Inc Reports Aug Master Trust; Net Charge offs 12.1% v 10.03% m/m
American Express Co Reports Aug Master Trust: Net write offs on managed basis 9.0% v 9.2% m/m (v 9.9% in June)
So out of these, only Amex reported a (tiny) improvement. Everyone else is worse - a lot worse.
As for Bair? Here's what she said:
FDIC's Bair: US financial industry is not much more stable presently,
I'd say its not much more stable when you've got a charge-off rate on revolving credit beyond 10% - and climbing!
Anyone care to dispute "the consumer has no more credit availability" with me again?
Again, I come back to the same point: Credit is contracting as a consequence of borrowing ABILITY, not (so much) desire. All the "liquidity pumping" in the world does NOTHING if there are no willing and able borrowers.
The entire premise of both government and our central bank is that "credit is too tight." In point of fact what we continue to see proof of month after month is that credit has been and still is too loose as borrowers are unable to pay back the money lent, which in turn leads to more and more onerous terms for those who still have money out.
That's deflationary as hell and the longer the game of "pretend" is played the more deflationary it is and the more damage is done to the underlying structure of the economy, as the money blown to "prop up the fable" simply disappears into a puff of smoke but the debt is left behind and continues to be a drag on economic activity.
Bernanke's gambit has failed - ...
To read the original article click here
Other articles of interest...
Florida Streamlines the Foreclosure Courtroom
The Florida Supreme Court Task Force on Residential Mortgage Foreclosure Cases released its report, streamlining the foreclosure process throughout the state.
Consumer prices expected to have remained in check
Inflation expected to have remained in check as weak economy limits prices increases
How Long Does a Foreclosure Stay on Your Credit?
With all the foreclosures sprouting up, struggling homeowners that are either going through the process or teetering on the brink may be wondering what the repercussions are.
President's opinion of Kanye West sparks debate
President Barack Obama's candid thoughts about Kanye West are provoking a debate over standards of journalism in the Twitter age.
Break up the big banks
President Barack Obama pledged on Monday “to put an end to the idea that some firms are ‘too big to fail.’”
Tuesday, September 15, 2009
Cleaning up the mess that remains
At least the Obama administration isn’t saying “Mission Accomplished.”
In marking the anniversary of Lehman Brothers’ demise, the administration understandably focused on how far we’ve come since, and on the various exit strategies in the works.
Lehman Brothers has been at the center of the narrative of what went wrong last year, and that makes it much easier for the administration to tell a story of triumph rather than the more uncomfortable legacy of dysfunctional companies and hidden toxic assets.
Coinciding with President Barack Obama’s speech in New York, the Treasury released a paper today, titled “The Next Phase of Government Financial Stabilization and Rehabilitation Policies.”
Its summary reads like a check list of emergency programs that are no longer needed now that the worst of the crisis is past. The insurance program for money market funds and the federal guarantee of qualifying bank debt can be tied directly to the fallout from Lehman’s spectacular end.
But last year’s turmoil didn’t begin and end with Lehman. Change the anniversary’s focus to, say, the government’s seizure of Fannie Mae and Freddie Mac that occurred a week earlier, or to American International Group, just a day after, and it’s clear that some of the messier legacies of the credit crisis still haunt the current administration a year later.
The government arguably isn’t any closer to figuring out what to do with the two giant housing finance companies than the previous administration was on September 7, 2008, when it announced Fannie and Freddie would be put into conservatorship.
Today, nothing was mentioned about what to do with the companies — nationalize them, split them into a good bank/bad bank structure, or wind them down — even though the government’s stake in their business has increased substantially. As of the second quarter, the two companies have drawn down close to $100 billion from the government’s $400 billion preferred share equity lines.
To read the original article click here
Other articles of interest...
The Hard Truth About Financial Regulation
For a year, lawmakers have struggled--and failed--to figure out how to make the system safer. Is anyone surprised?
World markets steady as recovery signals eyed
European, Asian markets mixed as investors look to economic indicators for signs of recovery
Mortgage crisis hurting americans credit scores
As expected, all the ongoing mortgage chaos is hitting Americans’ credit scores, according to credit scoring company VantageScore Solutions.
In marking the anniversary of Lehman Brothers’ demise, the administration understandably focused on how far we’ve come since, and on the various exit strategies in the works.
Lehman Brothers has been at the center of the narrative of what went wrong last year, and that makes it much easier for the administration to tell a story of triumph rather than the more uncomfortable legacy of dysfunctional companies and hidden toxic assets.
Coinciding with President Barack Obama’s speech in New York, the Treasury released a paper today, titled “The Next Phase of Government Financial Stabilization and Rehabilitation Policies.”
Its summary reads like a check list of emergency programs that are no longer needed now that the worst of the crisis is past. The insurance program for money market funds and the federal guarantee of qualifying bank debt can be tied directly to the fallout from Lehman’s spectacular end.
But last year’s turmoil didn’t begin and end with Lehman. Change the anniversary’s focus to, say, the government’s seizure of Fannie Mae and Freddie Mac that occurred a week earlier, or to American International Group, just a day after, and it’s clear that some of the messier legacies of the credit crisis still haunt the current administration a year later.
The government arguably isn’t any closer to figuring out what to do with the two giant housing finance companies than the previous administration was on September 7, 2008, when it announced Fannie and Freddie would be put into conservatorship.
Today, nothing was mentioned about what to do with the companies — nationalize them, split them into a good bank/bad bank structure, or wind them down — even though the government’s stake in their business has increased substantially. As of the second quarter, the two companies have drawn down close to $100 billion from the government’s $400 billion preferred share equity lines.
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Mortgage crisis hurting americans credit scores
As expected, all the ongoing mortgage chaos is hitting Americans’ credit scores, according to credit scoring company VantageScore Solutions.
Monday, September 14, 2009
Mortgage problems are walloping Americans' credit scores
Late payments, delinquencies, short sales and foreclosures are on the rise -- and so are the number of borrowers seeing their credit scores plummet, according to scoring company VantageScore Solutions
Reporting from Washington - When you do a short sale of a house, or modify the mortgage, is there much of an effect on your credit score? What if you walk away from the mortgage altogether?
A scoring company created by the three national credit bureaus -- Equifax, Experian and TransUnion -- has some eye-opening numbers. VantageScore Solutions, whose risk-prediction scores are now being used by some of the largest mortgage companies and banks, has found that the way consumers handle their mortgage problems can have profound effects on their credit scores.
For example, loan modifications that roll late payments and penalties into the principal debt owed on the house can actually increase borrowers' scores modestly. Refinancings of underwater, negative-equity mortgages -- which the Obama administration's Making Home Affordable program offers through government-controlled Fannie Mae and Freddie Mac -- may have little or no negative effect on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing.
The Vantage credit score, the primary competitor to the long-dominant FICO credit score, rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.'s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer.
When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little effect on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.
But according to VantageScore researchers, short sales can trigger big drops in credit scores. Sarah Davies, senior vice president of analytics, said a homeowner with an excellent score of 862 might plummet 120 to 130 points after a short sale.
Although it's true the lender may lose less money through a short sale compared with a foreclosure, "it's still a derogatory event," Davies said. The full debt was not repaid and the lender lost money.
What happens when borrowers walk away from their mortgage debts altogether -- the so-called strategic defaults that have become commonplace in some large markets such as in California? They should expect 140- to 150-point hits to their scores, plus negative marks on their credit bureau files for as long as seven years.
People who file for bankruptcy protection covering all their debts (mortgage, credit cards, auto loans, etc.) will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers' credit bureau files for 10 years.
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Reporting from Washington - When you do a short sale of a house, or modify the mortgage, is there much of an effect on your credit score? What if you walk away from the mortgage altogether?
A scoring company created by the three national credit bureaus -- Equifax, Experian and TransUnion -- has some eye-opening numbers. VantageScore Solutions, whose risk-prediction scores are now being used by some of the largest mortgage companies and banks, has found that the way consumers handle their mortgage problems can have profound effects on their credit scores.
For example, loan modifications that roll late payments and penalties into the principal debt owed on the house can actually increase borrowers' scores modestly. Refinancings of underwater, negative-equity mortgages -- which the Obama administration's Making Home Affordable program offers through government-controlled Fannie Mae and Freddie Mac -- may have little or no negative effect on scores, even though the homeowners might have been tottering on the edge of serious delinquency before refinancing.
The Vantage credit score, the primary competitor to the long-dominant FICO credit score, rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.'s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer.
When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little effect on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.
But according to VantageScore researchers, short sales can trigger big drops in credit scores. Sarah Davies, senior vice president of analytics, said a homeowner with an excellent score of 862 might plummet 120 to 130 points after a short sale.
Although it's true the lender may lose less money through a short sale compared with a foreclosure, "it's still a derogatory event," Davies said. The full debt was not repaid and the lender lost money.
What happens when borrowers walk away from their mortgage debts altogether -- the so-called strategic defaults that have become commonplace in some large markets such as in California? They should expect 140- to 150-point hits to their scores, plus negative marks on their credit bureau files for as long as seven years.
People who file for bankruptcy protection covering all their debts (mortgage, credit cards, auto loans, etc.) will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers' credit bureau files for 10 years.
To read the original article click here
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Greenspanism" the Root Cause of this Depression
Bernanke, Geithner, and others have stated the biggest mistake in this depression was the failure to rescue Lehman.
Cheap dollars and the next financial crisis
...a condition that doesn't look as though it will change anytime soon given the likelihood of U.S. interest rates staying low for quite a while.
Friday, September 11, 2009
Loan modifications growing, U.S. says
Increase in activity comes amid confusion on standards; foreclosures not letting up
The Obama administration said Wednesday it is on track to secure 500,000 trial loan modifications for struggling homeowners by Nov. 1, as both the number of participating mortgage companies and the number of offers extended under the Home Affordable Modification Program increased last month.
The second report from the Treasury Department on its $75 billion mortgage relief program showed modest improvement, but officials said they planned more initiatives to increase the program's success.The results: Nineteen percent of the almost 3 million eligible borrowers who were 60 days or more delinquent were offered three-month trial modifications and 12 percent of them, about 360,000 homeowners, have begun them.
"We are certainly seeing more resolutions happening out in the field, and we are seeing it more routinely with the biggest servicers," said Bruce Dorpalen, Acorn Housing Corp.'s national director of housing counseling.
Some of the largest servicers say they continue to work on loan modifications through their own internal programs as well as the government's effort.
Two of the banks that did not fare well in last month's report, Bank of America and Wells Fargo Bank, both reported improved results but still lagged behind other industry heavyweights like JPMorgan Chase Bank, CitiMortgage, Saxon Mortgage Servicing and Aurora Home Services.
"HAMP is just a piece of the overall story," said Mike Heid, co-president of Wells Fargo Home Mortgage. "We're very pleased with a 64 percent increase" in modifications made during the past 30 days.
The concern: Some consumers are being told to submit all their financial data again as the trial period ends and others aren't because there's no uniformity in how the different servicers administer the program, housing counselors say. Also, some homeowners are reluctant to sign trial modifications without knowing the terms of a permanent change that would take effect when the three-month trial period ends.
"It seems a lot to ask people to sign a document that says, 'Trust us on this one,'" Dorpalen said.
Why continued progress is important: Foreclosure actions show little sign of letting up. A report scheduled to be released Thursday by RealtyTrac shows that August foreclosure filings nationally were up 18 percent from a year ago.
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The Obama administration said Wednesday it is on track to secure 500,000 trial loan modifications for struggling homeowners by Nov. 1, as both the number of participating mortgage companies and the number of offers extended under the Home Affordable Modification Program increased last month.
The second report from the Treasury Department on its $75 billion mortgage relief program showed modest improvement, but officials said they planned more initiatives to increase the program's success.The results: Nineteen percent of the almost 3 million eligible borrowers who were 60 days or more delinquent were offered three-month trial modifications and 12 percent of them, about 360,000 homeowners, have begun them.
"We are certainly seeing more resolutions happening out in the field, and we are seeing it more routinely with the biggest servicers," said Bruce Dorpalen, Acorn Housing Corp.'s national director of housing counseling.
Some of the largest servicers say they continue to work on loan modifications through their own internal programs as well as the government's effort.
Two of the banks that did not fare well in last month's report, Bank of America and Wells Fargo Bank, both reported improved results but still lagged behind other industry heavyweights like JPMorgan Chase Bank, CitiMortgage, Saxon Mortgage Servicing and Aurora Home Services.
"HAMP is just a piece of the overall story," said Mike Heid, co-president of Wells Fargo Home Mortgage. "We're very pleased with a 64 percent increase" in modifications made during the past 30 days.
The concern: Some consumers are being told to submit all their financial data again as the trial period ends and others aren't because there's no uniformity in how the different servicers administer the program, housing counselors say. Also, some homeowners are reluctant to sign trial modifications without knowing the terms of a permanent change that would take effect when the three-month trial period ends.
"It seems a lot to ask people to sign a document that says, 'Trust us on this one,'" Dorpalen said.
Why continued progress is important: Foreclosure actions show little sign of letting up. A report scheduled to be released Thursday by RealtyTrac shows that August foreclosure filings nationally were up 18 percent from a year ago.
To read the original article click here
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the fallout from the emotional outburst continues to ripple across the nation,
Banks Ease Burden Of Credit Card Debt
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Foreclosures: The struggle continues
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Thursday, September 10, 2009
Tax Credit Boosts Home Sales, Says Fed’s Biege Book
The first-time homebuyer tax credit is helping the housing market recover, especially in the low end of the market for much of the country, according to the Federal Reserve’s Commentary on Current Economic Conditions, also known as the Beige Book.
The report, issued eight times a year, is a compilation of economic reports from the Fed’s 12 district banks, which in September said while residential real estate markets remain weak, there are signs of improvement.
The Chicago, Richmond, Boston and San Francisco Districts experienced an increase in sales over the past six weeks, while the Boston, Cleveland, Dallas, Kansas City, Richmond and New York districts reported the first-time homebuyer tax incentive contributed to increased sales. Philadelphia reported steady activity.
Most districts reported sales below the last year’s levels, but the Atlanta, New York, Cleveland, and Minneapolis districts experienced year-over-year gains in select markets.
The St. Louis district reported residential home sales had not improved in the Midwest.
While the recent increase in activity has been focused on the low-priced end of the market, the Philadelphia market reported an increase in sales at the upper end of the market.
While prices continue to face downward pressure, Dallas and New York reported some increases.
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The report, issued eight times a year, is a compilation of economic reports from the Fed’s 12 district banks, which in September said while residential real estate markets remain weak, there are signs of improvement.
The Chicago, Richmond, Boston and San Francisco Districts experienced an increase in sales over the past six weeks, while the Boston, Cleveland, Dallas, Kansas City, Richmond and New York districts reported the first-time homebuyer tax incentive contributed to increased sales. Philadelphia reported steady activity.
Most districts reported sales below the last year’s levels, but the Atlanta, New York, Cleveland, and Minneapolis districts experienced year-over-year gains in select markets.
The St. Louis district reported residential home sales had not improved in the Midwest.
While the recent increase in activity has been focused on the low-priced end of the market, the Philadelphia market reported an increase in sales at the upper end of the market.
While prices continue to face downward pressure, Dallas and New York reported some increases.
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Wednesday, September 9, 2009
NYSE to Sell Stake in Amex Options Unit to Brokers
NYSE Euronext agreed to sell stakes in the options business it purchased last year with the American Stock Exchange to seven brokerages including Bank of America Corp. and Barclays Plc, as it seeks to revive the division.
Citadel Investment Group LLC, Goldman Sachs Group Inc., TD Ameritrade Holding Corp., Citigroup Inc. and UBS AG will also purchase stakes in NYSE Amex, the company said in a Business Wire statement today. NYSE Euronext will remain the biggest shareholder in the options exchange after the transaction, which is expected to close by the end of 2009, the company said.
Once the nation’s second-largest options exchange, NYSE Amex has lost market share for eight straight years, to 5.8 percent in 2008 from 28.6 percent in 2000, according to data compiled by Options Clearing Corp. The proportion climbed to 5.9 percent in 2009. NYSE spent $260 million to buy Amex in 2008.
In selling a stake to its biggest customers, NYSE is following a strategy pioneered by rivals such as Direct Edge Holdings LLC and Bats Global Markets, which are vying to become the U.S.’s third-largest equity exchange. In Europe, broker- owned trading systems including Turquoise and Chi-X Europe Ltd. have taken about a third of market share from traditional bourses such as London Stock Exchange Group Plc and Deutsche Boerse AG.
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Citadel Investment Group LLC, Goldman Sachs Group Inc., TD Ameritrade Holding Corp., Citigroup Inc. and UBS AG will also purchase stakes in NYSE Amex, the company said in a Business Wire statement today. NYSE Euronext will remain the biggest shareholder in the options exchange after the transaction, which is expected to close by the end of 2009, the company said.
Once the nation’s second-largest options exchange, NYSE Amex has lost market share for eight straight years, to 5.8 percent in 2008 from 28.6 percent in 2000, according to data compiled by Options Clearing Corp. The proportion climbed to 5.9 percent in 2009. NYSE spent $260 million to buy Amex in 2008.
In selling a stake to its biggest customers, NYSE is following a strategy pioneered by rivals such as Direct Edge Holdings LLC and Bats Global Markets, which are vying to become the U.S.’s third-largest equity exchange. In Europe, broker- owned trading systems including Turquoise and Chi-X Europe Ltd. have taken about a third of market share from traditional bourses such as London Stock Exchange Group Plc and Deutsche Boerse AG.
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Tuesday, September 8, 2009
This Recovery is an Imposter
It is amazing how many things have NOT happened.
Probably most incredible is that the dollar has NOT collapsed. It has lost ground, and was trading at $1.43 per euro on Friday, but no one laughs at you when go to exchange dollars…or offer to pay in dollars rather than the local currency.
For the last 10 years, the money supply in the United States has expanded at roughly twice the rate of GDP growth. And the Fed doubled its balance sheet in just the last 18 months. This last bit of information is stunning. It took the central bank nearly 100 years to build a balance sheet of $1 trillion. Then, under the leadership of Ben Bernanke, it added another $1 trillion in just a few months.
What does that mean, exactly? It means they bought a lot of debt from US agencies and the financial sector. It means also that they “monetized” this debt…transforming it into cash by paying for it with money especially created for that purpose. It also means that the whole financial sector has a bigger financial base against which to lend. The Fed lends against its balance sheet to member banks. These banks then lend to other banks who lend to business and consumers. So the amount of potential credit – as well as the amount of actual cash – has gone up.
There is an iron law in economics. Quality and quantity vary inversely…which is another way of saying that when you add more of something…each unit is worth less than the unit that preceded it (assuming everything else remained unchanged.) Certainly, this is true of money. The more money in a financial system, the less each unit of it is worth. Add enough new money – as Zimbabwe proved recently – and each unit becomes worthless.
But so far, the dollar has not collapsed. It has fallen, but gently…
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Credit Bureau Claims to Pinpoint Strategic Defaulters
Experian and consulting firm Oliver Wyman claim they have developed a way to estimate the number of “strategic defaulters,” those who stop paying the mortgage intentionally due to negative equity.
Probably most incredible is that the dollar has NOT collapsed. It has lost ground, and was trading at $1.43 per euro on Friday, but no one laughs at you when go to exchange dollars…or offer to pay in dollars rather than the local currency.
For the last 10 years, the money supply in the United States has expanded at roughly twice the rate of GDP growth. And the Fed doubled its balance sheet in just the last 18 months. This last bit of information is stunning. It took the central bank nearly 100 years to build a balance sheet of $1 trillion. Then, under the leadership of Ben Bernanke, it added another $1 trillion in just a few months.
What does that mean, exactly? It means they bought a lot of debt from US agencies and the financial sector. It means also that they “monetized” this debt…transforming it into cash by paying for it with money especially created for that purpose. It also means that the whole financial sector has a bigger financial base against which to lend. The Fed lends against its balance sheet to member banks. These banks then lend to other banks who lend to business and consumers. So the amount of potential credit – as well as the amount of actual cash – has gone up.
There is an iron law in economics. Quality and quantity vary inversely…which is another way of saying that when you add more of something…each unit is worth less than the unit that preceded it (assuming everything else remained unchanged.) Certainly, this is true of money. The more money in a financial system, the less each unit of it is worth. Add enough new money – as Zimbabwe proved recently – and each unit becomes worthless.
But so far, the dollar has not collapsed. It has fallen, but gently…
To read the original article click here
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Time running out for bipartisan health compromise
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The average rate for a 30-year fixed mortgage was 5.08 percent...
Stocks Show Why Analysts Dismiss Economists on Growth
Never before have Wall Street stock analysts diverged more with economists...
The Van Jones resignation raises more serious questions
At two separate points in the article, we’re treated to this bit of White House spin:
Credit Bureau Claims to Pinpoint Strategic Defaulters
Experian and consulting firm Oliver Wyman claim they have developed a way to estimate the number of “strategic defaulters,” those who stop paying the mortgage intentionally due to negative equity.
Friday, September 4, 2009
WSJ: Loan losses spark concern over FHA
A must-read in tomorrow’s WSJ talks about the solvency crisis facing FHA:
The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.
The required reserve level is a paltry 2%. Readers may recall that was the capital level Fannie and Freddie were operating with just before they were taken into conservatorship:
Federal law says the FHA must maintain, after expected losses, reserves equal to at least 2% of the loans insured by the agency. The ratio last year was around 3%, down from 6.4% in 2007.
No doubt the reserve ratio has fallen substantially since last year. The revised figure won’t be made available until FHA’s fiscal year ends Sept. 30th.
In the past two years, the number of loans insured by the FHA has soared and its market share reached 23% in the second quarter, up from 2.7% in 2006, according to Inside Mortgage Finance. FHA-backed loans outstanding totaled $429 billion in fiscal 2008, a number projected to hit $627 billion this year.
Rising defaults have eaten through the FHA’s cash cushion. Some 7.8% of FHA loans at the end of the second quarter were 90 days late or more, or in foreclosure, according to the Mortgage Bankers Association, a figure roughly equal to the national average for all loans. That’s up from 5.4% a year ago.
FHA’s exploding volumes are just another indicator of the substantial government support propping up house prices.
With all that volume, one would hope FHA had a robust risk management apparatus. Nope:
Critics have said the FHA, which has never had a chief risk officer, isn’t able to manage such a large portfolio and has weak underwriting standards.
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Thursday, September 3, 2009
Study: unemployed feel 'traumatized' by recession
New study finds jobless workers struggling to cope with psychological stress of recession
A new study finds that the recession has left many jobless workers struggling to cope with the psychological stress caused by becoming unemployed in a weak economy.
Researchers at the John J. Heldrich Center for Workforce Development at Rutgers University said the financial strain that comes with being out of work combined with the sometimes daunting task of seeking new employment in a difficult job market has left many Americans "traumatized."
"Psychologically, it's a world of hurt out there for the jobless," Cliff Zukin, a Rutgers professor and co-author of the study, said during a conference call with reporters.
Zukin said "significant numbers" of respondents have had trouble sleeping since losing their jobs, have strained relations with family members and increased alcohol and drug dependency. Many also say they now avoid social situations.
The report released Thursday is based on a survey of 1,200 Americans who have been unemployed and looking for a job for the past 12 months. Two-thirds of respondents reported being depressed. More than half said they have borrowed money from friends or relatives. One quarter said they have skipped mortgage or rent payments.
Meanwhile, just 40 percent received unemployment insurance, and 83 percent of those who got aid said they're concerned the benefits will run out before they find a job. Half said they didn't have health insurance.
To read the original article click here
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A new study finds that the recession has left many jobless workers struggling to cope with the psychological stress caused by becoming unemployed in a weak economy.
Researchers at the John J. Heldrich Center for Workforce Development at Rutgers University said the financial strain that comes with being out of work combined with the sometimes daunting task of seeking new employment in a difficult job market has left many Americans "traumatized."
"Psychologically, it's a world of hurt out there for the jobless," Cliff Zukin, a Rutgers professor and co-author of the study, said during a conference call with reporters.
Zukin said "significant numbers" of respondents have had trouble sleeping since losing their jobs, have strained relations with family members and increased alcohol and drug dependency. Many also say they now avoid social situations.
The report released Thursday is based on a survey of 1,200 Americans who have been unemployed and looking for a job for the past 12 months. Two-thirds of respondents reported being depressed. More than half said they have borrowed money from friends or relatives. One quarter said they have skipped mortgage or rent payments.
Meanwhile, just 40 percent received unemployment insurance, and 83 percent of those who got aid said they're concerned the benefits will run out before they find a job. Half said they didn't have health insurance.
To read the original article click here
Other articles of interest...
Obama Steps Into Congressional Health-Care Fight With Speech
President Barack Obama will take a more direct role in the legislative fight over revamping U.S. health care...
S&P Lowers Ratings on More Alt-A Mortgage Securities
Standard & Poor’s lowered its ratings on 1,558 classes from 114
FHA Backed Loans and No Money Down Government Financed Mortgages with Seller Funded Down Payment Assistance.
$8,000 Tax Credit Costing $45,000 for Each Additonal Home Sale
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