Thousands of NYC residents may lose rent subsidies
This is going to make living in one the nations most expensive cities even harder. According to the NY Times, the housing department is facing a large $45 million short-fall in their budget. This is more evidence of the hardships that have come on us since the housing crash. It sent the economy into a tailspin and that has reduced tax receipts to the point where many of these entitlement benefits needs to be trimmed back to bring back balance to the city and state spending.
It is hard and certain hardship circumstances need to be addressed but over all, spending will need to be reduced across the board because they are based on tax dollars that were in a bubble environment. The other option is higher taxes that will fall mostly on the wealthier class and that might need to be done, being that they got much benefit on the bubble and crash. Either way, a policy needs to be made so we know what we are dealing with. More to come.
NY Times - Linda Couch, the vice president for policy at the National Low Income Housing Coalition, said that given the recession, the drop in attrition rates should not have come as a surprise. In recent years, she added, the act of continuing to issue vouchers to the point at which authorities exceeded their federal cap for Section 8 units has become “a big no-no at HUD.”
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Bank of America boosts staff handling troubled loans by 2,000
This is the reality for what is needed to handle this real estate crisis. We have chosen not to let people default so home will be foreclosed on and that would bring prices down across the board. We have chosen the path of modify home loans and re-writing principal balances. I still support homeowners that actually have the means to support the mortgage and we should keep them in their homes. If not then we need to face the fact that the home needs to be foreclosed and put back on the market at a fair value.
Hopefully the 18,000 employees that BofA has put in this division will help move through the massive backlog of defaulted homes they have on their books. Currently interest rates are extremely low levels so if people can refinance out of their high interest rate loan, this is the time to take advantage of this opportunity.
Bloomberg - Bank of America Corp., the second- largest U.S. home lender, added 2,000 employees since April to work with borrowers having trouble paying their mortgages, a senior executive said.
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Economists consider tearing down homes to protect U.S. housing market
This is a hilarious idea. It follows the classic supply and demand theory. Economists are proposing to tear down houses to reduce the “shadow inventory” that are on the banks books as REO (Real Estate Owned) foreclosures. It is true that if you reduce the supply of housing, that will tend to keep prices stable and then cause them to rise with all things equal.
The problem is that we are butting up again with the same problem I have been writing about for 2 years now. What are are saying is that we want to keep prices artificially higher than they should be. This punishes people who are saving up for a home by forcing them to purchase these homes and in effect paying much more for them through the interest charges that go along with a home mortgage.
Wouldn’t it be a better idea to force this inventory on the market and have that supply bring prices to reflect the current housing situation? Wouldn’t that in effect spur buying in the housing market and then you would see spill-over in all the purchases that go along with buying a new home? We as taxpayers are paying for this crisis so why should the people benefit from this mis-allocation of resources and turn a bad situation into a positive one. The more home-owners you have the more of a community is built and that also helps bring down other problems like crime and brings in revenue to the cities through property taxes. Bottomline this is a laughable idea and will be a quite sad state of affairs if we start carrying this out as a policy. We can be more creative than that….can’t we?
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Fitch sees $65 billion in U.S. bank losses on home equity in 2010
In Reuters release, Fitch (ratings agency) is projected a over 100% increase in home equity losses. These will primarily stem from home equity loans and 2nd liens on residential real estate. The surprising comment was that this will have a minor impact on credit ratings for the banks that are holding this paper.
They cite the increased loan loss reserves and increased capital levels. Another point that is not mentioned is the effects of the changes to FASB 157 and how banks are allow to record and valuations that are more likely than not an inflated value compared to an actual fair market price.
Fitch also reported that we should see another 10-15% decline in the next year to year and a half so these losses will continue to climb in lockstep with losses at the banks.
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Banks refusing to buyback fraudulent mortgages from Freddie and Fannie
NY Times has posted a scathing piece about how banks are truly dragging their feet when it comes to honoring the buyback agreements the banks entered in when they sold these loans to the GSE’s (Government Sponsored Enterprises). According to the article (I agree), they are holding these mortgages on their balance-sheets are very inflated values but when they are finally bought back by the banks, the loans are written down by a substantial amount.
It is disgusting that they helped fuel the sub-prime mortgage crisis and now they are balking at re-purchasing their obviously shame loans that they never even bothered to verify income or job status. The banks should be forced to honor these agreements and if they fall below their tier 1 capital requirements, they should be forced to raise more or go into receivership. This is the fair and just course of action. Anything less would be going in the direction of less transparency and more corruption of our financial system. There are 3 things that will need to happen to all this debt: 1. Paid off 2. Restructured 3. Defaulted; hiding losses and pretending they are not there is not an option.
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Fed to exit mortgage-backed security market today
This is positive news. The more we see these government programs winds down and their assistance not being there to support for the U.S. housing market, the more we will see if this is a real recovery or a head fake. The market has run up in the last few weeks so we are going to continue more impressive earnings and growth to get everyone back into growth and investment mode. Like I said, this is a good first step.
Bloomberg - The end today of the Federal Reserve’s unprecedented buying of mortgage securities won’t have much effect on the market, BlackRock Inc.’s Curtis Arledge said.
Yields on agency mortgage securities relative to benchmark rates will likely widen “a bit” and become more volatile after the Fed’s exit, though probably won’t expand more than 0.2 percentage point, Arledge, chief investment officer of fixed income at New York-based BlackRock, said today in an interview with Bloomberg Television.
“It’s been one of the more telegraphed changes we’ve seen in a long time,” said Arledge, who oversees about $590 billion at the world’s largest money manager. “The marketplace has positioned itself for the Fed to be absent.”
The Fed’s $1.25 trillion of purchases in the $5.4 trillion market of securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae helped drive yield premiums to the lowest on record, which they remain near by some measures as the program ends.
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U.S. Home Prices Up 5% Year-Over-Year
With jobless claims going down, consumer spending up and home prices rising, this may be a sign of an actual recovery. To be sure, we still have need to see large gains in the job market to really believe we will have a sustained and durable recovery.
Let us not forget if we look at the U6 unemployment number, we have over 15% unemployment and that represents discouraged workers that have given up looking for work. Once jobs start being created rapidly, those workers are going to re-enter the labor market and that will but a strain on the recovery. We are walking a fine line right now and hopefully we can get through this without creating another bubble.
DS News – New data released by Clear Capital Thursday shows that home prices nationally are up 5.0 percent compared to February 2009. The quarter-over-quarter price change for the numbers through last month was flat at 0.0 percent, indicating a softening during the winter months.
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