KeNo's Housing and Economic Portal: Sunday June 28 Housing and Economic stories

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New Hampshire Revenue chief airs tax ideas - Mortgage refinance, LLC loopholes are hot topics - (www.concordmonitor.com) With days to go before lawmakers are supposed to finish the state budget, New Hampshire Revenue Commissioner Kevin Clougherty yesterday presented lawmakers with a smorgasbord of tax ideas that could help close a $150 million budget gap. The biggest-ticket items: taxing mortgage refinancing and closing loopholes on limited liability corporations. For weeks, lawmakers working to finalize the state's next budget have extolled the idea of a "third way," new ideas for fees, fines and taxes that don't involve two lightning-rod plans: the Senate plan to permit - and tax at a 49 percent rate - 13,000 video slot machines in the state and the House plan to implement a new 5 percent tax on capital gains. The House-Senate panel negotiating the 2010 and 2011 state budget is supposed to finish Thursday. Clougherty's refinance tax presentation, however, quickly attracted lightning bolts, with senators asking whether the tax would hurt those who are already struggling, whether it would increase the cost of home ownership and whether the revenue in the proposal could be relied upon. Gov. John Lynch's office has quietly vetted the refinance idea for a couple of weeks; the state Mortgage Bankers and Brokers Association came out against it Thursday. "This has been floated for a couple of weeks now in the media, and I don't think I've talked to anyone anywhere" who likes the idea, said Berlin Republican Sen. John Gallus, who said he sees many people refinancing properties to keep their homes, send a child to college or pay for emergency home repairs. Manchester Democrat Lou D'Allesandro panned the refinance tax idea after the hearing. "That's the one I don't see. . . . I don't see it as an alternative when we have other alternatives that are better," said D'Allesandro, pointing to the plan he sponsored to allow a total of 13,000 video slot machines spread between the state's three horse and dog tracks and two North Country slot parlors. D'Allesandro estimates the plan would bring in $205 million for the state's two-year budget, which will total about $11.5 billion.

Report: Durbin Cashed Out During Big Stock Collapse‎ - (www.newsroomamerica.com) Senior U.S. Sen. Dick Durbin, a Democrat from Illinois, cashed out most of his stock during the huge market collapse last fall, after meeting with then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Bloomberg News reported. Durbin, the Senate's No. 2 Democrat, sold about $115,000 worth of stocks and mutual fund shares and invested much of the money in Warren Buffett's Berkshire Hathaway Inc., the financial newswire service said. Durbin's stock sale came a day after meeting with Paulson and Bernanke, who had "urged congressional leaders in a closed meeting to craft legislation to help financially troubled banks," Bloomberg reported. The same day, according to Durbin's 2008 financial disclosure form, he bought more than $42,000 worth of Berkshire Hathaway's Class B stock. Durbin's sale took place as U.S. stock markets plummeted last September. "The Standard & Poor's 500 index plunged 4.7 percent last Sept. 15 after the bankruptcy of Lehman Brothers Holdings Inc. and Bank of America Corp.'s government-engineered takeover of Merrill Lynch & Co. By the end of October, the index had fallen 22.6 percent," Bloomberg said. Durbin spokesman Joe Shoemaker said his boss "was doing what a lot of other people were doing, taking a look at their savings" and seeing it "start to tank and trying to preserve some level of wealth by getting out of the market." Critics counter, however, that most Americans didn't have access to Treasury and Fed chiefs to help them make their decision to sell before markets completely plunged.

Senate’s No. 2 Democrat, Dick Durbin, Dumped His Stock After Closed Meeting with Treasury Secretary in September - (doctorbulldog.wordpress.com) Alright, here’s the scenario: You have lots of money invested in stocks and mutual funds. You are privy to a closed meeting with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. In that meeting, you learn that the bottom has dropped out on the Fannie and Freddie scam. Not only that, but the Treasury is going to declare a financial emergency and steal about 700 billion in tax-payer dollars to try and salvage the financial train-wreck. The news is sure to cause the Stock Market to fall hundreds, if not thousands of points. What do you do? Well, you could wait until news of this becomes public, or, you could use this key bit of insider information and sell off all of your stocks and mutual funds the moment the Stock Market opens up in the morning—hours ahead of when the grim financial news is officially released to the public by the government—and, then re-invest that money in a less risky company; like Warren Buffett’s Berkshire Hathaway Inc., for instance. Which is, of course, exactly what Senator Dick Durbin seems to have done: Durbin cashed out during big stock collapse. Asset sales came after meeting with Fed, Treasury chiefs. As U.S. stock markets plummeted last September, the Senate’s No. 2 Democrat, Dick Durbin, sold more than $115,000 worth of stocks and mutual-fund shares and used much of the money to invest in Warren Buffett’s Berkshire Hathaway Inc.

The Illinois senator’s 2008 financial disclosure statement shows he sold mutual-fund shares worth $42,696 on Sept. 19, the day after then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged congressional leaders in a closed meeting to craft legislation to help financially troubled banks. The same day, he bought $43,562 worth of Berkshire Hathaway’s Class B stock, the disclosure shows.

Proposed Legislation in Oregon Seeks to Stem Foreclosures - (www.oregonlive.com) Another state-backed hair-brained scheme to delay foreclosures with unintended consequences of locking homeowners into long-term unsustainable debt. When Kelly Holmes stepped into the kitchen of a house for sale in Eugene three years ago, she knew she had found her dream home. With plenty of storage space and an island in the middle, the kitchen suited Holmes' family of six and was perfect for her hobby of cooking and baking. The new subdivision was close to the house the family had been renting, enabling her children to stay at the same school. But two years and two layoffs later, Kelly and Ivan Holmes lost their home to foreclosure. They didn't make mortgage payments and risked being sued for thousands of dollars. "It was one of, if not the worst, time of my life," Kelly Holmes said. The Holmes family is one of many who have lost their homes in Oregon's turbulent economy, and two bills alive in Salem are aimed at helping those facing foreclosure. "Who's to say they don't track you down a year later and still sue you for the $50,000?" Ivan Holmes asked. House Bill 3004 would prevent lenders from suing borrowers long after the foreclosure sale, which currently is allowed under Oregon's Trust Deed Act. Senate Bill 628 would attempt to prevent foreclosures by offering free home counseling and by obligating the lender and borrower to discuss an alternative payment plan before foreclosing on the home. When real estate was booming, mortgage loans were virtually unregulated and accessible to people with poor credit histories. Borrowers such as the Holmes family, who had a shaky credit background and a past bankruptcy, were told they could secure a loan with no money down -- and were even offered $1,000 for signing the trust deed. A combined loan consisting of two mortgage notes called an 80/20 loan became common, which is how the Holmeses financed their house. Under that arrangement, the two notes make it appear as if borrowers were able to afford a 20 percent down payment so they can qualify to finance the remaining 80 percent. Because such borrowers often had a low income or shaky finances, they could easily fall into debt and risk foreclosure. Stacey Howard, a foreclosure counselor at the nonprofit Neighborhood Economic Development Corporation, said about 70 percent of borrowers who come to her facing foreclosure have combination loans. "People can get into them with almost no down payment, and when they did that, they didn't have to pay mortgage insurance," she said. Howard said while the combination loan may work for a savvy borrower, "for the average person, they're not a good option." The credit crunch and tighter lending rules have made two-note loans rare. Foreclosures, though, have only increased as more people lose their jobs. A report from the Mortgage Bankers Association at the end of May showed that 2.2 percent of Oregon's 636,000 outstanding mortgages were in the process of foreclosure in the first three months of 2009, the highest rate since 1985.

Latvian Lawmakers Will Vote Today on Budget Cuts to Unlock Loan - (www.bloomberg.com) Latvia’s lawmakers will approve cuts in government spending as early as today, enabling bailout payments to resume and allaying concern about a currency devaluation. The Riga-based parliament is poised to vote on cuts of $1 billion, equal to 10 percent of budget spending, in an effort to unlock a 1.7 billion-euro ($2.4 billion) tranche from a group led by the European Commission and the International Monetary Fund. The funds will probably be transferred at the end of June or in early July, Prime Minister Valdis Dombrovskis has said. Latvia, the European Union’s fastest growing economy in 2006, is suffering the bloc’s severest recession and relying on a 7.5 billion-euro international bailout to avoid bankruptcy. The loan’s terms assume Latvia will keep its euro peg and curtail the budget deficit, exacerbating the slump. “The government gets to buy some time” with the loan, said Martins Kazaks, chief economist at Swedbank AB’s Latvian unit. “It seems they will do what is necessary.” Lawmakers will vote on measures including 10 percent pension reductions and 20 percent state pay cuts, with the proposal also entailing the closure of some state agencies and advisory councils for state-owned companies. “We are preparing for a late night,” said Lelde Rafelde, a spokeswoman for the parliament, in a telephone interview. Parliament will begin an extraordinary session, in which 16 bills will be discussed starting at about 3 p.m. local time. After that, lawmakers will return to a standard session to look at legislation including the budget amendments, she said.

Calif. Aid Request Spurned By U.S. - (www.washingtonpost.com) The Obama administration has turned back pleas for emergency aid from one of the biggest remaining threats to the economy -- the state of California. Top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching "fiscal meltdown" caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California's fiscal condition has worsened, leading to high-level administration meetings. But federal officials are worried that a bailout of California would set off a cascade of demands from other states. With an economy larger than Canada's or Brazil's, the state is too big to fail, California officials urge. "This matters for the U.S., not just for California," said U.S. Rep. Zoe Lofgren, who chairs the state's Democratic congressional delegation. "I can't speak for the president, but when you've got the 8th biggest economy in the world sitting as one of your 50 states, it's hard to see how the country recovers if that state does not." The administration is worried that California will enact massive cuts to close its deficit, estimated at $24 billion for the fiscal year that begins July 1, aggravating the state's recession and further dragging down the national economy. After a series of meetings, Treasury Secretary Timothy F. Geithner, top White House economists Lawrence Summers and Christina Romer, and other senior officials have decided that California could hold on a little longer and should get its budget in order rather than rely on a federal bailout. These policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions. California is among several states that have asked for a bailout from the Treasury Department. A few have gotten some traction, notably Michigan, whose economy is among the country's weakest and is struggling to deal with the fallout from the bankruptcies of General Motors and Chrysler. To stave off mass layoffs, Treasury officials are considering helping the state's auto suppliers stay afloat and convert their businesses to support other industries. California Controller John Chiang, a Democrat, warned last week that the state was "less than 50 days away from a meltdown of state government."

Record Corporate Bond Sales Fail to Ease Cash Gap, Moody’s Says - (www.bloomberg.com) s many as 14 percent of investment grade European companies will be unable to meet their cash requirements in the next 12 months even as bond issuance is at record levels, according to Moody’s Investors Service. For high-risk, high-yield companies the situation is worse, with as many as 20 percent failing to have sufficient cash to meet outflows, the New York-based ratings firm said in a report today. “Despite significant bond issuance volumes since the beginning of the year, liquidity remains fragile for corporate issuers,” said Jean-Michel Carayon, a corporate finance analyst at Moody’s in Paris. European companies have sold more than 640 billion euros ($886 billion) of bonds this year to meet refinancing needs as the credit crisis forces banks to crimp lending. Borrowers have about $650 billion of debt maturing in the next 12 months and Moody’s said that “as the global financial crisis continues, the availability of reliable external funding continues to be a question mark.” Almost half of sub-investment grade borrowers are in danger of breaching terms of their debt agreements, the report said, with 17 percent of investment grade companies at peril. “Economic prospects are expected to remain weak at least for the remainder of 2009,” said Moody’s analyst Sabine Renner. “While a continuation of recent bond market activity helps mitigate -- at least to some extent -- liquidity pressures stemming from bank market stress and cash flow shortfalls, uncertainty will remain elevated.” High-yield debt is graded below Baa3 by Moody’s and BBB- at Standard & Poor’s.