KeNo's Housing and Economic Portal: Monday January 3 Housing and Economic stories

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Lenders' high bids at foreclosure auctions defer true accounting - (www.denverpost.com) Claremont's numbers show 293 home sales so far in the fourth quarter to outside investors in the 10-county metro area, compared with 2,898 homes offered at public-trustee auctions. Lenders can determine who gets a home in foreclosure based on what they bid. Most bid the unpaid mortgage amount, plus delinquencies and fees tied to the foreclosure. Given that so many homes in foreclosure lack any equity, that formula keeps investors away. Lenders who want to sell a home usually set their bid close enough to the market price to draw a buyer, taking the hit. "Banks are not pricing these things to sell them at the auction," said Rick Sharga, a senior vice president with RealtyTrac, a California provider of foreclosure data. Sharga said his analysts think the only logical explanation for above-market price bids is a change in accounting rules following the financial crisis. Banks don't have to record their assets at market value, so by bidding high, they can delay taking write-offs and losses. "The lenders wouldn't have to write down the value of these assets until they resold them," he said. Owning the properties gives lenders more control over when they recognize a loss, making it easier to meet quarterly earnings targets or comply with regulatory requirements, Sharga said.

Families Swap Houses to Stop Foreclosure - (foreclosureblues.wordpress.com) “But what’s all this about swapping homes?” I asked myself as I dug into the press release. As it turns out, the release was touting a new (and free) service being offered by an entity known as Home Lease Exchange LLC. In addition to boasting offices in Phoenix and San Jose, Calif., Home Lease Exchange appears to be the creative force behind the ForceYourLenderToModify.com – a domain name that doesn’t exactly conjure up thoughts of compromise, good-faith negotiating, etc. Here’s how Home Lease Exchange’s new service works: A borrower whose foreclosure is drawing near leases – under very generous terms – his or her home to another borrower who (a) lives nearby and (b) is also facing foreclosure. The long-term lease will deter buyers at trustee sales, leaving the servicer and/or bank to deal with the REO and its tenants, Home Lease Exchange explains. According to the release, this plan “creates amazing leverage for homeowners with their lenders, because under President Obama’s Helping Families Save Their Homes Act, tenants have the right to stay in their homes through the term of their lease, as long as the lease is entered into before complete title to the property is transferred.”

College Education Bubble Already Exists - (www.forbes.com) The overwhelming cultural consensus of the post-WWII generation was that if you are middle-class, then you simply must own your own home and your children must go to college. Out of that cultural consensus emerged a complex system of tax breaks and special lending deals designed to make sure that the number of Americans who bought houses and bachelor's degrees was as high as possible--or maybe more so. Many people now understand that this system of tax-and-lend has created a multigenerational housing bubble. But only a few have noticed that a very similar tax-and-lend system has also created a multi-generational higher education bubble. Bubbles arise in nature when some sort of film, bolstered by surface tension, contains a pocket of air under greater pressure than the general atmosphere. Bubbles arise in markets when some factor external to the market (usually tax engineering or a regulatory mandate) creates a pocket of concentrated capital in which asset prices rise well above levels that can be justified by the assets' underlying value.

New Era of Cooperation Between White House and Big Business - (www.robertreich.org) Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., praises the President’s agreement with Republicans to extend the Bush tax cuts. “If we’re going to strengthen our economy and grow jobs, this type of outreach — and cooperation between the administration, Congress, and the private sector — are critical,” says Dimon. Dimon met last week with the President. Thirty other CEOs are meeting with him today. Dimon’s compensation over the last three years has averaged $21,991,394 a year. The tax deal agreed to between President Obama and the Republicans will give Dimon and extra $1,179,000 next year, according to an analysis by Citizens for Tax Justice.  The bank Dimon heads was also the beneficiary of the giant Wall-Street bailout of 2007 and 2008. JPMorgan Chase & Co, along with other Wall Street banks, also poured millions of dollars into a lobbying campaign to water down the financial reforms Congress considered earlier this year.

showdown with state employee unions - (www.jsonline.com) "Anything from the decertify all the way through modifications of the current laws in place," Walker said at a luncheon sponsored by the Milwaukee Press Club at the Newsroom Pub. "The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers and the people who care about services." Union supporters did not like the idea one bit and sought legislation in the lame-duck session that would tie Walker's hands. It was a done deal. The votes were there in the house. In the Senate it was 18-14 in favor. Or so everyone thought. Amazingly, at the last moment, two democrats including Senate Majority Leader Russ Decker switched votes sending the bills up in flames.