Subprime Clips, September 14, 2007
Full text of the articles follow below
1. http://www.presstelegram.com/business/ci_6888608
Alan Greenspan `missed it'
Former Fed. Reserve Chair didn't recognize subprime problem.
By Jeannine Aversa, Associated Press
Article Launched: 09/14/2007 12:00:00 AM PDT
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday.
2. http://money.cnn.com/2007/09/14/real_estate/legislative_proposals/?postversion=2007091412
Legislative bull's eye: Mortgage lenders, brokers
The subprime crisis has generated heat on the Hill to prevent abusive lending in the future.
By Jeanne Sahadi, CNNMoney.com senior writer
September 14 2007: 12:41 PM EDT
Among other things, Dodd's bill would:
• Require lenders to assess borrowers' ability to pay the mortgage even after a rate reset if they're signing up for an adjustable-rate loan.
• Require lenders to verify subprime borrowers' income with documentation. Earlier this year, the Federal Reserve
• Prohibit pre-payment penalties and yield spread premiums (YSP) in subprime loans. A pre-payment penalty is the fee some lenders charge if you end up paying off your mortgage early, including if you choose to refinance. It sometimes can be as high as six months' worth of mortgage payments. A YSP is the difference between the the lowest interest rate a borrower qualifies for, and the actual rate he gets. A broker's fee may be based on it.
• Prohibit steering borrowers to more expensive loans when they qualify for lower cost ones.
• Hold lenders liable for appraisals and for brokers' actions when the broker is paid based on yield spread premiums.
3. http://money.cnn.com/2007/09/13/news/economy/fed_preview/index.htm?cnn=yes
The Fed's unkindest cut?
Wall Street is certain the Fed will cut rates to ease the pain of the credit crunch. But how will investors react if Bernanke & Co. cut by just a quarter of a point?
By Paul R. La Monica, CNNMoney.com editor at large
September 14 2007: 10:03 AM EDT
John Norris, director of wealth management at Oakworth Capital Bank, a private bank in Birmingham, Ala., … "Obviously everyone wants a 50 basis point cut. If it's only a quarter of a point the market will be upset," Norris said. "But if the Fed cuts by 25 basis points and the language in the statement is strong enough to indicate that this is the first of many cuts to come, cooler heads will prevail.
Norris added that the most recent figures from the Institute of Supply Management regarding manufacturing growth and services industry growth indicate that the economy is still expanding.
4. http://www.memphisdailynews.com/Editorial/StoryDaily.aspx?story
Wall Street, Consumer Groups
Battle Over Fraud Liability
This report compiled by Rosalind Guy with contributions from reporter Eric Smith, research analyst Kate Simone, editorial assistant Rebekah Hearn and The Associated Press.
Banks that package mortgage securities - and the institutional investors who buy them - are fearful that lawmakers could in the future make them legally responsible for fraud committed by lenders.
5. http://www.memphisdailynews.com/Editorial/StoryLead.aspx?id=98939
Fannie Mae, Freddie Mac Rise Again
By MARCY GORDON
AP Business Writer
Daniel Mudd, Fannie's president and CEO, on Wednesday said his firm can play a crucial role in steadying a home loan market while a shakeout removes what he calls the "bad actors."
6. http://www.247wallst.com/housing/index.html
Hovnanian: The Big House Giveaway
September 14, 2007
According to Bloomberg, Hovnanian will be cutting prices on some homes by "offering discounts of up to almost $150,000."
Ads for the sales have headlines like ``These three days could change your life! Don't miss this once in a lifetime opportunity!
7. http://www.nysun.com/article/62649
Greenspan Gives Bernanke An ‘Atta-Boy'
By CRAIG TORRES
Bloomberg News
September 14, 2007
The former chairman of the Federal Reserve, Alan Greenspan, said he "didn't really get" how the boom in subprime lending might hurt the economy, and endorsed his successor's handling of recent market turmoil, CBS television reported.
"I'm not certain I would have done anything different" than Mr. Bernanke, Mr. Greenspan said in the interview, according to excerpts released by CBS. "I'm not sure that's true," Mr. Greenspan said when asked if he would act "dramatically and quickly now."
After the 2001 recession, the Fed cut its benchmark rate to a four decade low of 1%. That move, along with Mr. Greenspan's hands-off approach to regulation, have brought him under fire as this year's bursting of the housing bubble and the subprime mortgage crisis again threaten to sink the broader economy.
8. http://www.nytimes.com/2007/09/14/business/14fed.html?ei=5090&en=67e57d3ac0bfa652&ex=1347422400&adxnnl=1&partner=rssuserland&emc=rss&adxnnlx=1189789564-xKfSejQxpRjIPXoNy12i+A
For Fed, a Question of Whom to Rescue, and When to Dive In
By EDMUND L. ANDREWS
Published: September 14, 2007
Mr. Bernanke wants to know if the overall economy is on the brink of a recession, and the evidence on that is far from decisive.
Mr. Bernanke and other Fed officials have said they do not want to be rescuers of investors or real estate speculators who made bad decisions.
Fed officials are also mindful of their experience in 1998, when a financial collapse in Russia led to a panic in credit markets but not a slowdown in the overall economy.
“Monetary policy’s unswerving focus should be on pursuing the Fed’s mandated goals of price stability and full employment,” Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech Monday. “Past experience does show that financial turbulence can be resolved more quickly than seems likely when we’re in the middle of it.”
9. http://www.iht.com/articles/2007/09/14/business/mortgage.php
Britain bails out mortgage lender hit by credit crunch
By Eric Pfanner
Published: September 14, 2007
The British financial authorities said Friday that they had extended an emergency loan to rescue a big mortgage bank as the effects of a global credit crunch stemming from the crisis in the U.S. subprime home lending business spread to one of the most buoyant housing markets in the world.
Northern Rock's need for emergency funding represents a significant broadening of the effects of the crisis in global financial markets, analysts said, because until now problems at European banks have stemmed mostly from their direct exposure to U.S. subprime loans.
MORTGAGE INDUSTRY NEWS
10. http://www.nationalmortgagenews.com/washington/
Washington News Update
• The Fed also said piggybacks, in which a first mortgage and a second lien are originated simultaneously, were used in 22% of home purchase transactions, about the same as in 2005, but that more second liens were reported.
• The Senate has passed a Department of Housing and Urban Development appropriations bill that provides $100 million for counseling for homeowners facing foreclosure.
• The Senate Banking Committee is tentatively scheduled to mark up a Federal Housing Administration reform bill Sept. 19, sources say, but committee members are still trying to reach agreement on key provisions of the bill.
• The Federal Home Loan Bank of Des Moines has received regulatory approval to accept one- to four-family construction loans as collateral for advances at a time when many members have stepped up their borrowings from the bank.
• The Federal Trade Commission has stepped up its surveillance of deceptive mortgage advertising,
• But the House Financial Services Committee chairman, Rep. Barney Frank, D-Mass., and Reps. Gary Miller, R-Calif., and Dennis Cardoza, D-Calif., have filed an amendment with the House Rules Committee to raise the maximum FHA loan limit to 175% of the conforming loan limit,
• Frederic Mishkin, a Fed governor, said in a speech … . "At this point, housing demand seems likely to be crimped further by a marked reduction in the availability of mortgages, and consumer and business spending also could be damped as a consequence of the recent financial turmoil,
• Chairman Barney Frank, D-Mass., says it doesn't make sense to expect the two government-sponsored enterprises to help with the refinancing of subprime borrowers unless they have room in their portfolios to buy the loans.
• Like banks and thrifts, Fannie Mae and Freddie Mac are now bound by federal underwriting guidelines when they purchase subprime mortgages and private-label securitizations backed by subprime loans, according to the Office of Federal Housing Enterprise Oversight.
• Several Federal Reserve district banks "noted that the reduction in credit availability added to uncertainty about when the housing market might turn around," the Beige Book says.
11. http://data.nationalmortgagenews.com/columns/hearing/
What We're Hearing
Commentary
By Paul Muolo
Who is to blame for the mortgage fraud crisis in America? Answer: loan brokers. According to the FBI, most mortgage fraud occurs during the application process -- and that would mean loan brokers.
1.
http://www.presstelegram.com/business/ci_6888608
Alan Greenspan `missed it'
Former Fed. Reserve Chair didn't recognize subprime problem.
By Jeannine Aversa, Associated Press
Article Launched: 09/14/2007 12:00:00 AM PDT
WASHINGTON - Even the maestro didn't see it coming.
Former Federal Reserve Chairman Alan Greenspan acknowledges he failed to recognize early on that an explosion of mortgages to people with questionable credit histories could pose a danger to the economy.
In an interview, Greenspan said he was aware of "subprime" lending practices where homebuyers got very low initial rates only to see them jacked up later, causing severe payment shock. But he said he didn't initially realize the harm they could do.
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday.
"I really didn't get it until very late in 2005 and 2006," Greenspan said.
An excerpt of the interview was released Thursday.
As Fed chief, Greenspan's handling of the economy had earned him monikers, including the maestro, the greatest central banker who ever lived and the second-most important person in Washington.
Yet, some wonder whether the Greenspan Fed could have done more to prevent lax lending standards, bad loans and other problems that have since come to light in the higher-risk subprime mortgage market.
A meltdown in that market has rocked Wall Street. Foreclosures and late payments have soared and lenders have gone out of business. Nervous financial institutions tightened credit standards, making it harder for even more creditworthy borrowers to get financing. This has increased chances the economy might slide into a recession.
Sen. Charles Schumer, D-N.Y., said: "Greenspan was one of the smartest regulators this country ever had. If he missed it, then it should be a warning to the current regulators about the depth of this crisis."
Greenspan, who ran the central bank for more than 18 years - the second-longest serving chairman in history - left in 2006.
His successor, Ben Bernanke, has had to deal with a credit and financial crisis stemming from the subprime mortgage mess.
When he was at the helm, Greenspan maintained there was little the Fed - which also oversees the safety and soundness of banks - could do about the subprime situation. One of the Fed's governors, however, had raised a red flag about questionable lending practices.
"Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," Greenspan said in the interview.
Some blamed Greenspan's interest rate policies for feeding the housing frenzy. Sales had hit record highs and house prices galloped from 2001 to 2005. Then the market fell into a slump.
The Greenspan Fed from early 2001 to the summer of 2003 had slashed interest rates to their lowest level in decades to rescue the economy from the blows of the bursting of the stock market bubble, the 2001 recession, the terror attacks and a wave of accounting scandals that shook Wall Street.
Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.
Greenspan defended the institution's actions.
"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.
Meanwhile, some believe Greenspan would have acted more aggressively than Bernanke in dealing with the current financial crisis.
2.
http://money.cnn.com/2007/09/14/real_estate/legislative_proposals/?postversion=2007091412
Legislative bull's eye: Mortgage lenders, brokers
The subprime crisis has generated heat on the Hill to prevent abusive lending in the future.
By Jeanne Sahadi, CNNMoney.com senior writer
September 14 2007: 12:41 PM EDT
NEW YORK (CNNMoney.com) -- The subprime crisis has put lawmakers under pressure to do something not only to help homeowners who could lose their homes but also to nail the guys who created the mess.
While there's lots of blame to go around, lawmakers are likely to focus on how to rein in lenders, brokers, appraisers and, not insignificantly, mortgage investors.
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) last week proposed a predatory lending bill.
That bill is geared toward permanently expanding mortgage borrower protections and weeding out unscrupulous lenders.
Among other things, Dodd's bill would:
0. Require lenders to assess borrowers' ability to pay the mortgage even after a rate reset if they're signing up for an adjustable-rate loan.
0. Require lenders to verify subprime borrowers' income with documentation. Earlier this year, the Federal Reserve
0. Prohibit pre-payment penalties and yield spread premiums (YSP) in subprime loans. A pre-payment penalty is the fee some lenders charge if you end up paying off your mortgage early, including if you choose to refinance. It sometimes can be as high as six months' worth of mortgage payments. A YSP is the difference between the the lowest interest rate a borrower qualifies for, and the actual rate he gets. A broker's fee may be based on it.
0. Prohibit steering borrowers to more expensive loans when they qualify for lower cost ones.
0. Hold lenders liable for appraisals and for brokers' actions when the broker is paid based on yield spread premiums.
Jaret Seiberg, a financial services analyst at policy research firm Stanford Group, said Barney Frank (D-Mass.), chairman of the House Financial Services Committee, is also expected to propose a reform bill with somewhat similar provisions.
In addition, Seiberg said, Frank also may include provisions that address mortgage securitizers (those who bundle and sell loans as securities). They would be held liable if they buy loans that violate the bill's provisions unless they can show they took steps to avoid buying predatory or deceptive loans. (What readers are saying about government's responses to real estate problems)
"This [provision] is intended to force securitizers to police nonbank lenders," Seiberg wrote in research note.
Many also argue that the robust appetite on Wall Street for mortgage-backed securities encouraged subprime growth, because banks didn't have to keep such risky loans on their books and could just sell them to investors as part of bundled packages.
Seiberg noted, however, that liability provisions are what could prove to be the major sticking point in any mortgage reform legislation.
Right now, the Dodd proposals are likely to serve as a template for any Senate bill, Seiberg wrote. And, he added, "if delinquencies and foreclosures rise appreciably in the coming months, the bill could get much worse for mortgage lenders."
3.
http://money.cnn.com/2007/09/13/news/economy/fed_preview/index.htm?cnn=yes
The Fed's unkindest cut?
Wall Street is certain the Fed will cut rates to ease the pain of the credit crunch. But how will investors react if Bernanke & Co. cut by just a quarter of a point?
By Paul R. La Monica, CNNMoney.com editor at large
September 14 2007: 10:03 AM EDT
NEW YORK (CNNMoney.com) -- The Federal Reserve is going to cut the target on a key short-term interest rate on September 18. There is no mystery about that.
According to futures on the Chicago Board of Trade, the market is pricing in a 100 percent chance of a cut to the federal funds rate, an overnight bank lending rate that heavily impacts how much interest consumers pay on their credit card debt, home equity lines of credit and car loans
The fact that the Fed already cut its discount rate, which is what banks pay to borrow money from the central bank, in a surprise move on August 17, coupled with remarks from Fed members in the past few weeks about how closely they are monitoring the mortgage meltdown that is roiling the markets, makes it a virtual lock that Ben Bernanke and Co. will lower the fed funds rate on Tuesday.
Fed can't stop recession
Still, there is a fair amount of intrigue surrounding the September 18 meeting. Specifically, investors are unsure about how much the Fed will lower interest rates.
The Fed cut the discount rate by a half of a percentage point, from 6.25 percent to 5.75 percent, on August 17, leading many market observers to speculate that the Fed would also lower the fed funds rate by a half of a percentage point on September 18.
To that end, as of September 14, investors were factoring in a 58 percent chance that the Fed will cut the fed funds rate by 50 basis points, or half of a percentage point, to 4.75 percent, on Tuesday.
But hopes appear to be diminishing somewhat for a big rate cut. Investors had been pricing in a 74 percent chance of a 50 basis point rate cut on September 12.
Still, what will happen if the central bank only lowers interest rates by a quarter of a percentage point? Fed watchers said it all depends on what the Fed says in its statement.
John Norris, director of wealth management at Oakworth Capital Bank, a private bank in Birmingham, Ala., said the market would probably not be too happy with just a 25 basis point cut at first. But he thinks that in some ways, a smaller rate cut might be more reassuring.
"Obviously everyone wants a 50 basis point cut. If it's only a quarter of a point the market will be upset," Norris said. "But if the Fed cuts by 25 basis points and the language in the statement is strong enough to indicate that this is the first of many cuts to come, cooler heads will prevail. Investors would like that as much, if not more, than a half-point cut with language that indicates this is just a one-off thing to placate the markets."
Why the credit crunch may deepen
Scott Martin, managing director with Astor Asset Management, a Chicago-based investment firm with $200 million in assets under management, agreed that a half of a point cut might soothe the market at first...but not for long.
"If the Fed cuts by 50 basis points, you have to worry about the health of the economy. If the Fed can just say that they are going to keep an eye on the subprime market and signal that they may cut two more times by the end of the year, that might be the best case scenario," Martin said.
Vincent Boberski, portfolio strategist with FTN Financial in Memphis, also said that a half-point cut might get some cheers at first but it could wind up spooking the markets once investors realize the reason behind it.
"If the Fed were to cut rates by a half point, it might backfire since it could potentially give the market the impression that the economy is much weaker than investors thought," Boberski said.
Despite fears that the subprime mortgage market implosion could send the economy into a recession, fears stoked by the surprise decline in jobs during the month of August and a smaller-than-expected increase in retail sales, Norris points to other economic evidence that might prevent the Fed from cutting rates aggressively.
For one, oil prices hit $80 a barrel for the first time ever on Wednesday. That, as well as rising prices for other commodities, could keep the Fed from lowering rates by too much since it wants to keep inflation in check.
Tales of the crash of 2007
Norris added that the most recent figures from the Institute of Supply Management regarding manufacturing growth and services industry growth indicate that the economy is still expanding.
"Bernanke is in an awkward situation. Right now, the data is still mixed. And he doesn't want his reputation to be that financial markets are dictating monetary policy. He doesn't want to be known as the Fed chairman that was bullied around by Wall Street," Norris said.
David Joy, chief market strategist with RiverSource Investments, a Minneapolis-based asset management firm agreed, adding that the economy still does not appear to be in dire enough shape to justify a half-point cut.
"If the Fed cuts rates by a quarter of a point, you will hear howls from those who think the Fed is behind the curve," Joy said. "But in my mind, a quarter of a point cut is appropriate. I'm not sure the economy needs a half-point cut. Plus, the Fed could always lower rates further in the coming months."
Compounding matters though is that Bernanke's widely respected predecessor, Alan Greenspan, is currently making comments about the economy as he promotes his new memoir, which will be published on Monday.
That has led some on Wall Street to unfavorably compare how Bernanke is handling the subprime woes with how Greenspan dealt with numerous crises during his tenure, such as the 1987 Black Monday crash, the collapse of the hedge fund Long-Term Capital Management in 1998 and the September 11 terrorist attacks.
But according to excerpts released Thursday from an interview that will air on the CBS news show "60 Minutes" Sunday, Greenspan said that he felt criticism of Bernanke was unfair and added that his successor was doing "an excellent job."
Still, Greenspan's legacy has come into question lately as well. According to the excerpt from the "60 Minutes" interview, Greenspan admitted that the Fed did not fully grasp how much of a danger the explosion in demand for subprime mortgages would have on the economy.
Martin of Astor Asset Management pointed out that Bernanke might want to avoid cutting interest rates too drastically, since it can be argued that the historically low rates from earlier this decade helped bring about the subprime mess in the first place.
"The market is begging for a rate cut but we're trying to fix a liquidity problem with more liquidity. It's kind of funny," Martin said.
So while a half-point rate cut might be considered a quick cure for what's ailing Wall Street, some think it might be more pragmatic for the Fed to lower rates gradually.
"It would be a bold move to cut rates by a half of a point," Boberski said. "There is some justification for it since the labor markets are a lot weaker than people thought. But it seems like the Fed would prefer to take an incremental approach since Bernanke does not want to be seen as bailing out the financial system."
Joy added that it's amusing to see people criticize the Fed for not cutting rates since many Fed skeptics thought the central bank kept rates too low for too long.
"It's somewhat disingenuous to say the Fed needs to cut rates to bail out housing while at the same time many of these people were saying a year ago that the Fed needed to raise interest rates because the housing market was a bubble," he said.
To that end, Boberski thinks the Fed would rather cut rates two or three times by a quarter of a point before the end of the year and perhaps once or twice more in 2008.
4.
http://www.memphisdailynews.com/Editorial/StoryDaily.aspx?story
Wall Street, Consumer Groups
Battle Over Fraud Liability
Banks that package mortgage securities - and the institutional investors who buy them - are fearful that lawmakers could in the future make them legally responsible for fraud committed by lenders.
As the housing crisis worsens and foreclosures mount, federal predatory lending legislation is moving to the front burner. But industry groups are warning the Democratic-led Congress that imposing such liability would dry up funding for mortgage loans.
Consumer advocates, meanwhile, say it is the best way to rein in Wall Street's aggressive role in the increasingly complex mortgage market, which boomed in recent years amid lax standards for borrowers with weak, or subprime, credit.
Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington, foresees a heated battle on the issue this fall. If companies that package mortgage securities and investors in them knew they could be liable, "they might actually look at the loans that they're buying, which they haven't been doing," Rheingold said.
However, it is unrealistic for investors to be expected to check to see whether loans were fraudulently issued, said George Miller, executive director of the American Securitization Forum, which includes buyers and sellers of securities backed by mortgages and other assets.
"The investor isn't sitting there when a lender and broker are ... at the table," he said.
At a hearing earlier this year, Republicans warned against overzealous efforts to create legal responsibilities, citing Georgia's experience as a textbook case. Georgia's 2002 predatory lending law allowed borrowers to seek punitive damages from anyone who bought a loan or a security that included the loan.
In response, major credit-rating agencies decided they would no longer rate the quality of securities containing Georgia home loans, leading to a mass withdrawal of lenders from the state. Georgia lawmakers subsequently changed their law limiting liability for loan abuses to original lenders.
House lawmakers, led by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, plan to introduce multifaceted mortgage legislation in the coming weeks. The details are still being worked out.
Rep. Brad Miller, D.-N.C., who plans to co-sponsor a bill with Frank, said the House bill probably will include protections against lawsuits for loans that don't show obvious signs of being predatory. Among those signs, he said, are requirements that borrowers pay penalties if they want to pay off their loans early.
"What we want to do is end predatory loans, but make sure that we don't regulate lending to death," Miller said.
5.
http://www.memphisdailynews.com/Editorial/StoryLead.aspx?id=98939
Fannie Mae, Freddie Mac Rise Again
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) - Several years after multibillion-dollar accounting scandals tarnished reputations at Fannie Mae and Freddie Mac, the mortgage giants are regaining market dominance amid an ailing housing market.
Daniel Mudd, Fannie's president and CEO, on Wednesday said his firm can play a crucial role in steadying a home loan market while a shakeout removes what he calls the "bad actors."
Fannie, which is the largest U.S. buyer and guarantor of mortgages, has helped some 33,000 struggling homeowners refinance $6 billion in mortgages since April.
That's when Fannie and government-created sibling firm Freddie Mac committed to buy up to $20 billion in mortgages to help financially at-risk borrowers remain in their homes. Fannie has been able to refinance "about half the time" in cases it has addressed, Mudd said.
Bert Ely, a banking consultant based in Alexandria, Va., who is a critic of Fannie and Freddie, said "That's a drop in the bucket. ... All these (refinancing) programs do is help around the edges."
Amid the worst housing downturn in 16 years, political pressure is building, largely from Democratic lawmakers, for the government to expand the caps on how many mortgages the two publicly traded companies can buy and hold.
Sen. Charles E. Schumer, D-N.Y., said boosting the investment limits would ease a credit crunch that has resulted from a near-collapse in the market for subprime mortgages made to borrowers with tarnished credit histories.
As many as 2.5 million adjustable-rate mortgages, or $600 billion worth of loans, are scheduled to "reset" this year and next, jumping from low "teaser" rates for the first two or three years to much steeper rates that could cost borrowers their homes.
Some experts say many of the mortgages won't qualify for refinancing no matter how much money Fannie and Freddie have to pump into the market because many of the homeowners involved are no longer employed or the values of their houses have fallen below the total due on the mortgage.
A rising tide of soured loans already has
forced a number of lenders into bankruptcy, while hedge funds and other big investors in securities backed by subprime mortgages took deep financial hits. The turbulence spilled over into global credit markets and stock exchanges last month as investors faced the prospect of not being repaid.
"We're not the sole solution," Mudd said, in an address at a meeting of the National Association of Federal Credit Unions. "We're part of a solution that can help us move through this period in the quickest and least painful way possible."
So far, though, the federal regulator of Fannie and Freddie has declined to increase their investment caps, and the White House said it is opposed to raising them until supervision of the mortgage giants is tightened.
Yet the dominance of Fannie and Freddie in the $3.5 trillion market for securities comprised of bundled mortgages appears to be re-emerging, regardless of whether their investment caps are raised.
There were $547 billion of securities backed by mortgages issued in the second quarter, of which 53 percent came from Fannie Mae, Freddie Mac and the Government National Mortgage Association, known as Ginnie Mae. That was up from a 44 percent market share at the end of 2006, according to government figures.
Lenders that rely on selling bundles of mortgages in the secondary market to fund operations - while often competing with Fannie and Freddie - have been particularly hard hit by the market squeeze.
Given the upheaval in the mortgage market, "this is the time to chase the bad actors out of the system," Mudd said, referring to the troubled lenders who engaged in abusive lending practices that fueled an unsustainable housing boom.
Mudd said Fannie Mae welcomed President George W. Bush's recently proposed plan to allow the Federal Housing Administration to get involved in helping borrowers who are delinquent on payments because their mortgages have reset to higher rates.
The plan, though modest, is significant because the FHA, part of the Department of Housing and Urban Development, has not been permitted in its 70-year history to insure refinanced loans of delinquent borrowers.
However, changes proposed by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and other Democrats go further, and the Democratic-controlled House is expected to vote on the proposals next week.
Fannie Mae also has bought special mortgage "rescue bonds" recently issued by Ohio and Massachusetts to help curb soaring foreclosures, Mudd noted.
Shares of Fannie fell 92 cents, or 1.4 percent, to $62.81, while Freddie's shares fell 41 cents to $58.84 Wednesday.
6.
http://www.247wallst.com/housing/index.html
September 14, 2007
Hovnanian: The Big House Giveaway
Hovnanian (HOV), the home builder, is going to have a three day sale this week. It would be more accurate to say that they will be giving the houses away, at least from a profit standpoint. According to Bloomberg, Hovnanian will be cutting prices on some homes by "offering discounts of up to almost $150,000."
Ads for the sales have headlines like ``These three days could change your life! Don't miss this once in a lifetime opportunity!''
But, Hovnanian needs to get the inventory off its books, even if it loses money on some of the properties. After building the homes, it has to pay to maintain them, a mix of interest payments and upkeep. Selling the homes not only brings in some cash. It also keeps the homes from having to be written down further in future quarters if home prices continue their slide.
And, that is the toy in the Cracker Jack. Hovnanian is signaling that it believes the housing market is going to get worse. It move is more a liquidation than it is a sale. It is putting its own homes into foreclosure so that the entire company does not go there. It is saying that a recovery in real estate is far, far off.
Douglas A. McIntyre
7.
http://www.nysun.com/article/62649
Greenspan Gives Bernanke An ‘Atta-Boy'
By CRAIG TORRES
Bloomberg News
September 14, 2007
The former chairman of the Federal Reserve, Alan Greenspan, said he "didn't really get" how the boom in subprime lending might hurt the economy, and endorsed his successor's handling of recent market turmoil, CBS television reported.
The current chairman of the Fed, Ben Bernanke, "is doing an excellent job," Mr. Greenspan said in an interview on the 60 Minutes program, according to excerpts emailed by CBS yesterday. The show is scheduled to air on September 16, a day before the publication of Mr. Greenspan's book, "The Age of Turbulence."
The remarks come amid criticism among some investors that Mr. Bernanke has failed to be as forceful as his predecessor in responding to financial turmoil. Mr. Greenspan in 1998 cut interest rates three times after a Russian debt default rippled through global markets. Mr. Bernanke's Fed has refrained from lowering its benchmark so far, relying on other tools to provide liquidity.
"I'm not certain I would have done anything different" than Mr. Bernanke, Mr. Greenspan said in the interview, according to excerpts released by CBS. "I'm not sure that's true," Mr. Greenspan said when asked if he would act "dramatically and quickly now."
The former Fed chief, who led the central bank for 18 years, said inflation is a bigger concern now than when policy makers cut the target rate for overnight loans between banks in 1998, CBS said. "We were dealing in an environment back there where inflation was easing," Mr. Greenspan said, according to the excerpts. "We could have acted without the fear of stoking inflationary pressures. You can't do that anymore."
" Greenspan, given his significant legacy and stature, giving Bernanke an ‘atta-boy' in this environment is a positive boost for Bernanke," the head of U.S. rate strategy for UBS Securities LLC in Stamford, Conn., William O'Donnell, said. "It's a nice vote of confidence for Bernanke going into next week's meeting."
The Federal Open Market Committee will lower the benchmark rate by a quarter percentage point, to 5%, when it meets September 18, according to the median forecast of economists surveyed by Bloomberg News.
As chairman, Mr. Greenspan won admiration for steering the economy through a series of crises, pumping out money to help growth rebound from a stock market crash in 1987.
After the 2001 recession, the Fed cut its benchmark rate to a four decade low of 1%. That move, along with Mr. Greenspan's hands-off approach to regulation, have brought him under fire as this year's bursting of the housing bubble and the subprime mortgage crisis again threaten to sink the broader economy.
Mr. Greenspan said in the interview that he was aware of lax lending standards in the subprime market, in which borrowers have little or poor credit history.
8.
http://www.nytimes.com/2007/09/14/business/14fed.html?ei=5090&en=67e57d3ac0bfa652&ex=1347422400&adxnnl=1&partner=rssuserland&emc=rss&adxnnlx=1189789564-xKfSejQxpRjIPXoNy12i+A
For Fed, a Question of Whom to Rescue, and When to Dive In
By EDMUND L. ANDREWS
Published: September 14, 2007
WASHINGTON, Sept. 13 — When policy makers at the Federal Reserve meet to set interest rates on Tuesday, their debate is likely to be less about whether to reduce rates than about how much.
Ben S. Bernanke has not previously faced a major economic upheaval as Fed chairman.
The meeting is also likely to be a defining moment for Ben S. Bernanke, who has not had to wrestle with a major economic upheaval since he took over as Fed chairman in February 2006. Wall Street, frightened by the turmoil in credit markets and in housing, is betting on the Fed to cut rates deeply. But Mr. Bernanke wants to know if the overall economy is on the brink of a recession, and the evidence on that is far from decisive.
Investors now assume that the central bank will reduce the overnight federal funds rate by at least a quarter of a percentage point, to 5 percent. Fed officials have not tried to dissuade anyone from that assumption. But there is a possibility that the central bank will go further, reducing its benchmark rate by half a percentage point and signaling further reductions later this year.
Mr. Bernanke and other Fed officials have said they do not want to be rescuers of investors or real estate speculators who made bad decisions.
Fed officials are also mindful of their experience in 1998, when a financial collapse in Russia led to a panic in credit markets but not a slowdown in the overall economy. The central bank reduced rates twice in response to market fears, but the panic subsided almost as quickly as it began.
“Monetary policy’s unswerving focus should be on pursuing the Fed’s mandated goals of price stability and full employment,” Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech Monday. “Past experience does show that financial turbulence can be resolved more quickly than seems likely when we’re in the middle of it.”
In practice, the line between rescuing financial markets and rescuing the overall economy is far from clear. Mr. Bernanke faces big risks, either by acting prematurely and giving investors the impression the Fed will shield them from risk or by acting too slowly and allowing a recession to set in.
Nearly a month after the Federal Reserve took its first steps to make money available for financial institutions rocked by problems with subprime mortgages, the panic in credit markets has relaxed slightly but conditions remain far from normal, according to industry executives.
New data on Thursday suggested that investors’ fears about buying commercial paper — securities backed by mortgages, credit card debt and business loans — might be easing, one of the reasons the stock market was rising Thursday.
The Fed reported that the volume of commercial paper declined by $8 billion for the week that ended Wednesday, a much smaller fall than in the four previous weeks, when investors first began to panic about subprime mortgages. Over the four weeks that ended Sept. 5, the volume of commercial paper shrank by an average of $74.6 billion each week.
But Steven Wieting, an economist at Citigroup, cautioned that recent signs of a recovery in the commercial paper market have been fleeting.
That bodes ill for the slumping housing market, which depends on the availability of capital for mortgages. Sales of new and existing homes remain weak, inventories of unsold homes are at their highest levels in years, and delinquencies are rising.
The overall economy, by contrast, has yet to show signs of serious damage.
The most disturbing sign of emerging trouble came in the Labor Department’s employment report for August, which estimated that the nation lost 4,000 jobs last month — the first monthly decline in four years. More worrisome, the Labor Department reduced its previous estimates for employment growth in June and July by a total of 81,000 jobs.
Kurt E. Karl, chief United States economist at Swiss Re Economic Research and Consulting, estimates the odds of a recession at “35 percent and rising,” but he predicted that the Fed would reduce its federal funds rate by only a quarter of a percentage point.
Yet, in a flurry of recent speeches, several Fed officials have made it clear they see a risk that the current housing problems and the credit squeeze could infect the rest of the economy.
Mr. Bernanke, who spent most of his career as a professor at Princeton and who favors a steady rules-based approach to monetary policy, has nonetheless carefully signaled that the Fed would not necessarily wait to act until it had irrefutable evidence of a looming downturn.
9.
http://www.iht.com/articles/2007/09/14/business/mortgage.php
Britain bails out mortgage lender hit by credit crunch
By Eric Pfanner
Published: September 14, 2007
LONDON: The British financial authorities said Friday that they had extended an emergency loan to rescue a big mortgage bank as the effects of a global credit crunch stemming from the crisis in the U.S. subprime home lending business spread to one of the most buoyant housing markets in the world.
The British government said it had authorized the Bank of England to provide a "liquidity support facility" of unspecified size to Northern Rock, a mortgage lender based in Newcastle, England, that has expanded aggressively in recent years.
The news prompted a sell-off in the shares of Northern Rock and other British bank stocks as investors worried about the possibility of similar problems at other institutions, as well as threats to the broader economy. The FTSE 100 index was down more than 2 percent in midday trading in London, and shares elsewhere in Europe fell sharply as well.
Northern Rock's need for emergency funding represents a significant broadening of the effects of the crisis in global financial markets, analysts said, because until now problems at European banks have stemmed mostly from their direct exposure to U.S. subprime loans.
Northern Rock, by contrast, said it had only a small amount of subprime loans in its portfolio, and British regulators said it "has a good quality loan book."
Instead, it ran into problems when the squeeze in capital markets undermined the bank's business model. Northern Rock has relied heavily on raising money in the capital markets, rather than consumer bank deposits, to finance its mortgage lending. With other banks increasingly reluctant to extend new credit, Northern Rock said it faced the possibility of being unable to meet existing obligations.
"The problems are potentially much wider now," said Jonathan Loynes, an economist at Capital Economics, a consultancy firm in London. "This means we have to worry about a wider range of institutions that aren't directly involved in this credit crisis but are in a way innocent bystanders."
The move came only two days after Mervyn King, the governor of the Bank of England, warned that moves by other central banks, like the Federal Reserve and the European Central Bank, which pumped extra cash into the financial system in recent weeks, could encourage "excessive risk-taking" by rewarding bad behavior.
The Bank of England emphasized Friday that its lending to Northern Rock would be conducted at a premium to market interest rates.
Because Northern Rock and other mortgage lenders will now have to pay more to raise money, they will have to pass along higher interest rates to consumers, analysts say. That will cause a slowdown in lending, they added, which could act as a drag on the British housing market and, perhaps, the economy.
"Costs for first-time borrowers, already stretched in the affordability stakes, will rise substantially," said Paul Mortimer-Lee, an economist at BNP Paribas. "First-time buyer activity seems pretty certain to show a sharp fall, which, since the whole market rests on the shoulders of the first-time buyer, is like throwing a spanner in the works of the whole market."
While the British housing market has soared over the last decade, repeatedly defying many analysts' warnings that valuations were overstretched, there have been some signs of a slowdown lately. A survey released this week by the Royal Institute of Chartered Surveyors, a real estate group, showed that prices in August fell in more areas of Britain than they rose.
But other surveys have shown continued increases, particularly in London, where an influx of buyers from Russia, the Middle East and elsewhere has fueled a surge in the cost of high-end homes.
Some analysts said the news of the bailout of Northern Rock could raise the specter of an old-fashioned "run" on the bank, as account-holders rush to reclaim their deposits. While the BBC reported on its Web site that there were long lines at some Northern Rock branches Friday morning, Adam Applegarth, chief executive of the bank, said account holders should not worry.
"I'm a depositor with Northern Rock," he said in a conference call with financial analysts. "Knowing that we have an uncapped facility with the Bank of England - you don't get better than the Bank of England."
Northern Rock approached the central bank, Applegarth said, because of the "astonishing" conditions in the markets that it had used to raise financing, and because "we could see no end to this in the short term."
He said the bank, whose level of residential lending in the first eight months of the year was 55 percent higher than a year earlier, had been more aggressive than some of its rivals in using "wholesale funding" rather than deposits to back its loans.
"With hindsight, if we had seen this coming, would we have run the same strategy? No," he said. "But hindsight is a great thing, and I don't think anybody else saw this coming either."
Now the bank will cut back on lending, as well as cut costs through a hiring freeze and other steps, he said.
"I don't expect us to move back to the volume of lending we were doing before," Applegarth said. "I think those volume days are in the past."
Some analysts said Northern Rock could become a takeover target.
Meanwhile, the Bank of England said it stood ready to make similar loans to other banks facing short-term liquidity problems, in its role as "lender of last resort."
News of the problems at Northern Rock prompted analysts to back away from predictions that the Bank of England, which has been raising interest rates, would continue to do so.
11.
http://www.nationalmortgagenews.com/washington/
Washington News Update
Fed: B&C, Piggyback Loans Rose in '06
Subprime and piggyback lending constituted a slightly higher percentage of mortgage originations in 2006 than in 2005, according to Home Mortgage Disclosure Act data released by the Federal Reserve Board. The HMDA data show that 28.7% of mortgages originated last year were "higher-priced," or subprime, up from 26.2% in 2005. The Fed also said piggybacks, in which a first mortgage and a second lien are originated simultaneously, were used in 22% of home purchase transactions, about the same as in 2005, but that more second liens were reported. "In 2006, lenders covered by HMDA reported about 1.43 million junior liens to purchase homes, almost all conventional loans, and a number about 4% greater than in 2005," the Fed said.
Senate HUD Bill Funds Foreclosure Counseling
The Senate has passed a Department of Housing and Urban Development appropriations bill that provides $100 million for counseling for homeowners facing foreclosure.
"Across the country too many families are facing the nightmare threat of foreclosure," said Sen. Christopher S. Bond, R-Mo. "This is a good step to help stem the tide of foreclosures without bailing out risky lenders and speculators in the market." Sen. Christopher J. Dodd, D-Conn., co-sponsored the counseling amendment with Sen. Bond. The $100 million can go to public, private, and nonprofit entities (including the Neighborhood Reinvestment Corp. and state housing finance agencies) that provide foreclosure counseling. No federal funds can go directly to lenders or homeowners, according to the Bond/Dodd amendment. The Senate has passed the Transportation/HUD appropriations bill by an 88-7 vote. The HUD bill also increases Federal Housing Administration multifamily loan limits in high-cost areas and suspends for one year a cap on the number of reverse mortgages the FHA can insure. The bill does not include any funding for President Bush's downpayment assistance program.
Senate Panel Sets Mark-Up of FHA Reform
The Senate Banking Committee is tentatively scheduled to mark up a Federal Housing Administration reform bill Sept. 19, sources say, but committee members are still trying to reach agreement on key provisions of the bill. The Senate bill is expected to raise the FHA loan limits to $417,000 in high-cost areas and limit the ability of the mortgage insurance agency to charge risk-based premiums based on credit scores. Just before the August recess, it appeared that the senators were near agreement to give the FHA the green light to set premiums based on loan-to-value ratios as well as loan or property type -- but not on credit scores. Separately, the FHA is expected to issue a proposed rule soon to establish an RBP system that the agency plans to implement if Congress does not pass an FHA bill by Jan. 1. In the other chamber of Congress, the House is expected to vote on passage of an FHA reform bill (H.R. 1852) the week of Sept. 16.
FHLBank Gets OK for ADC Collateral
The Federal Home Loan Bank of Des Moines has received regulatory approval to accept one- to four-family construction loans as collateral for advances at a time when many members have stepped up their borrowings from the bank. For many community banks, "construction loans are an important part of their lending portfolio," said Richard Swanson, president and chief executive of the Iowa-based FHLBank. Expanding the list of eligible collateral will help to "maximize their borrowing capabilities," he said. In August, members of the Des Moines bank borrowed $2 billion in advances. During the first six months of 2007, the Des Moines bank's advance business grew by only $700 million. Mr. Swanson noted that several other FHLBanks take construction loans as collateral, and his members expressed an interest. So an application was filed with the Federal Housing Finance Board six months ago. "We have determined that the proposed activity has sufficient controls that minimize the risk to the Bank," the approval letter says.
FTC Eyeing Deceptive Mortgage Ads
The Federal Trade Commission has stepped up its surveillance of deceptive mortgage advertising, and it has warned 200 mortgage brokers, lenders, and media outlets to be careful about touting low interest rates without adequate disclosures. "Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments without telling consumers the whole story -- for example, that these low rates and payments apply for a short period only and can go up substantially after the loan's introductory period," said Lydia Parnes, the FTC's consumer protection director. In June, the FTC conducted a nationwide review of mortgage advertisements that might be deceptive or violate the Truth in Lending Act. Many advertisements touted rates as low as 1% but failed to adequately disclose the actual interest rate on the mortgage or the annual percentage rate, the FTC said.
Amendment Would Let FHA Insure $700K Loans
The Federal Housing Administration would be able to insure $700,000 single-family mortgages in high-cost areas under an amendment the chairman of the House Financial Services Committee wants to attach to an FHA reform bill the House is expected to vote on soon.
The FHA reform bill (H.R. 1852) already raises the FHA loan limit in high-cost areas from $362,790 to the $417,000 conforming loan limit, which is the upper limit on the loans Fannie Mae and Freddie Mac can purchase. But the House Financial Services Committee chairman, Rep. Barney Frank, D-Mass., and Reps. Gary Miller, R-Calif., and Dennis Cardoza, D-Calif., have filed an amendment with the House Rules Committee to raise the maximum FHA loan limit to 175% of the conforming loan limit, or $729,750, to address problems in the jumbo loan market. "The amendment modifies FHA loan limits to permit loans up to the lower of (a) 125% of the local media home price, or (b) 175% of the 2007 GSE national conforming loan limit [indexed in subsequent years] -- with additional HUD authority to raise limits by area or unit size by up to $100,000 if market conditions warrant," according to a summary of the Frank-Miller-Cardoza amendment.
Fed Officials Voicing Mortgage Worries
Federal Reserve officials are becoming more concerned that the turmoil in the credit and mortgage markets will prolong the downturn in the housing sector and lead to a pullback in consumer and business spending. Frederic Mishkin, a Fed governor, said in a speech to the Money Marketeers of New York that even creditworthy borrowers are finding it more difficult to qualify for a mortgage or are paying more for the loan. "At this point, housing demand seems likely to be crimped further by a marked reduction in the availability of mortgages, and consumer and business spending also could be damped as a consequence of the recent financial turmoil," the Fed governor said. Janet Yellen, president of the San Francisco Federal Reserve Bank, also warned in a speech that the financial market turmoil "seems likely to intensify the downturn in housing." She also opined that mortgage interest rates are likely to remain relatively high for some time and that "this could prolong the adjustment in the housing sector."
Schumer Unveils Bill to Raise Portfolio Caps
Sen. Charles E. Schumer, D-N.Y., has introduced a bill that would temporarily raise the caps on Fannie Mae's and Freddie Mac's portfolios as Democrats in Congress are becoming increasingly frustrated with federal regulators who insist on maintaining the caps at a time when the secondary market for many mortgage products has dried up.
In a letter to the Federal Reserve Board, House Financial Services Committee Chairman Barney Frank, D-Mass., says it doesn't make sense to expect the two government-sponsored enterprises to help with the refinancing of subprime borrowers unless they have room in their portfolios to buy the loans. Forcing the GSEs to sell their best mortgage-backed securities and buy riskier assets will diminish the quality of their portfolios and raise safety-and-soundness concerns, Rep. Frank says in a letter to Fed Chairman Ben Bernanke. Separately, Office of Federal Housing Enterprise Oversight Director James Lockhart says the portfolio caps are not hindering the GSEs from helping subprime borrowers. "Most new refinance loans of such borrowers can be securitized," Mr. Lockhart says in a letter to Sen. Schumer. The New York senator's bill would raise the portfolio cap by 10% so the GSEs could purchase $145 billion in new mortgages and increase the GSE conforming loan limit from $417,000 to $625,000 in high-cost areas.
OFHEO: GSEs Now Bound by B&C Guidance
Like banks and thrifts, Fannie Mae and Freddie Mac are now bound by federal underwriting guidelines when they purchase subprime mortgages and private-label securitizations backed by subprime loans, according to the Office of Federal Housing Enterprise Oversight.
OFHEO Director James Lockhart said the two government-sponsored enterprises have completed their implementation of the subprime guidance that federal banking regulators issued on June 29. The guidance requires lenders to qualify borrowers at the fully indexed rate and restricts stated-income loans and risk-layering features. Meanwhile, Treasury Under Secretary Robert Steel told a congressional panel last week that he is urging the two GSEs to develop loan products that can help refinance troubled subprime borrowers. He cited studies indicating that a large number of borrowers ended up in subprime loans when they could have qualified for a prime mortgage. "In those cases, the GSEs could help," Mr. Steel told the House Financial Services Committee. A Fannie Mae spokesman said, "Conversations are occurring. So we will see where they go."
Fed Reports Impact of Tighter Lending Standards
The tightening in lending standards on residential mortgages has had a "noticeable" impact on home sales and construction activity in August, according to the Federal Reserve Board's Beige Book. Several Federal Reserve district banks "noted that the reduction in credit availability added to uncertainty about when the housing market might turn around," the Beige Book says. The Boston Federal Reserve Bank reported increases in sales and house prices in Massachusetts. But most district banks reported declining home sales and declining or stable prices along with "high" inventories of unsold homes. Commercial real estate activity was "generally stable or expanding," the Beige Book says. However, several Federal Reserve Banks reported tighter credit conditions on CRE loans.
12.
http://data.nationalmortgagenews.com/columns/hearing/
What We're Hearing
By Paul Muolo
Lost in the press release about Citigroup buying Ameriquest's servicing portfolio (and wholesale division, Argent) is the even bigger news that the sale effectively ends the mortgage career of Roland Arnall. Mr. Arnall, as a technical matter, was no longer managing the day-to-day operations of Ameriquest/Argent. (He owned both lenders through a holding company.) Instead, he's been hosting state dinners, playing the role of U.S. ambassador to the Netherlands. (It pays to donate money to President Bush.) Three or so decades ago, Mr. Arnall took his S&L charter at Long Beach Savings and told the Federal Home Loan Bank Board that it could “stick it” (my words). He converted Long Beach into a nonprime lender, sold part of the business to Washington Mutual and then grew the remainder into Ameriquest and Argent. Back in 2005 the two (combined) reportedly earned $1 billion, but that was before the subprime meltdown. Arnall had hoped to take his mortgage empire public but bad publicity (and bad loan practices) hit him like a tsunami. Anyway, it's all history now. (If you have any good Arnall stories send me an e-mail at Paul.Muolo@SourceMedia.com.) As for what the sale means for Adam Bass and other executives at Ameriquest/Argent, stay tuned. For the full story on the sale see the Monday edition of National Mortgage News. Don't subscribe? Call: (800) 221-1809…
Who is to blame for the mortgage fraud crisis in America? Answer: loan brokers. According to the FBI, most mortgage fraud occurs during the application process -- and that would mean loan brokers. An FBI agent spoke this past week at the annual convention of the New York Association of Mortgage Brokers. The show was held in Melville, N.Y., headquarters of the now-defunct American Home Mortgage. Fraud was not the reason for AHM's demise -- Wall Street was but don't get me started on that topic…
This just in: According to Dow Jones, Citigroup's First Collateral unit will no longer accept any new warehouse customers…
The carnage in the subprime industry has caused financial damage worldwide -- but now the mess is spreading (that's right) to the art world. So says The New York Times, which recently quoted homebuilder and billionaire Eli Broad predicting that the subprime mess will rein in recent astounding levels of spending at art auctions. By the way, whoever bought that Rubens painting that the government inherited when it took control of CenTrust Savings two decades ago?
An estimated two million adjustable-rate mortgages could reset this year and next, jumping from low "teaser" rates (for the first two or three years) to much higher rates that could cost borrowers their homes. Then again, if the Federal Reserve cuts rates by 50 basis points (as anticipated) all bets might be off. Then again, maybe not…
National City Corp. of Cleveland revealed the other day that it had chopped 800 positions at its National City Mortgage affiliate. This follows a 500-position job cut that came in August at its home equity division. NCM is no longer funding home-equity loans through brokers. According to the Alternative Products Quarterly Data Report, NCM ranks seventh among second-lien funders. To order the AP-QDR e-mail Deartra.Todd@SourceMedia.com…
IN CASE YOU MISSED IT: Triad Guaranty, the smallest of the nation's seven MI firms, recently disclosed that it had borrowed on all of an $80 million line of credit it has with three banks, including Bank of America. After its stock was clocked, Triad issued a statement saying it is not having any liquidity issues. At the end of June it had $26.7 million in cash on hand, compared to $38.6 million a year earlier. The company recently lost its largest customer, American Home Mortgage, which closed its doors in August…
MORTGAGE PEOPLE: Countrywide Financial Corp. named Jess Lederman as its new chief risk officer. Mr. Lederman -- who joined Countrywide in 2005 and served as managing director of products and pricing -- replaces John P. McMurray. Mr. McMurray was poached by Washington Mutual as its new chief credit officer. Lederman, by the way, is a former managing director at Bear Stearns. He worked on Wall Street during the “Liar's Poker” days of Lewis Raineri. He also ran the mortgage group at Ohio Savings. Mortgage Cadence, a technology company, has named Michael Hammond chief marketing officer.
DATA NOTICE: If you're trying to figure out where the mortgage market is headed and what the business will look like for the rest of the year, you're in luck. NMN has just published the brand new Mortgage Industry Directory, which ranks the nation's top 400 lenders, 300 servicers, top 85 subprime and much, much more. The book also provides a special analysis on America's subprime crisis. To order, e-mail Rebecca.Keen@SourceMedia.com or Delores.Stokes@SourceMedia.com. Also now available: the brand-new Mortgage Broker Database which ranks the nation's top 100 brokers and provides contact info for 2,000 active brokerage firms. For more info, e-mail Deartra.Todd@SourceMedia.com. According to the first-quarter edition of the Quarterly Data Report, 18.76% of all subprime mortgages are delinquent, based on unpaid principal balances. Ask Deartra about the QDR as well.
Sunday, September 16, 2007
Subprime Clips September 13, 2007
Subprime Clips September 13, 2007
1. http://biz.yahoo.com/ap/070913/greenspan_mortgages.html?.v=15
AP Greenspan Concedes Mortgage Dilemma
Thursday September 13, 6:20 pm ET By Jeannine Aversa, AP Economics Writer
Greenspan Acknowledges He Didn't Initially Grasp Risks of 'Subprime' Mortgages
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday. "I really didn't get it until very late in 2005 and 2006," Greenspan said. Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.
Greenspan, however, defended the institution's actions.
"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.
2.
http://www.housingwire.com/2007/09/13/countrywide-pending-foreclosures-jump-15-percent-in-one-month/
Countrywide: Pending Foreclosures Jump 15 Percent in One Month
by Paul Jackson
September 13, 2007
Pending foreclosures represented 1.2 percent of unpaid principal balance during August, up an eye-opening 15.4 percent from one month earlier and the largest monthly jump in pending foreclosures in over one year.
3.
http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd16/P1/AllStarTeam20070912.aspx
The Fed won't cut rates
By Ken Kam
Reducing interest rates, we are told, will prevent 2 million homeowners from losing their homes and restore calm to the mortgage industry.
4.
California Association of Mortgage Brokers
The Mortgage Broker's Voice for Ethics, Best Practices and Consumer Choice
Wednesday, September 12, 2007
A Special Message from the CAMB President: Government Hot Topics
Although the benefit to California will be minimal until FHA loan limits are raised, this is still a giant step forward for the industry: that the administration has acknowledged and is taking steps to address the problems besetting the mortgage market is very encouraging.
CAMB has been at the forefront of efforts to promote common sense solutions like FHA Secure in response to the current mortgage market crisis
Last Thursday we met with the Editorial Board of the Sacramento Bee, asking them to come out in favor of high-cost state status for California and FHA modernization reforms. Our CAMB panel, Ed Smith, Jr., Ed Craine, Leon Huntting, Glenda Brass and myself, also spoke to issues such as licensing, fiduciary duty, our call for lender loan workout programs, and the place of nontraditional products in a fully functioning mortgage marketplace.
http://biz.yahoo.com/ap/070913/greenspan_mortgages.html?.v=15
AP Greenspan Concedes Mortgage Dilemma
Thursday September 13, 6:20 pm ET By Jeannine Aversa, AP Economics Writer
Greenspan Acknowledges He Didn't Initially Grasp Risks of 'Subprime' Mortgages
WASHINGTON (AP) -- Former Federal Reserve Chairman Alan Greenspan acknowledges he failed to see early on that an explosion of mortgages to people with questionable credit histories could pose a danger to the economy.
In an upcoming interview, Greenspan said he was aware of "subprime" lending practices where homebuyers got very low initial rates only to see them later jacked up, causing severe payment shock. But he said he didn't initially realize the harm they could do.
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday. "I really didn't get it until very late in 2005 and 2006," Greenspan said.
An excerpt of the interview was released Thursday.
A meltdown in the subprime mortgage market has rocked Wall Street. Foreclosures and late payments have soared and lenders have gone out of business. Nervous financial institutions tightened credit standards, making it harder for even more creditworthy borrowers to get financing. This has increased chances the economy might slide into a recession.
Greenspan, who ran the central bank for more than 18 years -- the second-longest serving chairman in history -- left in 2006. His successor, Ben Bernanke, has had to deal with a credit and financial crisis stemming from the subprime mortgage mess.
When he was at the helm, Greenspan maintained there was little the Fed -- which also oversees the safety and soundness of banks -- could do about the subprime situation. One of the Fed's governors, however, had raised a red flag about questionable lending practices.
"Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," Greenspan said in the interview.
Some blamed Greenspan's interest rate policies for feeding the housing frenzy. Sales had hit record highs and house prices galloped from 2001 to 2005. Then the market fell into a deep slump.
The Greenspan Fed from early 2001 to the summer of 2003 had slashed interest rates to their lowest level in decades. It was done to rescue the economy from the blows of the bursting of the stock market bubble, the 2001 recession, the terror attacks and a wave of accounting scandals that shook Wall Street.
Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.
Greenspan, however, defended the institution's actions.
"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.
Meanwhile, some believe that Greenspan would have acted more aggressively than Bernanke in dealing with the current financial crisis. "I'm not sure that's true," Greenspan said. "I think (Bernanke) is doing an excellent job," he said.
Greenspan has written a book, looking back on his life and his days as Fed chief. It will be released on Monday.
2.
http://www.housingwire.com/2007/09/13/countrywide-pending-foreclosures-jump-15-percent-in-one-month/
Countrywide: Pending Foreclosures Jump 15 Percent in One Month
-1. by Paul Jackson
September 13, 2007
Countrywide’s operational results were released today, showing that the pace of pending foreclosures and the nation’s largest lender have continued to increase. Pending foreclosures represented 1.2 percent of unpaid principal balance during August, up an eye-opening 15.4 percent from one month earlier and the largest monthly jump in pending foreclosures in over one year.
A 15 percent jump in foreclosure activity in one month is a large move, although HW readers know I prefer to utilize year-over-year comparisons. (Speaking of which, new foreclosures are up 150 percent by that measure in August, after being up 126 percent YoY in July — so foreclosure velocity is increasing).
Delinquencies also registered a new high-water mark, Countrywide said, with 4.90 percent of the overall servicing portfolio reported delinquent as a percentage of unpaid principal balance. The raw number of loans delinquent decreased slightly, indicating that an increasing number of higher-balance loans may be running into problems versus previous months.
The mortgage giant’s servicing portfolio continued to grow, reaching $1.5 trillion in spite of a 17 percent decrease in loan fundings for the month to $34 billion. I’ve heard rumors that Countrywide recently obtained servicing rights to a sizeable portion of loans that had been with GMAC Mortgage, which may in part explain the increase.
Most of the business press, however, buzzed about Countrywide’s disclosure that it had “recently arranged” for $12 billion in secured credit, ostensibly to be used to provide liquidity for future operations. From Bloomberg:
The ability to find new sources of capital “should substantially address funding concerns,” a team of Credit Suisse Group analysts led by Moshe Orenbuch wrote in a research note today. They rate the stock “outperform.”
While this is really good news, I’d be curious to know what assets are securing the credit line, myself. I’m always leery of vague language surrounding financing agreements that run into the tens of billions of dollars — especially in this market.
The company also said in an SEC filing later today that it needed more time to estimate the financial impact of its announced restructuring effort, which will see the company lay off between 10,000 and 12,000 of its employees.
3.
http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd16/P1/AllStarTeam20070912.aspx
The Fed won't cut rates
By Ken Kam
Everyone who the media talk to seems to want the Fed to cut interest rates next week.
Reducing interest rates, we are told, will prevent 2 million homeowners from losing their homes and restore calm to the mortgage industry. Bad economic news strengthens the case for a rate cut because it implies that lower interest rates would lead to higher growth, instead of higher inflation. Bad news also lends itself to attention-grabbing headlines, which sell newspapers, increase viewership and drive page views. It's no wonder that bad news, such as Friday's weak jobs report, makes headlines.
Between now and next Tuesday's Fed meeting, I expect to see the importance of every piece of bad news exaggerated in order to increase the pressure on the Fed to reduce interest rates. But once the decision is announced, I expect most of the people the media always go to for instant analysis will support the Fed's decision -- whatever it is.
Since the financial futures market is already pricing in a cut of 0.25% in the fed funds rate with 100% certainty, a lot of people are going to be surprised if interest rates are not reduced next week.
I think this is a likely scenario because most of the data indicate the economy has been running pretty close to full capacity for some time now. Evidence that an interest rate cut is needed is starting to emerge, but it is not at all clear. Given Fed chief Ben Bernanke's track record of letting data guide policy, I think an interest rate cut is not in the cards for next week.
Investment strategy
Changing investment strategies involves transactions costs and tax consequences. These costs are justified when you think market conditions have fundamentally changed. …
4.
California Association of Mortgage Brokers
The Mortgage Broker's Voice for Ethics, Best Practices and Consumer Choice
Wednesday, September 12, 2007
A Special Message from the CAMB President: Government Hot Topics
To my fellow CAMB brokers and affiliates:
As you may already have learned, President Bush has announced a new Federal Housing Administration initiative called FHA Secure which will assist nearly one-quarter of a million homeowners refinance and keep their homes. This temporary program is designed to provide refinancing opportunities to homeowners and to increase liquidity in the mortgage market.
Under FHA Secure, homeowners with strong credit, who had been making timely mortgage payments before their loans reset but who are now in default, will be eligible for refinancing. Although the benefit to California will be minimal until FHA loan limits are raised, this is still a giant step forward for the industry: that the administration has acknowledged and is taking steps to address the problems besetting the mortgage market is very encouraging.
CAMB has been at the forefront of efforts to promote common sense solutions like FHA Secure in response to the current mortgage market crisis. Just this past week, our Vice President of Government Affairs, Ed “Smitty” Smith, Jr., was present at a Financial Services subcommittee hearing in Washington D.C., to lobby for FHA modernization with higher loan limits for California homebuyers, and for increased access to the program for mortgage brokers.
We are going full steam ahead to have California designated as a high cost state, which I am happy to say has passed in the House and has been taken up by the Senate. Our Government Affairs team is working diligently with legislators in California and Washington D.C., to ensure that your voice is heard and that the reforms needed during this critical time are being pushed through.
Last Thursday we met with the Editorial Board of the Sacramento Bee, asking them to come out in favor of high-cost state status for California and FHA modernization reforms. Our CAMB panel, Ed Smith, Jr., Ed Craine, Leon Huntting, Glenda Brass and myself, also spoke to issues such as licensing, fiduciary duty, our call for lender loan workout programs, and the place of nontraditional products in a fully functioning mortgage marketplace.
I thought our team did a superb job of educating the editorial staff of this extraordinarily influential newspaper on the role of the broker, and why brokers are essential if consumers are to be provided a full range of home financing options. Getting to know the editorial staff at the Sacramento Bee, and giving them an opportunity to get to know CAMB is important because the Bee is THE newspaper read in every legislator’s and regulator’s office in the State Capitol. We are hopeful that our exchange with them will mark the beginning of more frequent opportunities to present the mortgage broker perspective.
Thanks again for your membership and your support. Please know that we are doing everything we can to make sure that home financing opportunities for Californians are preservecd and that our mortgage broker industry is protected and fully restored in all its vitality, with our role in real estate financing secured. Together, we are making a difference!
Highest regards,
Pete Ogilvie CMC
CAMB State President
1. http://biz.yahoo.com/ap/070913/greenspan_mortgages.html?.v=15
AP Greenspan Concedes Mortgage Dilemma
Thursday September 13, 6:20 pm ET By Jeannine Aversa, AP Economics Writer
Greenspan Acknowledges He Didn't Initially Grasp Risks of 'Subprime' Mortgages
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday. "I really didn't get it until very late in 2005 and 2006," Greenspan said. Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.
Greenspan, however, defended the institution's actions.
"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.
2.
http://www.housingwire.com/2007/09/13/countrywide-pending-foreclosures-jump-15-percent-in-one-month/
Countrywide: Pending Foreclosures Jump 15 Percent in One Month
by Paul Jackson
September 13, 2007
Pending foreclosures represented 1.2 percent of unpaid principal balance during August, up an eye-opening 15.4 percent from one month earlier and the largest monthly jump in pending foreclosures in over one year.
3.
http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd16/P1/AllStarTeam20070912.aspx
The Fed won't cut rates
By Ken Kam
Reducing interest rates, we are told, will prevent 2 million homeowners from losing their homes and restore calm to the mortgage industry.
4.
California Association of Mortgage Brokers
The Mortgage Broker's Voice for Ethics, Best Practices and Consumer Choice
Wednesday, September 12, 2007
A Special Message from the CAMB President: Government Hot Topics
Although the benefit to California will be minimal until FHA loan limits are raised, this is still a giant step forward for the industry: that the administration has acknowledged and is taking steps to address the problems besetting the mortgage market is very encouraging.
CAMB has been at the forefront of efforts to promote common sense solutions like FHA Secure in response to the current mortgage market crisis
Last Thursday we met with the Editorial Board of the Sacramento Bee, asking them to come out in favor of high-cost state status for California and FHA modernization reforms. Our CAMB panel, Ed Smith, Jr., Ed Craine, Leon Huntting, Glenda Brass and myself, also spoke to issues such as licensing, fiduciary duty, our call for lender loan workout programs, and the place of nontraditional products in a fully functioning mortgage marketplace.
http://biz.yahoo.com/ap/070913/greenspan_mortgages.html?.v=15
AP Greenspan Concedes Mortgage Dilemma
Thursday September 13, 6:20 pm ET By Jeannine Aversa, AP Economics Writer
Greenspan Acknowledges He Didn't Initially Grasp Risks of 'Subprime' Mortgages
WASHINGTON (AP) -- Former Federal Reserve Chairman Alan Greenspan acknowledges he failed to see early on that an explosion of mortgages to people with questionable credit histories could pose a danger to the economy.
In an upcoming interview, Greenspan said he was aware of "subprime" lending practices where homebuyers got very low initial rates only to see them later jacked up, causing severe payment shock. But he said he didn't initially realize the harm they could do.
"While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he said in a CBS "60 Minutes" interview to be broadcast Sunday. "I really didn't get it until very late in 2005 and 2006," Greenspan said.
An excerpt of the interview was released Thursday.
A meltdown in the subprime mortgage market has rocked Wall Street. Foreclosures and late payments have soared and lenders have gone out of business. Nervous financial institutions tightened credit standards, making it harder for even more creditworthy borrowers to get financing. This has increased chances the economy might slide into a recession.
Greenspan, who ran the central bank for more than 18 years -- the second-longest serving chairman in history -- left in 2006. His successor, Ben Bernanke, has had to deal with a credit and financial crisis stemming from the subprime mortgage mess.
When he was at the helm, Greenspan maintained there was little the Fed -- which also oversees the safety and soundness of banks -- could do about the subprime situation. One of the Fed's governors, however, had raised a red flag about questionable lending practices.
"Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," Greenspan said in the interview.
Some blamed Greenspan's interest rate policies for feeding the housing frenzy. Sales had hit record highs and house prices galloped from 2001 to 2005. Then the market fell into a deep slump.
The Greenspan Fed from early 2001 to the summer of 2003 had slashed interest rates to their lowest level in decades. It was done to rescue the economy from the blows of the bursting of the stock market bubble, the 2001 recession, the terror attacks and a wave of accounting scandals that shook Wall Street.
Critics say the Fed kept rates too low for too long, encouraging a Wild West mentality in housing.
Greenspan, however, defended the institution's actions.
"They are mistaken," he said of the critics. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he said.
Meanwhile, some believe that Greenspan would have acted more aggressively than Bernanke in dealing with the current financial crisis. "I'm not sure that's true," Greenspan said. "I think (Bernanke) is doing an excellent job," he said.
Greenspan has written a book, looking back on his life and his days as Fed chief. It will be released on Monday.
2.
http://www.housingwire.com/2007/09/13/countrywide-pending-foreclosures-jump-15-percent-in-one-month/
Countrywide: Pending Foreclosures Jump 15 Percent in One Month
-1. by Paul Jackson
September 13, 2007
Countrywide’s operational results were released today, showing that the pace of pending foreclosures and the nation’s largest lender have continued to increase. Pending foreclosures represented 1.2 percent of unpaid principal balance during August, up an eye-opening 15.4 percent from one month earlier and the largest monthly jump in pending foreclosures in over one year.
A 15 percent jump in foreclosure activity in one month is a large move, although HW readers know I prefer to utilize year-over-year comparisons. (Speaking of which, new foreclosures are up 150 percent by that measure in August, after being up 126 percent YoY in July — so foreclosure velocity is increasing).
Delinquencies also registered a new high-water mark, Countrywide said, with 4.90 percent of the overall servicing portfolio reported delinquent as a percentage of unpaid principal balance. The raw number of loans delinquent decreased slightly, indicating that an increasing number of higher-balance loans may be running into problems versus previous months.
The mortgage giant’s servicing portfolio continued to grow, reaching $1.5 trillion in spite of a 17 percent decrease in loan fundings for the month to $34 billion. I’ve heard rumors that Countrywide recently obtained servicing rights to a sizeable portion of loans that had been with GMAC Mortgage, which may in part explain the increase.
Most of the business press, however, buzzed about Countrywide’s disclosure that it had “recently arranged” for $12 billion in secured credit, ostensibly to be used to provide liquidity for future operations. From Bloomberg:
The ability to find new sources of capital “should substantially address funding concerns,” a team of Credit Suisse Group analysts led by Moshe Orenbuch wrote in a research note today. They rate the stock “outperform.”
While this is really good news, I’d be curious to know what assets are securing the credit line, myself. I’m always leery of vague language surrounding financing agreements that run into the tens of billions of dollars — especially in this market.
The company also said in an SEC filing later today that it needed more time to estimate the financial impact of its announced restructuring effort, which will see the company lay off between 10,000 and 12,000 of its employees.
3.
http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd16/P1/AllStarTeam20070912.aspx
The Fed won't cut rates
By Ken Kam
Everyone who the media talk to seems to want the Fed to cut interest rates next week.
Reducing interest rates, we are told, will prevent 2 million homeowners from losing their homes and restore calm to the mortgage industry. Bad economic news strengthens the case for a rate cut because it implies that lower interest rates would lead to higher growth, instead of higher inflation. Bad news also lends itself to attention-grabbing headlines, which sell newspapers, increase viewership and drive page views. It's no wonder that bad news, such as Friday's weak jobs report, makes headlines.
Between now and next Tuesday's Fed meeting, I expect to see the importance of every piece of bad news exaggerated in order to increase the pressure on the Fed to reduce interest rates. But once the decision is announced, I expect most of the people the media always go to for instant analysis will support the Fed's decision -- whatever it is.
Since the financial futures market is already pricing in a cut of 0.25% in the fed funds rate with 100% certainty, a lot of people are going to be surprised if interest rates are not reduced next week.
I think this is a likely scenario because most of the data indicate the economy has been running pretty close to full capacity for some time now. Evidence that an interest rate cut is needed is starting to emerge, but it is not at all clear. Given Fed chief Ben Bernanke's track record of letting data guide policy, I think an interest rate cut is not in the cards for next week.
Investment strategy
Changing investment strategies involves transactions costs and tax consequences. These costs are justified when you think market conditions have fundamentally changed. …
4.
California Association of Mortgage Brokers
The Mortgage Broker's Voice for Ethics, Best Practices and Consumer Choice
Wednesday, September 12, 2007
A Special Message from the CAMB President: Government Hot Topics
To my fellow CAMB brokers and affiliates:
As you may already have learned, President Bush has announced a new Federal Housing Administration initiative called FHA Secure which will assist nearly one-quarter of a million homeowners refinance and keep their homes. This temporary program is designed to provide refinancing opportunities to homeowners and to increase liquidity in the mortgage market.
Under FHA Secure, homeowners with strong credit, who had been making timely mortgage payments before their loans reset but who are now in default, will be eligible for refinancing. Although the benefit to California will be minimal until FHA loan limits are raised, this is still a giant step forward for the industry: that the administration has acknowledged and is taking steps to address the problems besetting the mortgage market is very encouraging.
CAMB has been at the forefront of efforts to promote common sense solutions like FHA Secure in response to the current mortgage market crisis. Just this past week, our Vice President of Government Affairs, Ed “Smitty” Smith, Jr., was present at a Financial Services subcommittee hearing in Washington D.C., to lobby for FHA modernization with higher loan limits for California homebuyers, and for increased access to the program for mortgage brokers.
We are going full steam ahead to have California designated as a high cost state, which I am happy to say has passed in the House and has been taken up by the Senate. Our Government Affairs team is working diligently with legislators in California and Washington D.C., to ensure that your voice is heard and that the reforms needed during this critical time are being pushed through.
Last Thursday we met with the Editorial Board of the Sacramento Bee, asking them to come out in favor of high-cost state status for California and FHA modernization reforms. Our CAMB panel, Ed Smith, Jr., Ed Craine, Leon Huntting, Glenda Brass and myself, also spoke to issues such as licensing, fiduciary duty, our call for lender loan workout programs, and the place of nontraditional products in a fully functioning mortgage marketplace.
I thought our team did a superb job of educating the editorial staff of this extraordinarily influential newspaper on the role of the broker, and why brokers are essential if consumers are to be provided a full range of home financing options. Getting to know the editorial staff at the Sacramento Bee, and giving them an opportunity to get to know CAMB is important because the Bee is THE newspaper read in every legislator’s and regulator’s office in the State Capitol. We are hopeful that our exchange with them will mark the beginning of more frequent opportunities to present the mortgage broker perspective.
Thanks again for your membership and your support. Please know that we are doing everything we can to make sure that home financing opportunities for Californians are preservecd and that our mortgage broker industry is protected and fully restored in all its vitality, with our role in real estate financing secured. Together, we are making a difference!
Highest regards,
Pete Ogilvie CMC
CAMB State President
Sub Prime Press Clips September 12, 2007
1. http://news.bbc.co.uk/1/hi/business/6990822.stm
Sub-prime woes hit US lender GMAC
The sub-prime mortgage downturn has now hit a number of firms
Finance firm GMAC has had to take out a $21.4bn (£10.1bn) loan as it becomes the
latest lender to reveal the impact of the US sub-prime mortgage crisis.
The crisis in the sub-prime mortgage sector has caused a shortage of global credit as banks are unwilling to lend money until the full impact of the situation is known.
2. http://www.iht.com/articles/ap/2007/09/12/business/EU-FIN-France-US-Credit-Crunch.php
IMF official warns of slowing U.S. economy amid subprime crisis
The Associated Press
Published: September 12, 2007
Simon Johnson, director of the IMF's Research department, said fallout from the subprime credit crisis hasn't yet been resolved — and the IMF doesn't understand why tight financial markets continue.
3.
http://online.wsj.com/article/SB118955540976824460.html?mod=googlenews_wsj
Mortgage Lender's Bankruptcy May Threaten Thousands of Homeowners
By PEG BRICKLEY
September 12, 2007
Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.
4.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-11T170627Z_01_N11430263_RTRIDST_0_RLPC-ALLISONTRANSMISSION.XML
RLPC-Allison Transmission $1 bln loan sold-source
Tue Sep 11, 2007 1:06 PM ET
Citigroup, Lehman Brothers, Merrill Lynch and Sumitomo Banking Corp. have sold a $1 billion block of their previously unsold $3.5 billion bank loan for Allison Transmission at 96 cents on the dollar
5.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145146Z_01_WBT007560_RTRIDST_0_USA-PAULSON-MORTGAGES-URGENT.XML
US' Paulson: subprime woes to take longer to fix
Wed Sep 12, 2007 10:51 AM ET
"Unlike periods of financial turbulence I've witnessed over many years, this turbulence wasn't precipitated by problems in the real economy. This came about as a result of some bad lending practices," Paulson said.
6.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145023Z_01_L12920556_RTRIDST_0_BRITAIN-BANK-UPDATE-3.XML&WTmodLoc=InvArt-C2-NextArticle-2
UPDATE 3-BoE's King signals no bailout for banks
Wed Sep 12, 2007 10:50 AM ET
By Sumeet Desai
As U.S. Treasury Secretary Henry Paulson predicted no quick end to the confidence crisis in credit markets, BoE Governor Mervyn King said a bailout now would only encourage more risky behaviour and cause an even bigger mess later on.
7. http://money.cnn.com/2007/09/11/real_estate/toxic_rate_reset_shock/
Mortgage reset shock: Not so bad
With a little help from the Fed, borderline borrowers could get some relief from a
flood of mortgages whose interest rates are set to jump.
By Les Christie, CNNMoney.com staff writer
September 12 2007: 9:54 AM EDT
Furthermore, many economists believe there's a good chance the Federal Reserve will begin to lower the Fed Funds rate next week. Doug Duncan, the chief economist with the Mortgage Bankers Association predicts the rate will drop a quarter percentage point at each of the next two Fed sessions
But Richard DeKaser, chief economist for National City Corp., warned that if the Fed lowers rates by only a quarter point, versus half a point, Treasury bill yields may not move much. "That [quarter point drop] expectation has already been priced into short-term treasuries," he said.
9. http://money.cnn.com/2007/09/12/real_estate/refi_rescue_status_check/index.htm
Refi rescue
And potentially some tax help, too. Here are breaks that borrowers in a pickle may
receive in the next few months.
By Jeanne Sahadi, CNNMoney.com senior writer
September 12 2007: 12:23 PM EDT
About 240,000 borrowers of the estimated 2 million with adjustable-rate loans scheduled to reset in the next year already are eligible to refinance into a loan insured by the Federal Housing Administration (FHA) - roughly 80,000 of them are eligible because of the newly created FHASecure Act, which loosens FHA's criteria for refinancing
Subprime Blog-September 12, 2007
http://cnnmoneytalkback.blogs.cnnmoney.com/2007/09/12/is-refi-rescue-a-bailout/
CNN TALK BACK BLOG ENTRIES
1.
http://news.bbc.co.uk/1/hi/business/6990822.stm
Sub-prime woes hit US lender GMAC
The sub-prime mortgage downturn has now hit a number of firms
Finance firm GMAC has had to take out a $21.4bn (£10.1bn) loan as it becomes the latest lender to reveal the impact of the US sub-prime mortgage crisis.
GMAC, which has borrowed the cash from Citigroup, said boosting its financial flexibility was "a prudent measure" in the current market environment.
Hit by higher US interest rates, the sub-prime mortgage sector has seen record loan defaults in the past year.
GMAC is a former unit of General Motors which still retains a 49% stake.
Private equity group Cerberus Capital Management owns the remaining 51%.
GMAC started out offering car loans before expanding into the mortgage industry.
Lack of credit
The one-year, short term loan from Citigroup, America's largest bank, replaces GMAC's existing $10bn funding facility from the bank.
GMAC's struggling home lending unit, Residential Capital, lost $254m in the three months to the end of June.
The crisis in the sub-prime mortgage sector has caused a shortage of global credit as banks are unwilling to lend money until the full impact of the situation is known.
Banks have also been putting aside funds to cover any of their own exposure to the sub-prime downturn.
A key problem is that sub-prime loans are often repacked into wider debt groupings which are then resold.
This means that no-one is yet quite sure of the full impact of the woes.
2.
http://www.iht.com/articles/ap/2007/09/12/business/EU-FIN-France-US-Credit-Crunch.php
IMF official warns of slowing U.S. economy amid subprime crisis
The Associated Press
Published: September 12, 2007
PARIS: The U.S. economy will slow next year amid continued trouble in the housing market, likely leading to lower interest rates, a senior International Monetary Fund official said Wednesday.
Simon Johnson, director of the IMF's Research department, said fallout from the subprime credit crisis hasn't yet been resolved — and the IMF doesn't understand why tight financial markets continue.
"The problem hasn't been resolved," despite efforts from major central banks to boost liquidity in the financial markets, said Simon Johnson, director of the IMF's research department. "This makes it hard to assess the outlook."
Johnson predicted that the impact of the lending crisis in the subprime mortgage market in the United States will be limited outside the Americas.
"The effect ... on the real economy is limited because European markets managed to be relatively insulated from the shock," he said.
The IMF is "very comfortable" with moves by the U.S. Federal Reserve and the European Central Bank to make funds available for the tightening credit markets.
Financial markets are expecting the Fed to ease rates further, Johnson said.
"This is a situation where interest rates are likely to fall," he said, adding that U.S. inflation appeared to be rising more slowly than previously thought. "Overall, the interest rate environment in the U.S. is clearly softening."
3.
http://online.wsj.com/article/SB118955540976824460.html?mod=googlenews_wsj
Mortgage Lender's Bankruptcy May Threaten Thousands of Homeowners
By PEG BRICKLEY
September 12, 2007; Page A15
Thousands of homeowners face an "imminent risk" of losing their homes because of clashes between American Home Mortgage Investment Corp. and its former financial backers, according to Freddie Mac, a government-chartered housing financier.
In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company's Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24.
Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.
Property-tax bills will go unpaid, Freddie Mac said, "resulting in increased tax liabilities and possible tax-foreclosure sales." It added it needs a court order allowing it to seize American Home's loan files "to avoid these serious consequences stemming from AHM's inability to service the Freddie Mac mortgage loans."
The wave of mortgage-lender bankruptcies in the past few months has disrupted loan-servicing arrangements and triggered court fights over who should get control of the files necessary to service the loans, court documents show.
American Home has resisted demands that it give up loan-servicing files, hoping to auction its loan-servicing business intact in an effort to raise money for creditors. Loan-servicing businesses have proven to be among the few valuable assets left in the wreckage of the failed lenders. Some of Wall Street's biggest investment banks are fighting for control of them.
For ordinary homeowners, however, the results could be dire, consumer lawyers say. "Companies receive the loan files that they are supposed to be servicing, but the payments don't catch up," said Jill Bowman, an attorney with James Hoyer Newcomer & Smiljanich, a Tampa, Fla., law firm that represents consumers in class-action suits against mortgage companies. "Payments are being deemed late, even when they're not, because they can't catch up with the paper." The result is additional insurance costs and accumulating late fees.
American Home, based in Melville, N.Y., and once one of the country's biggest mortgage lenders, serviced about $50 billion in mortgages. Its bankruptcy-court filing generated particular concern at Freddie Mac and Ginnie Mae, an agency that is part of the Department of Housing and Urban Development.
Just days before American Home's bankruptcy filing, Freddie Mac and Ginnie Mae terminated the company's loan-servicing rights. They also sent representatives to collect loan files from American Home's servicing facility in Irving, Texas.
In court documents, American Home said Ginnie Mae representatives "stood in a line in front of the doors and sat on the stairs, preventing AHM Servicing employees from entering the office." Freddie Mac said American Home "had its security personnel escort the Freddie Mac representatives out."
In addition to Freddie Mac and Ginnie Mae, several Wall Street banks are fighting to extract their loans from American Home's servicing operation. The list includes Morgan Stanley, Deutsche Bank AG, Credit Suisse Group and EMC Mortgage.
In an interview last week, Ginnie Mae's senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. "What's occurred is that we have the money, but AHM hasn't been able to or willing to pay the taxes and insurance, and they have the loan records," Mr. Foster said. "Therefore, we don't know who to pay, and we don't know how much."
4.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-11T170627Z_01_N11430263_RTRIDST_0_RLPC-ALLISONTRANSMISSION.XML
RLPC-Allison Transmission $1 bln loan sold-source
Tue Sep 11, 2007 1:06 PM ET
NEW YORK, Sept 11 (Reuters) - Citigroup, Lehman Brothers, Merrill Lynch and Sumitomo Banking Corp. have sold a $1 billion block of their previously unsold $3.5 billion bank loan for Allison Transmission at 96 cents on the dollar, a source close to the deal told Reuters Loan Pricing Corp. on Tuesday.
The loan financing was funded in early August at 275 basis points over Libor. The $1 billion block is currently being quoted in the 95-96 cents-on-the-dollar range, while its loan credit default swap (LCDS) is quoted around 350-450 basis points.
The underwriters have agreed not to sell the deal further for another two months. The inclusion of this clause will protect pricing on the loan from devaluation, according to a loan investor.
------------------------------------------------------------------------
5.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145146Z_01_WBT007560_RTRIDST_0_USA-PAULSON-MORTGAGES-URGENT.XML
US' Paulson: subprime woes to take longer to fix
Wed Sep 12, 2007 10:51 AM ET
WASHINGTON, Sept 12 (Reuters) - U.S. Treasury Secretary Henry Paulson on Wednesday said that problems with U.S. subprime mortgages will take longer to correct than those in other financial markets due to the wave of interest rate resets coming over the next two years.
Speaking to mortgage servicing executives at the Treasury, Paulson also called for an expansion of mortgage products to refinance mortgages made unaffordable by resets.
"Unlike periods of financial turbulence I've witnessed over many years, this turbulence wasn't precipitated by problems in the real eeconomy. This came about as a result of some bad lending practices," Paulson said.
6.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145023Z_01_L12920556_RTRIDST_0_BRITAIN-BANK-UPDATE-3.XML&WTmodLoc=InvArt-C2-NextArticle-2
UPDATE 3-BoE's King signals no bailout for banks
Wed Sep 12, 2007 10:50 AM ET
By Sumeet Desai
LONDON, Sept 12 (Reuters) - The Bank of England signalled on Wednesday it would not ride to the rescue of banks caught up in the credit crunch by cutting interest rates or flooding markets with cash unless the whole financial system was in danger.
As U.S. Treasury Secretary Henry Paulson predicted no quick end to the confidence crisis in credit markets, BoE Governor Mervyn King said a bailout now would only encourage more risky behaviour and cause an even bigger mess later on.
Moral hazard is not an abstract concept, King said in a written submission to a parliamentary committee. But central banks, of course, stood ready to act in the event of major shock to the financial system.
Echoing European Central Bank President Jean-Claude Trichet's comments on Tuesday, King said that for now banks, as a whole, were well capitalised enough to handle their losses.
"The current turmoil, which has at its heart the earlier underpricing of risk, has disturbed the unusual serenity of recent years, but, managed properly, it should not threaten our long-run economic stability."
REAL ECONOMY RISK
King reiterated it was too early to say what effect the credit crunch would have on the economy. At the start of August, he thought some slowdown in the economy was needed. But the market turmoil would raise borrowing costs for consumers.
"In other words, the crisis has removed the need to hike but not yet led to the need for a cut," said George Buckley, chief UK economist at Deutsche Bank.
Some lenders are already raising their mortgage rates as the cost of money has shot up as banks have become afraid to lend to each other for fear of possible nasty surprises lurking on their balance sheets.
Economists said that could soon start hurting consumers who have already seen their mortgages go up five times in the last year as the BoE has tried to quell inflation after hefty rises in energy bills.
On Tuesday, retailers Next, French Connection and JJB Sports said that already tough trading during Britain's wettest summer ever was getting worse as rising interest rates hit spending.
In the U.S., where the crisis started because of lending to the subprime sector -- people who were such bad credit risks that normally they would not be eligible for home loans -- the economy already appears to be slowing down fast.
U.S. jobs fell for the first time in four years in August prompting markets to bet the Fed will cut interest rates by 50 basis points and moral hazard be damned.
For now, economists say King looks sure to hold his ground. The BoE, alone of the major central banks, has so far shied away from pumping the financial system with cash in order to bring interbank lending rates down.
Its only concession to London financial institutions so far has been to offer them another chance this Thursday to set a new reserve target with the central bank without penalty on the assumption they may have underestimated last week how much ready cash they will need for their daily business.
"King is still playing hard ball," said Brian Hilliard, economist at Societe Generale. "His comments suggest some repricing of risk is necessary."
7.
http://money.cnn.com/2007/09/11/real_estate/toxic_rate_reset_shock/
Mortgage reset shock: Not so bad
With a little help from the Fed, borderline borrowers could get some relief from a flood of mortgages whose interest rates are set to jump.
By Les Christie, CNNMoney.com staff writer
September 12 2007: 9:54 AM EDT
NEW YORK (CNNMoney.com) -- The number of adjustable rate mortgages (ARMs) up for reset is set to peak this fall, with an estimated $50 billion worth poised to adjust to higher rates in October.
The housing and credit markets are bracing for another blow, but recent trends may mean the reset shock will be less painful than expected, especially if the Federal Reserve drops its Fed Funds rate.
Ironically, the recent spike in defaults on ARMS is one reason why borrowers with resetting ARMs should be better off. Fixed-income investors are buying much safer investments, which has pushed up short-term bond prices and brought down interest rates.
"Many 2/28 hybrid ARM interest rates are based on one-year treasury yields," said said Allen Hardester, a mortgage consultant in Maryland. "The new rate will be more affordable."
From a recent high of 5.02 percent in mid-July, one-year Treasury yields have fallen to 4.09 percent as of Sept. 10. The reset rates of ARMs are calculated using an average of several treasury prices, but the final result should be around that 4.09 percent.
Add a margin of 2.75 percent (a common margin according to Keith Gumbinger of publisher of mortgage information, HSH Associates), and it totals an interest rate of 6.84 percent, compared with 7.77 before.
On a $200,000 mortgage, borrowers will be paying $127 less at 6.84 percent than they would at 7.77 percent. For borderline borrowers, that could be the difference between being able to make the mortgage payments or not.
Furthermore, many economists believe there's a good chance the Federal Reserve will begin to lower the Fed Funds rate next week. Doug Duncan, the chief economist with the Mortgage Bankers Association predicts the rate will drop a quarter percentage point at each of the next two Fed sessions.
The yields on short-term Treasury bills tend to follow the same direction as the Fed Funds rate, so ARM reset rates could drop even further into affordable territory.
Said Keith Gumbinger, of the mortgage information publisher HSH Associates, "If you're coming due for an adjustment - I don't want to say you're in for a jackpot - but it could help some on-the-cusp borrowers."
But Richard DeKaser, chief economist for National City Corp., warned that if the Fed lowers rates by only a quarter point, versus half a point, Treasury bill yields may not move much. "That [quarter point drop] expectation has already been priced into short-term treasuries," he said.
Not all resetting ARM borrowers will benefit from T-bill yield declines. Many 2/28 hybrid ARM borrowers started their mortgages at such low "teaser" levels that their rates will rise the contractual maximum of three percentage points even if yields do remain low, according to DeKaser.
And one large class of ARM borrowers - as many as half, according to Gumbinger - who will not be seeing more affordable resets are those with adjustables tied to LIBOR, the London Interbank Offered Rate. Libor has been moving in the opposite direction as treasuries. On Sept. 5, the 30-day LIBOR stood at 5.80 percent, up from 5.33 percent 30 days earlier.
That would send the resetting LIBOR-based loans to about 8.45 percent, considerably higher than the ones tied to T-bill rates.
But the loan resets based on T-bills will certainly be reasonable compared with historical averages if yields remain low or fall further. At 6.84 percent they're not much higher than the current rate for a 30-year fixed, which averaged 6.46 percent last week, according to Freddie Mac.
"It does take some of the pressure off," said Gumbinger. "Maybe the borrower could now wait for a better deal [before refinancing]."
8.
http://money.cnn.com/2007/09/12/real_estate/refi_rescue_status_check/index.htm
Refi rescue
And potentially some tax help, too. Here are breaks that borrowers in a pickle may receive in the next few months.
By Jeanne Sahadi, CNNMoney.com senior writer
September 12 2007: 12:23 PM EDT
NEW YORK (CNNMoney.com) -- Hundreds of thousands of homeowners who may struggle to make mortgage payments are likely to get some relief in coming months, including more options to refinance into lower-cost, fixed-rate loans and tax relief if they do face foreclosure.
About 240,000 borrowers of the estimated 2 million with adjustable-rate loans scheduled to reset in the next year already are eligible to refinance into a loan insured by the Federal Housing Administration (FHA) - roughly 80,000 of them are eligible because of the newly created FHASecure Act, which loosens FHA's criteria for refinancing.
And more changes are likely, with the possibility of helping tens of thousands more.
TalkBack: Is the government taking the right steps to deal with the mortgage crisis?
The FHA program has been geared toward home buyers and homeowners with weak credit. Lenders may be more willing to lend to a buyer with shaky credit when the FHA is insuring the loan.
Borrowers with FHA-insured loans - which they get from private lenders as they would any other mortgage - pay a small premium to the FHA every month. The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.
If you are behind on payments by at least four months but no more than 12, the FHA may even make a one-time interest-free loan to you to make your account current with your lender.
It used to be you couldn't refinance into an FHA loan if you'd been delinquent in your payments for any reason. But with the FHASecure Act, delinquent homeowners qualify for an FHA-insured refi if they have:
-1. A history of on-time payments for at least six months before their loans reset to higher rates
-1. Interest rates scheduled to reset between June 2005 and December 2009
-1. 3 percent equity in their home, or the cash equivalent
-1. A sustained history of employment
-1. Sufficient income to make their FHA-insured mortgage payment and all other obligations
The FHA will still insist that lenders verify borrowers' income and ensure that their total debts don't exceed 43 percent of their income or that their mortgage payment won't exceed 31 percent of income. If those ratios are exceeded, the lender must explain how the homeowner can compensate for that.
For borrowers who qualify, an FHA refi can save them money. Even with the premiums FHA charges, an FHA-insured loan could save a borrower $100 or more a month for every $100,000 borrowed compared to the payments they'd owe under an adjustable-rate mortgage that readjusts upward by 3 percentage points.
And if the homeowner has an FHA-insured loan for five years and has built up 22 percent equity in the home, the borrower no longer needs to pay the premium.
FHA requirements may get even more liberal
Lawmakers also are considering legislation to modernize FHA guidelines, which could make FHA refis available to another 60,000 troubled mortgage borrowers, and open the door to another 140,000 new home buyers who today wouldn't qualify for an FHA-insured loan, according to FHA estimates.
Jaret Seiberg, a financial services analyst at policy research firm Stanford Group, expects lawmakers will pass the FHA legislation, noting that it has broad support in both parties. "FHA reform is the lowest hanging fruit. It's the easiest thing to do."
That legislation would further liberalize FHA loan requirements. Among its key provisions, it would:
Raise loan limits. Today the FHA won't insure loans above $362,790 for single-family homes, and even less in lower-cost areas. Under the bill before the House, which is expected to vote next week, that ceiling would increase to 100 percent of the conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac, currently $417,000.
But Barney Frank, chairman of the House Financial Services Committee, plans to propose an amendment that would boost that new limit to $500,000, and give the FHA commissioner discretion to raise that limit further during mortgage crises.
Reduce down payment requirements. Homeowners would no longer be required to have 3 percent equity or the cash equivalent. They could get an FHA-insured loan with 0 percent down.
Reduce complexity. Reform also would "clear away a bunch of burdensome rules that make FHA difficult to use," Seiberg said.
Foreclosed borrowers may get tax break
For homeowners whose situations can't be remedied with a refi, they may get a tax break if they end up facing foreclosure.
Currently, if you foreclose on your home and the bank forgives a portion of your mortgage debt which isn't recovered by the sale of your home, that forgiven debt is treated as taxable income to you. President Bush has asked lawmakers to provide a temporary exemption from that rule.
Both Seiberg and Clint Stretch, managing principal of tax policy at Deloitte Tax LLP, think it's likely lawmakers to pass that exemption this fall and to make it retroactive so that homeowners who foreclosed in 2007 would be covered.
BLOG, SEPTEMBER 12, 2007
http://cnnmoneytalkback.blogs.cnnmoney.com/2007/09/12/is-refi-rescue-a-bailout/
CNN TALK BACK BLOG ENTRIES
Screwing around with the loan limits and then having a zero down payment program?? You have to be kidding me!! Isn’t that the reason we’re in this mess in the first place? Nothing down and home prices falling. In CA. I don’t think all this political BS is going to do anything except help the law makers feel better.
I’ve been in the mortgage business for about 20 years and a few of us saw this coming. What about relief to the few of us that have ethics and morals in the business, and have never done one of those nasty neg am ARMS? Our business is down…….gone for the moment.
Posted By Lon Alward, Redding, CA : September 12, 2007 4:41 pm
The “bailout” is for the big money boys that made the loans or invested in real estate. The “homeowner” can not loose his house because he never really owned it - he just borrowed a lot of money. This plan to help homeowners is really another bailout, payed for by taxpayers, so the wealthy won’t loose money.
Posted By Anonymous : September 12, 2007 4:40 pm
One more step toward communism.
Posted By John, Frederick, MD : September 12, 2007 4:39 pm
I should also add that the up front premiums on a loan 1.5% and the monthly primiums .5% (anually) are used pay for the default risk accociated with the this program. Meaning no to next to no cost to the taxpayers
Posted By Rob Raleigh, NC : September 12, 2007 4:37 pm
sink or swim, people need to learn personal responsibility, bail outs enable foolish/ risky behavior to continue . i resent paying my tax dollars other than for services I receive.
Posted By denise digiovanni sanjose ca : September 12, 2007 4:36 pm
I am all for revamping the FHA program and bring it up to speed. As a mortgage profecional that has access to the FHA program it has been invaluble in helping people in trouble that have a recent (2year) history of paying their bills on time and meet the fairly strict but not unreasonable income to debt requirements.
Posted By Rob Raleigh, NC : September 12, 2007 4:33 pm
At best, it’s postponing the inevitable because most who took out these loans don’t manage money/debt in the first place. However, I hate to see more of a “bailout”, because it’s not right to reward the OUTRIGHT STUPIDITY of all parties involved in this, and expect the rest of us to foot the bill!!
Posted By Jeff, Phoenix AZ : September 12, 2007 4:32 pm
Defaulting on a mortgage is a tough pill to swallow, but I wonder if too much assistance will negate the lesson that should be learned here, both for the banking/mortgage industry and the individual homebuyer. The government is probably doing the right thing by providing assistance, but a cool apprehension comes over me whenever the government becomes involved in business. I suppose time will tell the effects of this bailout.
Posted By Dave C., Rockville, MD : September 12, 2007 4:31 pm
We have turned into a country of whining socialists. These people took a risky loan, but now that the risk has occurred, somehow the govt (my taxes) will bail them out. They took the risk, they lived in homes beyond their means, they didn’t save, if they can’t pay, foreclosure is right. I’m sick to death of being responsible, and then I end up having to pay for others irresponsibility.
Posted By Bill, Denver, CO : September 12, 2007 4:23 pm
The solution to this crisis is to allow people who cannot repay their debts to default and allow the companies that issued bad loans to fail
Posted By Anonymous : September 12, 2007 4:20 pm
Sub-prime woes hit US lender GMAC
The sub-prime mortgage downturn has now hit a number of firms
Finance firm GMAC has had to take out a $21.4bn (£10.1bn) loan as it becomes the
latest lender to reveal the impact of the US sub-prime mortgage crisis.
The crisis in the sub-prime mortgage sector has caused a shortage of global credit as banks are unwilling to lend money until the full impact of the situation is known.
2. http://www.iht.com/articles/ap/2007/09/12/business/EU-FIN-France-US-Credit-Crunch.php
IMF official warns of slowing U.S. economy amid subprime crisis
The Associated Press
Published: September 12, 2007
Simon Johnson, director of the IMF's Research department, said fallout from the subprime credit crisis hasn't yet been resolved — and the IMF doesn't understand why tight financial markets continue.
3.
http://online.wsj.com/article/SB118955540976824460.html?mod=googlenews_wsj
Mortgage Lender's Bankruptcy May Threaten Thousands of Homeowners
By PEG BRICKLEY
September 12, 2007
Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.
4.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-11T170627Z_01_N11430263_RTRIDST_0_RLPC-ALLISONTRANSMISSION.XML
RLPC-Allison Transmission $1 bln loan sold-source
Tue Sep 11, 2007 1:06 PM ET
Citigroup, Lehman Brothers, Merrill Lynch and Sumitomo Banking Corp. have sold a $1 billion block of their previously unsold $3.5 billion bank loan for Allison Transmission at 96 cents on the dollar
5.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145146Z_01_WBT007560_RTRIDST_0_USA-PAULSON-MORTGAGES-URGENT.XML
US' Paulson: subprime woes to take longer to fix
Wed Sep 12, 2007 10:51 AM ET
"Unlike periods of financial turbulence I've witnessed over many years, this turbulence wasn't precipitated by problems in the real economy. This came about as a result of some bad lending practices," Paulson said.
6.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145023Z_01_L12920556_RTRIDST_0_BRITAIN-BANK-UPDATE-3.XML&WTmodLoc=InvArt-C2-NextArticle-2
UPDATE 3-BoE's King signals no bailout for banks
Wed Sep 12, 2007 10:50 AM ET
By Sumeet Desai
As U.S. Treasury Secretary Henry Paulson predicted no quick end to the confidence crisis in credit markets, BoE Governor Mervyn King said a bailout now would only encourage more risky behaviour and cause an even bigger mess later on.
7. http://money.cnn.com/2007/09/11/real_estate/toxic_rate_reset_shock/
Mortgage reset shock: Not so bad
With a little help from the Fed, borderline borrowers could get some relief from a
flood of mortgages whose interest rates are set to jump.
By Les Christie, CNNMoney.com staff writer
September 12 2007: 9:54 AM EDT
Furthermore, many economists believe there's a good chance the Federal Reserve will begin to lower the Fed Funds rate next week. Doug Duncan, the chief economist with the Mortgage Bankers Association predicts the rate will drop a quarter percentage point at each of the next two Fed sessions
But Richard DeKaser, chief economist for National City Corp., warned that if the Fed lowers rates by only a quarter point, versus half a point, Treasury bill yields may not move much. "That [quarter point drop] expectation has already been priced into short-term treasuries," he said.
9. http://money.cnn.com/2007/09/12/real_estate/refi_rescue_status_check/index.htm
Refi rescue
And potentially some tax help, too. Here are breaks that borrowers in a pickle may
receive in the next few months.
By Jeanne Sahadi, CNNMoney.com senior writer
September 12 2007: 12:23 PM EDT
About 240,000 borrowers of the estimated 2 million with adjustable-rate loans scheduled to reset in the next year already are eligible to refinance into a loan insured by the Federal Housing Administration (FHA) - roughly 80,000 of them are eligible because of the newly created FHASecure Act, which loosens FHA's criteria for refinancing
Subprime Blog-September 12, 2007
http://cnnmoneytalkback.blogs.cnnmoney.com/2007/09/12/is-refi-rescue-a-bailout/
CNN TALK BACK BLOG ENTRIES
1.
http://news.bbc.co.uk/1/hi/business/6990822.stm
Sub-prime woes hit US lender GMAC
The sub-prime mortgage downturn has now hit a number of firms
Finance firm GMAC has had to take out a $21.4bn (£10.1bn) loan as it becomes the latest lender to reveal the impact of the US sub-prime mortgage crisis.
GMAC, which has borrowed the cash from Citigroup, said boosting its financial flexibility was "a prudent measure" in the current market environment.
Hit by higher US interest rates, the sub-prime mortgage sector has seen record loan defaults in the past year.
GMAC is a former unit of General Motors which still retains a 49% stake.
Private equity group Cerberus Capital Management owns the remaining 51%.
GMAC started out offering car loans before expanding into the mortgage industry.
Lack of credit
The one-year, short term loan from Citigroup, America's largest bank, replaces GMAC's existing $10bn funding facility from the bank.
GMAC's struggling home lending unit, Residential Capital, lost $254m in the three months to the end of June.
The crisis in the sub-prime mortgage sector has caused a shortage of global credit as banks are unwilling to lend money until the full impact of the situation is known.
Banks have also been putting aside funds to cover any of their own exposure to the sub-prime downturn.
A key problem is that sub-prime loans are often repacked into wider debt groupings which are then resold.
This means that no-one is yet quite sure of the full impact of the woes.
2.
http://www.iht.com/articles/ap/2007/09/12/business/EU-FIN-France-US-Credit-Crunch.php
IMF official warns of slowing U.S. economy amid subprime crisis
The Associated Press
Published: September 12, 2007
PARIS: The U.S. economy will slow next year amid continued trouble in the housing market, likely leading to lower interest rates, a senior International Monetary Fund official said Wednesday.
Simon Johnson, director of the IMF's Research department, said fallout from the subprime credit crisis hasn't yet been resolved — and the IMF doesn't understand why tight financial markets continue.
"The problem hasn't been resolved," despite efforts from major central banks to boost liquidity in the financial markets, said Simon Johnson, director of the IMF's research department. "This makes it hard to assess the outlook."
Johnson predicted that the impact of the lending crisis in the subprime mortgage market in the United States will be limited outside the Americas.
"The effect ... on the real economy is limited because European markets managed to be relatively insulated from the shock," he said.
The IMF is "very comfortable" with moves by the U.S. Federal Reserve and the European Central Bank to make funds available for the tightening credit markets.
Financial markets are expecting the Fed to ease rates further, Johnson said.
"This is a situation where interest rates are likely to fall," he said, adding that U.S. inflation appeared to be rising more slowly than previously thought. "Overall, the interest rate environment in the U.S. is clearly softening."
3.
http://online.wsj.com/article/SB118955540976824460.html?mod=googlenews_wsj
Mortgage Lender's Bankruptcy May Threaten Thousands of Homeowners
By PEG BRICKLEY
September 12, 2007; Page A15
Thousands of homeowners face an "imminent risk" of losing their homes because of clashes between American Home Mortgage Investment Corp. and its former financial backers, according to Freddie Mac, a government-chartered housing financier.
In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company's Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24.
Freddie Mac said 4,547 loans valued at nearly $797 million are at stake. It said it doesn't have the loan files necessary to pay insurance premiums and property taxes on them, however. "Therefore, there is the imminent risk that borrowers' insurance policies may lapse for nonpayment, subjecting the borrowers to a risk of loss of their mortgaged properties," Freddie Mac said.
Property-tax bills will go unpaid, Freddie Mac said, "resulting in increased tax liabilities and possible tax-foreclosure sales." It added it needs a court order allowing it to seize American Home's loan files "to avoid these serious consequences stemming from AHM's inability to service the Freddie Mac mortgage loans."
The wave of mortgage-lender bankruptcies in the past few months has disrupted loan-servicing arrangements and triggered court fights over who should get control of the files necessary to service the loans, court documents show.
American Home has resisted demands that it give up loan-servicing files, hoping to auction its loan-servicing business intact in an effort to raise money for creditors. Loan-servicing businesses have proven to be among the few valuable assets left in the wreckage of the failed lenders. Some of Wall Street's biggest investment banks are fighting for control of them.
For ordinary homeowners, however, the results could be dire, consumer lawyers say. "Companies receive the loan files that they are supposed to be servicing, but the payments don't catch up," said Jill Bowman, an attorney with James Hoyer Newcomer & Smiljanich, a Tampa, Fla., law firm that represents consumers in class-action suits against mortgage companies. "Payments are being deemed late, even when they're not, because they can't catch up with the paper." The result is additional insurance costs and accumulating late fees.
American Home, based in Melville, N.Y., and once one of the country's biggest mortgage lenders, serviced about $50 billion in mortgages. Its bankruptcy-court filing generated particular concern at Freddie Mac and Ginnie Mae, an agency that is part of the Department of Housing and Urban Development.
Just days before American Home's bankruptcy filing, Freddie Mac and Ginnie Mae terminated the company's loan-servicing rights. They also sent representatives to collect loan files from American Home's servicing facility in Irving, Texas.
In court documents, American Home said Ginnie Mae representatives "stood in a line in front of the doors and sat on the stairs, preventing AHM Servicing employees from entering the office." Freddie Mac said American Home "had its security personnel escort the Freddie Mac representatives out."
In addition to Freddie Mac and Ginnie Mae, several Wall Street banks are fighting to extract their loans from American Home's servicing operation. The list includes Morgan Stanley, Deutsche Bank AG, Credit Suisse Group and EMC Mortgage.
In an interview last week, Ginnie Mae's senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. "What's occurred is that we have the money, but AHM hasn't been able to or willing to pay the taxes and insurance, and they have the loan records," Mr. Foster said. "Therefore, we don't know who to pay, and we don't know how much."
4.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-11T170627Z_01_N11430263_RTRIDST_0_RLPC-ALLISONTRANSMISSION.XML
RLPC-Allison Transmission $1 bln loan sold-source
Tue Sep 11, 2007 1:06 PM ET
NEW YORK, Sept 11 (Reuters) - Citigroup, Lehman Brothers, Merrill Lynch and Sumitomo Banking Corp. have sold a $1 billion block of their previously unsold $3.5 billion bank loan for Allison Transmission at 96 cents on the dollar, a source close to the deal told Reuters Loan Pricing Corp. on Tuesday.
The loan financing was funded in early August at 275 basis points over Libor. The $1 billion block is currently being quoted in the 95-96 cents-on-the-dollar range, while its loan credit default swap (LCDS) is quoted around 350-450 basis points.
The underwriters have agreed not to sell the deal further for another two months. The inclusion of this clause will protect pricing on the loan from devaluation, according to a loan investor.
------------------------------------------------------------------------
5.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145146Z_01_WBT007560_RTRIDST_0_USA-PAULSON-MORTGAGES-URGENT.XML
US' Paulson: subprime woes to take longer to fix
Wed Sep 12, 2007 10:51 AM ET
WASHINGTON, Sept 12 (Reuters) - U.S. Treasury Secretary Henry Paulson on Wednesday said that problems with U.S. subprime mortgages will take longer to correct than those in other financial markets due to the wave of interest rate resets coming over the next two years.
Speaking to mortgage servicing executives at the Treasury, Paulson also called for an expansion of mortgage products to refinance mortgages made unaffordable by resets.
"Unlike periods of financial turbulence I've witnessed over many years, this turbulence wasn't precipitated by problems in the real eeconomy. This came about as a result of some bad lending practices," Paulson said.
6.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-12T145023Z_01_L12920556_RTRIDST_0_BRITAIN-BANK-UPDATE-3.XML&WTmodLoc=InvArt-C2-NextArticle-2
UPDATE 3-BoE's King signals no bailout for banks
Wed Sep 12, 2007 10:50 AM ET
By Sumeet Desai
LONDON, Sept 12 (Reuters) - The Bank of England signalled on Wednesday it would not ride to the rescue of banks caught up in the credit crunch by cutting interest rates or flooding markets with cash unless the whole financial system was in danger.
As U.S. Treasury Secretary Henry Paulson predicted no quick end to the confidence crisis in credit markets, BoE Governor Mervyn King said a bailout now would only encourage more risky behaviour and cause an even bigger mess later on.
Moral hazard is not an abstract concept, King said in a written submission to a parliamentary committee. But central banks, of course, stood ready to act in the event of major shock to the financial system.
Echoing European Central Bank President Jean-Claude Trichet's comments on Tuesday, King said that for now banks, as a whole, were well capitalised enough to handle their losses.
"The current turmoil, which has at its heart the earlier underpricing of risk, has disturbed the unusual serenity of recent years, but, managed properly, it should not threaten our long-run economic stability."
REAL ECONOMY RISK
King reiterated it was too early to say what effect the credit crunch would have on the economy. At the start of August, he thought some slowdown in the economy was needed. But the market turmoil would raise borrowing costs for consumers.
"In other words, the crisis has removed the need to hike but not yet led to the need for a cut," said George Buckley, chief UK economist at Deutsche Bank.
Some lenders are already raising their mortgage rates as the cost of money has shot up as banks have become afraid to lend to each other for fear of possible nasty surprises lurking on their balance sheets.
Economists said that could soon start hurting consumers who have already seen their mortgages go up five times in the last year as the BoE has tried to quell inflation after hefty rises in energy bills.
On Tuesday, retailers Next, French Connection and JJB Sports said that already tough trading during Britain's wettest summer ever was getting worse as rising interest rates hit spending.
In the U.S., where the crisis started because of lending to the subprime sector -- people who were such bad credit risks that normally they would not be eligible for home loans -- the economy already appears to be slowing down fast.
U.S. jobs fell for the first time in four years in August prompting markets to bet the Fed will cut interest rates by 50 basis points and moral hazard be damned.
For now, economists say King looks sure to hold his ground. The BoE, alone of the major central banks, has so far shied away from pumping the financial system with cash in order to bring interbank lending rates down.
Its only concession to London financial institutions so far has been to offer them another chance this Thursday to set a new reserve target with the central bank without penalty on the assumption they may have underestimated last week how much ready cash they will need for their daily business.
"King is still playing hard ball," said Brian Hilliard, economist at Societe Generale. "His comments suggest some repricing of risk is necessary."
7.
http://money.cnn.com/2007/09/11/real_estate/toxic_rate_reset_shock/
Mortgage reset shock: Not so bad
With a little help from the Fed, borderline borrowers could get some relief from a flood of mortgages whose interest rates are set to jump.
By Les Christie, CNNMoney.com staff writer
September 12 2007: 9:54 AM EDT
NEW YORK (CNNMoney.com) -- The number of adjustable rate mortgages (ARMs) up for reset is set to peak this fall, with an estimated $50 billion worth poised to adjust to higher rates in October.
The housing and credit markets are bracing for another blow, but recent trends may mean the reset shock will be less painful than expected, especially if the Federal Reserve drops its Fed Funds rate.
Ironically, the recent spike in defaults on ARMS is one reason why borrowers with resetting ARMs should be better off. Fixed-income investors are buying much safer investments, which has pushed up short-term bond prices and brought down interest rates.
"Many 2/28 hybrid ARM interest rates are based on one-year treasury yields," said said Allen Hardester, a mortgage consultant in Maryland. "The new rate will be more affordable."
From a recent high of 5.02 percent in mid-July, one-year Treasury yields have fallen to 4.09 percent as of Sept. 10. The reset rates of ARMs are calculated using an average of several treasury prices, but the final result should be around that 4.09 percent.
Add a margin of 2.75 percent (a common margin according to Keith Gumbinger of publisher of mortgage information, HSH Associates), and it totals an interest rate of 6.84 percent, compared with 7.77 before.
On a $200,000 mortgage, borrowers will be paying $127 less at 6.84 percent than they would at 7.77 percent. For borderline borrowers, that could be the difference between being able to make the mortgage payments or not.
Furthermore, many economists believe there's a good chance the Federal Reserve will begin to lower the Fed Funds rate next week. Doug Duncan, the chief economist with the Mortgage Bankers Association predicts the rate will drop a quarter percentage point at each of the next two Fed sessions.
The yields on short-term Treasury bills tend to follow the same direction as the Fed Funds rate, so ARM reset rates could drop even further into affordable territory.
Said Keith Gumbinger, of the mortgage information publisher HSH Associates, "If you're coming due for an adjustment - I don't want to say you're in for a jackpot - but it could help some on-the-cusp borrowers."
But Richard DeKaser, chief economist for National City Corp., warned that if the Fed lowers rates by only a quarter point, versus half a point, Treasury bill yields may not move much. "That [quarter point drop] expectation has already been priced into short-term treasuries," he said.
Not all resetting ARM borrowers will benefit from T-bill yield declines. Many 2/28 hybrid ARM borrowers started their mortgages at such low "teaser" levels that their rates will rise the contractual maximum of three percentage points even if yields do remain low, according to DeKaser.
And one large class of ARM borrowers - as many as half, according to Gumbinger - who will not be seeing more affordable resets are those with adjustables tied to LIBOR, the London Interbank Offered Rate. Libor has been moving in the opposite direction as treasuries. On Sept. 5, the 30-day LIBOR stood at 5.80 percent, up from 5.33 percent 30 days earlier.
That would send the resetting LIBOR-based loans to about 8.45 percent, considerably higher than the ones tied to T-bill rates.
But the loan resets based on T-bills will certainly be reasonable compared with historical averages if yields remain low or fall further. At 6.84 percent they're not much higher than the current rate for a 30-year fixed, which averaged 6.46 percent last week, according to Freddie Mac.
"It does take some of the pressure off," said Gumbinger. "Maybe the borrower could now wait for a better deal [before refinancing]."
8.
http://money.cnn.com/2007/09/12/real_estate/refi_rescue_status_check/index.htm
Refi rescue
And potentially some tax help, too. Here are breaks that borrowers in a pickle may receive in the next few months.
By Jeanne Sahadi, CNNMoney.com senior writer
September 12 2007: 12:23 PM EDT
NEW YORK (CNNMoney.com) -- Hundreds of thousands of homeowners who may struggle to make mortgage payments are likely to get some relief in coming months, including more options to refinance into lower-cost, fixed-rate loans and tax relief if they do face foreclosure.
About 240,000 borrowers of the estimated 2 million with adjustable-rate loans scheduled to reset in the next year already are eligible to refinance into a loan insured by the Federal Housing Administration (FHA) - roughly 80,000 of them are eligible because of the newly created FHASecure Act, which loosens FHA's criteria for refinancing.
And more changes are likely, with the possibility of helping tens of thousands more.
TalkBack: Is the government taking the right steps to deal with the mortgage crisis?
The FHA program has been geared toward home buyers and homeowners with weak credit. Lenders may be more willing to lend to a buyer with shaky credit when the FHA is insuring the loan.
Borrowers with FHA-insured loans - which they get from private lenders as they would any other mortgage - pay a small premium to the FHA every month. The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.
If you are behind on payments by at least four months but no more than 12, the FHA may even make a one-time interest-free loan to you to make your account current with your lender.
It used to be you couldn't refinance into an FHA loan if you'd been delinquent in your payments for any reason. But with the FHASecure Act, delinquent homeowners qualify for an FHA-insured refi if they have:
-1. A history of on-time payments for at least six months before their loans reset to higher rates
-1. Interest rates scheduled to reset between June 2005 and December 2009
-1. 3 percent equity in their home, or the cash equivalent
-1. A sustained history of employment
-1. Sufficient income to make their FHA-insured mortgage payment and all other obligations
The FHA will still insist that lenders verify borrowers' income and ensure that their total debts don't exceed 43 percent of their income or that their mortgage payment won't exceed 31 percent of income. If those ratios are exceeded, the lender must explain how the homeowner can compensate for that.
For borrowers who qualify, an FHA refi can save them money. Even with the premiums FHA charges, an FHA-insured loan could save a borrower $100 or more a month for every $100,000 borrowed compared to the payments they'd owe under an adjustable-rate mortgage that readjusts upward by 3 percentage points.
And if the homeowner has an FHA-insured loan for five years and has built up 22 percent equity in the home, the borrower no longer needs to pay the premium.
FHA requirements may get even more liberal
Lawmakers also are considering legislation to modernize FHA guidelines, which could make FHA refis available to another 60,000 troubled mortgage borrowers, and open the door to another 140,000 new home buyers who today wouldn't qualify for an FHA-insured loan, according to FHA estimates.
Jaret Seiberg, a financial services analyst at policy research firm Stanford Group, expects lawmakers will pass the FHA legislation, noting that it has broad support in both parties. "FHA reform is the lowest hanging fruit. It's the easiest thing to do."
That legislation would further liberalize FHA loan requirements. Among its key provisions, it would:
Raise loan limits. Today the FHA won't insure loans above $362,790 for single-family homes, and even less in lower-cost areas. Under the bill before the House, which is expected to vote next week, that ceiling would increase to 100 percent of the conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac, currently $417,000.
But Barney Frank, chairman of the House Financial Services Committee, plans to propose an amendment that would boost that new limit to $500,000, and give the FHA commissioner discretion to raise that limit further during mortgage crises.
Reduce down payment requirements. Homeowners would no longer be required to have 3 percent equity or the cash equivalent. They could get an FHA-insured loan with 0 percent down.
Reduce complexity. Reform also would "clear away a bunch of burdensome rules that make FHA difficult to use," Seiberg said.
Foreclosed borrowers may get tax break
For homeowners whose situations can't be remedied with a refi, they may get a tax break if they end up facing foreclosure.
Currently, if you foreclose on your home and the bank forgives a portion of your mortgage debt which isn't recovered by the sale of your home, that forgiven debt is treated as taxable income to you. President Bush has asked lawmakers to provide a temporary exemption from that rule.
Both Seiberg and Clint Stretch, managing principal of tax policy at Deloitte Tax LLP, think it's likely lawmakers to pass that exemption this fall and to make it retroactive so that homeowners who foreclosed in 2007 would be covered.
BLOG, SEPTEMBER 12, 2007
http://cnnmoneytalkback.blogs.cnnmoney.com/2007/09/12/is-refi-rescue-a-bailout/
CNN TALK BACK BLOG ENTRIES
Screwing around with the loan limits and then having a zero down payment program?? You have to be kidding me!! Isn’t that the reason we’re in this mess in the first place? Nothing down and home prices falling. In CA. I don’t think all this political BS is going to do anything except help the law makers feel better.
I’ve been in the mortgage business for about 20 years and a few of us saw this coming. What about relief to the few of us that have ethics and morals in the business, and have never done one of those nasty neg am ARMS? Our business is down…….gone for the moment.
Posted By Lon Alward, Redding, CA : September 12, 2007 4:41 pm
The “bailout” is for the big money boys that made the loans or invested in real estate. The “homeowner” can not loose his house because he never really owned it - he just borrowed a lot of money. This plan to help homeowners is really another bailout, payed for by taxpayers, so the wealthy won’t loose money.
Posted By Anonymous : September 12, 2007 4:40 pm
One more step toward communism.
Posted By John, Frederick, MD : September 12, 2007 4:39 pm
I should also add that the up front premiums on a loan 1.5% and the monthly primiums .5% (anually) are used pay for the default risk accociated with the this program. Meaning no to next to no cost to the taxpayers
Posted By Rob Raleigh, NC : September 12, 2007 4:37 pm
sink or swim, people need to learn personal responsibility, bail outs enable foolish/ risky behavior to continue . i resent paying my tax dollars other than for services I receive.
Posted By denise digiovanni sanjose ca : September 12, 2007 4:36 pm
I am all for revamping the FHA program and bring it up to speed. As a mortgage profecional that has access to the FHA program it has been invaluble in helping people in trouble that have a recent (2year) history of paying their bills on time and meet the fairly strict but not unreasonable income to debt requirements.
Posted By Rob Raleigh, NC : September 12, 2007 4:33 pm
At best, it’s postponing the inevitable because most who took out these loans don’t manage money/debt in the first place. However, I hate to see more of a “bailout”, because it’s not right to reward the OUTRIGHT STUPIDITY of all parties involved in this, and expect the rest of us to foot the bill!!
Posted By Jeff, Phoenix AZ : September 12, 2007 4:32 pm
Defaulting on a mortgage is a tough pill to swallow, but I wonder if too much assistance will negate the lesson that should be learned here, both for the banking/mortgage industry and the individual homebuyer. The government is probably doing the right thing by providing assistance, but a cool apprehension comes over me whenever the government becomes involved in business. I suppose time will tell the effects of this bailout.
Posted By Dave C., Rockville, MD : September 12, 2007 4:31 pm
We have turned into a country of whining socialists. These people took a risky loan, but now that the risk has occurred, somehow the govt (my taxes) will bail them out. They took the risk, they lived in homes beyond their means, they didn’t save, if they can’t pay, foreclosure is right. I’m sick to death of being responsible, and then I end up having to pay for others irresponsibility.
Posted By Bill, Denver, CO : September 12, 2007 4:23 pm
The solution to this crisis is to allow people who cannot repay their debts to default and allow the companies that issued bad loans to fail
Posted By Anonymous : September 12, 2007 4:20 pm
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