Thursday August 28 Housing and Economic stories

Top Stories:

Alabama County Prepares for Bankruptcy in Debt Crisis - (www.bloomberg.com) Jefferson County, Alabama, officials told their lawyers to prepare a bankruptcy filing if the county can't reach an agreement with creditors over how to escape from $3 billion of bonds with soaring interest rates. The Jefferson County Commission voted unanimously today to have the law firm Bradley, Arant, Rose and White LLP and the county attorney take over negotiations with creditors led by JPMorgan Chase & Co. and draw up bankruptcy papers should talks falter. The two replace bankers and advisers including Citigroup Inc., whose proposals failed to win support. ``We are hoping for success but preparing for filing if necessary,'' Commission President Bettye Fine Collins, a Republican, told reporters. ``This has some likelihood to work. Wall Street may not want to take a chance at court.''

FDIC: Troubled Banks Rise To 117, Most in Five Years - (www.cnbc.com) The number of problem banks on a regulatory watch list increased to 117 by the end of the second quarter from 90 at the end of the first quarter, the Federal Deposit Insurance Corp said.
The combined assets of the problem banks increased to $78 billion from $26 billion, the agency said.

Woodside Homes Insolvent, BK Real - (www.ml-implode.com) - Court filings that have come to light in the last 24 hours have led us to re-affirm our "implode" listing for major homebuilder Woodside. See key excerpts at our entry on Woodside.

Pulte & Hovnanian Push For Last Minute DPA Deals Ahead of FHA's Expiration Clock - - (www.ml-implode.com) - Pulte Homes Inc. and Hovnanian Enterprises Inc. are both urging to visitors to their Web sites to take advantage of the down payment assistance programs before they expire.. Homebuilders are always trying to sell their homes, but these days they have an extra incentive — beating the clock. In a few weeks, a financing option used by almost 20 percent of new-home buyers to help scrape together a down payment is going away, making it tougher for many people to become homeowners. It's a loophole in the Federal Housing Administration rules that let builders and other home sellers channel money through a charity to help homebuyers cover their down payment. But lawmakers axed the programs — effective Oct. 1 — because almost 40 percent of FHA borrowers who went into foreclosure since October had down payment assistance. For borrowers who don't have any money for a down payment there "is a big incentive to buy now versus later, when you most likely won't have that option for you," said Robert Curran, an analyst with Fitch Ratings. "It makes a lot of sense (for builders) to do a lot of promotions on that."

FHA: Lending Over Backward To Fund Fraud - (www.forbes.com) The FHA has been turned into the mortgage industry's lender of last resort. Taxpayer price tag? Maybe $100 billion. When the nation's politicians take the stage here and later in St. Paul, Minn., you'll hear a lot of talk about saving the decrepit housing market, and lately that means one thing: The Federal Housing Administration. Watch your wallet. Heralded as a savior in reversing the mortgage market’s woes, risks to the agency could cost taxpayers dearly, says one mortgage expert, as Washington morphs the FHA from a helping hand for low-income home buyers into a back door bailout for the imploding mortgage industry. Trouble is, there's little choice at this point. “Nobody is talking is talking about it, but in three years the FHA bailout is going to cost taxpayers at least $100 billion dollars,” said Guy Cecala, a mortgage industry insider and publisher of Inside Mortgage Finance. “Everybody on Capital Hill recognizes that there will be significant costs, but they’re trying to keep the housing spigot open even if it will bring in some bad water down the road.” According to the Mortgage Banker’s Association, 30% of all July loan applications had FHA backing and, without a means or credit requirement, it’s the riskiest borrowers who are being shunted onto the government's books. (See "FHA's Risky Business.")

Anyone smell a stench? FBI knew about housing scams in 2004 - (www.digitaljournal.com) Of course, everyone was fat and happy as long as they were all making money. "It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said. Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast. … In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.

Suez, America-style - (optionarmageddon.ml-implode.com) It’s no longer any secret that the USA is deeply in hoc to foreign governments, particularly China, Japan, the Petro States, and increasingly Russia. We have two very large deficits that have to be financed: a trade deficit and a fiscal deficit. Americans buy more than they sell. We consume more than we earn. To keep the process going, Americans and our government have to borrow money from abroad. At rates that are totally unprecedented. As I.O.U.S.A. notes, foreigners today own a larger share of American society than ever before. (During WWII the U.S. government ran up much larger deficits as a percentage of GDP, but these were financed primarily by American citizens themselves.) This leaves our economy incredibly vulnerable. But how? It’s easy to understand military vulnerabilities, not so easy to contemplate economic vulnerabilities.

California median price dropped 40.3% in year - (www.sfgate.com) The number of existing, single-family houses that traded hands in July leaped an estimated 43.4 percent from a year ago, the California Association of Realtors reported. The median price, however, dropped 40.3 percent to $350,760, the biggest decline since the Realtors began tracking the market. In the Bay Area, sales increased 6.7 percent, and the median sank 21.2 percent to $663,190.

Inflated appraisal nearly cost couple their house - (msnbc.msn.com) Only a month after the Petrones bought their house with a conventional mortgage, Carl Petrone was diagnosed with cancer. He and Marie decided to move back to New York to be with family, and listed the home at $118,500. There were a couple early offers, all for much less. "We thought: 'This is crazy,'" Marie Petrone said. "The appraiser said the house was worth $114,500, so why would we sell it for $100,000?" A new appraiser concluded their house was worth only $98,000 and said the Petrones had been duped in 1999: The home hadn't lost value. It was just never worth the price they paid. An angry Marie Petrone filed a complaint with the North Carolina Appraisal Board, alleging the original appraiser, Ed Britt, conspired with the real estate agents — who also owned the home — to inflate its value. "I called regularly to ask for updates. But most of the time they never returned my calls. Finally, I just gave up," Marie Petrone said. Board director Philip Humphries said his agency should have contacted the Petrones. But he defended the board's overall performance in regulating the state's 3,500 appraisers. "The mere fact that a number of complaints have been filed against a person doesn't mean that all of the complaints reach the level of where there needs to be disciplinary action taken," he said.


Other Stories:

Former HUD Secretary Cisneros Calls for New Stimulus Package With Strong Housing Measures - (www.ml-implode.com) - Henry Cisneros, former secretary of the US Department of Housing and Urban Development (HUD), declared today that the housing in...
Beijing swells dollar reserves through stealth - (www.telegraph.co.uk)
House Sales, True Inventory: No Good News - (www.seekingalpha.com)
Backlog of US houses for sale worst on record - (www.independent.co.uk)
House Prices Continue Decline - (www.nytimes.com)
Pasquinelli Homes: Ailing Coverage Initiated - (www.ml-implode.com) - We've been hearing word that this Top 25 builder is being foreclosed on all over the place, and have received public confirmatio...

The Two Great Financial Mysteries of Our Time: Missing Money and Collateral Fraud - (www.ml-implode.com) - Whatever discrepancies existed between the official U.S. government financial statements and real debt outstanding before the ho...
Fannie, Freddie Debt Deferral May Not Trigger Swaps - (www.ml-implode.com) - Buyers of credit-default swap contracts that protect against losses on Fannie Mae or Freddie Mac subordinated debt may not get p...
Lehman Said to Weigh Forming New Company to Buy Mortgage Assets - (www.ml-implode.com) - Lehman Brothers Holdings Inc. may set up a company funded by outside investors to buy some of its mortgage assets, aiming to di...
A matter of Principal - Here comes the Tsunami - (www.ml-implode.com) - "Today's housing report shows a rise in home sales in July. FIRE Economy bulls are taking this as evidence of a bottom in real e...
FED, OCC and FDIC Slam Banks - (www.ml-implode.com)
Major Builder Woodside Homes Forced Into Chapter 11 - (www.ml-implode.com)
Housing Prices Post Record Decline in Q2 - (www.ml-implode.com)
Cities Think They Can “Flip This House” - (www.ml-implode.com)
Temasek Says Credit Crunch Will Last Two More Years - (www.ml-implode.com)
Shiller's Subprime Solutions - (www.ml-implode.com)
U.K. July Mortgage Approvals Hold Close to Decade Low - (www.ml-implode.com)
Mortgage fraud still soaring - (www.ml-implode.com)
ECRI's Weekly Leading Index: No Business Cycle Upturn in Sight - (www.ml-implode.com)
Lending Over Backward: FHA Bailout Could Cost $100 Billion - (www.ml-implode.com)

Mortgage fraud jumps 42% in 2008's first quarter - (money.cnn.com)
Mortgage fraud soars in first quarter, report says - (www.latimes.com)

You can STILL pay nothing down, live free for a year, then walk away - (www.latimes.com)
Living for Free - (patrick.net)
Housing bottom isn't even around the corner - (www.marketwatch.com)
After negative report, appraisers call for reform - (msnbc.msn.com)
Will economy's path be shaped like a U, V, W or L? - (www.signonsandiego.com)


Fed Officials Agree Next Rate Move Will Be Increase - (www.bloomberg.com)
New-Home Sales in U.S. Increase From 17-Year Low - (www.bloomberg.com)
S&P: Home prices drop by record amount in 2Q - (www.ap.com)
U.S. Consumer Confidence Index Rises on Cheaper Gas - (www.bloomberg.com)
Credit crunch hurting entrepreneurs - (www.dallasnews.com)
Valley permits for new housing dip 40% - (www.azcentral.com)
Communities Become Home Buyers to Fight Decay - (www.nytimes.com)
Agency’s Head Expects Banking’s Crisis to Worsen - (www.nytimes.com)
U.S. Bank Earnings Plunge to Second-Lowest Level Since 1991 - (www.bloomberg.com)
Freddie, Fannie Mortgage Portfolio Growth Rate Slows - (www.bloomberg.com)
Regulators Step Up Bank Actions - (online.wsj.com)

Private equity groups in running for Lehman unit - (www.ft.com)
Ad troubles rumble on for Tribune - (www.ft.com)
BankUnited Needs $400 Million to Satisfy Regulators - (www.bloomberg.com)
A Greenwich of the mind - (www.newyorker.com)
Asia Is About to Give U.S. a Kick in the Fannie: William Pesek - (www.bloomberg.com)
Disney spent $1.5 million lobbying in 2Q - (www.azcentral.com)
New Fears of a Downturn in Germany - (www.nytimes.com)
Credit crisis takes toll on London - (www.ft.com)
German Recession Looms as Business, Consumer Confidence Drop - (www.bloomberg.com)
Alarm at Russian 'policy of confrontation' - (www.ft.com)
Credit crisis takes toll on London - (www.ft.com)

Insight: Painful lesson for UK banks - (www.ft.com)
Indian company to pay $2.6B for Britain's Imperial - (www.chron.com)
Retailers Take a Slower Road in India - (online.wsj.com)
UK mortgage approvals close to record lows - (www.ft.com)
Fear of Defaults After a Flurry of Apartment House Sales - (www.nytimes.com)
FDIC Says Banks on `Problem List' Rose 30% in Second Quarter - (www.bloomberg.com)
Borrowing at Merrill, Wachovia Hit With Record Refinancing Bill - (www.bloomberg.com)
Blame Game Is Dishonest - (www.thestreet.com)
Regulators secretly cracking down on banks: report - (www.financialweek.com)
Lending Over Backward - (www.forbes.com)
The Storylines of the Last Days of Summer - (www.nytimes.com)
After Merrill's Sale of Bad Debt, Few Have Followed - (www.washingtonpost.com)
Pension funds seek leveraged loan deals - (www.ft.com)
Russell Led Hedge Investors to Losses - (online.wsj.com)
Mortgage fraud soars in first quarter, report says - (www.latimes.com)