KeNo's Housing and Economic Portal: Friday January 24 Housing and Economic stories

TOP STORIES:

Lenders will not lend if they cannot get their money back - (www.economist.com via Patrick.net) IN 2000 Loretta and Clifton Christian bought a two-family home in Irvington, a hardscrabble New Jersey town of 54,000, for $132,000. They poured money into it, fixing the roof and replacing the boiler. But in 2008 the world caved in and the couple lost their jobs soon afterwards; they now live off their pension and the income from a second-floor flat they let out. They manage to meet their monthly mortgage payments of $1,845. But their house is now worth just $71,000, significantly less than the outstanding mortgage of $115,000. Nearly 11m American homes are similarly “underwater”. Despite the housing recovery, parts of the country are still struggling: 3m-4m people are in default, in foreclosure or awaiting liquidation. According to New Jersey Community United, a lobby group, nearly one in four homes in the state is worth less than the mortgage. Hence the return of an unorthodox proposal many thought had been laid to rest: for municipal governments to use eminent-domain (or compulsory-purchase) powers to seize underwater mortgages at below the home’s market value and to refinance them at lower rates.

Analysis: Cash crunch signals policy dilemma for China's reformist central bank - (www.reuters.com) China's central bank looks set to risk another cash crunch at the end of January, barely a month after the last market squeeze, as policymakers press ahead with a crackdown on shadow financing and other risky bank lending. The People's Bank of China (PBOC) is attempting a delicate balancing act to keep economic growth on track while avoiding a debt-induced financial crisis. Periodic cash squeezes as banks scramble for fresh funds highlight the policy dilemma the PBOC faces in 2014, as it pushes financial reforms to help rebalance the world's second biggest economy away from the investment- and exports-led model that powered its rapid rise. Spikes in June and December in the interest rates at which banks lend to each other signaled the central bank's determination to reduce alarming levels of debt. But it must try to do so without hurting growth by braking too hard on credit.

JPMorgan nears $2 bln settlement in a case tied to Madoff - NYT - (www.reuters.com) JPMorgan Chase & Co is nearing a $2 billion settlement with federal authorities to resolve suspicions that the bank ignored signs of Bernard Madoff's Ponzi scheme, the New York Times reported, citing people briefed on the case. The bank's civil and criminal settlements would also involve a deferred prosecution agreement, a criminal action that would suspend an indictment as long as the bank acknowledged the facts of the government's case and changed its behavior, the NY Times said. As per the deal, JPMorgan will pay more than $1 billion to the prosecutors in Manhattan and the remainder to the Office of the Comptroller of the Currency (OCC) and a unit of the Treasury Department investigating breakdowns in the bank's safeguards against money laundering. The government plans to use some of the payout for Madoff's victims, the paper said.

Real Estate Appraiser Admits Conspiring with Borrower to Submit False Valuation - (www.mortgagefraudblog.com) Darryl Glasco, 54, North Tonawanda, New York, a licensed New York State appraiser, pleaded guilty to conspiracy to commit bank fraud. The charge carries a maximum penalty of 30 years in prison, a fine of $ 1,000,000, or both. According to the plea, the defendant conspired with James P. Vasiliou, Jr., a borrower, to submit a false appraisal to JP Morgan Chase Bank to refinance a property located at 16 Blackley Court, Lockport, New York. The false statements resulted in an inflated fair market value for the property and were used to obtain approval of the loan. Vasiliou pleaded guilty to bank fraud and is awaiting sentencing. U.S. Attorney William J. Hochul, Jr. announced the guilty plea. The plea is the result of an investigation by the Mortgage Fraud Task Force of Western New York, led by the U.S. Attorney’s Office, which includes agents and personnel from the United States Secret Service, under the direction of Special Agent in Charge Tracy Gast; and the Federal Bureau of Investigation, under the direction of Special Agent in Charge Brian P. Boetig.

Brits house homeless for $32,000 a unit - (www.huffingtonpost.com) When the CEO of YMCA in Forest, London grew frustrated that vulnerable youth couldn’t find an affordable place to live after moving out of the organization’s supported housing program, he found a cheap and safe option for them. Living in shipping containers. Timothy Pain came up with the idea as rents continued to soar in his city and the at-risk young people who were graduating from the YMCA’s program would find themselves right back where they started when they tried venturing out into the real world, according to the program’s website. So Pain, who has experience working in African shanty communities, devised an unusual plan. He got funding to launch mYPad, a program that sets up shipping containers from China that function as studio apartments. “We wanted to come up with something that would be affordable on one-third of minimum wage,” he told CNN. Minimum wage is about $200 a week. Though the living space is small, each is equipped with everything a young person could need. It comes with a shower, toilet, sink, bed, fridge, cooking area, microwave, TV, heating and clothing storage. Each container costs about $32,000 to set up, according to CNN, but residents will pay only a little over $100 a week.

OTHER STORIES:

U.S. Crops Threatened by Cold as Cattle at Record - (www.bloomberg.com)

Analysis: Corruption scandal complicates Turkish rate policy as lira slides - (www.reuters.com)

Gold Analysts Get Most Bullish in a Year After Rout: Commodities - (www.bloomberg.com)
Bitcoin Tops $1,000 Again on Adoption by Zynga Amid Wider Usage - (www.bloomberg.com)