KeNo's Housing and Economic Portal: Friday January 7 Housing and Economic stories

Thursday, January 6, 2011

Friday January 7 Housing and Economic stories

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Michigan Town Is Left Pleading for Bankruptcy - (www.nytimes.com) HAMTRAMCK, Mich. — Leaders of this city met for more than seven hours on a Saturday not long ago, searching for something to cut from a budget that has already been cut, over and over. This time they slashed money for boarding up abandoned houses — aside from circumstances like vagrants or obvious rats, said William J. Cooper, the city manager. They shrank money for trimming trees and cutting grass on hundreds of lots that have been left to the city. And Mr. Cooper is hoping that predictions of a ferocious snow season prove false; once state road money runs out, the city has set nothing aside to plow streets. “We can make it until March 1 — maybe,” Mr. Cooper said of Hamtramck’s ability to pay its bills. Beyond that? The political leaders of this old working-class city almost surrounded by Detroit are pleading with the state to let them declare bankruptcy, a desperate move the state is not even willing to admit as an option under the current circumstances. “The state is concerned that if they say yes to one, if that door is opened, they’ll have 30 more cities right behind us,” Mr. Cooper said, as flurries fell outside his City Hall window. “But anything else is just a stop gap. We’re going to continue to pursue bankruptcy until the door is shut, locked, barricaded, bolted.”

Quinn Weighs $15 Billion Illinois Borrowing ‘Option’ - (www.bloomberg.com) Illinois Governor Pat Quinn is considering borrowing $15 billion to pay overdue bills and balance the biggest budget deficit in the state’s history. The plan is among a range of proposals that Quinn is discussing with state lawmakers as they prepare to return to Springfield Jan. 3 for the final days of the legislative session, said Kelly Kraft, a Quinn spokeswoman. Illinois faces a budget shortfall of at least $13 billion because of declining tax revenue. The state Senate in November didn’t have the votes to approve the borrowing of $3.7 billion to cover pension-fund contributions for the fiscal year that ends June 30. “We are working on a variety of options,” Kraft said in an interview today. “Nothing has been finalized. We’re talking with legislators on both sides of the aisle. Our goal is to stabilize the budget.”

Illinois Default Insurance Cost at Five-Month High: Muni Credit - (www.bloomberg.com) The cost of insuring Illinois’s bonds against default rose to the highest level in five months as the state headed for the new year without a plan to finance a $3.7 billion pension-fund contribution. The cost of credit-default swap insurance on the lowest- rated state after California has risen 16 percent to $330,000 to protect $10 million of debt, from $285,000 on Dec. 3, according to data compiled by Bloomberg. That’s the most expensive since July 12, when it reached $335,000. “They’re punishing all the states but they’re punishing the worst states more,” said Alan Schankel, director of fixed- income research for Janney Montgomery Scott LLC, a money- management firm based in Philadelphia. “Illinois has been worse for a while.” Insuring Illinois against default now costs more than that for California, the lowest-rated U.S. state according to Standard & Poor’s. Covering the most-populous state’s general- obligation debt averaged $291,000 in December, Bloomberg data show. S&P ranks California at A-, its fourth-lowest investment grade, and Illinois at A+, two levels higher.

Ally Pays $462 Million to Settle Fannie’s Loan Buyback Demands - (www.bloomberg.com) Ally Financial Inc., the auto and home lender majority-owned by the U.S. government, agreed to pay $462 million to settle repurchase demands from Fannie Mae linked to $292 billion in home loans. Ally, formerly known as GMAC Inc., said the deal covers loans serviced by GMAC Mortgage unit for Fannie Mae before June 30 and mortgage-backed securities purchased by the Washington-based loan-funding firm. The accord was reached on behalf of Ally’s Residential Capital unit and subsidiaries, the Detroit-based company said yesterday in a statement. Chief Executive Officer Michael Carpenter is seeking to resolve claims tied to faulty mortgages as he prepares Ally for a public offering to repay U.S. bailout funds. Mortgage lenders typically promise to buy back loans sold to investors or cover losses if information about the borrowers or property later proves to be incorrect. “At the start of 2010, we set a goal to substantially reduce risk in our mortgage operation,” Carpenter, 63, said in the statement. “We have successfully completed a series of steps toward that objective and are largely complete.”