KeNo's Housing and Economic Portal: Friday July 9 Housing and Economic stories

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TOP STORIES:

Cost of Seizing Fannie and Freddie Surges for Taxpayers – (www.nytimes.com) Fannie Mae and Freddie Mac took over a foreclosed home roughly every 90 seconds during the first three months of the year. They owned 163,828 houses at the end of March, a virtual city with more houses than Seattle. The mortgage finance companies, created by Congress to help Americans buy homes, have become two of the nation’s largest landlords. Bill Bridwell, a real estate agent in the desert south of Phoenix, is among the thousands of agents hired nationwide by the companies to sell those foreclosures, recouping some of the money that borrowers failed to repay. In a good week, he sells 20 homes and Fannie sends another 20 listings his way. “We’re all working for the government now,” said Mr. Bridwell on a recent sun-baked morning, steering a Hummer through subdivisions laid out like circuit boards on the desert floor. For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion.

In Budget Crisis, States Take Aim at Pension Costs - (www.nytimes.com) Many states are acknowledging this year that they have promised pensions they cannot afford and are cutting once-sacrosanct benefits, to appease taxpayers and attack budget deficits. Illinois raised its retirement age to 67, the highest of any state, and capped public pensions at $106,800 a year. Arizona, New York, Missouri and Mississippi will make people work more years to earn pensions. Virginia is requiring employees to pay into the state pension fund for the first time. New Jersey will not give anyone pension credit unless they work at least 32 hours a week. “We can’t afford to deny reality or delay action any longer,” said Gov. Pat Quinn of Illinois, adding that his state’s pension cuts, enacted in March, will save some $300 million in the first year alone. But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired. Though heralded as breakthrough reforms by state officials, the cuts phase in so slowly they are unlikely to save the weakest funds and keep them from running out of money. Some new rules may even hasten the demise of the funds they were meant to protect.

Peddling Relief, Industry Puts Debtors in a Deeper Hole - (www.nytimes.com) For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity. So lucrative, that an industry trade association, the United States Organizations for Bankruptcy Alternatives, recently convened here, in the oceanfront confines of the Four Seasons Resort, to forge deals and plot strategy. At a well-lubricated evening reception, a steel drum band played Bob Marley songs as hostesses in skimpy dresses draped leis around the necks of arriving entrepreneurs, some with deep tans. The debt settlement industry can afford some extravagance. The long recession has delivered an abundance of customers — debt-saturated Americans, suffering lost jobs and income, sliding toward bankruptcy. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer’s debt is actually reduced.

FHA and Fannie Mae getting tougher with reverse mortgage borrowers - (www.latimes.com) Here's a sobering message for anyone who has a federally insured reverse mortgage or plans to apply for one: If you don't pay your local property taxes or hazard insurance premiums, you should know that the risk of losing your house to foreclosure is about to increase. Although the Federal Housing Administration, which runs the dominant reverse mortgage program, often had been lenient and forgiving in past years about tax and insurance delinquencies by senior borrowers, it's likely to take a more disciplined approach when it issues new guidelines this summer. FHA is essentially under the budgetary gun to do so: Its reverse mortgage program suffered a $798-million estimated budget shortfall in the last fiscal year — its first-ever loss — in part because of widespread declines in the value of the homes that secure its insured loans. It has already cut maximum borrowing amounts available to seniors by 10% and is looking for other ways to bring the program back into profitability in an era of low home-appreciation rates. The agency has asked Congress for a $250-million subsidy, but so far it has not been funded.

Gregory Meeks and Maxine Waters… the Two Members of the Black Caucus Who Cost Taxpayers Billions. Watch this video and you may want to toss them from Congress Today – (www.youtube.com) Listen to the morons (Maxine, Gregory, Barney Frank) arguing about the outstanding leadership of Franklin Raines and saying there are no issues.

Nancy Pelosi, Barney Frank Clueless on Freddie Mac Fannie Mae and the financial credit - (www.youtube.com) Again, Nancy Pelosi and Barney Frank behind the failures of Fannie Mac and Freddie Mac

The Inflatable Loan Pool - (www.nytimes.com) AMID the legal battles between investors who lost money in mortgage securities and the investment banks that sold the stuff, one thing seems clear: the investment banks appear to be winning a good many of the early skirmishes. But some cases are faring better for individual plaintiffs, with judges allowing them to proceed even as banks ask that they be dismissed. Still, these matters are hard to litigate because investors must persuade the judges overseeing them that their losses were not simply a result of a market crash. Investors must argue, convincingly, that the banks misrepresented the quality of the loans in the pools and made material misstatements about them in prospectuses provided to buyers. Recent filings by two Federal Home Loan Banks — in San Francisco and Seattle — offer an intriguing way to clear this high hurdle. Lawyers representing the banks, which bought mortgage securities, combed through the loan pools looking for discrepancies between actual loan characteristics and how they were pitched to investors.