Weak housing market weighs on job growth

[waltky]

Gonna go up their butt with a microscope...

Judge to let feds look at Countrywide records
Wed., April. 2, 2008 - Justice Department investigating whether lender abused borrowers

A federal judge ruled the Justice Department can subpoena documents and question Countrywide Financial Corp. executives under oath to determine whether the lender abused borrowers and the bankruptcy-court process. U.S. Bankruptcy Judge Thomas Agresti said “it certainly has not been proven that Countrywide did anything wrong,” but noted a bankruptcy trustee “has made a showing of a common thread of potential wrongdoing” in several cases. The cases are a representative sample of nearly 300 Pennsylvania bankruptcy cases involving Countrywide borrowers. The potential wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of the Justice Department, Agresti said.

Countrywide and other mortgage companies have come under scrutiny amid a surge in home loan defaults by borrowers with poor credit histories. Countrywide, the nation’s largest mortgage lender and home loan servicer, has sought to address the growing number of defaults on its books by modifying loan terms, working out long-term repayment plans and other actions. The company has acknowledged errors in handling some debts, but has denied any systematic effort to thwart bankruptcy protections to collect money.

Some bankrupt borrowers, however, have accused the company of threatening them with foreclosure even after they made payments under court-approved bankruptcy plans that were meant to shield them from Countrywide’s subsequent efforts to collect the debts. Agresti’s 50-page ruling was issued late Tuesday in Pittsburgh. A Countrywide attorney did not immediately return a call for comment Wednesday. Countrywide attorneys had previously argued that the subpoenas were beyond the scope of the bankruptcy trustee’s powers and that the trustee’s requests to interview Countrywide executives under oath amounted to an illegal “fishing expedition.”

More Judge to let feds look at Countrywide records - Mortgage Mess - MSNBC.com

[waltky]

Not gonna get better any time soon...

Builders: No full recovery until 2010
April 3, 2008: Head of National Association of Home Builders said it could be several years before demand for homes returns to typical levels.

Demand for new homes may not return to normal levels until next decade, according to the latest outlook from the National Association of Home Builders. "Traditionally when housing has been in a recession, it recovers very quickly. We don't see that happening this time," said Jerry Howard, CEO of the builders' trade group. "It could be 2010 before we see sustainable, long-term stability in the home building sector."

As recently as the end of 2007, the trade group was forecasting a pick-up in the demand for new homes in the second half of this year. But Howard said the best case scenario now calls for stabilization in the market in early summer, with no signs of improvement until early next year. Howard also warned that more jobs will be lost in the sector this year than in 2007. Even with stronger demand for nonresidential building and public sector construction last year, the industry still lost 165,000 jobs.

But with the construction slowdown now spreading beyond housing, home builders and contractors won't be able to keep workers busy by branching out beyond residential construction as they did last year. Howard said this year's spring selling season for homes is already shaping up to be a bad one. And while he praised legislation now gaining steam in the Senate aimed at helping demand for foreclosed homes, he said the effort is too late to make a difference this year. "While we congratulate the Senate for taking the bull by the horns now, it would have been much more helpful for the economy in this calendar year if they had done this in the stimulus bill," he said, referring to the more than $150 billion in tax rebates passed by Congress in February.

MORE

See also:

New Housing Bill Criticized As Scant Help for Distressed
Friday, April 4, 2008; For anyone hoping to buy a home, sell one or hold onto the one they have, the $15 billion housing bill unveiled in the Senate yesterday may mean nothing more than a bit of extra cash in the pocket.

The housing bill, hastily cobbled together by Republican and Democratic leaders, would allow state and local property tax deductions this year of up to $1,000 for families and $500 for individuals who now can't deduct that money. It also aims to spur demand for homes by providing a $7,000 tax break, split over two years, to anyone who buys a foreclosed home within a year of the bill's enactment.

But many consumer advocates say the Senate's "Foreclosure Prevention Act" does not live up to its name. They say it fails to deliver swift help to the most distressed homeowners and is of limited use to borrowers who may soon be in trouble. "Anybody who gets money in their hands out of this bill will be happy, but that does not mean it will solve the larger social problem or larger economic problem," said Peter Morici, economist and business school professor at the University of Maryland.

Those who stand to benefit the most are home builders and businesses hit by the economic downturn. Through 2010, the entire tax package would cost about $28.8 billion, of which $25.5 billion would go to money-losing businesses in the form of tax rebates. They would give up other tax breaks, reducing the cost of the entire housing bill to $15 billion by 2018.

MORE

[waltky]

Bush goin' out like Reagan...

U.S. Lost 80,000 Jobs in March
Friday, Apr. 04, 2008 (WASHINGTON) — Employers buffeted by talk of recession slashed 80,000 jobs in March, the most in five years and the third straight month of losses.

At the same time, the national unemployment rate rose from 4.8 percent to 5.1 percent, the clearest signal yet that the economy might already be shrinking. The new snapshot of the job market, released by the Labor Department Friday, underscored the damage that a trio of crises —in the housing, credit and financial sectors — has inflicted on companies, jobseekers and the economy as a whole.

"The labor market has indeed turned south," said Joel Naroff, president of Naroff Economic Advisors. "That was the one last bastion of hope to stay out of a recession. Now the question is how deep and how long will it last?" The unemployment rate was the highest since September 2005, when significant job losses followed the devastating blows of Gulf Coast hurricanes.

Job losses were widespread in March. Construction, manufacturing, retailing, financial services and various business services all racked up losses. That overwhelmed gains elsewhere, including in education and health care, leisure and hospitality as well as in government. The new employment figures were much weaker than economists were expecting. They were anticipating a drop of 50,000 payroll jobs and the unemployment rate to rise to 5 percent.

The 5.1 percent rate is relatively modest by historical standards, but was nonetheless the highest in 2 1/2 years. Job cuts in both January and February turned out to be even deeper. Employers got rid of 76,000 in each month. The elimination of 80,000 jobs in March was the most since March 2003, when the labor market was still struggling to recover from the 2001 recession.

MORE

[waltky]

A trillion dollar bailout???...

The trillion-dollar mortgage time bomb
April 21, 2008: Risks are rising that Fannie Mae and Freddie Mac may need a government bailout that could cost far more than previous rescues.

Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac. Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor's recently placed an estimated price tag on this worst case scenario -- $420 billion to $1.1 trillion of taxpayer's money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980's and early 1990's. That cost taxpayers about $250 billion in today's dollars. S&P added that saving Fannie (FNM) and Freddie (FRE, Fortune 500) might cost so much that the federal government's AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become more expensive.

Fannie Mae and Freddie Mac both help the mortgage market function by purchasing pools of loans and packaging them into securities. So it is crucial for the mortgage industry for the two agencies to continue functioning smoothly. The two companies are known as government-sponsored entities because they have Congressional charters, which implies that the federal government is behind them.

MORE

[waltky]

Accounting Changes Help Freddie Mac 1Q Beat Views...

Freddie Mac Loses $151M as Loans Falter
May 14, 2008 - Freddie loses $151M in 1Q, CEO says mortgage damage is manageable, housing bottom not hit

Freddie Mac beat Wall Street's expectations in the first quarter, but the mortgage finance company didn't vanquish concerns about its ability to weather the housing bust. Changes in accounting practices helped McLean, Va.-based Freddie Mac achieve better-than-expected results Wednesday. For example, Freddie adjusted how it accounts for derivatives, financial instruments used to hedge against swings in interest rates.

Under the new accounting practices, the company said it lost more than $1.3 billion on those derivatives in the first quarter, compared with a loss of nearly $2.3 billion in the fourth quarter of 2007. "If you change the accounting rules, things can look better," said R. Christopher Whalen, managing director of consulting firm Institutional Risk Analytics.

Others saw the change as a needed improvement that better reflects performance. In a research note, Citigroup analyst Bradley Ball cited "improved accounting methodologies" as a reason for Freddie's positive results. Freddie reported a first-quarter loss of $151 million, or 66 cents a share, beating the expectations of analysts polled by Thomson Financial, who expected a loss of 92 cents per share.

More ABC News: Freddie Mac Loses $151M as Loans Falter

[waltky]

Isn't this what got us into the subprime problem to begin with??...

Getting Easier to Get Big Loans
Sunday, May 18, 2008; The gears of the mortgage market are starting to unlock for borrowers needing big loans. In expensive markets such as Washington, that covers most people looking to refinance or move up from an entry-level home.

Just in the past two weeks, interest rates on the new "conforming jumbo" mortgages -- for amounts between $417,000 and $729,750 -- have come down enough to make a difference to borrowers. And mortgages allowing down payments of just 3 to 5 percent are coming back to the market for borrowers who have good credit. "The bottom line is rates are lower than they were," said Kevin Connelly, a vice president at BB&T.

Last week, for example, BB&T was offering 30-year, fixed-rate mortgages for a conforming loan, which is for $417,000 or less, at 6 percent interest with no points, a type of prepaid interest. A conforming jumbo cost only one-quarter of a percentage point more, 6.25 percent. Loans for amounts beyond $729,750, now called "jumbo jumbo" loans, were at 7.25 percent. That 1-point difference is enough to matter in anyone's budget: On a $729,000 mortgage, the lower rate saves $484 per month.

Before you jump on one of these loans, though, check out FHA mortgages. Insured by the Federal Housing Administration, these loans are available for as much as $729,750, the same cap as on conforming jumbo loan amounts. FHA's loan-amount cap has been raised through the end of the year so that the program can be more widely used in expensive areas, including ours.

MORE

See also:

Cities sue home lenders...

Cities Sue Banks as Neighborhoods Crumble
Sunday, May 18, 2008 - Communities Take Banks, Lenders to Court for Failing to Fix Up Foreclosed Homes

Valeria Golebiowski moved to the Hawthorne neighborhood 45 years ago, and she's staying even as it crumbles around her. Golebiowski, 72, remembers when flower gardens bloomed and neighbors chatted over coffee. Eleven of the 13 houses that once made up her block are vacant, condemned or demolished — victims of a foreclosure crisis that walloped this north Minneapolis neighborhood on the Mississippi River.

A city plan to redevelop the neighborhood stalled over 415 31st Ave. North, a decrepit, long-vacant bungalow in the middle of the block. In October, CitiMortgage foreclosed on the house. The Hawthorne Area Community Council then sued CitiMortgage in January, saying the lender had approved an inflated mortgage on the property and created a nuisance by failing to fix it up after foreclosure.

Hawthorne and the city of Minneapolis are pioneers in an emerging civic strategy to sue lenders and banks to recoup lost revenue and reclaim neighborhoods devastated by the mortgage crisis. Around the country, the loss of tens of thousands of homes to foreclosure is shrinking cities' tax base, straining city services such as policing, and ruining neighborhoods. Minneapolis and three of its neighborhoods won their first legal battle last month in a separate lawsuit against real estate company TJ Waconia, when a judge appointed a legal caretaker to manage 141 mostly vacant properties.

Cleveland, Baltimore and Buffalo also have sued lenders and banks in recent months. St. Paul has written to its lenders threatening a lawsuit if they don't fix their foreclosed properties."Hundreds of cities across the United States are in the same position," says Greg Squires, a professor of sociology at George Washington University who studies urban redevelopment. "I think there will be more lawsuits. If we get an early decision in one of these cases, it will either encourage or discourage" other cities from filing suit.

More ABC News: Cities Sue Banks as Neighborhoods Crumble

[waltky]

... but the end is not yet...

Housing: It'll get worse
June 12, 2008: Hard hit cities like Sacramento, Phoenix and Las Vegas are set for more steep losses. Some real estate experts are bracing for price drops of as much as 50%.

With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce. But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%. "The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."

Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com. In Riverside, Calif. prices fell 29%, while San Diego prices dropped 26%.

Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines. Outside California, hard-hit markets include Phoenix (-18.8%), Las Vegas (-22%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%). Youngblood expects that these markets will likely endure total price drops of 50% or more.

The smart money

See also:

US Foreclosure Filings Up 48% in May
Friday, Jun. 13, 2008 (WASHINGTON) — Soaring foreclosures are continuing to raise questions about the mortgage industry's claims that they are making a dent in the housing crisis.

Foreclosure filings last month were up nearly 50% compared with a year earlier. Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 in the same month last year and up 7% from April, foreclosure listing service RealtyTrac Inc. said Friday. The latest grim foreclosure news comes as criticism mounts that efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners. Critics say a Bush administration-backed mortgage industry coalition, dubbed Hope Now, is falling far short.

"It's clear that these voluntary efforts in and of themselves cannot really make a dent," said Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. "Government intervention is going to be necessary." Mark Zandi, chief economist of Moody's Economy.com who also serves as an adviser to Republican John McCain's presidential campaign wrote earlier this week that "the Bush administration's efforts to encourage loan modifications and delay foreclosures are being completely overwhelmed."

A Credit Suisse report from this spring predicted that 6.5 million loans will fall into foreclosure over the next five years, reaching more than 8% of all U.S. homes. Sobering statistics like these are leading to more calls for government intervention, especially from lawmakers pushing a plan for the government to guarantee as much as $300 billion in new loans to help borrowers refinance into cheaper, fixed-rate mortgages.

MORE

[waltky]

Mortgage companies cryin' now...

Mortgage industry blasts Senate bill
June 17, 2008 WASHINGTON (AP) -- Six trade groups representing lenders said parts of the Senate housing bill are too restrictive and will expose lenders to lawsuits.

Mortgage industry and business groups are urging lawmakers to drop pieces of a housing bill they say would be too restrictive on lenders. Six trade groups on Tuesday told lawmakers shepherding a comprehensive package of housing legislation through Congress that the bill would impose too-strict standards on lenders, requiring them to determine what kind of loan is best for each borrower.

That standard will expose lenders to potential lawsuits, and force them "to reduce the number and type of products to consumers," according to a letter written by the Mortgage Bankers Association, U.S. Chamber of Commerce and other groups to Sens. Christopher Dodd, D-Conn., and Richard Shelby, R-Ala., the two senior members of the Senate Banking Committee.

The letter also criticized a portion of the bill that creates a nationwide licensing system for mortgage brokers and loan officers. The groups say federal regulators should oversee the system, rather than the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, which have been putting together a national licensing system since 2004.

MORE

[waltky]

Congress tryin' to fix foreclosure crisis...

Senate Considers Broad Housing Bill
Thursday, Jun. 19, 2008 (WASHINGTON) — The Senate began considering a broad housing package Thursday after clearing away conservative GOP objections, paving the way for votes this week on the election-year foreclosure rescue that could help hundreds of thousands of struggling homeowners.

House and Senate Republicans voiced reservations about the bill in light of allegations that Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., one of its architects, and Senate Budget Committee Chairman Kent Conrad, D-N.D., got cut-rate home loans through a VIP program at Countrywide Financial Corp., a leading subprime lender at the center of the mortgage meltdown. But Sen. Jim DeMint, R-S.C., dropped a threat to block the measure. Democrats and Republicans consider the legislation a political imperative amid rising foreclosures and growing public anxiety about the sagging economy. "We have a responsibility to respond to the plight of the American family, and to their pessimism, and to renew their confidence in the promise of the American dream," Dodd said.

Sen. Richard C. Shelby of Alabama, the senior Banking Republican who exacted large concessions from Dodd to win bipartisan backing for the measure, said acting on it was a chance to show that Congress could move on a pressing issue. "The American people expect us to provide effective and timely solutions the best we can," Shelby said. The centerpiece of the package is a foreclosure rescue program in which the Federal Housing Administration would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties. The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it also would benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they're owed by people facing financial ruin.

MORE

[waltky]

Home Slump Harder to Reverse Than Usual: Harvard...

Housing Rebound? Don't Hold Your Breath
June 23, 2008 - Harvard Study Finds Record Foreclosures and Limited Credit Will Hamper Rebound Prospects

Record foreclosures and limited access to credit will make it harder than usual for the U.S. housing market to rebound from this slump, the worst at least since World War Two, according to a Harvard University study on Monday. A two-year home price drop is eating into housing wealth, curbing consumer spending and slicing away economic growth. This is unlikely to change until potential home buyers are convinced that prices have stopped tumbling, the study found. The downturn has room to run.

The highest home loan rates in nine months and strict lending standards are keeping buyers on the sidelines, even after aggressive Federal Reserve intervention and a 16 percent national home price slide from the 2006 peak, by some measures. "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability," Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard, said in a statement. "It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets," he said. "The slump in housing markets has not yet run its full course."

Price declines and mortgage defaults are the worst on records dating back to the 1960s and 1970s, the study noted. Job losses and falling prices intensify risk of foreclosure. The number of homes entering foreclosure nearly doubled to 1.3 million in 2007 from about 660,000 in 2005. Payment shock after rate resets on some adjustable loans, many made to higher-risk borrowers, has propelled owners into foreclosure. For others in trouble, falling prices leave them with mortgages larger than the home's value, and they are often unable to refinance or sell. Foreclosures are adding to an already massive supply of unsold homes, which further pressures prices.

More ABC News: Housing Rebound? Don't Hold Your Breath

See also:

Senate wrangles over foreclosure aid while people lose their homes...

Housing Rescue Faces Key Test
Tuesday, Jun. 24, 2008 (WASHINGTON) — A plan to help hundreds of thousands of homeowners avoid foreclosure is drawing bipartisan support in the Senate, setting the stage for high-stakes negotiations among congressional Democrats.

The far-reaching housing plan faces a Senate test-vote Tuesday, when it could also come to a final vote. The disputes among Democrats over key details, however, as well as a veto threat from the White House will almost certainly push any final agreement into July. Conservative "Blue Dog" Democrats are concerned about how to pay for the measure, while members of the Congressional Black Caucus — most of them liberal — call it "unacceptable," arguing it doesn't do enough to address the needs of African Americans.

The centerpiece of the package is a foreclosure rescue program in which the Federal Housing Administration would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The bill would tighten controls and create a new regulator for Fannie Mae and Freddie Mac, which provide huge amounts of cash flow to the mortgage market by buying home loans from banks. It also would provide a $14.5 billion array of tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year and boosts in low-income tax credits and mortgage revenue bonds.

MORE