KeNo's Housing and Economic Portal: Tuesday February 22 Housing and Economic stories

Monday, February 21, 2011

Tuesday February 22 Housing and Economic stories

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TOP STORIES:

Danville's hero pilot Sullenberger sues over real estate deal - (www.insidebayarea.com) Hero sully proves he is an amateur and not accepting personal responsibility for bad real estate decisions.

The pilot acclaimed for safely landing a plane in New York's Hudson River has filed a lawsuit over a real estate deal in Northern California. Chesley Sullenberger and his wife, Lorraine, claim the $935,000 they paid for a building in the city of Paradise in 2002 was well above its market value. They accuse bank officials and the real estate broker of overinflating the price. The suit seeks a nullification of the original loan and reimbursement for alleged overpayments. A trial is set for September if mediation talks fail. The real estate broker, Cherie Huillade, tells the Press Democrat of Santa Rosa the property's appraisal was accurate.

Views of Life After Fannie, Freddie - (online.wsj.com) The Obama administration outlined on Friday its plans to begin shrinking the government's broad support of the nation's crippled mortgage market, a process that officials said could take several years and would include phasing out Fannie Mae and Freddie Mac. Officials portrayed a housing-finance system that would include a role for both the public and private sectors, but would be different from the current system in that the government's role would be smaller, underwriting standards would be tighter, and borrowers would be required to hold larger amounts of equity in their homes. The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation's home-building industry.

Borders Prepares to File for Bankruptcy - (www.nytimes.com) Borders, the beleaguered bookseller, is preparing to file for bankruptcy as early next week after efforts to refinance its debt faltered, people briefed on the matter said Friday. The company had largely failed to persuade publishers to convert payments they had been owed since late last year into interest-bearing loans. Borders itself had suggested two weeks ago that it might need to file for bankruptcy despite receiving a $550 million loan commitment from GE Capital. It has also been working on securing financing to support itself through a Chapter 11 filing, according to a person briefed on the matter.

U.S. Mortgage Finance Overhaul May Create New Winners, Losers - (www.bloomberg.com) Under the privatization plan, the government would regulate insurers and, in exchange for a premium, provide a backstop in the event of a market failure. The approach, which follows the contours of plans submitted by groups including the Financial Services Roundtable, could give big banks the opportunity to move into a niche that would be vacated by the GSEs. “They’re saying let’s just move everything over to the private sector,” said Lawrence Yun, senior vice president of the National Association of Realtors, who joined others in the real estate industry in opposing the proposal. The administration’s emphasis on expanding privatization, won praise from Tom Deutsch, executive director of the American Securitization Forum, who cited short-term proposals that would reduce the market share of Fannie Mae and Freddie Mac, which now own or insure almost 97 percent of mortgage bonds.

'Toxic' Assets Still Lurking at Banks - (online.wsj.com) During the financial crisis, investors fretted over "toxic," hard-to-value assets that banks were carrying. Those fears have faded as bank profits have rebounded, loan delinquencies have declined, and bank stocks have soared 25% in the past five months. But banks still hold plenty of the bad assets that once spooked investors: mortgage-backed securities, collateralized debt obligations and other risky instruments. Their potential impact concerns some accounting and banking observers. In part due to those bad assets, the top 10 U.S.-owned banks had $13.8 billion in "unrealized losses" that have lasted at least a year in their investment portfolios as of Sept. 30, according to a Wall Street Journal analysis. Such losses are baked into banks' book value, but don't get counted against earnings as long as the banks believe the investments will later rebound. If those losses were assessed against earnings, it would have reduced the banks' pretax income for the first nine months of 2010 by 21%, according to the Journal analysis.