Thursday August 7 Housing and Economic stories

Top Stories:

Realtors live close to the edge - (www.usatoday.com) Jack Jentzen never saw it coming. Four years ago, as a real estate agent in Elgin, Ill., he was enjoying the rewards of the most frenzied U.S. housing market in decades, and money poured in. Now he's fighting to keep his home. The real estate slump that hit in 2006 eventually stifled home sales, shrank prices and unleashed a wave of foreclosures. And as it did, the hardest-hit victims included a group of people, such as Jentzen, who never imagined they had anything to fear: real estate agents themselves. Tens of thousands of Realtors have been forced to quit the industry in the past couple of years. Some are enduring their own agonizing foreclosures. Agents who had staked their fortunes on galloping home sales now struggle to afford health care, utilities and other basics.

Freddie Mac's negative net worth raises questions - (www.reuters.com) - Investors are manifestly concerned about the stability of Freddie and larger sibling Fannie Mae, which together own or guarantee just under half the country's $12 trillion of mortgage debt. Freddie's shares have lost nearly 90 percent of their value in the last year, and Fannie's nearly 80 percent. Freddie Mac hopes to raise $5.5 billion of additional capital to bolster its balance sheet, but in a sense that would just bring it back to about zero: the company's assets had a negative $5.6 billion net fair value at June 30, compared with their accounting value of $12.9 billion, according to financial statements Freddie posted on Wednesday

Pimco's Gross Says U.S. Will Rescue Fannie, Freddie - (www.bloomberg.com) Bill Gross, who manages the world's biggest bond fund, said the U.S. Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie Mae and Freddie Mac to help shore up their capital.
``By the end of the third quarter, the preferred stock in Fannie and Freddie will be issued, the Treasury will have bought it,'' Gross, co-chief investment officer at Pacific Investment Management Co., said today in an interview on Bloomberg Television. ``We'll be on our way toward a joint Treasury-agency combination.''

Mortgages Made in 2007 Go Bad at Rapid Clip - (online.wsj.com) - Mortgages issued in the first part of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated. An analysis prepared for The Wall Street Journal by the Federal Deposit Insurance Corp. shows that 0.91% of prime mortgages from 2007 were seriously delinquent after 12 months, meaning they were in foreclosure or at least 90 days past due. The equivalent figure for 2006 prime mortgages was just 0.33% after 12 months. The data reflect delinquencies as of April 30.
Evidence that lax lending standards were leading to higher mortgage delinquencies first emerged in late 2006. The first major casualty of the subprime credit crisis, New Century Financial Corp., imploded in early 2007. Yet the data from the FDIC and others suggest that lenders didn't substantially tighten standards until at least July or August 2007, when credit jitters hit Wall Street and financial stocks began to swoon.

Lawmaker Explores Mortgage Giants' Falling Share Prices - (www.washingtonpost.com) Yes, Waxman, you are a freaking idiot. Much of Fannie and Freddies problems stem to the late 90s and early 2000 period. Rep. Henry A. Waxman (D-Calif.), chairman of the House Oversight and Government Reform Committee, has asked the mortgage finance giants Fannie Mae and Freddie Mac whether they know of any White House involvement in the recent decline in their share prices." Waxman has been a regular irritant to President Bush on issues ranging from the leak of a CIA officer's identity to the development of U.S. policy on greenhouse-gas emissions. He has been rebuffed by the White House on numerous occasions when he sought assistance on these and other topics. A committee spokeswoman declined to comment on the requests to Fannie Mae and Freddie Mac, as did a Freddie Mac spokesman. Tony Fratto, a spokesman for President Bush, said Waxman has not contacted the White House. "It's been clear that what we have been focused on is shoring up Fannie Mae and Freddie Mac and instilling confidence in them, and that's all," he said.

Almost Half of Indiana’s Mortgage Brokers See Licenses Yanked - (www.housingwire.com) More than 40 percent of mortgage brokers in Indiana no longer have a license to do business in the state, after Indiana Secretary of State Todd Rokita said Tuesday that his office had revoked licenses for 393 of the state’s 950 mortgage brokerages for failure to comply with a new state law. To be sure, some of the firms are simply out of business — the Indianapolis Star reported Wednesday that 79 of the state’s notices to offending companies were returned as undeliverable — but the fact that so many of the brokers operating in the state literally failed to meet basic licensing criteria introduced by a 2007 law should be eye-opening. Rokita worked with leaders in the state’s General Assembly to pass a law last year requiring each licensed mortgage office doing business in the state to employ a so-called principal manager to supervise the business affairs of the office and the staff, defined as a mortgage professional with at least three years experience in the industry. Furthermore, the reforms mandate that each principal manager take and pass a practice standards examination based on Federal regulation, Indiana statute and industry best practices.

Default Risk on GM, Ford, Chrysler Hits 95%; Automakers Ask For Taxpayer Handout - (globaleconomicanalysis.blogspot.com) - One of America's three biggest automakers is almost certain to default within the next five years, according to UniCredit SpA analysis of the market for credit-default swaps. Contracts to insure $10 million of General Motors Corp. debt cost a record $4.7 million upfront plus $500,000 a year, indicating an 84 percent chance of default, while Ford Motor Co. has at least a 75 percent risk, according to UniCredit data. Combined with Chrysler LLC, the probability that one of the three will be unable to fund its business is more than 95 percent. "There might be a default at any time," said Jochen Felsenheimer, the Munich-based head of credit strategy at UniCredit, Europe's fourth-biggest bank. "The costs imply there is close to 100 percent probability that one of the big three will file for Chapter 11 bankruptcy." There is no way GM or Ford can raise money in this market. The "solution" of course is to ask for a taxpayer bailout just as Fannie Mae received. Indeed, the Detroit 3 ask up to $40 billion in loans. Detroit's three automakers are urging Congress to make as much as $35 billion to $40 billion in low-cost loans available during the next two to three years to assure that the companies survive long enough to retool and build a new generation of fuel-efficient vehicles. Chief executives Rick Wagoner, Alan Mulally and Robert Nardelli -- of General Motors Corp., Ford Motor Co. and Chrysler LLC, respectively -- talked Friday and agreed that access to capital is their most critical short-term need during this volatile period of high fuel prices and slumping SUV and truck sales, sources told the Free Press.

Freddie CEO Makes Preposterous Claim - (Mish at globaleconomicanalysis.blogspot.com) Freddie Mac CEO, Richard Syron, warned of the troubled times in housing, even revised his forecast for home price drops, peak to trough, from 15 percent to 18-20 percent. He said we’re only halfway through the correction. But then one of his underlings went on to assure everyone that Freddie Mac (FRE) would be able to withstand $40 billion worth of credit pain through 2009 (if it finishes raising that $5.5 billion it promised). He also talked about how they may reverse some of the previously estimated losses as the portfolio does better than expected. Anyone following Alt-A mortgages knows that Freddie's claim is simply preposterous. Thus, the only surprise this quarter is that anyone was surprised when Freddie Mac's loss was bigger than expected.


Other Stories:

AIG Falls After Insurer Posts Third Straight Loss - (www.ml-implode.com) - American International Group Inc., the world's biggest insurer, fell 11 percent in early trading after housing-related writedown...
Foreclosures Skyrocketing in Military Towns - (www.ml-implode.com) - Support the troops! "Foreclosures in many military towns are increasing at rates drastically above the national average, accord...
The Frugal Future - (www.ml-implode.com)
Want to know why home prices are gonna keep falling. - (www.ml-implode.com)
Freddie Mac and the Housing Market - (www.ml-implode.com)
Countrywide Dogs Howling Over Bare Bones - (www.ml-implode.com)
Rescap Update: 1 More HomeComings Office Gone - (www.ml-implode.com)
Texas Cities Lead Nation with Highest Home Equity - (www.ml-implode.com)
Will The Muni Bond Market Embrace Connie Lee? - (www.ml-implode.com)

U.S. Stocks Retreat on AIG's Loss, Wal-Mart's Sales Forecast - (www.bloomberg.com)
Crude Oil Rises as Turkey Says Pipeline Repair May Take 2 Weeks - (www.bloomberg.com)
Treasuries Gain After Unemployment Claims Reach Six-Year High - (www.bloomberg.com)

U.S. Jobless Claims Rose Last Week to Six-Year High - (www.bloomberg.com)
40% of U.S. homeowners say their houses have risen in value - (www.dallasnews.com)
Inflation fears persist as Fed holds rates - (www.ft.com)
Highest Unsold Home Supply Since '82 Seen Needing 50% Reduction - (www.bloomberg.com)
Pending Home Resales in U.S. Unexpectedly Rose 5.3% - (www.bloomberg.com)

Mortgage Failure Rate Rises - (online.wsj.com)
Wall Street Report Tries to Dissect Financial Meltdown - (www.nytimes.com)
Mortgage Delinquencies Accelerated During 2007 - (online.wsj.com)
Hedge Funds Chalk Up Losses - (online.wsj.com)
Big banks seek to limit their own risks - (www.ft.com)
Big banks prepare to scale back business - (www.ft.com)
Citigroup May Pressure Other Firms With Deal on Auction-Rate Securities - (online.wsj.com)

AIG Posts Third Straight Quarterly Loss on Housing - (www.bloomberg.com)
Chrysler, Nissan May Team Up - (online.wsj.com)
Freddie Needs Equity Lift - (online.wsj.com)
Retailers slash prices in back-to-school fight - (www.chicagotribune.com)
Shoppers buying more store brands as budgets get tight - (www.dallasnews.com)
High Costs, U.S. Sales Hurt Toyota - (online.wsj.com)
Freddie Mac’s Big Loss Dims Hopes of Turnaround - (www.nytimes.com)
Freddie Mac's negative net worth raises questions - (www.reuters.com)
CarMax to slow growth after seeing sales drop - (www.signonsandiego.com)
GM Presses Ad Agencies on Costs - (online.wsj.com)
Tempest for a Bank That Bet on Risky Loans - (www.nytimes.com)

Credit crisis taking toll on European insurers - (www.iht.com)
Bank of Korea Raises Rate to 5.25% to Curb Inflation - (www.bloomberg.com)
Food price inflation spirals to 9.5 per cent - (business.timesonline.co.uk)
UK dealers cut car prices as sales fall - (www.ft.com)
Defaults to Rise in Europe a Year After Crunch Began - (www.bloomberg.com)
Barclays profits plunge on huge credit-related losses - (news.yahoo.com/s/afp)
U.K. July Home Values Fall Most Since 1983, HBOS Says - (www.bloomberg.com)
As Mexican inflation soars, President Felipe Calderon shakes up Economic Ministry - (www.latimes.com)
The Big Freeze part 4: How to build a US recovery - (www.ft.com)