Sunday, December 16, 2012

Monday December 17 Housing and Economic stories


How to game the system with FHA loans for maximum advantage - (www.ochousingnews.comFHA just recently revised their modification guidelines to basically throw out any relevant ratios (Housing Ratio, Total DTI) Essentially we all see this as a sign of, “For the love of god just get some payments coming in on these mods”. We see clearly that their liquidity is drying up and they are getting crushed by claim payments, particularly on short sales where they’ve insured the full balance of the mortgage and are taking enormous losses. They’ve basically decided, as you stated above, that these squatters making some payment is better than none at all. The crazy thing is, it’s just like the housing bubble, where anyone who could fog a mirror was offered a loan. Now FHA is offering anyone who can fog a mirror, a mortgage modification, completely irrespective of their ability to pay (for instance, giving people with a 70% housing ratio a mod, instead of foreclosing on them because they clearly cannot afford even the reduced payment) They are now extending and pretending, within the extend and pretend program itself. FHA’s insolvency is a 100% certainty.

Costliest Jet, Years in Making, Sees the Enemy: Budget Cuts - ( The Marine version of the F-35 Joint Strike Fighter, already more than a decade in the making, was facing a crucial question: Could the jet, which can soar well past the speed of sound, land at sea like a helicopter? Articles in this series are examining the American military and the decisions confronting it in a new age of austerity. On an October day last year, with Lt. Col. Fred Schenk at the controls, the plane glided toward a ship off the Atlantic coast and then, its engine rotating straight down, descended gently to the deck at seven feet a second. There were cheers from the ship’s crew members, who “were all shaking my hands and smiling,” Colonel Schenk recalled. The smooth landing helped save that model and breathed new life into the huge F-35 program, the most expensive weapons system in military history. But while Pentagon officials now say that the program is making progress, it begins its 12th year in development years behind schedule, troubled with technological flaws and facing concerns about its relatively short flight range as possible threats grow from Asia.

Chinese Official Denies Owning 80 Homes, 20 Cars, Xinhua Reports - (  A Chinese village official accused of accumulating personal assets of more than 2 billion yuan($321 million) denied online reports that he had some 80 homes and 20 cars, the official Xinhua News Agency said. “Among the eight properties that were made public online, five to six are mine,” Zhou Weisi said in an interview with Xinhua published today. He acknowledged that he has more than 10 cars, including Porsche, BMW and Mercedes-Benz vehicles. Zhou, a vice director in the Nanlian neighborhood of Shenzhen’s Longgang district, was suspended and put under investigation yesterday, Xinhua reported. It said the suspension came after reports of his wealth on the Internet “triggered public outrage.”

Allied Bank revisited? - ( Last Friday was the filing deadline set by (a rather irked) Judge Griesa for Argentina and interested third parties in that country's long-running battle with NML and other restructuring holdouts. NML's reply brief is due today, but it has already made clear that it wants to be paid in full (roughly $1.4 billion) and that it expects the district court's injunction to bind a lot of third parties, including the trustee for the exchange bondholders. The genius of NML's strategy is that it has found a way to enforce its claims without having to find and seize Argentine assets. (Not that it's afraid to seize anasset or two.) If the strategy works and can be used in other cases, it will have major policy implications. Readers familiar with the sovereign debt markets may remember the Allied Bank litigation - a trilogy of opinions that launched the modern era of holdout litigation. The parallels between the Allied Bank case and this one are striking, right down to the identity of the district judge. Allied Bank also involved litigation by holdouts, although the holdout there was a member of a commercial bank syndicate that filed suit in 1982 after Costa Rica suspended payments on its external debt. A primary question was whether the lawsuit was barred by the act of state doctrine, which prevents courts from hearing certain lawsuits that might interfere with foreign policy matters. Judge Griesa initially sided with Costa Rica and a panel of the Second Circuit affirmed. The decisions sent shock waves through the New York financial community, which feared the consequences for New York financial markets if US courts effectively declared sovereign debts unenforceable. The Second Circuit agreed to rehear the case and, persuaded by a US government amicus brief, it changed its mind. The appeals court sent the case back to Judge Griesa with instructions to enter judgment for the plaintiff.

Neighbors stealing from neighbors, HELOCs make a comeback - ( When bankers make bad loans, they are supposed to lose money. The fear of loss is the only thing that compels bankers not to take excessive risks like the ones that brought down the economy in 2008. If bankers know they can look to the US taxpayer to bail them out and absorb their losses, bankers have every incentive to take wild risks to generate private profits. The US taxpayer shares some portion of these profits through taxes, but it assumes 100% of the liability for losses, not a particularly good deal for taxpayers. So far, the US taxpayer has absorbed about $150 billion in losses through the GSEs. Plus, through the variety of loan modification and short sale incentive programs, we have paid investors and bankers billions for their worthless securities. For example, we now pay second lien holders $6,000 to sign off on a short sale. Since these securities are subordinate to an underwater first mortgage, they have no value at all. Paying these investors — who ostensibly knew the risks — $6,000 from the treasury for their worthless second mortgage is a government bailout of an investor’s bad decision. Theft.

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