Wednesday, July 25, 2012

Thursday July 26 Housing and Economic stories



TOP STORIES:

Crop Insurance Set to Expand Despite Growing Fraud Worries - CNBC - (www.cnbc.com) Farming can be a tough business. The work is hard, the hours are long, and the profits unpredictable at best.  But Robert Warren had a secret weapon: crop insurance. It helped make the man who describes himself as “just a dumb farmer” into a multi-millionaire, with properties in North Carolina, South Carolina and Tennessee. It turned out that Warren made his millions by abusing the taxpayer-backed federal crop insurance program for years, collecting more than $9 million in bogus claims. He pleaded guilty to two conspiracy counts in 2005 after authorities found he had directed his workers to scatter ice cubes and mothballs in one of his tomato fields in Cocke County, Tenn., then sent in the pictures to show his plants were damaged by a “hailstorm.” That claim alone netted Warren more than $80,000, according to court documents. Warren’s wife, two employees, an insurance agent and a claims adjuster also pleaded guilty. “The defendants’ involvement with the (crop insurance) program was conceived and born in fraud,” wrote Assistant United States Attorney Richard Lee Edwards in Warren’s 2005 sentencing memorandum. “(T)hese defendants simply sat around the kitchen table and created the production history figures which they submitted to the insurance company and the USDA.”

FHA mortgage delinquencies skyrocket more than 25% - (www.ochousingnews.com) The mortgage market appears to finally be stabilizing — as long as you ignore loans backed by the Federal Housing Administration. Increasingly, FHA-insured loans are falling into foreclosure or serious delinquency, moving in the opposite direction of loans guaranteed by Fannie Mae and Freddie Mac or those held by banks, which are all showing signs of improvement. Does anyone really believe bank-held mortgages delinquency rates are down 39%? Based on the charts of shadow inventory, the number of 90-day delinquent loans hasn’t declined much at all over the last year. We know the banks have not been foreclosing in earnest, and they have billions in non-performing HELOCs and second mortgages on their books. I don’t see how they could have reduced their delinquency rates that much. Perhaps the include the loan modifications which temporarily cure the loans.  And taxpayers could ultimately be on the hook for FHA’s growing number of troubled mortgages. The agency’s finances are already on shaky ground, and additional losses from loans going sour could prompt the need for a federal bailout, experts said. “We can’t escape this one,” said Joseph Gyourko, a real estate professor at the University of Pennsylvania’s Wharton School. “This is an arm of the U.S. government.” The share of government-guaranteed loans, a majority of which are backed by FHA, that were 90 days or more delinquent soared nearly 27% during the year ending March 31. Foreclosures jumped nearly 17%, according to a report published recently by federal regulators.

Spain borrowing rate hits bailout danger zone of 7 pct - (www.washingtonpost.com) Spain’s struggling banks and the country’s punishing borrowing costs will be the main subject of discussions at this week’s meetings in Brussels of Europe’s finance ministers. Representatives from the 17 countries that use the euro are to meet later on Monday to discuss the terms of a €100 billion ($124 billion) lifeline from other members of the 17-country eurozone for Spain’s banking industry. The discussions are all the more pressing as Spain’s borrowing costs rose to dangerously high levels Monday. The interest rate, or yield, on the country’s 10-year bonds hit 7 percent, a level that market-watchers consider is unaffordable for a country to raise money on the bond markets in the long term and the point at which Greece, Ireland and Portugal all sought an international bailout. Stocks on Madrid’s benchmark share index fell 0.7 percent.

2013 perfect storm may surpass 2008 crisis: Roubini - (www.economonitor.com) Video… Nouriel Roubini discusses “greedy” bankers, the euro-zone crisis and risks facing the global economy in 2013. He speaks in Aix-en-Provence, France, with Bloomberg Television’s Caroline Connan.

In Lost Opportunity of 1932, Are There Lessons for Today? - (www.nytimes.com) By the summer of 1932, the Great Depression was three years old with no end in sight. The Hoover administration, like Republicans today, was adamant that economic stimulus was wrongheaded, that the big problem was business confidence, which would be restored by keeping the budget under control, and that under no circumstances should the Federal Reserve adopt policies that would ignite inflation.  However, it was painfully clear to farmers and business people that deflation – falling prices – was the root of the economy’s problem. Between 1929 and 1932, the consumer price index fell 20 percent and prices for many commodities had fallen much more. As a consequence, producers could not make a profit, which led them to lay off workers. As workers lost income, they reduced their purchases, which intensified the downward pressure on prices. By early 1932, a growing number of prominent economists were openly advocating “reflation” – just enough inflation to get the price level back to where it was in 1929.





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