KeNo's Housing and Economic Portal: Friday January 14 Housing and Economic stories

Thursday, January 13, 2011

Friday January 14 Housing and Economic stories

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Illinois Has Days to Plug $13 Billion Deficit That Took Years to Produce - (www.bloomberg.com) Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years -- resolve the state’s worst financial crisis. The legislative session that began today as the House convened will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions. The fiscal mess is largely of the lawmakers’ own making, and failure to address the shortages threatens public schools, local governments and other public services, said Dan Hynes, the state’s outgoing comptroller. “We’ve reached a very critical and concerning point,” Hynes said in an interview in his Chicago office, with packing boxes stacked in the corner. “What’s missing right now is a general understanding by the public of where we are, of how bad it is, and what the fallout would be if we don’t deal with it properly.”

Bank of America Sees $2 Billion Charge on Home Loans, Insurance - (www.bloomberg.com) Bank of America Corp., the biggest U.S. lender by assets, paid $2.8 billion to Freddie Mac and Fannie Mae after the U.S.-owned firms demanded the company buy back mortgages they said were based on faulty data. The bank rose as much as 5.6 percent in New York trading. Resolving the disputes cost Bank of America about $3 billion in the fourth quarter, including additions to loss reserves for loans that weren’t a part of the deals announced today, the Charlotte, North Carolina-based lender said in a statement. The agreements “largely addressed” liabilities from Fannie Mae and Freddie Mac, Bank of America Chief Financial Officer Charles H. Noski said on a conference call. Mortgage buyers including McLean, Virginia-based Freddie Mac and Washington-based Fannie Mae are trying to force lenders to repurchase loans that may have been made with incorrect data on income and home values. Before today’s announcement, Bank of America faced $12.9 billion in unresolved putback demands, with about half related to government-sponsored entities, according to an Oct. 19 presentation. The company said in October it had reserved $4.4 billion for costs related to the problem.

Ending Federal Subsidies for Mortgages - (www.nytimes.com) Could the government stop subsidizing mortgages altogether? Probably not in real life. But that is where the debate over reforming Fannie Mae and Freddie Mac, as well as righting the public-private sector balance in housing, should begin. This unlikely dream imagines the government out of the business of guaranteeing home financing within 10 years. That should be long enough to phase out subsidies slowly, preventing the still fragile housing market from dropping further. It would give private sector banks time to absorb an estimated $5 trillion of government-backed mortgages. And it would wean homeowners gently off the subsidized financing they have grown accustomed to. Just as important, though, a decade is short enough to focus minds now. The Treasury Department, which is to propose some sort of changes for Fannie and Freddie in January, has been equivocating for two years. And the indecision has made the two giants more powerful. They currently guarantee more than 60 percent of home mortgages, the highest proportion seen in the last 20 years, according to Barclays. They enjoy unlimited access to taxpayer money and have expanded their affordable housing mission to include the well-off.

Brown Faces California's `Reckoning' as $28 Billion Gap Shadows Inaugural - (www.bloomberg.com) Jerry Brown returns as California governor today after an absence of almost three decades, facing a “day of reckoning” over a $28 billion budget gap that promises battles with lawmakers, unions and investors threatening to shun the bonds of the most-indebted state. Brown, 72, a Democrat who served two terms as governor from 1975 to 1983, has pledged an austerity budget, due Jan. 10, that will be free from gimmicks and that will skirt the gridlock that forced the state to pay bills with IOUs two years ago. He’s told Californians they’ll face painful choices to restore fiscal health. Whether that will mean higher taxes, he hasn’t said. In the U.S. state with the biggest economy and population, Brown faces a super-size version of the stress governors confront coast to coast. States will contend with about $140 billion in deficits in the next fiscal year after closing $160 billion in gaps this year, the Center on Budget and Policy Priorities, a Washington research group, estimated Dec. 16.

Former Escorts Say Lenny Dykstra Bounced Checks, Stole Credit Cards - (www.businessinsider.com) Lenny Dykstra just seems to go from bad, to worse. First, the former baseball megastar went more or less bankrupt. And now, a stripper/porn star is saying Dykstra bounced a $1000 check he wrote to her. "Monica F" now has a blog where she's spilling the beans on her meeting with the former baseball star and failed entrepreneur (and quoting BI in the process - thanks to CJ Johnson for letting us know!) Monica Foster says no illegal or sexual activity occurred during her time with Dykstra and that she was hired strictly as "his companion to have drinks and conversation with" one morning at the Avalon Hotel in L.A.