KeNo's Housing and Economic Portal: Monday May 23 Housing and Economic stories

Sunday, May 22, 2011

Monday May 23 Housing and Economic stories

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Housing's Good News Is Federal Cash Shortage - (www.bloomberg.com) With U.S. home prices back down to their 2009 lows, you might be wondering what all the government programs to stabilize the housing market have accomplished. And for good reason. Various federal initiatives, especially the first-time homebuyer’s tax credit, seemed to put a brake on the three-year dive in prices from July 2006, the peak, to April 2009. Home sales and prices bounced, only to hit the skids when the program ended in April 2010. Which is what you’d expect when the government stops cutting checks for $8,000, payable to the homeowner on completion of his purchase. Was the two-year respite worth it? Would prices have fallen harder and faster if left to their own devices and now be showing signs of stabilization? It sure seems that way. Instead, two years and billions of dollars later, home prices are back to their 2009 lows, according to the S&P Case-Shiller Index for February. (For sticklers, the unadjusted index was actually 0.01 point higher than in April 2009.) There are a couple of reasons to think that, without intervention, the housing market would have “cleared” by now, and that buyers would be attracted by falling prices rather than taxpayer dollars.

Government accuses Deutsche Bank of mortgage fraud - (latimesblogs.latimes.com) U.S. prosecutors are suing Deutsche Bank and accusing it of fraudulently approving mortgages over a number of years in ways that have ended up costing the government hundreds of millions of dollars. The lawsuit filed Tuesday morning in Manhattan federal court says that Deutsche Bank and its subsidiary, MortgageIT, lied to the government and "recklessly" approved mortgages for federal mortgage insurance without fully vetting the quality of the mortgages. From 1999 to 2009, MortgageIT was part of a government program that allowed it to approve home loans for Federal Housing Administration mortgage insurance, and it ended up doing this with 39,000 mortgages worth $5 billion, according to the complaint. After Deutsche Bank acquired MortgageIT in January 2007, it marketed and sold these mortgages to investors. The complaint says that Deutsche Bank and MortgageIT pushed out the mortgages at a rapid pace, without worrying about the quality of the mortgages or problems with the approval process. "When an outside auditor provided findings to MortgageIT revealing serious problems, those findings were literally stuffed in a closet and left unread and unopened," the complaint says.

Serious Foreclosure Inventory Problem at FHA - (www.calculatedriskblog.com) According to this report, the pace of FHA property sales began to slow significantly last November, was virtually at a crawl in December and January, and remained shockingly low given the inventory levels in February. As a result, the reported inventory of FHA REO has exploded upward to 68,801 at the end of February from 54,609 at the end of October and 44,605 at the end of last February. I can’t recall any time in recent history when the FHA has “let” REO inventories jump at the pace observed since last summer, and if the numbers in the commissioner report are correct, it suggests that there may be a FHA REO property management “issue.” Last August HUD announced that it was launching the third generation of its REO Management and Marketing program, with new contracts that would “streamline HUD's operations, capitalize on the expertise of its potential vendors, and provide flexibility to meet changing market conditions in the REO industry.”

US Business are world leaders in tax avoidance - (www.nytimes.com) But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied. The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.