Thursday July 24 Housing and Economic stories

Top Stories:

Fannie Mae Unsold $5 Billion Homes Bring Peril to Shareholders - (www.bloomberg.com) Fannie Mae, the largest U.S. mortgage finance company, couldn't find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000. Megie still couldn't sell it. ``There's oversupply,'' he said. The home sold in 2005 for $110,000. Fannie Mae acquired twice as many homes through foreclosure in the first quarter as it sold, regulatory filings show. Unsold properties may weigh on the company's stock, which lost almost half its value since June 5, said Moshe Orenbuch, managing director of equity research at Credit Suisse Group AG in New York. Late payments on the company's home loans, a harbinger of foreclosures, almost doubled in the past year. Together, Fannie Mae and Freddie Mac, the two biggest U.S. mortgage finance companies, owned a record $6.9 billion of foreclosed homes on March 31, compared with $8.56 billion held by all 8,500 U.S. commercial banks and savings and loans. Foreclosed houses sell at an average discount of about 20 percent, according to economists Ethan Harris and Michelle Meyer at New York-based Lehman Brothers Holdings Inc. At that rate, the two mortgage companies stand to lose $1.39 billion on the foreclosed houses they currently own. ``Progress on this is probably one of, if not the single most important economic process right now,'' Orenbuch said. ``With prices decreasing, it's better to get rid of houses quickly.''

Philadelphia Streets Unsafe for Manhole Covers - (www.bloomberg.com) – Another side effect of the Fed inflationary policies. City crews tried screwing down the covers with hexagonal bolts, but the thieves responded with Allen wrenches to unscrew them. The city pressed scrap dealers to refuse material marked as city property; but the thieves adapted again, using blow torches to partially cut up or melt off the city labels. One thing has helped. A Water Department worker, Fred Feoli, designed a way to lock the manhole covers from the inside. But so far, only 300 of the city’s more than 70,000 manhole and inlet covers have been locked.

Collapse of loan market, change in rules have families scrambling - (www.boston.com) Maria Ferraguto is finding it difficult to relax this summer. She's too busy figuring out how to pay for her son Michael's senior year at the College of the Holy Cross. Some of the stress feels familiar. Maria and her husband, Paul, have been writing checks to Holy Cross for eight years. Their older son, Mark, graduated from the private Worcester college in 2005, and the Woburn family has always struggled to keep up with rising tuition and fees, which now total about $47,500 annually. But this year, with first semester payments due Aug. 1, the Ferragutos, like many families, are especially concerned. Since the unprecedented collapse of the student loan market, financing a college education has become more complicated than ever. For the Ferragutos, it started in April with a letter from the Massachusetts Educational Financing Authority, the nonprofit lender for thousands of students who attend colleges and universities in Massachusetts. The letter said the authority would no longer offer federal loans, including low-interest Stafford and parent loans. Even worse, the authority said money for private student loans was in doubt.

CA Central Valley foreclosures continue to skyrocket - (www.modbee.com) The number of homes repossessed by lenders continues to skyrocket throughout Stanislaus, San Joaquin and Merced counties, according to DataQuick Information Systems.
This April, May and June, for instance, 2,207 homes were foreclosed on in Stanislaus, pushing the county's one-year total to 5,554. That's five-times higher than the number of homes foreclosure on during the previous year.
In San Joaquin, 3,185 homeowners lost property to foreclosure this spring, pushing its one-year total to 8,366.

Lender-Liability Suits Rise - (online.wsj.com) The love affair between banks and builders during the housing boom has deteriorated into a series of divorces now spilling into the courts. As lenders rush to curtail their real-estate exposure and preserve sorely needed capital, they are triggering lawsuits from builders that say the banks have unfairly cut off their construction financing, stopped their projects midstream and forced their companies to the brink of bankruptcy. "Lender-liability lawsuits are coming. It's only just beginning," says Michael Hackard, a lawyer in Sacramento, Calif., who focuses on real-estate law. "There are going to be builders who argue that the lender forced me into insolvency by not acting in good faith."

A Mortgage Rescue Strains Calculations - (www.nytimes.com) The proposed government rescue of the nation’s two mortgage finance giants should appear on the federal budget as a $25 billion expense, the independent Congressional Budget Office said on Tuesday, but officials conceded that there was no way to really know what, if anything, a bailout might cost taxpayers. The budget office said the chances were better than even that a rescue would not be needed before the end of 2009 and would not cost any money. But the office also said there was a 5 percent chance that the mortgage giants, Fannie Mae and Freddie Mac, could lose $100 billion. Lawmakers said that the $25 billion cost would not have to be offset with spending cuts or tax increases as would normally be required by “pay as you go” budget rules, and instead would be regarded as emergency spending and added to the national debt.

Some Hit Hardest Are Looking To Sell Mutual-Fund Arms - (online.wsj.com) - Despite the rally in banks stocks, struggling banks are still trying to raise capital, and some of the hardest hit are now considering selling their lucrative money-management units to raise cash.
National City Corp. is working with Morgan Stanley to shop its Allegiant Funds operation, according to people familiar with the matter. The division manages about $30 billion, about half of which is in its more than 30 mutual funds. The possibility of such a sale arose ...

2nd Mortgage Holders (Banks) Now to be Bailed Out Too - Breaking! - (www.ml-implode.com) - Our nations largest banks are being weighed down by 2nd mortgage liens (Home Equity Lines/Loans or HELOCs). You have heard this in many of their earnings calls recently. The home equity market is thought to be as large as $1.3 trillion. For many banks this is their largest residential mortgage exposure. For example, Wells Fargo still carries $84 billion and Bank of America and Chase about $100 billion a piece. The banks were very touchy in their recent earnings reports on this topic. Wells Fargo actually changed the definition of ‘default’ from 120 days to 180 days to push out defaults further consequently hiding losses. See my report on Wells Fargo’s mystery earnings. Real losses on 2nd mortgage portfolios will befall the banks, as values continue to fall and these now unsecured loans default. But now it looks as though the tax payers could shoulder much of the risks FHA will assume when doing all of these ‘underwater refis’. How much can FHA shoulder when they even admitted lately that they were on the brink after a $4.6 billion loss. Mish wrote about it recently. Our nations largest banks are being weighed down by second mortgage liens (Home Equity Lines/Loans). You have heard this in m... 2nd Lien Provision Added to Housing Bill - Source: National Mortgage News: “Second lien holders could benefit from permitting the refinancing of struggling homeowners under a special Federal Housing Administration foreclosure rescue program contained in a massive housing bill the House is expected to pass Wednesday. A provision added during final negotiations on the bill will allow second lien holders to share in a portion of future appreciation on the property. However, they have to agree to the restructuring and refinancing of the existing first mortgages, which would extinguish any second or subordinated liens”….

Other Stories:

More Than 1 Trillion Needed to Solve Housing Crisis - (finance.yahoo.com)
Bush Caves In On Housing Bill That Won't Save Housing Market - (www.clusterstock.com)
Bunning criticizes support for mortgage giants - (www.ml-implode.com) - "U.S. Sen. Jim Bunning again condemned a support package for troubled mortgage giants Fannie Mae and Freddie Mac, saying the pla...
Bloomberg Discovers the REO Industry - (www.ml-implode.com) - "A piece today at Bloomberg co-authored by Bob Ivry marks the financial news outlet’s “come to Jesus” moment with the REO indust...
Fannie, Freddie Race Banks To Bottom - (www.ml-implode.com) - "Fannie Mae and Freddie Mac may be unintentionally driving down prices in already depressed markets to the detriment of commerc...
Plunger Alert - (www.ml-implode.com)
**RED ALERT** RAPE BY CONGRESS IMMINENT - (www.ml-implode.com)
Fannie Mae Unsold $5 Billion Homes Bring Peril to Shareholders - (www.ml-implode.com)
California Real Estate in Perspective: 2008-2012 - (www.reochronicle.com)
How to buy the whole US for no money down - (www.solari.com)
House improvements are a waste of money - (www.telegraph.co.uk)
Wachovia CEO Steel's Plan Boosts Stock $7.7 Billion - (www.ml-implode.com)
Moody’s Warns on Weakening Credit Quality - (www.ml-implode.com) The strain of increased debt and falling home prices is pushing the U.S. economy to a breaking point, setting up consumers and investors for a nasty fall later this year, according to new research published Wednesday by Moody’s Economy.com
Freddie, Fannie Should Split, Not Get Aid, Faber Says - (www.ml-implode.com)
Fannie, Freddie Rise After Lawmakers Agree on Bill - (www.ml-implode.com)
Time to Get Political Folks…Massive Bailouts Front and Center - (www.ml-implode.com) what is going on with the Fannie/Freddie, housing, mortgage, Treasury, Fed, Wall St, Washington, rich investor and foreign Gov’t bailout plan could turn out to be nothing short of the largest fraud ever perpetrated on the taxpayers, at least in my lifetime. I feel compelled to use whatever soapbox I have here to get this message out there to as many as I can

You Know The Banking System Is Unsound When.... - (Mish at globaleconomicanalysis.blogspot.com)
500 Year Housing Hurricane Gets Worse - (Mike Morgan)
Woes Afflicting Mortgage Giants Raise Loan Rates - (www.nytimes.com)
Fannie Mae Has $5 Billion In Unsold Houses - (www.bloomberg.com)
Fannie Mae and Freddie Mac bailout makes matters worse - (www.newsweek.com)
New Fed rules miss key lending abuse - (money.cnn.com)
Housing implosion has Texans recalling banking collapse of '80s - (www.dallasnews.com)
Why Its Worse Than You Think - (www.newsweek.com)
Builders Dislike Taste Of Own Medicine - (www.minyanville.com)
Beachside real estate no guarantee of value - (lansner.freedomblogging.com)

Most foreclosures in at least 20 years in CA - (www.sfgate.com)
Housing Package Deal Reached - (online.wsj.com)
Fed sees prices rising even as economy slows - (www.marketwatch.com)
Phila. Fed chief urges rate increase - (www.philly.com)
Moody's Economy.com: Rising Household Debt, Defaults Straining US Economy - (www.marketwatch.com)

Vote looms in Congress on housing rescue plan - (www.reuters.com)
Supervision, not media coverage, is reprehensible - (www.chron.com)
Record home losses in California - (www.latimes.com)

Moody's: More firms found with weakest liquidity - (www.signonsandiego.com)
County foreclosures soar in June - (www.signonsandiego.com)
UPS says profit fell nearly 21 percent in second quarter, lowers outlook for year - (www.chicagotribune.com)
Whirlpool reports 27 percent dip in 2Q profit - (www.startribune.com)
Autos Face More Woes, Ghosn Says - (online.wsj.com)
High Costs Put Sara Lee CEO in a Bind - (online.wsj.com)
Banks' Health Questioned as Wachovia Posts $8.9 Billion Loss - (www.washingtonpost.com)
Supervalu says fiscal 1st-quarter earnings rise 9 percent, cuts 2009 profit guidance - (www.chicagotribune.com)

Stagflation in Britain: Things can only get worse - (www.economist.com)
Japan's Exports Fall for First Time in Four Years - (www.bloomberg.com)
Australia's Quarterly Inflation Accelerates to 1.5% - (www.bloomberg.com)