KeNo's Housing and Economic Portal: Tuesday January 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Massive Tsunami of Defaults Coming - (www.youtube.com) Good Youtube video. Massive Tzunami of Home Defaults Coming or How to Rob America Blind. Because there is a massive and growing backlog of latent foreclosures. Millions of owners have simply stopped paying their mortgages, and the banks are doing nothing about it, letting the owner live in the house for free. If a bank forecloses and takes possession of a house, that means the bank is responsible for property taxes and maintenance. Banks don't like those costs. If a bank then sells the foreclosure at current prices, the bank has to admit a loss on the loan. Banks like that cost even less. So there is a tsunami of foreclosures on the way that the banks are ignoring, for now. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price. One day, those foreclosures will wash over the landscape, decimating prices, and benefitting millions of families which will be able to buy a house without a suicidal level of debt, and maybe without any debt at all!

Federal Reserve Seeks to Protect Bankster Bailout Secrets - (www.bloomberg.com) The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history. The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News. “This case is about the identity of the borrower,” said Matthew Collette, a lawyer for the government, in oral arguments today. “This is the equivalent of saying ‘I want all the loan applications that were submitted.’” Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

Bernanke's Eye on Real Estate - (www.onn.tv) Does Ben Bernanke care about the stock market or inflation? Yes, he wants both higher. In fact, he’ll take any increase in any asset prices because the real problems with this economy are much scarier than stock bubbles, $3.00 gasoline, or a falling dollar. The real problems are the systemic banking crisis and its ties to real estate, both residential housing and commercial property. Bernanke and Hank Paulson staved off a banking—and therefore, an economic—collapse last year with swift action. But that was only the beginning. And quickly going from credit bubble to credit freeze in 2008 only intensified the problems that had been brewing for years. This made the next tasks of Fed and Treasury, after halting Depression 2.0, even harder: (1) help banks stabilize their junk-filled balance sheets so they can survive, pay their debts, and lend to businesses and conumers, and (2) help homeowners keep from drowning in their underwater homes, which obviously has spillover effects for banks and the economy at large. So, where are we now in that healing process? Bottom of the third inning is my guess. But my analysis or opinions aren’t the ones that count. If Ben thinks we’re still in the second inning, we may not see a rise in the Fed funds rate until the fourth quarter. And keep in mind that the Fed funds rate is not the key benchmark here that he’s worried about. It’s just a symbol of his campaign. The real goal is keeping mortgage rates down, and he has and will continue to use all available tools. Quantitative easing (QE) is all about throwing liquidity at the problem, whether it’s TARP, Treasury and MBS purchases, or other creative credit facilities.

GIC Incurs Loss After Tishman Misses Stuyvesant Town Payment - (www.bloomberg.com) Government of Singapore Investment Corp., manager of more than $100 billion of the city-state’s foreign reserves, reported losses from its investment in Manhattan’s largest residential enclave. Tishman Speyer Properties LP and BlackRock Inc. said on Jan. 8 they missed a bond payment tied to their $5.4 billion purchase of the 80-acre property, which includes Stuyvesant Town and Peter Cooper Village apartments. Missing the payment puts the property on course to become the second-largest default in a commercial mortgage-backed security in the U.S. GIC owns a $575 million mezzanine loan backed by the property, the Wall Street Journal reported in October, citing unnamed people familiar with the matter. The sovereign wealth fund, among the world’s top 10 global investment companies, also holds about $100 million to $200 million in equity, according to the newspaper report. A GIC spokeswoman declined to confirm the numbers today. GIC’s assets fell more than 20 percent in the year ended March 31 following the collapse in global financial markets. The fund increased its allocations to alternative investments, including private equity, real estate and hedge funds, to 30 percent in the 12-month period, from 23 percent in the previous fiscal year.

Gentrification Hangover in NYC - (www.prospect.org) How New York could create affordable housing from its empty glass condo buildings and failed takeover projects. Commuters arriving in Brooklyn via the Manhattan Bridge are greeted with a shiny vision of New York City's future that never came to be: condo buildings with names like the Oro, the Toren, and Forté, towering monuments to real-estate developers' credit-bubble hubris. Two-bedroom apartments in the Oro were priced at nearly $1 million apiece; today, just 90 of 303 units have been sold. The Forté would have gone into foreclosure had its developer not voluntarily relinquished the building to the bank, losing investor Goldman Sachs its $13 million stake. Property records declare 37 of its 108 units purchased, and the high-rise itself feels even lonelier -- as night falls, just a few windows in its upper reaches are illuminated. On the opposite sidewalk of Flatbush Avenue one drizzly fall evening, more than a hundred demonstrators, members of the Right to the City Coalition, drew attention to another possibility: A city starved for affordable housing could find it in the glassy confines of failed luxury dreams. They had converged from hardscrabble neighborhoods on the frontiers of gentrification, where jackhammers had provided the soundtrack for Mayor Michael Bloomberg's second term. At the height of the national mortgage boom, New York City was deluged with cash -- fees for packaging, rating, and selling securities. Wall Street bonuses alone totaled nearly $24 billion in 2006, and finance employed almost 200,000 people at its peak. That money had a ripple effect out from Lower Manhattan, bringing formerly fringe working-class neighborhoods -- Bushwick, Crown Heights, East Harlem -- into the limelight as desirable new frontiers. Developers raced to catch the wave, armed with funds not just from the local banks that usually back speculative construction but from some of the biggest names on Wall Street. New York City made the Scarfacemistake: It got high on its own supply.

Israel real estate companies to face debt problems this year - (www.jpost.com) The Israel Securities Authority warned on Tuesday that more companies will be facingdebt settlement difficulties over the course of the new year. "The global financial crisis has not bypassed Israel. Last year, 20 percent of bond-issuing companies were in difficulties according to our calculations. Looking ahead to this year we estimate that in addition to that 20%, another 8% of the companies will face debt repayment difficulties," ISA chairman Zohar Goshen said at a capital market conference in Jerusalem. "The majority of companies expected to face problems in recycling debt are real estate companies, many of which have active operations in Israel and not necessarily only in Eastern Europe," Goshen said. He added that the forecast for 2010 showed that 21% of bondholder debt was expected to be in trouble. Goshen's estimates are based on an internal rating study by the ISA examining a sample of the biggest borrowers that have issued bonds and are facing the risk of defaulting on debt.

OTHER STORIES:

It May Be Financially Irresponsible to Pay Your Mortgage - (www.lewrockwell.com)

Why Option ARMs will hit Mid to Upper Priced Houses - (www.financemymoney.com)

Quake illustrates force of plate movement - (www.sfgate.com)

The Banks Are Run By Robot Monkeys - (www.contracostatimes.com)

Yield curve can't drive profits if banks won't lend - (www.blogs.reuters.com)

Is it just my return to earth, or is TARP just not working? - (www.heraldtribune.com)

Corker questions Geithner on 'blank check' - (www.politico.com)

China Ends U.S. Reign as Largest Auto Market - (www.bloomberg.com)

In China, fear of a real estate bubble - (www.washingtonpost.com)

Pimco's Paul McCulley Wants Japan To Go "All In" - (www.Mish)

Keynesian Economics vs. Austrian Economics - (www.eclipptv.com)