|
This page is graphically intense with long load times due to photos. However, the photos and narratives makes the wait well worthwhile. The opinions expressed are those of the author and in no way represents the opinions of others. 
RETURN TO MAIN TABLE OF CONTENTS
OBAMANATION CHRONICLESFANNIE MAE AND FREDDIE MAC BAILOUTSeptember 2008Fannie Mae and Freddie Mac Bailout (Sep 2008) "John McCain started smearing Obama about non-existent ties to Fannie Mae in some of his deceptive attack ads," says FightTheSmears.com. The site downplays connections between Obama and two former heads of the giant mortgage-backing institution — James A. Johnson and Franklin D. Raines — whose corruption played a key role in the current financial crisis.The Democratic Party blocked attempts, backed with proof, to fix Fannie Mae and Freddie Mac. The Democratic Party was told that Freddie Mae and Fannie Mac was rife with fraud and they were going to fail. Democratic Party defends Freddie Mac and Fannie Mae with racial accusations. The Office of Federal Housing Enterprise Oversight, OFHEO, Regulator that has unearthed the disaster back in 2004! was attacked by Maxine Waters, Barney Frank, Gregory Meeks, and others saying the facts are not true. Republicans stand up again and again to show overwhelming evidence of fraud and abuse that was occurring. Franklin Raines, says “These assets are so riskless that there capital for holding should be under 2% Rep. Lacy Clay, D Missouri, ”This hearing is about a political lynching of Franklin Raines.” The OFHEO regulator is attacked during this meeting as having crossed the racial line in having the gall to ask Congress for oversight of the failing Freddie Mac and Fannie Mae institutions. With Proof! Rep Arthur Davis, D-Alabama, ” You’re making very specific what you have correctly acknowledged broad and categorical judgements about the magrt of thes institiutuaion about the willfull nes of practices that may or amy not be in controversy.. you put a 48 hour ultimatum on them with any authority.. this sounds like there has been an invisable line that has been crossed.” Rep Maxine Waters D- CA, “Under the outstanding leadership of Mr. Frank Raines everthing in the 1992 act has worked just fine in fact the GSE’s have exceded the housing mission.” Barack Obama Democrat Presidential candidate, must be proud. Franklin Raines is going to be his Treasury Secretary! Rep. Lacy Clay, D Missouri, “I get the feeling that the markets are not worried about the saftey and soundness of Fannie Mae as OFHEO says that it is, but of course the markets are not political.” Rep Barney Frank, “I don’t see nothing in here that raises saftey and soundness problems” Rep. Don Manzullo R-Illinois!, “Mr. Raines 1.1 million bonus on a 526k salary. Jamie Goerlick 779k bonus on a salary of 567k.. the 1998 earning per share number turned out to be 3.23 and 9mills a result that Fannie Mae met the eps maximum payout rule right down to the penny!” Former Pres. William (Bill) Jefferson Clinton, “I think the responsibilty that the dems have may rest more in resisting any efforts by Republicans in the congress or by me when I was pres to put some standards and tighten up a little on Fannie Mae and Freddie Mac.” But an editorial in the Aug. 27, 2008, Washington Post described Johnson and Raines, as "members of Mr. Obama's political circle." Raines advised the Obama campaign on housing matters. Obama chose Johnson to select his vice presidential running mate. But because neither are advising Obama today, this Web site's present-tense claim that he "doesn't [not didn't] take advice from Fannie Mae execs" is technically, if deceptively, true. Johnson also reportedly helped raise as much as $500,000 for Obama's campaign. And despite Obama's lack of seniority in the U.S. Senate, he pocketed more than $105,000 in political contributions, the third-highest amount given to any lawmaker, directly from Fannie Mae and Freddie Mac. Obama's Web site leaves all this unmentioned. (Source: NewsMax.com.) November 2008Michael Barr: Cause of Present Economic Crisis (Nov 2008) The U.S. economy is caught in a vicious downward spiral of declining home prices, escalating foreclosures, rising losses on mortgage-backed securities, and disappearing liquidity. The crisis spread rapidly from the mortgage market to engulf other forms of consumer credit, commercial real estate, and municipal debt, and reached far beyond American soil. Major financial institutions failed. The risk of sustained global economic crisis remains high. (SITE NOTE: This article is from the Center for American Progress (CFAP) that we believe is the mastermind of all of the American ills. Filled with liberal think-tank far-left radical nuts, it announced its agenda on 5 Nov 2009 on C-Span -- and published its manifesto that would be "advice" for Obama. Headed by John Podesto and funded by George Soros, it has spearheaded all the radical reforms -- and a large portion of Obama's "czars" have come from here.)Lax regulation, supervisory neglect, lack of transparency, and conflicts of interest all undermined the foundations of our financial system. Financial innovations in securitization and other factors brought increased liquidity, but also broadened the wedge between the incentives facing brokers, lenders, borrowers, rating agencies, securitizers, loan servicers, and investors. The lack of transparency and oversight, coupled with rising home prices, hid the problems for some time. When home prices and other assets imploded, credit woes cascaded through the financial system, and the lack of trust in the system meant that even sound financial institutions faced contagion from the crisis. That is why we need fundamental change in our system of financial regulation. Alarmed by the specter of a prolonged economic slowdown, both the Federal Reserve and Congress acted aggressively to stimulate demand through monetary and fiscal levers. For too long, the U.S. Department of the Treasury simply pressed mortgage holders to restructure mortgages and suspend foreclosures on a voluntary basis. But continuing turmoil in financial markets confirmed that these actions were not enough. Restoring confidence and liquidity in credit markets required, and still requires, bold action to restructure distressed assets and contain the effects of the downward spiral in financial markets. Rather than a measured market correction warranted solely by the underlying quality of assets, we have seen a freefall in mortgage-related financial assets and in U.S. home prices, with the crisis in credit quality extending like a contagion across the financial sector. The total inventory of homes in foreclosure reached 2.75 percent by June 2008, and delinquencies reached 6.41 percent of all mortgages. More than 2 million foreclosures are anticipated within the next two years. As of September 2008, home prices had already fallen by approximately 20 percent from their peak two years ago, and the median home price has fallen for the first time since the Great Depression. Sharply falling home prices put a growing number of homeowners underwater, with nearly 10 million households already facing home mortgage debt levels that exceed the value of their homes. Negative equity is a strong predictor of default and foreclosures. As the crisis spread, it helped to slow the U.S. and global economies and bring down major U.S. financial institutions. The investment banking firm, Bear Stearns Cos., with significant exposure to the subprime mortgage sector, failed, and was acquired by JP Morgan Chase & Co. with the support of Treasury and the financial backing of the Federal Reserve. IndyMac Bank, a federally insured depository and major subprime lender, faced an old-fashioned bank run and was taken over by the Federal Deposit Insurance Corporation. The vaunted home mortgage giants Fannie Mae and Freddie Mac, with $5 trillion in debt and mortgage-backed securities outstanding, succumbed to the crisis and were put into conservatorship by Treasury, with promises from the department to provide up to $100 billion in capital to each institution. Soon after, Wall Street investment bank Lehman Brothers Holdings Inc. went bankrupt, and rival Merrill Lynch & Co. sold itself to Bank of America to avoid the same fate. The global insurance firm American International Group, Inc. succumbed the next day, and the Federal Reserve agreed to loan the company up to $85 billion on an emergency basis as it sought to sell off its assets—with new loans and equity investments continuing even this week to attempt to separate out AIG's bad assets from the rest of the firm. After a run on historically "safe" money market mutual funds, which operate outside the FDIC-insured banking system, Treasury announced that it would extend the safety net by offering insurance to this entire industry for funds in place as of September 19. And the Fed and Treasury announced an array of programs designed to bolster the commercial paper market. By the end of that week, the last two remaining independent investment banks, Morgan Stanley and Goldman Sachs Group, Inc., converted to Bank Holding Companies subject to the prudential supervision of the Federal Reserve. Washington Mutual Bank went into FDIC receivership and was sold to JP Morgan, and after a rescue offer by Citi and the FDIC, Wachovia Bank merged with Wells Fargo. In the meanwhile, Treasury, the Federal Reserve, and the FDIC's board signed off on invoking the FDIC's "systemic risk" exception under which the FDIC has now guaranteed interbank lending, senior unsecured bank debt, and uninsured depositors holding funds in non-interest bearing accounts. The scope of federal intervention thus far has been unprecedented. Yet millions of American homeowners remain struggling to meet their home mortgage obligations. (Source: Michael Barr, Center of American Progress Fund, testimony to Congress.) December 2008BACKGROUND: Fannie Mae and Freddie Mac (Dec 2008) The US government is on the verge of enacting a multi-billion dollar bail-out of mortgage giants Fannie Mae and Freddie Mac aimed at stabilising financial markets after a tumultuous week. The bail-out will involve the US Treasury using its newly-granted powers to provide financial support to the pair, in return for senior management changes at the helm of both companies. Rather than enact privatisations of the pair, however, the Treasury is believed to have concocted a somewhat more creative plan that could lead to capital injections at a number of points, in particular in each company's preferred shares. Bankers from Morgan Stanley have been working with the Treasury to devise the best way to provide a back-stop for the pair, whose shares have been thrashed in recent weeks as investors lost confidence in their ability to continue as going concerns.Fannie and Freddie are so important to the wider market because they own or guarantee almost half of the US's $12,000bn (£6,800bn) mortgage market, a market that has been ravaged in the last 18 months as a result of lax lending standards and a worsening economy. Concerns over the state of the US and the global economy have weighed heavily on financial markets all week, culminating in Thursday's bear plunge, which saw the Dow Jones Industrial Average fall 3pc, and Nasdaq and S&P500 indices enter bear market territory - 20pc below their October highs.  Those concerns have been so-called "non-farm" jobs lost in August. At the same time, the US Labour Department revised upwards the amount of jobs lost in June and July, while separate figures showed that the US unemployment rate is now running at 6.1pc, close to a five-year high. "We're running job losses that are typically seen in the early stages of an economic recession," said Nomura Securities chief economist David Resler. "We're probably in one." Adding to the economic gloom was a report from the Mortgage Bankers Association showing that new foreclosures – when a bank begins proceedings to evict someone from their home for defaulting on payments – rose to 1.19pc in the second three months of the year — the first rise above 1pc in the survey's 29 years. The total level of foreclosures stood at 2.75pc at the end of June, with the share of mortgage holders missing one or more payments – an indicator of future foreclosures – rose to 6.41pc. (Source: Telegraph.) Now...Fannie Mae and Freddie Mac. You probably know that between the two, they guarantee or hold about half the mortgages in the United States. (That's somewhere near $6 trillion worth of mortgages.) They are both stockholder-owned corporations. One was founded in the '30s to help people afford housing and became a corporation in the '60s; the other was created as a corporation in 1970 to further expand the mortgage market.MOST US borrowers never come into contact with mortgage finance giants Fannie Mae and Freddie Mac. That's because the companies work with lenders rather than consumers. Nevertheless, Fannie and Freddie play an essential role in the mortgage industry and the economy in general. What are Fannie Mae and Freddie Mac? They are called government-sponsored enterprises because they initially were formed by the federal government. Fannie Mae is a common name for Federal National Mortgage Association. in Washington, DC. Freddie Mac is a common name for Federal Home Loan Mortgage Corp. in McLean, Virginia. What do Fannie Mae and Freddie Mac do? Fannie Mae and Freddie Mac buy mortgages from savings and loans, banks and other lenders to generate more cash for those lenders to make more home loans. Together they hold or guarantee $5.4 trillion of mortgages, about half of the US's outstanding home loans. The enormous risk that Sen. McCain warned of in 2005 has now become a financial crisis of staggering proportions. That crisis can trace its roots to Bill Clinton's signature on legislation making it easier for minority constituents with bad credit to obtain mortgages. In 1995, he had his Treasury Secretary, Robert Rubin, rewrite the lending rules for the Community Reinvestment Act, opening the flood gates of mortgage lending to unqualified borrowers.What's the difference between the two? There is no practical difference in their missions or criteria for buying and guaranteeing loans. Their origins differ: Fannie Mae was created under President Franklin D Roosevelt in 1938 to make sure funds were available in the housing market during tough economic times. It was turned into a publicly traded company in 1968. Freddie Mac was created in 1970 so that Fannie Mae wouldn't have a monopoly on government-backed mortgages. Why are they in trouble? As home prices fell, so did the value of the mortgages the companies held, lowering their already small cushions of capital. As more of the loans they had backed went bad, they were no longer able to raise money from private sources. Could this have been avoided? The depressed US housing market and high rate of foreclosures make it tough for anyone investing in home loans, but Fannie and Freddie took steps in 2006 and 2007 that came back to bite them. The companies lowered their standards for loans they would buy, and they backed riskier mortgages, including loans that didn't require borrowers to provide proof of their stated income. Such loans accounted for half the companies credit losses in the second quarter this year. What will happen to shareholders? Shares of Fannie and Freddie, which have plunged more than 80 per cent this year, are likely to slide further today in response to the actions announced Sunday. Depending on how much capital the government pumps into the firms to keep them solvent, the stocks could lose all their value. - ( Source: Irish Times: LA Times service. ) See Michael Barr, Center of American Progress Action Fund, testimony to Congress for his suggested actions to Congress. The CAPAF has the ear of Obama and Congress so their recommendations are well-listened to. He suggested (1) Guarantee home mortgages in exchange for real restructuring. (2) Pay servicers to restructure loans. (3) Let the FDIC act now. (4) Enlist Fannie Mae and Freddie Mac. and (5) Bolster FHA. In addition, he suggested new legislation to (1) Preserve tax benefits. (2) Indemnify servicers. (3) Provide legal certainty under accounting standards. (4) Authorize judicial modifications in bankruptcy. and (5) Pause foreclosures.  The gripe is that the bailouts are for the 7% of the irresponsible mortgage holders that are in trouble -- who created the troubles for the rest of the 93% of the homeowners/renters who were responsible. February 2009Distressed Homeowners Get New Options in Plan (Feb 2009) President Barack Obama's plan to aid troubled homeowners, set to be unveiled Wednesday, will include efforts to cut monthly mortgage payments, allow more borrowers to refinance their loans and give bankruptcy judges greater power to modify mortgages, according to people familiar with the proposal. The array of options fills in some of the blanks left by Treasury Secretary Timothy Geithner last week when he unveiled the Obama administration's overhaul of the $700 billion financial-system bailout plan, which he said included an as-yet-to-be-outlined new approach to housing. Many economists say addressing the cycle of foreclosures and falling home prices is one key to ending the financial crisis.At the heart of the plan is an effort to make loans more affordable by providing a government subsidy to help mortgage companies modify certain troubled loans. The administration is expected to kick in $50 billion out of the bailout fund to help mortgage companies with the costs of such an effort. In addition, the administration is expected in the Wednesday announcement to detail a program that will allow homeowners who owe more than their homes are worth to refinance their mortgages, something that currently isn't possible. Amid fears that some of these borrowers may default, the administration would use government-controlled mortgage giants Fannie Mae and Freddie Mac to assist such borrowers who are still current on their payments. The Obama plan would represent one of the most ambitious efforts yet to tackle the housing-market problems that helped trigger the financial crisis. The Bush administration created several voluntary plans implemented by the mortgage industry, most of which had little impact. Until housing prices stop falling, economists say, banks won't be certain about the extent of their losses, prolonging the lack of confidence that has slowed lending, as well as consumer and business activity. Devising a comprehensive solution has posed political and financial challenges. The aim is to help homeowners without rewarding risky behavior or spending hundreds of billions of dollars. It's hard for the government to compel mortgage companies to rewrite the terms of loans. Also, such plans tend to raise the ire of homeowners who have been diligently making regular mortgage payments. To make loans more affordable, the Obama administration is expected to support a mix of efforts, including lowering interest rates or lengthening the term of some loans, said people familiar with the plans. Because any reduction in monthly payments will hurt the bank or investor who owns the loan, the government is expected to help defray the costs with a subsidy. That could take the form of a direct payment. The government could also match, point by point, any interest-rate reduction made by the servicer. The administration may provide between $800 to $1,000 per loan, according to a financial-services representative familiar with the plans. The goal is to compensate banks or investors who own the loans if they reduce payments to a certain level, possibly as low as 31% of a borrower's pretax income. In addition, the administration could indemnify mortgage servicers from being sued by investors angered by any changes made to the loan agreements. This is important because many loans have been repackaged and sold to investors. To determine who qualifies for a lower monthly payment, the administration is expected to look at homeowners' debt to income ratio, these people said. There is a big debate among housing experts as to whether reducing interest payments, as opposed to cutting into the principal, makes enough of a difference to keep people in their homes. Some evidence suggests borrowers quickly run into trouble again even if their monthly payments are reduced. Thus far, the administration's plan doesn't appear to include reducing the principal owed on homeowners' loans. Instead, in a move designed to push mortgage companies to take such action themselves, the administration is expected to make it easier for judges to modify mortgages during bankruptcy proceedings. The mortgage industry has long fought such a move, arguing that it is costly, cumbersome and could lead to higher rates for everyone. Opposition from big banks has softened since the election when it became clear such a move was in the offing. Many of the housing plans considered by the Obama and Bush administrations have suffered from one big problem: It isn't clear how the government can prevent people from halting payments in order to qualify for help. To address that, Mr. Obama's plan may require that homeowners eventually pay back the difference between the original payment and the reduced rate. While borrowers would get a lower monthly payment, they would still technically owe a big additional payment at the end of their loan's term. That could be covered by the rise in a home's value, assuming the market recovers. Mr. Obama hinted at such a move at a town hall meeting in Florida last week, saying, "The borrower is going to have to probably -- if they get some assistance -- agree to give up some equity once housing prices recover so that both sides are giving a little bit." The administration is also expected to create national standards for loan modifications to be adopted by Fannie Mae and Freddie Mac. The plan could include a mechanism to determine the value of homes facing foreclosure. The difficulty of valuing such homes is one reason many loan-modification efforts have stalled. Administration officials believe the plan, combined with efforts to aid banks and the $787 billion economic stimulus that Mr. Obama signed into law Tuesday, will help pull the economy out of recession. Mr. Obama, Treasury Secretary Geithner and Housing and Urban Development Secretary Shaun Donovan are set to announce the plan in Arizona. The state had the third-highest foreclosure-filing rate in the nation in January, according to foreclosure tracking firm RealtyTrac Inc. One out of every 182 Arizona households received a foreclosure filing during the month. (Source: Wall Street Journal: Deborah Soloman.) What is most galling of all is how Obama continues to blame Bush for the economic troubles. It was the DEMOCRATS that brought this madness on America -- and young Obama as a lawyer won in court to force the banks to make bad loans. In 1977, Carter, along with a Democrat Congress, created a worthy project with noble intentions -- the Community Reinvestment Act. Over strong industry objections, it mandated that all banks meet the credit needs of their entire communities.Exactly who is getting bailed out? (Feb 2009) According to startling data in today's New York Post, in the 275 billion Obama bailout, 45 states are, in effect, paying for the mortgage crisis of 5 states: Nevada (where an astonishing 47.8% of mortgages are under water), California, Arizona, Florida, and Michigan. Michigan's ongoing economic implosion aside, all of these states saw speculators making huge amounts of money as prices climbed in response to an avalanche of newly-qualified buyers. Richard Baehr writes: In California, most of the defaults are in Central Valley. Hispanic purchasers were a big share of the total. There was a bit of speculative excess (second home buyers) in the San Diego area. In Nevada, Arizona, and Florida, there are heavy concentrations of bad loans are in specific cities: Las Vegas, Phoenix, Miami, where many of the buyers were "investment" oriented second home flippers. Many of purchasers never lived a day in their homes in Las Vegas and Miami. Michigan is different. Devastation in the Detroit metro area and other former car plant cities. Ed Lasky notes: Four of the 5 states were Sunbelt states, where economic growth was relatively healthy over the years (except for California). So it was speculative fever that caused the problems, not an economic crisis. What about all those people we have read about over the years? The ones bragging about their ability to flip houses for a fortune? Are we rewarding their greed? Obama talks a lot about greed, but he does not talk about people who rolled the dice, lost the gamble, and expect us to pay (for) the house. Rick Moran adds: Don't forget Greenspan and the Federal Reserve who fed the frenzy with impossibly low interest rates. Isn't one of the fed's jobs to recognize bubbles like that and gently burst them? Think of the dot-com bubble that hurt a lot of speculators (and those with vastly overvalued stocks) but didn't send the entire economy into the kind of free fall we're seeing now. The downturn was mild and was only exacerbated when 800 billion went up in smoke on 9/11. (Source: American Thinker.) FROM THE OTHER SIDE: Obama Embraces ACORN's Foreclosure Strategies to Fix Economy, Housing (Feb 2009) ACORN members are celebrating President Obama's announcement today of the "Homeowner Affordability and Stability Plan," the first federal effort to fight foreclosures since the crisis that brought down the economy began two years ago. For years, ACORN has been advocating repeal of the ban on judicial modifications, a central plank in the Obama plan that Congress should immediately take up in a must-pass bill and get to the President in March. Obama also proposes administrative actions to spend $75 billion of the Financial Stabilization Fund on facilitating modifications and to require companies receiving taxpayer assistance to use a rational foreclosure prevention protocol to prevent unnecessary foreclosures. These three planks are absolutely essential to repair our economy and are exactly what ACORN called for in its memo to the Obama Transition in January, "Housing for America: A Roadmap out of the Crisis." "Finally, a President who is a friend of homeowners when it counts," said Bertha Lewis, ACORN CEO. "With 8 to 9 million Americans on the verge of losing their homes in the next four years, the nation's housing crisis demands leadership commensurate with its enormous scale, and we got that today from the Obama Administration. These effective sticks and carrots will do the job that the previous all-voluntary efforts have failed to do, and help prevent millions of unnecessary foreclosures once fully operational and enacted in law. Until that time, however, there should not be a single foreclosure on any family that could benefit from this comprehensive housing plan, so we need a thorough, binding moratorium." (SITE NOTE: Bill passed by the Democratic majority in Congress over the strident objections of the Republicans.) More specifics will be needed as the plan rolls out, especially regarding assurances that the modifications of mortgages are truly affordable and based on the borrower's ability to repay. Already today, many essential elements that ACORN called for in Housing for America have already been announced by Obama as elements of his housing rescue plan:
ACORN is building support for the Obama plan across the country, and helping families who could benefit the plan stay in their homes and stop evictions or foreclosures until the program is fully implemented and helping modify loans en masse. (Source: ACORN.) OPPOSING ACORN: Michelle Malkin: ACORN and Obama - together again (Feb 2009) In tandem with the White House Bad Borrowers Bailout, Obama's old friends at the Association of Community Organizations for Reform Now (ACORN) are launching a new campaign of their own: the "Home Savers" campaign. What a coinky-dinky, huh? As with most of the bully tactics of the radical left-wing group, it ain't gonna be pretty. They are the shock troops on the streets doing the dirty work while the Community Organizer-in-Chief keeps his delicate hands clean. Trumpets ACORN: "On Feb. 19, ACORN members will launch a new tactic in fighting foreclosures: civil disobedience. Participants in the ACORN Home Savers campaign nationwide will simply refuse to move out of foreclosed homes, or in some cases, will move back in. ACORN homesteaders intend to squat in their homes until a comprehensive, federal solution for people facing foreclosure is put in place."Instead, ACORN offices, funded with your tax dollars, are training teams of "Home Savers" -- described as "people ready and willing to mobilize on short notice to defend the homesteaders against attempts to evict them." Ready, willing and able to mobilize on short notice because they are either unemployed or employed full-time as ACORN shakedown artists. Guess who's encouraging them to defy the law. Democratic Rep. Marcy Kaptur of Ohio, who told them: "Stay in your homes. If the American people, anybody out there is being foreclosed, don't leave." The housing bullies will be assisted by left-wing propaganda documentarians at the Brave New Foundation, headed up by Hollywood lib Robert Greenwald, who will disseminate sob stories to crank up pressure while Obama pushes his housing entitlement plan. ACORN is targeting the following cities: Tucson, Ariz.; Oakland, Calif.; Los Angeles, Calif.; Contra Costa County, Calif.; Orlando, Fla.; Baltimore, Md.; New York, N.Y.; Houston, Texas; San Mateo County, Calif.; Denver, Colo.; Bridgeport, Conn.; Wilmington, Del.; Broward County, Fla.; Boston, Mass.; Flint, Mich.; Detroit, Mich.; Minneapolis, Minn.; Raleigh, N.C.; Durham, N.C.; Albany, N.Y.; Cincinnati, Ohio; Cleveland, Ohio; Pittsburgh, Pa.; and Dallas, Texas. ACORN has waited three decades for this moment in the sun. And as Obama promised ACORN members at a forum in December 2007, "We're going to be calling all of you in to help us shape the agenda. We're gonna be having meetings all across the country...so that you have input into the agenda." The moment is nigh. Prepare for lawlessness. (Source: Michelle Malkin.) Some community activists could face criminal charges after breaking into a home in Southeast Baltimore. Police were at the home Thursday night looking for fingerprints and other evidence. The activists who staged the break-in belong to the Association of Community Organizations For Reform Now or ACORN. After snapping a lock with bolt cutters, ACORN member Louis Beverly told supporters "this is our house now." ACORN staged the demonstration to protest the foreclosure crisis sweeping the nation.FROM THE OTHER SIDE: Mainstream Media Waking Up (Feb 2009) Basically, if you were responsible and saved your money and rented while you amassed enough for a large downpayment, you are a fool under Obama's plan. Only a small percentage of the mortgages in trouble are the irresponsible or tragic cases of defaulting home loans. What Obama's plan does is penalize the responsible for the irresponsible. CBSNews EconWatch panned Obama's massive mortgage entitlement plan: President Obama's mortgage bailout announcement on Wednesday directs $75 billion in government funds to bail out certain borrowers who are behind on mortgage payments or "at risk" of falling behind. Larry Kudlow complements his CNBC colleague Rick Santelli's rant against the Obama mortgage plan with some straight from the shoulder advice that incorporates free market solutions instead of what he terms "a thinly disguised entitlement program" that has 92% of homeowners subsidizing the rest. Obama's plan won't solve a thing - "throwing good money after bad" says the economist. And he quotes a study showing how the free market is already bringing the housing market back in California: Writing on his Carpe Diem blog, University of Michigan professor Mark Perry notes that while California home prices dropped 41% in 2008, home sales in the state jumped 85%. It now looks like 2008 sales for single-family houses will exceed levels reached in 2007. What's more, the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008, compared with 66.7 in December 2007. Office of Urban Affairs Created (Feb 2009) ACORN Now has a new home in the White House Office of Urban Affairs. It was a campaign promise of Obama's and now ACORN has full access to the Presidential staff. Remember that under the Obama Porkulus Maximus Stimulus the Department Of Housing & Urban Development received: $5,000,000,000 - Public & Indian Housing, Public Housing Capital Fund; $2,500,000,000 - Elderly, Disabled, and Section 8 Assisted Housing, Energy Retrofit; $500,000,000 - Native American Housing Block Grants; $1,000,000,000 - Community Planning & Development, Community Development Fund; $4,190,000,000 - Neighborhood Stabilization Activities (ACORN money here?); Community Development Fund; $1,500,000,000 - Home Investment Partnerships Program; $10,000,000 - Self-Help & Assisted Homeownership Opportunity Program; $1,500,000,000 - Homeless Assistance Grants; $100,000,000 - Office of Healthy Homes and Lead Hazard Control, Lead Hazard Reduction Whew! Boar-a-rama. Hog heaven. Executive Order: ESTABLISHMENT OF THE WHITE HOUSE OFFICE OF URBAN AFFAIRS Half of 'rescued' borrowers still default (Feb 2009) More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said on 23 Feb. Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference. The report, which will be released in full next week, covers nearly 35 million loans worth a total of $6 trillion - or 60% of all primary mortgages in the United States. The high redefault rate raises concerns about the long-term effectiveness of loan modifications, which many are pushing as a key solution to the nation's financial crisis. A record 1.35 million homes are in foreclosure, while the number of borrowers who have fallen behind on their payments soared to a record 6.99%, the Mortgage Bankers Association said last week. Dugan said the Office of the Comptroller of the Currency is asking servicers for more details on the loans in his report to determine what went wrong. He wants to know whether the modifications reduced the monthly payments to affordable levels or whether the borrowers had too much other debt to keep their head above water. "These answers are important, because they have important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months," Dugan said. Other regulators speaking at the conference questioned the quality of the loan modifications, saying that early efforts to restructure loans were not very effective. Many simply tacked on the missed payments and penalties to the end of the loan. "The quality of the modifications are not what they should be," said FDIC Chairwoman Sheila Bair. Verifying income is very important. (McAuleys World: No kidding! - Who put these people in charge? - Verifying income should be the first thing that is done! If we keep repeating what got us here in the first place - we will never get out of this mess) Other regulators said that federal money may be better spent on economic stimulus and job creation since a growing number of foreclosures are caused by unemployment. In those cases, loan modifications won't help. "I have to wonder whether or not focusing on job creation..is a better way to focus federal dollars than on a loan modification process that may be only partially effective," said John Reich, director of the Office of Thrift Supervision (Source: CNN Money.) Reworked mortgages not working -- Even after help, homeowners end up back in default (Feb 2009) More than half of delinquent borrowers who had their mortgages reworked earlier this year to avoid foreclosure were behind on their new loan payments after just six months, a federal regulator said on 24 Feb. John C. Dugan, US comptroller of the currency, told a housing forum yesterday that data his agency is collecting show the increase in repeat defaults by homeowners is "remarkably high." "Put simply, it shows that over half of the loan modifications seemed not to be working after six months," Dugan said. The findings raise several major questions for government and lending industry executives as they struggle for a fix to the nation's foreclosure crisis: Are lenders not doing enough to modify loans so delinquent borrowers can afford them? Or, are too many borrowers just not cut out to be homeowners and shouldn't be bailed out of their debts? Even an increasingly popular proposal floated by the head of the Federal Deposit Insurance Corp. to refinance as many as 2.2 million troubled homeowners into affordable, fixed-rate mortgages estimates as many as a third, or about 700,000, could fall behind again by the end of 2009. Other specialists said the problem is as much the homeowners. Paul Willen, an analyst for the Federal Reserve Bank of Boston, said too many borrowers simply cannot afford to own their homes. "Many of the people in the foreclosure process are in deep, deep trouble. They are not a modified loan away from financial happiness," said Willen. "Many people who are heading into foreclosure don't need a modification, they need an exit strategy." (Source: Boston.com.) Fannie Mae posts huge 2008 loss, seeks new bailout (Feb 2009) Troubled US mortgage finance giant Fannie Mae said Thursday it lost almost 60 billion dollars last year and expected to suffer more losses in 2009, and asked for a further 15.2 billion dollars in government aid. The US government-controlled Fannie Mae reported a loss of 25.2 billion dollars in the fourth quarter driven mainly by the effects of a prolonged housing slump and a global financial crisis. It had a third-quarter loss of 29.0 billion dollars. For the full year of 2008, the company posted a loss of 58.7 billion dollars, almost 27 times higher than the 2007 loss of 2.1 billion dollars. Fannie Mae said it submitted a request Wednesday (25 Feb) for 15.2 billion dollars from the Treasury "in order to eliminate our net worth deficit as of December 31, 2008." "We expect the market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009, which is likely to cause further reductions in our net worth," the company said in a statement. The fourth-quarter loss was driven mainly by 12.3 billion dollars in credit losses due to declining housing market conditions, 12.3 billion dollars in losses on derivatives and 4.6 billion dollars in writedowns of the value of its mortgage-backed securities, the statement said. The company and its troubled twin, government-controlled Freddie Mac, finance more than 40 percent of US home mortgage and were taken over by the government in September last year in a bid to avert their collapse and a further meltdown of the mortgage market. The US Treasury Department said last week it was doubling its financial support to the two mortgage giants, to 200 billion dollars each, in an effort to stabilize the real estate sector. (Source: AFP.) March 2009Most foreclosures pack into a few counties (Mar 2009) More than half of the nation's foreclosures last year took place in 35 counties, a sign that the financial crisis devastating the national economy may have begun with collapsing home loans in only a few corners of the country.Those counties, spread over a dozen states, accounted for more than 1.5 million foreclosure actions last year, a USA TODAY analysis of figures compiled by the real estate listing firm RealtyTrac shows — more than were recorded in the entire United States just two years earlier. They were the epicenter of a wave of foreclosures that have left leading banks teetering and magnified the nation's economic problems. "This crisis was triggered by foreclosures, and a lot of those were in a very small number of areas," says William Lucy, a University of Virginia professor who has studied the link between lenders and faltering home loans. Banks spread the risk and "it became like a car with no reverse gear. Once it starts to go over the cliff, it's gone." In other parts of the country, the foreclosure wave was barely a ripple — at least until it started swamping major banks that had invested heavily in mortgages. Banking giant Wachovia Corp., for example, was hammered after California and Florida customers of one mortgage firm it bought began defaulting at high rates. The risks of such lending were spread so broadly among financial institutions that, when the loans went bad, it drove the national credit crisis, says Christopher Mayer, who studies real estate at Columbia Business School. A few of the 35 counties leading the foreclosure boom are in already-distressed areas around Detroit and Cleveland. But most are clustered in places such as Southern California, Las Vegas, Phoenix, South Florida and Washington, where home values shot up dramatically in the first half of the decade, then began to crumble. RealtyTrac's counts of foreclosure actions include default notices, auctions and repossessions by lenders, and can sometimes count the same property twice. As a result, they tend to be higher than estimates from other tracking firms. But they remain one of the best geographic measures of the nation's housing collapse. The Obama administration on Wednesday detailed a $75 billion plan to keep more homeowners from slipping into foreclosure by helping them refinance loans or reduce their monthly payments. But that effort could face political challenges because most of the foreclosure problem has been so concentrated in a few areas, says Brookings Institution researcher Alan Mallach. The worst-hit counties are home to about 20% of U.S. households, but accounted for just over 50% of the nation's foreclosure actions last year, driving most of the national increase. And even among those places, a few stand out: Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation's foreclosures last year. In more than 650 other counties — about a fifth of the nation — the number of foreclosure actions actually dropped since 2006. (Source: USA Today.) House approves mortgage bankruptcy overhaul (Mar 2009) The U.S. House of Representatives approved a bill on Thursday to let bankruptcy judges reduce the primary residence mortgage debt of homeowners going through bankruptcy proceedings as a last resort to avoid foreclosure. Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages. The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain. The House vote tally was 234-191. Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence. Bankers say changing bankruptcy law to allow this would raise costs for everyone by diverting capital from the mortgage debt market. But Democrats backing the bill say it could sharply cut the high U.S. home foreclosure rate. About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported on Thursday. President Barack Obama on Wednesday launched a $75 billion foreclosure relief plan, part of a $275 billion housing stimulus program announced last month. (Source: Yahoo News.) Fedreral Reserve Announces New $1.2 Trillion Bailout Of Fannie & Freddie - Additional $1 Trillion Bailout In Planning Stages (Mar 2009) With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. SITE NOTE: This is unbelievable. The Democrats are out of control. As McAuley's World stated: "To buy bad credit card debt, bad auto loan debt, bad student loan debt, and sub-prime mortgage debt and place those debts squarely on the backs of the American taxpayer - the additional $1.2 Trillion will increase the spending of the New Democratic Administration to just over $10 Trillon in just under 3 months - the average American family share now exceeds $100,000 per family. ... The original plan was to "modify mortgages, released less than two weeks ago - started as a $75 Billion program - in two weeks that amount has increased to $750 Billion - a 1000% increase."Fed Chairman Ben Bernanke and his colleagues wrapped a two-day meeting by leaving a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most — if not all — of next year. The decision to hold rates near zero was widely expected. But the Fed's plan to buy government bonds and the sheer amount — $1.2 trillion — of the extra money to be pumped into the U.S. economy was a surprise. "The Fed is clearly ready, willing and able to be the ATM for the credit markets," said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco. Wall Street was buoyed. The Dow Jones industrial average, which had been down earlier in the day, rose 90.88, or 1.2 percent, to 7,486.58. Broader indicators also gained. And government bond prices soared. Heralding a coming drop in mortgage rates, the yield on the benchmark 10-year Treasury note dropped to 2.50 percent from 3.01 percent — the biggest daily drop in percentage points since 1981. The dollar, meanwhile, fell against other major currencies. In part, that signaled concern that the Fed's intervention might spur inflation over the long run. If the credit and financial markets can be stabilized, the recession could end this year, setting the stage for a recovery next year, Bernanke has said in recent weeks. The Fed chief and his colleagues again pledged to use all available tools to make that happen, and economists expect further steps in the months ahead. SITE NOTE: This is insanity -- Obama and the Democrats MUST be stopped. McAuley's World stated: "The additional spending also mandates additional taxation which in turn reduces the disposable income and savings of the working class and the profits and dividends received or paid by the business class - the spending will create a short term stimulus and will, unquestionably, create a significant long term detriment to future economic growth - over $10 Trillion in National Debt. ... Another Trillion - before the last has even been spent - to make loansds to whom - those just coming out of foreclosure or bankruptcy? Loans made whith whose tax money? Does the Treasury think this is "Monopoly Money"?"Since the Fed last met in late January, "the economy continues to contract," Fed policymakers observed in a statement they issued Wednesday. "Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending," they said. The Fed's announcement that it will spend up to $300 billion over the next six months to buy long-term government bonds was something that in January it had hinted it would do. But some officials had seemed to back off from the idea in recent weeks. Such action is designed to boost Treasury prices and drive down their rates, as it did Wednesday. Rates on other kinds of debt are likely to fall as well. "This is going to help everybody," said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. "This might help the Fed put Humpty Dumpty back together again." The last time the Fed set out to influence long-term interest rates was during the 1960s. The Fed's decision to buy an additional $750 billion in mortgage-backed securities guaranteed by Fannie and Freddie comes on top of $500 billion in such securities it's already buying. It also will double its purchases of Fannie and Freddie debt to $200 billion. Since the initial Fannie-Freddie program was announced late last year, mortgage rates have fallen. Rates on 30-year mortgages now average 5.03 percent, down from 6.13 percent a year ago, according to Freddie Mac. The Fed's decision to expand the program could further reduce rates, analysts said. "This is not only going to keep mortgage rates low for a long period of time," said Greg McBride, a senior financial analyst at Bankrate.com. "The mere announcement may produce a honeymoon effect and bring mortgage rates down to even lower levels in the coming days." The goal behind all the Fed's moves is to spur lending. More lending would boost spending by consumers and businesses, which would revive the economy. The Fed also said it would consider expanding another $1 trillion program that's being rolled out this week. That program aims to boost the availability of consumer loans for autos, education and credit cards, as well as for small businesses. Where does the Fed get all the money? It prints it. The Fed's series of radical programs to lend or buy debt has swollen its balance sheet to nearly $2 trillion — from just under $900 billion in September. Sohn believes the Fed's balance sheet could grow to $5 trillion over the next two years. The Fed has said it's mindful of the risks of pumping more money into the economy, bailing out financial institutions and leaving a key rate near zero for too long. There's the potential to plant the seeds for higher inflation, put ever-more taxpayer money at risk and encourage "moral hazard." That's when companies make high-stakes gambles knowing the government stands ready to rescue them. Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to new ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent. Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis. The Fed is taking the new steps as the U.S. economy sinks deeper into recession. Businesses are facing weaker sales prospects as customers in the United States and abroad cut back, the policymakers said. Still, the Fed said it hoped its actions, the government's bank rescue effort and President Barack Obama's $787 billion stimulus of increased government spending and tax cuts eventually will help revive the economy. "Although the near-term economic outlook is weak, the committee anticipates that policy actions .... will contribute to a gradual resumption of sustainable economic growth," the Fed said. But even in this best-case scenario, the nation's unemployment rate — now at quarter-century peak of 8.1 percent — will keep climbing. Some economists think it will hit 10 percent by the end of this year. The recession, which began in December 2007, already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work. (Source: AP.) April 2009Senate to sink mortgage relief plan (Apr 2009) The centerpiece of President Barack Obama's plan to keep thousands of people from losing their homes amid the worst economic crisis in decades is headed for defeat next week in the Senate. Allowing people to seek mortgage relief in bankruptcy court is opposed by Republicans and enough Democrats to block it. They remain worried that the legislation would unleash a torrent of loan defaults, ultimately driving up mortgage rates and introducing fresh uncertainty to an already ailing economy.The rejection would deal a blow to the popular president pushing an ambitious agenda to stabilize the economy. "I just want to underscore our commitment ... to doing everything we can to help mitigate the damage homeowners are facing across the country," Treasury Secretary Timothy Geithner told lawmakers this week. The number of homes under threat of foreclosure has shot up since last year, when 2.3 million households received foreclosure filings. RealtyTrac Inc., a foreclosure listing firm, has reported that some 650,000 homes received at least one foreclosure-related note in the first three months of 2008. This year, nearly 804,000 homes have already received foreclosure notes. Economists also estimate that about a fourth of U.S. mortgage-holders owe more to the bank than their property is worth. In February, Obama announced his plan to save some 9 million debt-ridden individuals from losing their homes by providing incentives to lenders to cut homeowners' monthly payments or refinance loans for individuals whose home's market value has sunk below what they owe. As part of the plan, Obama said he also wanted to change bankruptcy laws so a judge can reduce a person's mortgage payment based on its market value. The option was cast as a last resort for homeowners who were unable to otherwise modify their loans. Bankruptcy judges can already reduce loans on investment properties or personal property based on the property's current value. Congressional Democrats championed the legislation, which passed the House in March. But the measure quickly stalled in the Senate amid a multimillion-dollar lobbying effort by banks and credit unions that said the forced easing, or "cram-down," of mortgage terms would impose steep and unpredictable costs. Sen. Dick Durbin, D-Ill., has led negotiations with the banking industry under the assumption that a deal would shore up Democratic support and win over a few moderate Republicans to reach the 60 votes needed to pass the bill. This week, the National Association of Federal Credit Unions released a letter from its board of directors rejecting the proposal. While other groups, including banking giants JP Morgan Chase, Bank of America and Wells Fargo, remained at the table, Democratic aides said the prospects of an agreement looked dim. Believing the Senate needed to move on, Senate Majority Leader Harry Reid, D-Nev., tentatively scheduled a Thursday vote. "There's no reason why every Republican shouldn't be on record for opposing a provision that could help tens of thousands of Americans," said Reid spokesman Jim Manley. The bankruptcy provision will be offered as an amendment to popular legislation aimed at freeing up capital for banks by increasing the borrowing authority of the Federal Deposit Insurance Corp. Last year, Republicans and 10 Democrats, along with Connecticut independent Joe Lieberman, voted to scuttle similar legislation in a 58-36 vote. Among those expected to reject the bill next week were Democratic Sens. Jon Tester of Montana and Ben Nelson of Nebraska. Tester and Nelson were among those who voted last year to block the proposal. Tester said in a statement on Friday that while he supports helping homeowners to modify their mortgages, he believes the bankruptcy bill would be ineffective and potentially harmful. Likewise, a Nelson spokesman said the senator believes the provision "would raise interest rates on other borrowers and further destabilize the mortgage industry." (Source: Associated Press.) May 2009Fannie And Freddie's Backdoor Bailout (May 2009) The Obama administration seemed to take a hit Thursday when its effort to allow judges to modify the terms of mortgages got blocked in the Senate. A tough political blow, yes, as the White House pushes to keep Americans in their homes, but they're unlikely to be upset. When it comes to loan modifications, Obama already has the two most powerful tools in America at his disposal: taxpayer-backed mortgage titans Fannie Mae and Freddie Mac.Thanks to Washington's push to boost homeownership among lower-income groups, Fannie and Freddie now hold more than $575 billion in subprime and Alt-securities between them, about a third of these type of loans. They're the same default-ridden paper the administration is spending $125 billion elsewhere to rework in a bid to stabilize the sliding U.S. housing market. From September to January, the number of Fannie and Freddie loans two or more months past due nearly doubled to 1.2 million. They have 30 million on their books. This risky portfolio means nearly 70,000, or 20%, of the loans voluntarily modified in the U.S. last year were owned by Fannie or Freddie according to HOPE NOW, an industry group. More than half of those modified during the first three quarters of last year were in re-default after just six months, according to the Office of the Comptroller of the currency. It's just the beginning. Fannie and Freddie have "taken the lead" on modifications, according to their overseer James Lockhart, who heads up the Federal Housing Finance Agency. "FHFA further encourages this important activity, which is essential to preventing foreclosures and keeping people in their homes," Lockhart said. Spokespersons for Fannie and Freddie won't estimate how many loans might be modified in the next year and what it might cost taxpayers. But in its most recent regulatory filing, Fannie said modifications would "likely have a material adverse effect on our business, results of operations, financial condition and net worth." Freddie said workouts could cause a $30 billion mark-to-market write-down, forcing it to "sacrifice the objectives of reducing the need to draw funds from Treasury and returning to long-term profitability." After losing a combined $50 billion last quarter, Treasury life-support hit $44 billion for Freddie and $5 billion for Fannie. Modifications are more expensive for these government-sponsored enterprises (GSE) than they are for other mortgage lenders. Fannie and Freddie have to cover the $9,500 in sweeteners Washington pays out to get loan servicers and borrowers to modify their loans as a part of Treasury's $275 billion Making Home Affordable plan. But unlike banks and other private sector investors Fannie and Freddie don't collect a $1,500 government bonus for working things out. Longer term, Fannie and Freddie will see payments on modified mortgages they own reduced while remaining on the hook for any hit to the securities they guarantee. If a borrower's monthly payment is lowered, resulting in diminished interest to a mutual fund or foreign bank, taxpayers have to make up the difference for the next 30 or 40 years. (Source: Forbes.) Fannie Mae taps Treasury again after $23 billion loss (May 2009) Fannie Mae (FNM.P), the largest provider of U.S. home mortgage funding, said on Friday it needs more capital from the U.S. Treasury after a $23.2 billion loss in the first quarter and warned government housing programs would cut deeper into its profitability. The government-controlled company said its regulator requested $19 billion from the Treasury under a funding commitment that was recently doubled to $200 billion. The credit, in the form of senior preferred stock purchases, was established as soaring losses led the government to push the company into conservatorship in September. As the nation's housing market reels in its worst downturn since the 1930s, credit-related expenses accounted for the majority of Fannie Mae's loss, at $20.9 billion. It also took a $5.7 billion loss on mortgage securities. Provisions for credit losses soared 85 percent as the U.S. economy faltered, expanding delinquencies -- which have wreaked havoc on the global financial system -- to consumers with better credit, it said. Fannie Mae's guaranty business, "including loans with lower risk characteristics, has begun to experience increases in delinquency and default rates as a result of the sharp rise in unemployment, the continued decline in home prices, the prolonged downturn in the economy" and the rise in loan balances relative to property values, it said. The Washington-based company and rival Freddie Mac (FRE.P) are crucial cogs to the nation's housing system, providing a market for loans that lenders originate. They buy mortgages for their $1.7 trillion in debt-financed portfolios or guarantee loans packaged into mortgage-backed securities. But they misjudged the downturn, sending them into the arms of the government that has since rescued banks, insurance companies and auto makers. FANNIE NET WORTH Fannie Mae said it will likely need more capital. It already received $15.2 billion in March from the Treasury. "All the signs indicate that Fannie Mae coming out of conservatorship and becoming a public company again are close to zero," said Gary Gordon, a managing director at Portales Partners in New York. Fannie Mae said its role as a linchpin in President Barack Obama's program to boost refinancings and modifications of risky mortgages will likely have a "material adverse effect" on its business and net worth. The programs, which can reduce interest rates on loans and defer payments, lend credence to speculation the U.S. is increasing its reliance on Fannie Mae and Freddie Mac to stabilize housing. The programs are seen as coming at the expense of shareholders, who were nearly wiped out last year as the stock dropped below $1, where it trades today. For a mortgage in a mortgage-backed security to be modified, Fannie Mae must purchase the loan out of the trust and recognize a loss under current accounting rules. Those losses may increase significantly as it ramps up modifications, which doubled in the quarter to 12,418 from the last three months of 2008, it said. The government also recently increased the limit on the company's investment portfolio to $900 billion from $850 billion. The balance has been little changed near $780 billion from October to March, however, as federal purchases of MBS increased costs of the assets, or to make room for required purchases as U.S. housing programs kick in, analysts said. "The market has to decide ... how much of this creates more demand in the market and how much provides the relief that was critical to executing Fannie Mae's second-half-of-the-year game plan" with U.S. housing programs, said Jim Vogel, a strategist at FTN Financial Capital Markets in Memphis, Tennessee. The $23.2 billion first-quarter loss compares with losses of $2.2 billion in the year ago period, and $25.2 billion in the previous quarter. Fannie Mae's results appear to counter recent data suggesting the housing market is bottoming as falling home prices and mortgage rates increase affordability. Earlier this week the government said pending sales of U.S. homes rose in March for a second straight month. Robert Shiller, the Yale University housing economist who predicted the housing bubble, this week said a bottom would probably not be seen until 2010. The speed of the downturn has greatly limited Fannie Mae's ability to estimate loss reserves, it said. After about a 10 percent decline in 2008, house prices could plunge another 7 percent to 12 percent this year, it said. (Source: Reuters.) June 2009Fannie, Freddie Were at Center of Financial Crisis But Are Not Included in Obama’s New Financial Regulations (Jun 2009) Fannie Mae and Freddie Mac, the two government-run mortgage giants, are absent from the Obama administration’s sweeping new financial regulations, despite the fundamental role played by both organizations in the financial system’s collapse.Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession. “We considered a full range of options and decided that now is the time to pursue the essential reforms,” Geithner said. “Those that address the core causes of the current crisis, and that will help to prevent or contain future crises.” Those “essential reforms” include the establishment of a new Financial Oversight Council to coordinate between banking regulators and watch for systemic risk; new powers for the Federal Reserve to supervise all systemically important firms; a new National Bank Supervisor to oversee all federally chartered banks; and new powers to allow the federal government to wind down any failing financial institution. Absent from Treasury’s 88-page proposal were any new regulations for the government-run mortgage companies Fannie Mae and Freddie Mac, two organizations widely cited as being at the heart of the country’s fiscal problems. The absence of either Fannie or Freddie is notable, because the two companies once owned or controlled nearly $6 trillion worth of home and commercial mortgages, nearly half of the total U.S. mortgage market – and both companies were pioneers of the now infamous sub-prime mortgages that caused the mortgage market to implode late last year. In analyzing the mortgage crisis, economist Walter E. Williams has written: “Starting with the Community Reinvestment Act of 1977, that was given more teeth during the Clinton administration, Congress started intimidating banks and other financial institutions into making loans, so-called sub-prime loans, to high-risk homebuyers and businesses. “The carrot offered was that these high-risk loans would be purchased by the government-sponsored enterprises Fannie Mae and Freddie Mac. Anyone with an ounce of brains would have known that this was a prescription for disaster but there was a congressional chorus of denial,” he added. “The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans,” said Williams. “They were forced to by the heavy hand of government.” During Geithner’s Senate testimony, he admitted that both Fannie and Freddie played a central role in the financial crisis, telling Sen. David Vitter (R-La.) that the two government-sponsored enterprises (GSE) were a “core part” of the country’s financial woes. “Absolutely,” Geithner said. “Fannie and Freddie were a core part of what went wrong in our system.” Geithner explained that the administration did not have the time to come up with coherent regulations regarding Fannie and Freddie because of its other legislative priorities. “We did not believe that we could have, in this time frame, lay out a sensible set of reforms to guide and determine what their future will be,” said Geithner. “We didn’t think it was an essential thing to do just now, but we do believe it is an essential thing to do.” Geithner said that at some point in the future the role of the GSEs would have to be “fundamentally reexamined.” He described the problem as one of government “exiting” the private housing market. “Our challenge with Fannie and Freddie, and this is true about the government’s role in the housing market more generally, it’s more a challenge for exiting, what the future should be,” said Geithner. “We have to fundamentally rethink what the appropriate role of the government is in the future [because] we did not get that right [in the past],” said Geithner. “It’s more about the questions we face about how the government gets out of and dials back and reverses these extraordinary actions we’ve been forced to undertake.” Despite the recognition that the federal government needed to figure out how to wind down the billions of dollars it has invested in both private firms and in Fannie and Freddie, Geithner admitted that the Obama administration had yet to come up with such an exit strategy. “To be honest,” Geithner told Sen. Mel Martinez (R-Fla.), “We have not designed yet the full details of the process we think will be helpful in exploring all alternatives.” Geithner did promise to work with Congress and other federal agencies in trying to solve the Fannie and Freddie fiasco, promising some type of proposal in early 2010. Treasury will coordinate the process,” he said. “We will consult, not just with this committee but with your counterparts in the House, and we’ll try to consult broadly in the markets and in the academic community as we think through broad options. I think it would be reasonable for us to bring forward recommendations and options in the first half of next year.” (Source: CNS.) July 2009Foreclosures top 1.5 million with no end in sight (Jul 2009) U.S. foreclosure filings continue to rise, proving that job losses and falling property prices are overpowering any attempt by the government to modify loans and keep people in their homes. For the fourth straight month, foreclosures topped 300,000 as more than 336,000 homes reported foreclosure filings in June, up 33 percent over last June.More than 1.5 million homeowners faced the possibility of foreclosure in the first six months of 2009. That total includes properties that received a default or auction notice or were seized by the banks, according to RealtyTrac. Banks repossessed 386,800 properties during this time period. California and Florida continue to lead the nation in foreclosure, but Clark County, Nevada, where Las Vegas is located, had the highest foreclosure rate with one in 13 households receiving a filing. Twenty of the 50 U.S. counties with the highest foreclosure rates were in California and 12 were in Florida. "I don't see any turn of the tide," Donald Haurin, an economics professor at Ohio State, told Bloomberg. "The effect of more foreclosures will be continued downward pressure on house prices, and lead to difficulty making mortgage payments." Rick Sharga of RealtyTrac is most worried about payment-option adjustable rate mortgages that are just starting to reset. People who borrowed using this type of mortgage could decide to pay even less than the interest owed, with the unpaid interest added to the principal of the loan. As home prices dropped, these homes fell quickly underwater with borrowers owing more than the house is worth. About three quarters of these loans reset in 2010 and in 2011, with the peak coming in August 2011 when 54,000 loans rest, according to data from First American CoreLogic. More than 8.3 million U.S. mortgage holders owed more than their homes were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, according to First American. "Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue." James Saccacio, RealtyTrac CEO, said in a statement released with the data. Yet the Obama mortgage rescue programs are failing. Allen Jones, a default-management policy executive for Bank of America, will testify before Congress today that the Obama administration stokes "confusion and delay" among mortgage lenders when it announces anti-foreclosure plans before drafting the rules. He believes the administration could improve the effectiveness of the programs if they would give loan servicers advance notice of new rules and time to review program changes before making announcements. Jones is right. Obama announced the mortgage modification program weeks before the rules were in place. In fact, borrowers are still waiting for details about a plan announced in April that would let homeowners rework home-equity debt. By the time the rules are set people are angry, which makes mortgage modification even more difficult. A research report released by the Federal Reserve of Boston also gives some clues as to why banks are not rushing to modify loans. The Fed found:
Yet that last reason seems to be a self-fulfilling prophecy since as more distressed properties are placed on the market, the lower home prices will go. Clearly, the Obama home modification programs are not working and it's time for the banks and the administration to come up with a plan that will work. House prices will not stop dropping until the foreclosures stop and the backlog of homes on the market are sold. Lita Epstein has written 25 books including The 250 Questions You Should Ask About Buying Foreclosures. (Source: Daily Finance: Lita Epstein.) White House's $50B foreclosure plan a bust so far (Jul 2009) The Obama administration’s $50 billion program to curb foreclosures isn’t working, and the White House knows it. Administration officials blame the mortgage servicers charged with carrying out the mortgage modifications and refinancing under the federal program. Many of their Democratic allies on Capitol Hill back them up, but others are criticizing the White House for fumbling the execution. Whatever the reason, the program hasn’t stopped the rising tide of foreclosures: Experts predict that at least another 2 million homes will be lost this year, and the administration’s plan has so far reached only about 160,000 of the 3 million to 4 million homes it was supposed to protect over the next three years. That’s bad news for the economy — and bad news for the Democrats. The Democrats’ political and policy fortunes rest on their ability to persuade voters that they’re fixing the economy. But experts say that rising foreclosures will only exacerbate the nation’s economic woes, pushing down home prices, slashing state and local tax revenues and imperiling consumer confidence. “Everybody understands that getting out of this broader crisis requires that we stabilize our housing market and stem the tide of foreclosures,” Senate Banking Chairman Chris Dodd (D-Conn.) said in a hearing Thursday. But in unusually harsh words for a Democrat, Dodd said that the Obama administration’s progress in stopping foreclosures has been “disgraceful” so far. “It’s just hard to explain to the working families in America how it is we could move so fast with extraordinarily complicated deals with the huge financial institutions, and we are moving so incredibly slowly, mired in paperwork, in rules, in talking to banks back home,” said Sen. Jeff Merkley (D-Ore.). The foreclosure listing service RealtyTrac Inc. reported Thursday that the number of homeowners in foreclosure in the first six months of 2009 was up 15 percent from the same time period a year ago. The Center for Responsible Lending, a nonpartisan research and policy organization, projects at least 2.4 million additional foreclosure starts this year, causing nearly 70 million surrounding households to lose a combined $500 billion in property value. The group estimates there will be 9 million foreclosures through the end of 2012, at the cost of $2 trillion in lower home values — enough to pay for the House Democrats’ health care plan, twice. The White House realizes the stakes. Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan took the 27 participating servicers to task in a July 9 letter to their CEOs, telling them to add more staff, improve training, create an appeal path for borrowers dissatisfied with the service and fulfill other measures to do more modifications, better. The servicers were told to designate a liaison with the administration who will meet with Treasury and HUD on July 28. The servicers have to tell the administration by July 23 what specific steps they’re taking to improve performance. In addition, the administration announced that next month it will start publishing company-by-company results, including how many modifications each servicer has made and how quickly. At the least, that will give policymakers ammunition to shame recalcitrant lenders. “We think that that type of disclosure, servicer-by-servicer, will be important to spurring greater activity on their part,” Herbert Allison, assistant treasury secretary for financial stability, told Dodd’s committee. But assurances that the administration is paying attention were not enough to satisfy senators on either sides of the aisle — and Republicans are ready to make the case that slow progress on the foreclosure front is just one more example of the Obama administration overpromising and overspending. “I see these extravagant promises in just about everything that happens here, ... and then I see this terrible execution,” said Sen. Mike Johanns (R-Neb.). “The stimulus money isn’t getting out, you’re not getting on top of the foreclosure numbers, you know, and that has nothing to do with what you inherited. Execution is what you do every day.” “I’m not happy where we are at, and I think there is a lot more to be done,” Republican Sen. Mel Martinez, whose home state of Florida has the third-highest foreclosure rate in the country, told the Treasury and HUD officials there to testify. “What’s your Plan B?” he asked later. That’s exactly what some outside experts are asking; they say that the situation requires more drastic action than the modifications the White House is pursuing. Many housing advocates argue that Obama’s plan was fatally flawed from the start because Congress refused to pass a controversial measure to allow bankruptcy judges to modify primary residential mortgages — recommended by the White House as the one stick in its plan, which is chock-full of carrots for servicers and borrowers.ave got to have some leverage, something to hold people’s feet to the fire,” said CRL spokeswoman Kathleen Day. “If you tell the industry this [judge] can do the loan mod if you don’t, that is going to get their attention.” Andrew Jakabovics, a housing expert with the left-leaning Center for American Progress, believes revisiting bankruptcy is a political nonstarter. But he says there are other sticks the administration could consider, including taking away the tax advantage enjoyed by the trusts that hold mortgage-backed securities if the investors refuse to allow modifications. “That’s a pretty big stick,” he said. And while it was the Senate that killed the bankruptcy measure, the White House took flak for not spending a single cent of its political capital on getting it through the upper chamber. Economist Mark Zandi — whose advice congressional Democrats relied upon during the stimulus debate — has argued that the Obama plan was too complicated. His recommendation for a Plan B: a simple program that covers any homeowner who took out a mortgage between 2005 and 2008 that was clearly unaffordable when it was made, with straightforward criteria to determine that. Zandi and others argue that the modifications should focus on reducing struggling homeowners’ outstanding principal on homes that have lost much of their value. A major criticism of the Obama housing plan was that it failed to aggressively encourage principal write-downs, focusing instead on reducing homeowners’ monthly payments, largely through interest rate cuts. But other experts say there’s not a whole lot the administration can do directly on the housing front anymore — and that might be the worst news of all for the White House. Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, said that while the Obama plan was well-crafted for the issues at hand in February, the cause of foreclosures has changed. Now they are less about the creative, variable-rate loans that buried many homeowners and more about an unemployment rate that has even those with fixed-rate loans struggling to keep up. “The issues have changed, and in some ways the solutions haven’t kept up with the problems,” Retsinas said. “The most effective intervention would be to put people back to work.” (Source: Politico.) Foreclosures rise 15 percent in first half of 2009 -- Foreclosures keep soaring as unemployment becomes main cause of housing woes (Jul 2009) The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills. The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc. The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year. Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said. “Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing. More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes. (Source: AP.) Rising unemployment accelerates foreclosure crisis”, Economy continues downward spiral. Credit Default Rates Up (Jul 2009) Relentlessly rising unemployment is triggering more home foreclosures, threatening the Obama administration’s efforts to end the housing crisis and diminishing hopes the economy will rebound with vigor. In past recessions, the housing industry helped get the economy back on track. Home builders ramped up production, expecting buyers to take advantage of lower prices and jump into the market. But not this time. These days, homeowners who got fixed-rate prime mortgages because they had good credit can’t make their payments because they’re out of work. That means even more foreclosures and further declines in home values. The initial surge in foreclosures in 2007 and 2008 was tied to subprime mortgages issued during the housing boom to people with shaky credit. That crisis has ebbed, but it has been replaced by more traditional foreclosures tied to the recession. Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982. But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn’t a drag on the economy, and when the recession ended, the boom was explosive. (McAuley's World: The economic recovery of the 1980’s was fueled by Reagan’s tax cuts and a shrinking of Government – a formula we won’t see from this Administration). No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.“It just doesn’t have the makings of a recovery like we saw in the early 1980s,” says Wells Fargo Securities senior economist Mark Vitner, who predicts mortgage delinquencies and foreclosures won’t return to normal levels for three more years. Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments — the highest levels since the Great Depression. (McAuley's World: In the last 12 months, 15% of mortgages have had forclosure completed. Obama's Trillion Dollar Mortgage Modification Program, which he promised would help 9,000,000 (9 Million), has in fact provided temporary relief to less than 75,000 (Seventy Five Thousand). Many of the 75,000 have, after receiving a modification, now slipped into foreclsoure anyway.) (Source: AP and McAuley's World.) August 2009President shifts focus to renting, not owning (Aug 2009) The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities. The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home. In addition to an ideological shift, the move is a practical response to skyrocketing foreclosure rates, tight credit, and the economic crisis. “I’ve always said the American dream should be a home - not homeownership,’’ said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people. Conservatives, however, believe that President Obama and HUD shouldn’t head too far in the other direction; in some cases, rent can be more expensive than a mortgage payment. Done properly, they say, homeownership can bolster the tax base and bring stability to neighborhoods and families, reducing crime and helping people achieve financial independence. The $4.25 billion set aside for the creation of rental housing will come from $14 billion that HUD has received from the federal economic stimulus package. Another $4 billion of the money will be used to fix up the nation’s existing public housing stock of 1.2 million units. The funds for new units will be available under competitive grants, and officials in Massachusetts said they will be among the states aggressively competing for the money. (SITE NOTE: Smell the corruption in the air. This is just the thing that Obama has been engaged in in Chicago with Jarrett and Rezko. What are we doing???) In Boston, more than 20,000 households are on a waiting list for affordable rental housing, said Lydia Agro, a spokeswoman for the Boston Housing Authority. “There’s definitely a need out there,’’ she said. City, state, and federal officials said they could not yet estimate how many new rental units will be created with stimulus money, but HUD said the “tens of thousands’’ of apartments and town houses it will produce nationwide will ease an increase in homelessness that has resulted from the foreclosure crisis. (SITE NOTE: With 20,000 on the waiting list, how did Zeituni Onyango get into public housing as an illegal alien hiding from deportation? If one can do it -- how many more illegal aliens are clogging the lists? Before you call for aid, you clean up your house first.) Carol Galante, HUD’s assistant secretary for multifamily housing, said HUD will still be in the business of helping people buy homes using existing lending subsidies. The difference from the Bush administration, she said, is “we’re trying to have a balanced policy. We’re not trying to say homeownership isn’t important, because it is. But we have to be sure we’re helping people get into homes that are sustainable for them.’’ RealtyTrac, a private company that follows homeownership trends, reported Thursday that the number of foreclosure notices issued to homeowners nationwide increased 9 percent during the first half of 2009. At the same time, the US Census Bureau reported that the vacancy rates for homeowner housing nationwide crept up for the second consecutive quarter, further signs of the ongoing mortgage crisis. The foreclosures are displacing large numbers of families, who will need new housing. “People who were owners are going to be renting for a while,’’ said Margery Turner, vice president for research for The Urban Institute, a Washington think tank that studies social and economic policy. “There is a housing stock that is sitting vacant. There is a real opportunity here’’ to use those homes as rental property and solve both problems, she said. (SITE NOTE: Pundits have been harping that the Obama failure to reverse the unemployment is at the root of the increased foreclosures. In addition, the Obama housing bailouts are a failure as the folks who were "bailed out" are back in foreclosure proceedings. Obama's plan sucks.) In addition to the stimulus money, Obama’s budget also seeks $1.8 billion for the construction of rental housing, the same amount that Congress approved in the last year. David John, a senior analyst at The Heritage Foundation, a conservative policy center, said it remains to be seen whether the Obama administration’s decision to step away from the Republican administration’s “ownership society’’ will have a positive effect on minorities and the working class. John said the benefits of homeownership are greater than just building equity in a house. For example, he said, children of parents who own homes do better in school. “There’s more stability in the family and overall an improvement in society,’’ he said. “Usually, homeownership brings with it a sense of building towards the future, rather than living day to day.’’ Still, he said, renting is better than putting a family in a house that it cannot afford. “It’s a mixed bag,’’ he said. In the past few weeks, Donovan, the former housing commissioner in New York City, has embarked on a series of cross-country trips to cities like Seattle and Anchorage to highlight the federal stimulus money being used to build low- and moderate-income rental housing units. Donovan was unavailable for an interview. Bush made homeownership a signature issue of his tenure. In remarks before a panel discussion on promoting minority homeownership in 2002, Bush said America is “a nation of owners. Owning something is freedom, as far as I’m concerned.’’ But that vision disappeared over the last two years as the housing market plunged, leaving homeowners struggling under mortgages they could no longer afford for a home that was no longer worth what they paid. (SITE NOTE: AND WHY DID IT PLUNGE. The Democrats got Fannie Mae and Freddie Mac to ok loans to people who did NOT qualify. The Democrats caused the problem and now are using the problem to create more problems.) As mortgage defaults piled up, banks that made the risky loans imploded, helping trigger the global financial crisis. “This notion that a home was your source of wealth was a recent one,’’ Frank said. “People thought that prices would go up, and up, and up, and up.’’ Frank said he never bought the idea that Americans could keep borrowing to support higher and higher home prices. “My answer was, I wish I could eat more and not gain weight,’’ he said. (Source: Boston.com.) October 2009Foreclosures rise 5 percent from summer to fall (Oct 2009) US foreclosures keep soaring as unemployment remains main cause of housing woesThe number of U.S. households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs. The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year. Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn't expected to peak until the middle of next year. Charter.net.) This is after an 81% increase in mortage foreclosures between 2007 and 2008. (Source: The Standard.) Housing sales drop "unexpectedly" (Oct 2009) Two economic indicators over the past week indicate that the recovery may have trouble getting off the ground. Today, the Commerce Department reported a sharp drop in sales of new homes after a few months of tepid increases fueled by a tax break. The previous month's figures also got revised downward by 12,000 sales, or almost 3%: Sales of new U.S. homes unexpectedly tumbled in September, their first drop in six months, underscoring the hazards to an economic recovery that businesses appeared to be banking on.The biggest mystery is why this result is labeled "unexpected." First, defaults rose last month, making the sale of new homes less attractive as foreclosures skew the market. More importantly, though, the expiration of the tax break should have made this outcome rather predictable. Just as with Cash for Clunkers, the tax credit did nothing but accelerate sales to people who could already afford to buy. As pointed out yesterday, the temporary prop for housing prices only delayed the inevitable reconciliation between actual value and market value, and stole sales from the future. Housing contractors didn't get fooled. As the AP reports, inventory of new homes has hit a 27-year low. Unlike the previous government interventions, the industry did not get suckered into investing a lot of cash into new real estate and construction, foreseeing the outcome of the tax credit's expiration date. They have over seven months of new-housing sales on the market at this rate, which means they will still have trouble unloading and recovering their investments. Why? Fewer people have jobs, which means they have fewer potential clients, with or without tax credits. Mass layoffs abated only slightly from August, the Bureau of Labor Statistics reported last week: Employers took 2,561 mass layoff actions in September that resulted in the separation of 248,006 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer. …In August, mass layoff events increased 24.7% over July. The new number still represents an 18.7% increase over July. Furthermore, these are cumulative. Job losses have not been balanced by job creation, which means that further job losses stack on top of previous job losses, rather than replace the earlier numbers. Large employers are still shedding jobs, which makes the new-housing sales slump entirely predictable. Instead of tax-credit gimmicks, the government needs to find ways to get out of the way of recovery and allow the private sector to invest and grow. (Source: Hot Air.) Fannie Mae Delinquency Rate Up Over 300% (Oct 2009) The [Fannie Mae] “seriously delinquent” rate has gone parabolic, increasing by roughly 5% sequentially and just under 300% YoY [year-over-year]. As mere text will simply not do this metric justice, please enjoy this chart of the dataset from Blytic. It tells you all you need to know about the Fed’s containment of the housing problem.  The August seriously delinquent single-family number comprised of a 2.87% non-credit enhanced delinquencies and a very bothersome 11.52%, consisting of credit enhanced loans November 2009Fannie red ink: $18.9B (Nov 2009) Fannie Mae, the largest provider of funding for US home loans, yesterday said it would again tap the Treasury to plug a net worth deficit after bad mortgages and foreclosure prevention efforts resulted in a $18.9 billion net loss in the third quarter.Fannie Mae, which was seized by the government last year, said the quarterly loss stemmed from $22 billion in credit-related expenses, including charges on impaired loans it bought from mortgage-backed securities as it modified loans under President Barack Obama's foreclosure prevention plan. The company also boosted its provision for credit losses in future quarters. Fannie's regulator will request $15 billion from the Treasury which will increase the total government support to $60.9 billion. (Source: NY Post.) Homebuyer Tax Credits Threaten the FHA (Nov 2009) A few weeks ago, President Barack Obama signed legislation extending an $8,000 tax credit for first-time home buyers. The refundable tax credit, available even if a family has no taxable income, will enable many more buyers to close on a home. But it also could bankrupt the Federal Housing Administration (FHA) and, by doing so, damage an already weak housing market. The tax credit was put in place as part of the stimulus package signed into law earlier this year. Initially, it was available only to first-time buyers with a combined income of $150,000 or less ($75,000 for individuals). Approximately 40% of all first-time buyers used the credit in 2009, so extending it was strongly supported by real estate brokers, home builders and their congressional allies. The extension the president signed makes the credit available to first-time buyers, but also to people who have owned a home for at least five years. In addition, it raises the maximum income for a qualified buyer to $225,000 a year for couples and makes the credit available until mid-2010. (It had been set to expire at the end of this month.) The problem is that the FHA insures mortgages of homes below certain price levels with such a low down payment that it can be funded solely by the refundable tax credit. And, as we've seen in the recent housing crisis, buyers with no skin in the game are more likely than others to default on their mortgages when the value of their home falls below their mortgage balance. Here's how the credit allows buyers to avoid putting their own money at risk. Suppose a couple making $60,000 annually buys a home worth $200,000. They can get an FHA-insured loan if they put down 3.5% of the purchase price, about $7,000. The couple will also need to come up with another $1,000 in closing costs, for a total of $8,000. The couple can either dip into savings or borrow that money from relatives or somewhere else on a temporary basis. After closing, the couple can quickly obtain the $8,000 refundable tax credit to pay off their temporary loan (or replenish their savings). In effect, they will have bought a home without putting any of their own money at risk. Owners who don't sink their own money into a house are much more likely to default on the mortgage. The FHA already is facing a rising number of serious problems on its insured mortgages. Last week the agency reported that its cash reserves dropped to 0.53% of the $685 billion of total loans it insurers. This is well below the 2% federal law requires the FHA to have in reserves. Beyond these reserves, the FHA has roughly $28 billion in a capital surplus fund, established by Congress to absorb losses on insured mortgages over the next 30 years. With the reserves and capital in hand, agency officials believe they have enough cushion to avoid needing a federal bailout. But a recent government audit concluded that the FHA would run out of money in 2011 and need a federal bailout if we have a protracted recession. The deteriorating quality of the FHA's mortgage portfolio is a critical challenge to the housing market and the federal budget. By the end of next year, the FHA's portfolio is projected to rise to $1 trillion. Currently, over 20% of all new home mortgages are insured by the FHA. Meanwhile, the tax credit for first-time home buyers is expected to cost the Treasury approximately $15 billion in 2009—more than twice the projected cost when Congress approved the stimulus package. Some of the cost overrun is due to fraud. At least 19,000 filers who claimed $139 million in tax refunds under this credit did not actually buy a home, according to Treasury officials. In addition, 74,000 filers claiming a total of $500 million in refunds seem to already have owned a home. We all want to help first-time buyers acquire homes and support the depressed U.S. housing market. Without real down payments, however, new homeowners are likely to default on their mortgages, and the FHA will probably need a taxpayer bailout. The Obama administration should increase the requirements to qualify for an FHA-insured mortgage. In addition to the 3.5% down payment, the administration should also require that buyers put down at least half of the tax credit they will receive for buying the home. Mr. Pozen, chairman of MFS Investment Management and senior lecturer at Harvard Business School, is the author of "Too Big to Save? How to Fix the U.S. Financial System" (Wiley, 2009). (Source; WSJ.) December 2009White House Crackdown to Protect Who??? White House Crackdown: 'Name and Shame' Lenders -- Administration to Fine Servicers Not Doing Enough to Make Loan Modifications Permanent (Dec 2009) The Obama administration today announced a new campaign to get mortgage companies to lower mortgage payments for struggling homeowners – and part of the strategy is some old-fashioned "name and shame." To date over 650,000 homeowners have entered into trial modifications under the Treasury Department's housing relief plan – a ratio of about one in five eligible borrowers. But the administration – frustrated with the performance of mortgage companies thus far – will now try to ratchet up the pressure on servicers, especially with 375,000 of these trial modifications set to convert to permanent ones by year's end.The administration today warned companies that failure to meet performance obligations under the program could result in fines and sanctions. "In our judgment servicers to date have not done a good enough job of bringing people a permanent modification solution," said Treasury Assistant Secretary for Financial Institutions Michael Barr. "The number that have been converted to permanent modifications thus far is low – and servicers need to do better." "Servicers who don't meet their obligations under the program are going to suffer consequences," he warned, adding, "We will not hesitate to use the full range of authorities we have to ensure compliance with the program." However, Barr repeatedly declined to detail what these additional consequences would specifically entail. Later today Barr and TARP chief Herb Allison will hold a call with mortgage servicers to emphasize this message and ask them to meet with Treasury officials in person next week in Washington. Mortgage servicers will have to submit a schedule for their plans to reach a decision on each loan and to communicate the decision to borrowers – daily progress will then be aggregated at the end of each business day and reported to the administration. Treasury's next report on servicer performance, set to be released sometime in the next two weeks, will include current data on permanent modifications as well as the number of active trial modifications that may be converted by year's end if all required documents are successfully submitted by borrowers. In other steps to make the conversion transition easier and more transparent, Treasury today also extended the period for trial modifications started on or before Sept.1 to give homeowners more time to submit required information. The department also said it's "streamlining" the application process to simplify it and reduce paperwork, as well as "enhancing borrower resources" on the government's Making Home Affordable Web site. To coordinate these new conversion efforts, Treasury today named Phyllis Caldwell as chief of the department's Homeownership Preservation Office. "We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners," Caldwell said in a statement. "We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones." Last spring, the administration tagged $75 billion in taxpayer funds to help quell the home foreclosure crisis, but officials say banks aren't doing their part to help the millions of Americans who risk losing their homes. For nearly a year the administration has been offering cash to banks if they will modify mortgages to lower payments for homeowners in crisis. Michael Barr, assistant director for financial institutions for the Treasury Department told the New York Times in a recent interview that banks are not doing a good enough job. "Some of the firms ought to be embarrassed and they will be,' Barr said. Members of the administration aren't the only ones frustrated by still dismal foreclosure rates. Just days ago, a judge in Long Island, N.Y., simply nullified the mortgage of one East Patchogue family, after accusing the bank of treating them with "duplicity" and a "condescending attitude." The judge lambasted the bank for refusing at every turn to renegotiate the terms of the family's loan. "We just wanted to modify the loan, that's all," said Kimberly Horoski, who, with her mother and father, had tried to get the mortgage modified. "I don't think that was asking too much." The Obama administration's plan was supposed to provide incentives to banks that would compel them to modify loans for struggling homeowners and reduce mortgage payments. But economists say the incentives haven't worked. That's because sometimes financial institutions can make a bigger profit by letting a home fall into foreclosure, rather than by renegotiating the terms of the mortgage, through steep fees levied on homeowners as the foreclosure process drags on. Phyllis Caldwell, the head of the Treasury's Homeownership Preservation Office, said in a statement released today that Treasury is now focusing its efforts on converting temporary loan modifications into permanent conversions by ensuring that "borrowers and servicers know what their responsibilities are." Peter Morici, an economist at the University of Maryland, said the government's mortgage program was "ill conceived" and "poorly executed," and the rising unemployment rate is making a bad situation, worse. "Interest rates are at rock bottom levels," he said. "If folks could re-finance, they would have already. The White House can't change that and casting blame on the banks won't help." He said the incentive program is futile because banks often sell off the mortgages to investors, so the only real way to fix the foreclosure crisis is to hold Wall Street's feet to the fire. Until that happens, economists say, naming and shaming may not make much difference. (Source: ABC News.) Foreclosure activity falls for fourth month -- Various government efforts help, but crisis is still likely to get worse (Dec 2009) The number of homeowners on the brink of foreclosure fell in November, the fourth straight monthly decline, as mortgage companies evaluated whether borrowers were eligible for help. Nearly 307,000 households, or one in every 417 homes, received a foreclosure-related notice in November, down 8 percent from a month earlier, RealtyTrac Inc. said Thursday. Banks repossessed about 77,000 homes last month, down slightly from October. Millions of borrowers are still being evaluated for the Obama administration's foreclosure prevention effort. States are also trying to delay the foreclosure process, temporarily lowering foreclosure numbers. But the foreclosure crisis is likely to get worse before it gets better. "We don't really believe the underlying problems have been resolved," said Rick Sharga, senior vice president at the Irvine, Calif.-based foreclosure listing service. Many borrowers, he said, "simply aren't going to qualify" for help. Foreclosure filings were still up 18 percent from a year ago, and a new wave is expected next year as unemployment remains high and borrowers fall out of loan modification programs. Nevada's posted the nation's highest foreclosure rate, followed by Florida, California, Arizona and Idaho. Rounding out the top 10 were Michigan, Illinois, Utah, Maryland and New Jersey. Among cities, Merced, Calif. had the highest rate, with one in 83 homes receiving a foreclosure filing. It was followed by fellow California cities Stockton and Modesto, and Cape-Coral-Fort Myers, Fla. Las Vegas, which had been No. 1 on that list for four-straight months, fell to No. 5. Nevada recently adopted a program that requires mediation before banks can seize a property. Nationwide, a report Wednesday showed only about 10,000 homeowners received permanent loan modifications this fall under the Obama administration's mortgage relief plan, more evidence of serious failings in the government's effort. Elizabeth Warren, chair of a watchdog panel, told reporters that the program is "not working" and that it had failed to make a dent in the record level of foreclosures. More than 14 percent of homeowners with a mortgage are either late on their payments or in foreclosure, and that number is expected to keep rising as unemployment remains stubbornly high. The Treasury Department said on Thursday that losses from the government's $700 billion financial rescue fund are likely to rise as disbursements to battle mortgage foreclosures increase. In a financial report on the program that accompanied a watchdog agency audit on Wednesday, the Treasury had said the program had estimated losses related to loans, equity investments and asset guarantees of $41.4 billion in its first year of operation. "As additional funds are disbursed, particularly for the housing initiative, the total cost of TARP is likely to rise," the Treasury said in a statement on Thursday. The administration has estimated the program, which it has extended to October of next year, will ultimately lose $141 billion. Data through October showed that fewer than 5 percent of homeowners who completed the trial periods had their mortgage payments permanently lowered to more affordable levels. Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a hardship letter. (Source: MSNBC.) Treasury uncaps credit line for Fannie, Freddie (Dec 2009) The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years. It also jettisoned a demand that the two companies cut the size of their mortgage-related investment portfolios next year, allowing them to provide even more support in the near term for a housing market recovering from its worst slump in decades. The Treasury Department said it made the changes to assure financial markets it stood firmly behind both companies and to buy more time for the two government-sponsored enterprises to whittle down their mortgage-related holdings. The two agencies each had a Treasury credit line of $200 billion. Combined, they have so far tapped about $111 billion. The Treasury's announcement came just hours after the companies said their chief executives would be paid up to $6 million on an annualized basis for 2009. Few analysts had expected Freddie Mac to tap full the $200 billion, but Fannie Mae's poor underwriting standards left it with losses many thought could grow past $200 billion. The administration waited until financial markets had closed on Christmas eve to make the announcement, thwarting chances for critics to have their voices heard. "This news today won't ruin anyone's Christmas. That is, except for those who are worried about the size of the nation's debt," said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. Under a law put in place before the government seized the two mortgage agencies in September 2008, Treasury Secretary Timothy Geithner had until the end of this year to increase the limit without asking Congress for approval. Treasury said Fannie Mae and Freddie Mac would still need to reduce their portfolios eventually. Under the new rules, their holdings could be no larger than $810 billion at the end of next year. The limit would drop by 10 percent a year thereafter, lessening the support they could provide to the mortgage market. Fannie Mae and Freddie Mac are congressionally chartered companies that buy up mortgages from banks and other originators to keep mortgage markets liquid. Some of the debt is repackaged as securities and sold off to investors, and the government has been buying an increasing share. Each company currently holds portfolios in the high $700 billion range, officials said, meaning that they would not be forced to sell assets next year. HOUSING STILL NEEDS A LIFELINE The 2010 reprieve was designed in part to avoid putting an added strain on the housing sector as the Treasury and Federal Reserve wrap up programs to purchase mortgage-related debt. As part of its announcement, Treasury said it was ending its mortgage-backed securities purchase program at the end of this year and the Fed has previously said it would wind down its separate program in the spring. The Obama administration hopes its unlimited guarantee will bolster investor confidence and bring private sector buyers back into the market to help hold down mortgage costs. (SITE NOTE: The operative word is "hopes" that it will bolster good things -- but like all the rest of the Obama "hopes" part of its "Hope and Change" programs, they never came true.) Without healthy demand for MBS and the debt of the two finance companies, mortgage rates would likely spike, sending a chill through the still-shaky housing market. The administration has already said it plans to lay out a vision for the future of the two agencies in the president's fiscal 2011 budget proposal in February. "The administration will have to determine what their status will be to support the housing market -- whether they stay as some kind of government-sponsored enterprises, become fully privatized or become full government agencies," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York Thursday's announcement was reminiscent of former Treasury Secretary Henry Paulson's colorful remark to Congress in July 2008, when he was lobbying for the bailout of Fannie Mae and Freddie Mac. Paulson told lawmakers that giving him authority to rescue the firms would reassure private investors. "If you have a bazooka in your pocket and people know it, you probably won't have to use it," he said at the time. However, less than two months later, the two companies were placed in a government conservatorship. Early in Obama's administration, the credit line for the firms was doubled to $200 billion each. It is now unlimited for three years. (Source: Reuters.) Obama Guarantees High Salary for BIG LOSSES in Fannie and Freddie Fannie and Freddie CEOs to get up to $6M in pay (Dec 2009) The two chief executives of Fannie Mae and Freddie Mac could get paid as much as $6 million for 2009, despite the companies' dismal performances this year which cost taxpayers more than $100 billion. Fannie's CEO, Michael Williams, and Freddie CEO Charles "Ed" Haldeman Jr. each will receive $900,000 in salary, $3.1 million in deferred payments next year and another $2 million if they meet certain performance goals, according to filings with the Securities and Exchange Commission on Thursday. The pay packages were approved by the Treasury Department and the Federal Housing Finance Agency, which regulates Fannie and Freddie. That pay is far less than what their predecessors earned. Former Fannie CEO Daniel Mudd received $10.2 million in 2008 and former Freddie CEO Richard Syron pocketed $13.1 million. Both execs were ousted when federal regulators seized the companies in September 2008. The federal government blocked exit packages for the pair worth up to $24 million. Since then, Fannie and Freddie have needed $111 billion in taxpayer money to stay afloat, one of the most expensive aftershocks of the financial crisis. News of the chief executives' pay could spark new criticism about the government's numerous bailouts, but that may be unfounded, said Mark Borges, principal with management consulting firm Compensia. Haldeman and Williams each could command between $5 million and $10 million in a similar position in the private sector, Borges estimated, and without the notable challenges and public scrutiny they face at these companies. "I doubt too many people would look at these jobs and say, 'Gosh, I would love to go there for my next career move,'" Borges said. "The government is getting top notch executives to solve problems that are not easy to solve." The bulk of their pay is also not guaranteed, Borges said, so these executives can't pocket and run and must meet certain long-term goals or risk giving some of it back. Freddie Mac's board sets the CEO's performance goals for the chief executive, which won't be disclosed until next year. Fannie Mae's filing outlined its corporate goals including "being a recognized leader in the housing recovery," "protecting taxpayers," and "managing risk more effectively." Fannie Mae and Freddie Mac declined to offer further details on CEO performance goals. Public anger over Wall Street pay boiled over earlier this year. In response, the Obama administration imposed pay curbs on banks that received government bailouts. All the major banks have since repaid their federal money, largely to escape caps on executive pay. Former Bank of America Corp. CEO Ken Lewis, for example, agreed to forgo his salary and bonus this year under pressure from the government. Last year, he pocketed more than $9 million in total compensation. Bank of America received $45 billion in government assistance, which it has since repaid. Freddie Mac hired Haldeman, a former mutual fund executive, in July. At the time, the company disclosed his annual salary of $900,000 but did not disclose other incentive payments. In September, the company hired a new chief financial officer, Ross Kari, and said his pay package would be worth up to $5.5 million. Williams, formerly Fannie Mae's chief operating officer, took over as CEO in April after the first government-appointed CEO, Herbert Allison, took a job at the Treasury Department. Williams earned a base salary of $676,000 last year, plus a retention award of $260,000. Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages. Without government aid, the firms could have gone broke, leaving millions of people unable to get a mortgage. And most experts say the price tag for the bailouts will rise and complicate the government's exit strategy. Though the Obama administration has yet to divulge its long-term plans for the two companies, they are unlikely to return to their former power and influence. Barclays Capital predicts the companies will need anywhere from $230 billion to $300 billion out of a potential $400 billion lifeline, which the Obama administration expanded from the original $200 billion set last fall. Most analysts don't expect the money to be returned anytime soon, if ever. Washington-based Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor McLean, Va.-based Freddie Mac. (Source: Breitbart.) DISTURBING SIDE NOTE: White House: Despite call for probe, Emanuel's job is 'very safe' (Dec 2009) White House deputy press secretary Bill Burton said Thursday that Chief of Staff Rahm Emanuel's job is "very safe" in the wake of a letter penned by a surprising political couple requesting the Justice Department to investigate him. Liberal blogger Jane Hamsher of Firedoglake.com and Grover Norquist, the head of the conservative Americans for Tax Reform, on Wednesday wrote a letter to Attorney General Eric Holder asking for an investigation into Emanuel's role on the board of Freddie Mac earlier this decade. The couple allege that Emanuel's position is a reason why Justice has not investigated the public-private mortgage lender. (Source: The Hill.) “Jane Hamsher, Grover Norquist Call for Rahm Emanuel’s Resignation” (Dec 2009) Yves here. This is a cross post from Jane Hamsher at FireDogLake. The fact that Jane and Grover Norquist are on the same page is noteworthy. More important, they call for an investigation (hear, hear!) and below the text of a letter to the Attorney General, provide a link to a petition. If you agree, please take a minute to sign it. (Source: Naked Capitalism.) U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says (Dec 2009) Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said. The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index. The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted. Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said. "It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent. From 1990 to 1999, Wallison served on the board of directors of MGIC Investment Corp., the largest U.S. mortgage insurer, including a stint on the audit committee, according to Bloomberg data and company filings. The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said. “It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.” (Source: Business Week.)  Obama drags his mess into the new year. January 2010U.S. loan program may have made things worse -- Experts: $75 billion effort to fight foreclosures has hurt some homeowners (Jan 2010) The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good. Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies. Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system. Postponing the pain? “The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.” Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues. “Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.” The Treasury Department publicly maintains that its program is on track. “The program is meeting its intended goal of providing immediate relief to homeowners across the country,” a department spokeswoman, Meg Reilly, wrote in an e-mail message. But behind the scenes, Treasury officials appear to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out. In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing. Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.” Whatever the merits of its plans, the administration has clearly failed to reverse the foreclosure crisis. In 2008, more than 1.7 million homes were “lost” through foreclosures, short sales or deeds in lieu of foreclosure, according to Moody’s Economy.com. Last year, more than two million homes were lost, and Economy.com expects that this year’s number will swell to 2.4 million. “I don’t think there’s any way for Treasury to tweak their plan, or to cajole, pressure or entice servicers to do more to address the crisis,” said Mark Zandi, chief economist at Moody’s Economy.com. “For some folks, it is doing more harm than good, because ultimately, at the end of the day, they are going back into the foreclosure morass.” Mr. Zandi argues that the administration needs a new initiative that attacks a primary source of foreclosures: the roughly 15 million American homeowners who are underwater, meaning they owe the bank more than their home is worth. Increasingly, such borrowers are inclined to walk away and accept foreclosure, rather than continuing to make payments on properties in which they own no equity. A paper by researchers at the Amherst Securities Group suggests that being underwater “is a far more important predictor of defaults than unemployment.”‘We want to overwhelm this problem’ From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments. A vast majority of modifications merely decrease monthly payments by lowering the interest rate. Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession. “We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.” Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012. “That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.” As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation. The government has pressured mortgage companies to move faster. Still, it argues that trial modifications are themselves a considerable help. “Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.” But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off. In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house. In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months. Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification. ‘I bawled my eyes out’ Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.) “I cried,” she said. “I was hysterical. I bawled my eyes out.” Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!” When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live. She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment. Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do. “I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.” A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer. “There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.” Many borrowers complain they were told by mortgage companies their credit would not be damaged by accepting a loan modification, only to discover otherwise. In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments. The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to Economy.com. The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances. “This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.” Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren. “Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?” A good question, Mr. Geithner conceded. “What to do about it,” he said. “That’s a hard thing.” (Source: MSNBC.) GOVERNMENT BAILOUT PIGS GET REPRIEVE -- EVERYONE ELSE PAYS GM, Chrysler, Fannie, Freddie Exempt from Obama's Proposed Tax on TARP Recipients (Jan 2010) Even banks that have already paid back their portion of the $700-billion federal bailout would be subject to a special tax under a White House proposal that opponents call punitive but the administration says is required to make taxpayers whole. But the failed and government-controlled mortgage giants Fannie Mae and Freddie Mac would not be subject to the tax, although they also received bailout money. President Barack Obama on Thursday announced a plan to impose a new tax on banks to cover an expected $117 billion shortfall in the Troubled Assets Relief Program (TARP). The tax would apply to 50 financial institutions, which have assets of more than $50 billion, and would constitute a 0.15 percent tax on the TARP liabilities of these institutions. However, auto companies General Motors and Chrysler, which are not expected to pay back all of their $66 billion of TARP money, will not be subject to the tax. Also exempted from the tax would be mortgage institutions Freddie Mac and Fannie Mae, which are largely responsible for the financial meltdown in 2008. The proposed tax would take effect on June 30 and reportedly collect $90 billion over 10 years. In his address Thursday, the president tapped into resentment over bonuses given to bank executives who were part of the bailed out institutions. "My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people who have not been made whole, and who continue to face real hardship in this recession," Obama said. The $700 billion TARP bailout bill was enacted in late fall 2008 as a means of rescuing financial institutions. It was later extended to the auto companies. Republicans argue that a TARP tax on the banks would be passed on to consumers, either through more consumer fees or through frozen credit. "Another day and another mixed economic message from this administration," said Rep. Tom Price of Georgia, chairman of the Republican Study Committee, in a statement: "The economic uncertainty that the president continues to generate leaves us perilously further from a sustainable recovery. While the President says he wants lending to increase, this tax increase will only limit access to credit for American families and small business owners." White House spokesman Robert Gibbs declined to say how popular the proposal would be in Congress, where reportedly some Democrats and most Republicans oppose the idea. Gibbs said that Republicans in Congress can decide "if you want to be on the side of the big banks." Price said just the announcement of the idea is likely to "slow the flow of credit further." "It seems this tax increase is driven more by revenge than recovery," Price said. "The fact is, corporations don't pay taxes; they collect them from their customers. And the last thing the American people need is Washington digging deeper into their pockets. A return to an environment of economic growth will require the will to remove Washington from the equation and provide our markets some certainty in the rules. Until the While House recognizes that a key to stable growth is predictability, this trying economy will be here to stay." Gibbs denied that the tax hike was punishment for the banks. "This is designed for the biggest banks," Gibbs said. "It's to make sure the American taxpayer won't be left holding the bag." Gibbs added that the administration has not "absolved" the auto industries' role in the financial fallout, but stressed that the financial problems of both GM and Chrysler resulted from the overall poor economy. On Fannie Mae and Freddie Mac, Gibbs said these institutions could not afford to pay the government back. "Fannie and Freddie are not at the health at this point that would allow them to do that," Gibbs said. (SITE NOTE: If Fannie Mae and Freddie Mac didn't make a profit, why is Treasury authorizing multi-million dollar bonuses for the CEOs???) (Source: CNS News.) Seventy GOP Congressmen Call on Geithner to Cancel the Multi-Million-Dollar Bonuses Treasury Approved for CEOs at Government-Owned Fannie Mae and Freddie Mac (Jan 2010) Seventy Republican members of Congress want Treasury Secretary Timothy Geithner to cancel up to $6 million in bonuses and deferred compensation -- approved before Christmas 2009 -- for the chief executive officers of the failed mortgage giants Fannie Mae and Freddie Mac. “(T)here’s a letter that’s going to Sec. Geithner from a number of us calling for a rescission of those bonuses,” Rep. Michele Bachmann (R-Minn.) told CNSNews.com Wednesday. On Christmas Eve, at the same time the Obama administration announced that it was removing any cap on the amount of taxpayer aid to Fannie Mae and Freddie Mac, the failed mortgage giants announced that they had received approval from their financial regulator to pay $42 million in compensation packages to 12 top executives for 2009. The compensation packages included up to $6 million each to Fannie Mae and Freddie Mac chief executives. For the CEOs, annual compensation consists of a base salary of $900,000, $3.1 million in deferred compensation and incentive pay of as much as $2 million. Public disclosure that the retention bonuses were being copnsidered first surfaced in the Spring. In their letter, the 70 congressmen state: “Awarding lavish pay packages with hefty bonuses to government owned entities while still lacking a comprehensive plan for reform demonstrates a disconcerting lack of judgment on the part of the Treasury Department and the FHFA (Federal Housing Finance Authority). "We share (House Financial Services Committee) Chairman (Barney) Frank’s sentiment expressed March 19, 2009 in a letter to former FHFA Director James B. Lockhart asking him to cancel retention bonuses for Fannie Mae and Freddie Mac executives," reads the letter. "Chairman Frank stated, ‘The public, having provided significant support for the purpose of restoring trust and confidence in our country's financial system, rightfully insists that large bonuses such as these awarded by institutions receiving public funds at a time of a serious economic downturn cannot continue.’ ” Bachmann, who is a member of the House Financial Services Committee, said the letter, which was drafted by Rep. Jeb Hensarling (R-Texas) and was sent Wednesday, protests the fact that the "government-sponsored enterprises" now owned by the American people, have already cost taxpayers more than $110 billion and "put taxpayers explicitly on-the-hook for over $2 trillion in potential losses through various federal programs." “(We are pushing) for an ending -- an unwinding, if you will -- of the U.S. owning Fannie and Freddie. We want out of this sinking business as quickly as we possibly can, and we want to pull the plug on an unlimited taxpayer bailout of Freddie and Fannie,” Bachmann said. Bachmann's comments came at a Wednesday news conference, when CNSNews.com asked her: “The Obama administration approved the CEOs of Fannie Mae and Freddie Mac getting salaries of $900,000, plus $3.1 million in deferred payments, plus another $2 million in performance bonuses. (S)hould taxpayers have to pay these bonuses, or should they be cancelled?” Bachmann replied: "I think that’s something that we’re very upset about. And I think we’re very upset about the bonuses." “When Sec. Geithner said that there’d be unlimited taxpayer funding continuing to go into this sinking ship, and then bonuses they’re given?," she said. "On what basis? What did they do? What was the criteria that they could possibly be given a bonus? The fact that they got unlimited taxpayer money?” Bachman was referring to Treasury’s announcement that it would send unlimited tax money to Fannie Mae and Freddie Mac, thereby eliminating the current $400 billion cap on emergency aid that Treasury can give without having to come back to Congress for authorization. On Thursday, meanwhile, the president proposed a fee on the nation’s top financial institutions to recoup $117 billion of money that the Treasury Department said was lost on the Troubled Asset Releif Program (TARP), the bank bailout fund. Ironically, Fannie Mae, Freddie Mac, GM and Chrsyler would all be exempt from the fee, which would apply mainly to major private banks, many of whom have already paid back the money they took under the the $700 billion TARP. In addition to Bachmann and Hensarling, the letter was signed by: Reps. John Boehner (R-Ohio); Spencer Bachus (R-Ala.); Mike Pence (R-Ind.); Paul Ryan (R-Wis.); Scott Garrett (R-N.J.); Shelley Moore Capito (R-W.V.); Don Manzullo (R-Ill.); Walter Jones (R-N.C.); Patrick McHenry (R-N.C.); Bill Posey (R-Fla.); Leonard Lance (R-N.J.); Peter Roskam (R-Ill.); Marsha Blackburn (R-Tenn.); Geoff Davis (R-Ky.); Virginia Foxx (R-N.C.); Mike Simpson (R-Idaho); Louie Gohmert (R-Texas); Lynn Jenkins (R-Kan.); Jack Kingston (R-Ga.); Dana Rohrabacher (R-Calif); Jason Chaffetz (R-Utah); Todd Akin (R-Mo.); Cathy McMorris Rodgers (R-Wash.); Steve King (R-Iowa); Joe Wilson (R-S.C.); Sam Graves (R-Mo.); Roy Blunt (R-Mo.); Frank Wolf (R-Va.); Kevin Brady (R-Texas); Adam Putnam (R-Fla.); Greg Walden (R-Ore.); John Fleming (R-La.); Ileana Ros-Lehtinen (R-Fla.); Cliff Stearns (R-Fla.); Steve Scalise (R-La.); Peter King (R-N.Y.); Ron Paul (R-Texas); Randy Neugebauer (R-Texas); Joe Barton (R-Texas); Jeff Flake (R-Ariz.); John Boozman (R-Ark.); Charles Dent (R-Pa.); Pete Olson (R-Texas); Peter Hoekstra (R-Mich.); Bob Goodlatte (R-Va.); Roscoe Bartlett (R-Md.); Judy Biggert (R-Ill.); Ed Royce (R-Calif.); John Duncan (R-Tenn.); Robert Latta (R-Ohio); Kenny Marchant (R-Texas); Mike Castle (R-Del. At large); Doug Lamborn (R-Colo.); Kevin McCarthy (R-Calif.); Joe Pitts (R-Pa.); Paul Broun (R-Ga.); Gregg Harper (R-Miss.); Trent Franks (R-Ariz.); John Kline (R-Minn.); Dan Burton (R-Ind.); Jim Jordan (R-Ohio); John Shadegg (R-Ariz.); Tom Rooney (R-Fla.); Blaine Luetkemeyer (R-Mo.); Dan Lungren (R-Calif.); Tom McClintock (R-Calif.); Mary Bono Mack (R-Calif.) and Kay Granger (R-Texas). (Source: CNS News.)
NOTICE/DISCLAIMER: The content of this page is unofficial and the views and opinions expressed do not necessarily reflect those of anyone associated with this page or any of those linked from this site. All opinions are those of the writer and are intended for entertainment purposes only. Links to other web pages are provided for convenience and do not, in any way, constitute an endorsement of the linked pages or any commercial or private issues or products presented there. Neither the DOD, the US Air Force, the 51st Fighter Wing nor Mickey Mouse has endorsed any of this site. All links are publicly accessible through the worldwide web. If there is any discrepancy between eye-witness accounts and OFFICIAL DOD records, this site opts to lend credence to the eye-witness views.
|
