Tuesday August 26 Housing and Economic stories

Top Stories:

In Central Valley, Ruins of Housing Bust - (www.nytimes.com) ELLIE WOOTEN, the likable mayor of this likable Central Valley city, is on her way to the office when her cell phone rings. A constituent wants her mortgage payments reduced, and is hoping that the mayor has some clout with her lender. Although Merced has one of the highest foreclosure rates in the country, this borrower isn’t in such dire straits. She’s not even behind on her mortgage. But her oldest daughter is turning 18, which means an end to $500 a month in child support. She just wants a better deal. The mayor hangs up and shrugs: “It’s a surprise her daughter is turning 18? You’d think she could have planned ahead.” But hardly anyone in Merced planned very far ahead.

Not the city, which enthusiastically approved the creation of dozens of new neighborhoods without pausing to wonder if it could absorb the growth. Certainly not the developers. They built 4,397 new homes in those neighborhoods, some costing half a million dollars, without asking who in a city of only 80,000 could afford to buy them all. Obviously not the speculators turned landlords, who thought that they could get San Francisco rents in a working-class agricultural city ranked by the American Lung Association as having some of the worst air in the nation. And, sadly, not the local folk who moved up and took on more debt than they could afford. They believed — because who was telling them differently? — that the good times would be endless.

Appraisers still under the gun to 'hit the numbers' - (www.chicagotribune.com) CONGRESS IS CONTRIBUTING TO THIS BEHAVIOR AS THEY ARE PRESSURING LENDERS TO WORK OUT NEW LOANS WITH BORROWERS. MANY OF THESE BORROWERS HAVE NEGATIVE EQUITY SO LENDERS ARE HESITANT. Have the real-estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared? Are mortgage loan officers and realty agents—even individual home sellers—continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior? Ask appraisers and many will tell you: It's still business as usual. Attempts to encourage inflated appraisals remain common, though some techniques have become subtle. "Absolutely appraisers continue to get pressured" to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country's largest professional organization representing appraisers.

The Great Consumer Crash of 2009 - (www.prudentbear.com) I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn’t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can’t get steroids from our dealer (banks) anymore.

After examining these charts it is clear to me that the tremendous prosperity that began during the Reagan years of the early 1980’s has been a false prosperity built upon easy credit. Household debt reached $13.8 trillion in 2007, with $10.5 trillion of that mortgage debt. The leading edge of the baby boomers turned 30 years of age in the late 1970’s, just as the usage of debt began to accelerate. Debt took off like a rocket ship after 9/11 with the President urging Americans to spend and Alan Greenspan lowering interest rates to 1%. Only in the bizzaro world of America in the last 7 years, while in the midst of 2 foreign wars, would a President urge his citizens to show their patriotism by buying cars and TVs. When did our priorities become so warped?

Fannie and Freddie's blame game - (www.iht.com) Whenever the mortgage finance giants Fannie Mae and Freddie Mac find themselves in a tough spot - and boy, are they in a tough spot now! - they always seem to find a way to blame "the mission" for their problems. "We exist to expand affordable housing," Fannie Mae says on its Web site, and although it also lists its original mission - providing liquidity for the American housing market - it is the former that has long been the companies' trump card. That mission of creating affordable housing is the reason that Alan Greenspan could testify as chairman of the Federal Reserve, year after year, that Fannie and Freddie had become so large, and took so much risk, that they could one day damage the American financial system - and be utterly ignored by the same members of Congress who otherwise hung on his every word. The mission is why the companies were able to run roughshod over their regulator for years, and why the Bush Administration was unable to rein them in, even after an accounting scandal. The mission is why their two chief executives, Daniel Mudd at Fannie and Richard Syron at Freddie, could take home a combined $30 million last year, while presiding over one of the great financial disasters of all time, posting billions in losses with no end in sight.

Ex-BOE Official Says Fed Serves Wall Street - (www.bloomberg.com) No news here. Of course Fed has proven time and time again that it primarily serves Wall Street interests.

Cramer Calls Another Housing Bottom…Puh-leeeze. Enough is Enough! - (www.ml-implode.com) - I believe you are intentionally deceiving people. Calling the bottom to housing using a variety of bad indicators and rampant speculation is wrong. I am giving you the benefit of the doubt by saying you are ‘deceiving’ people because there is no way you are this naive about the housing and mortgage markets. In your research story published yesterday in RealMoney and TheSreet.com, you use the fact that 14 million homes were “purchased” between 2005 and 2007 and those being the ‘bad lending years’ for the basis of a hypothesis that the housing market will bottom seven months from now. You also talk about new home builders reducing their supply, the FDIC offering mortgage modifications and FHA being the savior. If you are a headline reader, perhaps these things do sound great. But, in reality very little of your analysis or conclusions have substance or are likely to come into play in any significant way. First, you are overly attached to ’subprime’ when anyone following the story knows that the Alt-A and Prime universes are beginning to blow and they dwarf the subprime universe. Second, you overemphasis ‘fraud’ when we all know that while fraud is a big factor, lender negligence and negative-equity are the leading contributors to loan default especially among higher grades of paper. I should have stopped reading after the ’14 million homes purchased’ statistic was thrown out. This is because purchases were only about 33% of the market at any given time and millions more refinanced into exotic loans than ever purchased a home using them. In addition, prices are down near 2004 levels and approaching 2003 levels quickly. There were exotic loans during those years as well, so only focusing on homes ‘purchased’ from ‘2005-2007′ captures a small portion of the at-risk market.

Too big to fail? We'll see about that - (www.latimes.com) The second phase, now underway, involves fire sales of assets by banks and brokerages that have no choice but to shrink themselves because there isn't enough willing and able capital out there to buttress every damaged balance sheet that needs it. And as assets are dumped at fire-sale prices, that will trigger markdowns of similar assets, further weakening the finances of banks and brokerages across the board. "We are approaching a solvency crisis that we think is about to result in an avalanche of asset sales," the hedge fund manager says.

Realtor Ethics - (patrick.net)
First and foremost on this agenda is do not ever, ever, never under any circumstances give the slightest smidgeon of a passing thought that brokers fix commission prices. The first and only video we viewed trained us specifically on the "commission objection", to basically say whatever you want, other than "this is a typical charge for the industry" and certainly NOT "this is what everyone charges". This message from NAR took up the first hour of a four-hour training class on ethics. I was sitting there just shocked.

Secondly, we never ever under any circumstances say anything negative about other Realtors. What? If I have personal knowledge that some agent is a real snake, I can't warn people? That's right folks. Any and all such comments must be sent to the "Ethics Committee" and dealt with behind closed doors. Hmmm. What about the public's best interest? This second message took up
another hour of this four-hour seminar. So there you go. I'm a full-fledged, ethical Realtor. We don't fix prices and we don't talk bad about each other. Would you like to see some property? It's not that I think these are bad ideas. But why are these two things the
very most important "ethical" topics in real estate? Am I missing something here or is something really missing? This just doesn't make sense, unless... hmmm...

NO. THAT couldn't be. Its just not possible that the most important thing to NAR leadership is staying in control and staying in power and covering their asses, even though they are not competent to run the organization. It just COULDN'T be smoke and mirrors. It COULDN'T be that their time has passed, that they need to evolve and adjust to the vastly different new paradigm in which
the world now operates. Could someone please tell NAR that the iron-fist approach is just passe? With so much emphasis and focus placed on CYA, is it any wonder NAR has missed so many opportunities to be a voice for transparency and honesty? That's not even on the radar.


Other Stories:

What Will Mac & Mae Cost You and Me? - (www.nytimes.com) This is the huge arena where participants buy and sell insurance to protect against defaults by issuers of debt. Some $62 trillion of insurance has been written, with a fair value of $2 trillion at the end of 2007. Back to the bailout du jour. Many analysts hypothesize that the Treasury will put cash into Fannie and Freddie, receiving dividend-paying preferred shares in return. Such an investment has occurred before, as noted last week by UBS research analysts in Mortgage Strategist, a weekly research report from the firm. In 1954, when the government began to change Fannie Mae into a shareholder-owned company, preferred stock was issued to Uncle Sam to help finance the process. Those shares were retired in 1968 when Fannie Mae became a publicly traded corporation. If preferred shares are again issued in exchange for taxpayer cash, common stockholders could lose the most because new preferred shares would take precedence in the payment of dividends and if the companies were liquidated.
$3.42 million down to $2.5 million in 3 years - (bubbletracking.blogspot.com)
When Cutting Price, Take Big Bite, Not Bunch of Nibbles - (www.washingtonpost.com)
Higher Fees for Mortgages - (www.nytimes.com)
Another Bank Closed by Regulators - (www.bloomberg.com)

The Best Mortgage Deals Around: VA Loans - (www.ml-implode.com) - The Veterans Administration (VA) has a mortgage guarantee program that is available to the more than 23.8 million U.S. veterans ...
State Sues Large Mortgage Lender - (www.ml-implode.com) - Indiana has sued Countrywide Home Loan Inc., claiming deceptive and misleading practices in thousands of loans issued in the st...
Obama's Dueling Views on Economy - (www.ml-implode.com) - Some of the confusion stems from Obama’s own strategy of presenting himself as a postpartisan figure. A few weeks ago, I joined...
Another Look at the Labor Market - (www.ml-implode.com) - ``What is clear is that while the employment series might not be evidencing a severe dropoff, the hours series is. This is relev...
Biden just ripped on "a government that does nothing while they watch the housing market collapse" - (www.ml-implode.com) - ""We can't afford four more years of a government that does nothing while they watch the housing market collapse. As you know, i...
The CDARS of Lebanon: Did Gramm-Leach-Bliley Doom FDIC? - (www.ml-implode.com)
Homeowners may be able to refinance mortgages - (www.ml-implode.com)
Fannie Doesn’t Want New York Subprime, Either - (www.ml-implode.com)

Central Bankers See More Credit Losses - (www.bloomberg.com)
How Mortgage Giants Lead Market Deeper Into Crisis - (www.washingtonpost.com)
Is The Government Stupid Enough? - (2.bp.blogspot.com)
Movie Review: I.O.U.S.A. - (optionarmageddon.ml-implode.com)
A Quick Review of I.O.U.S.A. - (www.seekingalpha.com)
Why we are in the early innings - (LARGE PDF - sastocks.files.wordpress.com)
Expect strong economy in 5 years - (www.inrich.com)

At the Fed, a Debate Over Countering Inflation Grows Louder - (www.nytimes.com)
Ex-BOE Official Slams Fed, Sparking Hottest Jackson Hole Debate - (www.bloomberg.com)
U.S. and Global Economies Slipping in Unison - (www.nytimes.com)
Ex-BOE official says Fed rate cuts went too far - (www.reuters.com)
In the Ruins of the Housing Bust - (www.nytimes.com)
Fed Chairman Urges Broader Market Oversight - (www.nytimes.com)
Fed conference speakers say US central bank too responsive to Wall Street on bailout issues - (www.chicagotribune.com)
Finding the Mess Behind the Mess - (www.nytimes.com)
Bernanke Urges Broader Powers For Central Bank - (www.washingtonpost.com)
Manhattan looks abroad for property saviours - (www.ft.com)
Driving Is Down, but Auto Insurance Rates Are Rising - (www.nytimes.com)
Property sector points to deepening downturn - (www.ft.com)
Uncertainty Over Fannie and Freddie - (www.nytimes.com)
Food Makers Scrimp on Ingredients In an Effort to Fatten Their Profits - (online.wsj.com)
Collateral damage - (www.signonsandiego.com)
SEC looks at timing for accounting rules change - (www.boston.com)
Detroit pushes for a $50-billion bailout - (www.latimes.com)
Detroit pushes for a $50-billion bailout - (www.latimes.com)
Fannie and Freddie threat to banks - (www.ft.com)
Moody's ratings cut latest blow to Fannie, Freddie - (www.reuters.com)
What Will Mac ’n’ Mae Cost You and Me? - (www.nytimes.com)
A Mission Goes Off Course - (www.nytimes.com)
Danish Central Bank, Grouping Acquire Roskilde Bank - (www.bloomberg.com)
Ex-Bank of England official slams Fed - (business.smh.com.au)
Libor Signals Credit Seizing Up as Banks Balk at Money Lending - (www.bloomberg.com)
Banks Hit as Fannie, Freddie Get Downgrade - (online.wsj.com)
Higher Fees for Mortgages - (www.nytimes.com)
That Student Loan, So Hard to Shake - (www.nytimes.com)
Columbian Bank and Trust of Kansas Shut by Regulators - (www.bloomberg.com)
Treasury wants GSEs shareholder-owned: source - (www.reuters.com)
Fannie Mae and Freddie Mac - (www.ft.com)
Risk-Taking Hits Investors In Leveraged-Loan Market - (online.wsj.com)
Bond fundraising costs soar - (www.ft.com)
Real estate appraisers still feel pressured to inflate valuations - (www.latimes.com)
Hedge fund Ore Hill limits redemptions - (www.reuters.com)
Appraisers still under the gun to 'hit the numbers' - (www.chicagotribune.com)

Monday August 25 Housing and Economic stories

Top Stories:

Columbian Bank and Trust of Kansas Shut by Regulators - (www.bloomberg.com) – Another Friday night take-over by the FDIC most likely to try and minimize news coverage. Columbian Bank and Trust Co. of Topeka, Kansas, was closed by U.S. regulators today, the ninth U.S. bank to collapse this year amid bad real-estate loans and writedowns stemming from a drop in home prices. The bank, with $752 million in assets and $622 million in total deposits, was shuttered by the Kansas state bank commissioner's office and the Federal Deposit Insurance Corp., the FDIC said today in a statement. The pace of bank closings is accelerating after financial companies reported more than $500 billion in writedowns and credit losses since the start of 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter from the preceding three-month period, to 90 banks with combined assets of $26.3 billion.

GM, Ford Seek Taxpayer Bailout - (globaleconomicanalysis.blogspot.com) Presidential candidate and presumptive Republican nominee Sen. John McCain today gave his support to the proposal. "Our auto companies are rising to the challenge building the next generation of American cars, but are doing so in times when credit conditions cripple the funding for the facilities and technologies to take the steps to the future," he said in an e- mailed statement. "We should fund it and take action that will assist Detroit and its suppliers in making it through this difficult time of transition," he said in the statement. My Comment: McCain is a fool and if Obama supports this mess he is too. GM and Ford are perpetually in a state of "transition", losing money on every car produced all along the way. There is no evidence that GM or Ford is rising to any challenge. Both overly relied on trucks, SUVs, and ridiculous concepts like the Hummer. Market share of both is collapsing, and rightfully so. Besides, GM is not really a manufacturing company at all, but rather a subprime lender that sells cars. The market for subprime has dried up so GM needs another "transition". GM had a miracle opportunity to dump GMAC and Rescap at absurd prices and failed to do so. GM executives are clearly incompetent. Yes, GM has some battery technology, but had GM focused on that instead of SUVs and subprime financing, it would be better positioned now. But the key issue is the marketplace and market competition is what should be leading the way, not taxpayer sponsored bailouts. "This is a horrible idea, another transfer of funds to failed ventures," said David Littmann, senior economist for the Mackinac Center for Public Policy in Midland, Michigan, which describes itself as a supporter of free-market ideals. "If this were a good idea, the market would price the debt accordingly and give them the money." "We've seen these kinds of bailouts for the financial companies, why not the automakers?" said Aaron Bragman, a Troy, Michigan-based auto analyst for Global Insight Inc. "The big problem is that a lot of people in Washington don't see a value in the U.S. auto industry because they have a foreign plant in their district that is doing just fine."

GM, Ford Seek $50 Billion From U.S., Double Request - (www.bloomberg.com) General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles. The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year's energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.

Lehman, Treasury, Fed Have Lost Control Of The Game - (globaleconomicanalysis.blogspot.com)
Ten Financial Entities On The Brink - (globaleconomicanalysis.blogspot.com)

Fannie Doesn’t Want New York Subprime, Either - (www.housingwire.com) - Following in the footsteps of Freddie Mac (FRE: 2.81 -11.08%), Fannie Mae (FNM: 5.00 +3.09%) said earlier this week that it would no longer purchase subprime loans fitting New York State’s new definition for the credit class. The decision by bth GSEs to exit subprime loan purchases in New York comes on the heels of new legislation designed to protect borrowers from predatory lending practices. “Fannie Mae will not purchase or securitize any mortgage loan that meets the definition of a subprime home loan under New York law, regardless of whether any provision of the law is preemptedparticular mortgage or for a particular originator,” senior vice president Michael Quinn wrote in a seller bulletin dated Aug. 19.
Quinn suggested that New York’s new definition of subprime falls under what the GSE sees as “high-cost” or “high-risk” home loans, and said that Fannie has had a long-standing policy of not purchasing such loans for securitization or for its retained portfolio. See the full letter. One of HW’s sources didn’t buy Neiman’s bluster, however. “Fannie and Freddie didn’t purchase a lot of subprime, as he suggests, but it’s also true that the GSEs are the only game in town right now,” said the source, a bank executive. At least one subprime lender is still making loans in New York State, as far as we know: the Federal Housing Administration. Which makes for an interesting twist: a state government passes tight restrictions and new liabilities for lenders making “subprime loans” within the state, and the federal government then becomes the only lender willing to make such a loan.

San Diego foreclosures hit new record in July - (www.signonsandiego.com) Those waiting for signs that the housing slump is nearing an end were disappointed Thursday, as MDA DataQuick reported 2,004 San Diego County homes went into foreclosure in July, a 9 percent increase over June and a jump of nearly 213 percent over last year. The July foreclosure tally was a record high since DataQuick began monitoring mortgage failures in 1988. It marked the county's 40th consecutive month of year-over-year increases in both foreclosures and notices of default, the start of the foreclosure process.

Lots of Lousy Houses Are On The Market - (money.cnn.com) - Mold, maggots and piles of festering trash - no wonder home prices are in freefall. It’s not just the subprime mortgage crisis that’s to blame for plummeting home prices. A flood of squalid properties on the market is helping to exaggerate the post-bubble price declines. "Part of the reason home prices are declining is a fundamental deterioration in the housing stock," said Glenn Kelman, CEO of the online, discount broker Redfin. "During the boom, nine out of 10 houses for sale in many markets were in prime condition. Now, for every 10 houses, at least three are dogs." Most of these mutts are foreclosed properties that have been permitted to fall into disrepair by lenders overwhelmed with thousands of vacant homes. If these houses sell at all, they’re going for bargain basement prices that are hurting home values throughout the neighborhood. "I’ve never seen so many houses in this condition before," said Ray Anderson of Buyer’s Advantage Real Estate in Auburn Calif., near Sacramento. "And I’ve been in the business 20 years. I’ve seen bank-owned properties in the past. They were never like this."

That Student Loan, So Hard to Shake - (www.nytimes.com) Then there is Alan Collinge, who for years has described his struggle with tens of thousands of dollars in student loan debt to anyone who will listen. He has appeared on “60 Minutes” criticizing Sallie Mae, the nation’s largest student lender, and has been quoted in the pages of this and other newspapers attacking loan companies. Student lending is a big business, one that has been the subject of many complaints over the past two years after revelations of questionable ties between lenders and colleges’ financial aid officers. More recently, tight credit markets raised the possibility that some students might not be able to borrow to go to college in the fall. But much less attention has been paid to what happens to students after they borrow. Lenders who make loans guaranteed by the federal government can more easily take steps against borrowers — like garnishing wages and benefits — than they can with other kinds of unsecured consumer debts. And all student loans, federally guaranteed or not, are extremely hard to get rid of in bankruptcy proceedings, more so than credit card or other debt.

Hedge fund Ore Hill limits redemptions - (www.reuters.com) Hedge fund Ore Hill Partners, which specializes in credit strategies, has barred clients from redeeming their money from its flagship offering, imposing a freeze just as investors clamored for an exit, the company said on Friday. The firm, half owned by Man Group Plc (EMG.L: Quote, Profile, Research, Stock Buzz), the world's largest publicly traded hedge fund, put up a so-called gate provision on its roughly $1.2 billion Ore Hill International portfolio this week, limiting the amount of withdrawals after investors sought the return of roughly $300 million, said an investor who asked not to be identified. Heavy redemptions for September triggered an automatic gate, said Sophie Sophaon, a spokeswoman for the fund. Fund directors are considering what measures to take that will be in the best interest of all investors, she added.

Manhattan looks abroad for property saviours - (www.ft.com) Real estate developers in New York City are stepping up their appeals to foreign buyers to bolster a housing market that is beginning to reflect the sagging fortunes of Wall Street. Stratospheric housing prices in Manhattan, which until recently was one of the few markets in the US that had escaped the housing slump, have long been propped up by foreigners eager to live and invest there. The weak dollar has helped to encourage them still further in recent years. But financial workers - whose annual bonuses (or lack thereof) are an obsession for Manhattan's property brokers - are facing job cuts and an uncertain future. This has left the city's resourceful brokers working harder to lure foreign investors.

English Families Suffering Because They Believed Realtors - (www.businessweek.com) She turns her swollen face away. Twenty-four years old, King has been fighting the undertow of poverty for a year. Poverty has won. Her mistake lay in believing what banks and politicians in Great Britain have been advising for years. Conventional wisdom was to get a "foot on the property ladder" as quickly as possible. In other words, buy property, and do it early in life. And it was okay, they said, to take out a large amount of credit, because property values would continue to rise, just as they had nearly tripled in the preceding decade. In the past year, however, the trend has reversed. The decrease in property values began in the United States, and in the past few months the phenomenon has reached Spain, Ireland and Great Britain—countries where a building boom produced a housing bubble that is now bursting. After that bubble bursts, the next sound is often a quiet whimper at the kitchen table. With interest rates rising and the value of houses declining, the first to go bankrupt are those who had little capital to begin with and could only receive dubious credit. In the United States it's called "subprime": credit that's risky, second-rate and expensive. For years, banks bundled these credits together and then resold them, making first-rate profits. That bubble, too, has burst. Between March and June alone, 37,740 British homeowners had to turn their property back over to the banks. By the end of the year it's likely to be 75,000. More than a million people in Britain will have difficulties paying off their debt. After 15 years of economic boom, a word is on their lips again that the country thought it had struck from its vocabulary entirely: recession.


Other Stories:

U.S. Mint to Resume Distribution of American Eagle Gold Coins - (www.ml-implode.com) - The U.S. Mint said it will resume limited distribution of its 1-ounce American Eagle Gold coins a week after suspending sales be...
Here They Go Again - (www. wallstreetexaminer.com) - On July 15th I actually posted a glass half full item about subprime suggesting that most of the problems or bad eggs were in the pipeline. If you view the chart and article from June from Bankstocks.com in the post you will see that new delinquencies were fading or burning out on a comparative basis. Now comes new data from July that indicates that a cause of this fade were earlier workouts or restructurings with borrowers. But, now exposed further to the cold reality of even lower housing prices, those are once again falling into trouble. More color is provided here as well.

NY now least affordable market as CA prices fall more - (biz.yahoo.com)

Blogger Threatened By MLS For Exercising Freedom Of Speech - (www.knifecatchers.com)
More lenders stuck with houses - (www.chicagotribune.com)
As values drop, lenders cut house-equity loans - (www.signonsandiego.com)
How Much Will Foreign Banks Lose On US Mortgage Collapse? - (www.clusterstock.com)
Greenback Surges, Euro Shrivels - (www.counterpunch.org)
The Merits of Staying in Cash - (www.seekingalpha.com)
Wholesale Inflation Is Red-Hot! - (www.insidefutures.com)
Are You Ready For Higher Mortgage Rates? - (www.nuwireinvestor.com)
Looking for a bright spot in housing crisis - (www.dailycamera.com)
Forgetting Freddie - (and Fannie) - (www.marketwatch.com)
Speculation nation - (www.salon.com)

"The subprime turmoil: What’s old, what’s new, and what’s next" - (www.ml-implode.com) - "When you think you've read everything worth considering on a given topic, once in a while something comes along to prove you wr...
Freddie's Loss is Gold's Gain - (www.ml-implode.com)
Homebuilders mourn loss of free down payments - (www.ml-implode.com)
Mr. Mortgage: Fannie/Freddie Bailout - Who Gets Thrown Under the Bus? - (www.ml-implode.com)
Update2: Revised - Rescap/GMAC Bank Cuts Balloon Jumbos, Freezes Hiring and Will Eliminate Recruiters - (www.ml-implode.com)
SouthCoast lenders point to benefits and remaining questions in mortgage relief plan - (www.ml-implode.com)
Wells Fargo's Premiere Asset Services: No More SFDPA's, Thank You! - (www.ml-implode.com)
These homes for sale suck - (www.ml-implode.com)
Fannie Mae & Freddie Mac Failure: The Lies, the Cover Ups and the Making of a Disaster - (www.ml-implode.com)

Mexico's growth rate falls short of expectations - (www.latimes.com)
Olympics disappoint China business owners - (www.latimes.com)
Treasury wants GSEs shareholder-owned: source - (www.reuters.com)

U.S. Mint Suspends Sales of American Eagle Gold Coins - (www.bloomberg.com)
Fannie, Freddie and Lehman ensure August is anything but quiet - (www.cfo.com)
More houses return to lender, address unsold - (www.chicagotribune.com)

Inflating the next bubble - (www.ml-implode.com)
Tepper Bought $2.4 Billion of Energy Stocks Before Prices Fell - (www.bloomberg.com)
Bad data used to manipulate natural gas market - (www.chron.com)
Auction-rate securities probe expands to nearly 40 brokerages - (www.latimes.com)
U.S. and Global Economies Slipping in Unison - (www.nytimes.com)
Ex-BOE official says Fed rate cuts went too far - (www.reuters.com)
In the Ruins of the Housing Bust - (www.nytimes.com)
Fed Chairman Urges Broader Market Oversight - (www.nytimes.com)
Inflation Stings U.S. Workers - (online.wsj.com)
Finding the Mess Behind the Mess - (www.nytimes.com)
Bernanke Urges Broader Powers For Central Bank - (www.washingtonpost.com)

Driving Is Down, but Auto Insurance Rates Are Rising - (www.nytimes.com)
Buy American? Foreign companies are doing just that - (www.financialweek.com)
Buffett says economy's troubles will continue - (www.ap.com)
Uncertainty Over Fannie and Freddie - (www.nytimes.com)

Moody's ratings cut latest blow to Fannie, Freddie - (www.reuters.com)
U.S. hotel sales down 81% in first half - (www.chicagotribune.com)
What Will Mac ’n’ Mae Cost You and Me? - (www.nytimes.com)
A Mission Goes Off Course - (www.nytimes.com)

Friday August 20 Housing and Economic stories

Top Stories:

FED Freaks Over Lehman Credit Lines - Credit Suisse Denies Rumors - (www.ml-implode.com) Lehman Brothers may find themselves edging closer to disaster in today’s trading as word of nervous Federal Regulators supposedly making secret phone calls to follow up on”rumors” that Credit Suisse had withdrawn one of Lehman’s remaining lines of credit.

Lehman In Deep Trouble - (Mish at globaleconomicanalysis.blogspot.com) On August 4, in Deleveraging Risk High And Growing At Lehman I commented "There is virtually no chance that Lehman can avoid huge losses on those $65 billion in mortgage and real estate securities, I do not care what the alleged quality is compared to Merrill. There is simply little market for illiquid mortgage and real estate securities. Furthermore, the longer Lehman waits, the worse both will get, especially commercial real estate holdings. A $20 billion hit would not surprise me one bit." Lehman raised $4 billion in capital in common equity on June 10th at $28 a share and an additional $2 billion in preferred stock. See Lehman posts loss and plans to raise capital. Clearly Lehman did not have a clue as to how much capital it would need. The same thing can be said for Citigroup (C), Merrill Lynch (MER), Washington Mutual (WM), Wachovia (WB) and others. Every step of the way, these companies have announced the "final round" of capital raising effort only to have to go back to the well again and again.

Federal Reserve acted on Lehman rumor: report - (news.yahoo.com/s/nm) Fed seems to be doing anything within its power to prevent a full meltdown of Lehman Brothers. The Federal Reserve acted on rumors last month and called Credit Suisse Group (CSGN.VX) to see if it had pulled a credit line from Lehman Brothers Holdings Inc (LEH.N), The Wall Street Journal said citing people familiar with the matter. Credit Suisse told Fed officials that there was no truth to the rumor and it had no intention of pulling the line of credit, the paper cited the people as saying.

Lehman’s secret talks to sell 50% stake stall - (www.ft.com) Yes, investors and foreign countries have finally wised up to the garbage that Wall Street has been selling the past 10 years. Lehman Brothers, the beleaguered US investment bank, held secret talks to sell up to 50 per cent of its shares to South Korean or Chinese parties in the first week of August but failed to reach agreement with either. The South Koreans and Chinese walked away after concluding that Lehman was asking too high a price, said New York-based people familiar with the potential buyers. Lehman declined to comment. The talks reflect the growing pressure on Dick Fuld, Lehman’s chief executive, to raise capital ahead of the mid-September earnings report, which, analysts said, could include more writedowns of $4bn (£2bn), bringing the total so far to $12bn. Lehman shares have fallen nearly 85 per cent since early 2007 and its market value is now about $9.5bn.

Buffett spotlights nation's debt crisis - (money.cnn.com) Billionaire investor teams up with Wall Street luminaries to focus attention on America's ballooning budget deficit. The catastrophe looming in the documentary "I.O.U.S.A." isn't romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts. The disaster they warn of could be bigger than any we've ever seen - bigger than an iceberg, bigger even than the current mortgage crisis. If the U.S. doesn't do something, and fast, to tame the federal government's debts - now more than $50 trillion - the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year's financial turbulence look like a trip to the debt counselor's office.

California mulls probing senator over IndyMac crash – (news.yahoo.com/s/nm) California's attorney general is reviewing a request by former employees of IndyMac Bancorp Inc (IDMC.PK) to investigate whether a New York senator triggered the bank's collapse by releasing confidential information. At issue is a much-publicized letter that Chuck Schumer, a Democrat, sent in June to the Federal Deposit Insurance Corp (FDIC) and Office of Thrift Supervision (OTS) questioning the company's ability to survive.

Why America Is Headed For A Depression - (market-ticker.denninger.net) America's GDP, or the total of all goods and services produced in this nation in a given year, is about $14 trillion dollars. America the nation currently has an outstanding debt of about $10 trillion dollars, and has more than doubled in the last ten years. But this number is not the real total, because it does not count all the "promises" (read: entitlements) that people have been told they will have. Those "promises" are Social Security, Medicare and Medicaid, in the main. They total, approximately $90 trillion dollars in current liability. What's worse, about 1/3rd of that was added with the "Medicare Part D" drug benefit, even though Congress was at the time fully aware that there was already $60 trillion or so sitting out there in unfunded liabilities. They did not care because the AARP, and you, screamed and demanded that Congress "do something." Oh they did something all right. They did the very same thing that you think you have a right to do - that is, spend more than you make.
That's right. You have a right as an American to have a 4,000 square foot house on an acre, even if you only cut hair for a living. If you can't get that loan honestly, you simply will make up an income and use some sort of "exotic" mortgage product to get it.
Your car broke down? Its beneath you to buy a used one, right? Just hit the home equity line and buy a new Suburban. $40,000. Cool. Oh, and charge the gas too. Your kid comes home from school complaining that one of his friends has an iPOD. To shut him up, you go buy him one - even though you don't have the $200 it costs. You just pull out the plastic and charge it. It will all be ok.

Money woes stall downtown plan - (www.boston.com) The $650 million redevelopment of the historic Filene's building - which Mayor Thomas M. Menino envisions as the new center of downtown Boston - is struggling because the developers have been unable to raise financing. An executive with knowledge of the project's financing said developers John B. Hynes III and Vornado Realty Trust have been battling an extremely tight credit market since they won city approvals to undertake the massive project almost one year ago.

Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns - (www.mortgagenewsdaily.com) - While the U.S is currently in the midst of the largest bout of home foreclosures in at least 30 years, at least one economist says two more 'waves' are likely on the way.
Patrick Newport, a housing economist at Global Insight, said the next round of foreclosures could come over the next several months as a result of continued job losses in the U.S. In addition to the nearly 660,000 U.S. jobs lost since December, Global Insight is currently forecasting another 600,000 jobs lost over the rest of 2008 and into the first quarter of 2009.

FDIC sets mortgage plan for distressed IndyMac borrowers - (www.usatoday.com) "Troubled home borrowers with loans from IndyMac Federal Bank will be able to switch to fixed-rate mortgages under a new plan from federal regulators, who seized the bank last month after it became the largest regulated thrift to fail."

Can the FDIC take over my bank? Please? - (www. blownmortgage.com) - If you’re in trouble with your mortgage I’m sure you’re rooting for an FDIC take-over. They seem to be far more willing to work with delinquent borrowers than traditional, private servicing companies. FDIC is reducing mortgage payments and interest rates for delinquent borrowers at the federally-controlled IndyMac Bank . FDIC spokesperson Shelia Bair said that the FDIC hopes to keep nearly 30,000 delinquent borrowers in their home with the changes.
Must be nice though. If you’re in trouble with your mortgage I’m sure you’re rooting for an FDIC take-over. They seem to be far more willing to work with delinquent borrowers than traditional, private servicing companies.

Bay Area Home Prices Plummet as Fire Sales Continue - (www.thetruthaboutmortgage.com) Bay area home sales achieved their first year-over-year gain since the beginning of 2005 as distressed properties boosted the numbers, Dataquick reported.
A total of 7,586 new and resale homes and condos sold during July in nine Bay Area counties, a 5.7 percent increase from June and a 2.2 percent increase from July 2007, but still the second slowest July since 1995.
Unfortunately, foreclosure resales made up a whopping 33 percent of all resales, up from 29.9 percent in June and 4.2 percent a year ago.
“So much of today’s market is driven by distress. Unless interpreted in that context, the stats give a rather distorted view of the overall market,” said John Walsh, DataQuick president.
“We know one-third of the Bay Area’s resales in July were homes fresh off foreclosure. Who knows how many more involved a desperate seller and a lender who accepted a short sale.”
All those fire sales, especially concentrated in less expensive inland areas of NorCal, led to a substantial median sales price drop during the month.

Foreclosures smack San Francisco area house prices down 29.3% - (www.sfgate.com) Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area's median price in July, sending it down nearly 30 percent to a level not seen in more than four years. A third of all existing homes sold in the nine-county region in July were foreclosed properties, the real estate research firm MDA DataQuick of San Diego reported Tuesday. A year earlier, just 4.2 percent of existing-home sales were foreclosed properties. The brisk business in bank-owned homes buoyed sales volume, especially in counties with a glut of foreclosures. "There is deep discounting in inland markets that have been slammed by foreclosures," said Andrew LePage, an MDA DataQuick analyst.

Fannie, Freddie Selloff Sends Shares to 18-Year Low - (www.ml-implode.com) - "Shares of Fannie Mae and Freddie Mac dove to their lowest levels in more than 18 years on mounting fears of a government bailout that would wipe out shareholders of the two U.S. housing finance giants."


Other Stories:

The Upside of Falling House Prices - (www.volokh.com)
Vacancies rise, putting downward pressure on rents - (latimesblogs.latimes.com)

The standard-of-living bubble - (money.cnn.com)
Foreigners push back on US debt - (optionarmageddon.ml-implode.com)
Federal foreclosure-purchase program may fall flat in California - (www.latimes.com)
Fannie, Freddie Shares Slump, Bonds Rise on Bailout Speculation - (www.bloomberg.com)
Freddie, Fannie stock slide picks up pace - (www.marketwatch.com)
Investors Say U.S. Bailout of Housing Fraud Giants Is Inevitable - (www.nytimes.com)
Les prix de l'immobilier devraient remonter fin 2011 - (www.lefigaro.fr)
Irish government must let property bubble burst - (www.irishtimes.com)
Market conditions worse than what data show - (www.msnbc.msn.com)
Mortgage application volume hits 8-year low - (news.yahoo.com)
The Outlook Remains Ugly - (www.seekingalpha.com)

Worst of financial crisis is still to come, ex-IMF chief Ken Rogoff warns - (www.telegraph.co.uk)
Sharp US money supply contraction points to Wall Street crunch ahead - (www.telegraph.co.uk)
Foreclosures likely skewing housing indicator - (www.msnbc.msn.com)
Goodyear to close 92 U.S. stores, cut jobs - (www.usatoday.com)

Commercial/Multifamily Mortgage Originations Off 63 Percent in Second Quarter - (www.ml-implode.com) - "Commercial and multifamily mortgage originations fell two percent from the first quarter and 63 percent year-over-year in the s...
Radio Free Wall Street - 8/20 - (www.ml-implode.com) - "Lee Adler, Russ Winter, and Aaron Krowne analyze the impact of key financial events on the financial markets and economy, tell ...
Mortgage Application Volume Dips Again - (www.ml-implode.com)
A Bottom in Housing? You've Got to Be Kidding! - (www.ml-implode.com)
In Face of Conflicting Economic Reports, Interest Rates Stand Pat - (www.ml-implode.com)
Federal foreclosure-purchase program may fall flat in California - (www.ml-implode.com)
Freddie, Fannie Nail-Biting Continues - (www.ml-implode.com)
Foreigners push back…. - (www.ml-implode.com)
Wachovia Unloads Troubled Loans - (www.ml-implode.com)

Fed Acted on Lehman Rumor - (online.wsj.com)
Weak economy propels record numbers at community colleges even higher; funding crunch feared - (www.chicagotribune.com)
Lifestyles of the rich may be changing in downturn - (www.chicagotribune.com)
Freddie pays highest risk premium - (www.ft.com)
Running out of road? Detroit’s big three face up to hard times - (www.ft.com)
Lehman’s secret talks fail to offload 50% stake - (www.ft.com)
Upscale malls reach out as shoppers cut back - (www.latimes.com)
I Spy More Road Kill on the Credit-Crunch Highway: Mark Gilbert - (www.bloomberg.com)
Faking the good life to get harder - (money.cnn.com)

U.K. holds few tools to revive a gloomy economy - (online.wsj.com)
Fannie, Freddie shares hit 18-year low on bailout fears - (www.reuters.com)
B of A, Goldman, Deutsche Bank Are Facing Greater Scrutiny In New York Auction-Rate Probe - (online.wsj.com)
FDIC Will Modify Mortgages for Some IndyMac Borrowers - (www.bloomberg.com)
Andor Hedge Fund Shutting Down - (online.wsj.com)

Thursday August 19 Housing and Economic stories

Top Stories:

Fannie & Freddie Trading Should Be Halted: Cramer - (www.cnbc.com) Cramer is trying to blame short-sellers for his bad picks (as usual). Jim Cramer urged that trading in Fannie and Freddie be stopped because the shares were being manipulated by short-sellers. "This is an outrage," Cramer said shortly after the market closed. "It's very clear that someone knows what's happening." Cramer blamed regulators, including the Securities and Exchange Commission and New York Stock Exchange, for not stepping in to halt trading in the shares on the possibility of insider trading. "They used to stop trading when it was clear that there were some people who knew what was going on and others don't," he said. "There's no cop on the beat anymore. "There's so much confusion, so much money changing hands," he added. "It's just so unfair to the little guy."

If anyone needs proof that Cramer is not genuine (in his support of the little guy) and is a complete moron, see the videos below:
1) New Cramer recommendation (very bad) telling users not to exit Bear Stearns 1 week before meltdown
2) Cramer Admits He Was Wrong on Bear Stearns – But he tries to justify his bad advice.
3) Then (Nov 2006) - Jim Cramer’s prediction of housing market – Arguing that anyone calling for real estate to fall is an idiot
4) Now (August 2007) - Jim Cramer complaining the Fed is not doing enough to bail out his buddies in Wall Street

Rescue May Cost $40 Billion: Gross - (www.cnbc.com) The Treasury Department will need to provide Fannie Mae and Freddie Mac as much as $40 billion to recapitalize the troubled mortgage giants, PIMCO bond magnate Bill Gross said. Gross said on CNBC that the public backstopping of the government-sponsored enterprises will be the only way the Treasury can restore investors' confidence that the two secondary market companies will not fail.
"They need to hear not only that they're willing to stand behind Fannie and Freddie but that their money is going to do that," he said. "In terms of the amount, 15 to 20 billion per institution in the form of preference or preferred stock that hopefully will be at the same level of the existing preferred stock." The preferred stock will give taxpayers priority in getting the money bank as Fannie [FNM 4.40 -1.61 (-26.79%) ] and Freddie [FRE 3.25 -0.92 (-22.06%) ] continue along in their business of buying mortgages from banks that don't wish to have the liabilities on their balance sheets. Consequently, investors holding common shares will be virtually wiped out, as the market is indicating in its current bargain-basement trading of the stocks.

Fannie, Freddie - Point of No Return - (www.cnbc.com) Good video clip. Shares of Fannie Mae and Freddie Mac are reaching the point of ultimate support -- zero. Ron Ianieri, chief options strategist at the Options University shares his view of why it's probable, not just possible that Fannie and Freddie will be nationalized.

FDIC Will Modify Mortgages for Some IndyMac Borrowers - (www.bloomberg.com) The FDIC and Sheila Bair have over-stepped their duties and are throwing away 200 years of contract law in the US by modifying contract terms. The Federal Deposit Insurance Corp. may lower mortgage interest rates for delinquent IndyMac Federal Bank FSB borrowers after suspending foreclosures on $15 billion in loans it's managing as successor to the failed lender. The FDIC, which is running IndyMac while seeking a buyer, may also extend repayment terms or base payments on reduced principal to help borrowers, FDIC Chairman Sheila Bair said today in a conference call with reporters. The program might serve as a ``catalyst to promote more loan modifications for troubled borrowers throughout the country,'' Bair said. ``We hope to keep tens of thousands of troubled borrowers in their homes and avoid the negative consequences that foreclosures can have on the broader economy,'' she said.

Many go bust in mortgage meltdown - (www.crainsnewyork.com) The mortgage crisis that sparked a wave of foreclosures is now responsible for a rising tide of bankruptcies across the city. Fueled in large part by the number of homeowners who could not keep up with monthly payments on subprime loans, 14,407 people filed for bankruptcy in the New York area during the first seven months of this year, compared with 11,026 in that period last year, according to bankruptcy court records. While the number of bankruptcies is not as high as it was during the previous economic downturn in 2001, the filings this time around are increasing at a greater rate, rising 31% from January through July versus the year-earlier period. "I've never seen it this bad," says Gregory Messer, a Brooklyn bankruptcy attorney. "There were times where there were more bankruptcies, but I don't know if I've ever seen so many people prepared to walk away from their houses." Bankruptcies are typically prompted by catastrophic events such as accidents, illnesses or divorce. The latest wave is different because the driving force is the mortgage crisis. Hit with monthly payments on subprime loans that suddenly increased by hundreds of dollars or more, many New Yorkers, already squeezed by rising gas and food prices, maxed out their credit cards in order to meet their obligations.

Fannie's Perilous Pursuit of Subprime Loans - (www.washingtonpost.com) As It Tried to Increase Its Business, Company Gave Risks Short Shrift, Documents Show. In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board. Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business." A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document. Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers. Since then, Fannie Mae's exposure to loosely underwritten mortgages has produced billions of dollars of losses and sent its stock price plummeting, prompting the federal government to prepare for a potential taxpayer bailout of the company. This month, Fannie Mae reported that loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.

Wall Street's bad reputation - (www.marketwatch.com) Get this: Part of John McCain's vision for America is cleaning up the financial-services industry, or as his Aug. 5 television ad "Broken" puts it: "He'll reform Wall Street."
The Republican presidential nominee's Democratic counterpart, Barack Obama, is attacking the other flank. On July 29, he blamed "irresponsible decisions" on Wall Street for the nation's economic woes. He's also been beating the drum that the industry needs more regulation. Forget for a moment that the securities industry is the third-biggest source of campaign donations to both McCain and Obama, according to Federal Election Commission data released July 28. Ignore that McCain and Obama served as senators while Wall Street was making all of those "irresponsible decisions." McCain and Obama are only feeding on the meat that Wall Street has given them. The blame for the nation's current economic crisis is shared by homeowners, banks, the government and the real estate market, but Wall Street, with its willingness to create a market for worthless loans, is an easy target, especially when everyone is feeling the pinch of a market that's fallen more than 15% from its highs.

Crony image dogs Paulson's rescue effort :: CHICAGO SUN-TIMES ... - (www.chicagotribune.com) Note: the article is no longer available on the Sun Times website, not even in a cache on google. Maybe accusing the head of the US Treasury of crony-ism isn't good business for the Sun-Times.) Luckily, the story has been copied in its entirety here J

Lawrence B. Lindsey on US Crony Capitalism - (www.itulip.com) - "Excellent video of Lawrence B. Lindsey, ex-Governor of the Federal Reserve System from 1991 to 1997, on CNBC followed by an article on Paulson and crony capitalism in which he is quoted." As financial storm signals appeared the last 18 months, some Bush officials urged drastic reform of Fannie Mae and Freddie Mac. But according to internal government sources, Treasury Secretary Henry Paulson objected because it would look "too political." The Republican administration kept hands off the government-backed mortgage companies that are closely tied to the Democrats. Paulson is a Republican, but as head of the Goldman Sachs investment bank, he had close ties with Democratic-dominated Fannie Mae. After prominent Democrat James A. Johnson left Fannie after eight years as chairman and CEO, he was named head of Goldman Sachs' compensation committee, helping set Paulson's abundant salary there. That connection clearly was not enough for Paulson to consider recusing himself from dealing with the crisis threatening Fannie, Freddie and the whole American economy. He structured the bailout and was on the phone last weekend encouraging leading investment bankers to buy Freddie Mac bonds. Financial consultant Lawrence Lindsey, President Bush's former national economic director, told clients Sunday, "Surely things are somewhat amiss when a country's finance minister plays bond salesman for a supposedly privately owned company." Testifying before the Senate Banking Committee on Tuesday, Paulson stressed the U.S. would purchase assets only if necessary. But relying on investment bankers could be awkward for Paulson because of indiscreet jubilation from his old company. "This is our bailout," a senior Goldman Sachs official told a Wall Street colleague this week, suggesting the firm will cherry-pick for mortgage bargains.

Paulson Playing Chicken With Markets - (www. nakedcapitalism.com) - “Hank Paulson’s gamble is that if the Treasury commits to investing in Fannie and Freddie [if required] it will never have to put money in,” said Alex Pollock, a fellow at the American Enterprise Institute... In other words, this was all meant to be a bluff. But the markets have called the bluff in very short order.

Even the 'comfortable' face need to alter spending habits - (www.csmonitor.com) Losses in home equity call for recalculation of net worth, and a return to reality. Bad news continues to batter the American consumer, from negative home equity to weak retail sales and rising claims for unemployment benefits. One in 3 homeowners who purchased homes since 2003 now owe more than what the property is worth, according to Zillow.com, an Internet service that values more than 80 million homes. The numbers are even more dismal for those who bought in 2006, with 45 percent now experiencing negative home equity. Equity holdings by households offer no cushion, falling a stunning 41 percent in value for the first quarter of 2008, according to the Federal Reserve's Flow of Funds Report. Announcements of Wall Street layoffs, bankruptcies of major US retail outlets, and even the decision by Starbucks to close 600 outlets has agitated Americans regarding their future employment. Reflecting the collapse in housing and equity values, household net worth has dropped for two consecutive quarters, as consumers increasingly depend on credit cards and consumer loans to maintain their lifestyles.

Large U.S. Banks May Fail Amid Recession, Rogoff Says - (www.bloomberg.com) The worst is yet to come in the U.S.,'' Rogoff, a Harvard University professor of economics, said in an interview in Singapore today. ``The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job.

FHA Share of Mortgage Apps Soars: MBA - (www.housingwire.com) - The government-insured share of mortgage applications tripled in the past year according to data compiled by the Mortgage Bankers Association and released Monday afternoon; relying on the group’s weekly application survey, the MBA said that of all mortgage applications accepted during the month of July 2008, 29.1 percent were for government-insured loans (mostly FHA) compared to 8.4 percent in July 2007.
News of the MBA data follows an HW story last week that found Ginnie Mae fixed-rate mortgage-backed securities issuance trumped similar issuance volume from Freddie Mac (FRE: 4.17 -5.01%) in July, and was running ahead of both Freddie and Fannie Mae (FNM: 6.01 -2.28%) to-date in August. Roughly 97 percent of FHA-endorsed mortgages are securitized via Ginnie Mae.
The government-insured share has been increasing since February 2007, the MBA said, but only since the beginning of this year has the share really exhibited significant increases; up from 9.4 percent in January. The MBA suggested that interest in government-insured mortgages still has room to run, however, relative to a record share of 43.8 percent of mortgage applications in February 1990.

Freddie Note Sale Crimps Treasurys - (online.wsj.com) - Financial weekly Barron's this week reported that a U.S. government bailout of the two mortgage-finance giants is increasingly likely. Freddie Mac had to jack up yields to entice investors, however. It sold the notes at 113 basis points over comparable Treasurys, the highest premium it has ever offered for a five-year note. The notes yielded 4.172% at sale.

“Calling all cash: please report to AIG FP” - (www.ft.com) - The one financial industry that seems to be dodging the subprime bullet is insurance. Only a handful of companies have had their safety ratings knocked down because of an excessive exposure to Wall Street’s toxic waste. The vast majority has enough capital to withstand the known problems on their balance sheets, the rating companies all say. Turns out: not so much. At least, not so much for AIG. The world’s largest insurer. AIG is, in fact, a trainwreck, and the market is only just waking up to this. A note from Goldman analysts this morning might just be the wake-up call investors need. For an idea of tone, let’s flash through some of the headers: Don’t buy AIG. A dangerous balance sheet posing as an inexpensive entry point. There’s nothing to be feared except fear itself…and mortgages. Raising capital: Ultimate number too difficult to quantify. The “base case” scenario for AIG under Goldman’s analysis is a further $9bn in losses on their CDS contracts. That widens to $20bn under the more likely “stressed” scenario.


Other Stories:

Fed's Lacker Clashes With Paulson on Fannie, Freddie - (www.bloomberg.com) Richmond Federal Reserve Bank President Jeffrey Lacker called for ``demonstrably'' privatizing Fannie Mae and Freddie Mac, becoming the first Fed official to publicly clash with the Bush administration's strategy of keeping them as federally backed firms. ``I would prefer to see them credibly and demonstrably privatized,'' Lacker said today in an interview with Bloomberg Television. He agreed with former Fed Chairman Alan Greenspan's view that the two largest U.S. mortgage finance firms ought to be nationalized, then split up and sold off. Treasury Secretary Henry Paulson by contrast has tried to keep Fannie Mae and Freddie Mac in their current form as government-sponsored companies owned by shareholders. Lacker's remarks come as a slide in the firms' stocks and increase in their borrowing costs spur speculation the Treasury will intervene.
Real estate chaos hits appraisal industry - (www.sfgate.com) How much is your house worth in this turbulent market? That's the question on the minds of many Bay Area homeowners, but it's become increasingly tough to answer, even for the pros.
Instability in the region's housing market is making it difficult to determine values, according to mortgage brokers and real estate appraisers. "It's miserable," said Karen Mann, who runs a small East Bay appraisal firm called Mann & Associates. "I've been in the business 28 years, and this is the worst downturn I've seen."
No Limit to Greenspan's Once-In-A-Century Events - (www.bloomberg.com) Alan Greenspan has presided over more hundred-year events in the last 20 years than the rest of us do in a lifetime. As chairman of the Federal Reserve from August 1987 through January 2006, the Maestro was ahead of the pack when he sniffed out a secular increase in productivity growth, the result of a ``once-in-a-lifetime'' technological boom.
US bank 'to fail within months' - (news.bbc.co.uk)
Large U.S. Banks May Fail Amid Recession, Rogoff Says - (www.bloomberg.com)
Today's Negative-Equity Update - (www.seekingalpha.com)
Housing, Prices Raise Stagflation Risk - (www.bloomberg.com)

Want to Live in a Castle for $250k or Less? - (www.intlistings.com)
Blub.... blub.... blub..... - (market-ticker.denninger.net)

Mortgage Interest Deduction Benefits Rich Much More Than Middle Class - (www.pbs.org)

Housing Starts - (www.ml-implode.com)
First American Rolls Out Loss Mitigation Management Platform - (www.ml-implode.com)
Top Alt-A Mortgage Lenders in First Quarter 2008 - (www.ml-implode.com)
M3 Contraction - The Future Is Now - (www.ml-implode.com)
High borrowing costs defy Fed's interest rate cuts - (www.ml-implode.com)
Sharp US money supply contraction points to Wall Street crunch ahead - (www.ml-implode.com)
M3 Contraction - The Future Is Now - (Mish at globaleconomicanalysis.blogspot.com)
House building plunges to 17-year low in July - (money.cnn.com)
Regional banks see bond prices decline, interest skyrockets - (cincinnati.bizjournals.com)
Single-family housing permits fall to 26-year low - (www.marketwatch.com)
Russia says keeps buying Fannie, Freddie debt - (www.ml-implode.com)
Update: First Horizon Home Loans Becomes MetLife Home Loans - (www.ml-implode.com)
Drop in U.S. Housing Starts Due to Inflated June Figure, but Trend Still Downward - (www.ml-implode.com)

Corporations not pulling weight on taxes - (www.chron.com)
U.S. MBA's Mortgage Applications Index Fell 1.5% Last Week - (www.bloomberg.com)
Foreclosures likely skewing housing indicator - (www.ap.com)
Federal foreclosure-purchase program may fall flat in California - (www.latimes.com)
Wachovia Unloads Troubled Loans - (online.wsj.com)
Some Say Bailout of Housing Giants Is Inevitable - (www.nytimes.com)
Lehman’s secret talks fail to offload 50% stake - (www.ft.com)
Casinos' revenue growth levels off - (www.azcentral.com)
AZ Court: Home buyers can bypass developers, sue builders - (www.azcentral.com)
Lehman looked to the east - (www.nypost.com)
Goodyear to close 92 U.S. stores, cut jobs - (www.usatoday.com)
Faking the good life to get harder - (money.cnn.com)
Reliving the S&L Meltdown - (online.wsj.com)
Ringback tone sales to triple in four years - (www.cnet.com)

Fannie, Freddie Slump on Concern Bailout Is Likely - (www.bloomberg.com)
Crude Oil Rises After Gasoline Stockpiles Drop a Fourth Week - (www.bloomberg.com)
Treasuries Advance on Speculation U.S. Will Take Over Freddie - (www.bloomberg.com)
Gold Falls in N.Y. as Dollar Gains Against Euro; Silver Drops - (www.bloomberg.com)
U.K. holds few tools to revive a gloomy economy - (online.wsj.com)
Mortgage lending slump continues - (news.bbc.co.uk)
Saudi's economic cities under pressure to deliver - (www.iht.com)
BOE Panel Split Three Ways in Vote to Keep Rate at 5% - (www.bloomberg.com)
Shanghai soars on hopes of stimulus plan - (www.ft.com)
China raises power prices amid shortages - (www.ap.com)

Fannie, Freddie shares hit 18-year low on bailout fears - (www.reuters.com)
B of A, Goldman, Deutsche Bank Are Facing Greater Scrutiny In New York Auction-Rate Probe - (online.wsj.com)
The next credit crunch - (www.fortune.com)
Fannie, Freddie Bailouts May Hinge on Debt Rollover - (www.bloomberg.com)
Andor Hedge Fund Shutting Down - (online.wsj.com)
Hole in the funding - (www.boston.com)
Lavish New York City Condo Project Contends With Lenders' New Demands - (online.wsj.com)