Monday, August 12, 2013

Tuesday August 13 Housing and Economic stories

TOP STORIES:

Watchdog: Borrowers in Obama housing program re-defaulting - (www.wyff4.com) 306,000 borrowers have re-defaulted on their loans, SIGTARP says. Borrowers who received help through the government's main foreclosure prevention program are re-defaulting on their mortgages at alarming rates, a federal watchdog said in a report released Wednesday. Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress. In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default. Those who have been in the program since 2009, are re-defaulting at a rate of 46%, the inspector general found.

Analysis: History offers few happy endings for Detroit to follow - (www.reuters.com) Detroit officials hope the bruising bankruptcy battle ahead of them will be rewarded with the birth of a leaner, more efficient and ultimately prosperous Motown. History, however, has few story book endings to offer as a guide when it comes to U.S. municipal bankruptcies. Fact is, they are rare events - just 61 local governments have gone through Chapter 9 bankruptcy since 1954 - and while the process is devoted to restructuring debt and provides temporary cash flow relief, it does not help a city enhance its revenue or economic outlook. Furthermore, cities typically lose access to capital markets in the wake of a bankruptcy.

Americans Gambling on Rates with Most ARMs Since 2008 - (www.americanbanker.com) Jung Lim plans to offset the cost of rising mortgage rates by using an adjustable-rate loan to buy a home for his expanding family. For the California endodontist, the money he'll save makes up for the ARM's risky reputation. Lim, 38, whose wife is expecting a second child in December, is leaving a two-bedroom condo in Los Angeles's Hancock Park to buy a four-bedroom house in the city's Sherman Oaks neighborhood for $1.12 million. His lender offered him a rate for an adjustable mortgage that is about a percentage point cheaper than a fixed loan. "If I could have gotten a 30-year fixed at the interest rate I'm getting the ARM for, I would have felt a lot more comfortable," said Lim, who's also a professor of endodontics at the University of California, Los Angeles. "But I'm hoping to refinance in five years or less. And we'll be in the house for about 10 years so we could also sell. Hopefully prices have bottomed so we won't be underwater then."

S&P cuts rating on 18 medium-sized Italian banks - (www.reuters.com) Ratings agency Standard & Poor's cut its long-term counterparty credit ratings by one notch on 18 medium-sized Italian banks, including Unione di Banche Italiane and Credito Emiliano, citing a worsening economic outlook. The ratings for UBI and Credem were lowered to 'BBB-', that of Banca Popolare di Milano and Banco Popolare Societa Cooperativa to 'BB', while Banca Carige was cut to 'BB-'. Other affected banks included FGA Capital, Iccrea Holding, MedioCredito Centrale, Banca Popolare di Vicenza, Veneto Banca, Banca Popolare dell'Emilia Romagna and Unipol Banca.  "Italian banks are operating in an environment with higher economic risks, leaving them more exposed to a deeper and longer recession in Italy than we had previously anticipated," S&P said in a statement.

Caterpillar Just Downgraded The Whole World - (www.businessinsider.com) Caterpillar's quarterly financial results are out, and the numbers don't look good for shareholders. Q2 earnings came in at $1.45 per share, missing analysts' estimates for $1.68 per share. Caterpillar is a global supplier of construction and mining machinery. As such, it's considered to be a reliable bellwether of global economic activity. In other words, what's bad for Caterpillar is good for almost no one. Among other things, management downgraded its forecast for global growth. "World economic growth slowed in the first half of the year, and we are revising our growth estimates downwards," they said. "Although we expect some improvement in the second half, the improvement will be less than previously expected. Currently, we expect that world economic growth for 2013 will be a little over 2 percent, slightly slower than in 2012."
 
'Walking Dead' market: Why the rally keeps going - (www.cnbc.com) Call it the Zombie Market, if you will, a staggering, stumbling, somnambulant thing of macabre beauty that sustains slings, arrows and shotgun blasts but still marches forward. Jeff Kleintop, chief market strategist at LPL Financial, is more succinct and culturally aware: He calls it the "Walking Dead" market, after the wildly popular, zeitgeist-y AMC zombie series. Instead of the perils zombies face to survive in a post-Apocalyptic world, the "walkers" of Wall Street must fend off the many macro and micro economic threats to their existence. Negligible economic growth? No sweat. Recession in Europe? Nobody cares. China slowdown? Big deal. Near-zero revenue growth? Someone else's problem. Federal Reserve tapering? Who needs 'em? "This unkillable stock market rally seems to get no respect. U.S. stocks have been snubbed by investors this year," he said. "The S&P 500 has continued the strongest bull market since WWII despite all the shots fired at the market this year." In addition to the aforementioned zombie-slayers, he also cited the "fiscal cliff" tax increases and sequestration spending cuts in Congress; zooming oil prices, European debt woes; rising interest rates, geopolitical turmoil and low market participation.





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