Thursday, October 24, 2013

Friday October 25 Housing and Economic stories


Brazil raises rate for fifth time in a row - (www.ft.com) Brazil’s central bank raised its benchmark interest rate for the fifth time in a row on Wednesday night, bringing it close to double digits and raising questions about how much longer the tightening cycle has left to run. The bank increased the Selic rate by 50 basis points to 9.5 per cent amid debate about whether it plans to continue the cycle at the next meeting in six weeks’ time, which would bring the rates to the politically sensitive 10 per cent level. The monetary policy committee “evaluates that this decision will contribute to set inflation into decline and ensure that this trend persists in the upcoming year”, it said, repeating the brief statement issued at its last meeting in August. The bank has been keen to underline the credibility of its inflation-targeting regime after perceptions of political interference earlier in the year.

IMF Sees Business-Loan Losses of EU250 Billion in EU Banks - (www.bloomberg.com) Banks in Spain, Italy and Portugal face about 250 billion euros ($338 billion) in potential losses on their business loans over the next two years, the International Monetary Fund said. About one-fifth of combined corporate loans is at risk of default in the three economies, which are forecast to contract this year, according to the fund’s Global Financial Stability Report released today. The Spanish banking system is the only one with enough reserves to cover the losses, it said. The study is “an illustration of the potential magnitude of corporate risks for banking systems,” the fund said in the report. “Some banks in the stressed economies might need to further increase provisioning to address the potential deterioration of asset quality on their corporate loan books, which could absorb a large portion of future bank profits.”

Icelanders Run Out of Cash to Repay Foreign Debts: Nordic Credit - (www.bloomberg.com) The nation faces a “repayment risk of foreign debt by private entities in the economy, who don’t have access to foreign financial markets,” Sigridur Benediktsdottir, head of financial stability at the Reykjavik-based central bank, said yesterday in an interview. “We view this as being exacerbated or made worse by the fact that our current account is actually declining.” Prime Minister Sigmundur David Gunnlaugsson has said Iceland’s foreign exchange shortfall is “a matter of huge concern” as he tries to scale back currency controls in place since 2008. The government’s biggest challenge is to allow capital to flow freely without triggering a krona sell-off that would cause Iceland’s foreign debt to spike and undermine the nation’s economic recovery.

So This is A Recovery: Housing Welfare Queens Oppose Rollback of Crisis Loan Limits - (www.mortgagenewsdaily.com) Pressure appears to be building on the Federal Housing Finance Agency's (FHFA) acting director to back down or at least delay an intended reduction in conforming loan limits for Fannie Mae and Freddie Mac (the GSEs).  In August Edward J. DeMarco announced plans to scale back existing limits on the size of conventional loans that can be purchased by the GSEs.  The current limit is $417,000 with exceptions for counties deemed to have high cost housing where the limit is as high as $625,000.   DeMarco proposed a gradual reduction as one mechanism to encourage the return of private money to the mortgage market and to reduce the government's housing finance footprint. Industry groups began almost immediately to question both the wisdom of a reduction and the authority of DeMarco to take the action without congressional authority.  It now appears they have unified to press their demands and have picked up some congressional support. On Tuesday, 15 industry groups including the National Associations of Home Builders (NAHB), Realtors (NAR),Credit Union Associations, and the Land Title Association, Credit Union National Association, and the Mortgage Bankers Association sent a letter to DeMarco stating that "a reduction of the conventional conforming loan limit to $400,000 would have impacted nearly 154,000 borrowers in 2012, many of whom were in markets still in recovery."  The group said that many of these borrowers could not have qualified for loans under the tighter private market standards. "These conditions leave the American dream out of reach for many families. Lowering the loan limits further restricts liquidity and makes mortgages more expensive for households nationwide."

The Guarantee That Banks May Fear to Invoke - (www.nytimes.comThe mortgage orgy that banks entered into before the financial crisis has caused them — and their borrowers — immense pain since then. I have lost track of all the settlements and payments. Now The American Banker newspaper is reporting that banks may be hiding losses from their shareholders: The nation’s four largest banks are holding $57 billion of seriously delinquent loans that they’ve been slow to move into foreclosure over concerns that the Federal Housing Administration, the government mortgage insurer, will refuse to cover the losses and hit them with damages, according to industry sources. The banks — Bank of America (BAC), Citigroup (NYSE: C), JPMorgan Chase (JPM), and Wells Fargo (WFC) — have assured investors in the footnotes of quarterly filings that the loans are government-insured and therefore pose no threat to their bottom lines, even if they end up in foreclosure. What’s more, the banks have used these supposedly ironclad government guarantees as a pretext for continuing to classify the loans as performing and for holding no reserves against them.





No comments: