KeNo's Housing and Economic Portal: Tuesday August 9 Housing and Economic stories

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GMAC Filed Phony Documents To Foreclose On Homeowners - (www.businessinsider.com) GMAC, one of the nation's largest mortgage servicers, faced a quandary last summer. It wanted to foreclose on a New York City homeowner but lacked the crucial paperwork needed to seize the property. GMAC has a standard solution to such problems, which arise frequently in the post-bubble economy. Its employees secure permission to create and sign documents in the name of companies that made the original loans. But this case was trickier because the lender, a notorious subprime company named Ameriquest, had gone out of business in 2007. And so GMAC, which was bailed out by taxpayers in 2008, began looking for a way to craft a document that would pass legal muster, internal records obtained by ProPublica show. "The problem is we do not have signing authority—are there any other options?" Jeffrey Stephan, the head of GMAC's "Document Execution" team, wrote to another employee and the law firm pursuing the foreclosure action. No solutions were offered. Three months later, GMAC had an answer. It filed a document with New York City authorities that said the delinquent Ameriquest loan had been assigned to it "effective of" August 2005. The document was dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a "Limited Signing Officer" for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure. An examination by ProPublica suggests this transaction was not unique. A review of court records in New York identified hundreds of similar assignment documents filed in the name of Ameriquest after 2008 by GMAC and other mortgage servicers. The issue has attracted growing scrutiny in recent months as bloggers, consumer attorneys and media outlets have identified what appears to be part of a pattern of questionable assignments filed across the country.

Growth Slowed in 8 of 12 U.S. Regions: Fed - (www.bloomberg.com) The Federal Reserve said the economy grew at a slower pace in more parts of the country since the beginning of June as shoppers restrained spending and factory production eased. “Economic activity continued to grow,” the Fed said in its Beige Book survey released today in Washington. “However, the pace has moderated in many districts.” Growth slowed in eight of the Fed’s 12 regions, compared with four in the last survey, the central bank said. The report underscores Fed Chairman Ben S. Bernanke’s message to Congress earlier this month that maintaining record monetary stimulus is necessary to bolster the economy. Bernanke left the door open to additional action, including buying more government bonds, should the recovery appear in danger of stalling.

U.S. Downgrade May Cost $100B a Year - (www.bloomberg.com) Political wrangling over a plan to reduce the deficit may cost the U.S. its AAA rating, adding $100 billion a year to government costs while dragging down economic growth, according to Wall Street bond dealers. A U.S. credit-rating cut would likely raise the nation’s borrowing costs by increasing Treasury yields by 60 to 70 basis points over the “medium term,” JPMorgan Chase & Co.’s Terry Belton said today on a conference call hosted by the Securities Industry and Financial Markets Association. Standard & Poor’s, which has given the U.S. a top ranking since 1941, reiterated on July 21 that the chance of a downgrade is 50 percent in the next three months and may cut the nation as soon as August.

Greece Will Default on Debt After EU Plan: S&P - (www.bloomberg.com) Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, Standard & Poor’s said. The rating company also cut its ranking for Greece to CC, two steps above default, from CCC, according to a statement published inLondon

today. The outlook on the debt is negative. “The proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,” S&P said. “We view the proposed restructuring as a ‘distressed exchange’ because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors.”

U.S. May Lose AAA Rating Even With a Debt Deal, BlackRock, Templeton Say - (www.bloomberg.com) BlackRock Inc., Franklin Templeton Investments, Loomis Sayles & Co., Pacific Investment Management Co. and Western Asset Management said the U.S. faces losing its top-level debt rating as officials struggle to raise the $14.3 trillion borrowing limit and reduce spending. Investors are warning a cut is likely as President Barack Obama and House Speaker John Boehner argue over how to increase the debt ceiling, while also trying to curb borrowing. The government needs to boost the cap by Aug. 2 so it can keep paying its bills, according to the Treasury Department. The comments suggest that the world’s biggest bond managers are resigned to the fact that the U.S. rating will be cut. Standard & Poor’s, which has rated the U.S. AAA since 1941, said July 14 that the chance of a downgrade is 50 percent in the next three months and it may cut the nation as soon as August if there isn’t a “credible” plan to reduce the nation’s deficit.