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Afternoon Quickie 04/07/2009

phillenbrand — Tue, 07 Apr 2009 23:49:36 +0000

MISH’S Global Economic Trend Analysis - Treasury To Delay Reporting Bank Stress Test Results
The Big Picture - Geithner Addresses Mortgage Fraud
Pro Publica - Does AIG Really Need to Pay Its Counterparties in Full?
Deal Journal - Evening Reading: Blankfein Jumps on Bonus Outrage Bankwagon

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Afternoon Quickie 03/12/2009

phillenbrand — Thu, 12 Mar 2009 11:00:28 +0000

Paper Economy - Effervescent Equity: The Federal Reserve’s Household Equity Estimate Q4 2008
Huffington Post - Bernie Madoff’s Jail Cell At Metropolitan Corrections Center
Calculated Risk - S&P: Delinquencies Surge for HELOCs and Jumbo Prime Loans
Pro Publica - Bailed Out Bank Had Friends in High Places

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$75 Billion Making Home Affordable Loan Modification Program Gets To Work

phillenbrand — Wed, 04 Mar 2009 19:18:03 +0000

While there’s been plenty of colorful and lively commentary here at Blown Mortgage regarding the necessity of the mortgage bailout, all points are pretty much moot. It’s been passed, and it’s going into effect, so the only thing to do now is to hope it does well and helps to achieve its goals. These include helping to stabilize housing prices, keep homeowners in their homes, and stem the foreclosure tsunami that’s contributed to the deepening recession. None of that will be particularly easy, of course, but the government recently released details as to how it’s going to operate.

The program aims to call companies into helping about 4 million struggling borrowers. This will be accomplished by modifying their loans so that monthly housing payments are no more than 31% of monthly gross income. Homeowners who have yet to miss a payment are also eligible to refinance into lower cost loans. The lenders themselves will be provided with incentives in order to “encourage” them into providing more modification efforts. Uncle Sam will pick up some of the tab to subsidize interest rate reductions, too, which means more affordable monthly payments without borrowers eating too steep a drop in revenue.

Housing Secretary Shaun Donovan seemed fairly optimistic: “This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans.” He said.

Not everyone will be able to participate in the modification party, however. As you might expect, there are some requirements that borrowers have to meet. They have to have obtained this mortgage before the beginning of 2009, so if you’re thinking you can buy an ultra large house and then cry foul when you can’t afford it and receive aid, you’re out luck (for those of you who did so before 2009, I have no choice but to tip my hat to you). You’ll also need to have a mortgage of less than $729,500, so McMansions are out. You’ll also need to agree to counseling for your household debt if it’s more than 55% of your income. Personal finance classes required by the government? I’m actually pleased at that development.

Advertisement: Get our exclusive report free: Top 10 Deadliest Loan Modification Mistakes

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Home prices tank across the country

Morgan — Mon, 02 Mar 2009 13:33:13 +0000

How’s your market holding up? The New York Times has graphed the Case-Shiller Index for home prices across the U.S. in the Case-Shiller markets. They’re all ugly. Here’s Los Angeles and San Francisco for us Californians. Check out the charts on NYTimes.com for your market.

Note that both San Francisco and Los Angeles have nearly given back all the gains during the boom.

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Cut Up Your AMEX Card, Get $300

Morgan — Tue, 24 Feb 2009 01:51:14 +0000

Courtesy of The Huffington Post

American Express is looking for any way to get rid of additional credit exposure by paying current card holders $300 to cancel their credit card account. That’s right, paying to get rid of card holders. They’re doing it via a targeted “promotion” that select members will receive in the mail. If you get this offer it basically means “you’re a crappy credit risk.”

It makes sense, American Express has been hammered (like the other credit card companies) with rising delinquencies and bankruptcies which are wiping out millions of dollars in owed debt. (Hey issuing unsecured debt can be a real b&$& sometimes.)

More from The Credit Matters Blog and how to trade your card for cash if you do get the letter:

Well, this sure is a different kind of deal. Instead of paying you a bonus to join, New York-based American Express will give you a $300 American Express prepaid card if you agree to say goodbye. American Express says that it is making this “deal” so that customers can “simplify” their finances. Sure. The offer, which isn’t available to everyone, requires a 14-digit RSVP code. Customers are receiving this offer via U.S. Postal and email.

Let’s get something straight here. If you receive this offer, American Express is telling you something: please leave. Note also that in order to get the $300 prepaid card the customer MUST pay off his or her entire balance by April 30, 2009. If the balance is not paid off by April 30, then you will not receive the $300 card. But your card will still get closed. That’s a heck of a deal.

When do we started getting paid to pay off our mortgages?

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The World’s Real Estate Crisis

phillenbrand — Wed, 18 Feb 2009 21:35:09 +0000

It’s been blatantly obvious for some time now that our credit-fueled prosperity party has now come to a rather abrupt end. The fallout from such a house of cards collapsing has been felt by just about every sector of the economy and almost every consumer. Those of us that still have jobs are busy putting away whatever we do earn like squirrels getting ready for a long winter (though they’re increasingly less long) and the little guy to the world’s largest wind farm is feeling the pinch. Foreclosures are on the rise here in the states along with job losses, but one has to wonder how things are going abroad. How are other countries’ real estate markets faring? Not as well as you might think.

The UK is right along with us in it’s share of housing problems, and in some cases they’re doing worse than we are, if that’s possible. Emerging economies like China and India had their own share of housing bubble factors, and those too are starting to unwind as well. Here’s an example of the situation in China as of late April:

â€œIn Shanghai, some one million residences were under construction in 2006, which was just half the amount of new construction in the entire U.S. in 2004, according to the Houston Chronicle. With Shanghai representing almost 20 percent of Chinaâ€™s property value, the bubble is seriously on edge, with many homes remaining empty. Shanghaiâ€™s property vacancy rate is roughly 25 percent, well above the international average of 10 percent, according to The New York Times. â€œ

The global economy continues to stall, speculators in markets like real estate in Shanghai are seriously feeling the pain. There’s a glut of completed properties, and other parts of the country are reporting similar situations as well. It may even be worse than the tea bubble. Yet Chinese banks may by and large be able to weather that storm. A key difference being that Chinese banks haven’t been as deeply involved in sub-prime lending as their United States counterparts. About 20 percent of the outstanding loans are in real estate and are in the form of mortgages or credit to developers, as per the World Bank.

Ultimately the real estate crisis may be continuing to cause billions of dollars in losses here, and it also seems likely that things will get worse before they get better. Yet it’s also important to realize that the economic problems wracking the country are not entirely unique, and collaborative efforts on an international level will be key in pulling us back toward sustainable growth.

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Home Values Lost $1.4 Trillion during 4Q 2008

Jay Hammond — Wed, 04 Feb 2009 02:02:17 +0000

Americans lost more, in terms of home values, during the final quarter of 2008 than in all of 2007. According to Zillow Real Estate Markets Report, home values fell 11.6 percent or $1.4 trillion during the eighth consecutive quarter of declines.

The declines mean that U.S. homeowners lost a cumulative $3.3 trillion in home values during 2008. During all of 2007, home values lost only $1.7 trillion. Since the peak of the housing market in 2006, home values have declined by $6.1 trillion.

As home values have declined, more American homeowners have found themselves underwater on their mortgages. One out of every six homeowners had negative equity by the end of 2008, up from the one in seven in the third quarter. Further, foreclosures made up nearly one in five or 19.9 percent of all transactions in 2008.

A witch’s brew of economic insecurity, foreclosure and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values,” said Dr. Stan Humphries, Zillow vice president of data and analytics. “As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007. The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year. People without jobs, of fearing jobs loss, typically don’t buy homes, no matter how low prices or mortgage rates might be. Public policy, in terms of both job creation and efforts to stem the tide of foreclosures, will have a large influence on when some of these markets find bottom.”

Of the 161 metropolitan statistical areas (MSA) surveyed as part of the Zillow Real Estate Market Reports, 21 are not feeling the pinch of declining home values. Home values in the Pittsburgh MSA were flat (-0.1 percent) in 2008. Home values in the Fayetteville, NC MSA actually increased by 6.9 percent, followed closely by the 6.2 percent increase in Yakima, WA MSA. Other areas in New York State, the Midwest and the South also experienced steady or increasing home values.

Unfortunately, 10.9 percent of all real estate transactions across the country in 2008 were short sales. The Lincoln, NE MSA led the country in the rate of short sales, with 14.1 percent of all transactions. Short sales also accounted for more than 11 percent of all transactions in California’s San Jose, Santa Rosa and Santa Cruz MSAs. The Central Valley in California continued to lead the nation in foreclosures, as well. More than half of all sales in the Madera, Merced and Stockton MSAs were foreclosures compared to the 3.9 percent recorded in the New York City MSA and Grand Junction, CO MSA, which were the nation’s lowest.

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Afternoon Reading 01/15/2009

phillenbrand — Fri, 16 Jan 2009 00:41:20 +0000

Inquisitor: Spend Taxpayer Dollars With The Bailout Game - New online Bailout Game! Play HERE.

Calculated Risk: Regional Banks: Marshall & Ilsley Posts Large Loss - More trouble for regional banks.

Naked Capitalism: Mother-In-Law Research & JP Morgan - Chase may not be as desperate as it appears.

Cassandra Does Tokyo: Ethics Exam - Ethical Assessment Examination for Financial Professionals.

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Yves Smith of Naked Capitalism: Podcast Interview

phillenbrand — Wed, 14 Jan 2009 04:49:23 +0000

I’m so excited to announce that we’ve started the podcast series up again on Blown Mortgage. After a year hiatus we’ve got some great interviews for you coming up, including our first of the year with Yves Smith of Naked Capitalism. Yves is a highly-regarded thought-leader on the current economic crisis, and her site Naked Capitalism is a daily must-read for anyone following the events that are defining our time.

We talk about clawbacks, Obamas plan and the Citigroup reorganization. All important topics in today’s news. Thanks for listening. I’m excited to bring these to you once again.

You can download an MP3 version of the podcast here.

As always, music licensed under the Creative Commons license, The Streets of Miami performed by Dokapi.

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IRS Speeds Lien Relief

Jay Hammond — Wed, 17 Dec 2008 14:52:48 +0000

The Internal Revenue Service (IRS) is giving struggling American homeowners a gift this holiday season. No, they aren’t canceling homeowners’ tax debt. They are, however, making it easier for distressed homeowners to avoid having a federal tax lien block the sale or refinancing of a home. They are also expediting the process for requesting a discharge or subordination of a tax lien.

?We don’t want the IRS to be a barrier to people saving their homes. We want to raise awareness of these lien options and speed our decision-making process so people can refinance their mortgages or sell their homes,? said IRS commissioner Doug Shulman.

The IRS issues more than 600,000 federal tax lien notices every year. Currently, there are more than 1 million federal tax liens, tied to real and personal property, outstanding. The IRS is not the only government entity interested in lowering the number of outstanding tax liens. Cities from Phoenix to Plainfield are trying to find ways to collect on or sell tax liens in order to raise much needed funds as budgets become tighter.

The IRS makes a legal claim on a property by filing a Notice of Federal Tax Lien. It serves as a public notice to other creditors that the federal government has a claim on a property. The federal claim is usually, but not always, the senior lien. In some cases, a federal tax lien can be made secondary to another lien if the IRS determines that taking a secondary position will ultimately help with collection of the tax debt. The process of taking a secondary position is called subordination. Taxpayers who are selling or otherwise giving up ownership of a property may apply for a certificate of discharge of a tax lien if the price is less than the mortgage lien and the mortgage lien is the senior lien.

Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Publication 784: How to Prepare an Application for Subordination of a Federal Tax Lien, provides taxpayers with instructions for applying for a lien subordination certificate while Publication 4235: Collection Advisory Groups, provides mailing addresses the request should be sent to for processing. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

A federal tax lien can make it difficult to sell or give up ownership of a property, as well. The IRS may issue a certificate of discharge of a tax lien if the sale price is less than the amount owed on a senior mortgage lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Taxpayers should follow the directions in Publication 783: Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien when applying for a tax lien discharge. There is no form to submit however a typed letter of request must accompany certain documentation and be mailed to the appropriate address listed in Publication 4235.

The IRS urges taxpayers to contact the agency’s Collection Advisory Group early in the sales or refinancing process so that it can begin work on their requests for subordination or discharge of a federal tax lien. People sometimes delay informing lenders of tax liens which only serves to further delay the transaction.

?We realize these are difficult times for many Americans,? Shulman said. ?We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.?

You can hear an audio version of the announcement here. (MP3)

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