KeNo's Housing and Economic Portal: Wednesday November 24 Housing and Economic stories

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Fannie Mae Is Now The Largest Landscaping Company In The U.S. - (www.dailybail.com) There is declining interest income on one side of the house and increasing costs in servicing foreclosures of properties. They are losing money on both sides. The efficiency ratio for banks is going to go close to 100%, banks are going to be bleeding cash. The next three to six months is when things are going to get out of control; banks servicing departments don't have the capacity to own and operate the real estate. Dodd-Frank legislation may be used to restructure banks. Fannie and Freddie are the biggest sellers of real estate in the U.S. Fannie Mae is the biggest landscaping company in the U.S. now. Banks are not equipped to be owners of real property; when their assets get illiquid they can't lend. Banks are walking away from the properties.

Postal Service Takes Massive Loss Despite Deep Cuts - (www.huffingtonpost.com) The Postal Service said Friday it lost $8.5 billion last year despite deep cuts of more than 100,000 jobs and other reductions in recent years. The post office had estimated it would lose $6 billion to $7 billion, but a sharp decline in mail took a toll. Increased use of the Internet and the recession, which cut advertising and other business mail, meant less money for the agency. For the year ending Sept. 30, the post office had income of $67.1 billion, down $1 billion from the previous fiscal year. Expenses totaled $70 billion, a decline of about $400 million. The post office also was required to make a $5.5 billion payment for future retiree health benefits. "Over the last two years, the Postal Service realized more than $9 billion in cost savings, primarily by eliminating about 105,000 full-time equivalent positions – more than any other organization, anywhere," chief financial officer Joe Corbett said in a statement. "We will continue our relentless efforts to innovate and improve efficiency. However, the need for changes to legislation, regulations and labor contracts has never been more obvious."

Rejected for a mortgage because of a house's shape - (www.washingtonpost.com) We found our dream house. We found it just 15 miles outside the District, in southern Prince George's County. A stunning three-bedroom, two-bath contemporary on six acres of wooded land with a stream running through it, a huge deck and a swimming pool. A wall of windows brings the surrounding woods into the house. Strongly built and energy-efficient, it sailed through inspection. It was perfect for us, a commuting couple with jobs in New York and Washington. And the price? Less than a Manhattan studio. But our efforts to buy the house revealed a dimension of the housing market many people probably don't see. Much of the recent news about the housing market has concerned massive foreclosures. But banks are scrutinizing much more than would-be buyers' financial shape. They're worried about other shapes, too. We were pre-qualified for a loan; with two professional incomes, good credit and enough cash for a 20 percent down payment, that would not be our problem. Yet two mortgage companies turned us down. The first did so after its investors - big banks with household names - rejected our application. The second mortgage company's internal underwriters also rejected us. Their reasons were the same: The home, a customized modular house of internationally acclaimed design, built in 1989, is . . . round. Being "unusual" or "unique," it was deemed "not marketable." Despite its evident worth and multiple independent appraisals, the lenders said they could not assign a value to the house because there were no comparable properties. And, with no "value," there was insufficient collateral for a loan.

Ireland Debt Swaps at Record High as Allied Signals 62% Chance of Default - (www.bloomberg.com) The cost of insuring Irish sovereign debt surged to a record as credit-default swaps on Allied Irish Banks Plc subordinated debt signaled a 62 percent probability of default within five years. Contracts insuring 10 million euros ($14 million) of Allied Irish’s junior bonds cost about 3.25 million euros upfront and 500,000 euros annually, according to data provider CMA. That’s up from 400,000 euros a year in April. Swaps on the government’s debt jumped 27 basis points to 545. Political pressure for bondholders to share the burden of losses is growing. German Finance Minister Wolfgang Schaeuble said today the euro’s stability depends on making investors pay for future debt crises, brushing aside warnings that Europe’s most indebted countries are being hurt by proposals for a permanent-debt crisis mechanism.

Foreclosure crisis reveals shocking unfairness in how law treats houseowners - (www.slate.com) The mortgage debacle in the United States has raised deep questions about "the rule of law," the universally accepted hallmark of an advanced, civilized society. The rule of law is supposed to protect the weak against the strong, and ensure that everyone is treated fairly. In America in the wake of the subprime mortgage crisis, it has done neither. Part of the rule of law is security of property rights: If you owe money on your house, for example, the bank can't simply take it away without following the prescribed legal process. But in recent weeks and months, Americans have seen several instances in which individuals have been dispossessed of their houses even when they have no debts. To some banks, this is just collateral damage: Millions of Americans—in addition to the estimated 4 million in 2008 and 2009—still have to be thrown out of their homes. Indeed, the pace of foreclosures would be set to increase—were it not for government intervention. The procedural shortcuts, incomplete documentation, and rampant fraud that accompanied banks' rush to generate millions of bad loans during the housing bubble has, however, complicated the process of cleaning up the ensuing mess. To many bankers, these are just details to be overlooked. Most people evicted from their homes have not been paying their mortgages, and, in most cases, those who are throwing them out have rightful claims. But Americans are not supposed to believe in justice on average. We don't say that most people imprisoned for life committed a crime worthy of that sentence. The U.S. justice system demands more, and we have imposed procedural safeguards to meet these demands.