Sunday, August 31, 2008

Monday September 1 Housing and Economic stories

Top Stories:

Georgia Bank Becomes 10th to Fail in US – (www.cnbc.com) Sheila Bair and the sneaky FDIC close another bank on Friday evening after financial news reporting becomes sparse. True to their normal game-plan, the FDIC shuts down another bank on Friday evening.

Ed McMahon -- S.O.L. Again - (www.tmz.com) - We've confirmed the guy who went into escrow to buy Ed McMahon's house has pulled out of the deal. We're told the buyer never came up with any cash ... which means the whole thing sounds phony. The escrow was opened without a deposit, but the buyer never put his money where his mouth was. So that leaves Ed with no place to live if the house does go into foreclosure ... which again leads to the doorstep of Donald Trump. Trump has said he'd step in again and buy the house and lease it back to Ed for life. Our sources say Donald has offered a low ball offer already, but that's it. We're told Trump has had discussions with Ed's realtor, Alex Davis, since the deal fell apart last Thursday. Will Donald save the day or is this a publicity stunt? We know the stumbling block with Trump is price -- he hasn't offered what Ed wants/needs to get the monkeys off his back.

Baghdad Bonds Safer Than KeyCorp and National City - (Mish at globaleconomicanalysis.blogspot.com) Iraq's bonds are delivering the biggest returns in emerging markets as oil export revenue bolsters government finances and violence declines. The country's $2.7 billion of 5.8 percent bonds due 2028 gained 45 percent since August 2007, according to Merrill Lynch & Co. indexes. Investors demand 4.84 percentage points more in yield to own the debt instead of Treasuries, down from 7.26 percentage points a year ago. The spread is narrower than for notes of Ohio banks National City Corp. and KeyCorp, suggesting Baghdad may be safer for bond investors than Cleveland.

Lehman Brothers Quick Fix Cash Injection TBA - (www.worldpress.com) - News from London today places Lehman Brothers in talks with Foreign Government backed Investment Funds in a desperate attempt to secure a quick-fix Capital Injection, this on the heels of the announcement that Lehman was implementing at least 1500 Layoffs.

Pakistan Sets Floor on Stock Prices - (Mish at globaleconomicanalysis.blogspot.com) Those looking for absurd government manipulation can find it here: Pakistan Sets Floor on Stock Prices to Stop Plunge. Pakistan set a floor for stock prices on the benchmark exchange, moving to halt a plunge that has wiped out $36.9 billion of market value since April. Securities can trade within their daily limit of 5 percent "but not below the floor-price level" of yesterday's close, the exchange said on its Web site, without giving details. The exchange is working to restore confidence after President Pervez Musharraf quit on Aug. 18 to avoid impeachment, and ruling alliance members nominated rivals for the presidency. Investors stoned the exchange last month after it removed a 1 percent daily limit on price declines.

Saving up for a down payment on a home is the new reality - (www.heraldtribune.com) Hey, what a concept. The investment and lending banks must be brilliant for coming up with this idea!! One reason the down payment is so important is that it is the single most important factor affecting loss to the lender. The down payment is a buffer against lender loss in the event of a foreclosure. For example, if foreclosure costs are 20 percent of value and property value does not change, a 20 percent down payment fully protects a foreclosing lender against loss, but a 10 percent down payment provides only partial protection. Perhaps even more important, borrowers who get into payment difficulties but have equity in their properties usually will sell to avoid foreclosure. By selling, they realize the equity themselves, whereas if they allow the property to go to foreclosure, the equity will be partially or wholly depleted by foreclosure costs. Their selling avoids the foreclosure. There is still another reason why lenders attach so much importance to the down payment. Borrowers who have been able to save the funds for a down payment are less likely to get into payment troubles later on. Saving for a down payment requires budgetary discipline; repaying a mortgage also requires budgetary discipline, and the one carries over to the other. Of course, this assumes that the down payment is saved, not borrowed. Underwriters look for evidence that the funds committed to down payment are the borrower's own.

Bulgaria's real estate boom stumbles as demand slumps - (news.yahoo.com/s/afp) Bulgaria's real estate boom is turning to bust as its key British and Irish property buyers are now discouraged by financial difficulties at home and the ugly concrete views outside their windows. According to a study by the Bulgarian Properties real estate agency, which works exclusively with foreign clients, holiday property sales in Black Sea and mountain resorts dropped 40 percent in the first half of 2008 compared to 2007. "The withdrawal of British and Irish buyers from the Bulgarian market was prompted by the financial crisis in their countries but also by the bad infrastructure and the excess of concrete here," said Dobromir Ganev of the Property Association in Varna on the Black Sea. Many areas of great beauty have been scarred, as elsewhere, by sprawling developments built for a quick speculative gain while the money flowed in. Between 20 and 30 percent of newly-built apartments on the coast have no chance of finding a buyer over the next two years, said Ganev.

Foreclosure Relief: HUD Better Aim Carefully Firing Those Funding Shots - (www.nytimes.com) - Across the United States, neighborhoods are littered with an estimated 900,000 vacant homes, the result of foreclosures, bank repossessions and abandonment. And with defaults rising nationwide, the number is expected to grow well into next year. Such blight is contagious. Empty houses pose fire and health hazards, attract crime and prolong the housing slump by depressing the value of nearby homes and adding to the nation’s already bloated unsold inventory. No one is immune. Even if your neighborhood looks fine — and you are financially secure — foreclosures in your metropolitan area mean less property tax revenue and, as the downturn deepens, less state sales tax revenue. The federal government is only limping to the rescue. The Department of Housing and Urban Development is expected to release a plan next month for funneling nearly $4 billion to states and cities, mainly to buy and redevelop foreclosed homes. The sum is far too small to have a broad impact. Properly targeted, it could stanch the decline in some of the neediest areas, and ideally, begin to revive them by attracting private investment. Success stories could serve as examples for other communities, when, as is likely, a future Congress has to provide more relief.

ECB Plots Clampdown - (online.wsj.com) The European Central Bank is considering tightening lending standards amid concerns it has become a dumping ground for troubled securities, a move that could squeeze some struggling banks. As soon as Thursday, when its governing council meets, the ECB could announce plans to toughen rules on the collateral it will accept in exchange for billions of euros in loans that have kept much of the banking sector afloat. Policy makers are worried that banks have been taking advantage of the ECB's lending facilities, in part by packaging risky mortgages into securities specifically designed to be parked as collateral ..

British economy facing 'worst downturn in 60 years': Darling - (news.yahoo.com/s/afp) The British finance minister has warned the country is facing "arguably the worst" economic downturn in 60 years and says it will be "more profound and long-lasting" than people had expected. Chancellor of the Exchequer Alistair Darling also admits in an interview with Saturday's Guardian newspaper that he had no idea how serious the credit crunch would become. Darling warns that the economic conditions faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". He adds: "And I think it's going to be more profound and long-lasting than people thought."

Closing the dustbin lid - (www.economist.com) There are signs of an increased dependence on ECB funding in some markets. The supply of central-bank cash in Ireland and Spain has more than doubled in the past year, both in size and as a share of the euro-area total (see chart). Ireland’s huge share is bloated by lending to non-Irish banks located in Dublin. Fitch, a credit-rating agency, said in May that standards for newly minted mortgage-backed securities in Spain had slipped since the credit crunch started. Despite this, such securities are appraised at close to their face value. Because trading in ABS is so limited, there is no reliable market benchmark. Another concern is that affiliates of foreign banks are using the ECB as a source of funds for lending outside the euro area. Macquarie, a Sydney-based investment bank (see article), was recently able to secure an ECB loan through a euro-area affiliate, putting up a security backed by Australian car loans. The ECB has been discussing for several months how to tighten the rules to prevent such abuses, without disrupting its cash lifeline to banks. One idea is to increase the “haircuts” it subtracts from the market value of collateral, in order to protect against a decline in asset prices (the bigger the haircut, the smaller the amount that can be borrowed). Haircuts vary from less than 1% for the safest and most liquid government bonds to 18% for some long-dated asset-backed securities. Increasing the haircuts for some securities would offer extra protection against the risk that initial valuations of collateral are too generous.

Worker Assets Shrink at Fannie and Freddie - (www.ml-implode.com) "Fannie Mae’s workers had $116 million in the employee stock ownership plan at the end of 2006. Today, it’s more like $17.5 million. Ouch."

Central California Housing Crash - (www.youtube.com)


Other Stories:

Treasury minister who thought housing crash was joke - (blogs.ft.com)
U.S., Europe, Japan Devised Plan to Prop Up Dollar, Nikkei Says - (www.bloomberg.com)
Uh-Oh - Housing Index Falls Another 15.9% - (www.seekingalpha.com)
Get Physical - (www.ml-implode.com) - "There is a lot of academic debate going on about whether silver prices are being manipulated, among Mish, Jason Hommel below, a...
FHA(In)Secure - (www.ml-implode.com) - "So while the FHA refinanced 324,184 loans so far this year, that doesn’t necessarily mean that the program stopped a wave of wo...
Mortgage Fraud Is on the Rise, Infecting the GSEs - (www.ml-implode.com)
Foreign Central Banks and Agency Debt: 2000 to Present - (www.ml-implode.com)
June Case-Shiller Housing Numbers - (www.seekingalpha.com)
July Housing Numbers Overly Optimistic - (www.seekingalpha.com)
Bank Implosion: Integrity Bank - (www.ml-implode.com)
What are CAMELS ratings? Is My Bank Okay? - (www.ml-implode.com)
FHA regaining market share - (www.ml-implode.com)
Homebuyers turn screws on desperate sellers - (www.ml-implode.com)
Bond fund titan seeks $5bn for mortgage-backed debts - (www.ml-implode.com)
Something Wicked This Way Comes - (www.ml-implode.com)

Foreign money spigot turned off for US consumers - (www.atimes.com)
Lagging Incomes Signal U.S. Economy Weaker Than GDP Suggests - (www.bloomberg.com)
Credit crunch: 'Just the end of the beginning' - (www.independent.co.uk)
Don't try to buck the housing market - (www.independent.co.uk)
The Popsicle Index - (www.solari.com)
Conspiracy Theory Psychology - (Mish at globaleconomicanalysis.blogspot.com)

European Economic Confidence Drops, Inflation Eases - (www.bloomberg.com)
Borrowing Costs Increase Sharply For Russian Firms - (online.wsj.com)
Taking its toll - (www.economist.com)
London Luxury-Home Prices Post First Drop Since 2003 - (www.bloomberg.com)
Japan unveils $18 billion stimulus package - (www.ap.com)
Real Estate Lender Is 10th Bank to Fail This Year - (www.ap.com)
U.S. Junk Bond Sales Slump to Lowest in Decade as Defaults Rise - (www.bloomberg.com)
Bank of China Reduces Fannie, Freddie Debt Holdings - (www.bloomberg.com)
Bank of China flees Fannie-Freddie - (www.ft.com)
When sorrows come - (www.economist.com)
Oil-Rig Insurers Brace for Test as Tropical Storm Bears Down - (www.bloomberg.com)

Mr. Lampert, Fire Thyself - (online.wsj.com)
Expecting more U.S. bank failures, FDIC expands Dallas office - (www.dallasnews.com)
Consumer Spending in U.S. Slowed in July as Prices Rose Most in 17 Years - (www.bloomberg.com)
Freezer sales climb as food prices soar - (www.sfgate.com)
GM Offers Early Retirement to 9,000 Salaried Workers - (www.bloomberg.com)
The Fannie & Freddie Question - (online.wsj.com)
Lehman Has Plan for Real-Estate Loans - (online.wsj.com)
Fannie Mae and Freddie Mac: A Damage Report - (www.businessweek.com)
Higher-end retailers fare a bit better - (www.chicagotribune.com)
Steelmakers Develop New Iron Recipes - (online.wsj.com)
Amgen to end rebates for anemia drug Aranesp - (www.latimes.com)
99 Cents Only retail chain may face price hike - (www.latimes.com)
Hurricane Gustav Strengthens, Accelerates, Heads for Cuba, Gulf - (www.bloomberg.com)

Thursday, August 28, 2008

Friday August 29 Housing and Economic stories

Top Stories:

Is Your Bank About to Implode? The FDIC is Hinting, YES! - (www.loanworkout.org) The lender carnage, death and destruction litter the home page of Aaron Krowne’s Mortgage Lender Implode-O-Meter like the beach at Normandy on D-Day. The infamous list has grown from September 2006 when Aaron started the website with approximately 10 failed lenders to a whopping 276 major U.S. failed lending operations today. Wall Street Journal - Exhibit A is the revelation by Federal Deposit Insurance Corp. Chairman Sheila Bair that her $45 billion deposit insurance fund may not be adequate to pay off account holders as banks continue to fail. This has been inevitable for months, but neither Ms. Bair nor Treasury wanted to admit the truth in public for obvious political reasons. Yet now we learn that the insurance fund shrank by $7.6 billion in the second quarter, bringing its reserve ratio well below the minimum required by Congress.

FDIC may borrow money from Treasury - (news.yahoo.com) Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported. The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said. The borrowed money would be repaid once the assets of that failed bank are sold. "I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper

FDIC says IndyMac failure costlier than expected - (www.reuters.com) WASHINGTON, Aug 26 (Reuters) - A U.S. banking regulator said the failure of mortgage lender IndyMac Bancorp Inc IDMC.PK will deliver a bigger blow to its insured deposit fund than originally expected. The Federal Deposit Insurance Corp said on Tuesday it now expects IndyMac's failure in July to cost its insurance fund $8.9 billion, compared with the previous expected range of $4 billion to $8 billion. The FDIC also said during its quarterly bank briefing that it will soon start widely marketing IndyMac's assets.

Fannie/Freddie’s Survival Spells Big Trouble for Housing Market - (www.ml-implode.com) - If these two companies survive as private, beware. House prices will continue to fall, defaults, foreclosures and inventory will continue to surge, which causes house prices to fall and defaults, foreclosures and inventory to surge……

Ron Paul throws the Fed and the GOP under the bus on CNN - (housingpanic.blogspot.com) - Here's Ron Paul speaking the truth on the Fed, the two parties, and Russia/Georgia among other things. Truth you won't hear from Dems or Reps. Truth you especially won't hear from McCain. Damn, I wish he'd run as an independent, just to get into the debates. Ron Paul has as much to do with the current GOP as Santa Claus has to do with Islam. I bet he's not even let in the door of the GOP convention next week.

Man Simulated Robbery to Pay Mortgage - (www.thetruthaboutmortgage.com) - It seems things are becoming increasingly desperate as more and more borrowers grapple with unaffordable mortgage payments.
The latest involves a Long Island truck driver behind on his mortgage who executed an elaborate fake robbery in order to pocket the money and make good on his commitments, CBS 2 reported.

From boom town to ghost town in Spain - (news.bbc.co.uk) Developers are desperate to get people to move into the apartments and are slashing prices. Monica Torremocha Orocco is one of few who is interested in moving into the area. She says that rents there have fallen by more than 400 euros in a month. "They've cut the prices of flats a lot because people don't have any money. You could say we are in poverty here," Ms Orocco adds.
Sesena is just the tip of the iceberg. Down on Spain's southern coastline, the signs of overdevelopment are plain to see. Cranes and apartment blocks under construction dominate the horizon. In many tourist communities on the Costa Del Sol, Britons and Spaniards have scrambled to snap up their dream holiday homes. But today many of the flats remain empty and developments unfinished. Developers have gone bust and people who have put down deposits have struggled to get their money back.

What happens when the downturn goes upmarket? - (www.newyorker.com) In the town of Greenwich, Connecticut, it is illegal for a real-estate agent to post a “For Sale” sign in front of a house or a tract of land. For many years, such an ordinance was unnecessary; those who needed to know knew, and those who did not did not. But in the nineteen-eighties, with the arrival in town of national real-estate firms, “For Sale” signs started sprouting up, cluttering the roadways with middleman names and numbers. Many residents found the signs unsightly and crass; some home-town agents, keen to preserve the relationship between their local knowledge and their market share, agreed. The absence of such signage has been a blessing in recent months, as the town’s brokers and homeowners have sought to maintain, in the face of mounting evidence to the contrary, that they are immune, more or less, to the ravages of the credit crisis. On its own, the subprime-mortgage fiasco would not much affect home prices in Greenwich, a place more prime than sub, but it has reverberated through the financial system, costing many residents, actual or aspiring, their jobs or credit lines. If brokers’ signs were allowed, the town might look, from the right distance, like a giant and very expensive tag sale, and the sudden conspicuousness of so much supply, in a time of slackening demand, might shatter a range of illusions best epitomized by the risible listing prices. Generally, people are almost as protective of their property values as they are of their children, and will be as doting in their appraisals of both.

Prime Foreclosure Starts Surge Past Subprime in July - (www.ml-implode.com) - There can be no remaining doubt that the nation’s mortgage crisis has become a problem for prime credit borrowers: data released by the HOPE NOW coalition on Wednesday finds that prime foreclosure starts have finally moved ahead of subprime foreclosure starts, for the first time since the industry coalition began collecting data in July of last year — and likely for the first time in a much longer timeframe, as well, sources suggested to HousingWire Thursday afternoon.


Other Stories:

Lehman Brothers Announces Layoffs - (www.ml-implode.com) - Lehman Brothers, the ailing Wall Street bank, plans to lay off as many as 1,500 employees, or nearly 6 percent of its work force...
House prices plummet to a new record - (money.cnn.com)
Housing market still in basement - (www.denverpost.com)
FDIC Head Expects Banking Crisis to Worsen - (www.nytimes.com)
IndyMac bailout worse than worst-case scenario - (latimesblogs.latimes.com)
Fear of Defaults After a Flurry of Apartment House Sales - (www.nytimes.com)
Small Banks, Tight Credit - (www.washingtonpost.com)
Fed Officials Agree Next Move Will Be Rate Increase - (www.bloomberg.com)
Housing: From Speculative Investment to Low-Cost Shelter - (Charles Hugh Smith at www.oftwominds.com)

Housing market has a green lining - (marketplace.publicradio.org)
The Great Gold, Silver Conspiracy Explained - (Mish at globaleconomicanalysis.blogspot.com)
Wachovia cutting home-equity credit lines - (www.ml-implode.com) - "Wachovia is the latest of the nation's big banks to close or reduce the size of home-equity lines of credit in response to the ...
Woodside Homes Insolvent, BK Real - (www.ml-implode.com) - Court filings that have come to light in the last 24 hours have led us to re-affirm our "implode" listing for major homebuilder ...
Former HUD Secretary Cisneros Calls for New Stimulus Package With Strong Housing Measures - (www.ml-implode.com) - Henry Cisneros, former secretary of the US Department of Housing and Urban Development (HUD), declared today that the housing in...
Pasquinelli Homes: Ailing Coverage Initiated - (www.ml-implode.com) - We've been hearing word that this Top 25 builder is being foreclosed on all over the place, and have received public confirmatio...
The FHA Whistleblower: FHA Raises and Lowers Mortgage Insurance Premiums with RBP Moratorium - (www.ml-implode.com)
BREAKING NEWS: Fannie Mae Shares Halted; New CFO & CRO To Be Announced - (www.ml-implode.com)
Graphs - Not Laughs - From the FDIC Report - (www.ml-implode.com)
Update: BankUnited "May Be Unable To Survive" - (www.ml-implode.com)
Fannie Rises as Merrill Calls Bailout Talk Premature - (www.ml-implode.com)
Stifel cuts BankUnited to sell on capital concerns - (www.ml-implode.com)
Fed's Lockhart Says House Prices May Fall Another 15% - (www.ml-implode.com)
Call It Wishful Thinking - (www.ml-implode.com)
Mortgage Applications Increase — or Did They? - (www.ml-implode.com)

Fire Sale: California home prices now 40% below year-ago levels - (www.latimes.com)
US shoppers turn away from credit - (www.ft.com)
Health care, not boomers, will bust us - (money.cnn.com)
Orders for Durable Goods in U.S. Unexpectedly Gain - (www.bloomberg.com)
Fed Minutes Show Split on Inflation Risk - (online.wsj.com)
3 Executives Are Leaving Fannie Mae - (www.nytimes.com)
Southwest Airlines to drop nearly 200 flights - (www.chron.com)
Microsoft browser threatens Google's ad model - (www.ft.com)
End of down payment program spurs builders - (www.chicagotribune.com)
Home Depot and Lowe's Cut Back Sales Promotions - (online.wsj.com)
Wind Energy Bumps Into Power Grid’s Limits - (www.nytimes.com)
ABS markets nervous over ECB collateral crackdown - (www.ft.com)
As Food Prices Soar, Brazil and Argentina React in Opposite Ways - (www.nytimes.com)
Inflation fears steer ECB away from rate cuts - (www.ft.com)

UK homebuilder Taylor Wimpey posts huge 1H loss - (www.chron.com)
New fears over quality of Northern Rock mortgages - (www.telegraph.co.uk)
Japan's Inflation Probably Exceeded 2% for First Time in Decade - (www.bloomberg.com)
Weber Says Higher ECB Rates May Be Needed When Economy Recovers - (www.bloomberg.com)
South African Inflation Surged to Record 13% in July - (www.bloomberg.com)
Power-Sector Emissions Of China To Top U.S. - (www.washingtonpost.com)
Moody's Reviewing All 2006, 2007 Jumbo Mortgage Bonds - (www.bloomberg.com)
Corporate America taking longer to collect: study - (www.reuters.com)
New Credit Hurdle Looms for Banks - (online.wsj.com)
FDIC may borrow money from Treasury: report - (www.reuters.com)
U.S. Moves Toward International Accounting Rules - (www.nytimes.com)
One in Four Junk Issues in Distress - (www.cfo.com)
Fed closes window on preferred ARS - (www.ft.com)
FHA Raises Its Premiums to Insure Repayment of Mortgages - (online.wsj.com)

Thursday August 28 Housing and Economic stories

Top Stories:

Alabama County Prepares for Bankruptcy in Debt Crisis - (www.bloomberg.com) Jefferson County, Alabama, officials told their lawyers to prepare a bankruptcy filing if the county can't reach an agreement with creditors over how to escape from $3 billion of bonds with soaring interest rates. The Jefferson County Commission voted unanimously today to have the law firm Bradley, Arant, Rose and White LLP and the county attorney take over negotiations with creditors led by JPMorgan Chase & Co. and draw up bankruptcy papers should talks falter. The two replace bankers and advisers including Citigroup Inc., whose proposals failed to win support. ``We are hoping for success but preparing for filing if necessary,'' Commission President Bettye Fine Collins, a Republican, told reporters. ``This has some likelihood to work. Wall Street may not want to take a chance at court.''

FDIC: Troubled Banks Rise To 117, Most in Five Years - (www.cnbc.com) The number of problem banks on a regulatory watch list increased to 117 by the end of the second quarter from 90 at the end of the first quarter, the Federal Deposit Insurance Corp said.
The combined assets of the problem banks increased to $78 billion from $26 billion, the agency said.

Woodside Homes Insolvent, BK Real - (www.ml-implode.com) - Court filings that have come to light in the last 24 hours have led us to re-affirm our "implode" listing for major homebuilder Woodside. See key excerpts at our entry on Woodside.

Pulte & Hovnanian Push For Last Minute DPA Deals Ahead of FHA's Expiration Clock - - (www.ml-implode.com) - Pulte Homes Inc. and Hovnanian Enterprises Inc. are both urging to visitors to their Web sites to take advantage of the down payment assistance programs before they expire.. Homebuilders are always trying to sell their homes, but these days they have an extra incentive — beating the clock. In a few weeks, a financing option used by almost 20 percent of new-home buyers to help scrape together a down payment is going away, making it tougher for many people to become homeowners. It's a loophole in the Federal Housing Administration rules that let builders and other home sellers channel money through a charity to help homebuyers cover their down payment. But lawmakers axed the programs — effective Oct. 1 — because almost 40 percent of FHA borrowers who went into foreclosure since October had down payment assistance. For borrowers who don't have any money for a down payment there "is a big incentive to buy now versus later, when you most likely won't have that option for you," said Robert Curran, an analyst with Fitch Ratings. "It makes a lot of sense (for builders) to do a lot of promotions on that."

FHA: Lending Over Backward To Fund Fraud - (www.forbes.com) The FHA has been turned into the mortgage industry's lender of last resort. Taxpayer price tag? Maybe $100 billion. When the nation's politicians take the stage here and later in St. Paul, Minn., you'll hear a lot of talk about saving the decrepit housing market, and lately that means one thing: The Federal Housing Administration. Watch your wallet. Heralded as a savior in reversing the mortgage market’s woes, risks to the agency could cost taxpayers dearly, says one mortgage expert, as Washington morphs the FHA from a helping hand for low-income home buyers into a back door bailout for the imploding mortgage industry. Trouble is, there's little choice at this point. “Nobody is talking is talking about it, but in three years the FHA bailout is going to cost taxpayers at least $100 billion dollars,” said Guy Cecala, a mortgage industry insider and publisher of Inside Mortgage Finance. “Everybody on Capital Hill recognizes that there will be significant costs, but they’re trying to keep the housing spigot open even if it will bring in some bad water down the road.” According to the Mortgage Banker’s Association, 30% of all July loan applications had FHA backing and, without a means or credit requirement, it’s the riskiest borrowers who are being shunted onto the government's books. (See "FHA's Risky Business.")

Anyone smell a stench? FBI knew about housing scams in 2004 - (www.digitaljournal.com) Of course, everyone was fat and happy as long as they were all making money. "It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said. Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast. … In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.

Suez, America-style - (optionarmageddon.ml-implode.com) It’s no longer any secret that the USA is deeply in hoc to foreign governments, particularly China, Japan, the Petro States, and increasingly Russia. We have two very large deficits that have to be financed: a trade deficit and a fiscal deficit. Americans buy more than they sell. We consume more than we earn. To keep the process going, Americans and our government have to borrow money from abroad. At rates that are totally unprecedented. As I.O.U.S.A. notes, foreigners today own a larger share of American society than ever before. (During WWII the U.S. government ran up much larger deficits as a percentage of GDP, but these were financed primarily by American citizens themselves.) This leaves our economy incredibly vulnerable. But how? It’s easy to understand military vulnerabilities, not so easy to contemplate economic vulnerabilities.

California median price dropped 40.3% in year - (www.sfgate.com) The number of existing, single-family houses that traded hands in July leaped an estimated 43.4 percent from a year ago, the California Association of Realtors reported. The median price, however, dropped 40.3 percent to $350,760, the biggest decline since the Realtors began tracking the market. In the Bay Area, sales increased 6.7 percent, and the median sank 21.2 percent to $663,190.

Inflated appraisal nearly cost couple their house - (msnbc.msn.com) Only a month after the Petrones bought their house with a conventional mortgage, Carl Petrone was diagnosed with cancer. He and Marie decided to move back to New York to be with family, and listed the home at $118,500. There were a couple early offers, all for much less. "We thought: 'This is crazy,'" Marie Petrone said. "The appraiser said the house was worth $114,500, so why would we sell it for $100,000?" A new appraiser concluded their house was worth only $98,000 and said the Petrones had been duped in 1999: The home hadn't lost value. It was just never worth the price they paid. An angry Marie Petrone filed a complaint with the North Carolina Appraisal Board, alleging the original appraiser, Ed Britt, conspired with the real estate agents — who also owned the home — to inflate its value. "I called regularly to ask for updates. But most of the time they never returned my calls. Finally, I just gave up," Marie Petrone said. Board director Philip Humphries said his agency should have contacted the Petrones. But he defended the board's overall performance in regulating the state's 3,500 appraisers. "The mere fact that a number of complaints have been filed against a person doesn't mean that all of the complaints reach the level of where there needs to be disciplinary action taken," he said.


Other Stories:

Former HUD Secretary Cisneros Calls for New Stimulus Package With Strong Housing Measures - (www.ml-implode.com) - Henry Cisneros, former secretary of the US Department of Housing and Urban Development (HUD), declared today that the housing in...
Beijing swells dollar reserves through stealth - (www.telegraph.co.uk)
House Sales, True Inventory: No Good News - (www.seekingalpha.com)
Backlog of US houses for sale worst on record - (www.independent.co.uk)
House Prices Continue Decline - (www.nytimes.com)
Pasquinelli Homes: Ailing Coverage Initiated - (www.ml-implode.com) - We've been hearing word that this Top 25 builder is being foreclosed on all over the place, and have received public confirmatio...

The Two Great Financial Mysteries of Our Time: Missing Money and Collateral Fraud - (www.ml-implode.com) - Whatever discrepancies existed between the official U.S. government financial statements and real debt outstanding before the ho...
Fannie, Freddie Debt Deferral May Not Trigger Swaps - (www.ml-implode.com) - Buyers of credit-default swap contracts that protect against losses on Fannie Mae or Freddie Mac subordinated debt may not get p...
Lehman Said to Weigh Forming New Company to Buy Mortgage Assets - (www.ml-implode.com) - Lehman Brothers Holdings Inc. may set up a company funded by outside investors to buy some of its mortgage assets, aiming to di...
A matter of Principal - Here comes the Tsunami - (www.ml-implode.com) - "Today's housing report shows a rise in home sales in July. FIRE Economy bulls are taking this as evidence of a bottom in real e...
FED, OCC and FDIC Slam Banks - (www.ml-implode.com)
Major Builder Woodside Homes Forced Into Chapter 11 - (www.ml-implode.com)
Housing Prices Post Record Decline in Q2 - (www.ml-implode.com)
Cities Think They Can “Flip This House” - (www.ml-implode.com)
Temasek Says Credit Crunch Will Last Two More Years - (www.ml-implode.com)
Shiller's Subprime Solutions - (www.ml-implode.com)
U.K. July Mortgage Approvals Hold Close to Decade Low - (www.ml-implode.com)
Mortgage fraud still soaring - (www.ml-implode.com)
ECRI's Weekly Leading Index: No Business Cycle Upturn in Sight - (www.ml-implode.com)
Lending Over Backward: FHA Bailout Could Cost $100 Billion - (www.ml-implode.com)

Mortgage fraud jumps 42% in 2008's first quarter - (money.cnn.com)
Mortgage fraud soars in first quarter, report says - (www.latimes.com)

You can STILL pay nothing down, live free for a year, then walk away - (www.latimes.com)
Living for Free - (patrick.net)
Housing bottom isn't even around the corner - (www.marketwatch.com)
After negative report, appraisers call for reform - (msnbc.msn.com)
Will economy's path be shaped like a U, V, W or L? - (www.signonsandiego.com)


Fed Officials Agree Next Rate Move Will Be Increase - (www.bloomberg.com)
New-Home Sales in U.S. Increase From 17-Year Low - (www.bloomberg.com)
S&P: Home prices drop by record amount in 2Q - (www.ap.com)
U.S. Consumer Confidence Index Rises on Cheaper Gas - (www.bloomberg.com)
Credit crunch hurting entrepreneurs - (www.dallasnews.com)
Valley permits for new housing dip 40% - (www.azcentral.com)
Communities Become Home Buyers to Fight Decay - (www.nytimes.com)
Agency’s Head Expects Banking’s Crisis to Worsen - (www.nytimes.com)
U.S. Bank Earnings Plunge to Second-Lowest Level Since 1991 - (www.bloomberg.com)
Freddie, Fannie Mortgage Portfolio Growth Rate Slows - (www.bloomberg.com)
Regulators Step Up Bank Actions - (online.wsj.com)

Private equity groups in running for Lehman unit - (www.ft.com)
Ad troubles rumble on for Tribune - (www.ft.com)
BankUnited Needs $400 Million to Satisfy Regulators - (www.bloomberg.com)
A Greenwich of the mind - (www.newyorker.com)
Asia Is About to Give U.S. a Kick in the Fannie: William Pesek - (www.bloomberg.com)
Disney spent $1.5 million lobbying in 2Q - (www.azcentral.com)
New Fears of a Downturn in Germany - (www.nytimes.com)
Credit crisis takes toll on London - (www.ft.com)
German Recession Looms as Business, Consumer Confidence Drop - (www.bloomberg.com)
Alarm at Russian 'policy of confrontation' - (www.ft.com)
Credit crisis takes toll on London - (www.ft.com)

Insight: Painful lesson for UK banks - (www.ft.com)
Indian company to pay $2.6B for Britain's Imperial - (www.chron.com)
Retailers Take a Slower Road in India - (online.wsj.com)
UK mortgage approvals close to record lows - (www.ft.com)
Fear of Defaults After a Flurry of Apartment House Sales - (www.nytimes.com)
FDIC Says Banks on `Problem List' Rose 30% in Second Quarter - (www.bloomberg.com)
Borrowing at Merrill, Wachovia Hit With Record Refinancing Bill - (www.bloomberg.com)
Blame Game Is Dishonest - (www.thestreet.com)
Regulators secretly cracking down on banks: report - (www.financialweek.com)
Lending Over Backward - (www.forbes.com)
The Storylines of the Last Days of Summer - (www.nytimes.com)
After Merrill's Sale of Bad Debt, Few Have Followed - (www.washingtonpost.com)
Pension funds seek leveraged loan deals - (www.ft.com)
Russell Led Hedge Investors to Losses - (online.wsj.com)
Mortgage fraud soars in first quarter, report says - (www.latimes.com)

Tuesday, August 26, 2008

Wednesday August 27 Housing and Economic stories

Top Stories:

Major Builder Woodside Homes Forced Into Chapter 11 – (www.ml-implode.com) - Top 25 builder Woodside is in bankruptcy. No mainstream stories on this yet; but we've got the scoop.

Jefferson County Alabama Considering Bankruptcy - (www.globaleconomicanalysis.blogspot.com) The president of the Jefferson County Commission has softened her opposition to bankruptcy and is instructing lawyers to begin research on the impact a bankruptcy filing would have on the county. President Bettye Fine Collins' move could substantially alter the course of negotiations as advisers work with Wall Street creditors on how to handle Jefferson County's $3.2 billion sewer debt and soaring interest rates the county is unable to pay. "A lot of it depends on Wall Street, as to whether we have to file bankruptcy or not," Collins said in an interview with The Birmingham News. "My sympathies are not with Wall Street. I think they realize now they are in a situation where the clock is ticking." The idea of bankruptcy emerged as a viable option in July, when Alabama pension chief David Bronner said the Retirement Systems of Alabama would buy Jefferson County's sewer system for as much as $1.4 billion if commissioners agreed to file for court protection under Chapter 9 of the U.S. Bankruptcy Code.

Tyrone Georgia finance director: "We’re broke" - (www.globaleconomicanalysis.blogspot.com) On May 7th city of Vallejo, California voted to declare Chapter 9 bankruptcy. Tyrone, Georgia could be next. The Citizen is reporting Tyrone finance director: "We’re broke" The Tyrone Town Council got a huge dose of reality Thursday night. “We’re broke,”said Finance Director Mary Sturm. Sturm said the city’s operating costs per month are $275,000 per month, but the town has only collected $53,000 in revenue this month. The economic climate has taken its toll on the town, with only two building permits this month, she added. The town currently has a Certificate of Deposit valued at $794,000 that earns just over 4 percent interest. Sturm recommended cashing in the CD, and invest in another CD when tax money starts rolling in at the end of the year. “We only have 7,000 residents and we’re providing services that towns such as Peachtree City with a population of 40,000 provide,” she added. The town reluctantly agreed to cash in the CD, but Councilman Tracey Young wants to make sure this does not happen again.

FDIC gets ready for bank failures - (www.statesman.com) The Federal Deposit Insurance Corp. is one of those agencies with a low profile but essential role similar to plumbing or electricity — you don't notice it until the power's out or the basement's flooding.
These days, the FDIC's folks are busier with the financial equivalent of fixing burst water mains and dead power lines. Seventy-five years after it was launched during the Great Depression, the bank regulator and insurer is facing its biggest challenge in decades. Many banks in Georgia and across the nation have been battered by the slumping economy and troubled loans to home builders, developers and homeowners. Hundreds could fail, some industry experts predict. That could force the agency to make good on its promise to insure most customers' checking and savings deposits up to $100,000 and some retirement accounts up to $250,000, putting pressure on its insurance fund. Is the agency, whose combined insurance funds were technically pushed into insolvency during the savings and loan debacle two decades ago, ready for another banking crisis? And how bad could it get? Despite the frequent gloom on both Wall Street and Main Street, industry players seem confident in the overall resiliency of the banking industry and the FDIC's ability to shelter customers from bank failures. It's hiring 70 new employees and bringing back 70 retirees to beef up its teams that swoop in, usually over a weekend, to take over and reopen banks under new management.

Seller wouldn't budge, house wouldn't sell - (www.contracostatimes.com) In October 2005, David Raimondi put his 100-year-old Allendale, N.J., house and barn on the market, asking $525,000. It's been almost three years, and the property has still not sold.
Raimondi, a house painter who wants to move to a less expensive area, is one of the growing ranks of frustrated sellers whose homes have been on the market for more than a year. Though most sellers don't stay on the market for years, real estate agents say the average time between listing and sale has stretched out during the housing slump. Within a week or two after Raimondi first listed his house in October 2005, he got an offer for $495,000 — $30,000 less than his asking price. He turned it down, convinced he could do better. But the real estate market began to slide in late 2005 and has not recovered yet.  Even today, Raimondi insists his house is worth $450,000 — after all, it is in Allendale, an upscale town with fine schools. In addition, the property is 200 feet deep and includes the barn. "The real estate agents wanted me to give my house away so they could make a sale; that's how I looked at it," said Raimondi, who paid $230,000 for the property in 1999. "I wanted to make a sale, too, but at the right price, not a giveaway." Recently, he's gotten several offers around $350,000. That's a sign, Gildea said. "If you've gotten two or three offers at the same number, that's where the market is," she said. Bouton agreed: "If it was worth $450,000, it would be selling for that." Raimondi has worked with six real estate agents since 2005.

FHA giving away taxpayer money to scammers - (www.fwweekly.com) Ameriquest has tried to foreclose on the property — and Garcia thinks that may be making it even harder for him to pull back even financially. He’s looking for a better job, but many prospective employers do credit checks — which turn up the foreclosure proceedings and may have cost him some potential health-care jobs. Ameriquest won’t comment on specific cases, but officials said late last month that the company is setting aside $325 million to settle predatory lending cases being investigated in 30 states, including Texas. Ameriquest “continues to be engaged in discussions with a number of state attorneys general and regulators about the company’s business practices,” the company said in a statement. “We are focused on resolving the issues under discussion with these agencies and hope to reach a reasonable resolution that is fair to our customers and fair to the company.” But recent lawsuits filed by borrowers in 20 other states echo Garcia’s claims. The filings allege a pattern of fraud, false documents, and bait-and-switch sales tactics. According to the Los Angeles Times, in a sworn statement in a California class-action case, a former loan officer named Kenneth Kendall said Ameriquest managers encouraged employees to “promise certain interest rates and fees, only to change those rates at the time of the closing.” On the same day that Ameriquest released the news of its $325 million lawsuit fund, the White House announced that President Bush nominated California billionaire Roland E. Arnall to be ambassador to the Netherlands. Arnall is Ameriquest’s principal shareholder, and he, his wife, and their companies have been the biggest political contributors (more than $250,000) to Bush since 2002, according to the Washington Post.
And maybe that says all one needs to know about why predatory lending practices seem to be flooding the country. Politicians, who credit the deregulated lending laws with opening up the housing market to people who couldn’t get a home loan before, generally don’t see much of a problem. And new housing is stoking the economy, providing 40 percent of the 2.3 million jobs added since the 2001 recession, according to economist David Rosenberg of Merrill Lynch & Co.

In Central Valley, Ruins of Housing Bust - (www.nytimes.com) ELLIE WOOTEN, the likable mayor of this likable Central Valley city, is on her way to the office when her cell phone rings. A constituent wants her mortgage payments reduced, and is hoping that the mayor has some clout with her lender. Although Merced has one of the highest foreclosure rates in the country, this borrower isn’t in such dire straits. She’s not even behind on her mortgage. But her oldest daughter is turning 18, which means an end to $500 a month in child support. She just wants a better deal. The mayor hangs up and shrugs: “It’s a surprise her daughter is turning 18? You’d think she could have planned ahead.” But hardly anyone in Merced planned very far ahead.

Not the city, which enthusiastically approved the creation of dozens of new neighborhoods without pausing to wonder if it could absorb the growth. Certainly not the developers. They built 4,397 new homes in those neighborhoods, some costing half a million dollars, without asking who in a city of only 80,000 could afford to buy them all. Obviously not the speculators turned landlords, who thought that they could get San Francisco rents in a working-class agricultural city ranked by the American Lung Association as having some of the worst air in the nation. And, sadly, not the local folk who moved up and took on more debt than they could afford. They believed — because who was telling them differently? — that the good times would be endless.

Appraisers still under the gun to 'hit the numbers' - (www.chicagotribune.com) CONGRESS IS CONTRIBUTING TO THIS BEHAVIOR AS THEY ARE PRESSURING LENDERS TO WORK OUT NEW LOANS WITH BORROWERS. MANY OF THESE BORROWERS HAVE NEGATIVE EQUITY SO LENDERS ARE HESITANT. Have the real-estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared? Are mortgage loan officers and realty agents—even individual home sellers—continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior? Ask appraisers and many will tell you: It's still business as usual. Attempts to encourage inflated appraisals remain common, though some techniques have become subtle. "Absolutely appraisers continue to get pressured" to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country's largest professional organization representing appraisers.

Cramer Calls Another Housing Bottom…Puh-leeeze. Enough is Enough! - (www.ml-implode.com) - I believe you are intentionally deceiving people. Calling the bottom to housing using a variety of bad indicators and rampant speculation is wrong. I am giving you the benefit of the doubt by saying you are ‘deceiving’ people because there is no way you are this naive about the housing and mortgage markets. In your research story published yesterday in RealMoney and TheSreet.com, you use the fact that 14 million homes were “purchased” between 2005 and 2007 and those being the ‘bad lending years’ for the basis of a hypothesis that the housing market will bottom seven months from now. You also talk about new home builders reducing their supply, the FDIC offering mortgage modifications and FHA being the savior. If you are a headline reader, perhaps these things do sound great. But, in reality very little of your analysis or conclusions have substance or are likely to come into play in any significant way. First, you are overly attached to ’subprime’ when anyone following the story knows that the Alt-A and Prime universes are beginning to blow and they dwarf the subprime universe. Second, you overemphasis ‘fraud’ when we all know that while fraud is a big factor, lender negligence and negative-equity are the leading contributors to loan default especially among higher grades of paper. I should have stopped reading after the ’14 million homes purchased’ statistic was thrown out. This is because purchases were only about 33% of the market at any given time and millions more refinanced into exotic loans than ever purchased a home using them. In addition, prices are down near 2004 levels and approaching 2003 levels quickly. There were exotic loans during those years as well, so only focusing on homes ‘purchased’ from ‘2005-2007′ captures a small portion of the at-risk market.



Other Stories:

Growing Herd Of White Elephants - (www.globaleconomicanalysis.blogspot.com)
Repossessed Toys Are A Booming Business - (www.globaleconomicanalysis.blogspot.com)
Subprime-mortgage crisis in third stage - (search.japantimes.co.jp)
Yakuza, the big winners - (business.smh.com.au)
Danish nation's No. 10 bank fails - (www.salon.com)
The big secret in U.S. housing: Fannie and Freddie are toast - (news.yahoo.com)
US prime mortgage defaults worsen faster than subprime - (www.reuters.com)

Bad time to buy, according to rent vs buy calculator - (www.geldpress.com)
My house's value has fallen sharply. Should I default on the mortgage? - (www.indystar.com)
Credit losses expected to double - (www.marketwatch.com)
Pent-up supply now holding housing back - (www.marketwatch.com)
FBI saw threat of mortgage crisis - (www.latimes.com)

Zero down for homebuyers almost gone - (www.ml-implode.com) - Call it the last gasp of no-money-down. In recent weeks, homebuilders have loudly advertised zero-down options at entry-level tr...
Housing Rebound Unlikely Before 2009 - (www.ml-implode.com) - A recovery in the U.S. housing market from the worst slump since the Depression is unlikely until "well into 2009," Housing and ...
Obama Plays Ball - (www.ml-implode.com) - Here’s the problem: If Fannie Mae and Freddie Mac collapsed, then probably the financial system would receive such a body blow t...
JPMorgan May Post $600 Million Write-Down On GSE Shares - (www.ml-implode.com) - "JPMorgan Chase & Co. (JPM) could post a write-down of $600 million or more on the value of its holdings of Fannie Mae's (FNM) a...
Flagstar Bank Selects ServiceLink as National Appraisal Company - (www.ml-implode.com)
Freddie, Fannie pare losses - (www.ml-implode.com)
China Construction Bank Cuts Fannie, Freddie Bond, MBS Holdings - (www.ml-implode.com)
Existing Home Sales Don't Signal Market Normalization, Economists Say - (www.ml-implode.com)
That Housing Recovery? Keep Waiting. - (www.ml-implode.com)
Existing Home Sales Post Gain, But So Does Inventory - (www.ml-implode.com)
Washington Is Quietly Repudiating Its Debts - (www.ml-implode.com)
U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate - (www.ml-implode.com)
Mortgage Future Now, Have One Later - (www.ml-implode.com)
Happy Real Estate - (www.ml-implode.com)

Bankers caught between hope and despair - (www.ft.com)
U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate - (www.bloomberg.com)
Economy Challenges Obama Agenda - (online.wsj.com)
Metro Atlanta jobless rate hits 16-year high - (www.ajc.com)
Some see moderation from wealthy - (www.chron.com)
Higher food prices staying, for now - (www.dallasnews.com)
Average taxpayers subsidize executive pay, report says - (www.kansascity.com)
Los Angeles, San Diego Luxury-Home Prices Fall Most in Decade - (www.bloomberg.com)
U.S. Auto Sales Woes Continue - (online.wsj.com)
Delta taps $1 billion credit line - (money.cnn.com)
Bankers caught between hope and despair - (www.ft.com)
A SarbOx for banks? It could happen - (www.financialweek.com)
Mining Industry Shifts on Bad News - (online.wsj.com)
Toyota raising Japan prices on hybrids - (www.boston.com)
Gulf Countries Remain Tied to the Dollar - (www.nytimes.com)
Mersch Says ECB to Change Collateral Rules Soon - (www.bloomberg.com)
China Construction Bank Cuts Fannie, Freddie Bond, MBS Holdings - (money.cnn.com)
Spain Producer Prices Rise Most in Two Decades - (www.bloomberg.com)
Bond fundraising costs soar - (www.ft.com)
Fannie, Freddie Woes Vex Experts And Leave U.S. Hard Choices - (online.wsj.com)
Retailers’ woes hit real estate investors - (www.ft.com)
Fannie-Freddie crisis spreads - (www.ft.com)
Funds feel the strain amid bond slide - (www.ft.com)
Flurry of debt issues could push yields even higher in September - (www.financialweek.com)
40% of options are underwater - (www.financialweek.com)
Bond Market Flashes Caution Signals for Stocks - (online.wsj.com)
FBI saw threat of mortgage crisis - (www.latimes.com)