KeNo's Housing and Economic Portal: Sunday November 28 Housing and Economic stories

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80% of Las Vegas houseowners underwater on mortgage - (www.lasvegassun.com) Las Vegas home values as measured by Zillow fell 4.2 percent in the third quarter and pushed the region’s percentage of underwater properties to 80.2 percent.

The number of homes underwater -- when property owners owe more on their mortgage then the home is worth -- increased from 78.1 percent in the second quarter, the Seattle-based firm reported. Phoenix ranked second with 68 percent underwater during the third quarter. “The high percentage of homeowners in negative equity continues to be troubling in that it represents a huge number of people who are not only more vulnerable to foreclosure but who are essentially trapped in their current homes and are prevented from selling and buying a new home,” said Zillow Chief Economist Stan Humphries. “This has profound implications for future demand and will be a millstone around the neck of the housing market.”

FDIC pretends to crack down on officials of failed banks - (www.but only small banks) - (www.latimes.com) Dozens of former officers and directors are advised to work out settlements or face legal action for their alleged misdeeds during the financial crisis. For former insiders at some of the several hundred banks that collapsed during the financial crisis and in its aftermath, a day of reckoning has arrived. The Federal Deposit Insurance Corp. has told dozens of former bank officers and directors that it has drawn up lawsuits accusing them of misdeeds such as fraud and breach of fiduciary duty. The federal agency is seeking damages to help offset losses in the nation's deposit insurance fund. It's time, the FDIC warns these officials, to sit down and work out settlements — or head to court to decide the matters there.

William K. Black: Lenders Put the Lies in Liar's Loans, Part 2 - (www.huffingtonpost.com) Why would the fraudulent nonprime lenders and brokers rely on financially unsophisticated borrowers to not only lie -- but lieastutely? Why would working class borrowers know the amount of income they would have to falsely claim so that the loan would appear to meet the magic debt-to-income ratios that would get the loan approved and allow it to be sold at a premium? Why would the borrowers know that they could rely on the brokers and lenders to not verify income and to wink at claims that hairdressers made $100,000 annually? It strains all credulity to think that millions of working class Americans managed to defraud financially sophisticated lenders. It is even more absurd to believe that honest lenders, finding themselves the victims of an epidemic of mortgage fraud by these clever working class Americans, responded by (1) massively expanding the number of liar's loans they made, (2) spreading them to subprime borrowers with severe credit defects, (3) made defaults on the loans, and the loss upon default, far greater by layering risk and inflating appraisals, and (4) slashed their allowances for losses (ALLL) to trivial levels to ensure that the inevitable fraud losses would cause catastrophic losses.

Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire - (www.bloomberg.com) The subprime mortgage crisis isn’t the only calamity Wall Street created that’s upending the finances of U.S. states and cities. For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008. California’s water resources department this year spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes. “It was brilliant, and it all blew up on me,” said Brian Mayhew, chief financial officer of the Bay Area Toll Authority, the state agency that gave Ambac Financial Group Inc., the New York-based bond insurer that filed for bankruptcy this week, $105 million to end $1.1 billion of interest-rate agreements. The payments equal more than two months of revenue on seven bridges the authority oversees around San Francisco.

Courts Helping Banks Screw Over Houseowners - (www.rollingstone.com) The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This "rocket docket," as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby rinthine derivative deals of a type that didn't even exist when most of them were active members of the bench. Their stated mission isn't to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.