KeNo's Housing and Economic Portal: Friday June 25 Housing and Economic stories

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TOP STORIES:

Buffett Expects ‘Terrible Problem’ for Municipal Debt - (www.bloomberg.com) Warren Buffett, whose Berkshire Hathaway Inc. has been trimming its investment in municipal debt, predicted a “terrible problem” for the bonds in coming years. “There will be a terrible problem and then the question becomes will the federal government help,” Buffett, 79, said today at a hearing of the U.S. Financial Crisis Inquiry Commission in New York. “I don’t know how I would rate them myself. It’s a bet on how the federal government will act over time.” Berkshire’s investment portfolio included municipal bonds valued at less than $3.9 billion as of March 31, down from more than $4.7 billion at the end of 2008. The company had a maximum of $16 billion at risk in derivatives tied to such debt, according to the company’s annual report for 2009.

Calif. jobless claims at record high - (www.economy.freedomblogging.com) Hmm, why do government unemployment numbers and jobs created keep improving if the number of people collecting unemployment keeps rising??? Is there any rigging of numbers by government taking place? Unemployment claims in California hit 768,709 in April, a modern-day record and the highest during this recession, state Employment Development Department officials report. The number comes after the U.S. Senate went into its Memorial Day recess without acting on a bill that would allow at least the more recently unemployed to continue to get extended jobless benefits. Just two years ago in April — a year into California's recession — the unemployed filed 254,123 claims for benefits, EDD stats show. This April, that number more than tripled as the state remained at a record 12.6% unemployment rate, third highest in the country.

Federal Housing Finance Agency demands Fannie and Freddie drive the poor into debt - (www.fhfa.gov) Government agencies continue to be the cause, not solution, to countries housing issues by continuing to push people further into debt. The Federal Housing Finance Agency (FHFA) has sent to the Federal Register a proposed rule implementing provisions of the Housing and Economic Recovery Act of 2008 (HERA) that establish a duty for Fannie Mae and Freddie Mac (the Enterprises) to serve very low-, low- and moderate-income families in three specified underserved markets -- manufactured housing, affordable housing preservation, and rural markets. The proposed rule, implementing HERA’s pre-conservatorship provisions, would require the Enterprises to take actions to increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for underserved markets while adhering to the requirements of conservatorship. As described in the proposed rule, while the Enterprises remain in conservatorship, they are expected to continue to fulfill their core statutory purposes, which include their support for affordable housing. FHFA’s approach to implementing the duty to serve provisions of HERA, consistent with the requirements of conservatorship, is to limit the proposed rule to existing core business activities at the Enterprises and to require that they not engage in new lines of business as a result of the duty to serve proposed rule.

U.S. gov't still supporting ponzi scheme that will drag house prices lower - (www.thepanicnews.com) Zellman is one of a handful of people to predict the housing bubble before it burst. I place great value in her opinions about real estate. Zellman told the audience that “Public policy is delaying the pig in the python”, meaning that government stimulus money has enabled banks to create a shadow inventory of foreclosures (the pig) that are being held on their books as worth more than they actually are. Thus the process of working the foreclosures through the nation’s financial system (the python) has been drastically slowed because the banks don’t want to mark their housing assets down to realistic values. If banks were to “mark to market” the actual value of their inventory, many would be exposed for what they are, ‘zombie banks’ as Nouriel Roubini calls them. So, instead, they currently value their assets at whatever they want, or what some analysts call “mark to make believe”. CNBC real estate journalist, Diana Olick, attended the conference and wrote this article, “Housing expert: Forecloseurs are ‘Pigs with lipstick’”, in which she talks about Zellman’s opinion of the continuing real estate problems. Zellman makes a number of points about the amount of inventory on hand and the log jam of upcoming foreclosures which will most certainly drive prices further downward. But one of the most interesting points in the article for me was this observation by Olick: She [Zellman] also raised an interesting policy question, which we brought up on the blog yesterday. What exactly is so wrong with renting? The Administration, she notes, is pushing the limits of the FHA for low-income borrowers, touting historically positive affordability. But Zelman counters that while we may be 6 percent undervalued as a nation, even markets that have overshot affordability are not moving because there’s a lot more to consider now, like supply, values, mortgage availability and jobs.

Latest Lie about Strategic Default: Borrowers Are Emotional Fools - (www.irvinehousingblog.com) Home debtors can wait, many know it's not too late and they're walking away. The ones that stay watch their souls slide away one payment at a time. Paying on a hopeless mortgage checking Zillow Zestimates and NAr press releases for good news about their home's value. Those are the debtors who will look back in anger -- anger at the lies they were fed, the manipulations from realtors, lenders, and now our own government. How would you feel after a decade of being underwater? Lenders are frightened about strategic default because it threatens to wipe out the remaining illusions about the value of the worthless loans on their balance sheets. If every underwater homeowner did what was in their best financial interest, our banks would be undeniably insolvent; therefore, lenders are coordinating a public relations campaign to appeal to false morality and now lenders are trying to stereotype strategic defaulters as hysterical fools. There is so much about the manipulation of borrowers by lenders I find offensive. This one I find particularly offensive because lenders are trying to make the correct and rational decision of hopeless debtors look like the incorrect and irrational decision of overemotional lunatics.