Feds Announce Initiative That Would Put Some Foreclosures on Hold for 30 Days
WASHINGTON (AP) -- Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday.
Dubbed "Project Lifeline," the program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus of previous relief efforts.
The program was put together by six of the nation's largest financial institutions, which service almost 50 percent of the nation's mortgages.
These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. The homeowners will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to homeowners.
"Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure," Housing and Urban Development Secretary Alphonso Jackson said at a joint news conference with Treasury Secretary Henry Paulson.
He said the goal was to provide a temporary pause in the foreclosure process "long enough to find a way out" by letting homeowners and lenders negotiate a more affordable mortgage.
Paulson said the new effort was just one of a number of approaches the administration was pursuing with the mortgage industry to deal with the country's worst housing slump in more than two decades.
In December, President Bush announced a deal brokered with the mortgage industry that will freeze certain subprime loans -- those offered to borrowers with weak credit histories -- for five years if the borrowers cannot afford the higher monthly payments as those mortgages reset after being at lower introductory rates.
"As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures," Paulson said. "However, none of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real estate speculators or those who committed fraud during the mortgage process."
In coming days, lenders will begin sending letters to homeowners who might qualify for the new program. Homeowners won't qualify if they have entered bankruptcy, if they already have a foreclosure date within 30 days, or if the home loan was taken out to cover an investment property or a vacation home.
The Mortgage Bankers Association reported that at least 1.3 million home mortgage loans were either seriously delinquent or in foreclosure at the end of the July-September quarter.
Private economists are forecasting that the number of foreclosures could soar to 1 million this year and next, about double the 2007 rate.
Officials did not have an estimate of how many people might be helped by the new "Project Lifeline" program.
Democratic critics said the administration was still not doing enough to help with a serious crisis that has slowed the overall economy to a near standstill and raised worries about a full-blown recession.
In a statement, Sen. Hillary Rodham Clinton, who is running for the Democratic presidential nomination, said that last year she had called for a 90-day moratorium on subprime foreclosures. She said the administration has been slow to react to the unfolding crisis.
"The administration's latest initiative is welcome news, but more remains to be done," she said in a statement.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the finance industry and the administration were falling further and further behind in dealing with the growing crisis.
"This plan, while a step in the right direction, will not stem the tide of the millions of foreclosures we are facing in the coming months," Dodd said in a statement. His committee will hold a hearing on the housing crisis on Thursday with testimony from Paulson and Federal Reserve Chairman Ben Bernanke.
The six participating banks are Bank of America Corp., Citigroup Inc. Countrywide Financial Corp., J.P. Morgan Chase and Co., Washington Mutual Inc. and Wells Fargo & Co.
Tuesday, February 12, 2008
Monday, February 4, 2008
Many unaware of mortgage help
NEW YORK (CNNMoney.com) -- More than half of borrowers who have missed mortgage payment deadlines are still in the dark about ways to avoid foreclosure, but that percentage is falling, said a survey released Thursday.
Research from government mortgage buyer Freddie Mac and marketing research firm Roper Public Affairs and Media said that 57% of late-paying borrowers are unaware of foreclosure alternatives offered by their lenders.
That percentage was down from the 61% reported in the first Freddie Mac/Roper survey in 2005.
"Efforts to get borrowers to call lenders and counselors are starting to work," said Ingrid Beckles, Freddie Mac's VP of Servicing and Asset Management.
But, she added, "Too many at-risk borrowers are still unaware their servicers routinely provide alternatives."
Both the percentage of delinquent borrowers who contacted their lenders and the percentage who said their lenders had contacted them have increased since 2005, Freddie Mac said. But while 59% said their communication was helpful, nearly a fourth said the contact was "intimidating" or "confusing."
Beckles pointed out that delinquent borrowers should proactively call their servicers, firms that collect payments for firms such as Freddie Mac (FRE, Fortune 500), to learn what they can do to avoid foreclosure.
The survey also found increased awareness of foreclosure avoidance strategies such as repayment plans, adjustable to fixed rate mortgage conversions, and lump sum payments.
Borrowers are less likely to turn to lenders and financial institutions for foreclosure information, and increasingly go to friends, family, and the Internet, said the report.
More than half of those surveyed still talk to their bank or mortgage lender first, a statistic unchanged since 2005, but a large percentage said those institutions are a pain to deal with.
www.guaranteedloanhelp.com
Research from government mortgage buyer Freddie Mac and marketing research firm Roper Public Affairs and Media said that 57% of late-paying borrowers are unaware of foreclosure alternatives offered by their lenders.
That percentage was down from the 61% reported in the first Freddie Mac/Roper survey in 2005.
"Efforts to get borrowers to call lenders and counselors are starting to work," said Ingrid Beckles, Freddie Mac's VP of Servicing and Asset Management.
But, she added, "Too many at-risk borrowers are still unaware their servicers routinely provide alternatives."
Both the percentage of delinquent borrowers who contacted their lenders and the percentage who said their lenders had contacted them have increased since 2005, Freddie Mac said. But while 59% said their communication was helpful, nearly a fourth said the contact was "intimidating" or "confusing."
Beckles pointed out that delinquent borrowers should proactively call their servicers, firms that collect payments for firms such as Freddie Mac (FRE, Fortune 500), to learn what they can do to avoid foreclosure.
The survey also found increased awareness of foreclosure avoidance strategies such as repayment plans, adjustable to fixed rate mortgage conversions, and lump sum payments.
Borrowers are less likely to turn to lenders and financial institutions for foreclosure information, and increasingly go to friends, family, and the Internet, said the report.
More than half of those surveyed still talk to their bank or mortgage lender first, a statistic unchanged since 2005, but a large percentage said those institutions are a pain to deal with.
www.guaranteedloanhelp.com
Sunday, February 3, 2008
'It's going to be much worse' Jim Rodgers
NEW YORK (Fortune) -- You might expect Jim Rogers to be gloating a little bit. After all, the famed investor has been predicting a recession in the U.S. economy for months and shorting the shares of now-tanking Wall Street investment banks for even longer. And with fears of a recession sparking both a worldwide market sell-off and emergency action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear. But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.
"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.
"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."
Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."
Where the opportunities are
The 1970s, of course, was when Rogers first made his reputation - and a lot of money - as George Soros's original partner in the Quantum Fund. And despite his gloomy outlook for the U.S., he still sees opportunities in today's world. In fact, he sees the recent correction as a potential gift for investors who know where to head in global markets: China.
Rogers has been fascinated with China ever since he rode his motorcycle across the country two decades ago, and he's been a full-fledged China bull for several years. In December he published his latest book, an investor-friendly tome titled "A Bull in China: How to Invest Profitably in the World's Greatest Market." And that same month he sold his beloved Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L. Hunt and moved his family full-time to Singapore - the better to be closer to the action in Beijing and Shanghai. (He bought the New York mansion 30 years ago for just over $100,000; not a bad return on his investment.)
But in a November interview I conducted with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level. With the bourses in Shanghai and Hong Kong both some 20% off their recent highs as of late January, Rogers says he's starting to consider new investments.
"I'm delighted to see what's happening in Shanghai and Hong Kong," he says. "As I've said, if things hadn't cooled off, the Chinese market was in danger of turning into a bubble. I find this most encouraging. The government's been doing its best to try and cool things off. Mainly they've been trying to deal with real estate but it's having an effect on stocks, too. I would suspect the correction isn't quite over in China. But I'm gearing up. I didn't put in any orders for tomorrow but I'm starting to prepare my list of things to buy in China. Whether I buy this week or this month or this quarter, who knows. But I'm starting to think about buying new shares in China for the first time in a while. And I'm not thinking about buying in America."
Ultimately, Rogers doesn't think that the troubles in the United States will be much of a drag on the prospects for the People's Republic. "Anybody who sells to Sears (SHLD, Fortune 500) or Wal-Mart (WMT, Fortune 500) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."
“We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene.”
Jim Rogers
"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.
"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."
Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."
Where the opportunities are
The 1970s, of course, was when Rogers first made his reputation - and a lot of money - as George Soros's original partner in the Quantum Fund. And despite his gloomy outlook for the U.S., he still sees opportunities in today's world. In fact, he sees the recent correction as a potential gift for investors who know where to head in global markets: China.
Rogers has been fascinated with China ever since he rode his motorcycle across the country two decades ago, and he's been a full-fledged China bull for several years. In December he published his latest book, an investor-friendly tome titled "A Bull in China: How to Invest Profitably in the World's Greatest Market." And that same month he sold his beloved Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L. Hunt and moved his family full-time to Singapore - the better to be closer to the action in Beijing and Shanghai. (He bought the New York mansion 30 years ago for just over $100,000; not a bad return on his investment.)
But in a November interview I conducted with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level. With the bourses in Shanghai and Hong Kong both some 20% off their recent highs as of late January, Rogers says he's starting to consider new investments.
"I'm delighted to see what's happening in Shanghai and Hong Kong," he says. "As I've said, if things hadn't cooled off, the Chinese market was in danger of turning into a bubble. I find this most encouraging. The government's been doing its best to try and cool things off. Mainly they've been trying to deal with real estate but it's having an effect on stocks, too. I would suspect the correction isn't quite over in China. But I'm gearing up. I didn't put in any orders for tomorrow but I'm starting to prepare my list of things to buy in China. Whether I buy this week or this month or this quarter, who knows. But I'm starting to think about buying new shares in China for the first time in a while. And I'm not thinking about buying in America."
Ultimately, Rogers doesn't think that the troubles in the United States will be much of a drag on the prospects for the People's Republic. "Anybody who sells to Sears (SHLD, Fortune 500) or Wal-Mart (WMT, Fortune 500) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."
“We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene.”
Jim Rogers
Wednesday, January 30, 2008
Fed delivers another rate cut
DOES THIS MEAN WE ARE IN A LOT MORE TROUBLE ?
I REALLY THINK SO, AND I AM NOT ALONE!
One member of the Federal Open Market Committee, Dallas Fed President Richard Fisher, voted against the cut in the fed funds rate, arguing that rates should have been left unchanged after the series of rate cuts by the central bank in recent months. Fisher is generally seen as a so-called inflation hawk who is greatly concerned with maintaining price stability.
The Fed's statement acknowledged that the risk of inflation needs to be monitored, but said that the majority of members believed that price pressures to moderate in coming quarters.
It said the rate cuts were necessary because problems in the credit markets were putting a squeeze on both consumers and businesses. It also sees growing weakness in both the job market and the battered housing market.
"Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity," said the statement. "However, downside risks to growth remain."
The Fed also appeared to hint in its statement that it will keep cutting rates if the economy shows more signs of decline.
"The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks," it said.
Keith Hembre, chief economist for First American Funds, said if there was any surprise in the Fed action, it's that the statement suggested a far greater likelihood of further cuts than he was expecting.
"I thought that they would probably include some language to temper expectations of any additional cuts in the near term," he said. "That statement makes it sounds like they're still in motion."
Wall Street is now betting on more rate cuts in the next few months. According to federal funds futures on the Chicago Board of Trade, investors are pricing in a 100 percent chance of at least another quarter point cut by the end of April and a 26 percent chance of a half-point of cuts. The Fed will meet in March and April.
I REALLY THINK SO, AND I AM NOT ALONE!
One member of the Federal Open Market Committee, Dallas Fed President Richard Fisher, voted against the cut in the fed funds rate, arguing that rates should have been left unchanged after the series of rate cuts by the central bank in recent months. Fisher is generally seen as a so-called inflation hawk who is greatly concerned with maintaining price stability.
The Fed's statement acknowledged that the risk of inflation needs to be monitored, but said that the majority of members believed that price pressures to moderate in coming quarters.
It said the rate cuts were necessary because problems in the credit markets were putting a squeeze on both consumers and businesses. It also sees growing weakness in both the job market and the battered housing market.
"Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity," said the statement. "However, downside risks to growth remain."
The Fed also appeared to hint in its statement that it will keep cutting rates if the economy shows more signs of decline.
"The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks," it said.
Keith Hembre, chief economist for First American Funds, said if there was any surprise in the Fed action, it's that the statement suggested a far greater likelihood of further cuts than he was expecting.
"I thought that they would probably include some language to temper expectations of any additional cuts in the near term," he said. "That statement makes it sounds like they're still in motion."
Wall Street is now betting on more rate cuts in the next few months. According to federal funds futures on the Chicago Board of Trade, investors are pricing in a 100 percent chance of at least another quarter point cut by the end of April and a 26 percent chance of a half-point of cuts. The Fed will meet in March and April.
Refinancings fuel mortgage application surge
Mortgage application volume rose 7.5% during the week ended Jan. 25, according to the trade group Mortgage Bankers Association's weekly application survey.
The MBA's application index rose to 1,054.9 from 981.5 the previous week.
Application volume was pushed higher by a jump in refinance volume. Refinance application volume increased 22.1%, while purchase volume tumbled 17.7%. Refinance applications accounted for 73% of total applications.
The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.
An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 1,054.9 means mortgage application activity is 10.549 times higher than it was when the MBA began tracking the data.
The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.
Application volume rose despite an increase in interest rates. The average rate for traditional, 30-year fixed-rate mortgages rose to 5.6% from 5.49%. The average rate for 15-year fixed-rate mortgages, which are often used to refinance, rose to 5.04% from 4.95%.
Average rates for one-year adjustable rate mortgages increased to 5.7% from 5.51%
Economy much weaker than expected
We are in for a much tougher 2008 than was first anticipated.
NEW YORK (CNNMoney.com) -- The economy grew at a much slower pace in the last three months of the year, according to a government report Wednesday.
The report raised fears of a recession and increased hopes that the Federal Reserve will make another significant interest rate cut.
The gross domestic product, the broadest measure of the nation's economic activity, grew at an annual rate of 0.6%, adjusted for inflation, in the fourth quarter, according to the Commerce Department, down from 4.9% in the final reading of growth in the third quarter. Economists surveyed by Briefing.com had forecast GDP would slow to a 1.2%.
The anemic growth in the fourth quarter matched the slowest expansion in the economy in the last five years. The report comes amid rising concern that the U.S. economy is falling into a recession, with some economists arguing the downturn started in the final month of 2007.
Tuesday, January 29, 2008
Countrywide's bad news
NEW YORK (Fortune) -- Countrywide on Tuesday reported a loss of $422 million in the fourth quarter and revealed that an astounding one-third of its investment portfolio's sub-prime mortgage loans are delinquent.
The loss threw cold water on Countrywide chief operating officer Steve Sambol's confident assurances to investors in October that, "We view the third quarter of 2007 as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008." Seen in this light, Countrywide's fourth-quarter quarter loss, compared to a $621 million profit a year ago, is what the numerous class action attorneys circling Countrywide (CFC, Fortune 500) will surely call "an unfavorable fact." Countywide finished 2007 with a loss of $704 million.
The numbers didn't appear to faze Bank of America CEO Ken Lewis's determination to acquire Countrywide, however. In a conference Tuesday, Bloomberg quoted him as telling investors. "Everything is a 'go' to complete this transaction." Just over two weeks ago, BoA (BAC, Fortune 500) agreed to buy Calabasas, Calif.-based Countrywide in a $4 billion deal. If and when the deal goes through, the combined company will control just over 25 percent of the U.S. real estate loan origination market.
The market took the highly scripted BoA support as crucial and sent Countrywide stock up 20 cents to $6.15.
At the fulcrum of the mortgage credit crisis, Countrywide's earnings are seen as a bellwether for the once vibrant - and now largely collapsed - United States mortgage industry. The primary culprit remains a combination of old-fashioned credit deterioration plus an alarming new development: Borrowers simply are walking away from their homes as their equity value falls ever further below their loan amount.
With respect to credit problems, Countrywide is unmistakably going from bad to worse.
The home lending giant reserved $924 million for credit-related losses in the fourth quarter - over a dozen times more than what it set aside in the fourth quarter of last year. To be fair, the $924 million figure is a bit of an improvement from the third quarter's $937 million reserve.
Countrywide's eye-popping 33% delinquency rate on its sub-prime mortgage book also represents a decline from the third quarter, where "only" 29.6% of sub-prime paper was delinquent.
The figures obscure a central fact, however: Countrywide's portfolio of sub-prime loans consist of those that were not previously written down, or could not be sold or securitized. In other words, this portfolio is likely to get much, much worse.
Perhaps as worrisome was the credit deterioration on the conventional loan portfolios, where delinquency rates spiked to 5.76% percent from 4.41%. Along similar lines, Countrywide also said it shifted $7 billion of "prime non-agency" loans to the portfolio - out of the held-for-sale inventory - because it appears that there were no buyers likely to be found for this paper.
Adding to those woes is the emergence of a disturbing trend for mortgage lenders as some borrowers choose to simply walk away from their homes.
As home values drop to levels far below the mortgage amount, it simply becomes more economically advantageous for certain borrowers to hand over their keys. In a foreclosure, a mortgage lender often winds up booking losses that approach or even outstrip its loan amount when it sells the property into a distressed market.
www.guaranteedloanhelp.com
The loss threw cold water on Countrywide chief operating officer Steve Sambol's confident assurances to investors in October that, "We view the third quarter of 2007 as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008." Seen in this light, Countrywide's fourth-quarter quarter loss, compared to a $621 million profit a year ago, is what the numerous class action attorneys circling Countrywide (CFC, Fortune 500) will surely call "an unfavorable fact." Countywide finished 2007 with a loss of $704 million.
The numbers didn't appear to faze Bank of America CEO Ken Lewis's determination to acquire Countrywide, however. In a conference Tuesday, Bloomberg quoted him as telling investors. "Everything is a 'go' to complete this transaction." Just over two weeks ago, BoA (BAC, Fortune 500) agreed to buy Calabasas, Calif.-based Countrywide in a $4 billion deal. If and when the deal goes through, the combined company will control just over 25 percent of the U.S. real estate loan origination market.
The market took the highly scripted BoA support as crucial and sent Countrywide stock up 20 cents to $6.15.
At the fulcrum of the mortgage credit crisis, Countrywide's earnings are seen as a bellwether for the once vibrant - and now largely collapsed - United States mortgage industry. The primary culprit remains a combination of old-fashioned credit deterioration plus an alarming new development: Borrowers simply are walking away from their homes as their equity value falls ever further below their loan amount.
With respect to credit problems, Countrywide is unmistakably going from bad to worse.
The home lending giant reserved $924 million for credit-related losses in the fourth quarter - over a dozen times more than what it set aside in the fourth quarter of last year. To be fair, the $924 million figure is a bit of an improvement from the third quarter's $937 million reserve.
Countrywide's eye-popping 33% delinquency rate on its sub-prime mortgage book also represents a decline from the third quarter, where "only" 29.6% of sub-prime paper was delinquent.
The figures obscure a central fact, however: Countrywide's portfolio of sub-prime loans consist of those that were not previously written down, or could not be sold or securitized. In other words, this portfolio is likely to get much, much worse.
Perhaps as worrisome was the credit deterioration on the conventional loan portfolios, where delinquency rates spiked to 5.76% percent from 4.41%. Along similar lines, Countrywide also said it shifted $7 billion of "prime non-agency" loans to the portfolio - out of the held-for-sale inventory - because it appears that there were no buyers likely to be found for this paper.
Adding to those woes is the emergence of a disturbing trend for mortgage lenders as some borrowers choose to simply walk away from their homes.
As home values drop to levels far below the mortgage amount, it simply becomes more economically advantageous for certain borrowers to hand over their keys. In a foreclosure, a mortgage lender often winds up booking losses that approach or even outstrip its loan amount when it sells the property into a distressed market.
www.guaranteedloanhelp.com
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