KeNosHousingPortal.blogspot.com
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California Pension Reform - Fun Numbers - (www.californiapensionreform.com)
6,133 retired California government workers receive pensions in excess of $100,000. They're all listed here. The information below was obtained under the Freedom of Information Act from the California Public Employees Retirement System (CalPERS). This list may be be updated periodically with more pensioners as more data is obtained. Search the CalPERS $100,000 Pension Club database ...
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FDIC Real Estate for Sale - (www.fdic.gov) Interesting FDIC website showing all properties owned by FDIC for sale.
Fannie's, Freddie's Woes Threaten Apartments - (online.wsj.com) The deteriorating commercial real-estate market is hitting Fannie Mae and Freddie Mac, the housing-finance giants that were taken over by the U.S. last year after billions of dollars in losses on residential real estate. The firms, which together have taken more than $110 billion in capital infusions from the Treasury, stepped up their lending for apartment buildings as the commercial real-estate market peaked, and they are now facing rapidly rising loan losses. Fannie, which has been more active than Freddie, faces the biggest problems. Its serious delinquency rate, or loans that were 60 days or more past due, stood at 0.62% at the end of September, up from 0.16% a year ago. One troubling sign: one-quarter of the $180 billion of apartment-building loans on Fannie’s books were originated near the top of the market in 2007 and those loans account for nearly half of all its commercial-loan delinquencies. Fannie increased to $1.2 billion its reserves for losses on multifamily loans at the end of September, up from $104 million at the end of 2008. In a statement, Fannie Mae said market fundamentals “will remain under pressure in the near term” and that the company is taking steps “to mitigate risks associated with weak rental demand.” The losses from Fannie’s and Freddie’s $300 billion in apartment-building loans will be a fraction of their losses on single-family homes, where the two firms back $5 trillion of loans. But the bigger impact could be on the market for apartment buildings. The firms were responsible for 84% of all multifamily lending last year, up from 34% of the market in 2006, according to the Federal Housing Finance Agency. A report published earlier this year by Harvard University’s Joint Center for Housing Studies warned that without Fannie’s and Freddie’s continued purchases, “apartment transactions could come to a near standstill” and that could spur a further unraveling where even “cash-flow-positive projects may not be able to get refinanced and will be pushed towards default.” Fannie and Freddie say they were conservative in underwriting of apartment-building loans. For example, 97% of Freddie-backed apartment properties are still worth more than the value of the underlying loans. “We were careful about our credit, but with the markets deteriorating, everybody will be impacted negatively in some form or another,” said Freddie spokeswoman Patti Boerger. But, in recent years, critics say that the firms became more aggressive. Some deals that they financed wouldn’t have occurred without their participation. “By 2007, Fannie basically put more gas on the fire,” says Mike Kelly, president of Caldera Asset Management, a consulting firm for distressed multifamily properties.
How the tax code encourages debt - (www.newyorker.com) John Kenneth Galbraith wrote that all financial crises are the result of “debt that, in one fashion or another, has become dangerously out of scale.” The recent financial crisis was no exception, with everyone—homeowners, private-equity investors, our biggest banks—taking on enormous amounts of debt. If it’s frustrating that the government is footing the bill to clean up the mess, it’s even worse that the government helped pay for the debt binge that created the mess in the first place, thanks to a tax system that actually subsidizes borrowing. Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked. The government doesn’t make people go into debt, of course. It just nudges them in that direction. Individuals are able to write off all their mortgage interest, up to a million dollars, and companies can write off all the interest on their debt, but not things like dividend payments. This gives the system what economists call a “debt bias.” It encourages people to make smaller down payments and to borrow more money than they otherwise would, and to tie up more of their wealth in housing than in other investments. Likewise, the system skews the decisions that companies make about how to fund themselves. Companies can raise money by reinvesting profits, raising equity (selling shares), or borrowing. But only when they borrow do they get the benefit of a “tax shield.” Jason Furman, of the National Economic Council, has estimated that tax breaks make corporate debt as much as forty-two per cent cheaper than corporate equity. So it’s not surprising that many companies prefer to pile on the leverage. There are a couple of peculiar things about these tax breaks—which have been around as long as the federal income tax. The first is that they’re unnecessary. Few people, after all, can save enough to buy a home with cash, so home buyers naturally gravitate toward mortgages. And businesses like debt because it offers them tremendous leverage, making it possible to put down a little money and potentially reap a huge gain. Even in the absence of the deductions, then, there would be plenty of borrowing. The second thing about these breaks is that their social benefits are pretty much nonexistent. Advocates of the mortgage-interest deduction, for instance, claim that it increases homeownership rates. But it doesn’t: in countries where mortgage deductions have been eliminated, homeownership rates haven’t dropped. Instead, the deduction simply inflates house prices. The business-interest deduction, meanwhile, may lower an individual company’s taxes, but it also means that the over-all corporate tax rate is higher, so its real impact is to give companies with lots of debt an unjustified advantage.
Real Estate, On the Wane, Fights to Stay Politically Relevant - (www.opensecrets.org) Mass property foreclosures and plunging property prices precipitated a veritable real estate crisis last year. A glut of available credit compounded matters, in turn flash-freezing property buying. The situation is ugly. It's costly. And the federal government wants to ensure that the risky mortgage products that in part helped hurl the nation headlong into this mess are strictly regulated. The U.S. House this year has already passed the Mortgage Reform and Anti-Predatory Lending Act, and a key House committee approved the creation of a Consumer Financial Protection Agency, designed to oversee financial products such as mortgages and loans. The U.S. Senate appears poised to pursue a similar course, although not without objections from some Senate Republicans who consider the new agency unnecessary. Of particular interest to many lawmakers: So-called subprime loans with exorbitant rates that many homeowners ultimately couldn't pay. The industry itself is girding for a political fight. "While abusive lending is mostly found in subprime loans, not all subprime loans are abusive," the National Association of Realtors said in a statement. "Responsible subprime lenders play an important role in helping millions of consumers achieve homeownership." During the past 20 years, the real estate industry has generally given Republicans candidates more campaign cash than Democratic candidates -- although Democrats currently in Congress have received 55 percent of the industry's cash since 1989. The simple fact that there are many more Democrats than Republicans in Congress could explain this.
Government Favors Obedient Debt-slaves Over Defiant Renters - (blogs.wsj.com) During the housing boom, critics increasingly complained that the government devoted too many resources to homeownership and too few to more affordable options, such as renting. Now, during the bust, the government’s commitment to ownership has grown even larger, according to a new report from the Congressional Budget Office. This year, the government devoted four times the amount of budgetary resources to homeownership as it devoted to rental housing, or around $230 billion in spending and tax breaks for homeowners compared to around $60 billion for renting, the CBO reported. Around two-thirds of Americans are homeowners, according to the Census Bureau, though the rate fell to around 67.5% earlier this year, from a peak of 69.2% in 2004. The report notes that, until recently, most government support for homeowners came in the form of tax breaks that don’t require government spending but result in the government collecting less in taxes than what might be owed. But recent efforts to help stabilize a fragile housing market means that government spending now accounts for around half of federal support for housing, including a $75 billion tab for the government’s loan modification programs and taxpayer money to keep Fannie Mae and Freddie Mac in the black. That doesn’t include aid that the government has agreed to give to state housing finance agencies through Fannie and Freddie, or any aid that the Federal Housing Administration may need in the future. FHA officials say the agency won’t need taxpayer money unless housing deteriorates further, but the agency last week said its capital cushion had fallen to very low levels. Several top officials in President Obama’s administration have a background in supporting multifamily housing, and the administration has indicated that it would do more to support a balanced housing policy than others in the past.
OTHER STORIES:
Mortgage delinquencies hit another record in 3Q - (apnews.myway.com)
Mortgage Delinquencies Still Rising - (www.benzinga.com)
Cheaper Prices Motivating House Buyers, Not Tax Gift - (www.usnews.com)
House construction at lowest level in 6 months - (www.money.cnn.com)
U.S. mortgage applications drop even as rates fall - (www.reuters.com)
Fed May Not Increase Rates Until 2012 - (www.bloomberg.com)
Fed Busting - (www.opinionator.blogs.nytimes.com)
The Fed is sending gold higher - (www.blogs.reuters.com)
Paulson Protege Pellegrini on Bernanke's Fed: "Sheer Lunacy" - (www.businessweek.com)
FDIC's Bair: Bank Bailouts Were 'Not a Good Idea' - (www.pbs.org)
Goldman is "vampire squid wrapped around the face of humanity" - (www.bloomberg.com)
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