KeNo's Housing and Economic Portal: Friday March 12 Housing and Economic stories

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TOP STORIES:

Man Bulldozes House After Foreclosure - (www.consumerist.com) A man in Ohio grew so angry at his bank for refusing to work with him to keep his home that he bulldozed it. He told WLWT News, "As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was. I brought it out of the ground and I plan on putting it back in the ground." Terry Hoskins owed $160,000 on a mortage on the home, which was valued at $350,000. Hoskins says the IRS placed liens on his business property and home after his brother, a former business partner, sued him. He says the bank then claimed his home as collateral and refused to accept a $170,000 buyout offer on the mortgage, telling him they could get more from it at auction. He says he might bulldoze the commercial property next.

Cash-for-clunkers rebates offered on new appliances - (www.usatoday.com) Three dozen states will launch programs in March and April to distribute almost $300 million in rebates to consumers buying energy-efficient appliances. The federally funded programs, similar to the cash-for-clunkers auto rebate program last year, are intended to improve energy efficiency and stimulate the economy. Rebates differ by state and appliance. Eight states launched programs this month, including New York, which offered $50 to $75 rebates on refrigerators, washers and freezers. On opening weekend, "There were people waiting outside every store to get started," says Doug Moore, president of appliances for Sears, which opened early to meet demand. New York's $18.7 million program was set to expire Sunday but was extended because millions remained. "It's been a boon to consumers and retailers," says Francis Murray, CEO of the New York State Energy and Research Development Authority. Michigan launched its program Feb. 10. It expects it'll take four months to distribute the $9 million in rebates, says Stephanie Epps, appliance analyst for the Michigan Bureau of Energy Systems. "The weak economy has a lot to do with it," Epps says.

Harvard’s Rogoff Sees ‘Bunch’ of Sovereign Defaults - (www.bloomberg.com) Ballooning public debt is likely to force several countries to default and the U.S. to slash spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big U.S. banks. Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years. I predict we will again,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo today. He said financial markets will eventually drive bond yields higher, and European countries such as Greece and Portugal will “have a lot of troubles.” Global scrutiny of sovereign debt has risen as nations including Greece reveal fiscal deficits that have swollen in the wake of the worst global financial crisis since the Great Depression.

Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs - (www.bloomberg.com) A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG. These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released. That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.” CDOs Identified: The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value. The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place.

New York State Budget Gap May Grow 43% to $2 Billion - (www.bloomberg.com) New York’s budget deficit for this year may be $2 billion, or 43 percent wider than projected earlier this month by the Division of Budget, comptroller Thomas DiNapoli said. Tax collections by the March 31 end of the state’s fiscal year might be less than anticipated, according to DiNapoli. Also, a $300 million payment expected from developers of a gambling parlor at Aqueduct Racetrack, $200 million from the Battery Park City Authority and $250 million from a tax amnesty plan may not materialize, he said. Governor David Paterson plans to roll the deficit into the year beginning April 1, when he forecasts an $8.2 billion budget gap, according to amendments announced Feb. 9. The state is required to pass a budget with revenue at least equal to spending, though not to keep it in balance during the year.

Protesters blockade Greek stock exchange - (news.yahoo.com/s/ap) Protesters blockaded the Athens Stock Market on Tuesday, on the eve of a general strike, as the leader of Greece's largest labor union warned the government's fiscal austerity measures could lead to an "eruption" in unemployment. About 100 protesters from a union backed by the Greek Communist Party staged the blockade, but stock market officials said the exchange was still running through online trading. Police did not intervene to end the protest. The incident was the latest sign of growing labor opposition to the Socialist government's plans for tougher spending cuts to cope with a debt crisis that has affected confidence in the euro as a common currency. On Wednesday, the country's main unions will stage a 24-hour general strike that is set to halt public services and ground flights, adding to Europe's airline travel disruption caused by walkouts elsewhere.

Nearly 20% of US Workers Underemployed in Jan - (money.cnn.com) Nearly 20 percent of the U.S. workforce lacked adequate employment in January and struggled to make ends meet with reduced resources and bleak job prospects, according to a Gallup poll released Tuesday. In findings that appear to paint a darker employment picture than official U.S. data, Gallup estimated that about 30 million Americans are underemployed, meaning either jobless or able to find only part-time work. Underemployed people spent 36 percent less on household purchases than their fully employed neighbors in January, while six out of 10 were not hopeful about their chances of finding adequate work in the coming month, the poll said.

Foreclosures and the next wave: taxes due on canceled debt - (www.ftb.ca.gov) Recent information on national foreclosure rates shows several California cities in the top 15, with Central California counties tending to have higher rates compared to other regions in California 1. The central valley experienced an explosion of homebuilding beginning in 2000, with home prices doubling over a four-year period. For the first half of 2007, California's capital Sacramento had one foreclosure for every 36 households - a 241 percent increase over the same period in 2006. Stockton's rate of one foreclosure for every 27 households in the first half of 2007 puts it at the top of the list: an increase of 256 percent over the same period in 2006 2. The tax consequences of foreclosure are a second hit for people who have had to walk away from their homes when their adjustable rate mortgages reset to a higher rate. They are often in an upside-down position, owing more on their mortgage than their home is worth. If their lender forecloses on their homes, or accepts an amount less than the loan balance from sale of the home, it may result in taxable gain to the homeowner. The type and treatment of the gain will depend on whether the mortgage is considered non-recourse or recourse debt. In California, purchase money mortgages, which are mortgages where the borrowed funds are used to purchase the house, are generally treated as non-recourse debt. If the bank forecloses on a non-recourse mortgage, then the homeowner is treated as having sold the home for the amount of the outstanding debt. The difference between the outstanding debt and the homeowner's adjusted basis in the house is considered a gain or loss on the sale of the home. If the home is the taxpayer's principal residence, where they have lived for at least two of the past five years, the gain may be eligible for the gain exclusion on the sale of a principal residence. If the foreclosure results in a loss, the loss may not be taken since it resulted from the sale of a principal residence.