Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Two Items on ForeclosuresThe New York Times business section has an interesting article about the limited success of the "Making Home Affordable Program," which was intended to encourage (but not require!) banks to work with homeowners on facing foreclosure to lower their monthly payments. (The copy of the Times that arrived on my doorstep gave this headline to the article: "In Trial Phase, Mortgage Bills Fall for 500,000." The online version of the article has the cheerier "Treasury Hails Milestone in Home Loan Modifications.")The upshot: half a million families have gotten loan modifications, though they often faced "bureaucratic bungling, ceaseless frustration and confusion." This is only 40% of the 1.2 million eligible. And some companies have been better than others about modifying the mortgages. Wells Fargo and BoA have only modified 62,989 and 94,918, respectively, which is only 20% and 11% of those companies eligible mortgages, respectively. Bad BoA! Bad WF! (Has anyone heard anything good about these companies lately? Oh yeah, Ken Lewis resigned.) Still, "economists said the program was still not big enough to prevent many millions of Americans from losing their homes before the books are closed on the Great Recession." Check out the full article. Meanwhile, Slate's blog The Big Money, is advising homeowners facing foreclosure to consider "strategic default," the fancy name for walking away from your mortgage (and your home). It's ok, they assure us. I'm having trouble disagreeing. Go Ahead, Walk Away Read the rest of the post. Labels: Bank of America, foreclosures, mortgage meltdown, Timothy Geithner, Wells Fargo Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). FHA Losses Threaten FundingCalculated risk quotes the following on why this is so. Unbeleievable.John Burns Consulting sent out a note today titled: FHA Likely To Be The Next Shoe To Drop SEPTEMBER 4, 2009 Loan Losses Spark Concern Over FHA By NICK TIMIRAOS and DEBORAH SOLOMON Wall Street Journal The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout. The rising losses at the FHA, part of the U.S. Department of Housing and Urban Development, come as the agency has rapidly increased its role in guaranteeing loans in an attempt to stabilize the housing market. It isn't clear how the rising losses may affect home buyers. Options for the agency could include politically unpalatable choices, such as asking for taxpayer funds to boost reserves or increasing the premiums borrowers pay for the insurance offered by the agency. Agency officials say if there is a shortfall, they don't have to do anything except report it to lawmakers. But some mortgage and housing analysts see trouble ahead. "They're probably going to need a bailout at some point because they're making loans in a riskier environment," says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. "...I've never seen an entity successfully outrun a situation like this." The FHA insures private lenders against defaults on certain home mortgages, an inducement to make such loans. Insurance from the New Deal-era agency has enabled lending to buyers who can't make a big down payment or who want to refinance but have little equity. Most private lenders have sharply curtailed credit to those borrowers. Read the rest of the article Labels: bailout, Federal Housing Administration, financial crisis, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Yves Smith on "Mortgage Armageddon"Yves Smith summarizes Frank Veneroso's views on why recovery in the mortgage market (and, presumably, for the rest of the economy) will be so very difficult.Sunday, August 16, 2009 Guest Post: Frank Veneroso on Mortgage Armageddon Frank Veneroso was kind enough to write as a result of seeing a guest post "Debtor's Revolt?" by his colleague Marshall Auerback. Veneroso also provided his latest newsletter and gave us permission to post it. It it pretty long (12 pages), I extracted the executive summary and other key bits. Be sure to read the final section, starting with the boldface heading "Why Resolving The Mortgage Armageddon Problem Will Be So Difficult:." (Enjoy!) From Frank Veneroso: 1. Deutsche Bank now predicts that 48% of all mortgaged American homeowners will be "under water" by 2011. 2. One might assume that means that the aggregate loan-to-value ratio of all mortgaged households will be a little less than 100%. 3. I have been focusing first and foremost on the aggregate loan-to-value ratio of all households with mortgages rather than the number of mortgaged homeowners who will eventually be underwater. 4. I calculated that, on mean reversion in house prices, this aggregate loan-to-value ratio would rise to 120% to 125%--a lot worse than what the Deutsche Bank analysis seems to imply. So I studied their analysis to ascertain why I went wrong or why they went wrong. 5. Though their analysis has a somewhat different objective and employs a different methodology, their analysis in fact comes to almost exactly the same conclusion as I have reached: when one focuses not on the share of all homeowners who will be underwater but the aggregate of mortgaged home values that will be under water, on mean reversion in home prices the aggregate loan-to-value ratio will probably be north of 120%. Here is why. 6. Deutsche Bank admits that their data on total mortgage debt is incomplete. Using more complete mortgage data the percent of homeowners under water would be higher and the implied aggregate LTV might be closer to 110% than 100%. 7. Also there is skewing. Those who are underwater have negative equities that exceed in value the positive equities of those who are not underwater 8 There is skewing on more than one account. Because the highest shares of those underwater are in the regions with the highest home values and the greatest percentage home price declines the overall skewing might be very great. And this skewing increases as home prices fall further to the Case Shiller mean. 9. When one factors in this skewing the aggregate loan-to-value ratio of all mortgaged homeowners based on the Deutsche Bank analysis probably rises to 120% or more Read the rest of the post Labels: Deutsche Bank, foreclosures, Frank Veneroso, mortgage banking, mortgage meltdown, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Foreclosed Home SalesThe Asia Times columnist sees a new breed of buyer--one that will buy-to-rent, and be financed by, of all things, debt! And don't forget to click on the link to the award-winning photo of the foreclosed property at the end of the article.August 12, 2009 Credit still at the wheel By Julian Delasantellis Asia Times In 1977, the Swedish pop band Abba sang Knowing Me, Knowing You, a lover's lament over once-vibrant rooms and a home now being vacated by passion's demise. These old familiar rooms, children would play, Now there's only emptiness--nothing to say. Walking through and empty house, tears in my eyes Here is where the story ends--this is goodbye. But that's probably not where the story ends--at least if the break-up took place in the United States. It's a lot more likely that it concludes at one of the thousands of court-adjudicated distressed home and property auction sales going on all across America, like the one I recently attended outside Seattle. Before the deluge, before the CDOs and the CDSs, before AIG and Lehman Brothers, and the TALF and the TARP, were the homeowners who borrowed and bought more house than they could afford. The nightmare that their American dream turned into was the match that lit the powder keg of an overleveraged world. According to Realtytrac, a real estate statistical service, 2.5 million American homes entered the foreclosure process in 2008, a number that had tripled just since 2005. For the first six months of 2009, foreclosures are running 15% ahead of last year's record, a torrid pace. In 1942, Austrian economist Joseph Schumpeter, in his book Capitalism, Socialism and Democracy, extolled capitalism's virtue in regularly promoting what he called "creative destruction", that is, the ability to build new, successful capitalist enterprises on the wreckage of those that have failed. In many ways here, the auction struck me as a celebration the "creative destruction" of about 80 families' dreams of a better life. Read the rest of the article Labels: bailout, financial crisis, foreclosures, Julian delasantellis, mortgage banking, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Commercial Property Shoe To Drop?From The Financial Times:US banks warn on commercial property Financial Times By Francesco Guerrera and Greg Farrell in New York Published: July 22 2009 19:21 | Last updated: July 22 2009 19:21 Two of America's biggest banks, Morgan Stanley and Wells Fargo, on Wednesday threw into sharp relief the mounting woes of the US commercial property market when they reported large losses and surging bad loans. The disappointing second-quarter results for two of the largest lenders and investors in office, retail and industrial property across the US confirmed investors' fears that commercial real estate would be the next front in the financial crisis after the collapse of the housing market. The failing health of the $6,700bn commercial property market, which accounts for more than 10 per cent of US gross domestic product, could be a significant hurdle on the road to recovery. Read the rest of the article Labels: baillout, commercial property, derivatives, financial crisis, Morgan Stanley, mortgage meltdown, Wells Fargo Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Realtors' Latest Lobby EffortFrom his Asia Times column:Cheating still beats real work By Julian Delasantellis Asia Times July 2d, 2009 A colleague recently relayed a story about her experience as an observer at a faculty/student disciplinary hearing for a pre-law undergraduate charged with cheating. Apparently, this young man had come around to the belief that, when it came to engaging in conduct that could get him expelled, in for a dime-in for a dollar. Just in the space of a single term, his teachers had found him copying from a test, rifling through the course's graduate assistant notebook looking for a test, and, word for word, punctuation mark by punctuation mark, lifting without attribution a large section of a Wikipedia entry on "jurisprudence" for a research paper. "How do you answer these charges?" asked the earnest student prosecutor, who, both my colleague and I agreed, can be expected to be next seen on TV in Kevlar helmet, flak jacket, frameless glasses and FBI windbreaker when the government takes down another religious compound in 2017 or so. Read the rest of the article Labels: appraisal management companies, bailout, financial crisis, Julian delasantellis, mortgage meltdown, National Association of Realtors Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). 1 in 5 Homeowners Under Water and Sinking FastOver 20% of homeowners (more than 1 in 5) owe more than their homes are worth, according to a new study by Zillow.com. In all, about 20 million homeowners have mortgages worth more than their houses.Median home prices have fallen 18% in the first quarter of 2009 compared to the same period a year earlier, with no bottom in sight. Mortgages made at the peak of the bubble are in the most trouble. Nearly 60% of mortgages written in 2006 are underwater. Even with lower prices and tighter lending standards, about a third of 2008 mortgages are higher than the values of the homes. Certain areas are worse off than the average. In Las Vegas, 67.2% of homeowners would have to pay someone to take their houses off their hands. In Stockton and Modesto California, more than half of all homeowners owe more than they could sell their houses for. --d.f. Labels: housing bubble, housing market, mortgage meltdown, underwater mortgages Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). 25 Lenders Made $1 Trillion In Subprime LoansFrom the Center for Public Integrity via HuffPo.Read the full report here. "The top subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or bankrolled by banks now collecting billions of dollars in bailout money -- including several that have paid huge fines to settle predatory lending charges," write John Dunbar and David Donald. Labels: mortgage meltdown, subprime crisis, subprime lending Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Senators Block Cram DownsThe US Senate voted down the "cram down" legislation that would have given bankruptcy judges temporary authority to write down the value of mortgages. Responding to the behest of the banking industry (recipient of hundreds of billions in taxpayer dollars) Republican senators and a dozen or so like-minded Democrats shot the bill down, even though a stronger bill had earlier passed through the House.Bankruptcy judges currently have the authority to rewrite the terms of mortgages on second homes and yachts, but not for primary residences. The failed bill would have given judges the authority to rewrite mortgages to reflect current home values, albeit with significant caveats: banks must have refused to make fair offers to renegotiate loans, future profits on the home (if the owner sold in a rising market) would have been split with the banks, and the authority would have expired in 2012. Advocates had argued that this was a critical element of any housing recovery plan in the face of plummeting home prices and unprecedented foreclosures and abandoned properties. They also argued that banks had to accept responsibility for making huge profits on bad loans for overvalued properties. --d.f. Labels: cram down, Daniel Fireside, foreclosures, mortgage meltdown, Mortgage plan Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). 14 million homes are vacantFrom USA Today:Census numbers show: Banks are on a tear to evict people rather than renegotiate loans to market rates. As we wrote earlier, this has hit renters as well as homeowners. The Obama plan barely addresses this problem by providing just $2 billion for buying up and renovating abandoned properties -- hardly enough to make the slightest dent in the growing glut of vacant properties. The bank policy of forcing eviction instead of renegotiating the loans to market rates is insane. The glut of foreclosed properties is driving down the value of homes everywhere. Vacant properties quickly attract vandals and criminals, often leaving disaster zones in their wake. The banks are left with a property worth a fraction of what they could have gotten by renegotiating the loans. This is why some Democrats have been pushing to give bankruptcy judges the authority to "cram down" mortgages. The impact has been devastating for communities. Owners who keep up on their mortgages have seen their home values fall even further, vacant properties are a blight on neighborhoods, and homelessness is rising. The banks seem determined to drive themselves into the ground and take the rest of the country with them. --d.f. Labels: Daniel Fireside, eviction, housing bubble, housing market, mortgage meltdown, Mortgage plan Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Cram Down Those Loans!Senate Democrats are negotiating with banking industry lobbyists on legislation that would allow for bankruptcy judges to "cram down" (or rewrite) mortgage loans. Judges currently have the authority to do this for mortgages on second homes, yachts, and luxury automobiles, but not for primary residences.Bank lobbyists (whose salaries are paid by banks receiving billions in taxpayer bailout funds) are hoping that Senate Republicans can either stop the bill outright or force limits on who would be covered by the bill, as well as a time limit (or sunset period). The House passed a version earlier this month. Advocates for troubled homeowners are pushing for legislation that would allow bankruptcy judges the authority to change the terms of interest rates and loan principle to reflect current market rates. This would help stop the flood of houses going into foreclosure, maintain value for the banks, and prevent neighborhoods from being overwhelmed with vacant properties. The bill would not only benefit homeowners who are able to convince judges that they have the means and will to pay a mortgage brought down to reflect the current value of their homes, but also renters -- a group that represents 40% of all people at risk of eviction because of foreclosure. Banks had no qualms about extending loans on overvalued properties in good times (and then leveraging them many times over in credit default swaps and other derivatives). Their current policy is to foreclose, evict everyone, and let the government deal with the resulting mess of abandoned property and growing homelessness. Even those current on their mortgages lose out as their property values continue to plummet amid the glut of bank-owned properties on the market. With profits rising thanks to government handouts, why should banks be allowed to duck their share of responsibility for the mortgage mess? --df Labels: banking crisis, banking system, Daniel Fireside, derivatives, lobbyists, mortgage backed securities, mortgage meltdown, Renters Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Delasantellis on Foreclosure EndgameHe has some great observations about US politics setting the upper middle class against the working and lower classes as well. From his Asia Times column:A scam at the heart of the US By Julian Delasantellis Asia Times, February 26th, 2009 Travelers visiting New York city from Americas's rural heartland in the 1980s might have been able to regale the folks back home with tales of encounters with knife-wielding drug addicts and/or disease-scourged prostitutes, but it's not like their predecessors who made the same trek back in the 1950s didn't have a tale to tell around the cracker barrel as well. They might have come back to the square dance and talked about playing and losing at the game of three-card monte. Set up on rapidly movable folding card tables, in order to remain mobile against the disproving eyes of the constabulatory, three-card monte games were operated by New York sharpies who, when spying a rural rube from Racine, Wisconsin, or maybe Red Wash, Utah, would invite the visitor to play a simple card game. Three cards from a deck would be dealt face up-one a face cardsuch as a King or Queen. Then the cards would be turned face down, the "dealer" would arrange and re-arrange them on the table, and, the contestant would be invited to chance a wager as to which card was the face card. This was a lot harder than it seemed, especially with the dealer usually employing sleight of hand to hide the face card in his sleeve. No matter how hard he tried, no matter with how much concentration he watched the dealer's hands, the contest could never be won by its very nature; the player was destined to lose the card and his wager - rather like the chances of those facing foreclosure in the current mortgage and financial crisis of ever gaining relief from their hardship. Read the rest of the article Labels: Fannie Mae, financial crisis bailout, Fredddie Mac, housing market, Julian delasantellis, mortgage innsurance, mortgage meltdown, securitization Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Anatomy Of a Foreclosure In ClevelandThere's a fantastic site detailing the foreclosure crisis in Cleveland (with the straightforward name of Foreclosing Cleveland). They have a wonderfully depressing story detailing the varied interests involved in the foreclosure of one particular home. The result says a lot about how we got into this mess.From the site: Here’s 4111 Archwood, a vacant foreclosed house four blocks down the street from me. Read the full post here. Labels: Deutsche Bank, foreclosures, mortgage meltdown, Polly Cleveland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). What's Missing From the Housing PlanDetails are still coming out about the Obama Administration's housing plan announced today. From the early reports there seems to be a couple of major holes:1. Renters in foreclosed properties. 20% of homes in danger foreclosure are rental properties. As many of these are multi-unit buildings, about 40% of the people facing eviction because of foreclosure are renters. (source: National Low Income Housing Coalition). The bill includes insufficient funds ($1.5 billion out of the total $75 billion) to help renters relocate, does not stop banks from evicting tenants in the first place, and doesn't appear to help owners of multi-family buildings avoid foreclosure. 2. Underwater property owners in non-Fannie/Freddie-backed loans. This group includes owners in high-cost areas with loans that exceed Fannie and Freddie's loan limits (including many houses in Boston, NYC, California, etc.). Even those at the top end of "conforming" loans, they may be so stretched that they can't reduce their mortgage payments to the 31% loan to income target. 3. Speculators. There's not much sympathy for speculators in general, but the plan doesn't address what to do with all the unsold and abandoned properties in places like Tampa, Phoenix, and Las Vegas. Do we just let the houses rot? 4. Bankruptcy judges. Obama has endorsed the idea of allowing judges to modify the terms and amounts of mortgages when the owner reaches bankruptcy court (something current law only allows for things like second homes, yachts, and the like), but giving them this authority will require an act of Congress. Without this change, banks have plenty of incentives to make foreclosure the default option to avoid having to write down the losses from loans they had no business making in the first place. Labels: mortgage meltdown, Mortgage plan Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama Plan: They've Got Their Work Cut OutAt least if the latest housing data from HSBC are any indication. Thanks to Across the Curve (here's what the writer of the blog--I forget his name, but he's good--has to say about the stats: "I mentioned in my opening that UBS economists took some solace from the fact that a poor housing starts number would have the beneficial effect of speeding the reduction in inventories. That process will eventually lead to stability in prices.Well what they wished for came to pass as the housing data was a debacle at every level with permits and starts lower. And it looks as though the collapse is across regions and sectors." Here's a summary of the HSBC data: This is the note which HSBC sent out to clients on the Housing Starts Data. There is no recovery or stability brewing in housing market. Housing starts continue to decline steeply, falling 17% in January to a new all-time low (back to 1959) of 466k (consensus 529k) Starts are down 39% over the last three months, down 57% since last June, and down 79% since the cycle high in January 2006 Building permits fell 5% to 521k (consensus 525k), also hitting a new record low. Both starts and permits have fallen for seven straight months, with permits falling 54% over this period In spite of this reduced activity, the month’s supply of new homes for sale rose to an all-time high of 12.9 months as of December. This overhang is likely to keep new construction quite low until home sales recover Evidence of any sales improvement has been scant, although December pending home sales rose for the first time in four months (+6.3%), and the yesterday’s NAHB index showed a slight improvement in buyer traffic (+3pts to 11) Ryan Wang Labels: Across the Curve, Barack Obama, financia crisis, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama Mortgage Relief PlanReuters just posted a preview of the plan to be delivered later today:Obama mortgage plan to aid up to 9 million families Wed Feb 18, 2009 9:52am EST WASHINGTON (Reuters) President Barack Obama's much-anticipated plan to deal with the U.S. housing crisis aims to help as many as 9 million families avoid foreclosure on their homes, one of the root causes of the global financial meltdown. "The plan not only helps responsible homeowners on the verge of defaulting but prevents neighborhoods and communities from being pulled over the edge too," according to a summary of the plan that Obama is due to formally unveil at 12:15 p.m. EST in Mesa, Arizona. It aims to help 4 million to 5 million "responsible homeowners" to refinance and another 3 million to 4 million homeowners by lowering the risk of imminent default with a $75 billion "homeowner stability initiative" that will help to reduce their monthly payments. The Obama administration's summary said the plan could offer a buffer of up to $6,000 against value declines on the average home. The plan also aims to increase confidence in mortgage giants Fannie Mae and Freddie Mac through Treasury funding to "ensure the strength and security of the mortgage market and to help maintain mortgage affordability," the plan summary said. "This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly," the summary said. As part of the housing rescue plan, the Treasury Department will double its financial support for housing finance giants Fannie Mae and Freddie Mac to allow them to play a bigger role supporting housing as part of a fresh foreclosure mitigation plan. The Treasury said it was increasing its preferred stock purchase agreements with the two government-controlled companies to $200 billion each from $100 billion. It also said it was raising the limit on the size of the mortgage portfolios the two companies can hold by $50 billion to $900 billion each, along with a corresponding increase in their allowable debt outstanding. (Editing by Bill Trott) Labels: Barack Obama, Fannie Mae, financial crisis bailout, Fredddie Mac, housing market, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). More Hindrance Than Help?From Reuters:Fannie, Freddie to channel mortgage rescue: sources Sun Feb 8, 2009 1:50pm EST Reuters By Patrick Rucker WASHINGTON (Reuters) - The Obama administration is crafting a mortgage-rescue program that would see Fannie Mae and Freddie Mac ease payments for hundreds of thousands of borrowers and offer a model for Wall Street to do the same, sources familiar with the plan said. Late last week, officials from the Treasury Department and Department of Housing and Urban Development worked with the companies' regulator to agree on standards for who could get relief and how they might coax other finance companies to follow their lead, said two industry sources familiar with the deliberations. Those discussions were still going on over the weekend with Treasury officials trying to weigh the merits and costs of several possible approaches, said one source familiar with the talks. Washington's two largest foreclosure-prevention initiatives of the last 12 months have fallen flat with only a handful of borrowers having been helped despite promises that hundreds of thousands would qualify. Officials hope to clear the red tape and rigid terms that have doomed past mortgage-aid efforts without burdening taxpayers with many billions of dollars in funding costs. "They want to get rid of all the high-cost mortgages out there and figure that there are 1.5 million people who could stay in their homes this year if their loans were modified," said one industry source who asked for anonymity. "But it's just really complicated and expensive to do these kind of workouts." Since Fannie Mae and Freddie Mac were nationalized in September, the government-controlled companies have been retooled as agencies for delivering housing aid. Both put a moratorium on foreclosures late last year, and are pioneering programs to let borrowers rent their homes after default. But while Fannie Mae and Freddie Mac have had some success with stopgap measures to keep people in their homes, the companies' effort to rewrite home loans announced in November has been a disappointment, industry sources said. Read the rest of the article Labels: bailout, Fannie Mae, financial crisis, Freddie Mac, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). WaMu ReckoningThis is from a series from the New York Times called "The Reckoning" exploring the causes of the financial crisis. Gretchen Morgenson continues to be impressive in her coverage of the crisis.The opening anecdote of the article and the idea that WaMu was "all about saying yes" is interesting: in the new Jim Carrey vehicle, The Yes Man (the reviews have been tepid), Carrey plays a loan officer. My understanding is that some kind of spell is placed on him that forces him to say "yes" to any request. He essentially became a pre-meltdown mortgage broker. Saying Yes, WaMu Built Empire on Shaky Loans By PETER S. GOODMAN and GRETCHEN MORGENSON | December 27, 2008 "We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe's-Home Depot did to their industry. And I think if we've done our job, five years from now you're not going to call us a bank."SAN DIEGO — As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers'. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes. Yet even by WaMu's relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer. Mr. Parsons could not verify the singer's income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved. Read the rest of the article. Labels: financial crisis, housing bubble, mortgage meltdown, Washington Mutual Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Homeowners Redefaulting After Getting AidFrom Reuters:Homeowners redefaulting after getting aid Mon Dec 8, 2008 3:26pm EST Reuters By John Poirier and Patrick Rucker WASHINGTON (Reuters) More than half of mortgages modified in a bid to avoid foreclosure fell delinquent within six months, a top U.S. banking regulator said on Monday, casting doubt on a proposal to rewrite home loans en masse. Comptroller of the Currency John Dugan said it was unclear why so many borrowers ran into trouble again so soon after getting help, and that raises questions about how policy-makers should address loan modifications. "Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt?" Dugan said at a housing conference in Washington organized by the Office of Thrift Supervision. Read the rest of the article Labels: bailout, banking system, financial crisis, mortgage meltdown Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). It's Official: Don't Blame the CRAFrom the Wall Street Journal (12/3/08):Federal Reserve governor Randall Kroszner, a conservative economist on leave from a teaching post at the University of Chicago Booth Graduate School of Business, says the Community Reinvestment Act isn't to blame for the subprime mess, despite some accusations to the contrary.Read the rest of the article. Labels: Community Reinvestment Act, Federal Reserve, financial crisis, mortgage meltdown, subprime crisis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
