KeNo's Housing and Economic Portal: Wednesday March 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. Housing Aid Winds Down, and Cities Worry - (www.nytimes.com) Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default. A few years ago, only one in 10 buyers in Elkhart used the housing agency program. Now about half do. Across the country, the agency has greatly expanded its reach so that it now insures six million mortgages.“There has been all kinds of help for housing. I’m not unappreciative,” said Barb Swartley, president of the Elkhart County Board of Realtors. “But you can’t turn real estate into a government-sponsored operation forever.” Many in Washington agree. With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs. The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not seen since the 1950s…. The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications…. The programs favor first-time buyers, who have the fewest resources to bring to a deal. Heather Stevens, a 23-year-old nurse here, is closing on a three-bedroom house this week. Since her loan was insured by the Federal Housing Administration, she had to put down only 3.5 percent of the $74,900 purchase price. “It was a breeze to get approved,” she said. The sellers are covering her closing costs, which agents say is often the case here. That meant Ms. Stevens had to come up with only the $2,600 down payment, which still took all her savings.

Greece Paid Goldman $300 Million To Help It Hide Its Ballooning Debts - (www.businessinsider.com) The news that Goldman and other banks got paid hundreds of millions of dollars to help Greece hide its huge debts from the EU overseers has now gone mainstream. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means... Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere. In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come. [Greece paid Goldman] about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.

Goldman Said to Have Helped Greece Hide Debt - (blogs.nytimes.com) As Europe tries to resolve the problem of Greek deficits and debt before the struggling southern economy puts the euro in the tank, more shenanigans have come to light, and this time, they are said to involve Goldman Sachs. In 2002, Spiegel reports, the debt-laden state struck a deal with Goldman for cross-currency swaps, whereby “government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.” In themselves, cross-currency swaps can be a normal and honest way for governments to raise funds, but in the case of Greece and Goldman, the exchange rate was fiddled with, so that the swaps hid credit of about $1 billion, according to the publication. “Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one person familiar with the matter told the magazine.

Banks step up lobbying against stiffer regulation - (www.latimes.com) Even as the financial industry has sought to keep a low public profile, some of the country's largest banks have ramped up their spending on lobbying to fight off some of the stiffest regulatory proposals pending in Congress. Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress. The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.

Hercules buys condo from councilman's daughter - (www.contracostatimes.com) The Hercules Redevelopment Agency recently bought a condo from a daughter of City Councilman Ed Balico in what looks like a much better deal than several other recent investments under the agency's Homeownership Retention and Loss Mitigation Program. According to records furnished by the city, the redevelopment agency spent $123,971 to acquire the condo of Adelyn Jill A. Balico, on Devonwood in the Village Park section, in a short sale; a grant deed was recorded with the Contra Costa County Recorder in late September. A sale price of $120,000 reported in real estate industry records appears to be net of closing costs. Industry records also show Jill Balico bought the condo in January 2006 for $412,500, with a $362,500 first mortgage from a bank and a $50,000 loan from the redevelopment agency, although neither her name nor the address of her condo appear on First-Time Homebuyer and other loan lists that the city provided to the newspaper in October. Barring any other expenditures, the acquisition, added to the earlier $50,000 loan, brings the city's investment in Jill Balico's property to $173,971.

Hercules homebuying program tough to join - (www.contracostatimes.com) The Hercules Redevelopment Agency occasionally buys homes and resells them or puts them up for rent. But what you have to do to get one is a bit of a mystery. The Homeownership Retention and Loss Mitigation Program was established in May 2007 with the primary aim of helping homeowners who previously borrowed money from the agency avoid foreclosure by their primary lender. The agency has bought 11 homes under the program, city records show. In some instances, the agency paid off the existing bank mortgage and stepped in as first lender; in others, the agency bought the home. Five of the 11 purchases occurred in the last half of 2009, all but one as short sales. The agency since has resold one of the homes, and rented two others back to the owners it acquired them from. The other two -- a condo at 1209 Devonwood and a condo at 16 Amber Court -- are vacant. In the same period, the agency also sold back to the previous owner a home on Crows Nest Circle it had bought earlier in the year. The homes were not advertised for sale or rent on the city Web site and did not appear on the real estate Multiple Listing Service since the city acquired them. Brent Hawkins, general counsel for the California Redevelopment Association, said that generally speaking, redevelopment agencies must hold a public hearing before selling or otherwise transferring property, but there are exceptions. "If you have some sort of a bidding process or competitive process, you don't have to have a public hearing," Hawkins said. "But you still have to make the public aware of this opportunity." Jon Sakamoto, an employee of NEO Consulting Inc./Affordable Housing Solutions Group, which runs the Hercules Affordable Housing Department under contract, referred a request for a list of agency-owned residential properties for sale or rent to City Attorney Mick Cabral.