Posts Tagged ‘Obama administration’
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 »
Thursday, June 2nd, 2011
The initial steps to dismantle Fannie Mae and Freddie Mac are underway with the introduction of a bipartisan bill in the House of Representatives that would replace the mortgage giants with a minimum of five companies that would issue mortgage-backed securities with significant federal regulation. The compromise legislation proposed by Representative John Campbell (R-CA) and Representative Gary Peters (D-MI) is likely to be the only plan that will attract sufficient support from both parties on a politically volatile subject, especially at a time when gridlock looms over issues such as how to curb federal spending. The bailout of the two companies has cost taxpayers upwards of $100 billion.
According to Representative Campbell, “Rather than putting out a political marker, we can move a piece of legislation that is significant…and can actually become law. The only other approach that’s out there in a bill is one that replaces Fannie and Freddie with nothing.” Other policymakers, such as Treasury Secretary Timothy Geithner, have discussed the merits of a limited but unambiguous government guarantee of securities backed by certain types of mortgages. The new entities – similar to Fannie and Freddie — would be limited to purchasing loans that meet certain standards, including size caps. The difference would be that the firms would be required to hold much more capital than Fannie and Freddie. Only the mortgage-backed securities that they issue –not the companies themselves — would enjoy federal guarantees. The companies would operate similarly to public utilities and likely will not have exchange-listed shares.
Critics say the proposal risks recreating the same dynamics that led Fannie and Freddie to use their government ties to take risks that harmed taxpayers. “In reality, this is almost surely going to be terrible,” said Dwight Jaffee, finance professor at the University of California, Berkeley. Government insurance programs, he says, inevitably lead to “a catastrophe.” Advocates argue that taxpayers will be less exposed to losses because borrowers will have to make significant downpayments. Additionally, the new firms will have to hold more capital. Additionally, the firms will be required pay a fee for government backing to finance a catastrophic insurance fund, much as the Federal Deposit Insurance Corporation levies fees and handles bank failures.
The mortgage and housing industry support a continued government role in supporting mortgage lending, including the Mortgage Bankers Association, National Association of Realtors and National Association of Home Builders.
The agencies are still hemorrhaging money. For example, Fannie Mae reported a loss of $8.7 billion for the 1st quarter of 2011, which included a $2.2 billion dividend payment to the Treasury Department. The loss was significantly less than the $13 billion reported one year ago. “We need to manage our credit book — our old legacy book very vigorously,” said Fannie Mae President and CEO Michael Williams. But that is not in conflict with helping distressed homeowners. “Helping people to avoid foreclosure is a good thing,” Williams said.
Action must be taken to keep the mortgage market afloat and provide securitization for investments. According to a Washington Post editorial, “The housing market is still in deep trouble. Prices nationwide have fallen by about a third since the peak in 2006 — and they appear to be trending down again. The resulting hit to household wealth may hinder the recovery, which is already sluggish. Small wonder that various advocates for housing are once again asking Washington for help. But in at least one area, the prescription would be worse than the disease. We refer to calls for extending the current elevated limit on the size of loans eligible for securitization by Fannie Mae and Freddie Mac, the mortgage-finance giants operating under government control. Congress ‘temporarily’ raised the limit to a maximum of $729,759 in certain markets in response to the sudden evaporation of private liquidity during the 2008 crisis, but that measure is set to lapse at the end of September. At that point, the limit will not revert to the pre-crisis maximum of $417,000 in most of the country but to a level set in relation to local medians — and capped at $625,000. But the Obama administration has supported a reversion to lower loan limits as the first step in gradually reforming the mortgage security market and reducing taxpayer exposure to Fannie and Freddie. The administration’s goal is to lure cash-rich would-be mortgage securitizers back into the market, starting with the high end. Treasury Secretary Timothy F. Geithner has described this as “crowding in” private capital, and it is the rare housing policy proposal that has enjoyed a measure of bipartisan support.”
Tags: Bipartisanship, Department of the Treasury, Fannie Mae, Federal Deposit Insurance Company, Freddie Mac, house of representatives, mortgages, National Association of Home Builders, National Association of Realtors, Obama administration, Representative Gary Peters, Representative John Campbell, Timothy Geithner
Posted in Economics, Financing, Residential | No Comments »
Wednesday, May 4th, 2011
The controversial Cape Wind Energy Project – to be constructed in Nantucket Sound between Cape Cod, Nantucket and Martha’s Vineyard in Massachusetts – has been given the green light by Secretary of the Interior Ken Salazar. “The Department has taken extraordinary steps to fully evaluate Cape Wind’s potential impacts on environmental and cultural resources of Nantucket Sound,” Salazar said.
The nation’s first offshore wind farm, Cape Wind will see 130 wind turbine generators constructed; each will have a maximum blade height of 440 feet and will be arranged in a grid pattern several miles offshore. When completed, Cape Wind will produce enough electricity to power about 400,000 homes on Cape Cod, Martha’s Vineyard and Nantucket. Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement approved the wind farm’s construction and operation.
Cape Wind – which was first proposed 10 years ago — has faced opposition from everyone from local Indian tribes to fishermen to the Kennedy family, whose six-acre compound in Hyannis Port overlooks Nantucket Sound. “Taking 10 years to permit an offshore wind project like Cape Wind is completely unacceptable,” Salazar said. Representative Edward Markey (D-MA) said “Let’s get this wind project built, and keep this American clean energy momentum pushing us ahead like a down east breeze.”
The opposition did not resonate on the national level and so the Interior Department used Cape Wind as a test case for offshore energy projects and green-lighted one major regulatory step after another. Those who forcefully opposed the wind farm include The Cape Cod Times, Cape Cod Chamber of Commerce, and the government of the Town of Barnstable. Many older residents say resistance to Cape Wind was an exact copy of the opposition to the creation of the Cape Cod National Seashore Park 50 years ago.
According to Salazar, the Cape Wind project could create as many as 600 to 1,000 jobs, and jump start a network of similar renewable wind farm projects up and down the Atlantic coast, which has the potential for tens of thousands of new jobs for Americans. He criticized the process, which delayed the construction of America’s first offshore wind farm for 10 years, saying, that the Obama administration wants to streamline the permitting process in the future. “After a thorough review of environmental impacts, we are confident that this offshore commercial wind project — the first in the nation — can move forward,” said Michael Bromwich, who directs Interior’s Bureau of Ocean Energy, Management, Regulation, and Enforcement. “This will accelerate interest in the renewable energy sector generally and the offshore wind sector specifically, and spur innovation and investment in our nation’s energy infrastructure.”
While Cape Wind has found a buyer for 50 percent of its output, it has not for the other half. Dennis Duffy, Vice President, said the company was “confident” it would find a customer for the other half. The approval comes as the state proposed to redefine a different federal ocean area that also is under consideration for offshore wind. The state wants the federal government to remove approximately half of a 3,000-square-mile area south of Massachusetts from potential wind development to protect vital fishing grounds.
“We submitted a proposal that would move the Commonwealth towards (making Massachusetts the nation’s offshore wind energy leader) while safeguarding waters important to our commercial fishing industry,” said Richard K. Sullivan Jr., state Secretary of Energy and Environmental Affairs.
Tags: and Enforcement, Bureau of Ocean Energy, Cape Cod, Cape Cod Chamber of Commerce, Cape Cod National Seashore, Cape Wind Energy Project, Department of the Interior, Ken Salazar, Kennedy Family, Management, Martha’s Vineyard, Massachusetts, Nantucket, Nantucket Sound, Obama administration, Offshore wind farm, Regulation, renewable energy, Representative Edward Markey, The Cape Cod Times, Town of Barnstable, wind turbines
Posted in Development, General, Green | No Comments »
Wednesday, April 27th, 2011
The American recovery is on the road to recovery, unless the mounting federal deficit slows its momentum.
A recent survey by Smart Brief and the international market research firm Ipsos of 841 financial professionals found that 67 percent think that stock prices will rise this year and that the country’s economic output will increase by 65 percent; another 59 percent said they expect unemployment to decrease slightly in the next 12 months. The survey found that even such modest optimism is tempered by expectations of rising health care costs (88 percent); higher fuel prices (85 percent); rising prices for durable goods such as appliances, automobiles and consumer electronics (72 percent); and slightly higher interest rates (59 percent). Additionally, 43 percent expect home prices to continue declining, while only 21 percent expect them to rebound; 34 percent expect no change. By a margin of 70 percent – 30percent, respondents oppose allowing states to declare bankruptcy; 77 percent expect the nuclear disaster in Japan to drive greater investment and funding into renewable energy.
“Financial professionals are cautiously optimistic about economic prospects in the near term; indeed, they think that the overall scenario will improve, and they’re making business decisions on that basis, such as increased investment and hiring,” said Ipsos Managing Director Cliff Young. “That being said, there are still concerns in the short to medium term about the increased costs of inputs such as fuel and durable goods.”
Larry Summers, former president of Harvard and architect of the Obama administration’s stimulus plan agrees, noting that “An economy in economic freefall has now recovered for 18 months,” he said. “Make no mistake, the American economy has a feeling of normalcy that was completely absent in 2009 and that is a substantial achievement.” Summers warned that the nation faces new challenges, including reducing the 8.9 percent unemployment rate, which he said is “far, far too high.” He said it will be important for the US — and Massachusetts, in particular — to keep the life sciences industry strong.
To keep the recovery on track, the International Monetary Fund urged the United States to speed up efforts to slash the budget deficit. “It is important the United States undertakes fiscal adjustment sooner rather than later,” said Carlo Cottarelli, director of the IMF Fiscal Affairs Department, the U.S. is projected to have a fiscal debt balance as a percentage of GDP of 10.8 percent in 2011, the biggest percentage among advanced countries. “Market concerns about sustainability remain subdued in the United States, but a further delay in action could be fiscally costly,” the IMF said.
According to the IMF, although most advanced economies have taken steps to tighten budget gaps, two of world’s largest economies — Japan and the United States — had delayed action to maintain their recoveries. “Countries delaying adjustment in 2011 will face more significant challenges to meet their medium-term objectives,” the IMF warned in its updated “Fiscal Monitor” report.
Tags: bankruptcy, deficit, economic recovery, Great Recession, Harvard, home prices, IMF Fiscal Affairs Department, International Monetary Fund, investment, Ipsos, Larry Summers, MarketWatch, Obama administration, renewable energy, SmartBrief, stimulus bill
Posted in Economics, General | 1 Comment »
Tuesday, April 26th, 2011
Federal regulators at the Departments of Justice, Treasury and Housing, as well as the Federal Trade Commission, have ordered the nation’s largest banks to revamp their foreclosure procedures and compensate borrowers who were financially hurt by “pervasive” bad behavior or carelessness. According to the bank regulators, failure to comply with the rules will result in fines and a broad investigation conducted by state attorneys general and other federal agencies. The regulators acted after being criticized for not putting a halt to risky lending practices during the housing boom.
Describing the lending practices as “a pattern of misconduct and negligence,” the Federal Reserve said that “These deficiencies represent significant and pervasive compliance failures and unsafe and unsound practices at these institutions.” Borrowers in trouble have complained that applying for a modification using the Obama administration’s program has been too complicated and characterized by multiple games of telephone tag. Enforcement requires servicers to set up compliance programs and hire an independent firm to review residential-foreclosures. The banks will be required to make sure that communications are more “effective” between borrowers and banks when it comes to foreclosure and mortgage-modification proceedings.
Citibank, Bank of America, JPMorgan Chase and Wells Fargo, the nation’s four leading banks, top the list of financial firms cited by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency. Citigroup said that it had “self-identified” desired changes in 2009 and that it has helped more than 1.1 million homeowners avoid foreclosure. “We are committed to working with our regulators to further strengthen our programs in these areas and meeting these new requirements,” the company said.
As stern as the recent move seems to be, there are still critics. “These consent orders are worse than doing nothing,” said Alys Cohen, staff attorney for the National Consumer Law Center. “They set the bar so low on some things and they give the banks carte blanche on others. And they give the appearance of doing something while giving banks control of the process.” Additionally, consumer advocates and members of Congress said the new rules are too little, too late.
Congressional critics maintain that the order is too moderate. House Democrats introduced legislation that would require lenders to perform specific actions, including an appeals process, before starting foreclosures. “I want to know what abuses (the government agencies) identified, which banks committed them and how their proposed consent agreement is going to fix these problems,” said Rep. Elijah Cummings (D-MD) the ranking member of the House Government and Oversight Committee. “Based on what I have read…I am not encouraged at all.”
More than 50 consumer groups don’t like the settlement, and claim that the expected settlements do little more than require mortgage servicers to obey existing laws and that they lack penalties. “They’re left to police their new improvements,” said Katherine Porter, a University of Iowa law professor who is an expert on mortgage services. Another concern is that the settlements may weaken the ability of 50 state attorneys general to force concessions from mortgage servicers. The attorneys general have been investigating mortgage servicers since last fall, and in March sent the companies a list of terms, which go further than those pursued by bank regulators. Iowa Attorney General Tom Miller, who’s leading the joint effort, says any settlements with banking regulators will not “pre-empt” the states’ efforts.
Tags: Bank of America, bank regulators, Citibank, congress, Department of Health and Human Services, Department of Justice, Federal Reserve, Federal Trade Commission, foreclosure, House Government and Oversight Committee, house of representatives, J P Morgan Chase, National Consumer Law Center, Obama administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, Predatory lending, Regulations, Representative Elijah Cummings, Treasury Department, Wells Fargo
Posted in Economics, Financing, General, Residential | 1 Comment »
Monday, March 21st, 2011
January’s big snowstorms on the East Coast contributed to the creation of just 63,000 jobs nationally in that month. In February, however, businesses started to hire workers. The economy added 192,000 jobs, the best showing since May of last year, the Bureau of Labor Statistics reported Friday. The unemployment rate – which is politically important — fell from nine percent to 8.9 percent. Economists said the employment numbers were “solid” but not “ebullient.”
The optimistic view is that the economy has at long last turned the corner. “I think the economy has not only turned the corner: I am expecting the employment gains to accelerate slightly,” said Sung Won Sohn, a professor of finance at California State University, Channel Islands. “We have definitely reached the point where the economy is self-sustaining.” Sohn thinks that the Federal Reserve can halt its monetary stimulus program for the economy. “There is a growing possibility they will cut short their bond-buying program before the end of June,” he said. Improved job growth would also help cut the federal budget deficit, since income-tax revenues would rise and requests for unemployment benefits will be reduced. States and cities would get a boost for the same reasons. “The chances are the revenue projections may be slightly better than the government anticipates,” according to Sohn.
Other economists were not as sanguine about the pace of recovery. “If we see 200,000 jobs added in March, April, and May, that will convince market participants that the recovery is self-sustaining,” said John Canally, economist at LPL Financial in Boston. “You can’t make that call just by looking at February, because the numbers may have been distorted by the weather.” According to Canally, the most accurate indications of how the weather affected the numbers were in construction, which gained 22,000 jobs in February after falling 33,000 in January; transportation, which added 22,000 jobs compared with losing 44,000 in January; and leisure and hospitality, which added 21,000 jobs after dropping 3,000 the previous month. “All of those swings are because of the weather,” he said.
Manufacturing added 33,000 jobs in February, primarily in producing durable goods such as washing machines and refrigerators. This comes as no surprise to Frank Fantozzi, president of Planned Financial Services in Cleveland. “In talking to our corporate clients, we were hearing there was definitely hiring going on and activity improving,” Fantozzi said. “My litmus test is when our corporate clients from manufacturing to services send me e-mails saying they are looking to hire someone and asking if we have anyone in our network who would qualify.”
Not surprisingly, the Obama administration was cheered by the February numbers. “We are seeing signs the initiatives put in place by this Administration – such as the payroll tax cut and the investment tax credit – are creating the conditions for sustained growth and job creation,” said Austan Goolsbee, chairman of the Council of Economic Advisers. Republicans countered, suggesting that the improvement was because they had convinced the Obama administration to extend the Bush-era tax cuts for two years. “Removing the uncertainty caused by those looming tax hikes provided much-needed relief for private-sector job creators in America,” said House Speaker John Boehner (R-OH).
According to Esmael Adibi, an economist at Chapman University in California, “Three sectors – construction, financial activities and government – are taking the oomph out of the recovery. Job creation is what is going to bring housing back, but with this pace of job creation, we’re not going to see a quick turnaround.”
Tags: Austan Goolsbee, Bureau of Labor Statistics, Bush-era tax cuts, California State University, Channel Islands, Chapman University, Council of Economic Advisers, Durable goods, Federal budget deficit, Federal Reserve, LPL Financial, manufacturing, Obama administration, Planned Financial Services, recovery, Representative John Boehner, Republicans, Snowstorms, Stimulus program, unemployment
Posted in Economics, General | No Comments »
Wednesday, February 23rd, 2011
The Obama administration and the Treasury Department have decided that Fannie Mae and Freddie Mac — the public-private housing finance model in place for the past four decades – will come to an end, although they pledged to continue backing the agencies’ existing obligations. “The GSE (government-sponsored enterprise) model is dead,” an Obama administration official said. The Treasury Department is currently working on three broad options for overhauling the mortgage lending system, but will let Congress make the final decision. The government bailouts of Fannie and Freddie have cost taxpayers nearly $150 billion.
Obama administration officials have emphasized areas of agreement with Republicans, stressing that they favor a system that is less dependent on government support. Approximately 90 percent of new mortgages are currently backed by Fannie, Freddie or other federal agencies. The move pleased Republicans, who have long criticized the mortgage companies. “I’m encouraged to see the administration included a number of reform ideas that track closely with my own,” Representative Scott Garrett (R — NJ) said. Garrett heads the House Financial Services subcommittee, which oversees Fannie and Freddie. Representative Randy Neugebauer (R – TX), said he was pleasantly surprised by the focus on restoring the mortgage-backed securities market issued without the government’s guarantee. Debate over the future of the mortgage giants is often contentious on Capitol Hill. Republicans consistently criticized last year’s Dodd-Frank financial-overhaul bill for not addressing the fate of Fannie and Freddie. Treasury Secretary Timothy Geithner said that winding down Fannie and Freddie and creating an alternative won’t happen overnight. “Realistically, this is going to take five to seven years,” he said. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.”
The Treasury Department report suggests that Fannie and Freddie purchase loans with smaller outstanding balances, reducing their risk. The report also recommends phasing in a requirement that Fannie and Freddie borrowers make larger downpayments — at least 10 percent. Lastly, the government wants Fannie and Freddie to wind down their own mortgage investment portfolios. In their heyday, Fannie and Freddie were public companies that encouraged home ownership thanks to a Congressional mandate. The companies buy home loans from lenders, which use the money to offer new loans to consumers.
The bad news is that mortgage costs could increase a bit once Fannie and Freddie are phased out. “Over the long run, the cost of a mortgage will rise modestly for the average American homeowner,” Geithner said. “We think it’s very important for the government to continue to play a role, a targeted role” to make certain that “Americans who need help to find a home, to rent a home, or own a home get that help.”
Nor will the process of replacing Fannie and Freddie be easy. Writing in the Wall Street Journal, David Reilly points out that “A return of private capital requires the revival of securitization markets for mortgages not backed by the government since bank balance sheets aren’t big enough to fill the gap”. But 30-year loans in their current form aren’t attractive to investors without a government guarantee. The Treasury implicitly acknowledges the conflict, noting that the less government backing there is for housing finance, the less feasible the 30-year mortgage becomes. It also admits the reward for losing that benefit, and largely removing government from mortgage markets, would be a reduced incentive to invest in housing so that ‘more capital will flow into other areas of the economy, potentially leading to more long-run economic growth and reducing the inflationary pressure on housing assets.’ That should be the clear goal of any housing-finance revamp.”
Tags: bailouts, congress, Dodd-Frank financial overhaul bill, Fannie Mae, Freddie Mac, GSE model, House Financial Services subcommittee, mortgage-backed securities, mortgages, Obama administration, President Barack Obama, Public-private housing finance model, Representative Randy Neugebauer, Representative Scott Garrett, Republicans, Timothy Geithner, Treasury Department
Posted in Economics, Financing, General, Residential | No Comments »
Monday, December 20th, 2010
The Obama administration is leaning on mortgage giants Fannie Mae and Freddie Mac to write down underwater loans and make life easier for homeowners who are at risk of default and may see their personal finances deteriorate. The Federal Housing Finance Agency (FHFA) wants Fannie and Freddie to join a Federal Housing Authority (FHA) program that allows banks and other creditors, which agree to write down mortgages, to transfer the reduced loans to the FHA.
According to government estimates, between 500,000 and 1.5 million homeowners have the potential to benefit from the program. This is a fraction of the 11 million homeowners who were underwater as of June 30, according to CoreLogic, Inc. To put that number into perspective, approximately 23 percent of all American households with a mortgage are underwater. According to the mortgage industry, the FHA program will be of minor benefit to the housing market unless Fannie and Freddie participate. In its first three months, the program accepted 61 applications and modified three loans.
David Stevens, the FHA’s commissioner, said resistance by lenders has been frustrating. Obama administration officials have given lenders “a responsible way to address borrowers with negative equity and if institutions are blatantly refusing” to participate, then that is “short-sighted.” “Letting the status quo continue is going to be much more expensive than people think,” said Kenneth Rosen, a professor of economics and real estate at the University of California at Berkeley. “We’ve got a downward spiral in housing here, and they’d better break the back of this with some shock and awe.”
Fannie and Freddie have been reluctant to reduce mortgage principal, primarily for the reason that it limits their opportunity to recover losses. According to the Office of the Comptroller of the Currency, Fannie and Freddie have reduced only 10 of the 120,000 loans modified during the 2nd quarter of 2010. “We have historically counted on the fact that the vast majority of borrowers – even borrowers who are underwater – continue making their payments,” said Don Bisenius, a Freddie Mac executive vice president.
Tags: CoreLogic Inc., Fannie Mae, Federal Housing Administration, Federal Housing Finance Administration, foreclosures, Freddie Mac, mortgage modifications, Obama administration, Office of the Comptroller of the Currency, Treasury Department, U.S. housing market, Underwater loans, University of California at Berkeley
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Tuesday, November 9th, 2010
A recent Washington Post poll found that 53 percent of all Americans are concerned that they will not be able to pay their mortgage or rent, despite the fact that they believe the economy has shown some improvement since the dark days of 2008. The worry is driven by slow job creation, said Karen Dynan, who served as a Federal Reserve economist and on George W. Bush’s Council of Economic Advisors. According to Dynan, “The unemployment rate is still very high, so if you think of it as being about the odds of someone losing their job and not being able to find another there’s good reason to be concerned about being able to make mortgage payments,” according to Dynan, who is now co-director of economic studies at the Brookings Institution.
More than half of Americans want the Obama administration to impose a moratorium on foreclosures on homeowners who are unable to make payments. The president and his economic advisors oppose the idea, saying it is dangerous to a housing market that is still on shaky ground. The push for a moratorium is driven primarily by people’s worries about personal finances and the economy as a whole. Not surprisingly, the people most worried about making their payments are strong supporters of the moratorium. Compounding the situation is the fact that several lenders – notably Bank of America, JPMorgan Chase and Ally Financial – were found to have significant errors in some of their foreclosure documents. Of those polled, 52 percent support the moratorium, while 34 percent oppose it.
So who do Americans think is responsible for the foreclosure mess? The mortgage lenders are to blame, according to 45 percent of poll respondents; 26 percent thought that homebuyers who purchased beyond their means are the guilty party; another 20 percent blames both sides. Cara Habegger of Akron, OH, summed up the last point of view. “Certainly they are both at fault. Most people tend to blame the big institutions and that’s valid but if you’re making poor financial decisions and buying houses you can’t afford, that’s also not excusable,” she said.
Tags: Bank of America, Brookings Institution, Council of Economic Advisors, Federal Reserve, foreclosure, George W. Bush, JP Morgan Chase, mortgage, mortgage payment, Obama administration
Posted in Economics, Financing, Residential | No Comments »
Thursday, November 4th, 2010
A total of $1.4 trillion worth of commercial real estate loans are coming due between now and 2014, with the majority on small- and medium-sized buildings that are either under water or very nearly there. Writing for the Huffington Post, Daphne Wysham says that “crisis breeds opportunity. It turns out that buildings are responsible for about half of America’s emissions of greenhouse gases.” Wysham, a fellow and board member of the Institute for Policy Studies, is founder and co-director of the Sustainable Energy and Economy Network, as well as founder and co-host of Earthbeat Radio, which airs on 54 stations in the United States and Canada.
According to Wysham, “Here’s the crazy truth: With a national effort to boost energy efficiency, we could actually meet the building sector’s greenhouse gas emissions target set by the Obama administration for the next few years, put 1,300,000 million workers – 600,000 of them construction workers, 20 percent of whom are unemployed – back to work and dodge the next wave of mortgage meltdowns. We could make a painless downpayment on our emissions reductions goals, while giving some of our beleaguered businesses a tax break and saving money we’re now squandering on wasted energy.”
Architects and researchers from Architecture 2020 have devised what they call the “CRE Solution”, which would allow small business and business owners in danger of default a multi-year tax break if they retrofit to improve energy efficiency. “The more energy efficient the building becomes, the greater the tax break,” Wysham said. “Commercial building owners could trade or sell these tax deductions to investors, who would be invested in putting our highly skilled construction workers back on the job, retrofitting these properties. For the $6 billion in tax breaks the federal government would provide for this purpose, Uncle Sam would receive $10 billion back in net federal tax revenue, while state and local governments netted $5.25 billion.”
Tags: CRE, democrats, Greenhouse gases, Huffington Post, Obama administration, Republicans, sustainable design, sustainable economic growth, underwater
Posted in Development, Green | No Comments »