KeNo's Housing and Economic Portal: Saturday August 20 Housing and Economic stories

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TOP STORIES:

BofA Slides as Lender Braces for New Wave of Mortgage Refunds - (www.bloomberg.com) Bank of America Corp. (BAC), the largest U.S. lender, posted its worst two-day decline since 2009 after telling investors that claims from Fannie Mae and Freddie Mac may cost more than previously forecast. The bank fell 7.5 percent yesterday in New York Stock Exchange composite trading, the biggest drop in the Dow Jones Industrial Average, and extended its slide for the past two sessions to 15 percent. New demands for refunds on soured loans from the two U.S.-owned mortgage firms are coming “in numbers that were not expected based on historical experience,” the company said in its Aug. 4 quarterly report to regulators. The filing signals that the $30 billion of expenses booked by Brian T. Moynihan since he became chief executive officer still may not be enough to clean up the faulty mortgages inherited from former CEO Kenneth D. Lewis. The Charlotte, North Carolina-based firm told investors in June that actions taken during the second quarter probably would cover any further buybacks unless Fannie Mae and Freddie changed their stance.

Fannie Mae Seeks More Help as Its Loss Grows - (www.nytimes.com) Fannie Mae, the mortgage-finance company under government conservatorship, reported a $2.9 billion second-quarter loss on Friday and said it would seek $5.1 billion in Treasury Department aid to balance its books. Fannie Mae requested the money to eliminate a net worth deficit of $5.1 billion for the three-month period that ended June 30, according to a Securities and Exchange Commission filing by the company, which is based in Washington. The loss, which compares with a $1.2 billion loss a year earlier, was mostly a result of credit-related expenses on home loans made before the 2008 financial collapse. Fannie Mae also made a $2.3 billion payment to the Treasury in the second quarter. As of the second quarter, Fannie Mae has drawn $104.8 billion in Treasury aid and paid $14.7 billion in dividends, the company reported. Fannie Mae and Freddie Mac together have drawn about $170 billion in taxpayer aid.

Euro Builder Ends His Career on a Bitter Note - (www.nytimes.com) Jean-Claude Trichet, the president of the European Central Bank, has spent much of his career building and defendingthe euro. But now, in a bitter twist, it looks as if his career may well end with the common currency in shambles. Mr. Trichet, 68, will retire at the end of October after an eight-year term. Yet markets are crashing, bond investors have turned on Italy and Spain, and it appears certain that when Mr. Trichet returns to civilian life on Nov. 1, the European sovereign debt crisis will be far from resolved. Indeed, the euro area threatens to become the epicenter of a global financial crisis to rival the one that followed the collapse of Lehman Brothers in September 2008 — a horror sequel that Mr. Trichet himself has said the world cannot bear. “Our democracies would not be ready to provide once again the financial commitments to avoid a great depression in case of a new crisis of the same nature,” he told an audience in Madrid in May.

China tells US "good old days" of borrowing are over - (www.reuters.com) China, the largest foreign holder of U.S. debt, took the world's economic superpower to task for allowing its fiscal house to get into such disarray. It also revived its calls for a new stable global reserve currency to replace the U.S. dollar, gaining a sympathetic ear in the United Kingdom. "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary. Xinhua scorned the United States for a "debt addiction" and "short sighted" political wrangling. China, it said, "has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets." China and Japan have called for coordinated action to avert a new worldwide financial crisis. India's Finance Minister Pranab Mukherjee told reporters: "There is no need to unnecessarily press the panic button."

Face It, Homeownership Leads To Longer Unemployment - (www.businessinsider.com) NYT Economix says that the average length of unemployment is the longest ever recorded, up to more than 40 weeks (compared to less than 15 weeks in the downturn of the late 1940s). According to the Census, home ownership rates have been growing gradually since 1950, as has the duration of unemployment. Let’s look at a couple of reasons that increased homeownership could lengthen unemployment periods. Let’s consider mobility. There is a large variation in demand for labor across states and regions. Homeowners are crippled in terms of mobility compared to renters. The homeowner, especially in a state with a shrinking number of jobs, may need months or years to sell a house and move. He may delay the move for months in hopes of landing a local job that will spare him the pain of paying a 6 percent real estate commission. A renter can pack up, tow a U-Haul, and be on the other side of the country within a month.