KeNo's Housing and Economic Portal: Tuesday April 21 Housing and Economic stories

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Wells Fargo Forecloses On Elderly Couple Who Sold Their Home 21 Years Ago - (www.mfi-miami.com) In another example of how disorganized American banking has become, Wells Fargo shocked elderly couple Sheridon and Susan Turner when a process server knocked on their door informing them that Wells Fargo was suing them for foreclosure on a home they sold 21 years ago. The Turners sold the house in suburban Orlando to Alton Ricks in July 1994 and transferred their assumable mortgage to him as part of the sale. 72 year-old Sheridon Turner told the Orlando Sentinel, “Needless to say, we were shocked. That lawsuit could ruin my credit. If we had the mortgage, why wouldn’t the bank send me a notice when someone stopped making the payments last August?” Wells Fargo told the Orlando Sentinel that it sued the Turners for foreclosure because Sheridon turner was the “borrower of record.” But, a spokesperson added,“the lender will not hold him financially liable for the debt or reflect the foreclosure on his credit reports.”

U.S. States Aren't Prepared for the Next Fiscal Shock - (www.bloomberg.com) U.S. states, still grappling with the lingering effects of the longest recession since the 1930s, are even more vulnerable to another fiscal shock. The governments have a little more than half the reserves they’d stashed away before the 18-month recession that ended in June 2009, according to a report last month by Pew Charitable Trusts. New Jersey, Pennsylvania, Illinois and Arkansas have saved the least. Skimpier rainy-day funds have implications for the national economy, which is in its sixth year of expansion. States would have to cut spending or raise revenue by a combined $21 billion in the event of a recession, exacerbating economic weakness, Moody’s Analytics found in a stress test of state finances. Reserves take on added importance for governments balancing obligatory pension and health-care costs with swings in tax collections, said Daniel White, a senior economist at the arm of Moody’s Corp. “What the Great Recession has shown is that things have fundamentally changed in terms of the way that state fiscal conditions are determined,” White said from West Chester, Pennsylvania. “They need to be much more prepared for very volatile fiscal conditions than they had been in the past.”

We Traveled Across China and Returned Terrified for the Economy - (www.bloomberg.com) China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country. What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook. “China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.” The China Steel Profitability Index compiled by Bloomberg Intelligence barely rose in March, a time after the annual Lunar New Year when demand would usually surge, and so far this month has resumed its decline. Steel use this year is down 3.4 percent, after slumping as much as 4 percent in 2014, according to BI. It had steadily risen for more than a decade.

[McArdle] Uncle Sam Is Uneducated About Loan Risks- (www.bloomberg.com) Under the Barack Obama administration, the government has pretty much taken over the student loan business. Loans that might once have been made by banks (often with a federal guarantee) are now issued directly by the government. Proponents of this policy have hailed it as cutting out the middleman, arguing that the system even turns a profit. But all along, critics have quietly asked a question: What about risk? And now, as student loan volumes and delinquencies rise, those critics have gotten a little louder. Under current conditions, the Congressional Budget Office estimates that the student loan program will remain profitable for the government, at least for the next 10 years. But that raises a couple of questions: What if those conditions change? And what happens outside the forecast window? The first question centers around a rather esoteric debate among budget wonks: Should the government estimate the cost of its guaranteed loan programs by simply adding up the expected costs (the interest that Uncle Sam will have to pay to borrow the money it lends, the money it will lose from defaults, and the overhead cost of loan origination and collections) and subtracting that from the expected revenues (the interest and principal the government will collect)?

Swiss Government Becomes First Ever To Issue 10Y Debt At A Negative Yield - (www.zerohedge.com) It had to happen sooner or later... in the new normal of yield-reaching, collateral-shortage-ing, money-printing economalypse, the Swiss government has become the first ever to issue a 10Y sovereign bond at a negative yield. As WSJ notes, while several European countries have sold government debt at negative yields up to five years of maturity - which means investors effectively pay for the privilege of buying it - no other country has previously stretched this out as long as 10 years. Mission Accomplished Central Bankers? As The Wall Street Journal reports, The Alpine country sold a total of 377.9 million Swiss francs (about $391 million) of bonds maturing in 2025 and 2049. On the 10-year slice, the yield was -0.055%, compared with 0.011% on its most recent similar bond two months ago.In the post-issuance secondary market, Swiss bonds maturing up to 11 years in the future already trade with yields under 0%. But such low yields at the initial point of sale “illustrate well the world we live in,” said Jan von Gerich, chief strategist at Nordea, referring to collapsing yields on debt amid widespread stimulus from central bank

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