KeNo's Housing and Economic Portal: Sunday July 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Attorneys advise clients to stay in their houses without paying - (www.heraldtribune.com) Phil Agnes and other lawyers have two words for homeowners facing foreclosure: Stay put. The flood of foreclosures has clogged the courts, allowing homeowners to stay in their homes while the paperwork goes through the system. Many homeowners are unaware that they can remain at home for months while the foreclosure is in court, attorneys say. And homeowners willing to challenge the foreclosure sometimes can remain in their homes for more than a year, sometimes more than two years, just by filing a few basic legal documents. "It's in everyone's best interest to stay in the home," said Agnes, an attorney who volunteers at Gulf Coast Legal Services Inc. A legal fight lets homeowners save money for post-foreclosure life, when a ruined credit score makes it harder to find a new place to live. And there are more advantages, attorneys say: Making the legal process costly and time-consuming may push the lender to find alternatives to foreclosure like a loan modification or short sale, the attorneys say. Staying in the house does not disrupt family life, and the owner takes care of the home, protecting its value for the bank and the neighborhood's appearance. Agnes said he sent letters to homeowners immediately after foreclosure filings, and about a third of them were returned because the homeowners had already left. The Manatee and Sarasota court records are full of cases in which the banks waited months to move forward, even if the owner did not respond. Agnes said he has two cases where he responded for the homeowners, and the bank has not filed anything in almost a year. "And they're still in the house," he said. Too rushed to fight: The attorneys for lenders hope owners do not bother to fight the foreclosure.If a homeowner simply walks away from the property, attorneys can spend hardly any time in court and retake it in as little as 90 days. Courts across Florida have expedited the process to clear tens of thousands of foreclosures that have been filed since the housing market fell in 2006. Sarasota and Manatee counties had 46,455 filings since January 2006, far outpacing the final judgments in cases. Adding to the clog, the lenders often pay law firms a flat fee for each judgment they obtain, so they focus on the easier cases, foreclosure defense attorneys who work in the system say. When a homeowner files paperwork that takes the case out of the fast track and into the traditional court, lender attorneys sometimes seem to put the case aside. "They don't have time to necessarily fight these cases," Agnes said. "If you just sort of roll over and do nothing, they're not going to help you." And any motion that requires the banks to produce information can delay the case for months. The more difficult the request, the longer the delay. The going time lag for banks to respond when a homeowner asks to see some types of paperwork? Up to six months. "They're very disorganized," said Christy Greene, an attorney at Advocates For Justice in Jacksonville.

Citi raises card rates on millions - (www.ft.com) Citigroup has sharply increased interest rates on up to 15m US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks. People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13m and 15m credit cards it co-brands with retailers such as Sears. Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees’ salaries. Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent – or nearly 3 percentage points – between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research. After FT.com broke news of the hike, Citi issued a statement saying: ”We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit.” Citi’s move came as the economic downturn caused record defaults among US card users and prompted many issuers to raise rates, both to cushion their losses and pre-empt the new restrictions set to come into effect in February. However, Citi’s increases have been larger than those of its main rivals, according to Lightspeed, which tracks about 12,000 US credit card accounts. Carolyn Maloney, Democratic representative for New York, the author of the new rules that will sharply constrain lenders’ ability to raise rates for risky borrowers, criticised Citi’s move. “It’s hard to tell if rate hikes on existing balances being put in place now are the result of prior bad business decisions or getting in under the wire of the new law,” Ms Maloney told the Financial Times.

Madoff Investors Were 'Greedy': Hedge Fund Manager - (www.cnbc.com) People who invested with Bernard Madoff were greedy and happy to accept high returns without probing too much in the way these were achieved, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday. "I'm sympathetic for people losing money but I think this pejorative term of being greedy still applies," Hendry told CNBC.com. "There was an implicit greed in not questioning and just accepting unnatural returns." "They didn't show the requisite amount of fear that would have generated the curiosity to investigate," he said, adding that for every one Madoff investor, there were ten who stayed on the sidelines. Regarding the indirect victims of Madoff, those who didn't know that their money was put in the Ponzi scheme, "shame on their advisors," Hendry said. "Did you invest with Madoff?" is the first question investors ask their advisors nowadays, and the market is already "de-selecting" the investment advisors who did from those who didn't, he said. Besides the lack of scrutiny over the numbers, a reliance on respectability is the other facet of the problem, according to Hendry. "The problem that we had, and Bernie typifies it, is he was respectable," Hendry told "Squawk Box Europe". "I can't raise money. People say 'look at that crazy guy'." Sometimes, it is the "crazy guy" who makes clients money when others lose it, he added. Madoff, who confessed to running a Ponzi scheme of more than $50 billion, was sentenced Monday to spend 150 years in prison – a virtual life sentence – after his scheme collapsed amid the financial crisis. "This is a speculative excess and the excess is a lack of scrutiny. And we see a lack of scrutiny across the board in the pricing of assets," Hendry added. "There will be more regulation," Hendry said. "I don't think that's necessarily the answer. The banking sector is the most tightly regulated sector, apart from nuclear, in the world. "

Senate Field Hearing Explores Reverse Mortgage Scams - (www.kansascity.com) Reverse mortgages, increasingly used by seniors to help fund retirement or pay unexpected medical bills, are often accompanied by excessive fees and marketed using overly aggressive tactics, Sen. Claire McCaskill said Monday. The Missouri Democrat hosted a Senate field hearing at a senior center in suburban St. Louis to address concerns about the fast-growing reverse mortgage industry. The mortgages, which are loans available to those age 62 or older that convert home equity into cash, have exploded in popularity in the past decade — the Federal Housing Association endorsed 112,148 reverse mortgages in fiscal year 2008, up from 7,757 in 2001. Mathew Scire, director of the Government Accountability Office’s Financial Markets and Community Investment team, testified that reverse mortgages are complex and costly for the vulnerable population they serve. McCaskill agreed. “You may borrow $100,000 and 10 years later owe $200,000,” she said. The GAO’s review of marketing material for reverse mortgages found examples of potentially misleading claims, Scire said. Some promise “lifetime income,” which Scire said isn’t always guaranteed. A reverse mortgage allows elderly homeowners to convert equity in their homes into cash. It differs from a home equity loan or a second mortgage because the borrowers don’t have to repay the loans as long as they continue to live in and maintain the home. Most reverse mortgages are insured through the Federal Housing Administration’s Home Equity Conversion Mortgage program. In fact, because the loans are federally guaranteed, reverse mortgages are costing taxpayers millions of dollars, McCaskill said. In its fiscal 2010 budget request, the Department of Housing and Urban Development sought $798 million to cover potential losses from declining value of homes using reverse mortgages. Peter Bell, president of the National Reverse Mortgage Lenders Association, told McCaskill his agency has polled state attorneys general offices, bank regulators and the Federal Trade Commission and found very few complaints about reverse mortgages. Bell said strong safeguards are in place to ensure against fraud, including mandatory counseling for anyone considering a loan. “I don’t think you could come up with any business in America in which every potential customer is referred to an independent third-party specialist, a counselor at a HUD-approved agency, to review the transaction under consideration and its implications before a decision is made to proceed,” Bell said. But Scire said GAO investigators posed as potential customers at 15 counseling sessions and found none of the counselors covered all of the topics required by HUD. Scammers also are taking advantage of reverse mortgages, said Anthony Medici, special agent in charge of HUD’s Criminal Investigation Division. In some cases, unauthorized individuals — relatives, even neighbors — keep payments after the homeowner dies or permanently leaves a residence. Another concern involves financial professionals convincing seniors to invest proceeds into some other financial product they may not be able to access for years, perhaps until after their life expectancy.

Realty fervor takes aim at reality - (Bill Fleckenstein at articles.moneycentral.msn.com) The real-estate balloon has deflated, but there's still plenty of hot air surrounding home prices. Let us now appraise industry lobbying efforts to lift valuations. As the aftermath of the real-estate/credit bubble enters its second year, let's begin by devoting our attention to two key cogs in that wheel: the National Association of Realtors and the National Association of Mortgage Brokers. For both organizations, the operative words are: long on bombast, short on shame. Mark-to-fantasy still rules: Reacting last Tuesday to macro data near and dear to his heart, NAR Chief Economist Lawrence Yun made his own plea for what -- in Wall Street terms -- would be called mark-to-model: "Pending home sales indicated much stronger activity, but some contracts are falling through from faulty (my emphasis) valuations that keep buyers from getting a loan." By "faulty," he meant: "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." (A slight variation is contained within a letter to members from the NAMB: "Appraisal Management Companies are assigning appraisers from a different municipality, county, or even state to appraise the target house. Therefore, unfamiliar with the neighborhood and unable to produce an accurate appraisal.") In other words, we don't want these house prices marked to the last sale. We want them marked to where we think they ought to be marked. Yun continued: "In the past month, stories of appraisal problems have been snowballing from across the country, with many contracts falling through at the last moment. There's the danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." Honest appraisals: Not in my backyard: That pathetic little threat didn't cut it for Barry Ritholtz (the author of "Bailout Nation," among his other talents), who, in an e-mail to me, summed up the situation: "I did some more digging, and I quickly discovered what this contemptible suggestion was all about: It is part of a broader lobbying effort by the National Association of Mortgage Brokers (NAMB) and the NAR against honest appraisals. For more proof of this lobbying effort, see the letters to mortgage brokers and real estate agents from their trade associations to mobilize against mandating honest appraisals." (Ritholtz has posted both the mortgage brokers letter and the Realtors letter on his Web site.)

The California IOUs are coming... - (themessthatgreenspanmade.blogspot.com) We're back in California for a couple of days and, having caught a few minutes of the local news from Sacramento a short time ago, there appears to be little progress being made in the effort to avoid state issuance of IOUs in the days ahead. The local paper carries news that the last day of the fiscal year should be quite an interesting one in the state capital, with each passing hour the odds increasing that the IOU man cometh. Both houses likely will be in session all day and into the evening, but look for the real action at the negotiating table in the Governor's Office. A key issue is $3.3 billion in budget savings that have to be approved by midnight -- in the current fiscal year -- or will be lost forever. Democrats are pushing the cuts to schools and redevelopment agencies to be approved by midnight, but the GOP and the governor want a full package before signing off. The 1992 version of this melodrama ended badly, with drunken shouting, a fistfight, and a mysteriously stopped clock in the Assembly. Ultimately, the production ran all summer, with IOUs, court fights and rock-bottom performance ratings for politicians of all stripes. Maybe someone will do the state a favor and roll a hand-grenade into the governor's office and a new group of "leaders" can begin the budget process anew. Too harsh? Probably. But, it seems clear that nearly all lawmakers in California are hopelessly out of touch with reality these days, many of them likely viewing the recent economic downturn as being just a temporary setback in what is seen as a birthright of ever-rising real estate prices, the absence of which makes the state, basically, ungovernable. The idea that an Obama bailout might also materialize, despite recent assurances to the contrary, is no doubt making the sense of urgency a bit less than it might otherwise be.