Posts Tagged ‘Congressional Oversight Panel’
Monday, August 29th, 2011
Foreclosure filings fell a dramatic 35 percent in July to the lowest level in nearly four years as lenders and state and federal agencies ramped up their efforts to keep delinquent borrowers in their homes, according to RealtyTrac Inc. A total of 212,764 properties received default, auction or repossession notices, the lowest number in 44 months. Filings declined on a year- over-year basis for the 10th consecutive month, and were down four percent when compared with June. One in every 611 households across the country received a notice. “The downward trend in foreclosure activity has now taken on a life of its own,” RealtyTrac Chief Executive Officer James J. Saccacio said. “Unfortunately, the fall-off in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond. It appears that processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts, may be allowing more distressed homeowners to stave off foreclosure.”
Nevada leads the nation with the highest foreclosure rate of any state, one filing for every 115 homes. California, with one foreclosure for every 239 homes came in second, while Arizona, with one in every 273 homes, was third. Las Vegas continued to record the nation’s highest foreclosure rate, with one in every 99 homes getting a foreclosure filing in July.
Foreclosure auctions, the final step in the agonizing foreclosure process were also scheduled on five percent fewer properties in July. The month’s auction total hit a three-year low and was nearly half (46 percent) below the March, 2010, peak. An estimated four million vacant homes not yet accounted for by lenders constitute an immense inventory of residential properties, approximately 2.2-million of which are in default and have not yet been formally foreclosed known as the “shadow inventory” weigh down the marketplace.
The Obama administration is proactively seeking ways to dispose of foreclosed homes that are under government control. The goal is to “bring stability and liquidity” to the housing market, Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said. The FHFA regulates Fannie Mae and Freddie Mac, which guarantee approximately 90 percent of American mortgages. President Obama has proposed a program to encourage the rental of foreclosed homes owned by the Federal Housing Administration, Fannie Mae, and Freddie Mac. Banks could adopt similar programs and offer homes at steep discounts to get residential real estate off their books. Financial institutions typically get lucrative write-offs from these and so might prefer to rent some properties. Other federal attempts to prop up the housing market have not been successful to date. The Making Home Affordable Program operation was launched in March of 2009 with the main component the Home Affordable Modification Program. This was created to cut mortgage payments for families who couldn’t afford them, but wanted to keep their houses. A Congressional Oversight Panel report said the programs had failed and fell far short of its goal to modify mortgages for three million to four million homes. The new Obama plan to rent foreclosed homes has the potential to positively impact home prices.
Writing on MSNBC, John W. Schoen says that “A sharp slowdown in the pace of home foreclosures may help ease the financial burden on bankers by helping them unload a glut of repossessed homes more slowly and delay booking losses from the sale of distressed properties. But it will do little to help millions of Americans families at risk of being tossed from their homes in the next few years. The slowdown follows a wave of legal challenges by homeowners that has all but shut down the machinery of bank repossession in some states. Some homeowners are disputing the widespread practice of ‘robo-signing’, in which lenders process batches of foreclosure fillings with little or no formal review. Other homeowners have successfully halted repossessions by questioning shoddy paperwork or broken paper trails that don’t establish clear title to a property. The slowdown has left millions of American households in legal limbo, prolonged the housing market’s four-year recession and delayed hopes for a broader economic recovery.”
“The process has more or less ground to a halt in a lot of states that do foreclosures through the court system,” said Rick Sharga, a senior vice president at RealtyTrac.
Tags: Arizona, California, Congressional Oversight Panel, Fannie Mae, Federal Housing Finance Agency, Foreclosure auctions, foreclosures, Freddie Mac, Home Affordable Modification Program, Inc., Las Vegas, Making Home Affordable Program, Nevada, Obama administration, RealtyTrac, robo-signing, “Shadow inventory”
Posted in Economics, Financing, General, Residential | No Comments »
Monday, April 18th, 2011
The Treasury Department is planning to sell $142 billion worth of toxic assets that it acquired during the financial crisis. According to Treasury, it wants to sell approximately $10 million worth of assets every month, depending on market conditions and hopes to end the program next year. Treasury acquired the securities — primarily 30-year, fixed-rate mortgage-backed securities guaranteed by Fannie Mae or Freddie Mac –between October, 2008 and December, 2009 to stabilize the home loan market.
The Treasury has decided to sell the securities now because the market has “notably improved.” According to Treasury officials, the sale could net $15 billion to $20 billion in profits for taxpayers. The sale will have a negligible impact on the U.S. debt limit but could delay the ceiling’s arrival by a few days. In early March, Treasury estimated the U.S. would hit the $14.294 trillion ceiling between April 15 and May 31. The Treasury in 2008 retained State Street Global Advisors, a leading institutional asset manager, to acquire, manage and dispose of the mortgage-backed securities portfolio.
“We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market,“ Mary Miller, assistant secretary for financial markets, said. “We’re continuing to wind down the emergency programs that were put in place in 2008 and 2009 to help restore market stability, and the sale of these securities is consistent with that effort.”
Congress gave Treasury the authority to buy securities guaranteed by Fannie Mae and Freddie Mac. The value of these mortgage-backed securities declined significantly after the housing bubble burst, prompting fears that write-downs could drag down individual banks and further plunge the financial system into panic. The Treasury said that three years after the worst point of the crisis, the market for asset-backed derivatives is now much more robust.
The government bought $221 billion of these bonds, as part of the Housing and Economic Recovery Act of 2008. Treasury announced that it would buy the bonds on the day the government took over Fannie and Freddie. “The primary objectives of this portfolio will be to promote market stability, ensure mortgage availability, and protect the taxpayer,” Treasury said at the time. The portfolio is now just $142 billion. The Congressional Oversight Panel, which supervised the Troubled Asset Relief Program, said that as of February of 2011, Treasury had received $84 billion in principal repayments and $16.7 billion in interest on the securities it holds.
“It was a bit of a surprise, though will likely be easy to digest,” said Tom Tucci, head of government bond trading at Capital Markets in New York. “We spent a year and a half at levels that were unsustainable because they weren’t based on economic fundamentals, they were based on fear. “Now some of the fundamentals are starting to come back into place.”
Republicans are asking for deeper cuts in government spending before they will agree to raise the debt limit. Treasury Secretary Timothy Geithner has cautioned that failure to raise the borrowing limit would cause an unparalleled default by the government on the national debt. Without question, this would drive up the government’s cost of borrowing money.
Tags: 30-year fixed-rate mortgage securities, congress, Congressional Oversight Panel, Debt ceiling, default, Fannie Mae, financial crisis, Freddie Mac, Housing and Economic Recovery Act of 2008, Housing bubble, mortgage market, national debt, Republicans, State Street Global Advisors, Timothy Geithner, Toxic assets, Treasury Department, Troubled Asset Relief Program
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Wednesday, March 23rd, 2011
A top Treasury official defended the federal government’s $700 billion bank bailout financial crisis-response program at a hearing where the effort was criticized by members of a watchdog panel insisting that it did more for Wall Street than Main Street. “The cost of TARP is likely to be no greater than the amount spent on the program’s housing initiatives,” said Timothy Massad, acting assistant secretary of the Treasury for the Office of Financial Stability, to the Congressional Oversight Panel that oversees the Troubled Asset Relief Program (TARP). “The remainder of the programs under TARP — the investments in banks, credit markets and the auto industry — likely will result in very little or no cost,” he said.
Panel member J. Mark McWatters, a Dallas-based CPA ad tax attorney, argued that it is difficult to call TARP a success when the unemployment rate is still approximately nine percent and millions of Americans are fighting foreclosure. Panel Chairman Ted Kaufman – who was Vice President Joe Biden’s chief of staff of 19 years and temporarily replaced him in the Senate – said that Wall Street bankers ended up in better shape than Main Street. “It’s not a tough economy on Wall Street, it’s a tough economy everywhere else,” Kaufman said.
According to Massad, TARP will end up spending no more than $475 billion; 86 percent of which has been disbursed. To date, Treasury has received $277 billion back, including $241 billion in repayments and $36 billion in additional income. The Treasury expects to receive an additional $9 billion, which will leave $150 billion outstanding through various investments. The department hopes to recover those funds over the next several years. “TARP helped bring our financial system back from the brink and paved the way for an economic recovery,” Massad said. “Banks are better capitalized, and the weakest parts of the financial system no longer exist. The credit markets on which small businesses and consumers depend — for auto loans, for credit cards and other financing — have reopened. Businesses can raise capital, and mortgage rates are at historic lows. We have helped bring stability to the financial system and the economy at a fraction of the expected costs.”
William Nelson, deputy director of the Federal Reserve’s division of monetary affairs, agrees with Massad. In testimony about the Fed’s program to restart the asset-backed securities markets with backing from the Treasury’s TARP program, Nelson said even that program is unlikely to experience any losses. “The Term Asset-Backed Securities Loan Facility (TALF) program helped restart the ABS markets at a crucial time, supporting the availability of credit to millions of American households and businesses,” Nelson said, adding that of the more than 2,000 loans worth $70 billion that were extended through the Fed’s facility, 1,400 totaling $49 billion were repaid early. Remaining loans are current, and the collateral backing the loans is retaining its value, “significantly reducing the likelihood of borrower default.”
“As a result, we see it as highly likely that the accumulated interest will be sufficient to cover any loan losses that may occur without recourse to the dedicated TARP funds,” Nelson said. Europe, by contrast, did not act as aggressively to apply stimulus with the result that financial crises occurred in countries like Ireland and Greece.
Tags: ABS markets, auto industry, banks, Congressional Oversight Panel, credit markets, Federal Reserve, foreclosures, Joe Biden, Main Street, Office of Financial Stability, Senate, Ted Kaufman, Term Asset-Backed Securities Loan Facility, Timothy Massad, Treasury Department, Troubled Asset Relief Program, Wall Street, William Nelson
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Thursday, January 13th, 2011
Although the Washington, D.C., residential market has held up surprisingly well over the past few years in an environment hammered by unemployment and foreclosures, there is a question of whether the nation’s capital will spur recovery or if the rest of the country will drag down the local market. Washington’s relatively low unemployment rate and availability of well-paying jobs has helped cushion the city’s housing market. During the 3rd quarter, the District of Columbia’s average home price rose 3.1 percent over the 2nd quarter to $410,839, according to Delta Associates, a real estate research firm. That is 6.2 percent higher than average home prices during the 3rd quarter of 2009. The region’s foreclosure rate as of September was 2.1 percent, according to CoreLogic. Nationally, the foreclosure rate was 3.3 percent.
According to Mark Zandi, chief economist at Moody’s Analytics, more than 4 million homes were in or near foreclosure nationally in 2010. That’s over and above the 6.2 million homes that were foreclosed between 2007 and 2010. Those 10.2 million foreclosures equal the combined populations of Vermont and North Carolina. Approximately 57 percent of economists and real estate experts surveyed by Macro Markets don’t think that home prices will recover until 2012; another 35 percent believe that real recovery won’t happen until 2013.
In recent testimony before the Congressional Oversight Panel, Treasury Secretary Timothy Geithner said that 24 percent of homes in the United States are under water – which puts their owners in the unenviable position of being unable to refinance or sell. “The most important thing that’s going to affect the trajectory of home prices, the overall number of foreclosures, the ability of people to stay in their homes, is what the government is able to do to get the unemployment rate down,” Geithner said.
Tags: Congressional Oversight Panel, CoreLogic, Delta Associates, District of Columbia, foreclosures, housing market, Macro Markets, Moody’s Analytics, Timothy Geithner, Under water, unemployment, Washington DC
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Wednesday, December 8th, 2010
Sloppy foreclosure paperwork could upset the nation’s housing market and destabilize the economy in general, according to a report released by the Congressional Oversight Panel. This group oversees the government bailout and its statement marks the first time a federal watchdog has issued an opinion on the foreclosure issue. Consumer advocates and financial analysts had previously raised the issue, noting that although the consequences of the foreclosure mess are unclear. The situation has the potential to impact mortgages that are not in trouble but were securitized and sold to investors.
“Everyone’s very nervous about what’s going to happen,” said an anonymous industry source. “We have all hands on deck.” Some lawmakers want to revisit legislation that would allow bankruptcy judges to order lenders to reduce the principal the homeowner owes. Others favor allowing big banks to spin off their mortgage-servicing operations to avoid conflicts of interest. “The risk is small that a bill gets through, but we are taking it very seriously,” said another unidentified financial lobbyist. The dilemma became apparent in recent months as Ally Financial, Bank of America and JPMorgan Chase halted foreclosures as it became clear that many were based on flawed documentation.
The oversight panel also voiced concerns that investors who bought the securitized mortgages could file lawsuits that ultimately might cost banks billions of dollars. At the same time, the panel said the Treasury Department’s claims that the mortgage situation poses slight systemic risk to the financial system are premature. “Clear and uncontested property rights are the foundation of the housing market. If those rights fall into question, that foundation could collapse,” according to the report, which also recommended that the Treasury and Federal Reserve conduct new stress tests on Wall Street banks to gauge their ability to cope with any new upheavals.
Tags: Ally Financial, Bank of America, Congressional Oversight Panel, Consumer advocates, Federal Reserve, Financial analysts, Financial Fraud Task Force, foreclosures, Fraudulent foreclosure paperwork, JPMorgan Chase, lobbyists, Senate Banking Committee, stress tests, Treasury Department, Wall Street banks
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Monday, May 10th, 2010
The nation’s small and medium-sized banks – those with under $10 billion in assets – could see a spate of commercial loan failures in coming years, according to a report issued by the Congressional Oversight Panel as part of its supervision of the Troubled Asset Relief Program (TARP). The panel’s chair, Harvard law professor Elizabeth Warren, is “deeply concerned” that commercial loan losses could destabilize many smaller banks – which account for nearly 50 percent of all small business loans.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, is especially troubled about the interaction among bank lending, small business employment and commercial real estate values. According to Lockhart, a significant amount of CRE exposure is concentrated at smaller institutions, which carry almost half of total CRE loans. Small firms’ reliance on banks with heavy commercial real estate exposure is considerable.
The Wall Street Journal counters the pessimism by pointing out that a decrease in unemployment and easier credit for developers could mitigate the losses, thus easing the pressure on real estate developers and other businesses trying to make their payments. On the other hand, Dr. Gary Shilling, president of A. Gary Shilling & Company, an investment advisory services company, is urging his clients to avoid regional and community banks. He expects that many more banks will fail, but notes that the Obama administration “is extending the Troubled Asset Relief Program to them and is using other techniques to keep them, as a group, intact.”
Tags: Congressional Oversight Panel, CRE, Dennis Lockhart, Elizabeth Warren, Federal Reserve, Foresight Analytics, Gary Shilling & Company, Harvard University, Obama administration, small banks, TARP, Wall Street Journal
Posted in Development, Economics, Financing | No Comments »
Monday, February 22nd, 2010
An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010. Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.
The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company. “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report. “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”
That said, after 14 months of TARP, the panel admits that problems remain. Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector. And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”
Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America. The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.
Tags: AFL-CIO pension fund, American Recovery, bailouts, Bank of America, Congressional Oversight Panel, department of treasury, Federal Deposit Insurance Company, Federal Reserve, Harvard Law School, Main Street, President Obama, Securities and Exchange Commission, TARP, Timothy Geithner, Wall Street
Posted in Economics, Financing | No Comments »