Wednesday November 11 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Capmark Financial, a Top-Tier Commercial Real Estate Lender, Seeks Bankruptcy - (Mish at globaleconomicanalysis.blogspot.com) Commercial real estate continues to show signs of extreme stress. Please consider Capmark Said Ready to File for Bankruptcy. Capmark Financial Group Inc., one of the nation's largest commercial-real-estate lenders, plans to file for bankruptcy as soon as this weekend, a person familiar with the situation said. The much-expected move underscores the deep problems in the business-property market. After suffering from the collapse in residential mortgages, U.S. banks face steep losses from commercial real-estate loans. Capmark has originated more than $10 billion in commercial real-estate loans, according to Moody's Investors Service. It also represents a blow to the company's private-equity owners. In 2006, a group led by KKR & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners acquired the lender GMAC LLC's commercial-real estate business and renamed it Capmark. As of March 31, the investor group owned about 75% of the company, with GMAC and its employees owning the balance. The Horsham, Pa., company recently reported a $1.6 billion second-quarter loss and warned it might be forced to seek Chapter 11 bankruptcy protection. KKR has already written down its investment in Capmark to zero. Adding to Capmark's pressures, the Federal Deposit Insurance Corp. had notified the company that it must raise capital and boost liquidity at its Utah bank, which has roughly $10 billion in assets. Capmark Financial Pours $600 Million into its Ailing Bank: Inquiring minds are reading Bank Watch: Capmark Financial Pours $600 Million into its Ailing Bank. Capmark Bank, the wholly-owned Utah industrial bank subsidiary of Capmark Financial Group Inc., agreed to a cease and desist order with each of the Federal Deposit Insurance Corp. (FDIC) and the Utah Department of Financial Institutions. The orders require Capmark Bank to maintain a Tier 1 leverage ratio of at least 8% and a Total Risk-Based Capital ratio of at least 10%. Capmark Bank reported $11.1 billion in assets as of June 30 and net loss of $261.3 million. Capmark Bank’s nonperforming loans and foreclosed property assets increased by nearly $240 million from the first quarter to the second quarter and now totals nearly $631 million. About 78% of those assets are related to commercial real estate. State Arbitrage Game Gone Mad: Joe Weisenthal writing for the Business Insider was on top of this story back in September. Please consider Commercial Real Estate May Kill "Well-Capitalized" Capmark Bank. Capmark Financial Group, one of the largest commercial real estate lenders in the US, said this week that it was seeing huge default rates and that it could be headed for bankruptcy. It's the latest in a string of decently-sized, non-Wall Street banks that appear headed for the dustbin of history (or into Sheila Bair's loving embrace) What caught our eye in Bloomberg's report Capmark Distress May Signal Bank Failures Topping 100 was this paragraph: Capmark’s holdings include a banking unit based in Salt Lake City with $11.1 billion in assets and a “well- capitalized” ranking from its regulators, according to the bank’s Web site. Deposits stood at $8.4 billion on June 30, according to the company’s quarterly statement.

USDA Must Buy Pork ‘Immediately,’ Hog Executive - (www.bloomberg.com) he U.S. Department of Agriculture must make funds available immediately to buy pork to keep hog farmers in business, the head of the second-biggest U.S. producer told a House of Representatives subcommittee. Government pork purchases worth $100 million have won the backing of a bipartisan group of 87 lawmakers to support prices for farmers, who have lost money since 2007. Hog futures have dropped about 25 percent in Chicago since April 23, when swine flu began making headlines, depressing consumer demand and curbing exports to major markets including China and Russia. Lawmakers need “to encourage and work with the Secretary of Agriculture to immediately make available” funds for government pork purchases, said Rod Brenneman, the chief executive officer of Seaboard Foods LLC, a unit of Merriam, Kansas-based Seaboard Corp. He testified before a House Agriculture Committee panel that oversees the livestock industry. Hog futures for December settlement rose 0.05 cent, or 0.1 percent, to 53.725 cents a pound on the Chicago Board of Trade. The price has climbed 8.3 percent this month as the dollar fell and concerns eased about the safety of U.S. pork. Yesterday, Russia ended its last ban on U.S. pork and the dollar touched a 14-month low against the euro. Smithfield Foods Inc., the biggest U.S. pork producer, posted its first annual loss since 1975 in June and reported a $162.1 million deficit for its hog-production unit in the three months through Aug. 2. Chief Executive Officer C. Larry Pope cited lower prices and lost export sales stemming from the flu. Legislative Support: Lawmakers led by Senators Al Franken, Democrat of Minnesota, and Richard Burr, Republican of North Carolina, asked Agriculture Secretary Tom Vilsack to increase U.S. spending on pork in letters earlier this month. The group of 24 senators and 63 representatives asked Vilsack to buy more pork in the year that began Oct. 1 through government food programs. The U.S. Department of Agriculture bought $165 million of the meat a year earlier, including $30 million announced on Sept. 3, according to Justin DeJong, a USDA spokesman.

The Dairy Industry Milks Congress for Another Bailout ... - (www.washingtonpost.com) AT $2.87 a gallon, the average price of milk is down 27 percent from a year ago. That means cheaper groceries for recession-weary consumers and more bang for the taxpayer's buck in food stamps and other federal nutrition programs. What's not to like? Well, dairy farmers hate it: They are facing a $12 billion decline in sales this year, according to the National Milk Producers Federation. Many could shut down; some farmers are slaughtering their cows for beef. Rushing to their rescue, Congress has approved a $350 million dairy bailout -- on top of more than $1 billion in regular price-support and direct-payment programs. If you find this hard to understand, we agree with you. Just two years ago, the price of milk was approaching $5 a gallon, thanks to strong U.S. and foreign demand; dairy farmers were making money hand over fist. But no one passed a law telling them to share the windfall with grocery shoppers. Yes, this recession has been unusually harsh, for the dairy industry and everyone else; but U.S. dairy farming has been shrinking for decades, with large-scale producers replacing smaller ones. Between 1970 and 2006, the number of farms fell from 648,000 to 75,000; the average herd size rose from 19 to 120, according to the Agriculture Department. Some farms threatened with bankruptcy today would have gone out of business within a few years anyway. Federal dairy policy was born in the Great Depression, when small, family-run farms produced milk for local markets. Today, the dairy market is national, and an increasing portion of milk is processed into cheese rather than drunk. Yet New Deal-era government programs remain, and even work at cross-purposes: price supports, confusingly known as Federal Milk Marketing Orders, push prices up; Milk Income Loss Contracts (MILC, get it?) encourage production in certain regions, thus pushing prices down. Large feedlot operations in the far West have very different economic interests from mid-size Midwestern farms; both are at odds with the Northeast, where farms are smaller and more pastoral. These interests regularly squabble in Congress. Congress has left it up to President Obama's agriculture secretary, Tom Vilsack, to distribute most of the $350 million bailout. On a recent visit to South Dakota, Mr. Vilsack told an assembly of farmers that it was time for "a longer-term discussion about . . . structural changes in the way the dairy industry is currently operated so we no longer have these rather stark contrasts between boom and bust." Yes, it is. There are already relevant proposals on the table: Reps. Ron Kind (D-Wis.) and Jeff Flake (R-Ariz.) proposed a bill last year to encourage tax-free savings accounts that farmers could build up in good years and draw down in bad ones. It didn't pass. If Mr. Vilsack is serious about avoiding a repeat of this year's fiasco, he'll encourage a truly radical policy rethinking. Dairy farmers should be able to compete in the marketplace -- they have milked taxpayers and consumers long enough.

Institutions ‘haven’t learnt’ from the turmoil - (www.ft.com) Institutional investors share responsibility for the financial crisis, but have learned little from the experience, according to a survey carried out by AQ Research on behalf of the Network for Sustainable Financial Markets. Just 10 per cent of the 208 investment professionals interviewed thought institutional investors were entirely blameless for the near collapse of the financial system, although a further 20 per cent had gone into the crisis thinking they were blameless, only changing their minds as events unfolded. Asked what conclusion they drew from the silence of institutional investors on newly increased remuneration in investment banking, more than half the respondents (55.7 per cent) said it told them institutional investors “haven’t learnt anything from the crisis”. The report also found over 90 per cent of respondents agreed with FT columnist Martin Wolf when he said “the financial sector that is emerging from the crisis is even more riddled with moral hazard than the one that went into it”. While many were optimistic regulators would address this problem, nearly a third of respondents were not so sure. Opinion on whether long-term investors should be given preferential treatment was split, with more than 40 per cent disagreeing and the rest differing on what such treatment should consist of.

If Lenders Say ‘The Dog Ate Your Mortgage’ - (www.nytimes.com) OR decades, when troubled homeowners and banks battled over delinquent mortgages, it wasn’t a contest. Homes went into foreclosure, and lenders took control of the property. On top of that, courts rubber-stamped the array of foreclosure charges that lenders heaped onto borrowers and took banks at their word when the lenders said they owned the mortgage notes underlying troubled properties. In other words, with lenders in the driver’s seat, borrowers were run over, more often than not. Of course, errant borrowers hardly deserve sympathy from bankers or anyone else, and banks are well within their rights to try to protect their financial interests. But if our current financial crisis has taught us anything, it is that many borrowers entered into mortgage agreements without a clear understanding of the debt they were incurring. And banks often lacked a clear understanding of whether all those borrowers could really repay their loans. Even so, banks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit. One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order. So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free. The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

OTHER STORIES:

Probe widens in Galleon case: report - (www.reuters.com)

Probe Widening in Galleon Case - (online.wsj.com)

Treasuries Fall for Third Week on Fed Speculation; Supply Looms - (www.bloomberg.com)

IPOs Produce Smallest Gains Since 1995 as Offers Jump - (www.bloomberg.com)

Clear repo pipeline key to global finance flows - (www.ft.com)

Strapped Borrowers Head to Court - (online.wsj.com)

Chinese consumers opt for bigger TVs - (www.ft.com)

Small Business Faces Sharp Rise in Costs of Health Care - (www.nytimes.com)

Bernanke puts heat on Congress to reform financial regulation - (www.washingtonpost.com)

Fed Weighs Shift to Market Signals - (online.wsj.com)

U.S. Gasoline Rises to $2.66 a Gallon, Lundberg Survey Shows - (www.bloomberg.com)

Bank failures hit 106 on year - (www.marketwatch.com)

Capmark Financial May File for Bankruptcy - (www.nytimes.com)

Tuesday November 10 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

The bust hits boomtown that banks built: Charlotte - (www.msnbc.msn.com) A monument to the financial crisis is rising amid this city's thicket of skyscrapers: a gleaming, glass-walled trophy tower that was intended as a fitting headquarters for Wachovia's national banking empire. It will open instead as the headquarters of a regional power company. Wachovia, unable to survive a run of bad decisions, was swallowed by San Francisco-based Wells Fargo during the depths of the crisis last year. Few American cities prospered more over the past two decades than Charlotte, its growth propelled and gilded by Wachovia and its cross-town rival, Bank of America. Executives shoehorned gaudy mansions into old neighborhoods around downtown. Workers poured into vast subdivisions on the city's ever-expanding periphery. With coffers overflowing, giddy public officials spent tax dollars on a manmade river for whitewater rafting. Now, Charlotte is suffering. Unemployment has spiked to 12 percent, well above the national average. Subdivisions sit unfinished. Mansions cannot be sold. The school system, which for years has recruited teachers from shrinking cities such as Detroit, laid off more than 1,000 employees this summer. The crisis that shattered several of the nation's largest banks and left many of the survivors struggling to recover has also damaged the bank towns, the smaller cities that became financial centers in recent years, less celebrated than New York but even more dependent on the industry. The unemployment rate in Wilmington, Del., the nation's credit card capital, thanks to lender-friendly state laws, has spiked above 11 percent. In California's Orange County, formerly the epicenter of subprime mortgage lending, the office vacancy rate stands at almost 17 percent. Other cities less focused on financial services also have taken hits, including Cleveland, which lost its largest bank, National City, and Seattle, home to the giant mortgage lender Washington Mutual, which became the largest bank to fail in U.S. history. In Charlotte, the number of people served by the soup kitchen at Urban Ministry, a local charity, has increased 22 percent since August 2007, while the number of private airplanes arriving and departing from Charlotte-Douglas International Airport has dropped by 38 percent. A city that for years has proudly billed itself as the nation's second-largest banking center now is home to just one bank of any size. After Bank of America, the next-largest institution still headquartered in Charlotte has six branches and 49 employees. "We didn't worry too much about the things being done in Dallas, Atlanta, San Francisco" when banks in those cities were swallowed by Charlotte's giants, said Bob Morgan, president of the city's Chamber of Commerce. "We are now living it ourselves."

Story Of Government Sponsored 21 Year Old With Underwater FHA Loan Is Even Worse - (www.businessinsider.com) A few days ago we told the story of Denise Tejada, the 21 year old California woman who bought a house with an FHA backed loan with almost no money down. Readers were outraged. And rightfully so. It's our money on the line and it is simply outrageous that our government is still encouraging these kind of loans to be made. Even if Tejada pays off her loan in full, it was an insane gamble on our behalf to have the government back her loan. But as it turns out, the gamble was even more insane that we originally reported. Scott Jagow, who writes the Scratch Pad blog for American Public Radio's Market Place, explains: Denise got an FHA loan to buy her home for $155,000. She took out a second loan (called a 203-K loan) to refurbish the place. The total loan amount is about $183,000. She says, “In total, I gave the bank $5,087 + $1,500 which were all deposit and closing costs.” So her “down payment” was no more than 4% of the value of the home when she bought it. She will get all of that back and then some with the first-time home buyer tax credit. In other words, thanks to the various government tax breaks, Denise put absolutely no money down on her home. If she has to default on her mortgage, she'll lose nothing except her credit rating. Of course, since she's only 21 years old, there's plenty of time to recover from that. How is the FHA still engaged in promoting this kind of lending? Barney Frank has explained that expanding home ownership is the policy of the United States. Now, more than ever, the government wants to promote home buying to prop up the great American home ownership scheme. If people like Tejada can't buy a home with no money down, then the recession wins. Don't you feel awesome for helping Tejada achieve the American dream?

Hedge manager Sprott sees trouble when easing ends - (www.marketwatch.com) When so-called quantitative easing by central banks ends, the world economy may slip back into trouble, Canadian hedge fund manager Eric Sprott warned on Tuesday. Toronto-based Sprott called Citigroup, Fannie Mae, Freddie Mac, and General Motors "dead men walking" in late 2007. On Tuesday, he said the U.S. government is the new dead man walking, partly because it may struggle to keep borrowing enough money if the Federal Reserve stops buying Treasury bonds. Sprott's Canadian hedge fund, Sprott Hedge Fund LP, is up more than 400% since inception in 2000 as it rode a surge in gold prices and shares of gold miners and other raw materials companies. Bank bailouts and other dramatic efforts by central banks have stopped the world "going into the abyss," Sprott said during a presentation at the Value Investing Congress in New York. The "granddaddy" of all those bailout efforts is quantitative easing, in which central banks in the U.S. and the U.K. especially buy government bonds to keep interest rates low, Sprott said. The U.S. government has raised roughly 200% more by selling bonds this year, versus last year, Sprott noted. Through the end of the second quarter of 2009, he said the only major buyers of these government bonds were central banks. "When quantitative easing ends, what's going to happen?" he added, noting that there are already two clues to answer that question.

Could a Land Tax Support the Operations of Government? - (www.miller-mccune.com) The shape of a new American health care system is clearer now than it was last month, but a fraction of the American public will still be permanently steamed at President Obama for pushing through a new "entitlement" (and, eventually, raising their taxes). They don't see why America has to be so European. This column has spent the last several weeks looking at how European health care schemes might work in America; now it's time to look at an American-born idea that would — in theory — revolutionize the tax system of any country. Taxes don't need to be pulled from your income. Before the world had ever heard of Karl Marx, an American journalist from San Francisco named Henry George wrote a radical and popular work of political economy called Progress and Poverty, the first serious economic manifesto to become an American best-seller. He argued for a "single tax" on the value of land. The book made him world-famous near the end of the 19th century, and figures from Tolstoy to Einstein declared their admiration. Land, to George, was the resource for earning money, or just living: Only hoboes could get by without renting a slice of it. Land was not just natural but limited, so it belonged, in the truest sense, to the nation. Other taxes put an undue burden on human activity: Income tax weighed on productivity (wages and profits); a sales tax put a burden on trade; a "property tax," which involves not just land but the structures on top of it, burdened development. To George, it was simple logic that a government should raise taxes from the value of land. In a booming city, land values rise with the tide of human activity, so the power of a government to build subways and schools would rise, too. At the same time, a land tax would curb speculation. If a bank had to pay for sitting on acreages of unused land as an investment, or on every new high-rise apartment building it financed, real estate bubbles would vanish. The most recent recession started as a real estate bubble, of course, so George has a painful new relevance.

Deserted shopping mall bleak symbol of Fed bailout - (www.reuters.com) A $29 billion trail from the Federal Reserve's bailout of Wall Street investment bank Bear Stearns ends in a partially deserted shopping center on a bleak spot on the south side of Oklahoma City. The Fed now owns the Crossroads Mall, a sprawling shopping complex at the junction of Interstate highways 244 and 35, complete with an oil well pumping crude in the parking lot -- except the Fed does not own the mineral rights. The Fed finds itself in the unusual situation of being an Oklahoma City landlord after it lent JPMorgan Chase $29 billion to buy Bear Stearns last year. That money was secured by a portfolio of Bear assets. Crossroads Mall is the only bricks and mortar acquired through bailout. The remaining billions are tied up in invisible securities spread across hundreds, if not thousands, of properties. It is hard to be precise because the Fed has not published specifics on what it now owns. The only reason that Crossroads Mall has surfaced is that it went into foreclosure in April. Noah Diggs, who had just successfully concluded a search for work here as a shop assistant, was surprised and somewhat alarmed to learn the U.S. central bank now owned the property. "That is a bad thing, right?" he said, surveying the empty parking lot on a rainy morning in early October. Public anger over the bailout of rich Wall Street bankers has evolved into wider opposition toward government intrusion into the private sector, complicating President Barack Obama's efforts to reform financial regulation and healthcare. The controversial action to save Bear Stearns in March 2008 was defended as less damaging for the U.S. economy than letting it fail. The merit of this argument was underscored in September 2008 when rival investment bank Lehman Brothers foundered, sparking a global financial panic.

Who cares if Wall Street 'talent' leaves? - (money.cnn.com) If lower pay lures some of Wall Street's finest away, so be it. It's not as if the best and brightest were doing a good job to begin with. NEW YORK (Fortune) -- There's no need to fear a Wall Street brain drain -- despite the crackdown on pay by Washington. On Thursday, White House pay czar Kenneth Feinberg outlined compensation restrictions at seven firms that got special bailouts, and the Federal Reserve proposed to review pay practices at 28 unnamed giant banks. Critics warn that reining in pay makes it hard to keep talented employees. Hemmed in, institutions like AIG,Bank of America and Citigroup could lose their best people. These firms would then perform even more abysmally, if that's possible, leaving them hard pressed to repay tens of billions of dollars of taxpayer-backed loans. Still, we say Godspeed to this "talent." After all, the traders and suits in the corner offices don't exactly have an unblemished track record. In 2008, Citigroup, BofA and Merrill Lynch (since acquired by BofA) posted a grand total of $51 billion in losses. Yet even as they were running themselves into the ground, the firms managed to pay out more than $12 billion in bonuses -- including 1,606 million-dollar-plus bonuses, according to a report from the New York attorney general's office. "Even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks' financial performance," the report said. Meanwhile, it's hard to imagine that defection-hit firms would have a lot of trouble finding qualified replacements in the current job market.

OTHER STORIES:

Foreclosure Epidemic Reaching More Expensive Homes - (finance.yahoo.com)

U.S. Initial Jobless Claims Rose More Than Forecast - (www.bloomberg.com)

Japan�s Exports Fall for 3rd Month - (www.nytimes.com)

Goldman Sachs Is Too Big to Tell It Straight - (www.bloomberg.com)

Volcker Fails to Sell a Bank Strategy - (www.nytimes.com)

Survey predicts South Florida house values will decline more - (www.sun-sentinel.com)

Rents fall 7.5% in SF Bay Area in one year - (www.sfgate.com)

Interview with Patrick: "It's a fantastic time to be a renter" - (www.mortgagecalculator.org)

The Green Mile: Starring the FHA - (www.homedebtors.blogspot.com)

Homedebtors' Handout -- Worse Than Cash for Clunkers - (www.barrons.com)

Latest bank fee is for paying off credit card on time every month - (www.usatoday.com)

Walking Away: Those Pesky Deficiency Judgments - (www.eyeonmiami.blogspot.com)

Banks really do prefer foreclosure - (www.articles.moneycentral.msn.com)

Express Your Outrage At Showdown In Chicago - (www.Mish)

Property taxes going up in Chicago and Cook County - (www.newsblogs.chicagotribune.com)

Economic "recovery" could be held back by job woes - (www.money.cnn.com)

Recession Will Be 'Full-Blown Depression' - (www.cnbc.com)

Monday November 9 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Boynton Beach, FL condo towers has 395 units, no buyers - (www.palmbeachpost.com) The Promenade, Boynton Beach's newest condo, boasts a luxurious lobby decorated in tones of cream and mahogany. Its two pools are filled, and the gym is stuffed with equipment. But nearly two months after receiving a certificate of occupancy from the city of Boynton Beach, the downtown property has not closed any sales of its 395 units. "My clients have not heard one thing - not one thing - from the developer. It's a big building sitting there doing nothing," said June Dunlea of Tauriello & Co. Real Estate in Delray Beach. Dunlea represents several buyers with contracts in the Promenade. An associate in the condo's sales office said the building is set to start closings in January. However, it appears that only one of the two towers will open then. The developer is trying to get buyers with contracts in the south tower to move their contracts to the north tower, so that at least one tower can be filled and opened, according to Lisa Bright, president of Boynton Beach's Community Redevelopment Agency. The reason for the change: To comply with Fannie Mae requirements that 51 percent of a condo be pre-sold before Fannie Mae will buy mortgages made to that condo. Bright said the last she heard the complex was 40 percent presold with more sales in the north tower than the south tower. Fannie Mae is working with developers so that new condominiums do not end up as glitzy, but vacant, ghost towns. Hence, "we agreed to recognize each (Promenade) tower separately and approve financing for the individual towers if certain pre-sale conditions are met," said Amy Bonitatibus, Fannie Mae spokeswoman.

Property taxes going up in Chicago and Cook County - (www.newsblogs.chicagotribune.com) Probably not much of a shock, but it’s now official: Collectively, homeowners and businesses in Cook County are being hit up for 4.2 percent more in property taxes this year than last. The semi-annual round of property tax bills will be arriving in mail boxes across the county in coming weeks, and most will be bigger than last year. As a prelude the Cook County Clerk’s office on Tuesday unveiled a snapshot of some of the complex number crunching behind the calculations. Results will clearly vary from house to house, shop to shop and factory to factory, but the total property tax burden for Chicago taxpayers will rise more than 6 percent over last year, the clerk’s office said. Suburban taxpayers as a group will see a lower increase, but it is difficult to come up with a comparable projection because most communities are comprised of a plethora of taxing districts that apply to some residents and not others. Some highlights, or lowlights, in the data:
* Despite last year’s housing market crash, tax officials calculate that property values for tax purposes rose 8.23 percent in suburban townships and 9.96 percent in the city. The calculation includes an array of moving parts, not the least of which is the gradual phase out of a program to limit assessment increases that was implemented at the height of the housing market boom earlier this decade.
* Some of the biggest percentage tax increases were logged by smaller taxing bodies. But among major taxing bodies one of the largest hikes belonged to the Chicago Board of Education, where the increase topped five percent, from $1.9 billion the previous tax year to $2 billion this year. The increase for the city government is 1.6 percent.
* Countywide, the increase for the Cook County government is negligible, though it stands at 4.5 percent for the Forest Preserve District which is a separately taxed arm of county government. Taxes for the Metropolitan Water Reclamation District will rise 4.5 percent.
Thanks to a record number of assessment appeals, this year’s second installment of property tax bills will be going out about three months late—although the bills rarely get mailed out as scheduled in August.

Union Pacific blames rail-traffic slump for 26% profit dip - (www.marketwatch.com) Union Pacific Corp. reported a 26% decline in third-quarter profit Thursday, citing a persistent slump in rail demand, particularly from the auto industry, in the face of the global recession. Shares of Union Pacific fell 2.9% to close at $61.12 but are still up 7% over the past year. The Omaha, Neb.-based railroad operator posted earnings of $517 million, or $1.02 a share, down from $703 million, or $1.38 a share, in the year-ago period. Revenue fell 25% to $3.47 billion from $4.63 billion, bogged down by a 30% decline in its auto-freight business and a 39% drop in industrial-products freight. Analysts polled by FactSet Research were looking for earnings, on average, of $1.01 a share on revenue of $3.73 billion. "As we enter the final quarter of 2009, business volumes seem to have stabilized, but at very low levels for Union Pacific," said Chairman and Chief Executive Officer Jim Young, in a statement. Separately, Burlington Northern Santa Fe Corp. reported a third-quarter profit of $488 million, or $1.42 a share, down from $695 million, or $1.99 a share, a year ago. Excluding a one-time favorable coal rate adjustment, earnings came in at $1.36 a share. Sales fell to $3.6 billion from $4.9 billion.

Paulson Met Secretly With Goldman's Board Last Year In Moscow - (www.bloomberg.com) Former U.S. Treasury Secretary Henry Paulson met privately with Goldman Sachs Group Inc.’s board in Moscow last year and kept the occasion off his official calendar, according to a new book about the financial crisis. Paulson, who was chief executive officer of Goldman Sachs before taking the Treasury post in 2006, arranged the meeting when he realized he’d be in the Russian city on business at the same time as the New York-based firm’s board was meeting there, according to Andrew Ross Sorkin’s“Too Big to Fail.” In his almost two years leading the Treasury Department, Paulson had only had one other private event with a company’s board, attending a cocktail party hosted by BlackRock Inc., according to the book. The meeting with Goldman’s board in late June 2008 was deemed a “social event” to ensure it didn’t violate U.S. government ethics rules, the book said. Still, Paulson aide Jim Wilkinson asked John Rogers, the firm’s chief of staff, to keep the plans quiet, the book says. In the meeting at the Moscow Marriott Grand Hotel, Paulson shared stories about his experience at Treasury and gave the Goldman Sachs directors his views on the economy, the book says. When they questioned him about the possibility that Lehman Brothers Holdings Inc. or another bank could fail, Paulson talked about the need for the government to gain the power to wind down troubled financial firms, the book says. He concluded by saying that while there could be tough times ahead, he thought the worst might be over by year end, the book says. Goldman Sachs CEO Lloyd Blankfein told a director of the firm the next day that he didn’t know why Paulson would say that, adding “it can only get worse,” the book recounts. Wilkinson and Goldman Sachs spokesman Lucas van Praag declined to comment. Rogers and Michele Davis, who served as Paulson’s assistant secretary for public affairs, didn’t immediately return calls seeking comment.

Houses: About to get much cheaper - (finance.yahoo.com) If you thought home prices were bottoming out, you may be wrong. They're expected to head a lot lower. Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices. Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%. In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years -- though it underestimated the scope. Mark Zandi, chief economist with Moody's Economy.com, agreed with Fiserv's current assessments. "I think more price declines are coming because the foreclosure crisis is not over," he said. In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June -- after having already fallen a whopping 48% during the past three years. If Fiserv's forecast holds, Miami real median home price will tumble to $142,000 by June 2011. In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they're expected to fall 26.8% and then flatten out. Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%. Prices had stabilized: The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%. Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however. "I'm afraid Case-Shiller may be just a temporary reprieve," he said. He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1. Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

Foreclosure figures spike in Marin - (www.marinij.com) The number of default notices filed against Marin homeowners in the third quarter of this year jumped 66 percent compared with the same quarter in 2008, according to a state real estate report. The 428 notices of default, the first step in the foreclosure process, were up from the 258 notices filed during the same July-through-September period last year, MDA DataQuick of San Diego reported Tuesday. The third-quarter figure was also a noted increase from the 381 notices filed in the previous quarter, from April through June. Marin had 345 default notices in the first quarter of 2009. Manny Fernandez, executive director of Marin Family Action, a San Rafael nonprofit offering assistance to families dealing with foreclosure, said just in the past few weeks the number of people coming to his office seeking such help has doubled. "It just keeps growing," Fernandez said. He said although the bulk of homeowners he's worked with made their purchase in the past three years amid the boom of subprime mortgages, longtime homeowners have also been snared in the foreclosure web. "Even people that refinanced within the last three years, they got caught up in the whirlwind of subprime loans," Fernandez said. "They got caught up in that boom, even though they had the house for 30 or 40 years." Actual Marin properties foreclosed on during the third quarter, represented by the 110 trustees' deeds recorded, showed a 26 percent decrease from the 149 deeds recorded during the same period in 2008. The number showed a slight uptick from the 105 trustees' deeds recorded in the second quarter of this year. Statewide, lenders filed 111,689 default notices during the past quarter, down 10 percent from 124,562 filed in the prior quarter, but a 19 percent increase from 94,240 notices filed in the third quarter of 2008. "It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings," said John Walsh, DataQuick president. "If so, it's not out of the goodness of their hearts. It's because they've concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interests." The 50,013 trustees' deeds recorded across the state the past three months was up 10 percent from 45,667 over the previous three months, but down 37 percent from 79,511 deeds from July to September in 2008.

OTHER STORIES:

The burden of prudent savers: propping up Wall Street - (www.money.cnn.com)

Wall Street 40% Bonus Rise Fuels Buying of $43 Steaks - (www.bloomberg.com)

Why No Welfare Reform for Wall Street? - (www.huffingtonpost.com)

Report Shows Increase In San Diego Foreclosures - (www.10news.com)

Sun cutting up to 3,000 jobs as awaits Oracle deal - (www.sfgate.com)

Big insider-trading hedge fund case hits Silicon Valley - (www.sfgate.com)

Distressed condo sales in Miami - (www.dailybusinessreview.com)

U.S. housebuilder confidence ebbs on tax credit fears - (www.reuters.com)

Why the dollar is falling - (www.economist.com)

On the US dollar, Europe Sings a Classic Meatloaf Hit - (www.Mish)

Scammer Pretends To Foreclose, Then Rents Out Houses - (www.9news.com)

Armageddon in Alabama Proves Parable for Local, U.S. Governments - (www.bloomberg.com)

California Bans A Few Neg Am Loans - (www.businessweek.com)

On PBS right now: The Warning - (themessthatgreenspanmade.blogspot.com)

The View From Inside a Depression - (www.nytimes.com)

Why Obama Has to do What Letterman Did: Refuse to Pay Hush Money - (robertreich.blogspot.com)

Sunday November 8 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

20 Year Old Buys House With $183K FHA Loan (Of YOUR Money) And 3.5% Down - (www.businessinsider.com) Denise Tejada bought a house last month at the age of 20, thanks in large part to a loan guaranteed by the Federal Housing Authority. This story offers a dramatic demonstration that, despite the housing bubble causing the worst economic downturn in generations, the ideology of home ownership is alive and well in the United States and still being supported by the government. Without question, Tejada's loan is toxic--to her and to the taxpayers who are backing the loan. Her house cost $155,000. Tejada's loan was apparently made on a micro-down payment of just 3.5%, the minimum down payment to qualify for an FHA loan. On top of this, however, she got an additional government backed loan to make improvements. Her total loans amount to $183,0000. In short, she was immediately underwater on her new house. The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments. She earns that income by holding down one full time and two part time jobs. Obviously, this woman has a strong work ethic. But it also means her income is precarious. With unemployment still rising, she obviously should be worried about losing one of her three jobs. A loss of one of them would likely leave her unable to make the debt payments. Tejada appears to be using imaginary numbers about the value of her house. She says that when she bought it, the house was just a “box” with no kitchen or bathroom. Now it is "gorgeous". She claims the renovation has increased the value of her home from $155,000 to $255,000. "I bought my house for $155,000. And now, after all the fixing, after all the remodeling, my house is worth $255,000. So just within a month period, I made a $100,000," she tells Market Place's Scott Jagow. As far as we can tell, this is just mark-to-imagination valuation. She doesn't give any indication about how she arrived at the conclusion that she has made a $100,000 gain in just a month. Even if her improvements had dramatically increased the value of the house beyond the cost of the improvements themselves, she would have to contend a declining housing market. From last year to this year, the median price of homes sale in Oakland, California has declined 28%. Tejada sees her house as an investment rather than a home. And she is planning on buying more homes, despite the fact that her income is already strained by her debt. This three bedroom house is just her "first house" and is "a little too big for me." This is the opposite direction house buying traditionally moved in, with young people buying a small fixer-upper or renting and moving into larger homes as their incomes and family size increased. Tejada has started big. Tejada, a first generation immigrant from Guatemala, isn't going to college. If that was ever the American dream, it isn't hers. She's going into home buying. Her older brother also bought a house. Indeed part of the reason she bought her house so young was that she wanted to beat her brother, who bought his house at the age of 21. She is very happy about the fact that her friends seem impressed that she owns a home. "This is the kind of mentality that our dad pretty much embedded in us since we were 12 years old," she says. Her father bought a house shortly after moving to the United States. Shortly after buying the home, the family started acquiring nicer things. New cars, new televisions, that kind of thing. When Tejada's brother asked about where they were getting the money for these things, the father said it was all because of the house. That sounds a lot like the father was using his house as an ATM, most likely borrowing from a home equity line of credit to purchase consumer goods. As the value of the house increased during the housing bubble, the family seemed to be getting richer. Most likely, they were simply acquiring more debt. This way of thinking has been passed on to Tejada--who believes she made $100,000 in a month. The Tejada family obviously has a very strong worth ethic and a savings ethic as well. Unfortunately, something appears to have gone haywire when it comes to homes. The children were encouraged to work and save but then to spend their savings on homes and to be completely unafraid of massive amounts of debt. This is, in short, a living breathing example of the ideology of home ownership at work. We wish the Tejada's nothing but the best of luck. We hope she really can keep paying her mortgages and that she somehow makes money on her house. But it is outrageous that the FHA is guaranteeing her loans, putting the taxpayer on the hook for her precarious financial situation. Here's a video of Tejada and her brother discussing her house. Also, click here for Market Place's interview with Tejada.

Mortgage applications plummet - (money.cnn.com) Industry group says activity sank by 13.7% last week as interest rates inched higher and tax credit expiration drew nearer. Mortgage applications plunged last week as rates ticked higher above 5%, an industry group said Wednesday, as the expiration of a home buyer tax credit drew nearer. The Mortgage Bankers Association said its index of mortgage application volume fell 13.7% in the week ended Oct. 16 from the prior week. The decline in activity came as rates on the widely-used 30-year fixed mortgage increased to 5.07% from 5.02%, according to the MBA. The week's adjustments included the Columbus Day holiday. Uncertainty about a possible extension and expansion of an $8,000 tax credit for first-time homebuyers may be hampering the housing recovery. The tax credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30. The MBA said refinancing applications also fell, by 16.8% from the previous week. The purchase index, a measure of applications at mortgage lenders, declined 16.7% last week. The MBA's Wednesday report comes on the heels of other downbeat data from the U.S. housing market, which had until recently showed signs of stabilization from a major slump. A report Tuesday showed initial construction of homes rose just 0.5% last month to 590,000, far less than expected. Last week, data showed foreclosure filings hit a record high in the third quarter. Another report predicted the national median home price will drop 11.3% by June 2010. The MBA report also showed the average rate for 15-year fixed-rate mortgages rose to 4.51% from 4.44%.

Like it or not, here comes more stimulus - (money.cnn.com) You won't see it all in one neat package. And you won't hear the White House call it stimulus. But there's a good chance lawmakers will decide to extend some of the stimulus measures included in the $787 billion economic recovery package passed in February and possibly create some new ones as well. On Wednesday, House Democrats are convening a forum of economists to debate the state of the economy, with a specific focus on job creation. And lawmakers are convening hearings on Capitol Hill this week to discuss the economic outlook and the state of the housing market. A number of ideas on the table are lifeline measures, while some are flat-out incentives to spur economic activity. Here's a rundown of what's under consideration, estimates of what the provisions might cost and where they stand currently in the legislative process. Unemployment benefits extension: By year-end, an estimated 1.3 million jobless workers will have run out of unemployment benefits, according to the National Employment Law Project. It's expected that lawmakers won't let that happen. The House has already approved an extension and the Senate has amended it but not yet voted on it. Both parties say they want to extend benefits but they disagree over how to pay for it and how to handle amendments to the bill. In the Senate proposal, unemployment benefits would be extended by up to 14 weeks in every state and then another six weeks on top of that in states where the unemployment rate tops 8.5%. Currently, states with unemployment rates topping 8% now offer up to 79 weeks of unemployment benefits, said Chad Stone, chief economist of the liberal Center for Budget and Policy Priorities. States with unemployment rates between 6% and 8% now offer up to 59 weeks. And all other states currently offer up to 46 weeks. Estimated cost: $2.4 billion. But Senate Democrats say the proposal would be paid for in full by extending an add-on tax for employers under the Federal Unemployment Tax Act. For the past 32 years, employers were required to pay an additional 0.2% on the first $7,000 of a worker's annual wages on top of the 0.6% they normally pay, said George Wentworth, a policy analyst for NELP. That surtax was supposed to expire this year. But lawmakers would extend it through June 30, 2011, to pay for the benefits extension.

Fannie, Freddie Tumble, Shares Called Worthless - (www.bloomberg.com) Fannie Mae and Freddie Mac each fell 22 percent, to the lowest prices since August, after analysts at KBW Inc. said the shares of the government-run mortgage finance companies are probably worthless. Analysts led by Bose George cut the companies’ price targets to zero today from $1 set in April, saying the entities need to be recapitalized by mortgage banks that use their services. Fannie Mae fell 32 cents to $1.14 at 4:15 p.m. on the New York Stock Exchange, the lowest price since Aug. 20. Freddie Mac fell 37 cents to $1.35, the lowest since Aug. 19. The government-sponsored entities, which more than tripled in August, have retreated from 13-month highs of $2.40 for Freddie and $2.04 for Fannie on Aug. 28. “Both the common and preferred equity of the GSEs should be worthless” if the companies are recapitalized, the analysts wrote in a research note. The companies “are acting as a direct arm of the federal government providing massive federal aid to support and revive the U.S. housing market in the midst of a crisis,” the report said. Fannie Mae and Freddie Mac remain the two largest sources of housing money in the U.S., financing about 70 percent of new mortgages, according to government statistics. Regulators seized their operations and placed Fannie Mae and Freddie Mac into conservatorship in September 2008 amid fears that the two were failing and posed a risk to the broader U.S. economy. Recapitalizing Fannie, Freddie: The Congressional Budget Office projects the two will require $389 billion of the $400 billion in taxpayer aid Treasury pledged last year to keep them solvent. “The only viable option to limit taxpayer expense and recapitalize Fannie Mae and Freddie Mac is to set up a Bad Fannie and Bad Freddie,” KBW said, adding that the plan would wipe out existing common and preferred shareholders. The government could spin off new companies that are cooperatively owned by mortgage banks such as Wells Fargo & Co. and Bank of America Corp. that sell loans to Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, mirroring the Federal Home Loan Bank system, the analysts wrote. The companies have booked a combined $165.3 billion in net losses during the past two years and have received or requested $95.6 billion in taxpayer aid since November.

Guide to Looking up Public Records for Foreclosure Fraud - (www.scribd.com) Helpful Guide For All States on how to research your recorded documents at county recorder and determine if there are forgeries or fraud when facing foreclosure. The evidence may help you stop your foreclosure or set aside a foreclosure. Forgery is illegal & criminal. More and more evidence in coming forth which indicates some of the notorious predatory lenders took shortcuts and did illegal document recordings and some with forgeries. Even though screen shots are from Florida counties, the information can be used in any state and for any county recorder.

Ruling could undo thousands of foreclosures - (www.bostonherald.com) A real estate judge is refusing to reverse a landmark ruling that opens the door to voiding tens of thousands of Bay State foreclosures dating as far back as 1989. “The foreclosure sales (in question are) invalid because they failed to meet the requirements of (Massachusetts law),” Land Court Judge Keith Long wrote yesterday in reaffirming a decision he originally reached in March. Long denied a request from Wells Fargo and U.S. Bank to reinstate two Springfield foreclosures he invalidated in March because of flawed paperwork. As the Herald first reported in June, the case centers on documents that banks and big investors must file any time they sell mortgages to each other. However, some paperwork often gets lost, as mortgages typically change hands over and over again in today’s complex market. Still, Long ruled that banks can’t foreclose on homes unless they have complete paperwork covering every time a specific loan changed hands. The judge found that fixing documents after the fact, as Wells Fargo and U.S. Bank did in the Springfield cases, isn’t enough. He ruled that flaws not resolved earlier can depress bids at foreclosure auctions, reducing how much consumers who face home losses get for their places. “The issues in this case are not merely . . . a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers,” Long wrote yesterday. Experts say the ruling paves the way for thousands of people who’ve lost houses to foreclosure to challenge their homes’ seizures. “The judge has thrown into question every foreclosure performed in the Commonwealth over the last 20 years,” said lawyer Lawrence Scofield, who represents Wells Fargo and U.S. Bank. Scofield said only foreclosures before 1989 are beyond review, as state law gives people two decades to dispute land ownership. Market watchers add that the judge’s ruling affects far more than just foreclosed homeowners. For instance, any consumer who owns a house foreclosed on in the past two decades must now worry that a former owner will sue to reclaim the property. Such homeowners could also find it impossible to sell or refinance because of “clouded” titles. In fact, some consumers who’ve tried to buy foreclosed homes in recent months haven’t been able to get mortgages or title insurance because of Long’s initial decision. Bank of America and other firms have even pulled some foreclosed homes off of the resale market. Scofield, who said his clients haven’t decided whether to appeal, believes delays in reselling foreclosures will only prolong the state’s housing slump. “Judge Long has taken a big sledgehammer and shoved the market a lot deeper into recession,” he said. But Eloise Lawrence of Greater Boston Legal Services, which represented one of the Springfield homeowners, claims lenders are “trying to scare people and win in the court of public opinion what they can’t win in (actual) court. Banks decided what was convenient for them should be the law of the land, but that’s not the way it works.”

OTHER STORIES:

Wells Fargo reports record profits - (money.cnn.com)

$700 billion bailout's hidden costs - (money.cnn.com)

'Car czar': Why GM's CEO had to go - (money.cnn.com)

Chair of Congressional Oversight Panel: Housing Market Getting Worse - (finance.yahoo.com)

Dismal Foreclosure Numbers Could Be the Tip of the Iceberg - (www.usnews.com)

County chief judge "irritated" by foreclosure lawyer delay tactics - (www.blogs.tampabay.com)

Drop in foreclosures scary; banks are giving up - (www.daytondailynews.com)

Reverse Brain Drain From Silicon Valley To India And China - (www.ccortez.com)

Where The Hell Is The Outrage? - (www.Mish)

Columnist Doesnt Get Anger Directed at the Super Rich - (www.dadtalk.typepad.com)

Goldman Sachs' Black Magic, Here's How They Did It - (www.theautomaticearth.blogspot.com)

Goldman/Treasury CEO Paulson "The Hammer" Gets Hit By A Tree - (www.dailybail.com)

Falling dollar a bogus crisis - (www.suntimes.com)

Embrace the dollar's downfall - (www.u.tv)

Einhorn on gold, sovereign risk, and more - (www.blogs.reuters.com)

Wall Street Income And Education - (www.baselinescenario.com)

We're repeating the mistakes of 1930 - (www.investmentnews.com)

Herbert Hoover: 1931 Radio Address to the Nation on Unemployment Relief - (www.presidency.ucsb.edu)

Saturday November 7 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

The Very Busy Politicians in Washington DC - (Ron Paul at www.safehaven.com) With a faltering economy, multiple wars, and the approaching demise of the dollar's reserve status, there are more than enough problems to keep politicians in Washington working day and night. In between handing out cash for clunkers and nationalizing healthcare, the administration is busy sending more troops overseas, escalating existing wars, and seeking out excuses to start new wars. Congress is working on "urgent" legislation to address crises like healthcare reform and climate change. The reforms are so very urgent that legislation must pass swiftly with no time to read the bills even though the new laws wouldn't take effect for several years! Meanwhile, the Federal Reserve is busy dealing with our dollar crisis by printing up more dollars. Yes, there certainly is a lot for Washington to do these days. Most, if not all, of what Washington is doing however, is more of what created the problems in the first place. Capitol Hill is filled with politicians running around putting out fires - but with gasoline. The truth is that all these fires keep so many powerful people employed and wealthy that it is not truly in many decision makers' interests to be very effective problem-solvers. If Washington ran out of problems, think how many lobbyists would be out of a job, and how many special interest groups would just disband? Sadly, whatever is bad for the greater economy is good for the economy and job market in DC. Of course, no form of government, not even one that respected its Constitutional restraints, would magically create a problem-free society. The question is: how should a society deal with its problems? The form of government that our founders envisioned, in which the federal government was strictly constrained by the Constitution, allows private citizens and communities to solve their own problems. The role of the government should be to protect contracts, punish fraud and violence through appropriate laws, law enforcement and the courts. Not a whole lot of laws or bureaucrats are really necessary to work on just that. Instead, new laws are constantly needed to fix the problems that previous unconstitutional laws created. We have ended up with an incomprehensible maze of laws and regulations that severely constrains the people and expands the government - the exact opposite of what our founders intended. This is all because the Constitution is treated like a suggestion manual instead of the supreme law of the land. Under the Constitution, politicians' hands are supposed to be tied in most of the areas they involve themselves in today. But somewhere along the line, politicians stepped out of Constitutional bounds and started pretending to solve our problems for us. All we have to show for it is more problems. Today, Washington politicians can busily "solve" one problem, knowing that unintended consequences from that "solution" will keep them and their friends all very busy tomorrow. The people are ultimately left suffocating under the burden of Washington's helping hands. It is coming to a point where our economy, our dollar, and indeed, the rest of the world have had about all the help from Washington that they can stand. The United States is headed the way of Rome and the Soviet Union, for the same reasons, unless we reverse the trend. I continue to hope that enough Americans will realize that the true strength of our country doesn't come from Washington, but rather the limitations placed on government in the Constitution. We must resolve to reverse the destructive course that we are on and then never again let big government problem-solving take over our lives and our country.

Buyers Sue Trump as Miamis Condo Prices Plummet - (www.bloomberg.com) Robert Cooper says he has found a way to make money in South Florida’s real estate bust. Cooper, an attorney in Aventura, Florida, sues for refunds on deposits in the nation’s largest condominium market. In the last two years, he filed lawsuits for about 1,500 buyers against companies and individuals including the Related Group of Florida, Dezer Development LLC, Corus Bankshares Inc., Donald Trump. More suits seeking refunds under a federal law regulating condo sales have been filed in South Florida than in the rest of the country combined, according to a search of federal court records. Fueling the litigation is a price crash that makes buyers unwilling to pour more money into bad investments -- even if they can get financing. Condos on which they made deposits of up to $1,000 a square foot in 2006 are now selling for $125 to $350 a foot, said Jack McCabe, a real estate consultant in Deerfield Beach, Florida. “If you’re thinking you can come here and buy and sell condos for a profit in less than five years, you’re sadly mistaken,” said McCabe, whose clients have included Credit Suisse Group AG and Pulte Homes Inc., the largest U.S. homebuilder. “You need a seven- to 10-year range.” Prices could fall to $100 a foot, less than half the cost of construction, and a value not seen in 20 years, he said. Vacant Condos: In Dade, Broward and Palm Beach counties, there are more than 43,000 condos and townhouses on the market, almost 1-1/2 times the number of single-family homes, according to Condo Vultures LLC, a Bal Harbour real estate brokerage. In downtown Miami, more than 8,000 condos stand vacant and unsold, relics of a building binge that added 23,000 condos from 2003 to 2008, said Peter Zalewski, principal of Condo Vultures. Over the past 12 months, condo prices fell 15 percent in the West Palm Beach-Boca Raton area to a median of $112,200, 36 percent in Fort Lauderdale to $85,100 and 31 percent in Miami to $144,700, according toFlorida Association of Realtors data. Those prices are likely to fall more when the $1 billion portfolio of South Florida condos financed by Corus Bankshares, the Chicago lender seized by federal regulators, goes on the market, Zalewski said. Investors led by Starwood Capital Group LLC won a bid for Corus’s loans. Two-thirds of the 2,537 condo units Corus financed in downtown Miami are unsold and unoccupied, Zalewski said. Corus Deal: Rather than drive prices down more, the Corus sale could help stabilize the condo market because Starwood, in its partnership with the FDIC, can hold onto the properties, said Craig Werley, principal of Focus Real Estate Advisors in Coral Gables. “Why on earth would they create more cutthroat competition when they’re in such a good position with the federal government?” said Werley, who co-wrote a study on the condo glut for the Miami Downtown Development Authority.

Some very ugly foreclosure numbers in Mass. - (www.boston.com) The Bay State may not be a national leader when it comes to the foreclosure epidemic. That honor still rests with such boomtown states gone bust as Nevada, Arizona and California. That’s the good news. But let’s not get smug here. The latest numbers from RealtyTrac are out, and they don’t look good for Massachusetts. Foreclosure activity, including initial notices starting the process, auctions and bank repossessions, jumped more than 17 percent over the past three months compared to the spring. And the third quarter numbers, when compared to the same period in 2008, look downright hideous – a 34 percent leap. Many of the overleveraged homeowners who took out all those goofy subprime loans during the bubble years have been foreclosed on already. The increase in filings is now being driven by an economy that appears to be on the mend, but is still shedding jobs at a worrisome rate. Nationally, foreclosure activity skyrocketed 23 percent in the third quarter over the same period in 2008, RealtyTrac reports. One out of every 136 household across the country got a foreclosure notice or other filing during the quarter – the most since RealtyTrac began tracking these trends in 2005. Where does it all end? One answer of course is when the job market finally stabilizes and the unemployment rate finally tops off and starts to come down. On that score, check out the “Adversity Index’’ put out by Moody’s Economy.com and msnbc.com. One of five metro areas in the country has emerged from the recession, according to the index’s latest report. The Cambridge/Metro is one of those lucky few. I live in Natick, so I am ready to really celebrate here! By contrast, the Boston/Quincy area is still stuck in the downturn. Such silliness aside, I think we’ll all know when the job market is starting to come back. And when it does, look for the beginning of the end of the foreclosure madness – at least until the next bubble bursts.

How Uncle Sam is killing your savings - (money.cnn.com) This is a quiz. What do the record-high Wall Street bonuses have in common with the record-low yields for savers? Answer: They show yet another way that prudent people, especially those living on fixed incomes, are being screwed by the government's bailout of the imprudent. Here's the deal. The government is spending trillions to keep interest rates down in order to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers' incomes. "It's a direct wealth transfer from savers and retirees to overly indebted borrowers," says Greg McBride, senior financial analyst at Bankrate.com. Since October 2007, when government intervention in the financial system began picking up speed, yields on the ultrasafe one-year and five-year investments that many retirees favor have tanked. Two years ago the average yield on a five-year federally insured bank CD was 3.9%, according to Bankrate.com. Now it's 2.2%, a drop of more than 40%. Yields on one-year CDs have almost vanished: 0.92%, compared with 3.6%. On five-year Treasury securities, yield is down to 2.3% from 4.4%. On one-year maturities, you get a minuscule 0.3%, down from more than 4% in 2007. The rates on AAA-rated one- and five-year tax-exempt bonds, another safe saver haven, are down sharply, too, for bailout-related reasons that we'll get to in a bit. As for money market mutual funds, fuggeddaboutit -- the average is about 0.06% (no, that's not a misprint) according to Crane Data, down from 4.6% two years ago. It's become customary practice -- a wise one -- that when the U.S. economy falters, the Fed cuts very short-term rates, the only ones that it controls, to stimulate business. But this time the Fed hasn't confined its rate-suppression activities to the short-term markets. It's been a huge buyer of Treasury securities with maturities of up to 10 years, as well as mortgage-backed securities and Lord only knows what else. This buying pressure forces up the securities' prices, and thus reduces their yields. The Fed, which declined to talk to me, is the major buyer of mortgage paper, in what's clearly an attempt to hold down mortgage rates and prop up house prices. The Fed has also been a huge buyer of Treasury bills -- securities with a maturity of less than a year -- that Uncle Sam has issued to help fund the federal deficit and pay for various bailout programs. But wait, there's more. As part of the economic stimulus package, the federal government is promoting Build America Bonds, under which the Treasury pays 35% of the interest costs of project-related bonds issued by state and local governments. These BABs, as they're known, are taxable securities rather than being tax-exempt as normal state and local bonds are. The BAB program has sharply reduced the supply of new tax-exempt muni bonds. Almost $40 billion of Build America Bonds have been issued since the program began in April, according to Bloomberg. Chip Norton, a muni maven at Wasmer Schroeder & Co., says that by reducing the supply of new munis, Build Americas have been a major factor in driving down yields on one- and five-year triple-A munis to 0.5% and 2.3%, respectively, from 3.4% and 3.6% two years ago.

Banks vaporize $8 billion in small biz credit - (money.cnn.com) President Obama is trying -- again -- to help small business get the cash they desperately need. The President will visit a small business in Maryland on Wednesday to present a series of initiatives aimed at increasing bank lending to small businesses, according to a White House official. The programs the President will unveil include an increase in the maximum amount businesses can borrow through the Small Business Administration's primary loan program, which currently stands at $2 million. In addition, the Treasury Department will expand access for smaller banks to the Troubled Asset Relief Program (TARP), a move aimed at spurring more local lending by community banks. The TARP program was set up to recapitalize banks so that they would bolster their lending to consumers and small businesses. In March, as the administration and the SBA took steps to stimulate small business lending, Treasury Secretary Tim Geithner ordered the top TARP recipients to begin sending the Treasury monthly reports on their small business lending activity. "We need every bank in the country to do everything in their power to provide the credit that small businesses need to operate, expand and add jobs," Geithner said as he announced the new requirements. "Given the role many banks played in causing this crisis, you bear a special responsibility for helping America get out of it." But in the five months they've been sending in those reports, the 22 biggest TARP recipients haven't increased their small business lending. Instead, they've cut their outstanding balances by $8 billion. As of Aug. 31, the 22 reporting banks held a collective small business loan balance of $261.3 billion, down 3% from when they began reporting in April. As unemployment nears 10%, lawmakers are worried about the ripple effects of the credit clampdown. Small businesses employ half of America's non-government workers and traditionally create most of the country's new jobs, according to government estimates. "New firms generate jobs and revenue where there once were none," Nydia Velázquez, a Democrat from New York and the chair of the House Committee on Small Business, said last week in a hearing on increasing capital access. "But of course, entrepreneurs can't create new positions and paychecks out of thin air -- startups require significant capital to get off the ground."

OTHER STORIES:

Federal action prevented 2nd Great Depression - (money.cnn.com)

Sun Microsystems to cut 3,000 jobs - (money.cnn.com)

The return of oil price shock | Crude falls - (money.cnn.com)

College: More expensive than ever - (money.cnn.com)

Bailout victim: Your savings account - (money.cnn.com)

If foreclosure is imminent, stop making your house payments - (www.tampabay.com)

Keeping up with an avalanche of troubled mortgages - (www.marketwatch.com)

Thousands at San Fran. Cow Palace seeking mortgage help - (www.sfgate.com)

Median price of homes sold in Peoria, AZ drops 27.3% - (www.azcentral.com)

Minnesota Mortgage Crisis Far From Over - (www.builderonline.com)

Foreclosure crisis far from over for South Florida - (www.miamiherald.com)

Detroit real estate: A bargain or a money pit? - (www.money.cnn.com)

California job losses continue to climb - (www.latimes.com)

Sentiment Index Decreased to 69.4 - (www.bloomberg.com)

Is commercial real estate next to fall? - (marketplace.publicradio.org)

Treas. Sec. Geithner Aides Reaped Millions Working for Banks, Hedge Funds - (www.bloomberg.com)

The FHA Is A Looming Disaster - (www.businessinsider.com)

If they're too big to fail, they're too big - (www.ourfuture.org)

Sliding dollar may be something to cheer about - (www.latimes.com)

An Analogy of the First Time Homedebtor Credit - (homedebtors.blogspot.com)

Don't Think, Just Shop - (www.dailybail.com)

Friday November 6 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Armageddon in Alabama Proves Parable for Local U.S. Governments - (www.bloomberg.com) In its 190-year history, Jefferson County, Alabama, has endured a cholera epidemic, a pounding in the Civil War, gunslingers, labor riots and terrorism by the Ku Klux Klan. Now this namesake of Thomas Jefferson, anchored by Birmingham, is staring at what one local politician calls financial “Armageddon.” The spectacle -- a tax struck down, about 1,000 county employees furloughed, a politician indicted over $3 billion in sewer debt that may lead to the largest municipal bankruptcy in history -- has elbowed its way up the ladder of county lore. “People want to kill somebody, but they don’t know who to shoot at,” says Russell Cunningham, past president of the Birmingham Regional Chamber of Commerce. One target of their anger is Larry P. Langford, who was the county commission’s president in 2003 and 2004 and is now mayor of Birmingham. The 61-year-old Democrat goes on trial today, charged in a November 2008 federal indictment with taking cash, Rolex watches and designer clothes in exchange for helping to steer $7.1 million in fees to an Alabama investment banker as the county refinanced its sewer debt. Jefferson County’s debacle is a parable for billions of dollars lost by state and local governments from Florida to California in transactions done behind closed doors. Selling debt without requiring competition made public officials vulnerable to bankers’ sales pitches, leaving taxpayers to foot the bill for borrowing gone awry. Swaps Blew Up: Under Langford’s stewardship, the county bet on interest- rate swaps, agreements that a representative of New York-based JPMorgan Chase & Co. told commissioners could reduce their interest costs. Instead, the swaps -- covering more than $5 billion in all -- blew up during the credit crisis after ratings for the county’s bond insurers fell. JPMorgan, through spokeswoman Christine Holevas, declined to comment for this story. Thousands of public borrowers across the U.S. chose a similar strategy, and many are now paying billions of dollars to escape the contracts, said Peter Shapiro, managing director at Swap Financial Group in South Orange, New Jersey. Even Harvard University, the world’s richest academic institution with an endowment of $26 billion, fell for Wall Street’s financing in the dark: It paid $497.6 million to investment banks during the fiscal year ended June 30 because it chose to cancel $1.1 billion of interest-rate swaps.

Adam Storch, 29-Year-Old Goldman Guy Who Is Now COO Of The SEC - (www.businessinsider.com) hat sure didn't take long. Only a few moments ago we noted that we hadn't yet been able to track down a photograph of the 29-year-old Goldman Sachs vice president who has just been named the chief operating officer of the Securities and Exchange commission. And now we've got this photo. Storch graduated from SUNY Buffalo. During college he did a stint as a summer intern at Neuberger Berman and worked at Deloitte & Touche for two years after graduating. He then went to NYU's Stern School of Business. This lead to a job at Goldman, where he worked for the last five years. As we noted earlier, this will surely lead to people complaining that A VAMPIRE SQUID IS RUNNING THE SEC. Interestingly, Storch seems to be a big fan of Bill Clinton. At Stern, he created a website asking people to vote for Bill Clinton in the 2008 election. "Don't stand for the 22nd Ammendment!" the website implores.

Medicare Premiums to Rise 15 Percent as Costs Jump - (www.nytimes.com) The basic Medicare premium will shoot up next year by 15 percent, to $110.50 a month, federal officials said Monday. The increase means that monthly premiums would top $100 for the first time, a stark indication of the rise in medical costs that is driving the debate in Congress about a broad overhaul of the health care system. About 12 million people, or 27 percent of Medicare beneficiaries, will have to pay higher premiums or have the additional amounts paid on their behalf. The other 73 percent will be shielded from the increase because, under federal law, their Medicare premiums cannot go up more than the increase in their Social Security benefits, and Social Security officials announced last week that there would be no increase in benefits in 2010 because inflation had been extremely low. Kathleen Sebelius, the secretary of health and human services, urged the Senate to approve a bill, already passed by the House, to block the scheduled increase in Medicare premiums. “We are in tremendously difficult economic times, and seniors are being hit particularly hard,” Ms. Sebelius said. “The last thing seniors need right now is a substantial increase in their Medicare premiums, and many seniors will see such an increase if no action is taken.” Among those who face higher premiums next year are new Medicare beneficiaries, high-income people and those whose Medicare premiums are paid by Medicaid. Premiums can be as high as $353.60 a month, or more than $4,200 a year, for Medicare beneficiaries who file tax returns with adjusted gross income greater than $214,000 for an individual or $428,000 for a couple. The higher premiums will impose “an additional and significant burden” on states, which help pay Medicaid costs, along with the federal government. The House bill was passed, 406 to 18, on Sept. 24. Among those who voted against it was the Democratic leader, Representative Steny H. Hoyer of Maryland, who said he saw no need to help multimillionaires at a time when the nation was struggling to rein in entitlement programs.

Foreclosures Force Ex-Homeowners to Turn to Shelters - (www.nytimes.com) The first night after she surrendered her house to foreclosure, Sheri West endured the darkness in her Hyundai sedan. She parked in her old driveway, with her flower-print dresses and hats piled in boxes on the back seat, and three cherished houseplants on the floor. She used her backyard as a restroom. The second night, she stayed with a friend, and so it continued for more than a year: Ms. West — mother of three grown children, grandmother to six and great-grandmother to one — passed months on the couches of friends and relatives, and in the front seat of her car. But this fall, she exhausted all options. She had once owned and overseen a group home for homeless people. Now, she succumbed to that status herself, checking in to a shelter. “No one could have told me that in a million years: I’d wake up in a homeless shelter,” she said. “I had a house for homeless people. Now, I’m homeless.” Growing numbers of Americans who have lost houses to foreclosure are landing in homeless shelters, according to social service groups and a recent report by a coalition of housing advocates. Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent lost homes to foreclosure, according to “Foreclosure to Homelessness 2009,” a survey produced by the National Coalition for the Homeless and six other advocacy groups. In the Midwest, foreclosure played a role for 15 percent of newly homeless people, according to the survey, reflecting soaring rates of unemployment — Ohio’s reached 10.8 percent in August — and aggressive lending to people with damaged credit. At a shelter for women and children run by the West Side Catholic Center in Cleveland, where Ms. West now lives, foreclosure accounted for zero arrivals in 2007, the center’s executive director, Gerald Skoch, said. Last year, two cases emerged. This year, the number has already reached four.

Muni Market Faces $11.3 Billion in New Issues, Most Since June - (www.bloomberg.com) The municipal market tackles its biggest week for new bond issues since June, as Minnesota and Denver-based Catholic Health Initiatives lead about $11.3 billion in fixed-rate offerings. Minnesota, home of Cargill Inc. and 3M Co., intends to bring $906 million of general obligation bonds to market. CHI, the second-largest Catholic health-care system in the U.S. after Ascension Health, seeks buyers for more than $1 billion of tax- exempt debt in three states. Both issues will refinance debt and finance new capital projects. States, local governments and nonprofit hospitals are pressing forward with borrowing plans after a buyer’s strike the past two weeks boosted benchmark tax-exempt yields from 42-year lows. The weekly Bond Buyer 20 yield index rose since Oct. 1 by 38 basis points, or 0.38 percentage point, to 4.32 percent. The gauge of 20-year general obligation bonds remains lower than it was from February 2008 through mid-September 2009. “Keep a sharp eye out for sizeable new-issue offerings that may be ‘priced to move’ in a difficult market,” John Dillon, a fixed-income credit strategist at Morgan Stanley Smith Barney in Purchase, New York, said in a report late last week. Weekly sales of fixed-rate municipal bonds reached $11 billion twice in the past four months, and totaled $11.9 billion for the period ended June 12, according to data compiled by Bloomberg. Following are descriptions of some pending sales of municipal bonds; the timing and amounts may change. CATHOLIC HEALTH INITIATIVES plans to sell about $1.1 billion of fixed-rate bonds as soon as this week in tax-exempt deals arranged by state agencies in Colorado and Kentucky, and by Ohio’s Montgomery County. The money raised will be used to pay off variable- and auction-rate debt as well as reimburse the system for previous capital spending and fund new projects. Morgan Stanley will lead banks marketing the bonds, which are rated AA by Fitch Ratings and Standard & Poor’s, and Aa2 by Moody’s Investors Service. The Denver-based health-care system operates 78 hospitals in 20 states and has annual revenue of $8.2 billion, according to its Web site. (Added Oct. 19) MINNESOTA will negotiate the sale of $906 million of general obligation bonds through a group of underwriters led by Barclays Plc this week. The proceeds will refinance debt and fund projects for parks, education, pollution control, transportation, natural resources and agriculture. The state’s full faith, credit and taxing power pledge carries S&P and Fitch’s top rating of AAA and Moody’s second-highest grade, Aa1. (Added Oct. 19) PENNSYLVANIA TURNPIKE COMMISSION, operator of the state’s toll roads, plans to issue $524 million of revenue bonds through Goldman Sachs Group Inc. this week. The commission is financing a payment, set by a 2007 law called Act 44, to the Pennsylvania Department of Transportation for capital projects. The debt, secured by a subordinate lien on turnpike revenue, is rated A2 by Moody’s and A- by S&P. (Added Oct. 19) CALIFORNIA PUBLIC WORKS BOARD plans to offer $820 million of bonds backed by lease payments appropriated this week. Underwriters led by Morgan Stanley and Royal Bank of Canada’s RBC Capital Markets unit will take orders from individual investors tomorrow and set final prices and yields on the debt Oct. 21, when institutions can buy. A portion of the deal will be taxable Build America Bonds, with the rest tax-exempt. The proceeds will fund various capital projects, including a prison in Monterey County near Soledad. Fitch grades the bonds BBB-, one level above high-risk, high-yield junk status. Moody’s rates them one level higher at Baa2. S&P assigns its A- rating, the fourth-lowest investment grade. (Updated Oct. 19)

OTHER STORIES:

Senate Bill Would Curtail Bank Overdraft Charges - (www.nytimes.com) The legislation would establish a limit of one overdraft fee in a month, with a maximum of six in a year.

Icahn Offers $6 Billion To Help CIT - (www.nytimes.com) The billionaire financier says a loan could help the CIT Group, a business lender, avoid bankruptcy.

DealBook: As Icahn Pitches CIT Investors, Egan-Jones Urges Rejection - (www.nytimes.com)

British Regulator Proposes Tighter Rules for Mortgages - (www.nytimes.com)

U.S. Said to Target Wave of Insider-Trading Cases After Galleon - (www.bloomberg.com)

Central banks fuel risky assets - (www.ft.com)

Gold at $2,000 Becomes Inflation-Adjusted Bullseye for ‘80 High - (www.bloomberg.com)

Won Crushes Yen as Dollar Substitute in Asian Rally - (www.bloomberg.com)

Japan Economy Improves in All Nine Regions, BOJ Says - (www.bloomberg.com)

Crisis Created ‘Moral Hazard,’ Former RBA Chief Says - (www.bloomberg.com)

U.S. Plans to Charge 10 More After Rajaratnam Arrest - (www.bloomberg.com)

Greenlight's Einhorn holds gold, says U.S. policies poor - (www.reuters.com)

Armageddon in Alabama Proves Parable for Local U.S. Governments - (www.bloomberg.com)

Muni Market Faces $11.3 Billion in New Issues, Most Since June - (www.bloomberg.com)

Brazil to Impose Tax on Foreign Inflows, Mantega Says - (www.bloomberg.com)

Fed Chief Cites Role of Trade Imbalances in Crisis - (www.nytimes.com)

Foreclosures Force Ex-Homeowners to Turn to Shelters - (www.nytimes.com)

Homebuilder Confidence in U.S. Unexpectedly Decreases - (www.bloomberg.com)

Bubble in Bubbles Means It’s Time to Close Bar: William Pesek - (www.bloomberg.com)

Thursday November 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Foreclosures: 'Worst three months of all time' - (money.cnn.com) Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading. Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday. "They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country. The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

JPMorgan Pitches Interest-Only Mortgages to Boost Obama Plan - (www.bloomberg.com) Banks will push the Obama administration to expand its mortgage-modification program to allow interest-only periods on reworked loans, seeking to bring more homeowners into the initiative while recognizing concern that it may only postpone defaults, according to JPMorgan Chase & Co. “We’re working with our peers to develop a proposal to present,” Douglas Potolsky, a senior vice president at JPMorgan’s Chase home-loan unit, said yesterday at a Mortgage Bankers Association conference in San Diego. The suggestion reflects a new round of ideas and plans to refine the $75 billion “Home Affordable” program, announced in February as a bid to rework as many as 4 million loans to ease a housing slump now showing signs of ebbing. The program’s latest phase also is marked by a need to permanently convert more than 500,000 trial modifications by collecting paperwork so consumers’ mortgage payments don’t revert within months. “Our primary goal for the next few weeks is to make sure we convert all of those borrowers, or as many as possible,” Laurie Anne Maggiano, director of the Treasury’s policy office for homeownership preservation, said at the conference. “It’s a huge push for the Treasury and all of its partners.” Only “a couple thousand” conversions have been completed, Maggiano said. To aid the process, the government last week streamlined documentation requirements, and granted borrowers and loan servicers on initial trials an extra two months to complete the work, which typically must be finished after three months of timely payments, she said. ‘Short Sales’: By next week, the Treasury will announce details of a program to encourage so-called short sales of properties -- for less than mortgage amounts -- by homeowners who don’t qualify for modifications, Maggiano said. It will include “capped” payments to retire second mortgages that may form an “industry standard” and help curb the “back and forth” with owners of that debt which creates one of the biggest hurdles, she said.

Letting Goldman roll the dice - (blogs.reuters.com) On this morning’s conference call, David Viniar, Goldman Sachs’ chief financial officer, emphasized the bank’s valuable social role. His bank made markets and provided credit when other financial players were suffering. But is Goldman really such an indispensible financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger. With markets recovering and competitors falling away, Goldman’s trading and principal investment revenue through the first nine months of the year was nearly $24 billion, on pace to break the $30 billion record set in 2007. Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure. With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort? Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves. Many of us didn’t like it — we thought banks like Goldman should have been recapitalized the right way, by wiping out shareholders and forcing subordinated creditors to eat their share of losses. But that ship has sailed. We socialized the risk while privatizing the profit because we were told we had no other choice: The government had to guarantee the biggest banks’ liabilities because they were too unstable to survive bankruptcy or FDIC receivership. If that’s true, why haven’t we seen any substantial reforms to reduce systemic risk? Congress is kicking around new resolution authority to help resolve failed systemically-important banks. But the goal should be reducing systemic risk to begin with. Yet serious reform of the derivatives market — something that would reduce its size significantly — is nowhere on the radar. Indeed, Goldman’s trading results suggest that market is coming back with a vengeance. It’s playing in very risky markets with a capital structure that remains vulnerable yet is guaranteed by taxpayers.

S. Fla. foreclosures surge - (www.miamiherald.com) Foreclosures in Miami-Dade County surged 94 percent in September compared to a year ago, with 5,721 homeowners receiving word their lenders had initiated foreclosure proceedings. In Broward, the rate rose two percent, with 3,493 homes entering foreclosure. The monthly figures released Thursday by RealtyTrac -- which tallies new filings, scheduled auction sales and homes that were returned to lenders -- suggest rising unemployment may be worsening the region's foreclosure problem. In Miami-Dade, some 1,312 homes were slated for auction in September and 687 were reclaimed by banks. In Broward, 1,769 were scheduled for public sale and 1,280 were taken back by banks. Broward and Miami-Dade ranked sixth and seventh, respectively, among the worst performing counties in Florida. St. Lucie County ranked first. Statewide foreclosures rose 15 percent compared to a year ago, with a total of 55,036 homes in some stage of foreclosure. In September, Florida ranked third nationally. For the third quarter, the rate in Miami-Dade was up 52 percent, compared with the same three months a year ago. In Broward, foreclosures rose 27 percent in the period ending Aug. 31.

Riverside and San Bernardino Shadow inventory - (housing-kaboom.blogspot.com) Here's a long and boring read about shadow inventory. This is a report put together by the Amherst Securities Group for their investors. There report starts off with... With the apparent stabilization of home prices and the increase in new and existing home sales, many investors believe the housing market has bottomed, and is beginning to recover. We believe this optimism is premature. We acknowledge that there are a lot of positives in the market—prices have fallen significantly and housing is more affordable than at any point over the past 2 decades. The tax credit for first time home buyers has helped spur purchase activity. However, investors are overlooking one critical factor—the size of the “housing overhang”; i.e., the # of loans in delinquent status or in foreclosure. We estimate the housing overhang at 7 million units – these loans are destined to liquidate, and are creating a huge shadow inventory. Interestingly, they used the city of Riverside as an one example.
The break out is as follows:
- For Sale = 1,372 Units
- Banked Owned (but not yet listed) = 1,362 Units
- Auction Date Announced = 1,916 Units
- Notice of Default Issued = 2,360 Units
- Total Probable Inventory = 7,010 (1,372 + 1,362 +1,916 + 2,360)
As of 2007, City-Data.com reports that the city of Riverside, CA had 34,854 mortgaged residential units. It is one of the cities in the San Bernadino/Riverside County areas that experienced rapid home price appreciation during the bubble, with median home prices escalating from $136,000 in 2000 to a 2007 median price of $423,400 (for a 17+%/year price appreciation). Using Loan Performance data, we estimate that almost 50% of the mortgaged properties in the city were financed with Alt-A, Pay Option, or subprime loan product. Recent median sales data indicate that home prices have fallen nearly 60% from the peak. Thus, the Trulia numbers imply a staggering 7,010 potential properties for sale in Riverside, out of only 34,800 units (thus 20% of all properties!). Stated differently, total inventory (actual listings + REO + Auction Date Announced + Notice of Default issued) are actually more than 5X the number of units listed “for sale.” And this doesn’t take account of homes backed by loans where a Notice of Default has not yet been filed.

OTHER STORIES:

U.S. Foreclosure Filings Jump 23% to Record in Third Quarter - (www.bloomberg.com)

Foreclosures Hit All-Time High - (www.businessinsider.com)

SF Bay Area houses still taking a hit - (www.contracostatimes.com)

Foreclosures rise 5% from summer to fall in LA - (www.latimes.com)

Foreclosures leap in Sarasota County, FL - (www.heraldtribune.com)

Hawaii foreclosure filings up 63% compared with September '08 - (www.honoluluadvertiser.com)

Maui leads in foreclosures - (www.starbulletin.com)

US housing: Sustainable bottom or dead cat bounce? - (www.morningstar.co.uk)

Housing could take double dip down in 2010 - (www.marketwatch.com)

Renting Beats House-Buying Remorse After Meltdown - (www.bloomberg.com)

What's Wrong With Being A Renter? - (www.cato-at-liberty.org)

Dow Breaks 10,000: Don't Get Caught Up - (www.finance.yahoo.com)

No, You're Reading That Right: 79.9% rate targets credit-challenged - (www.nbcsandiego.com)

Ask 'But Why?': Sir James Goldsmith interview 11-15-1994 - (www.askbutwhy.com)