Monday December 15 Housing and Economic stories

TOP STORIES:

Are Credit Unions in Trouble? - (www.time.com) The federal agency that oversees credit unions is stepping in with a two-tier plan to bolster institutions battered by investments in souring mortgages and other loans, a turning point for a pocket of the financial community that has so far received little of the assistance doled out to other firms. Starting in January, the National Credit Union Administration (NCUA) will tap a $41.5 billion pot of money approved by Congress in September to feed liquidity into corporate credit unions faced with mounting losses on securities tied to home loans and other lending. Corporate credit unions act as banks to retail credit unions, which are the institutions consumers interact with. In addition, the plan provides $2 billion for retail credit unions to cut interest rates on mortgages held by homeowners struggling to make payments. All of the funding is structured as loans and is due to be paid back.

8 really, really scary predictions - (money.cnn.com) To give you an idea, here are some of the predictions: Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening. Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it's going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

Mortgage Troubles Moving To Downtown Commercial Buildings - (www.nytimes.com) Like others who got caught up in the recent commercial real estate frenzy, Joseph Moinian, the owner of 20 million square feet of office towers, apartment buildings and hotels throughout the country, sought to take advantage of the huge run-up in values as banks feverishly competed to make loans with exceedingly generous terms. But now that office rents in Manhattan and elsewhere are declining and empty space is beginning to flood the market, Mr. Moinian, who is developing a 58-story W hotel and residential tower just south of the World Trade Center, finds himself with a problem. He recently missed part of a $319,000 monthly payment on a $66.5 million mortgage for 60 Madison Avenue, a second-tier Midtown Manhattan office building that he refinanced in April 2007, Commercial Mortgage Alert, a trade publication, reported in October. The cash flow from the property does not come close to what was projected in the loan documents, according to Realpoint, a credit ratings agency which has put the loan on its watch list.

Jumbo Prime: "Walk Away" Loans - (mrmortgage.ml-implode.com) AAA Prime, full doc, bank portfolio Jumbo 30-year fixed rate loan rates over the Fannie/Freddie $625k limit for higher value areas have recently surged again. Actually, they never really came back but rates are between 7.75% and 9% for perfect borrowers. And you have to put down 25 to 40% in many cases. Agency Jumbo from $417 to $625k and FHA Jumbos to $730k in some areas are both about 7.5%. Either way, Jumbo rates are at multi-year highs no doubt. In my opinion, bank portfolio mortgage loan rates show the true appetite by a bank to take on real estate and consumer exposure. These loans are submitted directly to the bank, underwritten by the bank, come with large down payments or significant equity in the case of a refi and are only available to perfect borrowers. In addition, they are totally secured by real estate! Jumbo mortgage rates being 500 to 600 bps above 10-year money and 700 to 800 above the funds rate show a mortgage credit market that would evaporate if the government was not in charge of 99% of its action through Fannie, Freddie and FHA.

Whole classes of subprime mortgages ruled unfair in Massachusetts - (www.bostonherald.com) The Bay State’s highest court has issued a landmark ruling tentatively declaring whole classes of subprime mortgages unfair under Massachusetts law. “Originating loans with terms that in combination would lead predictably to . . . default and foreclosure (is) within established concepts of unfairness,” state Supreme Judicial Court justices unanimously ruled yesterday. The decision upholds a lower-court injunction issued against subprime-lending giant Fremont Investment & Loan. Suffolk Superior Court Judge Ralph Gants handed down the injunction in February, declaring - apparently for the first time in state history - that some subprime-mortgage terms automatically violate Massachusetts law. Ruling in a lawsuit brought by state Attorney General Martha Coakley, Gants found that many of Fremont’s Bay State subprime loans seemed “doomed to foreclosure” from the start. The judge ordered Fremont to give Coakley’s office a chance to object before foreclosing on any of 2,700 Massachusetts subprime mortgages with terms Gants deemed “structurally unfair.”

Germany Attacks "Crass" British Rescue Package - (www.cnbc.com) More reason to believe the Euro may not last for 10 more years. German Finance Minister Peer Steinbrueck has criticised countries for rushing through what he called crass and untested economic rescue packages at a "breathtaking and depressing" pace. In an interview with Newsweek magazine, Steinbrueck urged governments to pause before pledging to spend billions of dollars on plans to try and help their economies emerge from the global credit crunch. A recession was unavoidable and governments should stop trying to outdo each other with ever bigger stimulus measures, said Steinbrueck. "The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," he said in the interview, published on the magazine's website on Wednesday.

California budget woes worsen - (www.reuters.com) California's budget crisis is growing worse as its shortfall for its current fiscal year has increased to an estimated $14.8 billion from a previously estimated $11.2 billion, Gov. Arnold Schwarzenegger said on Wednesday. Schwarzenegger's new budget shortfall estimate comes a day after state Controller John Chiang reported the state's general fund revenues in November were $1.3 billion, or 18.5 percent, below expectations.

Muni bond yields soar, signaling buyers' wariness - (www.latimes.com) The average yield on an index of 40 long-term muni issues tracked by the Bond Buyer newspaper rose to 6.53% on Wednesday, up from 6.49% on Tuesday and 5.84% in mid-November. Yields on tax-free municipal bonds are soaring again, pushed up in part by deepening budget woes in California and other states. One measure of investors' concern about the safety of historically rock-solid munis: In a first for the so-called credit default swap market, the average cost of insuring a basket of muni bonds nationwide against a possible default now exceeds the cost of insuring against defaults on high-quality corporate bonds.And it now costs more to insure California state debt than Mexican government debt. As investors have balked at buying muni bonds in recent weeks, prices of the securities have tumbled, pushing yields up.

Fighting Foreclosures, F.D.I.C. Chief Draws Fire - (www.nytimes.com) On the weekend before Thanksgiving, Washington’s top financial regulators were gathered on a conference call to discuss the rescue of the banking giant Citigroup when Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, interrupted with a concern. Skip to next paragraphSpeaking from her home, Mrs. Bair declared that the F.D.I.C. would contribute to a bailout only if Citigroup were forced to participate in a foreclosure prevention program she was championing on Capitol Hill. After a brief discussion, she got her way. That meeting of the minds was one of the rare agreements in an increasingly rancorous debate in Washington over how to help millions of at-risk borrowers stay in their homes as the economy deteriorates. More than any administration official, Mrs. Bair has called publicly for using billions of taxpayer dollars to finance the modification of loans threatened by default. But her advocacy has contributed to a battle that is pitting White House and Treasury officials against the F.D.I.C. and lawmakers in Congress. The discord has influenced programs that have so far proved insufficient to stem a tide of foreclosures that Moody’s Economy.com expects will affect 10 million homeowners over the next five years. And it is drawing personal conflicts and animosities into the policy-making process. White House and Treasury officials argue that Mrs. Bair’s high-profile campaigning is meant to promote herself while making them look heartless. As a result, they have begun excluding Mrs. Bair from some discussions, though she remains active in conversations where the F.D.I.C.’s support is needed, like the Citigroup rescue.

Freight Haulers Slam on the Brakes - (online.wsj.com) Expecting the Weakest Year in Three Decades, Truck, Rail and Ocean Shipping Firms Are Cutting Back. In a normal year, Gordon Trucking Inc. might replace 20% of its fleet of 1,500 big rigs with new trucks. But given the bleak outlook for the freight business, the Pacific, Wash., hauler doesn't intend to buy a single new truck next year. "We're settling in for nuclear winter in the first half of 2009," says Steve Gordon, operating chief for the company, which hauls everything from paper products to electronics.

Charge-Offs Start to Shred Card Issuers - (online.wsj.com) More credit-card holders who fall behind on their payments are eventually defaulting, deepening losses for thousands of banks that issue plastic. The worsening trend indicates that charge-off rates among credit-card issuers, which stood at more than 6% in the third quarter, are poised to rise more than expected in the fourth quarter and into next year. That means additional misery for financial firms already besieged with losses on everything from soured mortgages to bad bets on capital markets.



OTHER STORIES:

Fannie, Freddie Invite More Appraisal Fraud - (www.bloomberg.com)
As F.H.A.'s Role Grows, So Does the Risk of Fraud - (www.gadsdentimes.com)
Ex-Officer Faults Mortgage Giants for "Orgy" of Nonprime Loans - (www.nytimes.com)
Mortgage fraud is booming business for prosecutors - (www.businessweek.com)

Some owners may intentionally fall behind on mortgage - (www.usatoday.com)
US house prices set for 4th year of falls - (business.smh.com.au)
Crash of U.S. housing market really a credit crash - (www.bclocalnews.com)

When Will Housing Bottom? Not soon! - (www.viewfromsiliconvalley.com)
Saving, not spending, will halt crisis - (www.canada.com)
Congressional Oversight Panel Questions Bailout's Efficacy - (www.washingtonpost.com)
Hedge Funds Shrink by $64 Billion, Eurekahedge Says - (www.bloomberg.com)
Hedge funds’ future may lay in the past - (www.ft.com)
Swiss Fund-of-hedge Funds Seen Losing 20% In 2008 -Study - (online.wsj.com)

House Passes Bill to Ease Pension Crunch for Retirees, Companies - (www.washingtonpost.com)
Banks' hard-to-value assets soar - (www.ft.com)
Russia Devaluation Gathers Pace as Central Bank Loosens Control - (www.bloomberg.com)
Swiss Central Bank Cuts Rate to 0.5%, Recession Looms - (www.bloomberg.com)
Slumping trade a sign of great fall for China - (www.latimes.com)
Taiwan cuts interest rates to 2% - (www.ft.com)
South Korea cuts key rate to record low of 3% - (www.iht.com)

Trade Deficit in U.S. Widens as Exports Decrease - (www.bloomberg.com)
U.S. Jobless Claims Soar 58,000 to a 26-Year High - (www.bloomberg.com)
California Budget Deficit Grows to $14.8 Billion - (www.bloomberg.com)
Retail sales post big drop in November - (www.reuters.com)
Federal deficit on pace to reach record $1T - (www.breitbart.com)
Foreclosure Storm Will Hit U.S. in 2009 as Loan Changes Fail - (www.bloomberg.com)
Foreclosures dip - but hold the applause - (money.cnn.com)
Procter & Gamble Says Quarterly Sales Growth May Slow - (www.bloomberg.com)
GM, Chrysler Short of Time as Senate Debates Rescue - (www.bloomberg.com)
GM Suppliers Said to Seek Payments in Advance as Cash Dwindles - (www.bloomberg.com)
P&G Lowers Sales Outlook for Quarter - (online.wsj.com)

Stanley Works Reduces Forecast, to Cut 2,000 Jobs, Close 3 Sites - (www.bloomberg.com)
Neiman Marcus quarterly profit falls - (www.reuters.com)
For Auto Industry, Bailout Considered Just a First Step - (www.washingtonpost.com)
Bank of America Gives Chicago Doormaker Loan After Protests - (www.bloomberg.com)
Drugs scheduled to go generic soon include some commonly prescribed medicines - (www.chicagotribune.com)
Goldman set to toughen retirement rules - (www.ft.com)
Deflation Says Buy Bonds; Supply Flood Says Sell: Mark Gilbert - (www.bloomberg.com)
Where the world dumps its garbage - (www.forbes.com)