Saturday December 17 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

PMI files for bankruptcy. Yes, _that_ PMI. - (www.contracostatimes.com) Walnut Creek-based PMI Group filed for bankruptcy Wednesday, listing debts of $736 million resulting from the meltdown of a housing market that remains weak. The company, which insures mortgages when borrowers make small down payments, was forced into bankruptcy when a judge upheld the takeover by Arizona state regulators of PMI's primary units to insure mortgages. "Continued high unemployment in the United States and the slow economic recovery in U.S. residential and mortgage and housing markets" have contributed to PMI's losses, L. Stephen Smith, PMI's CEO, said in a court filing. PMI pays lenders after an insured homeowner defaults and a foreclosure fails to recoup enough to cover the lender's losses. Over the 12 months that ended in June, it lost $727.1 million and generated revenue of $762.9 million.

Fed lays a trap for itself with bank stress tests - (www.bloomberg.com) As for the stress tests, we probably can count on the Fed to do a more credible job than Europe’s regulators have done with theirs, though that isn’t saying much. The French-Belgian lender Dexia SA (DEXB) passed its European Banking Authority stress test with ease in July, and needed a government rescue three months later. Last year the biggest Irish banks got passing marks shortly before taking bailouts. The Fed avoided those kinds of embarrassing errors in 2009. Although its tests were widely criticized as too soft at the time, that mattered little in the end. The government had expressly committed to provide additional capital to any of the banks on the stress-test list that needed it and couldn’t raise enough on their own. By making clear they wouldn’t let anyone go under, the Fed and the Treasury Department made it far easier for some of the biggest U.S. banks to raise new equity from the public markets, which was the main goal all along.

Apocalyptic Warnings - (www.telegraph.co.uk) Regrettably, he's only telling it as it is. We stand on the brink, apparently incapable of pulling back. Events on the Continent have come to feel much like the drift into war. There is a feeling of powerless inevitability about it. Crisis summits come and go with no resolution in sight, but there's always the next one to set the world to rights, though we all know that in truth it won't. Markets and politicians cling to the belief that in the end, the single currency won't be allowed to fail. The economic and financial consequences are thought too awful to allow for such an outcome. Yet as long as the eurozone's creditor nations continue to adopt their "can pay, but won't pay" approach to the crisis, it is hard to see how it can end in any other way. Europe is already back in the midst of a credit crunch, with its banks largely frozen out of wholesale funding; eurozone banks have become so risk averse that they prefer to lodge their excess liquidity with the European Central Bank than lend to each other. Across the Continent, banks are shrinking their credit.

Realtors blame banks for failing to inflate replacement housing bubble - (www.irvinehousingblog.com)

Renee Holt, Keller Williams Realty, Oviedo, Fla.: “Banks. Banks don’t have the system to help homeowners recover, and they’re not hiring and/or training employees to make the process less painful for homeowners.”

Response: What obligation to the banks have to make their losses less painful for loan owners? These people cost them billions of dollars, and the banks are supposed to be worried about the loan owner's pain?

Former California Association of Realtors President Ann Pettijohn, Oak Tree Realtors in Orange: “Banks,” she said, echoing Holt. “They’re making it tough to borrow.”

Response: Yes, they only want to loan money to people who can pay them back. It's a good business practice they abandoned during the housing bubble.

Former New Jersey Association of Realtors President Chris Clemans: “Before, (lending standards) were too loose. Now they’ve gone to the other side.”

Response: No, they haven't. In the 1980s, there was FHA and 20% down conventional financing. That's it. Today we still have 5% conventional financing, we allow low FICO scores (above 580 FHA can put 3.5% down), and many fringe qualifying standards we did not have 25 years ago. Credit is not tight by historical standards, and the loosening of credit standards over the last 25 years was not innovation, it was folly.

OTHER STORIES:

Pouring Good Money After Bad - (www.nytimes.com)

For the jobless, little hope of better days - (www.nytimes.com)

Killing The Euro - (www.nytimes.com)

Bursting of the global housing bubble is only halfway through - (www.economist.com)

How We Were All Misled - (www.nybooks.com)

The Death of the Fringe Suburb - (www.nytimes.com)

Not your grandfather's Republican Party - (www.ipolitics.ca)

Very entertaining interview with former Reagan official - (www.youtube.com)