KeNo's Housing and Economic Portal: Thursday March 24 Housing and Economic stories

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TOP STORIES:

EU paralysis drives fresh bond rout - (www.telegraph.co.uk) Portugal edged closer to the brink yesterday, having to pay almost 6pc to raise two-year debt. The yield on 10-year bonds briefly surged to 7.8pc after the Chinese rating agency Dagong downgraded the country's debt to BBB+. "These levels of interest rates are not sustainable over time," said Carlos Costa Pina, secretary of the Portuguese Treasury, blaming the latest upset on the lack of a coherent EU debt strategy rather any failing by Portugal to deliver on austerity. Mr Costa Pina rebuffed calls by leading economists in Portugal for an EU-IMF bail-out rather than drawing out the agony. "It is not justified. Portugal doesn't need external help, it needs urgent measures by the EU to restore market confidence." David Owen from Jefferies Fixed Income said last week's shock move by the ECB to pre-announce rate rises had tightened credit and effectively doomed the country. "The ECB by its actions has made it inevitable that Portugal will need a bail-out. There are parallels with the actions of the Bundesbank during the ERM crisis in 1992," he said.

Cities issue a flood of bonds in the face of proposed state money-grab - (www.latimes.com) As the Legislature weighs Gov. Jerry Brown's plan to shutter all redevelopment agencies and divert their funds, municipalities rush to secure money through bonds — $700 million in the last two months. State Treasurer Bill Lockyer released data Friday that confirmed what many local government watchers have known anecdotally for weeks: local officials went on a municipal-bond selling spree in the first two months of this year, desperate to gather as much money as possible in case Gov. Jerry Brown succeeds in his plan to eliminate redevelopment agencies. And some paid a premium to do it. Municipal redevelopment agencies sold nearly $700 million in bonds between Jan. 1 and March 9, compared with $1.2 billion for all of 2010, according to state figures. The rush to market comes as the Legislature considers Brown's plan to eliminate the state's 400 redevelopment agencies and send much of the $5 billion a year in property taxes the agencies control to counties, schools and the state.

A Red Flag On Reverse Mortgages - (www.nytimes.com) It is the saddest of paradoxes: a government-backed financial maneuver intended to free up extra money for struggling older people turns out to have left some widows and widowers on the brink of foreclosure. This week, AARP sued the Housing and Urban Development Department over a handful of reverse mortgages gone awry. Lenders, following the letter of one of HUD’s rules, are requiring newly widowed people who want to stay in their homes to pay off the balance of their loans quickly, even if it is much more than the value of the home. Because they can’t (or won’t), the lenders are foreclosing. This is happening only to a small number of people who did not have their names on the reverse mortgage for a variety of reasons. Some spouses did not put their names on the applications in order to qualify for a bigger loan, without necessarily realizing that they were putting themselves in jeopardy. Reverse mortgages were not supposed to work like this. Instead, the big idea was to let people who were cash-poor but relatively rich in home equity draw on some (but not all) of that stored value. They’d get a lump sum, a line of credit or a monthly check for either a fixed period or for as long as they stayed in the home. And nearly everyone thought the rules were clear: homeowners or their heirs would never, even decades later, owe a cent beyond the value of the property.

Fannie Mae Ex-CEO May Face SEC Claims in Subprime Probe - (www.bloomberg.com) Daniel Mudd, the former head of Fannie Mae, became the latest target in a probe by U.S. regulators of whether financial institutions were honest with investors about their exposure to subprime loans. Mudd, now chief executive officer of Fortress Investment Group LLC (FIG), confirmed in a statement to Bloomberg News that the Securities and Exchange Commission notified him yesterday the agency intends to pursue civil claims against him. Mudd, who was ousted when Fannie Mae and Freddie Macwere seized by regulators in September 2008, said he plans to submit a written rebuttal to the allegations. The SEC’s investigation involves several people who were executives at Fannie Mae as the housing crisis deepened in 2007, according to two people with direct knowledge of the investigation who spoke on condition of anonymity because the matter isn’t public. It focuses on the firm’s disclosures to investors as the financial crisis gathered steam in 2007 and 2008, the people said.

Nuclear Renaissance Threatened as Japanese Reactor Struggles After Quake - (www.bloomberg.com) Global expansion of nuclear power may draw more scrutiny and skepticism as the world watches Japan struggle to prevent a meltdown at a reactor damaged by a record earthquake, a former U.S. atomic regulator said. “This is obviously a significant setback for the so-called nuclear renaissance,” said Peter Bradford, a former member of the U.S. Nuclear Regulatory Commission. “The image of a nuclear power plant blowing up before your eyes on a television screen is a first.” An explosion at Tokyo Electric Power Co.’s Fukushima Daiichi No. 1 reactor, which had begun venting radioactive gas after its cooling system failed, injured four workers yesterday. The utility reported no damage to the building housing the reactor. It began flooding the reactor with sea water and boric acid today to prevent a meltdown and eliminate the potential for a catastrophic release of radiation.