KeNo's Housing and Economic Portal: Frday July 16 Housing and Economic stories

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Battles in California Over Escaping Mortgage Debt - (www.nytimes.com) As the housing market continues to sputter, the real estate industry is increasingly split on the responsibilities of overextended and foreclosed homeowners. On one side are the bankers, who say borrowers should be liable for what they owe. On the other side are real estate agents, who say those who lost their houses should not be so burdened by debt that they cannot move on. The differences have real financial consequences: bankers want to collect on billions of dollars in outstanding loans; real estate agents want as many people as possible to return to the housing market. For the first time, the debate is spilling into the realm of law making, with state legislators in California considering a bill that would redefine the obligations of many defaulting homeowners. The efforts to shape the bill demonstrate how much is at stake — in California and the many other states with distressed real estate markets. The legislation introduced in the winter by the real estate lobby would have largely shielded foreclosed homeowners from debt collectors. But by the time it passed the state Senate on June 3, the banking lobby had succeeded in scaling it back. Now the bill goes to the state Assembly, where a committee will take it up next week, and bankers intend to continue lobbying.

Portugal’s banks turn to ECB for €36bn - (www.ft.com) The funding of Portuguese banks from the European Central Bank more than doubled last month, as financial institutions struggled to access international capital markets. Portuguese banks borrowed €35.8bn from the ECB in May compared with €17.7bn in April, according to the Bank of Portugal. The country was also forced to pay extremely high yields to sell five-year bonds as investors demanded big premiums amid the continuing worries over high debt levels in the eurozone. It was forced to pay average yields of 4.657 per cent, almost 1 percentage point more than the 3.701 per cent paid at an auction at the end of May. Steven Major, global head of fixed income research at HSBC, said: “These yields are approaching that magic number of 5 per cent that is likely to be charged by the European stability fund. “If the yields keep going up at this rate, then they will be paying much more than 5 per cent next month, which is arguably unsustainable.”

CA, FL, other states to get more housing "aid" to increase cost of a house - (finance.yahoo.com) Again rewarding failures (added by blog author), the Obama administration has approved five state-designed plans to help homeowners as part of a $1.5 billion effort to assist areas slammed by the housing bust. The Treasury Department said Wednesday that plans for Arizona, California, Florida, Michigan and Nevada had received approval. The states estimate that the plans are projected to help up to 93,000 homeowners. That's a small part of the administration's main existing $75 billion mortgage assistance program, which is widely viewed as a disappointment. President Barack Obama unveiled the state assistance effort in February. Since then, state agencies have designed their own approaches, largely focused on borrowers who owe more on their properties than their homes are worth or those who have lost their jobs. Officials say the state efforts could be used to make changes to the administration's broader mortgage assistance plan. The state agencies are planning to work with local housing groups to put the plans in place. "These states have identified a number of innovative programs that will make a real difference in the lives of many homeowners facing foreclosure," Herbert Allison, an assistant Treasury Secretary, said in a prepared statement.

Government Bureaucrat Recommends Against 30-Year Fixed-Rate Mortgages - (www.irvinehousingblog.com) As the chief economist of the Federal Housing Finance Agency, Patrick Lawler ... launched a frontal assault on the most sacred element in U.S. housing-policy dogma: the 30-year fixed-rate mortgage loan, providing the right to refinance at any time, with no prepayment penalty. If more members of the audience had been fully awake at this moment, I feel sure that their gasps would have been audible. The reason people at this event might have gasped is because the 30-year fixed-rate mortgage is a good idea, particularly now at the bottom of the interest rate cycle. The author of this article, James R. Hagerty, obviously disagrees. He is a fool. Now, Americans are very attached to their 30-year fixed-rate freely prepayable mortgages. They like not having to fuss about the possibility of 28% interest rates in 2032, even though most of us will move or die long before then. They love to refinance every time rates drop and then brag to their neighbors about how much they are saving per month. Notice the emotional derisiveness in the comments about bragging to the neighbors and the ridiculous overstatement about 28% interest rates after we die. People who managed their risk well by utilizing 30-year fixed-rate mortgages should brag to their neighbors. They were smarter than their neighbors who used adjustable-rate mortgages and assumed interest rate risk. People who use fixed-rate financing can still take advantage of lower interest rates by refinancing, and they lock in protection against higher rates. This is smart.

Buyer-bait tax credit offers no boost to Las Vegas home sales, prices - (www.lasvegassun.com) A last-minute jump in home sales expected by people taking advantage of a federal tax credit that expired April 30 hasn’t materialized so far, according to the latest statistics. SalesTraq reported Tuesday that existing home closings in Las Vegas in May fell to 4,186, down from 4,323 in April and 1.6 percent below sales levels of May 2009. The National Association of Realtors reported Tuesday that May’s sales fell 2.2 percent from April and analysts said that was a worrisome sign for the housing market this summer. That nearly matches the 2.3 percent decline reported for Southern Nevada by the Greater Las Vegas Association of Realtors. Under the tax credit, buyers had until April 30 to purchase a home and June 30 to close to qualify for $8,000 for first-time buyers and $6,500 for existing homeowners. The full breadth of the last-minute sales push through the end of April may not be known until this summer because Congress is considering extending the closing deadline to Sept. 30. Analysts said much of the boost from the tax credit came in 2009. The bigger beneficiary appears to be the new-home market in Las Vegas, but not by much. The 515 closings in Las Vegas are up 33 percent over May 2009, but it is only 35 closings higher than April.