KeNo's Housing and Economic Portal: Friday January 28 Housing and Economic stories

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Recession-bruised states' revenue sank 30 percent in 2009 - (www.washingtonpost.com) The recession blew a huge hole in the already shaky finances of state governments, causing them to lose nearly one-third of their revenue in 2009, according to a Census Bureau report released Wednesday. The severe drop in revenue resulted largely from the big investment losses experienced bystate pension funds during the worst period of the downturn. Also, the report said, tax revenue slipped while surging demand from newly needy citizens drained the funds that back unemployment benefits, publicly funded health care and workers' compensation. Overall, total state government revenue dropped 30.8 percent, to $1.1 trillion, between fiscal 2008 and 2009, according to the report.

Blue Shield Seeks Significant Hike In California Health Insurance Rates - (www.npr.org) Blue Shield of California informed hundreds of thousands of policy holders that their insurance costs could go up as much 59 percent this year. The Los Angeles Times reports: San Francisco-based Blue Shield said the increases were the result of fast-rising healthcare costs and other expenses resulting from new healthcare laws. "We raise rates only when absolutely necessary to pay the accelerating cost of medical care for our members," the nonprofit insurer told customers last month. In all, Blue Shield said, 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October. Nearly 1 in 4 of the affected customers will see cumulative increases of more than 50% over five months.

Government mortgage subsidies keep prices unnaturally high - (www.nytimes.com) AS we all move forward with our New Year’s resolutions, it’s a good time to remember the promises our politicians have been making about the American mortgage market. The Obama administration, at a conference last August on the future of housing finance, pledged to have, come January, a plan for Fannie Mae and Freddie Mac, the mortgage giants that are now wards of the government. Congressional Republicans, in their recent position paper, made an even bolder resolution: to build a mortgage market that “does not rely on government guarantees” and “does not make private investors and creditors wealthy while saddling taxpayers with losses.” This latter promise is pleasing populist rhetoric. The problem is, it may be neither politically nor practically feasible. Even if we forget about the gigantic near-term problem — namely, that the federal government is in the housing market mainly because most banks simply won’t issue mortgages that can’t be guaranteed by Fannie, Freddie or the Federal Housing Administration — there’s the fact that federal involvement in housing has been a constant since the 1930s.

Foreclosures May Be Undone by State Ruling on Mortgage Transfer - Bloomberg - (www.bloomberg.com) Massachusetts’s highest court is poised to rule on whether foreclosures in the state should be undone because securitization-industry practices violate real- estate law governing how mortgages may be transferred. The fight between homeowners and banks before the Supreme Judicial Court in Boston turns on whether a mortgage can be transferred without naming the recipient, a common securitization practice. Also at issue is whether the right to a mortgage follows the promissory note it secures when the note is sold, as the industry argues. A victory for the homeowners may invalidate some foreclosures and force loan originators to buy back mortgages wrongly transferred into loan pools. Such a ruling may also be cited in other state courts handling litigation related to the foreclosure crisis. “This is the first time the securitization paradigm is squarely before a high court,” said Marie McDonnell, a mortgage-fraud analyst in Orleans, Massachusetts, who wrote a friend-of-the-court brief in favor of borrowers. The state court, under its practices, is likely to rule by next month.

Bust in housing creates new kind of declining city - (www.latimes.com) In the Inland Empire and other former home-building hot spots, the housing bust has created a new kind of declining city, different from the nation's traditional rusting centers of industry, that could languish for years. Although the causes of the decline in these metropolitan areas are distinct from the loss of employment from shrinking manufacturing and industry in some of the nation's old industrial powerhouses, these areas could experience fates similar to places such as Cleveland and Detroit, with neighborhoods experiencing high rates of vacancies for a very long time, according to a study to be released Thursday. "Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly," said James R. Follain, senior fellow at the Rockefeller Institute of Government and author of the study published by the Research Institute for Housing America, a division of the Mortgage Bankers Assn.