KeNo's Housing and Economic Portal: Monday October 4 Housing and Economic stories

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Credit Union Fix May Be $9.2 Billion, Regulator Says - (www.bloomberg.com) Credit unions in the U.S. may absorb as much as $9.2 billion in losses over the next decade as the industry strives to recover from sour investments in real estate and consumer loans, U.S. regulators said today. Part of the plan to resolve the credit unions’ financial problems includes the National Credit Union Administration packaging $50 billion in distressed securities for sale as $35 billion in bonds carrying government guarantees, the agency said today. The debt will be backed primarily by bonds tied to home loans, with the first sale scheduled for next month. The NCUA already sold more liquid securities from two credit unions that failed last year: U.S. Central Federal Credit Union in Lenexa, Kansas and Western Corporate Federal Credit Union in San Dimas, California. The administration said today that it assumed control of Members United Corporate Federal Credit Union of Warrenville, Illinois; Southwest Corporate Federal Credit Union of Plano, Texas; and Constitution Corporate Federal Credit Union of Wallingford, Connecticut. “Up until this point we’ve been doing stabilizing actions,” Larry Fazio, NCUA’s deputy executive director, said in a telephone interview. “We’ve pumped some liquidity into these institutions. Our resolution is going to be the exit from these government programs.”

Lawmakers question Fannie Mae on use of 'foreclosure mills' - (www.washingtonpost.com) A trio of congressional Democrats is demanding to know why government-backed mortgage giantFannie Mae has entrusted many of its foreclosure cases to Florida law firms that stand accused of fabricating or backdating numerous court documents. These so-called "foreclosure mills," essentially law firms that specialize in representing lenders while churning out foreclosure suits quickly and efficiently, are under investigation by the Florida attorney general and are running into legal challenges in other parts of the country. According to the letter from three House Democrats - Financial Services Committee Chairman Barney Frank of Massachusetts and Corrine Brown and Alan Grayson of Florida - several firms facing scrutiny represent Fannie Mae both in foreclosure suits and in the company's pre-filing mediation program, which is designed to help borrowers and lenders talk through possible alternatives to foreclosure. "In other words, Fannie Mae seems to specifically delegate its foreclosure avoidance obligations out to lawyers who specialize in kicking people out of their homes," the group wrote Friday in a letter to the company's chief executive. "The legal pressure to foreclose at all costs is leading to a situation where servicers are foreclosing on properties on which they do not even own the note," they added. "This practice is blessed by a legal system overwhelmed with foreclosure cases and unable to sort out murky legal details, and a set of law firms who mass produce filings to move foreclosures as quickly as possible."

Banks devise new fees - (money.cnn.com) Bank fees: They're like a game of Whac-a-Mole. The minute one set is banned, a whole new set pops up. In August, the Card Act banned a variety of fees -- including certain overdraft and excessive late charges. But one month later, banks are increasing existing fees and finding creative new ways to charge customers more for credit cards, so-called "free" checking accounts and banking services. Already this year cash-advance fees and balance transfer fees have risen to 4%, up from 3% in July last year, according to a study conducted by the Pew Health Group's Safe Credit Cards Project. "It's like you've got a sinking boat, where you plug one hole and another one springs up," said Curtis Arnold, founder of CreditRatings.com. "You can shut down one egregious fee, but that doesn't mean other fees aren't just going to start popping up elsewhere." Here's a bank-by-bank look of what to expect. Bank of America: Just last week, Bank of America said it plans to raise minimum balance requirements over the next 12 months and charge a monthly account fee for customers who can't maintain those balances.

GMAC’s Errors Leave Foreclosures in Question - (www.nytimes.com) The recent admission by a major mortgage lender that it had filed dubious foreclosure documents is likely to fuel a furor against hasty foreclosures, which have prompted complaints nationwide since housing prices collapsed. Lawyers for distressed homeowners and law enforcement officials in several states on Friday seized on revelations by GMAC Mortgage, the country’s fourth-largest home loan lender, that it had violated legal rules in its rush to file many foreclosures as quickly as possible. Attorneys general in Iowa and North Carolina said they were beginning separate investigations of the lender, and the attorney general in California directed the company to suspend all foreclosures in that state until it “proves that it’s following the letter of the law.” The federal government, which became the majority owner of GMAC after supplying $17 billion to prevent the lender’s failure, said Friday that it had told the company to clean up its act. Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.

On the Secret Committee to Save the Euro, a Dangerous Divide - (online.wsj.com) Two months after Lehman Brothers collapsed in the fall of 2008, a small group of European leaders set up a secret task force—one so secret that they dubbed it "the group that doesn't exist." Its mission: Devise a plan to head off a default by a country in the 16-nation euro zone. When Greece ran into trouble a year later, the conclave, whose existence has never before been reported, had yet to agree on a strategy. In a prelude to a cantankerous public debate that would later delay Europe's response to the euro-zone debt crisis until the eleventh hour, the task force struggled to surmount broad disagreement over whether and how the euro zone should rescue one of its own. It never found the answer. A Wall Street Journal investigation, based on dozens of interviews with officials from around the EU, reveals that the divisions that bedeviled the task force pushed the currency union perilously close to collapse. In early May, just hours before Germany and France broke their stalemate and agreed to endorse a trillion-dollar fund to rescue troubled euro-zone members, French Finance Minister Christine Lagarde told her delegation the euro zone was on the verge of breaking apart, according to people familiar with the matter.