Tuesday April 14 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Texas Rangers Owner Hicks Sports Group Misses Interest Payments - (www.bloomberg.com) Billionaire Tom Hicks’s holding company for the Texas Rangers baseball team defaulted on $525 million in loans after missing interest payments, Bloomberg data show. Hicks Sports Group, which also owns the Dallas Stars hockey team, is involved in negotiations with its lenders over the terms and covenants of the loans, Hicks Sports said in an e- mailed statement. Describing the situation as a “business dispute,” the team owner decided to withhold last week’s interest payment “as part of its negotiations,” according to the statement. “We are simply asking the lenders to be reasonable,” Tom Hicks, 63, said in the statement. “They need to understand that these important assets must be managed with long-term perspective and a commitment to winning.” The company missed payment on a $350 million term loan with an interest rate of 2.5 percentage points above the London interbank offered rate, or Libor; a $100 million so-called second-lien loan, with an interest rate of 5.5 percentage points plus Libor; and a $75 million revolving bank loan that pays 2 percentage points over Libor. “Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated,” Tom Hicks said. “The company is not asking for additional money; it is only asking for full access to the interest reserve account and revolving credit line as well as some amendments in the debt covenants.”

Thornburg Throws In The Towel - (www.forbes.com) New Mexico mortgage REIT files for bankruptcy after yearlong battle with creditors and credit crunch. After a year of trying to rescue his beleaguered company, money manager Garrett Thornburg is bowing to the realities of the credit markets. New Mexico mortgage company Thornburg Mortgage will file for bankruptcy, cede assets to its banks and liquidate what's left, the company said Wednesday. Investors were already expecting the worst. Shares of the real estate investment trust opened at 5 cents Wednesday morning and dropped to under 2 cents after the announcement, compared to $32 a share a year ago……In the meantime, Thornburg managed to raise $1.5 billion in capital and stopped writing new mortgages, but the freezing up of credit markets took a toll. In the first nine months of 2008, the company lost $2.8 billion, according to its last SEC filing. At the end of September, it had a negative net worth, with $26.3 billion in assets against $26.6 billion in liabilities. As the market for private mortgage bonds dried up, the value of the bonds it owned dropped sharply. Two weeks ago, Thornburg got the banks to extend or forbear on those debts as it scrambled to find an investor or reorganize. Now the banks will take back and sell the collateral they are owed, the company said. The business of servicing its mortgages will transfer to the lenders.

Recession outlasts even extended jobless benefits - (finance.yahoo.com) In the coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits, just when it's never been harder to find a job. Congress extended unemployment aid twice last year, allowing people to draw a total of up to 59 weeks of benefits. Now, as the recession drags on, a rolling wave of people who were laid off early last year will lose them. Precise figures are hard to determine, but Wayne Vroman, an economist at the Urban Institute, estimates that up to 700,000 people could exhaust their extended benefits by the second half of this year. Some will find new jobs, but prospects will be grim: Layoffs are projected to go on, and many economists expect the jobless rate, already at 8.5 percent, to hit 10 percent by year's end. "It's going to be a monstrous problem," Vroman said. U.S. employers shed 663,000 jobs in March, and the jobless rate now stands at its highest in a quarter-century. Since the recession began in December 2007, a net total of 5.1 million jobs have disappeared. Those who know that their unemployment aid is about to run out are counting the days, taking on odd jobs, moving in with relatives and fretting about the future.

Shrinking airlines park more planes in the desert - (www.sfgate.com) Old jets come here, empty engine pods shrink-wrapped in white, tall red tails fading to pink in the desert sun. More will come soon. Some will never fly again. Airlines have announced plans over the past year to take 1,700 planes out of service as fewer people fly. United Airlines is retiring all 94 of its Boeing 737s by the end of this year, and Northwest Airlines has cut its old DC-9 fleet by about a third. The number of planes in storage has jumped 29 percent in the past year to 2,302, according to aerospace data firm Ascend Worldwide. That includes 930 parked by U.S. operators alone. Eventually, some will be sold, some scrapped, some will sit at desert facilities in southern California, Arizona, and New Mexico. But at the moment, their number is growing faster than expected. The banking crisis has made it very difficult to get loans to buy aircraft, and the drop in commodity prices has gutted their scrap value.

Aid to Borrowers Not Preventing Rising Delinquency - (www.washingtonpost.com) Mortgage lenders have boosted their foreclosure-prevention efforts, but homeowners nonetheless are increasingly falling into delinquency even after receiving help on their loans, according to a government report issued yesterday. The report, by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulate mortgage lenders, illustrates the challenges facing industry and government efforts to tackle the foreclosure crisis. Foreclosure rates are expected to continue to increase as the economy falters and the labor market weakens. It could take months for the Obama administration's prescription for the foreclosure crisis to begin to have an impact. The financial services industry has been increasingly focused on finding affordable mortgage levels for troubled homeowners, said Faith Schwartz, executive director of the Hope Now Alliance, a group of mortgage lenders. "Our members are reporting to us that they have been increasingly using loan modifications during 2009," she said in a statement. According to the report, a growing number of homeowners are falling behind on their payments and borrowers with prime mortgages, which traditionally are considered less risky, are a growing part of the problem. The number of prime loans that were seriously delinquent -- the borrower having missed two or more payments -- exceeded seriously delinquent subprime loans for the first time in the fourth quarter, the report said.

IBM’s Takeover Discussions With Sun Said to Collapse - (www.bloomberg.com) International Business Machines Corp.’s talks to buy Sun Microsystems Inc. collapsed after the two companies failed to agree on a price, a person familiar with the matter said. Sun’s board, headed by co-founder Scott McNealy, told IBM yesterday it was breaking off exclusive negotiations, prompting IBM to withdraw the bid, according to the person. Sun rejected an offer of about $9.40 a share as too low, said the person, who declined to be identified because the talks are private. At that price, about $7 billion based on Sun’s shares outstanding, the purchase would be the biggest in IBM’s history. Sun balked because there were no guarantees in the merger contract that IBM would close the deal if the companies faced barriers or delays such as an antitrust review, the person said, leaving Sun’s shareholders and customers vulnerable. It’s unclear whether the talks have come to a dead end or whether negotiations will resume this week, the person said. The discussions remain in flux, so there is a chance the two sides could come together. IBM, led by Chief Executive Officer Samuel Palmisano, planned to announce the acquisition tomorrow, another person familiar with the matter said last week.

Gov't sees loan defaults rise - (www.google.com) The number of troubled loans backed by the government's mortgage insurance program is on the rise as economic problems mount, and lawmakers are worried that taxpayers will be stuck with the final bill. Sen. Kit Bond, R-Mo., warned Thursday that the Federal Housing Administration is a "powder keg" waiting to explode, and said the Congress and the Obama administration shouldn't place a greater financial burden on the already strapped agency. "The taxpayer credit card is maxed out," Bond said at a Senate subcommittee hearing. However, Housing and Urban Development Secretary Shaun Donovan told senators that the Federal Housing Administration is "unlikely to face the catastrophic losses borne in the subprime sector." That's partly because the agency didn't back loans for more expensive properties that have plummeted in value, particularly in places like California, Donovan said. As of February, 7.2 percent of loans backed by the FHA were either 90 days overdue or in foreclosure, up from 5.8 percent last August. The FHA became the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market's collapse. It allows borrowers to take out home loans with a down payments of as low as 3.5 percent, compared with 20 percent for a typical loan that doesn't require mortgage insurance.

Bailout Cash Nears GDP as Pledges Top $12.8 Trillion - (www.bloomberg.com) The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s. New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008. President Barack Obama and Treasury Secretary Timothy Geithner met with the chief executives of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending. “The president and Treasury Secretary Geithner have said they will do what it takes,” Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said after the meeting. “If it is enough, that will be great. If it is not enough, they will have to do more.”

Jumbo Prime R.I.P. - (www.minyanville.com) Countrywide was to subprime lending what Thornburg Mortgage was to jumbo-prime. Now, both are out of business. Thornburg said it expects to file for Chapter 11 bankruptcy protection, ending a nearly 2-year struggle to fend off creditors and survive the credit crunch. The company, once the country's second largest independent mortgage lender, specialized in making jumbo loans to borrowers perceived to have little credit risk. Ever since the market for its mortgage-backed securities evaporated in the summer of 2007, however, Thornurg has been under siege. In what now seems like ancient history, Countrywide nearly collapsed as its short-term commercial papers seized up, and investors fled Thornburg in droves. The Federal Reserve stepped in and shocked the market back to life, but the revival was short-lived. Enough damage had been done that any financial institution holding even highly rated securities backed by residential mortgages had a target on its back. Thornburg's stock was delisted last December as a series of last-ditch efforts by CEO Larry Goldstone failed to save the company. With investors buying nothing by government-backed Fannie Mae (FNM) and Freddie Mac (FRE) mortgages, Thornburg’s bread and butter -- jumbo loans -- became virtually worthless.

Pity The Forgotten Rich - (www.nytimes.com) The Senate budget debate began this week against a backdrop of war and recession, rising unemployment and surging foreclosures, runaway health care costs and diminishing insurance coverage — to name just a few of the nation’s big problems. But for Senator Blanche Lincoln, Democrat of Arkansas, and Senator Jon Kyl, Republican of Arizona, the most pressing issue is clear: America’s wealthiest families need help. Now. The two senators plan to propose an amendment to deeply cut estate taxes for the fraction of the top 1 percent of the population still subject to those levies. The proverbial millionaires next door — the plumbers, contractors and accountants who amass substantial wealth through hard work and modest living — are not the intended beneficiaries of the proposed cut. The Obama budget already takes care of them, because it retains today’s law, which imposes the estate tax only on couples with property worth more than $7 million, or individuals with property worth more than $3.5 million. That means 99.8 percent of estates will never — ever — pay a penny of estate tax. The heirs of the remaining 0.2 percent of estates are who Ms. Lincoln and Mr. Kyl are so worried about. Their amendment would increase to $10 million the level at which the estate tax kicks in. It would also lower the top estate-tax rate to 35 percent from 45 percent.



OTHER STORIES:

Treasuries Slide as Traders Focus on Record U.S. Debt Supply - (www.bloomberg.com)
Global Fiscal Crisis Brings Renewed Role for IMF - (www.washingtonpost.com)
Why Creditors Should Suffer, Too - (www.nytimes.com)
Who’s Most Indebted? Banks, Not Consumers - (www.nytimes.com)
U.S. stock rally faces test as earnings kick off - (www.marketwatch.com)

China greets G20 results with caution - (www.ft.com)
Emerging-Market Stocks Rise, Extending Four-Week Rally on G-20 - (www.bloomberg.com)
Japanese Bond Yields Reach Highest This Year as Stocks Rally - (www.bloomberg.com)
European Stocks Rise for Fourth Week, Led by Banks, Carmakers - (www.bloomberg.com)
Downturn Pushes More Toward Bankruptcy - (www.nytimes.com)
Summers Earned Millions in D.E. Shaw Salary, Bank Speech Fees - (www.bloomberg.com)
Bernanke, Kohn Pledge Fed to Withdraw Credit When Crisis Ends - (www.bloomberg.com)
U.S. May Keep Losing Jobs After Unemployment Hit 25-Year High - (www.bloomberg.com)
Top Economics Aide Discloses Income - (www.washingtonpost.com)

Fed Chief ‘Uncomfortable’ With Bailouts - (www.nytimes.com)
Banks could bet on toxic assets with taxpayers' money - (www.reuters.com)
Empty Tables Threaten Some Restaurant Chains - (www.nytimes.com)
Big Bonuses at Fannie and Freddie Draw Fire - (www.nytimes.com)
Goldbugs rest assured, inflation will return - (www.ft.com)
A Global Free-For-All? - (www.newsweek.com)

Manhattan Co-Op Prices Decline 22%, Most Since 1995 - (www.bloomberg.com)
As Wall Street Punished, Manhattan apartment prices fall - (www.reuters.com)
Commercial Property Defaults Rise as Equity Dries Up - (www.bloomberg.com)
Consumer loan delinquencies highest on record - (uk.reuters.com)

Why The Stimulus Will FAIL in Vermont And Everywhere Else - (ashizashiz.blogspot.com)
US seen facing danger of 2nd recession next year - (www.reuters.com)
Mortgage Insurance Woes Grow for Fannie, Freddie - (www.housingwire.com)
Rents falling as vacancies rise at major complexes - (www.northcountytimes.com)

New Accounting Rules for Mortgage Bonds Encourage Fraud - (www.nytimes.com)
Congress And New Fraudulent Accounting Rules - (216.157.72.247)
Gov't wants easy mortgages and few foreclosures: a contradiction - (www.vancouversun.com)
House buyer smarts should be taught in high school - (www.buffalonews.com)
An Honest Realtor - (www.patrick.net)