Some good news to see…
From CNN/Money:
Once rivals, these smaller financial institutions have banded together under a common brand called Kasasa. A total of 128 banks and credit unions across 35 states have joined this brand alliance to pool their advertising and marketing resources and offer more competitive products to their customers.
The banks’ customers still conduct business directly with their individual bank (and their account is still FDIC-insured through the bank), but they are also getting the added benefits of being part of the broader network. For example, customers of member banks are able to open free Kasasa-branded rewards checking accounts and Kasasa high-interest savings accounts.
From David Dayen ad FireDogLake.com:
This is known as a side deal. California has a separate agreement with the five servicing units at the big banks to achieve this level of commitment. She breaks it down this way:
• $12 billion for either principal reductions or short sales, which she claims will help around 250,000 homeowners;
• $849 million for refis;
• $279 million for those “sorry we stole your home” $2,000 checks;
• $1.1 billion for forbearance, transition assistance, checks to communities to fix blight (which is part of the $2.75 billion distributed to states for foreclosure mitigation);
• $430 million in additional costs
• $3.5 billion to “relieve 32,000 homeowners of unpaid balances remaining when their homes are foreclosed.” That’s essentially to stop deficiency judgments. I assume that the banks will just back off, so this represents money they won’t collect.
From ThinkProgress.org:
Here are some of the key numbers in the settlement, which is being officially announced at 10 a.m.:
49: States that have reportedly signed onto the settlement. The lone holdout is Oklahoma, as Attorney General Scott Pruitt (R) feels that the terms are too hard on the banks. Attorneys General Eric Schneidermann (D-NY), Kamala Harris (D-CA), and Beau Biden (D-DE) have thrown their support to the agreement, after opposing earlier versions for being too easy on the banks.
5: Banks covered by the settlement: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.
$26 billion: The amount of the settlement. About $5 billion will be direct cash penalties, $1.5 billion of which will go directly to homeowners foreclosed upon between September 2008 and December 2011.
$17 billion: The amount of settlement money going toward reducing loan principal (the amount homeowners have outstanding on their mortgages) and mortgage modifications. Banks will not get dollar-for-dollar credit for every principal reduction, so HUD Secretary Shaun Donovan believes the deal will ultimately result in $30-$40 billion in real principal reduction.
$1,800 to $2,000: The amount going to homeowners who qualify for direct cash payments.
1 to 2 million: Homeowners expected to be aided by the settlement money, with one million receiving reduced loan balances or loan modifications and 750,000 receiving direct payments.
4 million: Americans who have been foreclosed upon since 2007.
The deal protects banks from state and federal lawsuits pertaining to some foreclosure fraud abuses, including robo-signing. However, Schneidermann’s lawsuit against three big banks for allegedly fraudulent use of a mortgage database will go forward. In addition, “individual homeowners retain private rights of action to sue over foreclosure fraud and other abuses.”
While this capture of SOME of the details is from Meteor Blades at DailyKos.com, please click on the link for the full description of the broad-based proposed plan:
Included in the details:
• The Department of Justice is establishing a working group of at least 55 DOJ attorneys, analysts, agents and investigators from around the country who will join existing state and federal resources investigating similar misconduct under those authorities. The working group will also be co-chaired by New York Attorney General Schneiderman, who will lead the effort from the state level, and by senior DOJ officials.
• A refinancing plan will help “responsible borrowers” save an average of $3,000 per year. Borrowers who are current on their payments will be able to refinance to take advantage of low interest rates, cutting through the red tape that currently prevents this. The plan will be paid for by a bank financial fee on institutions with $50 billion or more in assets. (Congress has twice rejected such proposals in the past two years.)
• The Homeowner Bill of Rights will include: access to a simple mortgage disclosure form, so borrowers can better understand the loans they are seeking; full disclosure of fees and penalties; guidelines to prevent conflicts of interest; support to keep responsible families in their homes and out of foreclosure; and protection against inappropriate foreclosure, including right of appeal.
• Provide a full year of mortgage-payment forbearance for borrowers looking for work.
• $15 billion in federal funds to put construction workers on the job rehabilitating and refurbishing hundreds of thousands of vacant and foreclosed homes and businesses.
But public documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.
Those trades “put them squarely against the homeowner,” PIMCO’s Simon says.
Freddie Mac’s trades came at a time when mortgage rates were falling to record lows. Millions of homeowners wish they could refinance, but their lenders tell them they can’t qualify for today’s low rates because of tight rules. Freddie Mac is one of the gatekeepers with the power to set those rules, and lately, it has been saying no more often to homeowners.
That raises concerns among some industry insiders who see a conflict: Freddie Mac’s own financial health improves when homeowners can’t refinance.
Simply put, “Freddie Mac prevented households from being able to take advantage of today’s mortgage rates — and then bet on it,” says Alan Boyce, a former bond trader who has been involved in efforts to push for more refinancing of home loans.
Trends in our local market show strong demand in some areas while others still lag, but this tells us something about the national trends:
From MarketWatch.com:
By region, sales jumped 46.7% in the Northeast in December. Sales rose 9% in the West; they dropped 10.1% in the South and fell 3.7% in the Midwest.
Median sales prices have fallen 12.8% in the past year to $210,300. This is the lowest level since October 2010.
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common
From CNN/Money:
“[T]he economy has been expanding moderately, notwithstanding some slowing in global growth,” the Fed said in a statement Wednesday. Meanwhile, the program known as Operation Twist remains in place.
The Fed’s main tool for stimulating the economy, the federal funds rate is the interest rate banks charge one another for overnight loans. Keeping it at historic lows as the Fed has done since 2008, is meant to stimulate spending by lowering interest rates on everything from mortgages to car and student loans.
Immediately, the Fed’s announcement sent U.S. bond yields falling. The 10-year Treasury yield fell to 1.94%. That’s down from a 2.06% yield just a day earlier.
Joan McCarter at DailyKos.com thinks not really
The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president’s Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.
That last paragraph is where one of the rubs is: This investigation will run in parallel with—and not supersede—the existing and thus far toothless existing investigations. So it’s unclear whether the new unit can go any farther than what DOJ has be willing (or unwilling) to do thus far, and whether this is another layer of bureaucracy that amounts to just so much window dressing. That’s one of the worries of David Dayen, who’s been covering this story comprehensively.
From ThinkProgress.org:
While the government sponsored mortgage giants were certainly not blameless, Federal Reserve data shows conclusively that it was private mortgage brokers, not Fannie and Freddie, who drove the subprime housing bubble:
– More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
– Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
As economist Robert Gordon has written, the lenders that made the bulk of subprime loans weren’t even covered by government laws to encourage homeownership. In fact, 94 percent of high-cost loans were totally unconnected from government homeownership laws.
As Paul Krugman has written, “Fannie and Freddie had nothing to do with the explosion of high-risk lending…In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.” But this is a zombie lie that refuses to be put to rest thanks to lawmakers like Bloomberg constantly promulgating it.
From the Washington Post’s Plum Line Blog:
“Moderate” Senators might not support infrastructure spending: Are there any job creation policies requiring tax hikes on the ultra rich that certain “moderate” Senate Democrats and Republicans will support? The Senate is set to vote for another key piece of Obama’s jobs plan this week — new spending to repair the nation’s infrastructure, with the goal of putting hundreds of thousands of construction workers back on the job.
But it’s still unclear whether senators Ben Nelson, Jon Tester, and Mark Pryor will vote to allow debate on it, apparently because of concerns about how it’s paid for, even though increased infrastructure spending, and a surtax on millionaires, are favored by large majorities of the American people, including independents and even Republicans.
So it’s time to pull out this handy data from Citizens for Tax Justice once again. It shows that in Nebraska, Montana, and Arkansas — the home states of those three senators — the millionaire surtax that would pay for the measure would hit exactly 0.1 percent of their constituents. Also: Two of the leading so-called moderate Republicans who are likely to oppose this plan — Olympia Snowe, Susan Collins — will be voting to protect the wealth of 0.1 percent of Mainers, too
From the Washington Post’s Plum Line Blog:
For some time now, Occupy Wall Street supporters — as well as those watching the larger debate over inequality and economic justice that’s underway — have been closely watching the banks’ handling of the uproar over fee increases for debit card holders to gauge whether the protests and the changed atmosophere are having an impact.
Today, in a move that the protest’s supporters will undoubtedly claim as a big victory, Bank of America — under fire from consumers — announced that it is nixing its plan to charge $5 a month for purchases with debit cards. Here’s the bank’s statement:
“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said David Darnell, co-chief operating officer. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
This comes after several other banks nixed similar fees.
From Truthout.org:
Widespread demonstrations in support of Occupy Wall Street have put the financial crisis back into the national spotlight lately.
So here’s a quick refresher on what’s happened to some of the main players, whose behavior, whether merely reckless or downright deliberate, helped cause or worsen the meltdown. This list isn’t exhaustive — feel welcome to add to it.
From SFgate.com:
Despite restrictions, the Congressional Budget Office estimates that a plan might help 2.9 million homeowners refinance. — Equity: HARP currently is for homeowners whose loan-to-value ratio is 80 to 125 percent. At 80 LTV, owners owe $320,000 on a home worth $400,000. At 125 LTV, they owe $500,000 on that home. The parameters being discussed would expand it to homeowners with up to a 150 LTV ratio – for instance, someone who owed $600,000 on a home worth $400,000, Lantz said. — Lending: Banks now use something called “loan level pricing adjustment” – basically charging more for riskier loans. That’s caused some HARP loans to be too expensive to be worthwhile. Lantz said regulators are considering waiving the guidelines. For loans with mortgage insurance, rules would call for keeping the existing policy rather than requiring a new one that likely would be more expensive. Finally, regulators might forbid holders of second mortgages from blocking refis, an ability they currently have. — Banks: Lenders would need to increase staffing to handle the expected volume of a large-scale refinancing plan. To reduce their risks, banks would like to see elimination of a buyback provision that says they have to reclaim a mortgage that goes into default within a short time after being issued. — Obstacles: The biggest roadblock to making the changes: large institutional investors who own Fannie and Freddie mortgage-backed securities. Instead of getting their current cash flow stream, they’ll see those bonds pay off early. Taxpayers are the No. 1 bondholders through holdings at the Federal Reserve, Treasury and Fannie and Freddie themselves. Foreign investors, commercial banks, public and private pension funds, and mutual funds also would take big hits.
Surprising comment from Mr. Pandit:
From The Huffington Post:
“I would also corroborate that trust has been broken between financial institutions and the citizens of the U.S. and that it’s Wall Street’s job to reach out to Main Street and rebuild that trust,” he said in the interview. “I’d talk about the fact that they should hold Citi and the financial institutions accountable for practicing responsible finance.”
Washington Post reports US Treasury Secretary Geithner trying to put European bonds on surer footing:
The idea Geithner is advocating would make the ECB more like the U.S. Federal Reserve and other central banks, which provide a last-resort guarantee that a government will not run out of money.
The role can be controversial — as have been the steps taken by the Fed in response to the U.S. financial crisis and recession — and can fuel inflation when excessive.
In Europe, the individual countries of the euro monetary union cannot rely on the ECB the same way. Investors have increasingly recognized that nations such asGreece, Portugal and Italy do not have the same sort of backstop that the United States has with the Fed and have driven up the borrowing costs for those countries.
The ECB was set up with a narrower mission — to control inflation — and its governing board has been hesitant to expand that role. While the bank has been buying government bonds in recent weeks to lower the interest rates paid by Italy andSpain, even that limited step has caused dissension on the ECB board. The bank’s leaders have said they hope to stop the practice as soon as possible.
According to this Yahoo Real Estate article:
Although the U.S. housing market continues to struggle, many local markets are doing significantly better than the country as a whole, with some places virtually missing the housing bust altogether.
While shifts in home values are important in any market, it’s important for sellers to determine the length of time a property can expect to be on the market before it will be sold. The faster that homes sell, the faster an inventory backlog can be cleared, suggesting heightened demand and an upward trajectory in prices. Additionally, if a home is on the market for an extended period of time, it may may turn off prospective buyers and force sellers to accept less-favorable offers.
So well said:
We did not have to accept the collapse of our domestic auto companies, and we do not have to accept that the Federal Reserve is powerless to give the economy the boost it needs. There is no reason to believe that the federal government is incapable of investing more in schools, roads and other public goods to build for the future and get more money into the hands of consumers now. We do not have to rely on giving rich people tax cuts and then confine ourselves to offering fervent prayers that they might invest some of the money in creating jobs.
We can seek to control our fate, or we can turn the invisible hand into a God who commands us to be helpless.
This from MortgageNewsDaily.com:
And what is new with the temporary loan limits, set to expire in about 2 1/2 weeks? Congress, which recently never seems to do much preemptively lately, is being hit up by mortgage and real estate trade groups. The latest is a push to take action on a bill that would extend the maximum mortgage loan limits through 2013. A bipartisan bill introduced about a month ago (don’t forget – they were on vacation) would allow the FHA, VA, and Fannie & Freddie to continue insuring homes up to the higher levels for another two years. Watch for news on The Homeownership Affordability Act of 2011. Few politicians want to be seen as hindering any recovery in housing, of course and in a joint letter to Congress several industry organizations warned that failing to extend the limits would delay the housing recovery and make it more difficult for consumers to secure affordable financing. “With tight underwriting already constraining mortgage availability, lowering the loan limits will only further restrict liquidity,” the letter reads in part. “Private lending remains wary of returning to the market with all the current uncertainty. Extending the existing limits at levels appropriate for all parts of the country will provide homeowners and home buyers with safe, affordable financing and help stabilize local housing markets.” On Thursday, a bipartisan group of 37 lawmakers sent a letter to the House Appropriations committee recommending a short-term extension of the current conforming limits. The lawmakers urged the committee to attach the provision to a temporary government funding bill.
Paul Krugman supplies this graph from the Center on Budget and Policy Priorities:
Says it all from my perspective.
Steve Benen at Washington Monthly puts it bluntly:
Elmendorf even went so far as tout the benefits of a payroll tax break — which Obama wants and which Republicans oppose — as having the most significant economic impact.
Taken together, every credible observer with a pulse — the Fed, the CBO, a wide variety of economists, the financial industry, the bond market, business leaders — are all saying more or less the same thing. They all want policymakers to approve short-term stimulus and oppose drastic short-term budget cuts. GOP officials, of course, desperately want to do the opposite.
It’s against this backdrop that House Republicans believe “every economist” agrees the GOP is on the right track. It’s hard to overstate how ridiculous that claim really is.