KeNo's Housing and Economic Portal: Saturday December 11 Housing and Economic stories

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BofA Mortgage Morass Deepens After Employee Says Notes Not Sent - (www.bloomberg.com) Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages. Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders. In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked. Following the decision, the bank disavowed the statements by DeMartini, whom it had flown in from California to testify. It was the policy of Countrywide Financial Corp., acquired by Bank of America in July 2008, to deliver notes as called for in its securitization contracts, according to Larry Platt, an attorney at K&L Gates LLP in Washington designated by the bank to answer questions about the case.

Red-light camera issue gets red hot - (www.chron.com) Houstonians may not have had the final word on the city's red light camera program, which voters rejected in a Nov. 2 referendum. A lawsuit filed by the city grew more complicated Tuesday when opponents of the devices attempted to intervene in litigation between the city and American Traffic Solutions, or ATS, the Kansas-based company that operated the cameras. Paul Kubosh, an attorney who along with his brothers bankrolled the effort to convince voters to shut down the camera program, accused Mayor Annise Parker's administration of purposefully offering a weak defense of the referendum. Such a strategy could result in allowing the cameras to remain in place and operational, he said. "It appears to us that the city of Houston is laying down cover for ATS because the citizens don't like to have their vote challenged by an out-of-state corporation," Kubosh said. "The city is trying to hide behind a federal judge to keep the cameras up because they need the money." The vote created an immediate $10 million hole in the Houston Police Department budget, city officials have said.

Banks Resisting Fannie, Freddie Demands to Buy Back Mortgages - (www.bloomberg.com) Fannie Mae and Freddie Mac are facing growing resistance as they attempt to push failed home loans off their books and onto the balance sheets of banks including Bank of America Corp. and JPMorgan Chase & Co. The two government-owned mortgage companies are enforcing contracts that require lenders to buy back loans that didn’t meet underwriting standards. At the end of September, the companies reported, banks hadn’t responded to $13 billion in buyback requests. A third of those were at least four months old and Freddie Mac has begun to assess penalties for the delays. Lenders say they are resisting buybacks because McLean, Virginia-based Freddie Mac and Washington-based Fannie Mae are unfairly second-guessing old appraisals, accusing originators of failing to verify income, or pinning failed loans on minor technical errors. Larger banks say they can handle the potential losses. Some smaller lenders say the strain could sink them. About 40 percent of repurchase requests are rescinded after lenders provide additional paperwork, said John A. Courson, chief executive officer of the Mortgage Bankers Association, a Washington trade group.

‘Real Bad’ Cash Jam May Make Michigan Towns Borrow or Default - (www.bloomberg.com) Cities and towns across Michigan have had property-tax collections plunge as much as 20 percent in the past year, the steepest drop since a 1994 state tax rewrite, forcing scores of communities to choose by March whether to borrow to pay bills or risk default on bonds. The municipalities rely on property taxes for as much as 60 percent of their revenue, according to the Michigan Municipal League. State support that typically makes up an additional 20 percent to 35 percent of city budgets has been slashed by almost a third in the past year, during the longest recession since the 1930s. The end of a three-year federal stimulus that sent $3.1 billion to Michigan -- a sum roughly equal to two annual budgets for Detroit -- will force “fundamental decisions,” according to a memorandum from the Michigan Senate Fiscal Agency. “This gets real bad in about 90 to 150 days,” said Robert Daddow, deputy executive of Oakland County, which is adjacent to Detroit’s Wayne County and has a per-capita income 147 percent of the state average, according to Moody’s Investors Service. “The question becomes whether they can secure enough cash from banks and whether banks are willing to lend in a credit-crunch situation.”

Jobless benefits end for 2 million - (money.cnn.com) Although the deadline to file for extended unemployment insurance is officially Nov. 30, many jobless have already filed their last claim for benefits. And since lawmakers aren't likely to extend the deadline anytime soon, many more unemployed Americans will run out of their extended federal benefits in coming weeks. About 2 million people are expected to stop receiving checks in December. Though President Obama on Tuesday called on Congress to extend unemployment benefits, lawmakers are still fighting over the expense. Sen. Max Baucus, a Montana Democrat, introduced a bill Monday night that would extend benefits through next year at a cost of $56.4 billion. But Republicans are likely to balk at the price tag. While they debate, state unemployment agencies are very concerned about the impending end to these extended jobless payments, which they say people depend on to cover their rent and buy food.