KeNo's Housing and Economic Portal: Sunday May 8 Housing and Economic stories

Saturday, May 7, 2011

Sunday May 8 Housing and Economic stories

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TOP STORIES:

Shakedown Nation - (www.financialsense.com) True story: Harold & Maude are a forty-something couple with two teenaged kids. Both are educated, both work in IT, both are fairly sophisticated, financially speaking. Back in 2003, they bought a vacation condo, in Mono County, California—you know, where Mammoth Lake and the Mammoth ski resort are located, right next to Yosemite National Park. They bought the condo in mid-2003, then flipped it later that same year—they closed escrow the first week of 2004, with every t crossed, with every i dotted. They went on with their lives: Work, vacations, kids, school, job, carpool—same-old-same-old, just like millions of other ordinary citizens. Then one day in March of this year, they get a letter—a pretty frightening letter, actually. It was from the Department of Finance of Mono County, informing them—in bold and capitalized letters—that they owed a “DELINQUENT AND UNSECURED PROPERTY TAX”. The letter went on to inform them that they owed—in bold, italicized, underlined and oversized lettering (I’m not kidding)—$845.99.

Could Debt Worries Accelerate Fannie, Freddie Overhaul? - (blogs.wsj.com) Do the finances of the U.S. government-supported enterprises (GSEs) affect the U.S. sovereign rating? Yes. We estimate that the government might have to inject up to $280 billion to cover losses at Fannie Mae and Freddie Mac; this includes $148 billion already spent. (Both GSEs are already in conservatorship.) Moreover, by our estimates, that $280 billion could swell to $685 billion if the government capitalizes Fannie and Freddie on a commercial basis. Some analysts may take issue with those loss projections. Others will note that the U.S. will try to attract private, not public, funds to recapitalize any successors to Fannie and Freddie. Margaret Kerins, an analyst at Royal Bank of Scotland, writes in a research note Monday that such an outcome is “highly unlikely.” The government has so far avoided bringing Fannie and Freddie onto the government’s books because that would boost the federal deficit by tens of billions and it could swell the total debt of the U.S. (Recall that Fannie Mae was privatized in 1968 when the Johnson administration was trying to reduce the country’s debt.) The Bush administration cited the “temporary nature” of the government’s stewardship of Fannie and Freddie in opting not to incorporate those obligations back onto the government’s books.

Appraisers often get less than half the appraisal fee - (www.stamfordadvocate.com) When you pay $450 to $550 at settlement for an appraisal on a home purchase or refinancing, do you assume that all or most of the money is going to the appraiser who comes to the house and performs the valuation? That's logical, but probably not correct. Despite new Federal Reserve regulations that took effect April 1 requiring lenders to pay appraisers fair fees, growing numbers of them say they are still being offered $200 to $250 -- even as low as $134 -- for work that gets billed out to consumers on settlement sheets at $450 and higher. Last year's Dodd-Frank financial reform law mandated that appraisers receive fees that are "customary and reasonable" for their local market areas, yet the largest national appraisal organization -- the 25,000-member Appraisal Institute -- says that is not happening. Leslie Sellers, immediate past president of the group, said in an interview that "the average fees across the country today are about $225 to $250 -- nowhere near reasonable or customary" in most markets.

Investors In For a Shock If Rising Rates Sink Bonds - (www.bloomberg.com) Investors who poured more than half a trillion dollars into bond mutual funds since 2007 will experience a market crash when interest rates rise, according to Marilyn Cohen, a Los Angeles money manager. Cohen lays out a grim scenario in “Surviving the Bond Bear Market” (John Wiley & Sons Inc.), co-written with husband Chris Malburg. Rates will surge if the global economy strengthens or because investors lose faith in governments with growing deficits, said Cohen, whose book came out this month. Standard & Poor’s this week put a “negative” outlook on U.S. credit, citing the risk that leaders will fail to curb debt. “The baby boomers, who really have been all-in to all kinds of bonds and bond funds since the end of the credit crisis, they’ve never lived through a bear market with skin in the game,” Cohen said in a telephone interview. “It’ll freak people out.” Fixed-income mutual funds took in net deposits of $645 billion from 2008 through 2010, according to the Washington- based Investment Company Institute. Cohen, who oversees $325 million as chief executive officer of Envision Capital Management Inc., said falling bond prices will lead to a wave of sales, much as the 2008 financial crisis triggered a 46 percent drop in the Standard & Poor’s 500 Index before the U.S. stock- market benchmark bottomed out in March 2009.

ETrade Baby Loses Everything - (www.dailybail.com) Funny video.