KeNo's Housing and Economic Portal: Friday January 29 Housing and Economic stories

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TOP STORIES:

U.S. 2009 foreclosures shatter record despite aid - (www.reuters.com) U.S. foreclosure actions shattered all records in 2009 and will do so again this year, with unemployment and wage cuts overcoming programs to remedy failing home loans, RealtyTrac said on Thursday. A record 2.8 million properties with a mortgage got a foreclosure notice last year, jumping 21 percent from 2008 and 120 percent from 2007, the Irvine, California-based real estate data company found. The loan failure rate -- and thus the fallout for home prices and the economy -- would have been even worse without foreclosure prevention programs and loan processing delays caused by sheer volume, the company said. In many cases loan fixes don't stick, however, and so a new record of at least 3 million properties getting a filing is seen in 2010. Filings include notice of default, auction sale or bank repossession. State, federal and private efforts to modify loan terms for at-risk borrowers either don't go far enough or are expanding too late to help many struggling homeowners on a permanent basis, many industry experts and economists agree. "Until the lenders start to get into principal balance reduction you're going to continue to see high redefault rates," Rick Sharga, senior vice president at RealtyTrac, said in an interview. "We haven't seen any appetite for that on the part of the lenders yet," he added. One in every 45 households got at least one filing last year, a rate almost four times that of 2006.

As Buildings Empty, Banks' Credit Woes Pile Up - (online.wsj.com) Commercial real-estate problems may be about to douse the recent rally enjoyed by regional banks. As banks start releasing fourth-quarter earnings this week, the losses and reserves tied to commercial real-estate loans could spike even higher than some analysts think. Regional banks could get hit hardest, given typically greater exposure to commercial property than their bigger brethren. The stress is building. This month, Reis Inc., a market research firm, announced sharp declines in rents and occupancies in all property classes, giving landlords less cash flow to service debt. Foresight Analytics estimates delinquencies on commercial real-estate loans held by banks will rise to 9.47% in the fourth quarter, up from 5.49% a year earlier. This could interrupt the 15% jump since early November in the KBW Regional Banking ETF, which tracks regional bank shares. The rally was partly triggered by the acquisitions of failed banks from the Federal Deposit Insurance Corp. by the likes of East West Bancorp. But nasty surprises could be lurking if Associated Banc-Corp.'s fourth-quarter earnings are any guide. The Wisconsin bank on Monday said the company took "additional steps" late in the quarter to perform a more extensive review of "criticized loans," particularly on its construction and other commercial-property debt. Blaming commercial real estate primarily, the company recorded credit-related charges of $405.1 million in the quarter, up significantly from $95.4 million for the third quarter and $65.0 million in the year-earlier period.

Freight trains carry 20% less cargo in 2009 than in the previous year - (www.latimes.com) The drop is a dramatic reminder of the brutality with which the recession cut demand for coal, lumber and other goods that make up the backbone of the economy. The nation's railroads had their worst year in decades in 2009, a dramatic reminder of the brutality with which the recession damped demand for coal, lumber and other goods that make up the backbone of the economy. Freight trains carried 20% less cargo last year than in 2008, according to a report by the Assn. of American Railroads, and the industry shed nearly 21,000 jobs. The 12-month period was the slowest since the association began keeping records in 1988. Among the most dramatic declines was a 33% drop in lumber and wood products carried by train, a key indicator of demand for new construction. Trains carried 34% fewer motor vehicle parts and 8% less coal. "Last year saw declines, most of them quite steep, in every major category of rail carload traffic," said John Gray, senior vice president of policy and economics for the rail association. "Railroads are happy to have 2009 behind them."

Schwarzenegger plan for gasoline taxes slammed as "bait and switch" -(www.sacbee.com) California drivers could save a dollar and change each visit to the gas pump under a tax swap proposed by Gov. Arnold Schwarzenegger. In an effort to free up money to balance the state budget, the governor wants to reduce the sales tax motorists pay on gas purchases while increasing the gas excise tax, also paid at the pump. The net result, state finance officials estimate, would be a 5-cent savings for consumers per gallon of gas in the next year. A Bee calculation based on this week's $3-per-gallon average in California puts the savings at 7 cents a gallon. The complex proposal – in the governor's 2010-2011 budget plan – is drawing sharp opposition from transit advocates, and scrutiny from public school officials – both of whom will take a financial hit. The change, if approved by legislators, starts in July. The temporary savings for consumers would then run through July 2011. Administration officials say the switch would help California close a $19.9 billion budget gap by nullifying laws that reserve most of the gas-pump sales tax for transit agencies. That would free up anywhere from a few hundred million dollars to more than a billion dollars for the state general fund. The total amount is disputed by the administration and transit officials. State finance spokesman H.D. Palmer said the plan has the added benefit of saving motorists nearly $1 billion at the pump in the coming year. "That's one of the pleasant aspects," Palmer said.

California's proposed in-home care cutoff leaves few options -(www.sacbee.com) Ken comment: I applaud this cut. This is the fastest growing, most wasteful, bloated group in the state of CA (well maybe not most bloated). Most of the caregivers are family members who are being paid to care for other family members…..

Like his wife, Phyllis, Joe Saunders was born with cerebral palsy. But it took a car accident a couple of decades ago to leave Saunders, now 74, in a wheelchair, with limited use of his arms and legs, unable to continue working as a rehabilitation center counselor. With the help of a caregiver from In-Home Supportive Services, the couple are able to remain in the small, fraying Woodlake home Saunders' parents bought in the mid-1950s. "This way, we maintain our dignity as citizens," said Saunders. "I like my dignity. We're in our own home. That's not degrading. That's what we call the golden years." The golden years are threatened, though. About 22,000 low-income elderly and disabled Sacramento County residents are in the middle of a fight over state finances. As part of his budget plan, Gov. Arnold Schwarzenegger has proposed eliminating IHSS, the state's fastest growing social services program, which pays caregivers to help the disabled and the frail elderly.

California Rating Cut Shows $20 Billion Gap Lifts Bond Costs - (www.bloomberg.com) California bondholders got an early glimpse of what the state’s budget-negotiation season may bring as a looming $20 billion deficit led Standard & Poor’s to cut its credit rating for the second time in less than year. S&P yesterday lowered its assessment on $64 billion of the most-populous U.S. state’s general obligation bonds one level to A-, four steps above speculative grade, saying a plan by Governor Arnold Schwarzenegger to erase the spending gap relies too much on proposals that may not succeed. It was S&P’s first downgrade of California since February, when it preceded Moody’s Investors Service and Fitch Ratings in lowering the state’s rating as lawmakers were locked in a stalemate over how to fill what was then a $46 billion gap. “This is déjà vu,” said Kenneth Naehu, who invests $2.5 billion in municipal bonds for Bel Air Investment Advisors in Los Angeles. A taxable California bond maturing in 2039 traded yesterday for as little as 97.90 cents on the dollar, to yield 7.73 percent. That’s down from 98.67 cents a day earlier, when the yield was 7.66 percent. The extra yield on California 10-year bonds was 1.30 percentage points yesterday compared with top-rated municipal securities. Last year at this time, the so-called yield spread on California 10-year debt soared above one percentage point, or 100 basis points, for the first time in more than a decade.

OTHER STORIES:

Top regulators to face U.S. financial crisis panel - (www.reuters.com)

California’s Credit Cut to A- by S&P Amid $20 Billion Deficit - (www.bloomberg.com)

Emerging market bonds shed junk status - (www.ft.com)

Treasury needs plan for selling TARP assets: watchdog - (www.reuters.com)

S.E.C. Reorganizes in Wake of Madoff Fraud - (www.nytimes.com)

CFTC to Propose New Limits on Energy Speculation to Curb Prices - (www.bloomberg.com)

Papandreou Vows EU10 Billion in Greek Deficit Cuts in EU Plan - (www.bloomberg.com)

Greek 10-Year Government Bonds Open Lower; Yield Rises to 5.90% - (www.bloomberg.com)

China’s Overheating Economy Poses ‘Major’ Global Risk, WEF Says - (www.bloomberg.com)

Chinese property prices spike - (www.ft.com)

Thousands feared dead in Haiti quake - (www.ft.com)