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
Home price drop hits a new record low
NEW YORK (CNNMoney.com) -- The housing market is only getting worse, according to the latest report from S&P Case/Shiller released Tuesday.
Home prices were down 8.4 percent in November compared with last year in its 10-city index, a record low. The 20-city index also fell 7.7 percent.
The Case/Shiller report compares same-home sale prices. The industry considers it to be one of the most accurate snapshots of housing prices.
Previously, the largest year-over-year decline on record was 6.3 percent in April 1991. The November report marked the 11th consecutive month of negative returns for the index, and twenty-four months of decelerating returns.
"We reached another grim milestone in the housing market in November," said Robert Shiller, Chief Economist at MacroMarkets LLC and co-creator the index in a statement.
"Not only did the 10-city composite index post another record low in its annual growth rate, but 13 of the 20 metro areas, each with data back to 1991, did the same."
The worst hit market of the 20 metro areas covered was Miami, where the median home fell a whopping 15.1 percent in value. San Diego prices also fell steeply, down 13.4 percent. Las Vegas was off 13.2 percent and Detroit by 13 percent.
Three cities did emerge with higher prices compared with 12 months ago: Prices rose 2.9 percent in Charlotte, N.C., 1.8 percent in Seattle and 1.3 percent in Portland, Ore. But even these markets have turned down over the last three months. Indeed, every city in the index recorded at least three consecutive months of falling prices through November.
The three biggest U.S. cities also recorded year-over-year declines; New York was down 4.8 percent, Los Angeles 11.9 percent and Chicago 3.9 percent. The losses in Los Angeles accelerated in November; that city recorded the largest month-over-month drop of any index city, 3.6 percent.
Tuesday's report came in the wake of many other surveys indicating that the housing market is getting worse. Foreclosure filings and the risks of future foreclosures were both up sharply; the number of new homes sold plunged more steeply than any year on record; and the pace of existing home sales fell to their lowest level in 27 years.
www.guaranteedloanhelp.com
Home prices were down 8.4 percent in November compared with last year in its 10-city index, a record low. The 20-city index also fell 7.7 percent.
The Case/Shiller report compares same-home sale prices. The industry considers it to be one of the most accurate snapshots of housing prices.
Previously, the largest year-over-year decline on record was 6.3 percent in April 1991. The November report marked the 11th consecutive month of negative returns for the index, and twenty-four months of decelerating returns.
"We reached another grim milestone in the housing market in November," said Robert Shiller, Chief Economist at MacroMarkets LLC and co-creator the index in a statement.
"Not only did the 10-city composite index post another record low in its annual growth rate, but 13 of the 20 metro areas, each with data back to 1991, did the same."
The worst hit market of the 20 metro areas covered was Miami, where the median home fell a whopping 15.1 percent in value. San Diego prices also fell steeply, down 13.4 percent. Las Vegas was off 13.2 percent and Detroit by 13 percent.
Three cities did emerge with higher prices compared with 12 months ago: Prices rose 2.9 percent in Charlotte, N.C., 1.8 percent in Seattle and 1.3 percent in Portland, Ore. But even these markets have turned down over the last three months. Indeed, every city in the index recorded at least three consecutive months of falling prices through November.
The three biggest U.S. cities also recorded year-over-year declines; New York was down 4.8 percent, Los Angeles 11.9 percent and Chicago 3.9 percent. The losses in Los Angeles accelerated in November; that city recorded the largest month-over-month drop of any index city, 3.6 percent.
Tuesday's report came in the wake of many other surveys indicating that the housing market is getting worse. Foreclosure filings and the risks of future foreclosures were both up sharply; the number of new homes sold plunged more steeply than any year on record; and the pace of existing home sales fell to their lowest level in 27 years.
www.guaranteedloanhelp.com
Monday, January 28, 2008
Foreclosures spike - and will get much worse
NEW YORK (CNNMoney.com) -- The risk of foreclosure is on a rapid rise nationally and, with a possible recession at hand, this spike in mortgage-defaults could last for years.
A report released Monday by First American Core Logic rates foreclosure risk for 381 metropolitan areas, and found that the risk of foreclosure has jumped 22 percent from January, 2007, and 9 percent from three months ago.
The risk scores are calculated based on economic factors such as job growth or loss, as well as incidences of fraud and other collateral risks. Home price trends are specially important.
"Before, it was all about the economy. Now, price drops are overcoming economic conditions [in driving up foreclosures]," said Mark Fleming, Core Logic's chief economist.
The Core Logic report speculated that foreclosure risks may get a lot worse, and stay that way for a long time.
In the wake of recent speculation that the United States economy may be entering a recession -- or is already in one - the report stressed that defaults continued rising for almost 2 years after the end of the last recession in 2001.
Based on that history, Core Logic expects that foreclosure risk will continue to increase over the next 18 months, at least.
Key to that finding is the added risk caused by the recent up-tick in job losses. Low unemployment had been a big factor in keeping foreclosure risk in check the past few years, according to Fleming.
The price declines are biting hardest in California, especially the Central Valley cities that had recorded outsized price gains during the boom. Of the top 10 large cities facing the highest risk of foreclosure over the next six months, five are in California. Of the 36 markets nationwide undergoing double-digit price declines, 22 are in California.
Bakersfield, Calif., was rated the highest risk market among the 100 largest metro areas. Home prices there are in steep decline, falling 16.9 percent during the past year, according to First American Loan Performance. Fleming pointed out that Bakersfield is a good example of a trend that is playing out in many markets.
Bakersfield acts like a satellite city for Los Angeles, where population density makes further housing development expensive. Supply of developable land in Los Angeles is scarce, which props up prices there, even in down years.
During the boom, home buyers priced out of L.A. purchased in far-flung markets like Bakersfield, where plentiful agricultural land was cheaply converted to housing. Many of the new residents continued to work in the Los Angeles area, a long but doable commute.
When demand slackened and prices slumped in Los Angeles, more people could afford to buy closer to the city, and demand dropped disproportionately in Bakersfield as well as in other nearby cities like Riverside and San Bernardino, sending prices plunging.
"Volatility in these places is high, especially on the down side," said Fleming.
And that goes a long way in explaining why foreclosure prospects are on the rise in Bakersfield, Stockton, Calif. (number 2 on the Core Logic list), Fresno, Calif. (number 3) and Riverside-San Bernardino (number 6).
Home sales way off
Monday, the government reported the steepest drop in new single-family home sales ever recorded. It was the first year on record that existing home prices posted declines. That followed last weeks announcement from the National Association of Realtors that home prices had recorded their first yearly decline ever.
After price drops, many mortgage borrowers find themselves underwater, owing more on their mortgages than their homes are worth. That makes it difficult for them to maintain their house payments if they run into any problems; they have one less asset (their home) to borrow against
The other main factor causing the heightened foreclosure risk is systemic economic problems. Cities such as Detroit (number 8 on the top 10 list), Warren, Mich. (number 4) and Youngstown, Ohio (number 10) are dependent on the auto and other heavy industry for jobs, and these industries have been laying off workers.
Midwestern markets ranked even higher up on the list in the recent past. Their present rankings don't represent any improvement on their part, but instead the rapid deterioration in the Sun Belt.
A report released Monday by First American Core Logic rates foreclosure risk for 381 metropolitan areas, and found that the risk of foreclosure has jumped 22 percent from January, 2007, and 9 percent from three months ago.
The risk scores are calculated based on economic factors such as job growth or loss, as well as incidences of fraud and other collateral risks. Home price trends are specially important.
"Before, it was all about the economy. Now, price drops are overcoming economic conditions [in driving up foreclosures]," said Mark Fleming, Core Logic's chief economist.
The Core Logic report speculated that foreclosure risks may get a lot worse, and stay that way for a long time.
In the wake of recent speculation that the United States economy may be entering a recession -- or is already in one - the report stressed that defaults continued rising for almost 2 years after the end of the last recession in 2001.
Based on that history, Core Logic expects that foreclosure risk will continue to increase over the next 18 months, at least.
Key to that finding is the added risk caused by the recent up-tick in job losses. Low unemployment had been a big factor in keeping foreclosure risk in check the past few years, according to Fleming.
The price declines are biting hardest in California, especially the Central Valley cities that had recorded outsized price gains during the boom. Of the top 10 large cities facing the highest risk of foreclosure over the next six months, five are in California. Of the 36 markets nationwide undergoing double-digit price declines, 22 are in California.
Bakersfield, Calif., was rated the highest risk market among the 100 largest metro areas. Home prices there are in steep decline, falling 16.9 percent during the past year, according to First American Loan Performance. Fleming pointed out that Bakersfield is a good example of a trend that is playing out in many markets.
Bakersfield acts like a satellite city for Los Angeles, where population density makes further housing development expensive. Supply of developable land in Los Angeles is scarce, which props up prices there, even in down years.
During the boom, home buyers priced out of L.A. purchased in far-flung markets like Bakersfield, where plentiful agricultural land was cheaply converted to housing. Many of the new residents continued to work in the Los Angeles area, a long but doable commute.
When demand slackened and prices slumped in Los Angeles, more people could afford to buy closer to the city, and demand dropped disproportionately in Bakersfield as well as in other nearby cities like Riverside and San Bernardino, sending prices plunging.
"Volatility in these places is high, especially on the down side," said Fleming.
And that goes a long way in explaining why foreclosure prospects are on the rise in Bakersfield, Stockton, Calif. (number 2 on the Core Logic list), Fresno, Calif. (number 3) and Riverside-San Bernardino (number 6).
Home sales way off
Monday, the government reported the steepest drop in new single-family home sales ever recorded. It was the first year on record that existing home prices posted declines. That followed last weeks announcement from the National Association of Realtors that home prices had recorded their first yearly decline ever.
After price drops, many mortgage borrowers find themselves underwater, owing more on their mortgages than their homes are worth. That makes it difficult for them to maintain their house payments if they run into any problems; they have one less asset (their home) to borrow against
The other main factor causing the heightened foreclosure risk is systemic economic problems. Cities such as Detroit (number 8 on the top 10 list), Warren, Mich. (number 4) and Youngstown, Ohio (number 10) are dependent on the auto and other heavy industry for jobs, and these industries have been laying off workers.
Midwestern markets ranked even higher up on the list in the recent past. Their present rankings don't represent any improvement on their part, but instead the rapid deterioration in the Sun Belt.
New home sales: Biggest drop ever
New home sales: Biggest drop ever
Weak December sales caps 2007's record slide, with prices for the month off sharply from a year earlier.
NEW YORK (CNNMoney.com) -- New home sales posted the biggest drop on record in 2007, according to the government's latest look at the battered housing market, as a year that saw a meltdown in the mortgage market and a drop in home values ended with yet more signs of weakness.
December sales came in at an annual rate of 604,000, the Census Bureau report showed, down from 634,000 in November, which was also revised lower.
The reading was well below the consensus forecast of 645,000, according to economists surveyed by Briefing.com.
The weak December sales left full-year new home sales at 774,000, down 26 percent from the 1.05 million sales in 2006. That was the biggest drop since the government started tracking new home sales in 1963, surpassing the 23 percent decline posted in 1980.
No bottom yet Adam York, an economist with Wachovia, said the report confirms fears that the housing market won't bounce back anytime soon.
"We're expecting sales to decline into at least mid-2008," he said. "We think housing still has a long way to go."
The mortgage market woes were a major part of the problem for new home sales in 2007. Homes financed by conventional mortgages fell 27 percent, the biggest drop since the government started tracking financing in 1988.
But the weakness in prices made buyers reluctant to jump into the market, even if the availability of financing was not an issue. The number of new homes bought with cash fell nearly 24 percent, while mortgages guaranteed by federal agencies such as the Federal Housing Administration or the Veterans Administration fell 16 percent.
Weak December sales caps 2007's record slide, with prices for the month off sharply from a year earlier.
NEW YORK (CNNMoney.com) -- New home sales posted the biggest drop on record in 2007, according to the government's latest look at the battered housing market, as a year that saw a meltdown in the mortgage market and a drop in home values ended with yet more signs of weakness.
December sales came in at an annual rate of 604,000, the Census Bureau report showed, down from 634,000 in November, which was also revised lower.
The reading was well below the consensus forecast of 645,000, according to economists surveyed by Briefing.com.
The weak December sales left full-year new home sales at 774,000, down 26 percent from the 1.05 million sales in 2006. That was the biggest drop since the government started tracking new home sales in 1963, surpassing the 23 percent decline posted in 1980.
No bottom yet Adam York, an economist with Wachovia, said the report confirms fears that the housing market won't bounce back anytime soon.
"We're expecting sales to decline into at least mid-2008," he said. "We think housing still has a long way to go."
The mortgage market woes were a major part of the problem for new home sales in 2007. Homes financed by conventional mortgages fell 27 percent, the biggest drop since the government started tracking financing in 1988.
But the weakness in prices made buyers reluctant to jump into the market, even if the availability of financing was not an issue. The number of new homes bought with cash fell nearly 24 percent, while mortgages guaranteed by federal agencies such as the Federal Housing Administration or the Veterans Administration fell 16 percent.
Saturday, January 26, 2008
Lasting Housing Woes Paint a Grim Economic Picture
The light at the end of the housing-market tunnel keeps receding. More price declines are coming.
Don't hold your breath for an upturn in the housing market. Improvement seems just as distant today as it did a year ago. That's bad news for the economy as a whole. As long as housing prices, sales and construction continue to flag, gross domestic product growth can't make much headway. Too much of the economy rests on consumer spending, and too much of that is tied to consumers' sense of wealth and well-being. With home values still sinking and job growth dwindling, their confidence is shaky and spending will be less than robust.
The housing market won't hit bottom for months yet. The industry won't turn the corner until midyear at the earliest and probably not until closer to the end of the year. And when the bottom does finally appear, it's likely to stay for a while. An actual upturn will be painfully slow to manifest. Mark Vitner, senior economist with Wachovia Corp., says, "Economists are talking about a bottom late this year, but most people will say things don't feel much better. It will be 2011 or 2012 before we return to conditions that people think are strong."
For housing to return to good health -- with the solid housing starts and sales of new and existing homes near the rates seen in the late 1990s, if not the red-hot figures of 2004 and 2005 -- it's likely to take at least three more years.
For now, the housing sector is caught in a sickening downward spiral. New construction is still much too high. At 2.5%, the ratio of vacant unsold homes to total homeownership is 50% greater now than it had been for 20 years. There's an excess inventory of up to a million homes. To work that off, housing starts must drop by an additional 25%, to about a million a year. But we expect starts of 1.2 million or so this year, down just 11% from last year's figure of 1.35 million.
One reason: Too much of builders' money is tied up in development -- the cost of buying finished lots, impact fees and permits, building roads, installing water and sewer lines and so on. To keep cash flowing and minimize losses, they keep building homes and hoping to sell them. Mario Ricchio, housing industry analyst with Zach's Investment Research, says, "If builders could shut down for two years, they would eliminate all the overhang. Of course, that's not going to happen. They have to generate cash flow."
More foreclosures will worsen the problem in the short term. Two million homeowners face a reset of adjustable mortgages both this year and next. The pressure from that, plus a weak job market, will keep 2008 foreclosure filings high.
Still, there are glimmers of hope: More-aggressive price cutting is taking hold. Builders are now routinely trimming prices by 10% and throwing in upgrades -- high-end appliances, granite kitchen counters, hardwood floors and so on -- worth an additional 10%. Sellers of existing homes are finally becoming more realistic and lowering their asking prices. A Las Vegas home, for example, listed at $910,000 a few months ago is now listed at $750,000. A home in suburban Washington, D.C., originally listed at $750,000 is now on the market for $100,000 less.
Nationwide, prices have about 5% more to fall, and two to three times that much in once-hot metro markets such as Miami, Tampa, San Diego and Las Vegas. Areas that escape the downward pressure altogether will be rare.
Bargain-hunting hedge funds are beginning to sniff around. They're not yet ready to plunge into the market. But some smell a turnaround coming and are preparing to jump in.
And Federal Reserve interest rate cuts will provide a bit of support, easing home-buying and helping to keep the job market lubricated.
Don't hold your breath for an upturn in the housing market. Improvement seems just as distant today as it did a year ago. That's bad news for the economy as a whole. As long as housing prices, sales and construction continue to flag, gross domestic product growth can't make much headway. Too much of the economy rests on consumer spending, and too much of that is tied to consumers' sense of wealth and well-being. With home values still sinking and job growth dwindling, their confidence is shaky and spending will be less than robust.
The housing market won't hit bottom for months yet. The industry won't turn the corner until midyear at the earliest and probably not until closer to the end of the year. And when the bottom does finally appear, it's likely to stay for a while. An actual upturn will be painfully slow to manifest. Mark Vitner, senior economist with Wachovia Corp., says, "Economists are talking about a bottom late this year, but most people will say things don't feel much better. It will be 2011 or 2012 before we return to conditions that people think are strong."
For housing to return to good health -- with the solid housing starts and sales of new and existing homes near the rates seen in the late 1990s, if not the red-hot figures of 2004 and 2005 -- it's likely to take at least three more years.
For now, the housing sector is caught in a sickening downward spiral. New construction is still much too high. At 2.5%, the ratio of vacant unsold homes to total homeownership is 50% greater now than it had been for 20 years. There's an excess inventory of up to a million homes. To work that off, housing starts must drop by an additional 25%, to about a million a year. But we expect starts of 1.2 million or so this year, down just 11% from last year's figure of 1.35 million.
One reason: Too much of builders' money is tied up in development -- the cost of buying finished lots, impact fees and permits, building roads, installing water and sewer lines and so on. To keep cash flowing and minimize losses, they keep building homes and hoping to sell them. Mario Ricchio, housing industry analyst with Zach's Investment Research, says, "If builders could shut down for two years, they would eliminate all the overhang. Of course, that's not going to happen. They have to generate cash flow."
More foreclosures will worsen the problem in the short term. Two million homeowners face a reset of adjustable mortgages both this year and next. The pressure from that, plus a weak job market, will keep 2008 foreclosure filings high.
Still, there are glimmers of hope: More-aggressive price cutting is taking hold. Builders are now routinely trimming prices by 10% and throwing in upgrades -- high-end appliances, granite kitchen counters, hardwood floors and so on -- worth an additional 10%. Sellers of existing homes are finally becoming more realistic and lowering their asking prices. A Las Vegas home, for example, listed at $910,000 a few months ago is now listed at $750,000. A home in suburban Washington, D.C., originally listed at $750,000 is now on the market for $100,000 less.
Nationwide, prices have about 5% more to fall, and two to three times that much in once-hot metro markets such as Miami, Tampa, San Diego and Las Vegas. Areas that escape the downward pressure altogether will be rare.
Bargain-hunting hedge funds are beginning to sniff around. They're not yet ready to plunge into the market. But some smell a turnaround coming and are preparing to jump in.
And Federal Reserve interest rate cuts will provide a bit of support, easing home-buying and helping to keep the job market lubricated.
Friday, January 25, 2008
Stimulus plan also sparks housing market
Stimulus plan also sparks housing market
The measures would make mortgages easier to get and reduce borrowing costs -- especially in hard-hit, high-cost housing markets.
NEW YORK (CNNMoney.com) -- The economic stimulus plan announced Thursday by Congress and the Bush administration includes provisions that specifically address the mortgage crisis. It aims to make getting a mortgage easier and cheaper in high-cost markets, to facilitate refinancing and to prevent foreclosures.
The package proposes lifting the dollar amount of loans that are eligible for purchase by Freddie Mac and Fannie Mae and that can be insured by the Federal Housing Administration (FHA). The cap limits for FHA loans, which offer protection to lenders against losses that result from defaults by borrowers, would be raised to $725,000 and would be permanent.
These government sponsored enterprises currently guarantee a secondary market for loans of less than $417,000, which makes lenders more willing to issue them. The stimulus package proposes raising that cap to $625,000 for twelve months in order to make it easier for buyers to get or refinance mortgages - especially in high-cost regions like California.
"It's about time," said Richard DeKaser, chief economist for banking giant National City Corp. "The idea has rattled around Congress for a year. Most analysts agree the market for "jumbo" loans [which exceed the cap limits] has been hurt by lender flight."
The increased cap should give a boost to some of the most sluggish markets in the nation, like Florida, where high home prices typically mean that mortgages exceed the $417,000 loan limits. When credit markets contracted last summer, jumbo loans over that amount became much harder to get and, as a result, home sales in pricey markets took a hit.
"This will have a big, immediate impact, especially in California where sales have been down most significantly," said Lawrence Yun, chief economist for the National Association of Realtors.
Homeowners with jumbo mortgages also pay higher interest rates because, with no guaranteed secondary market for the loans, lenders take on more risk, and charge borrowers more for doing so.
For instance, the interest rate difference between loans that fall within the cap limit and jumbo loans was more than 1 percent on Thursday -- 6.39 percent compared with 5.30 percent, according to Bankrate.com. On a $500,000 mortgage, the difference is about $350 a month.
If you are facing any type of mortgage, refinance, reset, loan or credit problems, visit:
www.guaranteedloanhelp.com
www.guaranteedloanhelp.com
The measures would make mortgages easier to get and reduce borrowing costs -- especially in hard-hit, high-cost housing markets.
NEW YORK (CNNMoney.com) -- The economic stimulus plan announced Thursday by Congress and the Bush administration includes provisions that specifically address the mortgage crisis. It aims to make getting a mortgage easier and cheaper in high-cost markets, to facilitate refinancing and to prevent foreclosures.
The package proposes lifting the dollar amount of loans that are eligible for purchase by Freddie Mac and Fannie Mae and that can be insured by the Federal Housing Administration (FHA). The cap limits for FHA loans, which offer protection to lenders against losses that result from defaults by borrowers, would be raised to $725,000 and would be permanent.
These government sponsored enterprises currently guarantee a secondary market for loans of less than $417,000, which makes lenders more willing to issue them. The stimulus package proposes raising that cap to $625,000 for twelve months in order to make it easier for buyers to get or refinance mortgages - especially in high-cost regions like California.
"It's about time," said Richard DeKaser, chief economist for banking giant National City Corp. "The idea has rattled around Congress for a year. Most analysts agree the market for "jumbo" loans [which exceed the cap limits] has been hurt by lender flight."
The increased cap should give a boost to some of the most sluggish markets in the nation, like Florida, where high home prices typically mean that mortgages exceed the $417,000 loan limits. When credit markets contracted last summer, jumbo loans over that amount became much harder to get and, as a result, home sales in pricey markets took a hit.
"This will have a big, immediate impact, especially in California where sales have been down most significantly," said Lawrence Yun, chief economist for the National Association of Realtors.
Homeowners with jumbo mortgages also pay higher interest rates because, with no guaranteed secondary market for the loans, lenders take on more risk, and charge borrowers more for doing so.
For instance, the interest rate difference between loans that fall within the cap limit and jumbo loans was more than 1 percent on Thursday -- 6.39 percent compared with 5.30 percent, according to Bankrate.com. On a $500,000 mortgage, the difference is about $350 a month.
If you are facing any type of mortgage, refinance, reset, loan or credit problems, visit:
www.guaranteedloanhelp.com
www.guaranteedloanhelp.com
New mortgage deals: 'Offset' loans
(Money Magazine) -- Question: I've heard that American lenders are now offering something called an offset mortgage, which is popular in the U.K. Do you think this is a good deal? - Jeffrey S. Kallas, Columbus, Ohio
Answer: It depends. Here's how it works in Britain. You get a mortgage linked to a non-interest-bearing savings account whose deposits "offset" your loan balance.
So if you owe $200,000 on your home but have $50,000 on deposit, the bank calculates your monthly interest as if you borrowed only $150,000.
The bank gets its back scratched by getting to use your deposit interest-free. You pay off your mortgage faster because more of your monthly payment is applied to principal - and you can get your hands on your savings any old time.
Because this deal would give you an extra weensy tax break under U.S. law, however, no offset mortgages are allowed here.
But two U.S. companies - CMG Financial Services and Macquarie Mortgages USA - have introduced a version that passes muster with the IRS.
You take out an adjustable-rate mortgage and deposit your paycheck into the mortgage account. Doing that gives you an offset on the principal, which lowers your interest.
The arrangement could be useful if you receive big bonuses; you'll be reducing your interest until you use the money. But here's the real benefit: If you manage not to spend all your pay, you cut your costs.
Say you save 5 percent of take-home pay of a gross income of $150,000 - about $460 a month. On a $300,000 7 percent mortgage, you'd slash your interest by $197,300 and be paid off in only 18 years - and you'd still have the money you saved.
But if you spend more than you put in, the difference adds to your loan balance.
For more help: www.guaranteedloanhelp.com
Answer: It depends. Here's how it works in Britain. You get a mortgage linked to a non-interest-bearing savings account whose deposits "offset" your loan balance.
So if you owe $200,000 on your home but have $50,000 on deposit, the bank calculates your monthly interest as if you borrowed only $150,000.
The bank gets its back scratched by getting to use your deposit interest-free. You pay off your mortgage faster because more of your monthly payment is applied to principal - and you can get your hands on your savings any old time.
Because this deal would give you an extra weensy tax break under U.S. law, however, no offset mortgages are allowed here.
But two U.S. companies - CMG Financial Services and Macquarie Mortgages USA - have introduced a version that passes muster with the IRS.
You take out an adjustable-rate mortgage and deposit your paycheck into the mortgage account. Doing that gives you an offset on the principal, which lowers your interest.
The arrangement could be useful if you receive big bonuses; you'll be reducing your interest until you use the money. But here's the real benefit: If you manage not to spend all your pay, you cut your costs.
Say you save 5 percent of take-home pay of a gross income of $150,000 - about $460 a month. On a $300,000 7 percent mortgage, you'd slash your interest by $197,300 and be paid off in only 18 years - and you'd still have the money you saved.
But if you spend more than you put in, the difference adds to your loan balance.
For more help: www.guaranteedloanhelp.com
Government "Bail-outs" usually fail !
Debt forgiveness a rarityFew bankers will willingly do that, attests Michelle Lewis, president of Northwest Counseling Service, an agency in Philadelphia that helps homeowners who are in danger of foreclosure. She says she's all for negotiating debt forgiveness. "And that's been something we've been working on for years -- but we have had no success," Lewis says.
She adds that, "occasionally, on a case-by-case basis," clients have had debt forgiven, but only after filing lawsuits.
There's no incentive for mortgage servicers to approve short refis, she says, because servicers believe they lose less money by foreclosing than by forgiving debt. And they fear that debt forgiveness would bring out the scammers.
Debt forgiveness isn't scary, but foreclosure is, and the threat of it keeps homeowners in line. "While we're seeing mass foreclosures, many (borrowers) are paying under these terms that some would call onerous," Lewis says.
Government plan benefits fewIn December, the Treasury Department and HUD announced a plan to help homeowners with onerous loans, but not with debt forgiveness. The plan would aid the small number of people who could afford the introductory rates on their subprime adjustable-rate mortgages, but couldn't afford the higher payments after the rate jumped. Those people would have their introductory rates frozen for up to five years. A homeowner taking advantage of the rate-freeze plan will end up making payments on a house that's worth less than the loan amount. That's not necessarily in the homeowner's best interest. A borrower would pay less every month if some of the debt was forgiven and the loan balance (and monthly payment) reflected the home's market value.
When you look at it that way, mortgage investors fared quite well in the plan brokered by the secretaries of Treasury and Housing. The rate freeze is friendlier to Wall Street than it is to Elm Street.
"We've really got no bailout for consumers, except through individual litigation, which is costly, but the market gets all kinds of bailouts," Lewis says. "Every effort to correct this leaves the loan whole. All the measures to figure out what to do with the people who got these loans still pay the lender for the bad behavior. It's crazy."
In December, even as the Treasury and Housing secretaries pushed a rate freeze instead of debt forgiveness, the president signed a law, called the Mortgage Forgiveness Debt Relief Act, that cuts taxes on homeowners whose debt is forgiven.
"So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation," President Bush said. "The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Short refi in lieu of foreclosureThe law might give borrowers a tax break, but contrary to what the president says, it doesn't provide incentives for lenders to refinance with debt forgiveness instead of foreclosing. The law doesn't give lenders and mortgage servicers tax breaks or subsidies for approving short refis.
It's hard enough to get a short refi as it is. A homeowner has to be past due for demonstrable reasons, with few prospects for catching up by reducing expenses or increasing income. A foreclosure is the outcome of most such cases. Or the homeowner can surrender title and move out voluntarily in what is called a deed in lieu of foreclosure.
In other cases, the servicer might approve a short sale -- a sale of the house for less than the loan balance, with the remaining debt forgiven. Or, if the homeowner is persistent and lucky, a short refi might be arranged.
A short refi won't happen unless the homeowner is willing to undergo a financial review and permit an appraisal with inspections inside and out. All stakeholders -- the servicer, borrower, mortgage insurer and any lender extending a second mortgage -- would have to approve a deal, agreeing that a short refi would lose less money than other options.
For debt forgivenessLazerson believes there would be many instances in which a short refi could be demonstrated to be the best choice. He would commission two appraisals -- one for the home's fair market value and another for the home's "REO value," or real estate owned value -- what it could be expected to fetch in a quick sale after foreclosure. In neighborhoods with a lot of empty and foreclosed homes for sale, the REO value might be so much lower than the fair market value that the servicer would be willing to approve a short refi rather than foreclose.
He cites the work of Dan Immergluck, an associate professor of city and regional planning at Georgia Tech, who wrote a study concluding that each foreclosure knocks about 1 percent off the value of every house within an eighth of a mile. By that reckoning, a cluster of foreclosures can reduce surrounding home values enough to trigger more foreclosures.
Elizabeth Warren, a professor at Harvard Law School who is an expert on bankruptcy and consumer credit issues, says debt forgiveness "is our best shot for getting out of the mortgage crisis without destroying value through foreclosures. More foreclosures will only hurt the lenders and homeowners involved, they will also depress the real estate market for everyone else."
To Lazerson, it's a no-brainer: If foreclosures lead to more foreclosures, lenders should halt the snowball before it gains momentum by approving short refis.
"They just take the hit on the debt forgiveness, because they're going to take a hit anyway," Lazerson says. "In either case (foreclosure or short refi), they're going to take a loss."
Against debt forgivenessFrom a mortgage servicer's perspective, a request for a short refi might sound like extortion, as if the borrower were saying, "Forgive some of the debt that I willingly took on, or I'll stop making payments altogether."
"It almost encourages everyone to say, 'Hey, maybe I'll stop making payments for a few months and the lender will refinance me,'" says Neil Garfinkel, partner in charge of real estate services for the New York-based law firm Abrams Garfinkel Margolis Bergson. "How do you prove that someone's just not gaming the system?"
That's the same question that Bitton has. It's why she has reservations about the rate-freeze plan, too.
"It's almost encouraged people to be late on their mortgages," she says.
Garfinkel's and Bitton's reservations are about moral hazard: The idea that people act recklessly if they are insulated from the consequences of their actions. Lazerson replies that moral hazard applies not only to borrowers, but to lenders, too.
"What about the moral hazard that they caused in the first place, by offering these loans for people who had no business being homeowners?" he says. "The lenders were just counting their money and they really created this whole thing. Had they not offered these loans, you wouldn't have to be choosing which borrowers are deserving or not deserving."
Waiting on Congress
However, I’m not sure anything will be done soon enough to help your situation. As you probably know, to a large extent the president’s hands are tied because, while he can make recommendations, it’s up to Congress to make the changes happen by passing new laws.
Although the House of Representatives overwhelmingly passed Bush’s “FHA Modernization” more than a year ago, the bill was loaded down with so many other “add-ons” (read: spending for unrelated special projects in various Congressional districts) that it was never signed into law.
When "Loss" = "Income"
The president is also asking Congress to temporarily change the tax code to provide relief to homeowners forced to sell homes at a loss — due to the fact that real estate values have gone down, even though their mortgage payments have gone up.
As the law stands today, if a lender cancels a debt you owe for less than the outstanding loan balance, the forgiven amount is considered “income.” Even though the borrower doesn’t receive any money, he/she still has to pay income tax on this amount.
For instance, let’s say you paid $200,000 for your house and have a loan for $180,000. If you live in one of the areas where the decline in residential real estate has been especially severe, similar homes in your area might now be selling for $160,000.
Assume that in order to avoid foreclosure, your lender agrees to release you of your mortgage for less than the current balance of $178,000. You sell the home, netting $158,000, which goes straight to your lender.
That additional $20,000 you owed the lender has been “forgiven,” and under the “cancellation of indebtedness” provision, this cancelled debt is now considered income. So when you file your income tax return next year, you would have to declare this $20,000 and, naturally, pay income tax on it.
Congress members have introduced several bills that would temporarily protect individuals from owing income tax on cancelled mortgage debt. Because President Bush also supports this idea, there’s a good chance legislation will eventually be enacted.
RE-financing Fairness
Over the coming months the Treasury Department will be reaching out to the FHA and private lenders, as well as community-based organizations such as Neighbor Works and 4divestdebt , a national nonprofit created by Congress to provide financial and hands-on support for community revitalization projects.
According to the White House, the goal of the collaboration is “to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage that works for them.”
Federal banking regulators are also considering ways to strengthen the disclosure requirements that lenders must provide to borrowers. One problem here is that in recent years, more and more mortgages are issued by private lenders, (Countrywide Mortgage, for instance) and the laws that govern banks and saving and loans do not cover private firms.
Deciphering Loan Documents
As you unfortunately discovered, mortgage documents are dauntingly complex. They are filled with terminology laced with legal and financial jargon that is difficult for the average person to understand. To combat this, there are also initiatives that would require clearer language and better explanations in loan documents so that borrowers fully understand the consequences of what they’re getting into.
The fact of the matter is: While perhaps the vast majority of mortgage brokers are honest, well-meaning individuals, we’re only now beginning to learn how many crooks were also operating during the recent housing boom. Investigations are underway at both federal and state levels, especially in formerly “hot” mortgage markets such as California, Florida, Nevada and Colorado.
Megan Burns, a former bank loan officer, points out that there’s an inherent conflict of interest: Mortgage brokers get paid based on the number of loans they write. This means officers have an incentive to approve borderline borrowers for larger loans than they might realistically be able to afford and to omit inconvenient details, such as the fact that the interest rate could rise significantly.
“People rely on loan officers” to explain the terms of their mortgage agreement,” says Burns. “But how can you when their income depends on them closing a loan?”
Sure, all of the details are disclosed in the obtusely-worded, 30+ page, loan document and may be explained verbally at the closing, but by then she says, “people feel pressured to sign because they could lose the house.”
Did I Hear Someone Say "Fraud"?
“Toxic mortgages,” that’s what Randy Johnson, a 27-year veteran of the mortgage business, calls these loans. From his location in Southern California, Johnson has seen some of the most egregious cases of mortgage brokers approving any loan they can just to make a buck.
“They put people in a $1,000/month mortgage with re-set characteristics that increase it down the road to $2,000 and don’t help borrowers understand that. It’s a prescription for disaster.”
Moreover, mortgage brokers receive a bigger payout based on the size of the loan and the terms. Johnson alleges that even “A-rated” borrowers who could have qualified for “a 30-year fixed at 6 percent” were sold subprime loans, the kind that “start at 6 percent for 2-3 years, then jump to 9 percent and bite you in the butt down the road.”
The sole reason, according to Johnson, is that mortgage brokers “made more than twice as much money for making a subprime loan than an A-paper loan.” He thinks the government “ought to devote a lot of energy to help people who have taken a great leap; to get good citizens to stay in their homes.”
He says the proposals to temporarily bail out these borrowers will “give people breathing room, allowing them to build up some equity.”
Borrowing Smarts
Johnson has written books to try and educate consumers about being smarter when shopping for a mortgage. Burns, who got “frustrated” with the mortgage business because she refused to adopt the deceptive tactics of many of her competitors, quit to launch a Web: www.guaranteedloanhelp.com
According to Burns, “most of the site is free for consumers.” After you’ve received a loan proposal, you can go to the site and set up an account based on your email address. Don’t worry, you’re not required to provide any sensitive information such as Social Security numbers or income.
The site then e-mails a questionnaire to your loan officer or mortgage broker. “We ask them more than what’s required to be disclosed by federal law,” says Burns. “It’s everything borrowers should know, but aren’t being told.”
When the questionnaire comes back, you’ll know, for instance, whether there is a pre-payment penalty, if your interest rate can increase and whether it’s capped at a certain amount. In addition, there are clear explanations of what the various terms mean.
By submitting a questionnaire for several different loan proposals, you can do an “apples-to-apples” comparison. You may find out that the loan with the lowest interest rate isn’t such a good deal, after all.
Don't Delay... Start by contacting your mortgage company as soon as possible and explain your situation. They might be willing to give you a new loan with more manageable terms.
But don’t stop there. You’ll also want to get at least one or two re-financing proposals from others lenders. Also visit the link below for more news.
www.guaranteedloanhelp.com
She adds that, "occasionally, on a case-by-case basis," clients have had debt forgiven, but only after filing lawsuits.
There's no incentive for mortgage servicers to approve short refis, she says, because servicers believe they lose less money by foreclosing than by forgiving debt. And they fear that debt forgiveness would bring out the scammers.
Debt forgiveness isn't scary, but foreclosure is, and the threat of it keeps homeowners in line. "While we're seeing mass foreclosures, many (borrowers) are paying under these terms that some would call onerous," Lewis says.
Government plan benefits fewIn December, the Treasury Department and HUD announced a plan to help homeowners with onerous loans, but not with debt forgiveness. The plan would aid the small number of people who could afford the introductory rates on their subprime adjustable-rate mortgages, but couldn't afford the higher payments after the rate jumped. Those people would have their introductory rates frozen for up to five years. A homeowner taking advantage of the rate-freeze plan will end up making payments on a house that's worth less than the loan amount. That's not necessarily in the homeowner's best interest. A borrower would pay less every month if some of the debt was forgiven and the loan balance (and monthly payment) reflected the home's market value.
When you look at it that way, mortgage investors fared quite well in the plan brokered by the secretaries of Treasury and Housing. The rate freeze is friendlier to Wall Street than it is to Elm Street.
"We've really got no bailout for consumers, except through individual litigation, which is costly, but the market gets all kinds of bailouts," Lewis says. "Every effort to correct this leaves the loan whole. All the measures to figure out what to do with the people who got these loans still pay the lender for the bad behavior. It's crazy."
In December, even as the Treasury and Housing secretaries pushed a rate freeze instead of debt forgiveness, the president signed a law, called the Mortgage Forgiveness Debt Relief Act, that cuts taxes on homeowners whose debt is forgiven.
"So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation," President Bush said. "The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Short refi in lieu of foreclosureThe law might give borrowers a tax break, but contrary to what the president says, it doesn't provide incentives for lenders to refinance with debt forgiveness instead of foreclosing. The law doesn't give lenders and mortgage servicers tax breaks or subsidies for approving short refis.
It's hard enough to get a short refi as it is. A homeowner has to be past due for demonstrable reasons, with few prospects for catching up by reducing expenses or increasing income. A foreclosure is the outcome of most such cases. Or the homeowner can surrender title and move out voluntarily in what is called a deed in lieu of foreclosure.
In other cases, the servicer might approve a short sale -- a sale of the house for less than the loan balance, with the remaining debt forgiven. Or, if the homeowner is persistent and lucky, a short refi might be arranged.
A short refi won't happen unless the homeowner is willing to undergo a financial review and permit an appraisal with inspections inside and out. All stakeholders -- the servicer, borrower, mortgage insurer and any lender extending a second mortgage -- would have to approve a deal, agreeing that a short refi would lose less money than other options.
For debt forgivenessLazerson believes there would be many instances in which a short refi could be demonstrated to be the best choice. He would commission two appraisals -- one for the home's fair market value and another for the home's "REO value," or real estate owned value -- what it could be expected to fetch in a quick sale after foreclosure. In neighborhoods with a lot of empty and foreclosed homes for sale, the REO value might be so much lower than the fair market value that the servicer would be willing to approve a short refi rather than foreclose.
He cites the work of Dan Immergluck, an associate professor of city and regional planning at Georgia Tech, who wrote a study concluding that each foreclosure knocks about 1 percent off the value of every house within an eighth of a mile. By that reckoning, a cluster of foreclosures can reduce surrounding home values enough to trigger more foreclosures.
Elizabeth Warren, a professor at Harvard Law School who is an expert on bankruptcy and consumer credit issues, says debt forgiveness "is our best shot for getting out of the mortgage crisis without destroying value through foreclosures. More foreclosures will only hurt the lenders and homeowners involved, they will also depress the real estate market for everyone else."
To Lazerson, it's a no-brainer: If foreclosures lead to more foreclosures, lenders should halt the snowball before it gains momentum by approving short refis.
"They just take the hit on the debt forgiveness, because they're going to take a hit anyway," Lazerson says. "In either case (foreclosure or short refi), they're going to take a loss."
Against debt forgivenessFrom a mortgage servicer's perspective, a request for a short refi might sound like extortion, as if the borrower were saying, "Forgive some of the debt that I willingly took on, or I'll stop making payments altogether."
"It almost encourages everyone to say, 'Hey, maybe I'll stop making payments for a few months and the lender will refinance me,'" says Neil Garfinkel, partner in charge of real estate services for the New York-based law firm Abrams Garfinkel Margolis Bergson. "How do you prove that someone's just not gaming the system?"
That's the same question that Bitton has. It's why she has reservations about the rate-freeze plan, too.
"It's almost encouraged people to be late on their mortgages," she says.
Garfinkel's and Bitton's reservations are about moral hazard: The idea that people act recklessly if they are insulated from the consequences of their actions. Lazerson replies that moral hazard applies not only to borrowers, but to lenders, too.
"What about the moral hazard that they caused in the first place, by offering these loans for people who had no business being homeowners?" he says. "The lenders were just counting their money and they really created this whole thing. Had they not offered these loans, you wouldn't have to be choosing which borrowers are deserving or not deserving."
Waiting on Congress
However, I’m not sure anything will be done soon enough to help your situation. As you probably know, to a large extent the president’s hands are tied because, while he can make recommendations, it’s up to Congress to make the changes happen by passing new laws.
Although the House of Representatives overwhelmingly passed Bush’s “FHA Modernization” more than a year ago, the bill was loaded down with so many other “add-ons” (read: spending for unrelated special projects in various Congressional districts) that it was never signed into law.
When "Loss" = "Income"
The president is also asking Congress to temporarily change the tax code to provide relief to homeowners forced to sell homes at a loss — due to the fact that real estate values have gone down, even though their mortgage payments have gone up.
As the law stands today, if a lender cancels a debt you owe for less than the outstanding loan balance, the forgiven amount is considered “income.” Even though the borrower doesn’t receive any money, he/she still has to pay income tax on this amount.
For instance, let’s say you paid $200,000 for your house and have a loan for $180,000. If you live in one of the areas where the decline in residential real estate has been especially severe, similar homes in your area might now be selling for $160,000.
Assume that in order to avoid foreclosure, your lender agrees to release you of your mortgage for less than the current balance of $178,000. You sell the home, netting $158,000, which goes straight to your lender.
That additional $20,000 you owed the lender has been “forgiven,” and under the “cancellation of indebtedness” provision, this cancelled debt is now considered income. So when you file your income tax return next year, you would have to declare this $20,000 and, naturally, pay income tax on it.
Congress members have introduced several bills that would temporarily protect individuals from owing income tax on cancelled mortgage debt. Because President Bush also supports this idea, there’s a good chance legislation will eventually be enacted.
RE-financing Fairness
Over the coming months the Treasury Department will be reaching out to the FHA and private lenders, as well as community-based organizations such as Neighbor Works and 4divestdebt , a national nonprofit created by Congress to provide financial and hands-on support for community revitalization projects.
According to the White House, the goal of the collaboration is “to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage that works for them.”
Federal banking regulators are also considering ways to strengthen the disclosure requirements that lenders must provide to borrowers. One problem here is that in recent years, more and more mortgages are issued by private lenders, (Countrywide Mortgage, for instance) and the laws that govern banks and saving and loans do not cover private firms.
Deciphering Loan Documents
As you unfortunately discovered, mortgage documents are dauntingly complex. They are filled with terminology laced with legal and financial jargon that is difficult for the average person to understand. To combat this, there are also initiatives that would require clearer language and better explanations in loan documents so that borrowers fully understand the consequences of what they’re getting into.
The fact of the matter is: While perhaps the vast majority of mortgage brokers are honest, well-meaning individuals, we’re only now beginning to learn how many crooks were also operating during the recent housing boom. Investigations are underway at both federal and state levels, especially in formerly “hot” mortgage markets such as California, Florida, Nevada and Colorado.
Megan Burns, a former bank loan officer, points out that there’s an inherent conflict of interest: Mortgage brokers get paid based on the number of loans they write. This means officers have an incentive to approve borderline borrowers for larger loans than they might realistically be able to afford and to omit inconvenient details, such as the fact that the interest rate could rise significantly.
“People rely on loan officers” to explain the terms of their mortgage agreement,” says Burns. “But how can you when their income depends on them closing a loan?”
Sure, all of the details are disclosed in the obtusely-worded, 30+ page, loan document and may be explained verbally at the closing, but by then she says, “people feel pressured to sign because they could lose the house.”
Did I Hear Someone Say "Fraud"?
“Toxic mortgages,” that’s what Randy Johnson, a 27-year veteran of the mortgage business, calls these loans. From his location in Southern California, Johnson has seen some of the most egregious cases of mortgage brokers approving any loan they can just to make a buck.
“They put people in a $1,000/month mortgage with re-set characteristics that increase it down the road to $2,000 and don’t help borrowers understand that. It’s a prescription for disaster.”
Moreover, mortgage brokers receive a bigger payout based on the size of the loan and the terms. Johnson alleges that even “A-rated” borrowers who could have qualified for “a 30-year fixed at 6 percent” were sold subprime loans, the kind that “start at 6 percent for 2-3 years, then jump to 9 percent and bite you in the butt down the road.”
The sole reason, according to Johnson, is that mortgage brokers “made more than twice as much money for making a subprime loan than an A-paper loan.” He thinks the government “ought to devote a lot of energy to help people who have taken a great leap; to get good citizens to stay in their homes.”
He says the proposals to temporarily bail out these borrowers will “give people breathing room, allowing them to build up some equity.”
Borrowing Smarts
Johnson has written books to try and educate consumers about being smarter when shopping for a mortgage. Burns, who got “frustrated” with the mortgage business because she refused to adopt the deceptive tactics of many of her competitors, quit to launch a Web: www.guaranteedloanhelp.com
According to Burns, “most of the site is free for consumers.” After you’ve received a loan proposal, you can go to the site and set up an account based on your email address. Don’t worry, you’re not required to provide any sensitive information such as Social Security numbers or income.
The site then e-mails a questionnaire to your loan officer or mortgage broker. “We ask them more than what’s required to be disclosed by federal law,” says Burns. “It’s everything borrowers should know, but aren’t being told.”
When the questionnaire comes back, you’ll know, for instance, whether there is a pre-payment penalty, if your interest rate can increase and whether it’s capped at a certain amount. In addition, there are clear explanations of what the various terms mean.
By submitting a questionnaire for several different loan proposals, you can do an “apples-to-apples” comparison. You may find out that the loan with the lowest interest rate isn’t such a good deal, after all.
Don't Delay... Start by contacting your mortgage company as soon as possible and explain your situation. They might be willing to give you a new loan with more manageable terms.
But don’t stop there. You’ll also want to get at least one or two re-financing proposals from others lenders. Also visit the link below for more news.
www.guaranteedloanhelp.com
Debt forgiveness a rarity
Debt forgiveness a rarityFew bankers will willingly do that, attests Michelle Lewis, president of Northwest Counseling Service, an agency in Philadelphia that helps homeowners who are in danger of foreclosure. She says she's all for negotiating debt forgiveness. "And that's been something we've been working on for years -- but we have had no success," Lewis says.
She adds that, "occasionally, on a case-by-case basis," clients have had debt forgiven, but only after filing lawsuits.
There's no incentive for mortgage servicers to approve short refis, she says, because servicers believe they lose less money by foreclosing than by forgiving debt. And they fear that debt forgiveness would bring out the scammers.
Debt forgiveness isn't scary, but foreclosure is, and the threat of it keeps homeowners in line. "While we're seeing mass foreclosures, many (borrowers) are paying under these terms that some would call onerous," Lewis says.
Government plan benefits fewIn December, the Treasury Department and HUD announced a plan to help homeowners with onerous loans, but not with debt forgiveness. The plan would aid the small number of people who could afford the introductory rates on their subprime adjustable-rate mortgages, but couldn't afford the higher payments after the rate jumped. Those people would have their introductory rates frozen for up to five years.
A homeowner taking advantage of the rate-freeze plan will end up making payments on a house that's worth less than the loan amount. That's not necessarily in the homeowner's best interest. A borrower would pay less every month if some of the debt was forgiven and the loan balance (and monthly payment) reflected the home's market value.
When you look at it that way, mortgage investors fared quite well in the plan brokered by the secretaries of Treasury and Housing. The rate freeze is friendlier to Wall Street than it is to Elm Street.
"We've really got no bailout for consumers, except through individual litigation, which is costly, but the market gets all kinds of bailouts," Lewis says. "Every effort to correct this leaves the loan whole. All the measures to figure out what to do with the people who got these loans still pay the lender for the bad behavior. It's crazy."
In December, even as the Treasury and Housing secretaries pushed a rate freeze instead of debt forgiveness, the president signed a law, called the Mortgage Forgiveness Debt Relief Act, that cuts taxes on homeowners whose debt is forgiven.
"So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation," President Bush said. "The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Short refi in lieu of foreclosureThe law might give borrowers a tax break, but contrary to what the president says, it doesn't provide incentives for lenders to refinance with debt forgiveness instead of foreclosing. The law doesn't give lenders and mortgage servicers tax breaks or subsidies for approving short refis.
It's hard enough to get a short refi as it is. A homeowner has to be past due for demonstrable reasons, with few prospects for catching up by reducing expenses or increasing income. A foreclosure is the outcome of most such cases. Or the homeowner can surrender title and move out voluntarily in what is called a deed in lieu of foreclosure.
In other cases, the servicer might approve a short sale -- a sale of the house for less than the loan balance, with the remaining debt forgiven. Or, if the homeowner is persistent and lucky, a short refi might be arranged.
A short refi won't happen unless the homeowner is willing to undergo a financial review and permit an appraisal with inspections inside and out. All stakeholders -- the servicer, borrower, mortgage insurer and any lender extending a second mortgage -- would have to approve a deal, agreeing that a short refi would lose less money than other options.
For debt forgivenessLazerson believes there would be many instances in which a short refi could be demonstrated to be the best choice. He would commission two appraisals -- one for the home's fair market value and another for the home's "REO value," or real estate owned value -- what it could be expected to fetch in a quick sale after foreclosure. In neighborhoods with a lot of empty and foreclosed homes for sale, the REO value might be so much lower than the fair market value that the servicer would be willing to approve a short refi rather than foreclose.
He cites the work of Dan Immergluck, an associate professor of city and regional planning at Georgia Tech, who wrote a study concluding that each foreclosure knocks about 1 percent off the value of every house within an eighth of a mile. By that reckoning, a cluster of foreclosures can reduce surrounding home values enough to trigger more foreclosures.
Elizabeth Warren, a professor at Harvard Law School who is an expert on bankruptcy and consumer credit issues, says debt forgiveness "is our best shot for getting out of the mortgage crisis without destroying value through foreclosures. More foreclosures will only hurt the lenders and homeowners involved, they will also depress the real estate market for everyone else."
To Lazerson, it's a no-brainer: If foreclosures lead to more foreclosures, lenders should halt the snowball before it gains momentum by approving short refis.
"They just take the hit on the debt forgiveness, because they're going to take a hit anyway," Lazerson says. "In either case (foreclosure or short refi), they're going to take a loss."
Against debt forgivenessFrom a mortgage servicer's perspective, a request for a short refi might sound like extortion, as if the borrower were saying, "Forgive some of the debt that I willingly took on, or I'll stop making payments altogether."
"It almost encourages everyone to say, 'Hey, maybe I'll stop making payments for a few months and the lender will refinance me,'" says Neil Garfinkel, partner in charge of real estate services for the New York-based law firm Abrams Garfinkel Margolis Bergson. "How do you prove that someone's just not gaming the system?"
That's the same question that Bitton has. It's why she has reservations about the rate-freeze plan, too.
"It's almost encouraged people to be late on their mortgages," she says.
Garfinkel's and Bitton's reservations are about moral hazard: The idea that people act recklessly if they are insulated from the consequences of their actions. Lazerson replies that moral hazard applies not only to borrowers, but to lenders, too.
"What about the moral hazard that they caused in the first place, by offering these loans for people who had no business being homeowners?" he says. "The lenders were just counting their money and they really created this whole thing. Had they not offered these loans, you wouldn't have to be choosing which borrowers are deserving or not deserving."
www.guaranteedloanhelp.com
She adds that, "occasionally, on a case-by-case basis," clients have had debt forgiven, but only after filing lawsuits.
There's no incentive for mortgage servicers to approve short refis, she says, because servicers believe they lose less money by foreclosing than by forgiving debt. And they fear that debt forgiveness would bring out the scammers.
Debt forgiveness isn't scary, but foreclosure is, and the threat of it keeps homeowners in line. "While we're seeing mass foreclosures, many (borrowers) are paying under these terms that some would call onerous," Lewis says.
Government plan benefits fewIn December, the Treasury Department and HUD announced a plan to help homeowners with onerous loans, but not with debt forgiveness. The plan would aid the small number of people who could afford the introductory rates on their subprime adjustable-rate mortgages, but couldn't afford the higher payments after the rate jumped. Those people would have their introductory rates frozen for up to five years.
A homeowner taking advantage of the rate-freeze plan will end up making payments on a house that's worth less than the loan amount. That's not necessarily in the homeowner's best interest. A borrower would pay less every month if some of the debt was forgiven and the loan balance (and monthly payment) reflected the home's market value.
When you look at it that way, mortgage investors fared quite well in the plan brokered by the secretaries of Treasury and Housing. The rate freeze is friendlier to Wall Street than it is to Elm Street.
"We've really got no bailout for consumers, except through individual litigation, which is costly, but the market gets all kinds of bailouts," Lewis says. "Every effort to correct this leaves the loan whole. All the measures to figure out what to do with the people who got these loans still pay the lender for the bad behavior. It's crazy."
In December, even as the Treasury and Housing secretaries pushed a rate freeze instead of debt forgiveness, the president signed a law, called the Mortgage Forgiveness Debt Relief Act, that cuts taxes on homeowners whose debt is forgiven.
"So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation," President Bush said. "The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Short refi in lieu of foreclosureThe law might give borrowers a tax break, but contrary to what the president says, it doesn't provide incentives for lenders to refinance with debt forgiveness instead of foreclosing. The law doesn't give lenders and mortgage servicers tax breaks or subsidies for approving short refis.
It's hard enough to get a short refi as it is. A homeowner has to be past due for demonstrable reasons, with few prospects for catching up by reducing expenses or increasing income. A foreclosure is the outcome of most such cases. Or the homeowner can surrender title and move out voluntarily in what is called a deed in lieu of foreclosure.
In other cases, the servicer might approve a short sale -- a sale of the house for less than the loan balance, with the remaining debt forgiven. Or, if the homeowner is persistent and lucky, a short refi might be arranged.
A short refi won't happen unless the homeowner is willing to undergo a financial review and permit an appraisal with inspections inside and out. All stakeholders -- the servicer, borrower, mortgage insurer and any lender extending a second mortgage -- would have to approve a deal, agreeing that a short refi would lose less money than other options.
For debt forgivenessLazerson believes there would be many instances in which a short refi could be demonstrated to be the best choice. He would commission two appraisals -- one for the home's fair market value and another for the home's "REO value," or real estate owned value -- what it could be expected to fetch in a quick sale after foreclosure. In neighborhoods with a lot of empty and foreclosed homes for sale, the REO value might be so much lower than the fair market value that the servicer would be willing to approve a short refi rather than foreclose.
He cites the work of Dan Immergluck, an associate professor of city and regional planning at Georgia Tech, who wrote a study concluding that each foreclosure knocks about 1 percent off the value of every house within an eighth of a mile. By that reckoning, a cluster of foreclosures can reduce surrounding home values enough to trigger more foreclosures.
Elizabeth Warren, a professor at Harvard Law School who is an expert on bankruptcy and consumer credit issues, says debt forgiveness "is our best shot for getting out of the mortgage crisis without destroying value through foreclosures. More foreclosures will only hurt the lenders and homeowners involved, they will also depress the real estate market for everyone else."
To Lazerson, it's a no-brainer: If foreclosures lead to more foreclosures, lenders should halt the snowball before it gains momentum by approving short refis.
"They just take the hit on the debt forgiveness, because they're going to take a hit anyway," Lazerson says. "In either case (foreclosure or short refi), they're going to take a loss."
Against debt forgivenessFrom a mortgage servicer's perspective, a request for a short refi might sound like extortion, as if the borrower were saying, "Forgive some of the debt that I willingly took on, or I'll stop making payments altogether."
"It almost encourages everyone to say, 'Hey, maybe I'll stop making payments for a few months and the lender will refinance me,'" says Neil Garfinkel, partner in charge of real estate services for the New York-based law firm Abrams Garfinkel Margolis Bergson. "How do you prove that someone's just not gaming the system?"
That's the same question that Bitton has. It's why she has reservations about the rate-freeze plan, too.
"It's almost encouraged people to be late on their mortgages," she says.
Garfinkel's and Bitton's reservations are about moral hazard: The idea that people act recklessly if they are insulated from the consequences of their actions. Lazerson replies that moral hazard applies not only to borrowers, but to lenders, too.
"What about the moral hazard that they caused in the first place, by offering these loans for people who had no business being homeowners?" he says. "The lenders were just counting their money and they really created this whole thing. Had they not offered these loans, you wouldn't have to be choosing which borrowers are deserving or not deserving."
www.guaranteedloanhelp.com
Understanding Adjustable Rate Mortgages
Understanding Adjustable Rate Mortgages
You've probably heard a lot about ARMs in the news of late, but many people still find them confusing. They know that the rate changes, but they aren't sure how. ARMs really aren't all that complicated.
An ARM, like its counterpart the fixed rate mortgages (or FRM), has two elements: The interest rate and monthly payment. With a fixed rate loan those items stay the same throughout the life of the loan. With an ARM, the interest rate changes and in turn, causes changes in your monthly payments.
It works like this. An adjustable rate mortgage has a period in between rate changes called the adjustment period. A one year ARM has an adjustment rate period of a year, so that's how often the interest rate - and your payments - can change. A 3-year ARM has a 3-year adjustment period, etc.
The interest rate itself has two parts: the index and the margin. The index determines the interest rate. It may be based on CMT securities, the Cost of funds Index (COFI), the London Interbank Offered Rate (LIBOR) or even the lender's own cost of funds. These indexes vary, with some changing more often than others and some that are generally higher than others. The margin represents how much your interest rate will be over and above the index. For example, if your index is 3% with a 3% margin, the rate would be 3% + 3% or 6%. Following is the formula.
Index + Margin = Fully Indexed rate
Using the formulas, if the index rose to 4%, the fully indexed rate would be 7%. There is a limit on how much your loan can change: It's called a rate cap. Rate caps limit how much interest the lender can charge you.
There are two main kinds of caps typically used on ARMs:
A periodic cap limits how much your rate is allowed to increase from one adjustment period to the next.
A lifetime cap limits how much the interest rate can change over the entire life of the loan. By law, there must be an overall (lifetime) cap on adjustable rate mortgages.
Note that if the interest rate on a given loan is held down by means of a periodic cap, if the index were to go up, the lender may be able to impose the increase at the end of the next adjustment period. For example, if a periodic cap is 2% but the index rose 3%, the lender may raise the rate 2% during the present adjustment period and the extra 1% during the subsequent period.
There is a third cap called a payment cap that limits how much your monthly payment can go up at the end of each adjustment period. Usually if your ARM has a periodic rate cap, it will not have a payment cap.
www.guaranteedloanhelp.com
You've probably heard a lot about ARMs in the news of late, but many people still find them confusing. They know that the rate changes, but they aren't sure how. ARMs really aren't all that complicated.
An ARM, like its counterpart the fixed rate mortgages (or FRM), has two elements: The interest rate and monthly payment. With a fixed rate loan those items stay the same throughout the life of the loan. With an ARM, the interest rate changes and in turn, causes changes in your monthly payments.
It works like this. An adjustable rate mortgage has a period in between rate changes called the adjustment period. A one year ARM has an adjustment rate period of a year, so that's how often the interest rate - and your payments - can change. A 3-year ARM has a 3-year adjustment period, etc.
The interest rate itself has two parts: the index and the margin. The index determines the interest rate. It may be based on CMT securities, the Cost of funds Index (COFI), the London Interbank Offered Rate (LIBOR) or even the lender's own cost of funds. These indexes vary, with some changing more often than others and some that are generally higher than others. The margin represents how much your interest rate will be over and above the index. For example, if your index is 3% with a 3% margin, the rate would be 3% + 3% or 6%. Following is the formula.
Index + Margin = Fully Indexed rate
Using the formulas, if the index rose to 4%, the fully indexed rate would be 7%. There is a limit on how much your loan can change: It's called a rate cap. Rate caps limit how much interest the lender can charge you.
There are two main kinds of caps typically used on ARMs:
A periodic cap limits how much your rate is allowed to increase from one adjustment period to the next.
A lifetime cap limits how much the interest rate can change over the entire life of the loan. By law, there must be an overall (lifetime) cap on adjustable rate mortgages.
Note that if the interest rate on a given loan is held down by means of a periodic cap, if the index were to go up, the lender may be able to impose the increase at the end of the next adjustment period. For example, if a periodic cap is 2% but the index rose 3%, the lender may raise the rate 2% during the present adjustment period and the extra 1% during the subsequent period.
There is a third cap called a payment cap that limits how much your monthly payment can go up at the end of each adjustment period. Usually if your ARM has a periodic rate cap, it will not have a payment cap.
www.guaranteedloanhelp.com
When does the Housing Pain Stop ?
NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.
The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.
By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.
"Merrill Lynch's figures are way too pessimistic, and they are unprecedented," Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com. "There is so much variation in local housing markets, and we see stable price conditions for 2008."
The current housing crisis and the depreciation in home prices have pummeled the economy, with businesses and consumers cutting back on spending, raising the specter of a recession. "Lower sales and higher inventory for sales are lowering the velocity of transactions," said Fritz Siebel, Director of US Property Derivatives for Tradition Financial Services. "That cannot be a sign of good health for the economy."
But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. "By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance," said the report.
Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 - a historic low.
The report says that the inventory situation only continues to worsen, as homebuilders are now looking at more than a nine months' supply. "The current supply/demand environment does not favor a swift recovery in the housing market, in our view," according to the report.
Yun agrees that the reduction in housing starts will not bode well for the economy, especially in the homebuilding industry, but he believes that the reduction will soothe the housing market by slowing the glut in inventory. "The reduction in housing starts is not stabilizing the economy, but it will stabilize the market," said Yun.
Thursday, January 24, 2008
Depending on Uncle Sam is HOGWASH!
Tax Rebates Deal AnnouncedThursday January 24, 3:18 pm ET By Andrew Taylor, Associated Press Writer
Congress, Treasury Secretary Announce Deal on Tax Rebates, Business Breaks to Boost Economy
WASHINGTON (AP) -- Congressional leaders announced a deal with the White House Thursday on an economic stimulus package that would give most tax filers refunds of $600 to $1,200, and more if they have children.
House Speaker Nancy Pelosi said Congress would act on the agreement -- hammered out in a week of intense negotiations with Republican Leader John A. Boehner and Treasury Secretary Henry Paulson -- "at the earliest date, so that those rebate checks can be in the mail."
President Bush praised the agreement at the White House, saying that it "has the right set of policies and is the right size."
The rebates, which would go to about 116 million families, had appeal for both Democrats and Republicans. Pelosi's staff noted that they would include $28 billion in checks to 35 million working families who wouldn't have been helped by Bush's original proposal. Republicans, for their part, were pleased that the bulk of the rebates -- more than 70 percent, according to an analysis by Congress' Joint Tax Committee -- would go to individuals who pay taxes.
Individuals who pay income taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don't pay taxes would get $300 rebates.
The first rebate payments could begin going out in May, and most people could have them by July, Paulson said, noting that the IRS will already be overwhelmed processing 2007 tax returns. The rebates were expected to cost about $100 billion, and the package also includes close to $50 billion in business tax cuts.
The package would allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and permit small businesses to write off additional purchases of equipment. A Republican-written provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped.
Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining the rebates of at least $300 for almost everyone earning a paycheck, including those who make too little to pay income taxes.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come," Pelosi said.
Boehner said the agreement "was not easy for the two of us and our respective caucuses."
"You know, many Americans believe that Washington is broken," Boehner said. "But I think this agreement and I hope that this agreement will show the American people that we can fix it and will serve to move along other bipartisan agreements that we can have in the future."
Paulson said he would work with the House and Senate to enact the package as soon as possible, because "speed is of the essence."
The Treasury Department has already been talking to the IRS about getting the checks out "as quickly as possible, recognizing that the tax filing season is ongoing," said Treasury spokesman Andrew DeSouza.
The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children.
The agreement left some lawmakers in both parties with a bitter taste, complaining that their leaders had sacrificed too much in the interest of striking a deal. Many senior Democrats were particularly upset that the package omitted the unemployment extension.
"I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own," Rep. Charles B. Rangel, D-N.Y., the Ways and Means Committee chairman, said in a statement.
Sen. Max Baucus, D-Mont., the Finance Committee Chairman, said leaving out the unemployment extension was "a mistake," as he announced plans to craft a separate stimulus package in the Senate starting next week.
Majority Leader Harry Reid said the goal is to send the package to the White House by Feb. 15 for President Bush's signature, but he noted the Senate would likely try to add more spending to the package.
"I expect that the (Finance) Committee and other senators will work to improve the House package by adding funds for other initiatives that can boost the economy immediately, such as unemployment benefits, nutrition assistance, state relief and infrastructure investment," Reid said in a statement.
Bush has supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates under Bush's initial proposal.
To address the mortgage crisis, the package also raises the limits on Federal Housing Administration loans and home mortgages that Fannie Mae and Freddie Mac can purchase to as high as $725,000 in high-cost areas. Those are considerable boosts over the current FHA limit of $362,000 and the $417,000 cap for Fannie Mae and Freddie Mac's loan purchases.
After a key Wednesday night meeting in which the parameters of an agreement were reached, Pelosi and Boehner spoke again Thursday to cement the accord.
In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, according to congressional aides.
The package was drawing fire from liberal activists and labor unions upset that proposals to extend unemployment insurance and boost food stamps had been dropped. Many Democratic lawmakers had assumed those proposals would make it into the package, and critics of the deal said those ideas could pump money into the economy more quickly than tax rebate checks that won't be delivered until June.
Democrats wanted to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Conservative Republicans, meanwhile, were likely to be restless over tax rebates going to those without income tax liability.
Democratic aides said greater GOP flexibility over giving relief to poor families with children -- who would not have been eligible under Bush's original tax rebate proposal -- was the catalyst that moved the talks forward.
www.guaranteedloanhelp.com
Congress, Treasury Secretary Announce Deal on Tax Rebates, Business Breaks to Boost Economy
WASHINGTON (AP) -- Congressional leaders announced a deal with the White House Thursday on an economic stimulus package that would give most tax filers refunds of $600 to $1,200, and more if they have children.
House Speaker Nancy Pelosi said Congress would act on the agreement -- hammered out in a week of intense negotiations with Republican Leader John A. Boehner and Treasury Secretary Henry Paulson -- "at the earliest date, so that those rebate checks can be in the mail."
President Bush praised the agreement at the White House, saying that it "has the right set of policies and is the right size."
The rebates, which would go to about 116 million families, had appeal for both Democrats and Republicans. Pelosi's staff noted that they would include $28 billion in checks to 35 million working families who wouldn't have been helped by Bush's original proposal. Republicans, for their part, were pleased that the bulk of the rebates -- more than 70 percent, according to an analysis by Congress' Joint Tax Committee -- would go to individuals who pay taxes.
Individuals who pay income taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don't pay taxes would get $300 rebates.
The first rebate payments could begin going out in May, and most people could have them by July, Paulson said, noting that the IRS will already be overwhelmed processing 2007 tax returns. The rebates were expected to cost about $100 billion, and the package also includes close to $50 billion in business tax cuts.
The package would allow businesses to immediately write off 50 percent of purchases of plants and other capital equipment and permit small businesses to write off additional purchases of equipment. A Republican-written provision to allow businesses suffering losses now to reclaim taxes previously paid was dropped.
Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining the rebates of at least $300 for almost everyone earning a paycheck, including those who make too little to pay income taxes.
"I can't say that I'm totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come," Pelosi said.
Boehner said the agreement "was not easy for the two of us and our respective caucuses."
"You know, many Americans believe that Washington is broken," Boehner said. "But I think this agreement and I hope that this agreement will show the American people that we can fix it and will serve to move along other bipartisan agreements that we can have in the future."
Paulson said he would work with the House and Senate to enact the package as soon as possible, because "speed is of the essence."
The Treasury Department has already been talking to the IRS about getting the checks out "as quickly as possible, recognizing that the tax filing season is ongoing," said Treasury spokesman Andrew DeSouza.
The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children.
The agreement left some lawmakers in both parties with a bitter taste, complaining that their leaders had sacrificed too much in the interest of striking a deal. Many senior Democrats were particularly upset that the package omitted the unemployment extension.
"I do not understand, and cannot accept, the resistance of President Bush and Republican leaders to including an extension of unemployment benefits for those who are without work through no fault of their own," Rep. Charles B. Rangel, D-N.Y., the Ways and Means Committee chairman, said in a statement.
Sen. Max Baucus, D-Mont., the Finance Committee Chairman, said leaving out the unemployment extension was "a mistake," as he announced plans to craft a separate stimulus package in the Senate starting next week.
Majority Leader Harry Reid said the goal is to send the package to the White House by Feb. 15 for President Bush's signature, but he noted the Senate would likely try to add more spending to the package.
"I expect that the (Finance) Committee and other senators will work to improve the House package by adding funds for other initiatives that can boost the economy immediately, such as unemployment benefits, nutrition assistance, state relief and infrastructure investment," Reid said in a statement.
Bush has supported larger rebates of $800-$1,600, but his plan would have left out 30 million working households who earn paychecks but don't make enough to pay income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. An additional 19 million households would receive only partial rebates under Bush's initial proposal.
To address the mortgage crisis, the package also raises the limits on Federal Housing Administration loans and home mortgages that Fannie Mae and Freddie Mac can purchase to as high as $725,000 in high-cost areas. Those are considerable boosts over the current FHA limit of $362,000 and the $417,000 cap for Fannie Mae and Freddie Mac's loan purchases.
After a key Wednesday night meeting in which the parameters of an agreement were reached, Pelosi and Boehner spoke again Thursday to cement the accord.
In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, according to congressional aides.
The package was drawing fire from liberal activists and labor unions upset that proposals to extend unemployment insurance and boost food stamps had been dropped. Many Democratic lawmakers had assumed those proposals would make it into the package, and critics of the deal said those ideas could pump money into the economy more quickly than tax rebate checks that won't be delivered until June.
Democrats wanted to extend unemployment benefits for people whose 26 weeks of benefits have run out, but Republicans resisted.
Conservative Republicans, meanwhile, were likely to be restless over tax rebates going to those without income tax liability.
Democratic aides said greater GOP flexibility over giving relief to poor families with children -- who would not have been eligible under Bush's original tax rebate proposal -- was the catalyst that moved the talks forward.
www.guaranteedloanhelp.com
Recession 2008 ?
The sputtering U.S. economy has gotten everyone from the financial markets to the Federal Reserve to Congress in a panic.
But here's a disheartening message for those already worried about economic growth -- it could get much worse.
Most economists who believe a recession is already here or at least near are looking for a relatively short and mild downturn, perhaps lasting only two or three quarters.
But many of those same economists say they also can envision a worst-case scenario where spending by consumers and businesses falls off sharply, unemployment heads higher than normal during a typical recession and housing and credit market problems worsen.
"I can easily imagine [the economy] going into a free fall," said Dean Baker, the chief economist for the Center for Economic and Policy Research. "The danger is that housing prices continue to tumble and accelerate, people's ability to pull out equity will evaporate, and you'll see a serious downturn in consumption."
We talked to three more leading economists to find out their biggest economic fears. Here's what they had to say.
Greenback blues David Wyss, chief economist with Standard & Poor's, said that among his biggest concerns is that overseas investors could pull back on investing in the dollar and other U.S. assets.
That could cause an even greater sense of fear among U.S. consumers and businesses, as stock prices fall and bond yields rise, which in turn would lift mortgage rates and be a bigger drag on the already battered housing market.
"Americans could just get scared by a barrage of bad news," Wyss said. "The stock market could continue going down because of foreigners pulling money out, and between that and home values going through the floor, it could lead to a real pullback of spending, particularly by Baby Boomers who are getting close to retirement."
Wyss said he's also concerned that oil prices could shoot higher, even if a recession cuts into global demand. He said supply disruptions in the Middle East could send oil prices up to $150 a barrel and help deepen any recession.
Wyss said that in his worst case scenario, the unemployment rate would climb to 7.5 percent by early 2009, up from its current level of 5 percent.
He also believes gross domestic product, the broad measure of the nation's economic activity, could wind up as much as 2 percent lower at the end of 2008 than it was at the end of 2007. That would be the biggest downturn since 1982. Many of those forecasting a recession this year are expecting GDP to show a slight gain by the end of the year.
House of pain. Edward McKelvey, senior economist at Goldman Sachs, agreed with Wyss that, in a worst case scenario, GDP could fall 2 percent this year..
His biggest fear is that home prices could fall much further in the coming months. In fact, Goldman and economists at Merrill Lynch have both predicted that home values could fall another 15 percent, on top of the 10 percent drop from earlier peaks that has already taken place.
McKelvey said further declines could cause much deeper problems for consumers and credit markets.
"One of the most likely candidates would be credit markets acting more violently than we thought, a tightening of the supply of credit to businesses and households," he said when asked what could bring about his worst case outlook.
"You could also see a more substantial response by businesses to the downturn through layoffs, cuts in their spending and business plans," he added.
Bank woes just beginning. Paul Kasriel, chief economist at Northern Trust, said he thinks there's a good chance that the economic pullback will be much steeper than now widely assumed. This weak forecast is based on his belief that the billions in dollars of writedowns already reported by Merrill Lynch (MER, Fortune 500), Citigroup (C, Fortune 500), JP Morgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and other big banks are just the beginning of the problem in the financial sector.
Kasriel said that if banks have to report more losses due to bad bets on subprime mortgages, they will be unwilling, or unable, to make large loans to businesses and consumers.
So even if the Fed keeps cutting interest rates, the impact of the cuts may be "less potent" than rate cuts in previous recessions since consumers and businesses may not be able to borrow enough to keep spending. That could make this recession more like the one in 1991-92 than the relatively short and mild recession of 2001.
"Historically, and not surprisingly, recessions accompanied by declines in consumer spending tend to be more severe. And people are going to be constrained from spending by the declines in housing," Kasriel said.
He added that state and local governments might have to cut back spending as a result of declining tax revenue. And that would be another sizable blow to the overall economy.
"People forget about state and local government spending, but it represents 11 percent of GDP," Kasriel said.
But here's a disheartening message for those already worried about economic growth -- it could get much worse.
Most economists who believe a recession is already here or at least near are looking for a relatively short and mild downturn, perhaps lasting only two or three quarters.
But many of those same economists say they also can envision a worst-case scenario where spending by consumers and businesses falls off sharply, unemployment heads higher than normal during a typical recession and housing and credit market problems worsen.
"I can easily imagine [the economy] going into a free fall," said Dean Baker, the chief economist for the Center for Economic and Policy Research. "The danger is that housing prices continue to tumble and accelerate, people's ability to pull out equity will evaporate, and you'll see a serious downturn in consumption."
We talked to three more leading economists to find out their biggest economic fears. Here's what they had to say.
Greenback blues David Wyss, chief economist with Standard & Poor's, said that among his biggest concerns is that overseas investors could pull back on investing in the dollar and other U.S. assets.
That could cause an even greater sense of fear among U.S. consumers and businesses, as stock prices fall and bond yields rise, which in turn would lift mortgage rates and be a bigger drag on the already battered housing market.
"Americans could just get scared by a barrage of bad news," Wyss said. "The stock market could continue going down because of foreigners pulling money out, and between that and home values going through the floor, it could lead to a real pullback of spending, particularly by Baby Boomers who are getting close to retirement."
Wyss said he's also concerned that oil prices could shoot higher, even if a recession cuts into global demand. He said supply disruptions in the Middle East could send oil prices up to $150 a barrel and help deepen any recession.
Wyss said that in his worst case scenario, the unemployment rate would climb to 7.5 percent by early 2009, up from its current level of 5 percent.
He also believes gross domestic product, the broad measure of the nation's economic activity, could wind up as much as 2 percent lower at the end of 2008 than it was at the end of 2007. That would be the biggest downturn since 1982. Many of those forecasting a recession this year are expecting GDP to show a slight gain by the end of the year.
House of pain. Edward McKelvey, senior economist at Goldman Sachs, agreed with Wyss that, in a worst case scenario, GDP could fall 2 percent this year..
His biggest fear is that home prices could fall much further in the coming months. In fact, Goldman and economists at Merrill Lynch have both predicted that home values could fall another 15 percent, on top of the 10 percent drop from earlier peaks that has already taken place.
McKelvey said further declines could cause much deeper problems for consumers and credit markets.
"One of the most likely candidates would be credit markets acting more violently than we thought, a tightening of the supply of credit to businesses and households," he said when asked what could bring about his worst case outlook.
"You could also see a more substantial response by businesses to the downturn through layoffs, cuts in their spending and business plans," he added.
Bank woes just beginning. Paul Kasriel, chief economist at Northern Trust, said he thinks there's a good chance that the economic pullback will be much steeper than now widely assumed. This weak forecast is based on his belief that the billions in dollars of writedowns already reported by Merrill Lynch (MER, Fortune 500), Citigroup (C, Fortune 500), JP Morgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and other big banks are just the beginning of the problem in the financial sector.
Kasriel said that if banks have to report more losses due to bad bets on subprime mortgages, they will be unwilling, or unable, to make large loans to businesses and consumers.
So even if the Fed keeps cutting interest rates, the impact of the cuts may be "less potent" than rate cuts in previous recessions since consumers and businesses may not be able to borrow enough to keep spending. That could make this recession more like the one in 1991-92 than the relatively short and mild recession of 2001.
"Historically, and not surprisingly, recessions accompanied by declines in consumer spending tend to be more severe. And people are going to be constrained from spending by the declines in housing," Kasriel said.
He added that state and local governments might have to cut back spending as a result of declining tax revenue. And that would be another sizable blow to the overall economy.
"People forget about state and local government spending, but it represents 11 percent of GDP," Kasriel said.
Ahh...When does it get better
The median price for a single-family home dropped 1.8 percent to $217,000; the first annual price decline on record since 1968.
Financial institutions set layoff records as credit woes continue.
Play video
WASHINGTON (AP) -- Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades.
The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.
For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. The median price for a single-family home dropped 1.8 percent to $217,000.
That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s
Financial institutions set layoff records as credit woes continue.
Play video
WASHINGTON (AP) -- Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades.
The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units.
For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. The median price for a single-family home dropped 1.8 percent to $217,000.
That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s
Wednesday, January 23, 2008
Presidential Candiates get into the SUBPRIME mess
Jan 19, 2008 04:30 AM
Andrew Chung Staff ReporterLAS VEGAS–She didn't actually use the words, but Senator Hillary Clinton might as well have repeated the phrase made so famous by her husband's winning campaign strategy in the 1990s: "It's the economy, stupid!" At a stop inside a cluttered printing shop in an industrial sector of this city yesterday, Clinton told an audience of workers and members of the public that the American dream of prosperity is becoming more elusive by the day. "Nobody ever thought the economy of Las Vegas would slow down, that a construction worker would be laid off, that a casino employee would be laid off," she said in a speech leading up to today's presidential caucuses in Nevada.
Clinton is following in the footsteps of her husband, former president Bill Clinton, in ways deeper than just the fact that she's also aiming for the Oval Office. The campaign is emerging as a mirror image of 1992 when Bill Clinton was elected based on his promise to fix the sputtering economy.
While Clinton was speaking, a few blocks away, 71-year-old Betty Turner was quietly listening to a credit counselor, a sheaf of printouts spread across her lap. She knows the economy is in a rough patch when she looks in the mirror every day.
"My credit cards have gotten away from me, which is why I came here," she said inside the counseling service's office. She adds, however, that at least her house isn't being foreclosed on, like some of her neighbors in the state that leads the nation in home foreclosures.
This morning, Nevadans will publicly jostle each other in small groups to pledge their support for presidential nominee hopefuls in this key battleground state, which, by virtue of its status as an early nomination contest, will influence the entire race.
A win for either of the two leading Democratic candidates, senators Hillary Clinton of New York or Barack Obama of Illinois, is vital because it will give their campaign momentum in a contest that is so far a virtual tie.
For Republicans, the caucuses here are less important than the vote in South Carolina, which holds that party's primary today as well. Only former Massachusetts governor Mitt Romney and libertarian Ron Paul have spent time and money campaigning here.
Polls have in past months put Clinton way ahead of Obama, including among Nevada's Hispanics, who make up 25 per cent of the population. But as Obama's profile has risen here, so have numbers. A poll released earlier this week had him ahead of Clinton by two points.
But a new poll out yesterday by the Las Vegas Review-Journal, which has endorsed Obama, has Clinton ahead of Obama by nine points at 41 per cent versus 32 per cent. John Edwards is at 14 per cent.
The same poll also has Romney 15 points ahead of Senator John McCain in the Republican race.
But signs of a national economic downturn are mounting, and it has emerged as the number one issue among Americans. Stock markets have tumbled in recent days, off more than 1,000 points since the beginning of 2008. Construction of new homes has dropped, as have home prices in the wake of the subprime mortgage crisis. Banks and brokerages are losing billions of dollars and writing off billions more in bad loans.
"I'm really worried," said Denise Gustafson, 50, who lives in Pahrump, a town an hour's drive west of Las Vegas. She makes the commute every day and is worried about rising gas prices.
"My husband is a union sheet-metal worker," added Gustafson, who is undecided between Clinton and Obama. "Construction jobs are going to undocumented workers because they can pay them less."
Peggy Maze Johnson, executive director of the Clark County Democratic Party, said the economy has become a huge issue among voters.
"When you look at one part of Las Vegas, all those new hotels and condos going up, people say, `What a great economy," she observed. "But when you draw down on the streets here, and see all the for sale signs, then you know."
Republicans and Democrats have begun talking about how to re-energize the economy. Clinton and Obama have been tripping over each other to get their message out.
Yesterday, Obama attacked Clinton on that front, saying Clinton's plan to stimulate the economy by providing a tax rebate for workers was partially taken from his plan.
"Senator Clinton has said she is ready to lead from Day 1," Obama said in Reno. "But it's important on Day 1 to get it right, whether you're talking about war or you're talking about economic proposals."
Obama's plan would also provide $10 billion to help homeowners facing foreclosure and $10 billion to cover state budget shortfalls. He also has vowed to go after unscrupulous lenders, who have played a major role in the foreclosure crisis, and a "credit card bill of rights."
At the printing shop in Nevada, Clinton told the crowd her plan also includes a moratorium on home foreclosures for 90 days to give people a chance to "figure things out," a freeze on interest rates, and a $25 billion plan to help people who can't pay their utility bills.
She said she wants to return the economy to the way it was while her husband was in office, when jobs were plentiful and the government was on track for a surplus.
But at a stop in San Francisco on Thursday, Obama countered: "The American people are not looking specifically for a repetition of what happened in the '90s," he said. "What they are looking for is who's going to lead us over the next eight years into an era of greater prosperity and also to meet new challenges as they come up."
Hillary Rodham Clinton urged for a moratorium on foreclosures for 90 days on homes with subprime mortgages and a five-year long period of freeze on the interest rates that those borrowers would have to pay.
She addressed a letter to Treasury Secretary, Henry Paulson, who is now ready to announce the Bush administration’s responsibility to today’s housing problems. Clinton, in her remarkable foresight, notes that today’s foreclosures continue to pose incalculable loss to the economy.
Clinton has stated that the mortgage problems have gone way beyond the state of transparency to the common people. At a news conference on last Sunday of December 2008, she has mentioned that what every Iowan should look forward to is, to have accurate information when they make decisions about undergoing mortgage payments.
Clinton has indicated that the battle within the Democrats is about how to get things done in a rougher manner. But she stresses that coming to the last month of the year she wants to start drawing contrasts from the way it has been with foreclosures so far.
Clinton has already dared to go further than her Democratic rivals and revealed what the administrators think about the decisions made on foreclosures. Obama has introduced a bill which would go on to make mortgage fraud a severe criminal offence. The bill also reinstates that such fraudulence attracts favors national funds to help the lenders who are severely in danger of losing their homes.
Obama and Edward, the two members of the Democrats are supposedly changing laws to make people live better and not lose their homes altogether. According to the Associates Press, Paulson would call for voluntary extensions on the issue of subprime mortgages at the present interest rates. In the letter to Paulson, as a part of the Clinton campaign, Hillary Clinton states that he needs to impose these new laws in the form of a moratorium on all foreclosures. The moratorium would be for at least 90 days acting upon all owner-occupied homes with subprime mortgages. The letter also states for a freeze in the monthly rates on subprime mortgage rates whish are of the adjustable nature. The mortgage rate would be effective for at least 5 years until they can be converted into affordable and fixed-rate loans. The letter urges that the mortgage industry would be required to submit status reports on the number of mortgages that need to be modified to make them affordable for the majority.
With these points in mind the reformation on foreclosures is expected to be done as an essential part of Clinton’s campaign.
Today, Hillary outlined an economic stimulus plan to help hard hit families and give our economy a much needed boost. Over a month ago, in a speech to Wall Street, Senator Clinton called on the Bush Administration to begin considering economic stimulus. In the month since, while the Administration has failed to act, we have seen growing signs that our economy is faltering. Tens of thousands of families have already been forced out of their homes. Recently, oil hit $100 a barrel, and last Friday, the Bureau of Labor Statistics reported that the economy lost jobs in the private sector in December for the first time in over four years. According to RealtyTrac, more than 201,000 foreclosure filings were reported in November alone, up 68 percent from the year before.
Hillary believes we need real action now. While economists may still be debating whether we've met the technical definition of a recession, for hard-hit middle class families that question has already been answered.
That is why today Senator Clinton called on the President and Congressional leaders from both parties to enact an aggressive, fast-acting stimulus package based on common-sense economic principles. Unlike 2001, when President Bush used stimulus as an excuse to force through long-term tax cuts for the wealthiest Americans-which ran up our debt to foreign governments while utterly failing to reignite job growth-Senator Clinton believes we need a strong immediate stimulus to jumpstart the economy without negatively affecting our long-term fiscal position. In addition, stimulus measures should be targeted toward hardworking families that are most likely to spend new resources, which will ensure that we give our economy an immediate boost. As President, Hillary would enact a five-part stimulus package that is consistent with these principles. This package includes:
Establishing a $30 Billion Emergency Housing Crisis Fund to assist states and cities mitigate the effects of mounting foreclosures. With our economy facing the prospect of substantial contraction as hundreds of thousands of subprime mortgages reset and housing values erode further, Senator Clinton believes that any effective stimulus package must take aggressive action to mitigate this contraction and help as many families as possible remain in their homes. Her $30 billion fund would provide immediate, time-limited resources to states, cities and community organizations to help prevent unnecessary foreclosures. States and communities could also use the funds to offset the costs associated with vacant properties by supporting efforts like community-level anti-blight programs and helping local housing authorities buy up vacant properties and rent them to working families. When families lose their homes, surrounding property values and local tax revenues decline and the cost of policing and maintaining vacant properties rise. This reduction in revenues and rise in costs can lead cities and states to cutback services, lay off teachers and other vital workers, raise college tuition, or even raise local taxes. The availability of $30 billion in federal assistance will ensure that states and cities have the resources they need to fight foreclosures, prevent a downward housing cycle impacting large numbers of homeowners and to weather the crisis without unnecessary fiscal contraction. M
Taking bold action to end the housing crisis. Senator Clinton is the only candidate with a comprehensive plan to keep families in their homes and keep the housing crisis from dragging down the economy. More than 2 million foreclosure notices went out last year, devastating families and communities. The foreclosure crisis is also contributing to the decline in home prices which has already cost families an estimated $1.3 trillion. Many experts believe the worst is yet to come. To stem this crisis, Senator Clinton has called for a 90-day moratorium on subprime foreclosures and an automatic rate freeze on subprime mortgages of at least five years or until servicers have converted the unworkable mortgages into loans families can afford. In addition, Senator Clinton proposed to temporarily empower state housing financing agencies to help families refinance unworkable mortgages and temporarily increasing the portfolio caps at Fannie Mae and Freddie Mac, and enabling them to purchase larger loans in high-cost areas. These steps would immediately increase the availability of mortgages for responsible borrowers.
WASHINGTON (Reuters) - Democratic presidential hopeful Hillary Clinton proposed on Monday a 90-day moratorium on home foreclosures to give financially troubled borrowers time to work with lenders and avoid losing their homes.
Clinton, the New York senator outlined the proposal in a letter to U.S. Treasury Secretary Henry Paulson, who is trying to broker a deal with mortgage lenders that would help troubled borrowers.
Clinton said, "The crisis surrounding subprime mortgages extended to borrowers with spotty credit has unnerved financial markets and could deepen a slump in the U.S. housing market that some economists fear has pushed the economy close to recession".
"It is critical that we address this crisis," Clinton said in a letter to Paulson. "The administration and the mortgage industry must reach agreement that matches the scale of the problem. If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable."
The U.S. Treasury Department has been pushing the mortgage industry to agree to temporarily freeze interest rates for some borrowers who took out loans with low teaser rates that will soon be resetting much higher. More than 2 million borrowers are estimated to be facing rate resets.
Clinton said any agreement should include a moratorium on foreclosures of at least 90 days on owner-occupied homes with subprime mortgages. Any agreement should also include a rate freeze on adjustable mortgages of at least five years or until the loan is converted into a fixed-rate mortgage, she said.
Clinton said the freeze would give the housing market time to stabilize and homeowners time to build equity. She also called on the mortgage industry to provide regular reports on the number of mortgages they have modified.
If the administration fails to secure an agreement that includes those provisions, Clinton said she would push for legislation that would allow lenders to convert subprime mortgages into more affordable loans without permission of investors.
Clinton said she also called for a $5 billion fund to help hard-hit communities and homeowners cope with the foreclosure crisis.
The subprime mortgage crisis has hit some states harder than others, including Florida, Nevada, California, Michigan and Ohio -- key states in next year's presidential elections. Clinton leads in the troubled States.
Wall Street deserves some of the blame for the current mortgage crisis, Democrat Hillary Clinton charged Wednesday, urging the industry to take steps to reverse the damage.
"Wall Street shifted risk away from the people who knew what was going on and onto the people who did not," Clinton told an audience at the Nasdaq Marketsite in Times Square.
"This is a moment for shared responsibility in America. Investors, lenders and homeowners all have a part to play, and sacrifices to make."
She called for a 90-day freeze on owner-occupied home foreclosures, and also for stopping increases in subprime mortgage rates for at least five years - a move similar to what the White House is expected to announce today.
"This is a moment for shared responsibility in America. Investors, lenders and homeowners all have a part to play, and sacrifices to make."
She called for a 90-day freeze on owner-occupied home foreclosures, and also for stopping increases in subprime mortgage rates for at least five years - a move similar to what the White House is expected to announce today.
The Democratic White House front-runner also suggested the creation of a one-time, multibillion-dollar "community support fund" to prevent foreclosures by providing financial counseling and other services, and for prosecuting foreclosure-related fraud.
Taking on Wall Street is viewed as smart and risky for Clinton, analysts said. It could make her look like a woman who won't be her donors' puppet - or anger a population with deep pockets.
The Democratic front-runner has hauled in more than $4.7 million from donors in the securities and investment industries, according to the Center for Responsive Politics.
She has also drawn nearly $4million from real estate supporters and just under $1 million from the commercial banking sector.
David Birdsell of the Baruch College School of Public Affairs said Clinton's appeal could be seen as "a response to the energetic critique from her left from John Edwards and Barack Obama" as the race to win Iowa nears - and tightens.
Obama addressed the mortgage crisis issue in a stern September speech, also at the Nasdaq Marketsite.
With a large stable of topflight investment types in her corner, Birdsell added, Clinton "probably has some running room, so she can go populist to some degree without risking their allegiance."
Clinton said she would consider legislation if Wall Street didn't come along voluntarily, but ended on a conciliatory note.
"I'm calling particularly on those who are so able, and so smart and so resourceful, to help us find our way forward here," she said. "It's the right thing to do for the economy, but even more importantly, it's the right thing to do for America."
Taking on Wall Street is viewed as smart and risky for Clinton, analysts said. It could make her look like a woman who won't be her donors' puppet - or anger a population with deep pockets.
The Democratic front-runner has hauled in more than $4.7 million from donors in the securities and investment industries, according to the Center for Responsive Politics.
She has also drawn nearly $4million from real estate supporters and just under $1 million from the commercial banking sector.
David Birdsell of the Baruch College School of Public Affairs said Clinton's appeal could be seen as "a response to the energetic critique from her left from John Edwards and Barack Obama" as the race to win Iowa nears - and tightens.
Obama addressed the mortgage crisis issue in a stern September speech, also at the Nasdaq Marketsite.
With a large stable of topflight investment types in her corner, Birdsell added, Clinton "probably has some running room, soshe can go populist to some degree without risking their allegiance."
Clinton said she would consider legislation if Wall Street didn't come along voluntarily, but ended on a conciliatory note.
"I'm calling particularly on those who are so able, and so smart and so resourceful, to help us find our way forward here," she said. "It's the right thing to do for the economy, but even more importantly, it's the right thing to do for America."
Source: New York Daily News
SAN DIEGO -- Sen. Hillary Rodham Clinton made a campaign stop Friday at a private home in Bonita, where she thanked her Democratic supporters and vowed to bring about change and better the lives of Americans.
"We know how fortunate we are because of all the opportunities we have been given, and we also know that it is up to us to make sure those opportunities and blessings remain available to our children and our grandchildren," Clinton said.
She made her proposal as polls indicated the recent economic downturn has caused the economy to overtake the war in Iraq as the leading issue in the presidential campaign. Her plan includes a $30 billion emergency housing crisis fund to assist states and cities mitigate the effects of mounting foreclosures; a 90-day moratorium on subprime foreclosures; and an automatic rate freeze on subprime mortgages of at least five years.
Clinton also called for $25 billion in emergency energy assistance for families facing rising heating bills, accelerating $5 billion in energy efficiency and alternative energy investments to stimulate "green collar" job growth and a $10 billion increase in extending and broadening unemployment benefits.
"Economists and politicians are finally waking up to what many of America's families already know -- that we might be sliding into a recession," she said. "But when the bills are stacking up, and you're just one pink slip away from losing everything you've got, the last thing you need is more talk. In the face of rising global competition, our children's future is at stake, so we don't need more rhetoric, we need action," she said.
"We need an immediate strategy to get our economy back on track. I would work with leaders from both parties to pass an aggressive, fast-acting stimulus package to create good new jobs and revitalize our economy."
Clinton also called on Congress to provide an additional $40 billion in direct tax rebates to what she called working and middle-class families if the economy continues to worsen.
Clinton's main rivals for the Democratic presidential nomination, Illinois Sen. Barack Obama and former North Carolina Sen. John Edwards, have made similar proposals.
Even before Clinton gave her first speech of the day, the California Republican Party issued a statement from Chairman Ron Nehring criticizing her credibility on economic issues.
"Senator Clinton has a pretty hard time squaring her rhetoric on economic issues with her record in the Senate," Nehring said. "Time and again, Senator Clinton contradicts herself when what she promises on the campaign trail collides with what she's actually done in office. "How can Californians trust a candidate who talks about fiscal responsibility in front of one audience, and proposes $800 billion in new spending in front of another? Whatever happened to Senator Clinton's campaign promise to create 200,000 new jobs in New York, or to bring broadband Internet access to rural areas, improve job training, and provides tax cut for business in areas with lagging economies? In California's high-tech economy, we recognize Senator Clinton's campaign promises on the economy for what they are: vaporware."
Clinton's appearance at the Electrical Training Institute in Commerce, a facility affiliated with the International Brotherhood of Electrical Workers, was her first in Southern California since a Dec. 10 fundraiser. Obama is scheduled to be in the Southern California Wednesday for a fundraiser in Pacific Palisades.
Clinton, accompanied by daughter Chelsea, came to California three days after her upset victory in the New Hampshire primary, where she beat Obama by 3 percentage points after trailing him in the polls, rebounding from a third-place finish in the Iowa caucuses behind Obama and Edwards.
Combat Mortgage Fraud and Subprime Loans: The implosion of the subprime lending industry threatens to bring foreclosure to over two million households, including many families with children. Barack Obama has been closely monitoring this situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity. This bill also provides counseling to homeowners and tenants to avoid foreclosures. Finally, Obama's bill requires the Government Accountability Office to evaluate and report to Congress on various state lending practices so that state regulations that undermine consumer's rights can be identified and hopefully eliminated.
Create Fund to Help Homeowners Avoid Foreclosures:
In addition to taking important steps to prevent mortgage fraud from occurring in the future, Barack Obama will establish policies to help Americans currently facing foreclosure through no fault of their own. For instance, in communities where there are many foreclosures property values of innocent homeowners are often also negatively impacted, driving them toward foreclosure, too.
Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will also assist individuals who purchased homes that are simply too expensive for their income levels by helping to sell their homes. The fund will help offset costs of selling a home, including helping low-income borrowers get additional time and support to pay back any losses from the sale of their home and waiving certain federal, state and local income taxes that result from an individual selling their home to avoid foreclosure. These steps will ensure that individuals who have to sell their homes will be able to quickly regain stable financial footing. The fund will be partially paid for by Obama's increased penalties on lenders who acted irresponsibly and committed fraud.
Presidential candidate Sen. Barack Obama (D-IL) is not concerned about the "technical definition" of a recession. Nor is he scrambling to pay for proposals to jumpstart the economy. He just knows that people across the country are struggling, and his mix of tax cuts and direct spending – not the plan of rival Sen. Hillary Clinton (D-NY) – will give the economy a fast-acting fix, he says.
"People have been hurting, and they've been hurting for some time, even before the downturn caused by the subprime lending crisis," Obama tells Melissa Block. "There's no doubt that things have gotten a little bit worse over the last several months."
Clinton's $70 billion plan includes emergency housing and heating assistance. Obama said it relies too much on spending proposals. In a recent press release, Clinton said Congress should also "stand ready" to provide an additional $40 billion in tax rebates.
Obama says his plan emphasizes tax relief. His $75 billion package would provide an immediate $250 tax cut per worker, his campaign said in a recent press release. He also calls for a temporary $250 increase in Social Security checks.
"I think speed is of the essence if you want a stimulus plan," Obama says.
For example, the Social Security supplement could be easily and quickly delivered to seniors, who could then buy prescription drugs.
"That is, I think, the kind of opportunity that's going to get money into pockets of Americans quicker and is more likely to boost the economy quicker," Obama says.
And how will he pay for the proposal?
He doesn't plan to.
"As [Federal Reserve] Chairman Bernanke planned to testify today, right now it is more important to jumpstart the economy," Obama says. "We will lose so much federal revenue if we plunge into a severe recession that, from a perspective of a one-time temporary boost, it's important for us to just get the money out."
Bureaucrat-in-Chief?
In recent comments to the Reno Gazette-Journal, Obama said voters do not want an "operating officer." Instead, he told the paper, his job would be to set a vision of where the bureaucracy needs to go.
Clinton responded to Obama's comments by saying the country does need a CEO – someone to focus on the nitty-gritty details — in the White House.
"She obviously wasn't paying attention to what I said," Obama tells NPR. Obama says he would be involved in the details if elected president.
"This is a broader theme that I think Sen. Clinton has been trying to project, that somehow there's a brisk efficiency to her potential presidency that would be lacking in mine," Obama says. Perceived Weakness: Obama takes another jab at his rivals when asked about a response he gave to a question at a recent Democratic debate.
At a debate in Nevada, Obama was asked about his weaknesses. He confessed that his greatest weakness is a lack of organization — a messy desk and office. At the debate, Obama answered the question first, followed by Clinton and former Sen. John Edwards (D-NC). "I think Sen. Edwards said he was too passionate about helping poor people, and Sen. Clinton said she was too impatient to move the country forward," Obama tells NPR. "I was trying to answer the question 'What's your greatest weakness?' as opposed to 'What's your greatest strength disguised as a weakness?'
But Obama says he would not want to redo his response.
"I think one of the hallmarks of our campaign is that I actually answer questions honestly and try not to engage in too much spin," he says.
Concerns for Safety
Obama's wife, Michelle, recently said that some, including those in the African-American community, have focused on "what might go wrong" as her husband pursues the presidency. The comments have been interpreted as allusions to threats to Obama's safety.
Obama says that he feels confident in his ability move the campaign forward and "assuage some of the concerns that people have."
"I think that for obvious historical reasons, there is a level of apprehension sometimes in the African-American community when there are efforts to break through glass ceilings," Obama says.
WASHINGTON, DC -- U.S. Senator Barack Obama today sent a letter to Federal Reserve Chairman Bernanke and Treasury Secretary Paulson urging them to immediately convene a homeownership preservation summit with key stakeholders to fight foreclosures driven by growth in the subprime mortgage market.
The text of the letter is below:
Dear Chairman Bernanke and Secretary Paulson,
There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.
We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.
Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody’s interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.
The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators’ Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:
What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates. How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty. How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical. How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage. How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.
How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.
Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation. Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by.
Sincerely,
U.S. Senator Barack Obama
Andrew Chung Staff ReporterLAS VEGAS–She didn't actually use the words, but Senator Hillary Clinton might as well have repeated the phrase made so famous by her husband's winning campaign strategy in the 1990s: "It's the economy, stupid!" At a stop inside a cluttered printing shop in an industrial sector of this city yesterday, Clinton told an audience of workers and members of the public that the American dream of prosperity is becoming more elusive by the day. "Nobody ever thought the economy of Las Vegas would slow down, that a construction worker would be laid off, that a casino employee would be laid off," she said in a speech leading up to today's presidential caucuses in Nevada.
Clinton is following in the footsteps of her husband, former president Bill Clinton, in ways deeper than just the fact that she's also aiming for the Oval Office. The campaign is emerging as a mirror image of 1992 when Bill Clinton was elected based on his promise to fix the sputtering economy.
While Clinton was speaking, a few blocks away, 71-year-old Betty Turner was quietly listening to a credit counselor, a sheaf of printouts spread across her lap. She knows the economy is in a rough patch when she looks in the mirror every day.
"My credit cards have gotten away from me, which is why I came here," she said inside the counseling service's office. She adds, however, that at least her house isn't being foreclosed on, like some of her neighbors in the state that leads the nation in home foreclosures.
This morning, Nevadans will publicly jostle each other in small groups to pledge their support for presidential nominee hopefuls in this key battleground state, which, by virtue of its status as an early nomination contest, will influence the entire race.
A win for either of the two leading Democratic candidates, senators Hillary Clinton of New York or Barack Obama of Illinois, is vital because it will give their campaign momentum in a contest that is so far a virtual tie.
For Republicans, the caucuses here are less important than the vote in South Carolina, which holds that party's primary today as well. Only former Massachusetts governor Mitt Romney and libertarian Ron Paul have spent time and money campaigning here.
Polls have in past months put Clinton way ahead of Obama, including among Nevada's Hispanics, who make up 25 per cent of the population. But as Obama's profile has risen here, so have numbers. A poll released earlier this week had him ahead of Clinton by two points.
But a new poll out yesterday by the Las Vegas Review-Journal, which has endorsed Obama, has Clinton ahead of Obama by nine points at 41 per cent versus 32 per cent. John Edwards is at 14 per cent.
The same poll also has Romney 15 points ahead of Senator John McCain in the Republican race.
But signs of a national economic downturn are mounting, and it has emerged as the number one issue among Americans. Stock markets have tumbled in recent days, off more than 1,000 points since the beginning of 2008. Construction of new homes has dropped, as have home prices in the wake of the subprime mortgage crisis. Banks and brokerages are losing billions of dollars and writing off billions more in bad loans.
"I'm really worried," said Denise Gustafson, 50, who lives in Pahrump, a town an hour's drive west of Las Vegas. She makes the commute every day and is worried about rising gas prices.
"My husband is a union sheet-metal worker," added Gustafson, who is undecided between Clinton and Obama. "Construction jobs are going to undocumented workers because they can pay them less."
Peggy Maze Johnson, executive director of the Clark County Democratic Party, said the economy has become a huge issue among voters.
"When you look at one part of Las Vegas, all those new hotels and condos going up, people say, `What a great economy," she observed. "But when you draw down on the streets here, and see all the for sale signs, then you know."
Republicans and Democrats have begun talking about how to re-energize the economy. Clinton and Obama have been tripping over each other to get their message out.
Yesterday, Obama attacked Clinton on that front, saying Clinton's plan to stimulate the economy by providing a tax rebate for workers was partially taken from his plan.
"Senator Clinton has said she is ready to lead from Day 1," Obama said in Reno. "But it's important on Day 1 to get it right, whether you're talking about war or you're talking about economic proposals."
Obama's plan would also provide $10 billion to help homeowners facing foreclosure and $10 billion to cover state budget shortfalls. He also has vowed to go after unscrupulous lenders, who have played a major role in the foreclosure crisis, and a "credit card bill of rights."
At the printing shop in Nevada, Clinton told the crowd her plan also includes a moratorium on home foreclosures for 90 days to give people a chance to "figure things out," a freeze on interest rates, and a $25 billion plan to help people who can't pay their utility bills.
She said she wants to return the economy to the way it was while her husband was in office, when jobs were plentiful and the government was on track for a surplus.
But at a stop in San Francisco on Thursday, Obama countered: "The American people are not looking specifically for a repetition of what happened in the '90s," he said. "What they are looking for is who's going to lead us over the next eight years into an era of greater prosperity and also to meet new challenges as they come up."
Hillary Rodham Clinton urged for a moratorium on foreclosures for 90 days on homes with subprime mortgages and a five-year long period of freeze on the interest rates that those borrowers would have to pay.
She addressed a letter to Treasury Secretary, Henry Paulson, who is now ready to announce the Bush administration’s responsibility to today’s housing problems. Clinton, in her remarkable foresight, notes that today’s foreclosures continue to pose incalculable loss to the economy.
Clinton has stated that the mortgage problems have gone way beyond the state of transparency to the common people. At a news conference on last Sunday of December 2008, she has mentioned that what every Iowan should look forward to is, to have accurate information when they make decisions about undergoing mortgage payments.
Clinton has indicated that the battle within the Democrats is about how to get things done in a rougher manner. But she stresses that coming to the last month of the year she wants to start drawing contrasts from the way it has been with foreclosures so far.
Clinton has already dared to go further than her Democratic rivals and revealed what the administrators think about the decisions made on foreclosures. Obama has introduced a bill which would go on to make mortgage fraud a severe criminal offence. The bill also reinstates that such fraudulence attracts favors national funds to help the lenders who are severely in danger of losing their homes.
Obama and Edward, the two members of the Democrats are supposedly changing laws to make people live better and not lose their homes altogether. According to the Associates Press, Paulson would call for voluntary extensions on the issue of subprime mortgages at the present interest rates. In the letter to Paulson, as a part of the Clinton campaign, Hillary Clinton states that he needs to impose these new laws in the form of a moratorium on all foreclosures. The moratorium would be for at least 90 days acting upon all owner-occupied homes with subprime mortgages. The letter also states for a freeze in the monthly rates on subprime mortgage rates whish are of the adjustable nature. The mortgage rate would be effective for at least 5 years until they can be converted into affordable and fixed-rate loans. The letter urges that the mortgage industry would be required to submit status reports on the number of mortgages that need to be modified to make them affordable for the majority.
With these points in mind the reformation on foreclosures is expected to be done as an essential part of Clinton’s campaign.
Today, Hillary outlined an economic stimulus plan to help hard hit families and give our economy a much needed boost. Over a month ago, in a speech to Wall Street, Senator Clinton called on the Bush Administration to begin considering economic stimulus. In the month since, while the Administration has failed to act, we have seen growing signs that our economy is faltering. Tens of thousands of families have already been forced out of their homes. Recently, oil hit $100 a barrel, and last Friday, the Bureau of Labor Statistics reported that the economy lost jobs in the private sector in December for the first time in over four years. According to RealtyTrac, more than 201,000 foreclosure filings were reported in November alone, up 68 percent from the year before.
Hillary believes we need real action now. While economists may still be debating whether we've met the technical definition of a recession, for hard-hit middle class families that question has already been answered.
That is why today Senator Clinton called on the President and Congressional leaders from both parties to enact an aggressive, fast-acting stimulus package based on common-sense economic principles. Unlike 2001, when President Bush used stimulus as an excuse to force through long-term tax cuts for the wealthiest Americans-which ran up our debt to foreign governments while utterly failing to reignite job growth-Senator Clinton believes we need a strong immediate stimulus to jumpstart the economy without negatively affecting our long-term fiscal position. In addition, stimulus measures should be targeted toward hardworking families that are most likely to spend new resources, which will ensure that we give our economy an immediate boost. As President, Hillary would enact a five-part stimulus package that is consistent with these principles. This package includes:
Establishing a $30 Billion Emergency Housing Crisis Fund to assist states and cities mitigate the effects of mounting foreclosures. With our economy facing the prospect of substantial contraction as hundreds of thousands of subprime mortgages reset and housing values erode further, Senator Clinton believes that any effective stimulus package must take aggressive action to mitigate this contraction and help as many families as possible remain in their homes. Her $30 billion fund would provide immediate, time-limited resources to states, cities and community organizations to help prevent unnecessary foreclosures. States and communities could also use the funds to offset the costs associated with vacant properties by supporting efforts like community-level anti-blight programs and helping local housing authorities buy up vacant properties and rent them to working families. When families lose their homes, surrounding property values and local tax revenues decline and the cost of policing and maintaining vacant properties rise. This reduction in revenues and rise in costs can lead cities and states to cutback services, lay off teachers and other vital workers, raise college tuition, or even raise local taxes. The availability of $30 billion in federal assistance will ensure that states and cities have the resources they need to fight foreclosures, prevent a downward housing cycle impacting large numbers of homeowners and to weather the crisis without unnecessary fiscal contraction. M
Taking bold action to end the housing crisis. Senator Clinton is the only candidate with a comprehensive plan to keep families in their homes and keep the housing crisis from dragging down the economy. More than 2 million foreclosure notices went out last year, devastating families and communities. The foreclosure crisis is also contributing to the decline in home prices which has already cost families an estimated $1.3 trillion. Many experts believe the worst is yet to come. To stem this crisis, Senator Clinton has called for a 90-day moratorium on subprime foreclosures and an automatic rate freeze on subprime mortgages of at least five years or until servicers have converted the unworkable mortgages into loans families can afford. In addition, Senator Clinton proposed to temporarily empower state housing financing agencies to help families refinance unworkable mortgages and temporarily increasing the portfolio caps at Fannie Mae and Freddie Mac, and enabling them to purchase larger loans in high-cost areas. These steps would immediately increase the availability of mortgages for responsible borrowers.
WASHINGTON (Reuters) - Democratic presidential hopeful Hillary Clinton proposed on Monday a 90-day moratorium on home foreclosures to give financially troubled borrowers time to work with lenders and avoid losing their homes.
Clinton, the New York senator outlined the proposal in a letter to U.S. Treasury Secretary Henry Paulson, who is trying to broker a deal with mortgage lenders that would help troubled borrowers.
Clinton said, "The crisis surrounding subprime mortgages extended to borrowers with spotty credit has unnerved financial markets and could deepen a slump in the U.S. housing market that some economists fear has pushed the economy close to recession".
"It is critical that we address this crisis," Clinton said in a letter to Paulson. "The administration and the mortgage industry must reach agreement that matches the scale of the problem. If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable."
The U.S. Treasury Department has been pushing the mortgage industry to agree to temporarily freeze interest rates for some borrowers who took out loans with low teaser rates that will soon be resetting much higher. More than 2 million borrowers are estimated to be facing rate resets.
Clinton said any agreement should include a moratorium on foreclosures of at least 90 days on owner-occupied homes with subprime mortgages. Any agreement should also include a rate freeze on adjustable mortgages of at least five years or until the loan is converted into a fixed-rate mortgage, she said.
Clinton said the freeze would give the housing market time to stabilize and homeowners time to build equity. She also called on the mortgage industry to provide regular reports on the number of mortgages they have modified.
If the administration fails to secure an agreement that includes those provisions, Clinton said she would push for legislation that would allow lenders to convert subprime mortgages into more affordable loans without permission of investors.
Clinton said she also called for a $5 billion fund to help hard-hit communities and homeowners cope with the foreclosure crisis.
The subprime mortgage crisis has hit some states harder than others, including Florida, Nevada, California, Michigan and Ohio -- key states in next year's presidential elections. Clinton leads in the troubled States.
Wall Street deserves some of the blame for the current mortgage crisis, Democrat Hillary Clinton charged Wednesday, urging the industry to take steps to reverse the damage.
"Wall Street shifted risk away from the people who knew what was going on and onto the people who did not," Clinton told an audience at the Nasdaq Marketsite in Times Square.
"This is a moment for shared responsibility in America. Investors, lenders and homeowners all have a part to play, and sacrifices to make."
She called for a 90-day freeze on owner-occupied home foreclosures, and also for stopping increases in subprime mortgage rates for at least five years - a move similar to what the White House is expected to announce today.
"This is a moment for shared responsibility in America. Investors, lenders and homeowners all have a part to play, and sacrifices to make."
She called for a 90-day freeze on owner-occupied home foreclosures, and also for stopping increases in subprime mortgage rates for at least five years - a move similar to what the White House is expected to announce today.
The Democratic White House front-runner also suggested the creation of a one-time, multibillion-dollar "community support fund" to prevent foreclosures by providing financial counseling and other services, and for prosecuting foreclosure-related fraud.
Taking on Wall Street is viewed as smart and risky for Clinton, analysts said. It could make her look like a woman who won't be her donors' puppet - or anger a population with deep pockets.
The Democratic front-runner has hauled in more than $4.7 million from donors in the securities and investment industries, according to the Center for Responsive Politics.
She has also drawn nearly $4million from real estate supporters and just under $1 million from the commercial banking sector.
David Birdsell of the Baruch College School of Public Affairs said Clinton's appeal could be seen as "a response to the energetic critique from her left from John Edwards and Barack Obama" as the race to win Iowa nears - and tightens.
Obama addressed the mortgage crisis issue in a stern September speech, also at the Nasdaq Marketsite.
With a large stable of topflight investment types in her corner, Birdsell added, Clinton "probably has some running room, so she can go populist to some degree without risking their allegiance."
Clinton said she would consider legislation if Wall Street didn't come along voluntarily, but ended on a conciliatory note.
"I'm calling particularly on those who are so able, and so smart and so resourceful, to help us find our way forward here," she said. "It's the right thing to do for the economy, but even more importantly, it's the right thing to do for America."
Taking on Wall Street is viewed as smart and risky for Clinton, analysts said. It could make her look like a woman who won't be her donors' puppet - or anger a population with deep pockets.
The Democratic front-runner has hauled in more than $4.7 million from donors in the securities and investment industries, according to the Center for Responsive Politics.
She has also drawn nearly $4million from real estate supporters and just under $1 million from the commercial banking sector.
David Birdsell of the Baruch College School of Public Affairs said Clinton's appeal could be seen as "a response to the energetic critique from her left from John Edwards and Barack Obama" as the race to win Iowa nears - and tightens.
Obama addressed the mortgage crisis issue in a stern September speech, also at the Nasdaq Marketsite.
With a large stable of topflight investment types in her corner, Birdsell added, Clinton "probably has some running room, soshe can go populist to some degree without risking their allegiance."
Clinton said she would consider legislation if Wall Street didn't come along voluntarily, but ended on a conciliatory note.
"I'm calling particularly on those who are so able, and so smart and so resourceful, to help us find our way forward here," she said. "It's the right thing to do for the economy, but even more importantly, it's the right thing to do for America."
Source: New York Daily News
SAN DIEGO -- Sen. Hillary Rodham Clinton made a campaign stop Friday at a private home in Bonita, where she thanked her Democratic supporters and vowed to bring about change and better the lives of Americans.
"We know how fortunate we are because of all the opportunities we have been given, and we also know that it is up to us to make sure those opportunities and blessings remain available to our children and our grandchildren," Clinton said.
She made her proposal as polls indicated the recent economic downturn has caused the economy to overtake the war in Iraq as the leading issue in the presidential campaign. Her plan includes a $30 billion emergency housing crisis fund to assist states and cities mitigate the effects of mounting foreclosures; a 90-day moratorium on subprime foreclosures; and an automatic rate freeze on subprime mortgages of at least five years.
Clinton also called for $25 billion in emergency energy assistance for families facing rising heating bills, accelerating $5 billion in energy efficiency and alternative energy investments to stimulate "green collar" job growth and a $10 billion increase in extending and broadening unemployment benefits.
"Economists and politicians are finally waking up to what many of America's families already know -- that we might be sliding into a recession," she said. "But when the bills are stacking up, and you're just one pink slip away from losing everything you've got, the last thing you need is more talk. In the face of rising global competition, our children's future is at stake, so we don't need more rhetoric, we need action," she said.
"We need an immediate strategy to get our economy back on track. I would work with leaders from both parties to pass an aggressive, fast-acting stimulus package to create good new jobs and revitalize our economy."
Clinton also called on Congress to provide an additional $40 billion in direct tax rebates to what she called working and middle-class families if the economy continues to worsen.
Clinton's main rivals for the Democratic presidential nomination, Illinois Sen. Barack Obama and former North Carolina Sen. John Edwards, have made similar proposals.
Even before Clinton gave her first speech of the day, the California Republican Party issued a statement from Chairman Ron Nehring criticizing her credibility on economic issues.
"Senator Clinton has a pretty hard time squaring her rhetoric on economic issues with her record in the Senate," Nehring said. "Time and again, Senator Clinton contradicts herself when what she promises on the campaign trail collides with what she's actually done in office. "How can Californians trust a candidate who talks about fiscal responsibility in front of one audience, and proposes $800 billion in new spending in front of another? Whatever happened to Senator Clinton's campaign promise to create 200,000 new jobs in New York, or to bring broadband Internet access to rural areas, improve job training, and provides tax cut for business in areas with lagging economies? In California's high-tech economy, we recognize Senator Clinton's campaign promises on the economy for what they are: vaporware."
Clinton's appearance at the Electrical Training Institute in Commerce, a facility affiliated with the International Brotherhood of Electrical Workers, was her first in Southern California since a Dec. 10 fundraiser. Obama is scheduled to be in the Southern California Wednesday for a fundraiser in Pacific Palisades.
Clinton, accompanied by daughter Chelsea, came to California three days after her upset victory in the New Hampshire primary, where she beat Obama by 3 percentage points after trailing him in the polls, rebounding from a third-place finish in the Iowa caucuses behind Obama and Edwards.
Combat Mortgage Fraud and Subprime Loans: The implosion of the subprime lending industry threatens to bring foreclosure to over two million households, including many families with children. Barack Obama has been closely monitoring this situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama's STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity. This bill also provides counseling to homeowners and tenants to avoid foreclosures. Finally, Obama's bill requires the Government Accountability Office to evaluate and report to Congress on various state lending practices so that state regulations that undermine consumer's rights can be identified and hopefully eliminated.
Create Fund to Help Homeowners Avoid Foreclosures:
In addition to taking important steps to prevent mortgage fraud from occurring in the future, Barack Obama will establish policies to help Americans currently facing foreclosure through no fault of their own. For instance, in communities where there are many foreclosures property values of innocent homeowners are often also negatively impacted, driving them toward foreclosure, too.
Obama will create a fund to help people refinance their mortgages and provide comprehensive supports to innocent homeowners. The fund will also assist individuals who purchased homes that are simply too expensive for their income levels by helping to sell their homes. The fund will help offset costs of selling a home, including helping low-income borrowers get additional time and support to pay back any losses from the sale of their home and waiving certain federal, state and local income taxes that result from an individual selling their home to avoid foreclosure. These steps will ensure that individuals who have to sell their homes will be able to quickly regain stable financial footing. The fund will be partially paid for by Obama's increased penalties on lenders who acted irresponsibly and committed fraud.
Presidential candidate Sen. Barack Obama (D-IL) is not concerned about the "technical definition" of a recession. Nor is he scrambling to pay for proposals to jumpstart the economy. He just knows that people across the country are struggling, and his mix of tax cuts and direct spending – not the plan of rival Sen. Hillary Clinton (D-NY) – will give the economy a fast-acting fix, he says.
"People have been hurting, and they've been hurting for some time, even before the downturn caused by the subprime lending crisis," Obama tells Melissa Block. "There's no doubt that things have gotten a little bit worse over the last several months."
Clinton's $70 billion plan includes emergency housing and heating assistance. Obama said it relies too much on spending proposals. In a recent press release, Clinton said Congress should also "stand ready" to provide an additional $40 billion in tax rebates.
Obama says his plan emphasizes tax relief. His $75 billion package would provide an immediate $250 tax cut per worker, his campaign said in a recent press release. He also calls for a temporary $250 increase in Social Security checks.
"I think speed is of the essence if you want a stimulus plan," Obama says.
For example, the Social Security supplement could be easily and quickly delivered to seniors, who could then buy prescription drugs.
"That is, I think, the kind of opportunity that's going to get money into pockets of Americans quicker and is more likely to boost the economy quicker," Obama says.
And how will he pay for the proposal?
He doesn't plan to.
"As [Federal Reserve] Chairman Bernanke planned to testify today, right now it is more important to jumpstart the economy," Obama says. "We will lose so much federal revenue if we plunge into a severe recession that, from a perspective of a one-time temporary boost, it's important for us to just get the money out."
Bureaucrat-in-Chief?
In recent comments to the Reno Gazette-Journal, Obama said voters do not want an "operating officer." Instead, he told the paper, his job would be to set a vision of where the bureaucracy needs to go.
Clinton responded to Obama's comments by saying the country does need a CEO – someone to focus on the nitty-gritty details — in the White House.
"She obviously wasn't paying attention to what I said," Obama tells NPR. Obama says he would be involved in the details if elected president.
"This is a broader theme that I think Sen. Clinton has been trying to project, that somehow there's a brisk efficiency to her potential presidency that would be lacking in mine," Obama says. Perceived Weakness: Obama takes another jab at his rivals when asked about a response he gave to a question at a recent Democratic debate.
At a debate in Nevada, Obama was asked about his weaknesses. He confessed that his greatest weakness is a lack of organization — a messy desk and office. At the debate, Obama answered the question first, followed by Clinton and former Sen. John Edwards (D-NC). "I think Sen. Edwards said he was too passionate about helping poor people, and Sen. Clinton said she was too impatient to move the country forward," Obama tells NPR. "I was trying to answer the question 'What's your greatest weakness?' as opposed to 'What's your greatest strength disguised as a weakness?'
But Obama says he would not want to redo his response.
"I think one of the hallmarks of our campaign is that I actually answer questions honestly and try not to engage in too much spin," he says.
Concerns for Safety
Obama's wife, Michelle, recently said that some, including those in the African-American community, have focused on "what might go wrong" as her husband pursues the presidency. The comments have been interpreted as allusions to threats to Obama's safety.
Obama says that he feels confident in his ability move the campaign forward and "assuage some of the concerns that people have."
"I think that for obvious historical reasons, there is a level of apprehension sometimes in the African-American community when there are efforts to break through glass ceilings," Obama says.
WASHINGTON, DC -- U.S. Senator Barack Obama today sent a letter to Federal Reserve Chairman Bernanke and Treasury Secretary Paulson urging them to immediately convene a homeownership preservation summit with key stakeholders to fight foreclosures driven by growth in the subprime mortgage market.
The text of the letter is below:
Dear Chairman Bernanke and Secretary Paulson,
There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.
We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes. And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.
Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody’s interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.
The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators’ Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:
What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates. How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty. How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical. How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage. How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.
How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.
Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short-term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation. Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don’t let this opportunity pass us by.
Sincerely,
U.S. Senator Barack Obama
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